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PLEASE REFER TO BACK COVER FOR IM PORTAN T DISCLOSURES.

N ew spapersNewspapers Not Good Takeout Candidates at Current Price Levels

We read with some amusement the Barron'sarticle from June 11, 2005 (entitled

Read All About It! ), about newspaper stocks as takeover candidates. It is not

exactly new news that media companies get taken out from time to time. In fact,

we have been expecting a couple of newspaper companies to be acquired

sometime in the next five years. However, we are not going to recommend the

group on that basis, and categorically do not believe the newspaper sector is

anywhere near cheap enough for a series of takeouts. We continue to rate the

sector 3-Negative, and we have five of 10 stocks rated 3-Underweight (KRI, SSP,

TRB, JRC, and MNI).

! Running the numbers using the Barron's takeout criteria of 25%35% equitycontribution, a ratio of net debt to EBITDA of 7x or less, and a ratio of EBITDA to

interest expense of 1.5x or greater yields exactly no stocks out of the 10

newspaper companies we follow.

! The Barron'sauthor and others base their thesis on Street estimates that we believeare way too optimistic. W e estimate EPS will decline 6.5%for 2005 for the more

pure-play newspapers/ TV broadcasters and will rise 4% in 2006 (helped by TV

station Olympic/ political advertising). Most of our estimates are Street-low, and

we remain concerned that our estimates are still too high.

! Of the past 10 years, now is actually one of the worst times for a private equityshop to buy public newspaper companies.

! Newspapers are one of the most expensive sectors in U.S. media, versushistorically being the cheapest in the prior 10 years. Newspapers are not

attractive relative to the S&P 500, trading at a 0%25%premium, in most cases,

on a P/ E basis and at the high-end of their 10 -year historical valuation range of

6-10.5x current year EBITDA.

! Because the 10 public newspaper companies we follow have already taken outsignificant expenses since peak 2000 levels, a private equity shop would not

have the major cost savings lever to play.

UNITED STATES

IN TERNET & MEDIA

Publishing & Advertising

Services

Sector View: 3-NEGATIVE

Craig A. Huber

Amanda J. Sigouin

June 21 , 2005

Analyst CertificationI, Craig A. Huber, hereby certify

(1) that the views expressed in

this research report accurately

reflect my personal views about

any or all of the subject

securities or issuers referred to in

this report and (2) no part of my

compensation was, is or will be

directly or indirectly related to

the specific recommendations or

views expressed in this report.


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2 June 21 , 2005

Investment Conclusion

W e have attached a table that outlines potential takeout stock prices and 2 005EEBITDA multiples for newspaper companies. The Barrons takeout criteria cited in itsarticle are: 1) an equity contribution of 25%35% of the purchase price; 2) a ratio of

net debt to EBITDA of not any more than 7x; and 3) a ratio of EBITDA to interest no less

than 1.5x. These criteria seem reasonable; however, when applied to our estimates forthe basket of 10 newspaper stocks we cover, they run into problems.

Running through the numbers, based on the midpoint equity contribution of 30%,none of the companies meets the second criterion of having net debt to EBITDA(2006E) of less than 7x, although Journal Communications is close at 7.1x. The thirdcriterion of having a ratio of EBITDA (2006E) to interest expense (assumed an 8.5%rate)

of no less than 1.5x yields Tribune (at 1.5x), Journal Communications (at 1.7x), Journal

Register (at 1.6x), and McClatchy (at 1.5x). That multiple is fairly tight, and one could

argue that an 8.5%interest rate assumption for a leveraged buyout is at the low end. If

we increase the interest rate assumption to 10%, then none of the companies meet thethird criterion.

On average, our takeout EBITDA multiples (using 2 005E EBITDA) are 11 .7x for themore pure-play newspapers/ TV station broadcasters (Gannett, Knight Ridder, N ewYork Times, Tribune, Journal Register, and McClatchy). If we also include Scripps,

W ashington Post, and Journal Communications, the average takeout multiple increases to

13.0x 2005E EBITDA. These figures exclude Dow Jones because of the overly

depressed nature of it fundamentals, which distorts the takeout multiple (estimated at

18.4x).

On average, our takeout stock price for Gannett, Knight Rdder, N ew York Times,Tribune, Journal Register, and McClatchy is 26 % greater than the current stockprice. If we include Scripps, W ashington Post, and Journal Communications, thenthe takeout stock price is 32% higher, on average. In either case, the premium wouldbe much less than those of two other public newspaper companies that were acquired in

early 2000:- Central N ewspapers (Phoenix and Indianapolis newspapers, acquired byGannett) and Times Mirror (The Los Angeles Times, Newsday, Baltimore Sun, etc.;acquired by Tribune). Both were acquired at a 100%premium to the prior days closing

prices. More recently, Lee Enterprises acquired Pulitzer, the only other publicnewspaper company to be acquired, at a 17%premium to the prior days closing price

(in mid-November); however, the stock had been widely anticipated to be up for sale

since before the company sold its TV station division in the late 1990s, and thus, traded

close to takeout multiples for years. As seen Figure 4, Central N ewspaper wasacquired for 12 .7x trailing EBITDA, Times Mirror at 11.5x, and Pulitzer at 13.5x.

Barrons takeout criteria seem

reasonable; however, when

applied to our estimates for

the basket of 10 newspaper

stocks we cover, they run into

problems.

On average, our takeout

EBITDA multiples (using

2005E EBITDA) are 11.7x

for the more pure-play

newspapers/ TV station

broadcaster .


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June 21, 2005 3

Figure 1: Private Market Assumptions Newspaper Companies

Knight New York Scripps, Washington Journal Journal Average

Dow Jones Gannett Ridder Times E.W. Tribune Post Comm. Register McClatchy (Excl. DJ)

Current Stock Price 35.18 74.98 62.75 32.11 49.10 36.47 853.50 16.53 17.31 67.96

EBITDA Takeout Multiple (2005E) 18.4 12.1 11.6 13.4 19.2 10.4 16.5 11.0 10.9 11.8 13.0

Takeout Stock Price 53.55 98.43 90.00 45.00 72.24 45.71 1,320.64 22.27 16.00 82.00

% Change vs. Current Stock Price 52.2% 31.3% 43.4% 40.1% 47.1% 25.3% 54.7% 34.7% -7.6% 20.7% 32.2%

Takeout Enterprise Value 4,757 29,022 7,664 7,550 13,413 14,901 12,724 1,699 1,434 4,058 Barron's

Criteria

Equity Portion (30% equity) 1,427 8,707 2,299 2,265 4,024 4,470 3,817 510 430 1,217 25-35%

Portion to Finance Using Debt 3,330 20,315 5,365 5,285 9,389 10,430 8,907 1,189 1,004 2,841

2006E EBITDA 335 2,503 661 572 786 1,373 911 169 136 352

Net Debt / EBITDA (2006E) 10.0 8.1 8.1 9.2 11.9 7.6 9.8 7.1 7.4 8.1 = 1.5 times

E = Lehman Brothers estimates

Free cash flow = Net Income + D&A - Capital Expenditures

Small/Mid-Cap Newspapers

Source: Lehman Brothers

W e have 15 additional key points concerning the Barrons article on newspaperspossibly being the target of private equity firms:1) Three major newspaper companies have bought large Internet properties this

year, not additional newspapers (Dow Jones bought CBS MarketW atch, N ewYork Times bought About.com, and Scripps announced last week it is buyingShopzilla.com). W e were surprised the article did not mention these deals.

2) Scripps has one of the most successful newspaper management teams which inthe past 10 years has built up a sizeable cable networks division using excesscash flow from their newspapers and TV stations, but it has not been buyingnewspaper assets. Scrippss stock price in the last 10 years has led the pack, andis an indication of how good its strategy has been (we think the stock is overvalued

at these levels, and the risk/ reward tilts to the downside, but that topic is for another

research note).

3) In our analysis, the most important paragraph in the Barrons article was thethird one, which says W arren Buffett recently bemoaned Internet competitionfor [newspaper] ads and readers who opt for papers free websites. Buffettknows newspapers; in fact, Berkshire Hathaway owns the Buffalo newspaper

outright and owns 20% of W ashington Post. W hy has The Washington Post not

bought newspapers for the 30 or more years Buffett has been on the board?

Probably because of the long-term secular concerns. In fact, for much of the last five

years, W ashington Post has been buying education assets, and for the prior five

years buying cable assets, at attractive multiples. Newspapers? N owhere to befound on the acquisition calendar at Berkshire Hathaway or W ashington Post.

Newspapers are currently

buying Internet properties

rather than additional

newspapers.

The most important

paragraph in theBarrons

article was the third one,

which says Warren Buffett

recently bemoaned Internet

competition for [newspaper]

ads and readers who opt for

papers free websites.


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4 June 21 , 2005

4) W hy did the article fail to point out the historical 10-year trading range for themore pure-play newspaper companies, such as 6x-10.5x current year EBITDA,versus the current group average of 10x, or 9.5x for the more pure-plays?

5) W e continue to think Street estimates are too optimistic for 2005 and 2006.W e estimate EPS will decline 6.5% for 2005 for the more pure-play

newspapers/ TV broadcasters and will rise 4% in 2006 (helped by TV station

Olympic/ political advertising). Most of our estimates are Street-low, and weremain concerned that our estimates are still too high.

6) W hy did the article not mention the multiples of other media stocks? Privateequity firms have choices where they can place their bets within media and

elsewhere. N ewspapers right now are one of the -most expensive sectors inU.S. media (at an average 10x 2005 estimated EBITDA, with Knight Ridder andTribune at the low end at 8.5x), versus historically being the cheapest in U.S.media in the prior 10 years. Only radio stocks are more expensive on this metricat 12x currently. The same is true for free cash flow multiples, as only cable is more

expensive, at 36x 2005 free cash flow, versus 20x for newspapers (with a low

among the large caps in Gannetts case at 15x). See Figure 3 for details.7) Most of the newspaper stocks still trade at a 0%25% premium to the S&P 500

on a P/ E basis (exceptions being DJ GCI, SSP, and W PO), and the privateequity firms are supposed to put a significant premium on top of that? SeeFigure 2 for details. The newspaper stocks have underperformed the S&P 500 by

approximately 15% since October 1; 20 04 , however, the group outperformed the

S&P 500 by roughly 50%in 200102, and is still working it off to this day. 8) The newspaper stocks are the last place in U.S. media that we would advise a

private equity firm to be sniffing around. W e think the newspaper stocks wi llbe significantly cheaper in perhaps two years, as secular issues becomeincreasingly apparent to investors, Street estimates get more in line with reality,

investors realize that the group should not be trading at 10x EBITDA or at a premium

to the S&P 500, and we start to see negative ad revenue growth, with or without a

recession.9) Did the author of the Barrons article consider the exit strategy for a private

equity firm that buys a major public newspaper company? Say a private equityfirm pays 11x13x 2005 EBITDA; how in, say, five years are they going to make a

large profit off that? Are they going to take the newspaper entity public in fiveyears, when the group multiple may only be 50 % of that level? There is nothistorically been a great amount of interest in newspaper stocks from privateequity firms over the past 10 years (although the Freedom newspapersOrangeCountry Register, etc.were acquired by a private equity firm a couple of years

ago at a 12x EBITDA multiple, we estimate).

Newspapers right now are

once of the -most expensive

sectors in U.S. media.

W e think the newspaper

stocks will be significantly

cheaper in perhaps

two year .

W hat is the exit strategy for a

private equity firm?


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June 21, 2005 5

10) In spring 2000, two public newspaper companies were acquired . Before theysold themselves, Central Newspapers (Phoenix and Indianapolis newspapers;

company was sold to Gannett) was trading at 6x6.5x EBITDA and Times Mirror

(The Los Angeles Times, N ewsday, Baltimore newspapers, etc.) was trading at 7.0x

EBITDA; the newspaper group right now is trading today at a significantly more

expensive 10x EBITDA on average.11) Importantly, after these two companies sold themselves in spring 2000, the

newspaper group kept selling off and did not bottom until October 2000. W hen Pulitzer put itself up for sale in November 2004, the group kept selling off

until where we are today.12)W e have been hearing about theories from others on the Street for over five

years that several public newspaper companies will be taken out. W e think thisis a long, long time to continue to recommend stocks on something that has failed to

happen.13)Because the 10 public newspaper companies we follow have already taken

out significant expenses since peak 2000 levels, a private equity shop wouldnot have the major cost savings lever to play. (See Figure 10 or page 58 in ourmonthly Newspaper Fact Book for details which show how non-newsprint cash costs

for the newspaper divisions have increased only 1% on average for 10 companies

back to 2001 .) In fact, we have been somewhat critical that the publicnewspaper companies have taken out too much in costs, and are thereforereducing their long-term franchise valuei.e., hurting the editorial quality of theirnewspapers too much. W e believe a private equity firm would have to go even

deeper in terms of cost cuts to make the financials work from their perspective, andin, say, five years when they look to unwind the position, they would likely have to

argue to potential buyers that the newspaper franchise is worth significantly more. 14) In our view, there is really no debating the negative secular issues confronting

the newspapers. For example, the chart on page 32 in our monthly NewspaperFact Book, Figure 20 shows how newspapers have only a 17% share of the U.S.advertising market, down from 25 % in 199 0 and 35% in 195 0, and marketshare is forecast to keep dropping annually (losing share to Internet, cable networks,

direct mail, etc.). On page 46 in the same report, the graphs show the percentage

of U.S. adults who read a daily newspaper is only 52% today, versus 75%80%

3540 years ago. Even more worrisome is that currently only 39% of 18- to 34 -year-olds read a daily newspaper, down from 55%56 % in 19 90, while ofadults ages 55 and older nearly 70 % currently read a daily newspaper, whichhas been fairly steady.

A private equity shop would

not have the major cost

savings lever to play.

Newspapers have only a

17%share of the U.S.

advertising market, down

from 25%in 1990 and 35%

in 1950.


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6 June 21 , 2005

15)Bottom line is that anything is possible, and we believe the world is full ofsuboptimum investors. It is important to note, though, that newspaper stocks arenotcurrently trading at a low-end 6x EBITDA when takeout speculation would make

more sense; rather they are trading at 10x EBITDA on average (versus a 10-year

average of 6x10.5x for the more pure-play newspaper companies), and are not

cheap compared to other subsectors in U.S. media or the S&P 500 and are tradingrelatively close to their takeout targets. W e believe investors would be better served

analyzing the fundamentals and stock valuations rather than engage in takeover

speculation in a group that is currently expensive. W e would get interested in select

newspaper stocks at roughly 25%lower stock prices. W e maintain our newspaper

sector rating of 3-Negative.

W e would get interested in

select newspaper stocks at

roughly 25%lower

stock prices.


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June 21, 2005 7

Figure 2: Newspaper Companies Comparative Valuation

Knight New York Scripps, Washington Journal Journal Average

Dow Jones Gannett Ridder Times E.W. Tribune Post Comm. Register McClatchy (Excl. DJ)

Rating 1-Overweight 2-Equal weight 3-U nderweight 2-Equal weight 3-U nderweight 3-Underweight 1-O verweight 2-Equal weight 3-Underweight 3-Underweight --

Recent Stock Price 35.18 74.98 62.75 32.11 49.10 36.47 853.50 16.53 17.31 67.96 --

52-week High 46.10 87.50 74.23 45.89 54.00 47.12 999.50 19.10 20.66 76.05 --

52-week Low 31.94 73.70 60.77 30.30 44.73 35.02 805.00 15.05 15.44 66.41 --

Year-to-Date Stock Price Return -18.3% -8.2% -6.3% -21.3% 1.7% -13.5% -13.2% -8.5% -10.5% -5.4% -9.4%

% Off 52-Week High -23.7% -14.3% -15.5% -30.0% -9.1% -22.6% -14.6% -13.5% -16.2% -10.6% -16.3%

12-month Price Target 43.00 74.00 55.00 28.00 43.00 29.00 1000.00 15.00 13.00 58.00 --

Dividend per Share 1.00 1.08 1.38 0.66 0.44 0.72 7.40 0.26 0.00 0.72 --

Yield (%) 2.8% 1.4% 2.2% 2.1% 0.9% 2.0% 0.9% 1.6% 0.0% 1.1% 1.3%

Earnings per Share

2003 0.96 4.46 3.63 1.91 1.52 2.09 26.66 0.80 1.19 3.05 --

2004(A) 1.21 4.92 3.89 1.96 1.74 2.25 34.59 0.99 1.23 3.38 --

2005(E) 0.95 5.10 3.85 1.50 1.85 2.10 35.50 0.84 1.05 3.45 --

2006(E) 1.50 5.50 4.05 1.55 2.15 2.05 45.00 0.95 1.10 3.70 --

% Change 2004(A) vs. 2003 26.0 10.3 7.2 2.6 14.9 7.7 29.7 23.8 3.4 10.8 12.3

% Change 2005(E) vs. 2004(A) -21.5 3.7 -1.0 -23.5 6.3 -6.7 2.6 -15.2 -14.6 2.1 -5.1

% Change 2006(E) vs. 2005(E) 57.9 7.8 5.2 3.3 16.2 -2.4 26.8 13.1 4.8 7.2 9.1

Valuation Ratios

P/E - 2004(A) 29.1 15.2 16.1 16.4 28.2 16.2 24.7 16.7 14.1 20.1 18.6

P/E - 2005(E) 37.0 14.7 16.3 21.4 26.5 17.4 24.0 19.7 16.5 19.7 19.6

P/E - 2006(E) 23.5 13.6 15.5 20.7 22.8 17.8 19.0 17.4 15.7 18.4 17.9

P/E Relative - 2004(A) 1.60 0.84 0.89 0.90 1.55 0.89 1.36 0.92 0.78 1.11 1.03

P/E Relative - 2005(E) 2.24 0.89 0.99 1.29 1.60 1.05 1.45 1.19 1.00 1.19 1.18

P/E Relative - 2006(E) 1.52 0.89 1.01 1.35 1.48 1.16 1.23 1.13 1.02 1.19 1.16

Enterprise Value/EBITDA

2004(A) 11.37 P 9.62 P 8.25 8.48 P 15.39 P 7.56 11.02 7.24 P 10.21 P 10.14 9.77

2005(E) 12.52 P 9.65 P 8.49 10.26 P 13.89 P 8.34 10.68 8.21 11.36 9.92 10.09

2006(E) 9.69 9.26 8.49 9.92 12.25 8.72 9.05 7.51 10.97 9.67 9.54

Free Cash Flow per Share

2004(A) 1.56 4.79 3.68 2.29 1.71 2.30 32.50 1.22 1.29 3.79 --

2005(E) 1.46 5.01 3.59 1.92 1.65 2.19 31.91 0.79 1.22 3.63 --

2006(E) 2.00 5.38 4.02 2.03 2.01 2.15 44.60 0.92 1.18 3.77 --

Price/Free Cash Flow

2004(A) 22.5 15.7 17.0 14.0 28.7 15.9 26.3 13.6 13.4 17.9 18.0

2005(E) 24.1 15.0 17.5 16.8 29.7 16.7 26.8 20.9 14.1 18.7 19.6

2006(E) 17.6 13.9 15.6 15.9 24.4 16.9 19.1 17.9 14.7 18.0 17.4

Financial Data ($ mil)

Revenue - 2005(E) 1,823 P 7,614 P 3,044 3,337 P 2,540 P 5,571 3,555 765 572 1,194 --

EBITDA - 2005(E) 259 P 2,402 P 662 553 P 693 P 1,434 772 154 131 343 --

EBITDA Margin (%) 14.2% 31.5% 21.7% 16.6% 27.3% 25.7% 21.7% 20.1% 22.9% 28.7% 24.0%

Revenue - 2006(E) 1,976 7,905 3,095 3,376 2,828 5,460 3,887 795 583 1,231 --

EBITDA - 2006(E) 335 2,503 661 572 786 1,373 911 169 136 352 --

EBITDA Margin (%) 16.9% 31.7% 21.4% 16.9% 27.8% 25.1% 23.4% 21.2% 23.3% 28.6% 24.4%

Market Capitalization ($ mil)

Shares Outstanding (mil) 82.5 249.6 75.2 145.6 163.4 317.5 9.6 75.5 42.0 46.6 --

Equity Market Capitalization 2,901 18,713 4,716 4,676 8,023 11,580 8,187 1,248 727 3,166 --

Total Debt 578 P 4,908 P 1,450 P 1,191 978 P 2,185 444 29 762 253 --

Cash 26 142 41 38 23 123 273 7 0 2 --

Minority Interests 4 91 90 144 724 0 198 0 0 0

Investments 215 400 600 300 70 1,675 313 4 0 13 --

Enterprise Value 3,242 23,170 5,615 5,673 9,632 11,967 8,243 1,266 1,489 3,404 --

Debt-to-Capital 78.0% 37.4% 53.5% 44.6% 17.4% 20.6% 15.0% 5.5% 78.2% 14.8% 31.9%

Net Debt/EBITDA (2005A) 2.1 2.0 2.1 2.1 1.4 1.4 0.2 0.1 5.8 0.7 1.8

EPS CAGR (2004-06E) 11.3% 5.7% 2.0% -8.2% 11.2% -4.5% 14.1% -2.0% -5.4% 4.6% 1.9%

EBITDA CAGR (2004-06E) 8.3% 1.9% -1.5% -5.8% 12.1% -6.9% 10.4% -1.8% -3.5% 2.4% 0.8%

FCF CAGR (2004-06E) 13.2% 6.0% 4.4% -3.5% 8.4% -3.2% 17.1% -13.0% -4.6% -0.3% 1.3%

E = Lehman Brothers estimates A= Actual P = Pro forma

Note: Revenue and EBITDA multiples are pro forma, as needed, for full year for acquisitions/divestitures.

EPS and free cash flow estimates are from transaction closing date forward.

Free cash flow = Net Income + D&A - Capital Expenditures

New York Times includes stock option expensing starting in 2005 (full-year). For EPS/EBITDA/FCF CAGRs, the 2004 base year is pro forma for stock option expensing.

Small/Mid-Cap Newspapers

Source: Lehman Brothers


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8 June 21 , 2005

Figure 3: Cross Media Comparative Valuation

10-Year Range* 2005(E) 2006(E) 2005(E) 2006(E)

Newspapers

Dow Jones 12.5 9.7 24.1 17.6

Gannett 9.6 9.3 15.0 13.9

Knight Ridder 8.5 8.5 17.5 15.6

New York Times 10.3 9.9 16.8 15.9Scripps, E.W. 13.9 12.3 29.7 24.4

Tribune 8.3 8.7 16.7 16.9

Washington Post 10.7 9.0 26.8 19.1

Journal Comm. 8.2 7.5 20.9 17.9

Journal Register 11.4 11.0 14.1 14.7

McClatchy 9.9 9.7 18.7 18.0

Average (excl. Dow Jones) 6-10.5** 10.1 9.5 19.6 17.4

Radio

Clear Channel 10.5 9.5 11.5 12.5

Cox Radio 12.2 11.6 16.6 14.6

Cumulus 12.6 11.9 11.1 11.2

Emmis 13.1 12.1 13.2 12.0

Entercom 11.7 11.0 12.2 11.9

Radio One 12.8 11.9 13.8 13.1

Average 10-25 12.2 11.3 13.1 12.6

Hispanic

Entravision 15.8 13.5 33.7 17.6

Spanish Broadcasting 17.7 14.8 31.1 12.3

Univision 15.5 13.4 33.5 22.7

Average 15-50 16.3 13.9 32.8 17.5

Television

Hearst-Argyle TV 11.4 10.0 18.7 16.0

Nexstar Broadcasting 11.8 9.4 38.1 5.9

Sinclair Broadcast 11.4 9.9 15.9 9.0

Average 9-13 11.5 9.8 24.2 10.3

Outdoor

Lamar 11-17 13.0 11.9 15.8 13.0

Yellow Pages

Dex Media 9.7 9.5 8.6 7.5

RH Donnelley 10.0 9.6 7.9 7.3

Average 8-10 9.8 9.6 8.2 7.4

Large Cap. Entertainment

Disney 10.0 8.8 16.8 13.8

News Corp. 8.2 7.4 14.9 14.7

Liberty 8.2 6.9 -- --

Viacom 10.0 8.8 17.5 14.8

Average 9-18 9.1 8.0 16.4 14.4

Cable

Cablevision 8.2 6.6 23.8 18.9

Liberty Global 7.5 6.0 50.9 38.0

Average 8-13 7.9 6.3 37.4 28.5

E = Lehman Brothers Estimates * = 10-year historical range using the current year EBITDA

** = Range is for the more pure-play newspaper companies

Note: EBITDA Multiple = Enterprise Value / EBITDA; Free Cash Flow Multiple = Price / Free Cash Flow

EBITDA multiples are pro forma, as needed, for full year for acquisitions/divestitures.

EBITDA Multiple Free Cash Flow Multiple

Source: Lehman Brothers (Newspapers Craig Huber; Radio/ Hispanic/ Television/ Outdoor/ Yellow Pages Bill Meyers; Large Cap. Entertainment/ Cable Vijay Jayant)


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June 21, 2005 9

Figure 4: Multiples Paid in Selected N ewspaper Transactions, 19972005A

Aggregate Trailing Trailing Daily

Value Revenue EBITDA Circulation Daily

Date Buyer Seller ($ mil) ($ mil) ($ mil) (000) Revenue EBITDA Circulation

2005

May-05 Lee Enterprises Pulitzer 1,460.0 443.7 108.1 578.4 3.3 13.5 2,524

2005 Average 3.3 13.5 2,524

2004

Aug-04 Journal Register 21st Century Newspapers (Michigan) 415.0 156.0 35.0 137.5 2.7 11.9 3,018

Jan-04 McClatchy Merced Sun-Star 40.5 13.0 2.5 17.4 3.1 16.2 2,328

2004 Average 2.9 14.0 2,673

2003

May-03 Dow Jones The Record of Stockton, CA 144.0 37.0 10.6 59.3 3.9 13.6 2,430

Jan-03 New York Times Wash. Post - 50% share of Int'l Herald Tribune 130.0 80.0 -- 264.0 1.6 -- 492

2003 Average 2.8 13.6 1,461

2002

Apr-02 Eagle-Tribune Dow Jones - Essex County Newspapers 70.0 28.0 7.0 E 59.6 2.5 10.0 1,175

Apr-02 Lee Enterprises Howard Publications 694.0 208.0 60.3 E 479.0 3.3 11.5 1,449

Feb-02 Com munity Newspaper Hol dings Dow Jones - 4 sm all daily newspapers 182.0 47.0 14.0 E 95.9 3.9 13.0 1,897

2002 Average 3.2 11.5 1,507

2001

Oct-01 Journal Register Arthur L. Carter (private) 3.8 E 2.5 0.4 E -- 1.5 9.5 --

Sep-01 Journal Register Gannett 42.9 E 13.0 3.9 E 19.0 3.3 11.0 2,258

Aug-01 Journal Register Roe Jan Independent Publishing 3.0 E 2.0 0.3 E -- 1.5 10.0 --

Jun-01 Journal Register Metroweek 25.2 E 18.0 2.5 E -- 1.4 10.1 --

Feb-01 Journal Register Chesapeake Publishing 7.0 E 3.0 0.6 E -- 2.3 11.7 --

2001 Average 2.0 10.4 2,258

2000

Oct-00 Freedom Journal Register 65.0 15.4 5.7 28.0 4.2 11.4 2,317

Aug-00 Pulitzer Journal Register 165.0 45.0 12.8 242.9 3.7 12.9 679

Aug-00 Media General Thomson 237.0 50.0 16.0 90.0 4.7 14.8 2,633

Jun-00 Gannett Central Newspapers 2,800.0 775.0 220.0 841.3 3.6 12.7 3,328

Jul-00 Gannett Thomson 1,036.0 215.0 64.5 424.0 4.8 16.1 2,443

Jun-00 Gannett Newscom 802.0 225.0 55.5 350.0 3.6 14.5 2,291

Mar-00 Tribune Times Mirror 5,907.6 2,515.0 515.4 2,382.6 2.3 11.5 2,479

Jan-00 New York Times Worcester Telegram & Gazette 295.0 82.0 25.4 107.0 3.6 11.6 2,757

2000 Average 3.8 13.2 2,366

1999

Oct-99 Pulitzer Pantagraph 180.0 29.0 9.7 354.6 6.2 18.5 508

Aug-99 Hearst San Francisco Chronicle 660.0 -- -- -- -- -- --

Jun-99 Gannett Newsquest 1,721.5 507.6 155.0 5,121.7 3.4 11.1 336

May-99 Media News Denver Newspapers - 20% stake Media General 460.0 233.4 -- 370.4 2.0 -- 1,242

May-99 Johnston Press Portsmouth and Sunderland News (82.7% stake) 410.9 -- -- -- -- -- --

Feb-99 Evercore Capital Partners American Media 840.2 298.8 102.5 714.3 2.8 8.2 1,176

Feb-99 Times Mirror Newport Media 125.0 -- -- -- -- -- --

1999 Average 3.6 12.6 815

1998

Dec-98 Torstar Corp Quebecor (Sun Media) 225.0 -- 18.8 -- -- 12.0 --

Dec-98 Quebecor Sun Media 864.5 -- -- -- -- -- --

Dec-98 Community Newspaper Holdings Hollinger International 475.0 -- -- 900.0 -- -- 528

Nov-98 WEHCO Media Chattanooga Times -- -- -- 41.3 -- -- --Sep-98 Seattle Times (Blethen Corp) Guy Gannett Communications 200.0 71.4 12.6 242.0 2.8 15.9 --

Jul-98 Community Newspaper Holdings Donrey Media Group 183.0 46.0 -- -- 4.0 12.2 --

Aug-98 Hollinger Canadian Publishing Southam 170.8 861.8 -- 1,600.0 0.2 8.3 107

Jul-98 Mirror Group Newspapers Derry Journal 29.9 -- -- 75.9 -- -- 394

May-98 Journal Register Goodson Newspaper 300.0 68.9 -- 360.0 4.4 14.0 833

May-98 Rural Press Canberra Times 92.8 -- -- -- -- -- --

May-98 Huckle Publishing Mainstream Publications 26.5 -- -- -- -- -- --

Apr-98 Orient Publishing Home Counties Newspapers Holdings 92.7 64.3 -- -- 1.4 15.6 --

Mar-98 Bonnier Group Tidnings Marieberg AB 559.7 -- -- -- -- -- --

Feb-98 Investor Group United Provincial Newspapers 591.9 228.2 -- -- 2.6 -- --

Feb-98 Com munity Newspaper Hol ding Media General - Kentucky Publi shing 23.8 -- -- 8.7 -- -- 2,736

Feb-98 Southnews United-Utd Southern Publications 77.6 -- -- -- -- -- --

1998 Average 2.6 13.0 919

1997

Nov-97 McClatchy Newspapers Minneapolis Star Tribune (Cowles) 1,380.0 492.6 93.9 -- 2.8 14.7 --

Nov-97 Leonard Green & Partners Hollinger International 310.0 103.0 31.0 -- 3.0 10.0 --

Jul-97 Harte-Hanks Communications ABC Shoppers Group (ABC) 503.0 -- -- -- -- -- --

Jul-97 Lee Enterprises Pacific Northwest Publishing 185.0 -- -- -- -- -- --

Jul-97 Mirror Group Newspapers Midland Independent Newspapers 501.2 189.4 36.1 -- 2.6 13.9 --

May-97 E.W. Scripps Harte-Hanks Communications-Media Assets 775.0 144.7 64.6 231 5.4 12.0 3,355

Apr-97 Knight Ridder Walt Disney-ABC Newspapers 1,650.0 500.0 150.0 -- 3.3 11.0 --

Jan-97 Community Newspaper Media General 107.0 -- -- -- -- -- --1997 Average 3.4 12.3 3,355

1997-2005 Average 3.1 12.5 1,767

E = Lehman Brothers estimates

Note: Tribune's purchase of Times Mirror has been adjusted for the sale of Times Mirror's non-newspaper assets.

For Journal Register, in 2001 most of the newspapers purchased were non-dailies.

Aggregate value of May 1999 Media News acquisition of 20% of Denver Newspapers shown is the implied 100% value.

Aggregate value of Jan. 2003 New York Times acquisition of 50% of I nternational Herald Tribune shown is the implied 100% value.

Aggregate Value as a Multiple of

Summary Data for

Acquired Co.

Source: Company reports and Lehman Brothers estimates


10/18

Newspapers

10 June 21 , 2005

Figure 5: Newspaper Advertising Revenue as a Percentage of Total U.S. Advertising Revenue, 19502006E

E = Lehman Brothers estimates A = Actual

0%

5%

10%

15%

20%

25%

30%

35%

40%

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

200

4(A)

200

6(E)

Newspaper Advertising Market Share

Source: Advertising Age, N ewspaper Association of America, Lehman Brothers

Figure 6: N ominal GDP % Change versus Newspaper Ad Revenue % Change, 19502006E


-15%

-10%

-5%

0%

5%

10%

15%

20%

1950

1952

1954

1956

1958

1960

1962

1964

1966

1968

1970

1972

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

(A)

2006

(E)

%C

hange

Nominal GDP % Change Newspaper Ad Revenue % Change

Source: Advertising Age, N ewspaper Association of America, Lehman Brothers


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June 21, 2005 11

Figure 7: Percentage of Adults W ho Read a Daily Newspaper, 19642004

40%

45%

50%

55%

60%

65%

70%

75%

80%

85%

1964

1967

1970

1971

1973

1974/75

1977/78

1978/79

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

Percentage of All U.S. Adults Who Read A Daily Newspaper

Source: 1964 N elson Media Service: Newspapers A.C. N ielsen Company (1964), W .R. Simmons & Associates (1967-1977 / 78 ), Study of Media & Markets (1978/ 79 -

1994 ), Simmons Market Research Bureau, Inc. (1996/ 97 ), Scarborough Research - Top 5 0 Market Report (1998-2004 )

Figure 8: Percentage of U.S. Adults Who Read a Daily N ewspaper - By Age Group, 19672004

20%

30%

40%

50%

60%

70%

80%

90%

1967

1970

1971

1973

1974/75

1977/78

1978/79

1979

1980

1981

1982

1983

1984

1985

1986

1987

1988

1989

1990

1991

1992

1993

1994

1995

1996

1997

1998

1999

2000

2001

2002

2003

2004

55+ Age Group

18-34 Year Olds

Source: 1964 N elson Media Service: Newspapers A.C. N ielsen Company (1964), W .R. Simmons & Associates (1967-1977 / 78 ), Study of Media & Markets (1978/ 79 -

1994 ), Simmons Market Research Bureau, Inc. (1996/ 97 ), Scarborough Research - Top 5 0 Market Report (1998-2004 )


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Newspapers

12 June 21 , 2005

Figure 9: Total Newspaper Company Circulation (for six-month periods ending March 31)

Company/Newspaper 2004 2005 % Change 2004 2005 % Change

Dow Jones

Wall Street Journal 2,101,017 2,070,498 -1.5% -- -- --

Ottaway Newspapers 428,568 437,101 2.0% 470,041 481,490 2.4%

Gannett

USA Today 2,280,761 2,281,831 0.0% -- -- --

Community Newspapers (100 in total) 5,372,239 5,258,798 -2.1% 6,870,120 6,667,935 -2.9%

Knight Ridder - total circulation 3,787,983 3,718,491 -1.8% 5,167,897 5,049,493 -2.3%

New York Times

New York Times 1,133,763 1,136,433 0.2% 1,677,003 1,680,582 0.2%

Boston Globe 452,109 434,330 -3.9% 686,575 672,882 -2.0%

Regionals 638,156 639,068 0.1% 693,569 690,266 -0.5%

Total circulation 2,224,028 2,209,831 -0.6% 3,057,147 3,043,730 -0.4%

Scripps - total circulation excluding JOA's 932,000 904,000 -3.0% 1,157,000 1,110,000 -4.1%

Tribune - total circulation 2,854,693 2,666,861 -6.6% 4,238,682 3,943,085 -7.0%

Washington Post - flagship 772,553 751,871 -2.7% 1,025,579 1,000,565 -2.4%

Journal Comm. - Milwaukee 244,893 242,819 -0.8% 430,755 411,749 -4.4%

Journal Register - total circulation 639,000 617,000 -3.4% 678,000 645,000 -4.9%

McClatchy - total circulation 1,433,651 1,434,258 0.0% 1,866,298 1,822,316 -2.4%

Total (for ten companies) 23,071,386 22,593,359 -2.1% 24,961,519 24,175,363 -3.1%

Total (excluding Tribune) 20,216,693 19,926,497 -1.4% 20,722,837 20,232,278 -2.4%

Overall Newspaper Industry Circulation 48,311,581 47,374,033 -1.9% 52,398,158 51,073,104 -2.5%

Note: Knight Ridder figures include company estimates for San Jose Mercury News.

Tribune figures exclude Newsday due to previous circulation misstatements.

Overall newspaper industry circulation includes 814 daily newspapers and 643 Sunday newspapers.

JOA = Joint Operating Agreement

Daily Sunday

Source: Audit Bureau of Circulations eFASFAX statement for the period ended M arch 31 , 200 5, and N ewspaper Association of America


13/18

Newspapers

June 21, 2005 13

Figure 10: Newspaper Division N on-Newsprint Cash Costs (% change), 200107E

Knight New York Scripps, Washington Journal Journal

Dow Jones Gannett Ridder Times E.W. Tribune Post Comm. Register McClatchy Average

2001 Annual -5.7 -3.5 -5.8 -2.2 1.5 -2.3 -2.8 -- 0.2 1.2 -2.2

2002 Annual -5.7 3.3 1.5 3.3 3.2 -0.5 0.1 -- 0.2 0.7 0.7

2003 Annual -2.2 2.4 2.7 2.5 2.5 1.8 2.3 -0.4 0.7 3.7 1.6

1Q 5.9 4.5 2.6 3.0 7.5 4.0 0.0 -5.5 1.9 3.5 2.7

2Q 4.3 4.5 2.5 2.7 5.6 4.8 7.8 -1.4 2.1 5.0 3.8

3Q 1.5 5.0 2.0 3.3 8.3 2.0 4.5 2.2 0.8 2.5 3.2

4Q -0.8 5.0 3.3 4.5 7.2 1.5 4.8 0.2 3.3 3.3 3.2

2004(A) Annual 2.7 4.8 2.6 3.4 7.2 3.1 4.3 -1.1 2.0 3.6 3.2

1Q(A) 0.0 2.6 2.6 4.1 0.2 -1.5 4.5 4.5 2.4 2.2 2.2

2Q(E) 4.2 2.7 1.7 5.8 1.4 -1.4 2.0 3.0 3.7 1.1 2.4

3Q(E) 7.5 2.1 1.2 2.0 2.1 -1.8 2.0 3.0 1.6 3.2 2.3

4Q(E) 10.0 1.9 1.9 3.6 2.4 -1.8 2.0 3.2 3.5 2.3 2.9

2005(E) Annual 5.4 2.3 1.9 3.9 1.5 -1.6 2.6 3.4 2.8 2.2 2.4

2006(E) Annual 3.9 3.2 1.6 -0.3 2.3 -2.4 2.4 2.3 0.8 2.5 1.6

2007(E) Annual 3.8 2.5 2.3 1.3 2.5 0.5 3.1 3.0 1.9 2.5 2.3


Note: Above figures adjusted for acquisitions/divestitures and "one-time items".

Dow Jones 2005/06 figures include costs for new weekend edition of Wall Street Journal.

New York Times includes stock option expensing starting in 2005 (full-year).

Washington Post figures are adjusted to exclude extra week in 4Q'04 due to fiscal reporting.

Source: Company reports and Lehman Brothers estimates


14/18

Newspapers

14 June 21 , 2005

Price Target Methodologies and Investment Risks

Our 12-month price target on shares of Dow Jones is $43, which is derived as theaverage of the following three methodologies. 1) Our 10-year discounted cash flow

analysisusing a weighted average cost of capital (WACC) of 11 .0%, a long-term free

cash flow growth rate of 4.0%, and a terminal free cash flow multiple of 14.4x, or an

implied terminal EBITDA multiple of 8.0xputs fair value at $43. 2) A target multiple of12x estimated 2006 EBITDA puts fair value at $45 per share (which works out to 30.0x

2006E EPS and 22.5x FCF). 3) Our sum-of-the-parts analysis puts fair value at $41

based on 2006 EBITDA multiples, 14x for Print Publishing (mostly The Wall Street

Journal), 10.5x for Electronic Publishing, 11.8x for MarketWatch (pro forma full year),

and 8.5x for the Community Newspapers, an approximate $434 million hit to the

overall valuation for corporate expenses, $215 million in estimated value for the equity

portfolio using revenue and EBITDA multiples, and net debt of approximately $552

million and shares outstanding of 82.5 million.

Our 12-month price target on shares of Gannett is $74 which is derived as theaverage of the following three methodologies: 1) Our 10-year discounted cash flow

analysis puts fair value at $76 (using a W ACC of 10.4%, a long-term free cash flow

growth rate of 4.0%, and a 1 5.7 terminal free cash flow multiple or an implied terminal

EBITDA multiple of 9.2x). 2) A target multiple of 9.0x estimated 2006 EBITDA, or $72

per share (which works out to 13.1x 2006E EPS and 13.4x FCF). 3) Our sum-of-the-

parts analysis puts fair value at $74 (based on applying a 2006E EBITDA multiple of

9.0x for the newspaper division and a multiple of 10.5x for the TV station group,

adjusting down the overall valuation by an estimated $507.5 million for corporate

expenses, and taking into account net debt of $4.7 billion, an estimated $400 million in

investments, and shares outstanding of 249.6 million).

Our 12-month price target on shares of KnightRdder is $55, which is derived as theaverage of the following two methodologies: 1) our 10-year discounted cash flow

analysis (using a W ACC of 10.4%, a long-term free cash flow growth rate of 3.8%, and

a terminal free cash flow multiple of 15.3 or an implied terminal EBITDA multiple of

7.9x), which puts fair value at $55; and 2) a target multiple of 7.5x estimated 2006

EBITDA, or $54 per share (which works out to 13.3x 2006E EPS and 13.4x FCF).

Our 12-month price target on shares of N ewYorkTimes is $28, which is derived asthe average of: 1) our 10-year discounted cash flow analysis puts fair value at $28

(using a W ACC of 10.6%, a long-term free cash flow growth rate of 3.8%, and a

terminal free cash flow multiple of 14.8x or an implied terminal EBITDA multiple of 8.5x;

and 2) a target multiple of 9.0x estimated 2006 EBITDA, or $28 per share (which

works out to 18.1x 2006E EPS and 13.8x FCF).


15/18

Newspapers

June 21, 2005 15

Our 12-month price target on shares of Scripps is $43, which is derived as theaverage of the following three methodologies. 1) Our 10-year discounted cash flow


growth rate of 4.3%, and a terminal free cash flow multiple of 16.5 or an implied

terminal EBITDA multiple of 8.4x). 2) A target multiple of 11.0x estimated 2006 EBITDA,

or $44 per share (which works out to 20.5x 2006E EPS and 21.9x FCF). 3) Our sum-of-the-parts analysis puts fair value at $46 based on 2006E EBITDA multiples (8.0x for

the newspapers, 9.0x for the TV stations, 12.0x for Home & Garden TV, 13.0x for Food

Network, 6.0x for licensing and other), and a value of $350 million for Do It Yourself,

$250 million for Fine Living, $15 0 million for Shop At Home Network, $10 0 million for

Great American Country Network (GAC), $400 million for newly acquired Shopzilla,

docking $502.5 million in value for corporate expenses at a multiple of 10.8, and

taking into account net debt of $955 million, and shares outstanding of 163.4 million.

Our 12-month price target on shares of Tribune is $29, which is derived as theaverage of the following three methodologies. 1) Our 10-year discounted cash flow


growth rate of 3.0%, and a terminal free cash flow multiple of 12.8x, or an implied

terminal EBITDA multiple of 6.8x). 2) A target multiple of 7.0x estimated 2006 EBITDA,

or $29 per share (which works out to 14.1x 2006E EPS and 13.5x FCF). 3) Our sum-

of-the-parts analysis puts fair value at $31 per share (based on a 2006E EBITDA multiple

of 7.0 for the newspapers, a multiple of 8.5 for the broadcasting and entertainment

division, a $395.6 million reduction in value for corporate expenses, $300 million in

value assigned to the Chicago Cubs, $1.675 billion in value of the equity portfolio, net

debt of $2.06 billion, assumed $475 million for an estimated 50% of potential Times

Mirror tax liability, and shares outstanding of 317.5 million).

Our 12-month price target on shares of W ashingtonPost is $1,000 which is derivedas the average of the following three methodologies. 1) Our 10-year discounted cash

flow analysis puts fair value at $1,000 per share (using a W ACC of 10.3%, a long-term

free cash flow growth rate of 4.5%, and a terminal free cash flow multiple of 17.3x, or

an implied terminal EBITDA multiple of 8.9x). 2) A target multiple of 10.5x estimated

2006 EBITDA, or $990 per share (which works out to 22.0x 2006E EPS and 22.2x

FCF). 3) Our sum-of-the-parts valuation puts fair value at $1,012 per share based on

2006 EBITDA multiples, 8.0 for the newspaper division, a multiple of 10.0 for

broadcasting, a multiple of 9.0 for magazines, a multiple of 9.5 for cable, and a

multiple of 15.0 for the 95 .2% education stake. Docking the overall valuation by

approximately $368 million for corporate expenses, and taking into account net debt of

$170.9 million, $312.7 million for the equity investment portfolio, and 9.59 million

shares outstanding, gives us fair value.

Our 12-month price target on shares of Journal Communications is $15, which isderived as the average of the following three methodologies: 1) our 10-year discounted

cash flow analysis puts fair value at $1 4 (using a W ACC of 10.8%, a long-term free


16/18

Newspapers

16 June 21 , 2005

cash flow growth rate of 3.5%, and a terminal free cash flow multiple of 13.8 or an

implied terminal EBITDA multiple of 6.4); 2) a target multiple of 6.75x estimated 2006

EBITDA equates to $15 per share (which results in 15.8x 2006 estimated EPS and

16.3x FCF); and 3) Our sum-of-the-parts analysis puts fair value at $16 based on the

following 2006 EBITDA multiples by segmentmultiple of 8.0 for the newspapers,

multiple of 9.5 for the TV stations, multiple of 10.0 for the radio stations, multiple of 5.0for the printing services operation, multiple of 7.5 for the other category, multiple of 3.5

for telecommunications, and net debt outstanding of $2.3 million and shares outstanding

of 75.5 million. This works out to a blended 2005E EBITDA multiple of 7.4x for all

these businesses, or 8.6x for the media businesses.

Our 12-month price target on shares of JournalRegister is $13 which is derived as theaverage of the following two methodologies: 1) our 10-year discounted cash flow


growth rate of 3.8%, and a terminal free cash flow multiple of 16.0x or an implied

terminal EBITDA multiple of 9.0x); and 2) a target multiple of 10.0x estimated 2006

EBITDA, or $13 per share (which results in 11.8x 2006 estimated EPS and 11.0x

FCF).Our 12-month price target on shares of McClatchy is $58, which is derived as the

average of the following two methodologies: 1) our 10-year discounted cash flow


growth rate of 4.0%, and a terminal free cash flow multiple of 15.6x, or an implied

terminal EBITDA multiple of 8.0x); and 2) a multiple target of 8.25x estimated 2006

EBITDA, or $57 per share (which is 15.4x 2006 estimated EPS and 15.1x FCF). Investment Risks

Rsks that may impede the achievement of our price targets for the 10 newspaperswe cover, in our view, include: 1) the U.S. economy does not continue to recover over

the next 1218 months, and thus the advertising rebound we expect never materializes;

2) national and/ or local advertisers make a secular shift out of newspapers and move

their advertising budgets to the TV networks/ stations, cable networks, the trade press,

business/ weekly magazines, and/ or cut them altogether; 3 ) secular deterioration occurs

at a faster rate in newspaper classified advertising (help wanted, in particular) and a

continued migration to third-party online sites; 4) newsprint prices rise faster than we

expect in 2005 and 2006; 5) a company starts to expand its cost base again in

anticipation of better economic times that do not occur in the coming years; 6) a

company undertakes a large, expensive acquisition and/ or the integration of an

acquisition does not go smoothly; 7) the proposed loosening of media ownership rules

and regulations fail or are tightened; 8) current circulation figures from the companys

newspapers are not correct and must be restated downward; and 9) recent larger than

normal newspaper circulation volume drops lead to lack of advertising pricing power

and/ or ad volume decreases.


17/18

Newspapers

June 21, 2005 17

Risks specific to each company that may impede the achievement of our price targets, in

our view, which are not aforementioned, include the following:

Dow Jones: 1) Employment levels on the sell side and/ or the buy side deteriorate,putting pressure on Dow Jones Newswires; 2) tombstone advertising suffers from a lack

of public offerings and/ or investment banks choose not to place tombstone advertising inThe Wall Street Journal; 3) a stock market downturn leads to fewer advertisements from

money management firms and/ or investment banks; and 4) other advertisers look for

alternative publications in which to place their ads.

Gannett: 1) TV stations suffer from a slowdown in advertising; and 2) the large U.K.newspaper operation is negatively affected by an advertising slowdown in that market

and/ or currency hurts the overall performance in U.S. dollars.

N ew York Times: 1) TV stations suffer from a slowdown in advertising; and 2) localeconomic trends in New York City and/ or Boston deteriorate worse than the national

average.

Scripps: 1) TV stations suffer from a slowdown in advertising; 2) investors lofty revenueand ratings expectations for Scripps Networks do not materialize; and 3 ) the company

stumbles trying to turn around the Shop At Home Network.

Tribune: 1) TV stations suffer from a slowdown in advertising; 2) ratings on the WBnetwork fall significantly and hurt Tribunes large WB TV station portfolio; 3 ) the

possibility of a $900 million payout for a tax liability inherited in the Times Mirror

acquisition of 2000.

W ashington Post: 1) TV stations and/ or its magazines suffer from a slowdown inadvertising; 2) a major falloff in the number of cable subscribers occurs; and 3) revenue

growth at the education division slows significantly and/ or regulation changes have an

impact on the business.

Journal Communications: 1) TV stations suffer from a slowdown in advertising; 2) thepossibility that continued margin expansion in all segments, particularly newspapers and

broadcasting, does not materialize as expected; 3) there is significant deterioration in the

telecommunications business; 4) the company loses some or all of its business from a

major client, including MCI, Global Crossing, Dell, and Miller Brewing; and 5)

continued pricing pressure in the commercial printing businesses.

McClatchy: 1) Advertising in one or both of McClatchys two largest newspapermarkets, California and Minneapolis, deteriorates much faster than the national average,

thus putting downward pressure on advertising overall at McClatchy.

Data in this report are priced as of the close of business, June 20, 2 00 5.


18/18

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FOR CURRENT IMPORTANT DISCLOSURES REGARDIN G COMPAN IES THAT ARE THE SUBJECTOF THIS RESEARCH REPORT, PLEASE SEND A W RTTEN REQUEST TO: Lehman Brothers ControlRoom, 745 Seventh Avenue, 1 9 th floor, New York, N Y 10019or refer to the firm's disclosure website at www.lehman.com/ disclosuresImportant DscosuresTheanalystsresponsiblefor preparingthisreport havereceivedcompensationbaseduponvariousfactorsincludingtheFirmstotal revenues, aportionof whichisgeneratedby investment bankingactivities.

Oher Materia ConflicsLehmanBrothersisactingasafinancial advisor toTimeWarner inconnectionwithTimeWarner andComcast'spotential acquisitionof AdelphiaCommunications.

Gude to Lehman BrothersEquty Research Rating SysemOur coverageanalystsusearelativeratingsysteminwhichthey ratestocksas1-Overweight, 2- Equal weight or 3-Underweight (seedefinitionsbelow)relativeto other companiescoveredby theanalyst or ateamof analysts that aredeemedto bein thesameindustry sector (thesector coverageuniverse). Toseealist of thecompaniesthat compriseaparticular sector coverageuniverse, pleasegotowww.lehman.com/ disclosures.Inadditionto thestock rating, weprovidesector viewswhichratetheoutlook for thesector coverageuniverseas1-Positive, 2-Neutral or 3-Negative(seedefinitionsbelow). Aratingsystemusingtermssuchasbuy, holdandsell isnot theequivalent of our ratingsystem. Investorsshouldcarefullyreadtheentireresearchreport includingthedefinitionsof all ratingsandnot infer itscontentsfromratingsalone.Sock Rating1 - Overweght - Thestock is expected to outperformtheunweightedexpected total returnof thesector coverageuniverse over a12-monthinvestment horizon.2 - Equa weght - Thestock isexpectedtoperforminlinewiththeunweightedexpectedtotal returnof thesector coverageuniverseover a12- monthinvestment horizon.3 - Underweght - Thestock isexpectedto underperformtheunweightedexpectedtotal returnof thesector coverageuniverseover a12- monthinvestment horizon.RS- Rating Suspended- Theratingandtarget pricehavebeensuspendedtemporarily tocomply withapplicableregulationsand/or firmpoliciesincertaincircumstancesincludingwhenLehmanBrothersisactinginanadvisory capacity inamerger or strategictransactioninvolvingthecompany.Sector Vew1 - Postive- sector coverageuniversefundamentals/valuationsareimproving2 - Neutra - sector coverageuniversefundamentals/valuationsaresteady, neither improvingnor deteriorating3 - Negative- sector coverageuniversefundamentals/valuationsaredeterioratingSock RatingsfromFebruary 2001 to Augus 5, 2002 (secor vew dd not exis ):Thisisaguidetoexpectedtotal return(priceperformanceplusdividend) relativeto thetotal returnof thestocks local market (i.e. themarket wherethestock primarily trades) over thenext 12 months.1 - Srong Buy- expectedtooutperformthemarket by 15 or morepercentagepoint.2 - Buy - expectedtooutperformthemarket by 5-15 percentagepoints3 - Market Perform- expectedtoperforminlinewiththemarket, plusor minus5 percentagepoints4 - Market Underperform- expectedtounderperformthemarket by 5-15 percentagepoints5 - Sel - expectedtounderperformthemarket by 15 or morepercentagepointsDsribution of RatingsLehmanBrothersGlobal Equity Researchhas1,706 companiesunder coverage.

40%havebeenassigneda1-Overweight ratingwhich, for purposesof mandatory regulatory disclosures, is classifiedasaBuy rating. 33%ofcompanieswiththisratingareinvestment bankingclientsof theFirm.

42%havebeenassigneda2-Equal weight ratingwhich, for purposesof mandatory regulatory disclosures, is classifiedasaHoldrating. 7%ofcompanieswiththisratingareinvestment bankingclientsof theFirm.

18%havebeenassigneda3-Underweight ratingwhich, for purposesof mandatory regulatory disclosures, is classifiedasaSell rating. 83%ofcompanieswiththisratingareinvestment bankingclientsof theFirm.

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