Note 3: Investments in Unconsolidated Affiliates

In June 1999, the Company sold 20% of the outstanding common stock of Denver Newspapers, Inc. (DNI), the parent company of The Denver Post (a Colorado daily newspaper), to MediaNews, Inc., for $39 million, resulting in a $19 million after-tax gain. Subsequently, DNI’s name was changed to the Denver Post Corporation (Denver). The Company still retains 20% ownership of the common stock of Denver and, for the three year period ending June 2002, will share in any realized appreciation in value of its previously owned 20% interest if that stock is sold to a third party or publicly offered. Additionally, the Company’s preferred stock investment in Denver was redeemed in June 1999 for $34 million plus $19.2 million of accrued but unpaid dividends. The Company recognizes its share of Denver’s net income applicable to common stockholders on a one month lag. In 1997, Denver’s net sales totaled $224.8 million while gross profit was $111. 3 million; net income was $19.4 million, of which $16.7 million was net income applicable to common stock. The Company’s equity in Denver’s 1997 net income amounted to $6.7 million.

The Company also has a one-third partnership interest in SP Newsprint Company (SPNC), formerly Southeast Paper Manufacturing Company, a domestic newsprint manufacturer which also pays licensing fees to the Company. In November 1999, SPNC acquired Smurfit Newsprint Corporation’s Newberg, Oregon mill. Summarized financial information for the company’s investment in SPNC, accounted for by the equity method, follows:

Other:

Retained earnings of the Company at December 26, 1999, included $23.9 million related to undistributed earnings of unconsolidated affiliates. During 1999, the Company invested approximately $2.5 million for a 7.14% ownership interest in AdOne, L.L.P., a national online database of classified advertising, which is being accounted for under the equity method.

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