8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 8-K/A

CURRENT REPORT PURSUANT

TO SECTION 13 OR 15(D) OF THE

SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported) September 14,  2007                                                                                                                

Champion Industries, Inc.

(Exact Name of Registrant as Specified in Its Charter)

West Virginia

(State or Other Jurisdiction of Incorporation)

0-21084                                                      55-0717455

             (Commission File No.)                      (IRS Employer Identification No.)

     2450 First Avenue

P. O. Box 2968

Huntington, West Virginia                                                                                                                               25728

    &# 160; (Address of Principal Executive Offices)                                                                                                      (Zip Code)

(304) 528-2700

(Registrant's Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

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INFORMATION TO BE INCLUDED IN THE REPORT
	Item 2.  Acquisition or Disposition of Assets.
	By Form 8-K dated September 19, 2007 filed with the Commission on September 19, 2007 Champion Industries, Inc.  (“Champion”), a West Virginia corporation, reported that effective September 14, 2007 it had completed the acquisition of the assets of the Herald-Dispatch daily newspaper published in Huntington, West Virginia for a purchase price of $77 million, subject to a post closing adjustment as set forth in the asset purchase agreement described in the 8-K, attached thereto and incorporated therein. In its Form 8-K, Champion stated that with respect to the information required by Items 9.01 (a) (4) and 9.01 (b) (2) of Form 8-K, such information would be filed as an amendment to Form 8-K to the extent required. Champion files this Amendment to Current Report on Form 8-K/A to amend and supplement its earlier report on Form 8-K by providing the financial statements of the acquired business and required pro forma financial information, as follows.

Item 9.01    Financial Statements and Exhibits

(a)	Financial Statements
		The following report and financial statements of the (Huntington) Herald-Dispatch (“HHD”) are filed as part of this Form 8-K/A and are attached hereto, and incorporated herein by reference as Exhibit 99.1.  Interim financial statements of HHD are filed as part of this Form 8-K/A and are attached hereto, and incorporated herein by reference as Exhibit 99.2.
		(a) Report of Independent Auditors. (b) Balance Sheets as of December 31, 2006 and December 25, 2005. (c) Statements of Income for the Fiscal years ended December 31, 2006, December 25, 2005 and December 26 2004. (d) Statements of Parent Equity for the Fiscal years ended December 31, 2006, December 25, 2005 and December 26, 2004. (e) Statements of Cash Flows for the Fiscal years ended December 31, 2006, December 25, 2005 and December 26, 2004. (f) Notes to Financial Statements. (g) Unaudited interim financial statements:  Balance Sheet as of June 30, 2007, Statements of Income for the Fiscal six months ended June 30, 2007 and 2006, Statements of Cash Flows for the Fiscal six months ended June 30, 2007 and 2006, Notes to Financial Statements.
(b)	Pro forma financial information
		The following pro forma financial information is filed as part of this Form 8-K/A and is attached hereto and incorporated herein by reference as Exhibit 99.3.  Champion’s fiscal year ends October 31, 2006 while the HHD fiscal year ends on the last Sunday of the calendar year.  Therefore, the pro forma financial statements are combined pursuant to the periods defined herein.
		(a) Unaudited Pro forma combined Balance Sheets as of April 30, 2007 for Champion and as of June 30, 2007 for HHD. (b) Unaudited Pro forma combined Statements of Operations for the year ended October 31, 2006 for Champion and December 31, 2006 for the HHD and the six months ended April 30, 2007 for Champion and the six months ended June 30, 2007 for the HHD. (c) Notes to the unaudited pro forma combined financial statements.

2

(d)	Exhibits
	23	CONSENT OF ERNST & YOUNG LLP
	99.1	(a) Report of Independent Auditors. (b) Balance Sheets as of December 31, 2006 and December 25, 2005. (c) Statements of Income for the Fiscal years ended December 31, 2006, December 25, 2005 and December 26 2004. (d) Statements of Parent Equity for the Fiscal years ended December 31, 2006, December 25, 2005 and December 26, 2004. (e) Statements of Cash Flows for the Fiscal years ended December 31, 2006, December 25, 2005 and December 26, 2004. (f) Notes to Financial Statements.
	99.2	Unaudited interim financial statements:  Balance Sheet as of June 30, 2007, Statements of Income for the Fiscal six months ended June 30, 2007 and 2006, Statements of Cash Flows for the Fiscal six months ended June 30, 2007 and 2006, Notes to Financial Statements.
	99.3	(a) Unaudited Pro forma combined Balance Sheets as of April 30, 2007 for Champion and as of June 30, 2007 for HHD. (b) Unaudited Pro forma combined Statements of Operations for the year ended October 31, 2006 for Champion and December 31, 2006 for the HHD and the six months ended April 30, 2007 for Champion and the six months ended June 30, 2007 for the HHD. (c) Notes to the unaudited pro forma combined financial statements.

3

SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf of the undersigned hereunto duly authorized

	CHAMPION INDUSTRIES, INC. (Registrant)
Date: November 14, 2007
	/s/ Todd R. Fry Todd R. Fry, Senior Vice President and Chief Financial Officer

4

EXHIBIT INDEX

Exhibit Number	Exhibit
23	CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
99.1	(a) Report of Independent Auditors. (b) Balance Sheets as of December 31, 2006 and December 25, 2005. (c) Statements of Income for the Fiscal years ended December 31, 2006, December 25, 2005 and December 26 2004. (d) Statements of Parent Equity for the Fiscal years ended December 31, 2006, December 25, 2005 and December 26, 2004. (e) Statements of Cash Flows for the Fiscal years ended December 31, 2006, December 25, 2005 and December 26, 2004. (f) Notes to Financial Statements.
99.2	Unaudited interim financial statements:  Balance Sheet as of June 30, 2007, Statements of Income for the Fiscal six months ended June 30, 2007 and 2006, Statements of Cash Flows for the Fiscal six months ended June 30, 2007 and 2006, Notes to Financial Statements.
99.3	(a) Unaudited Pro forma combined Balance Sheets as of April 30, 2007 for Champion and as of June 30, 2007 for HHD. (b) Unaudited Pro forma combined Statements of Operations for the year ended October 31, 2006 for Champion and December 31, 2006 for the HHD and the six months ended April 30, 2007 for Champion and the six months ended June 30, 2007 for the HHD. (c) Notes to the unaudited pro forma combined financial statements.
5

EX-23

Exhibit 23

Consent of Ernst & Young LLP, Independent Auditors

We consent to the incorporation by reference in the registration statement of Champion Industries, Inc. and Subsidiaries on Form S-8 (file No. 333-113851) of our report dated October 11, 2007, with respect to the financial statements of the (Huntington) Herald-Dispatch as of December 31, 2006 and December 25, 2005 and for each of the three fiscal years in the period ended December 31, 2006, included in this Form 8-K of Champion Industries, Inc.

McLean, Virginia

November 12, 2007

Ex 23 - 1

EX-99.1

EXHIBIT 99.1

Report of Ernst & Young LLP,

Independent Auditors

Board of Directors and Shareholders of GateHouse Media, Inc.:

We have audited the accompanying balance sheets of the (Huntington) Herald-Dispatch (the Company) as of December 31, 2006 and December 25, 2005, and the related statements of income, cash flows, and parent equity for each of the three fiscal years in the period ended December 31, 2006. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the (Huntington) Herald-Dispatch at December 31, 2006 and December 25, 2005, and the results of its operations and its cash flows for each of the three fiscal years in the period ended December 31, 2006, in conformity with U.S. generally accepted accounting principles.

As disclosed in Note 2 to the financial statements, the Company adopted Statement of Financial Accounting Standards No. 123(R) during fiscal 2006.

McLean, Virginia

October 11, 2007

Ex 99.1 - 1

BALANCE SHEETS

(Huntington) Herald–Dispatch

(Carved-out Newspaper of GateHouse Media, Inc.)

In thousands of dollars

	December 31, 2006			December 25, 2005
ASSETS
Current assets
Cash and cash equivalents	$	200		$	163
Trade receivables, less allowance (2006 - $82; 2005 - $82)		2,649			2,988
Inventories		748			662
Prepaid expenses		33			67
Total current assets		3,630			3,880
Property, plant and equipment
Land		379			379
Buildings and improvements		2,575			2,551
Machinery, equipment and fixtures		8,526			8,258
Construction in progress		19			5
Total		11,499			11,193
Less accumulated depreciation		(7,981	)		(7,775	)
Net property, plant and equipment		3,518			3,418
Intangible and other assets
Goodwill		2,438			2,438
Other Assets		1			1
Total intangible and other assets		2,439			2,439
Total assets	$	9,587		$	9,737
LIABILITIES AND PARENT EQUITY
Current liabilities
Accounts payable	$	636		$	737
Compensation and other accruals		355			346
Deferred income		504			625
Total current liabilities		1,495			1,708
Deferred income taxes		531			505
Total liabilities		2,026			2,213
Total Parent equity		7,561			7,524
Total liabilities and Parent equity	$	9,587		$	9,737

The accompanying notes are an integral part of these financial statements.

Ex 99.1 - 2

STATEMENTS OF INCOME

(Huntington) Herald–Dispatch

(Carved-out Newspaper of GateHouse Media, Inc.)

In thousands of dollars

	Fiscal Year Ended
	December 31, 2006		December 25, 2005		December 26, 2004
Net Operating Revenues
Newspaper advertising	$	15,650	$	15,950	$	16,231
Newspaper circulation		4,336		4,361		4,768
Commercial printing and other		3,561		4,164		3,475
Total		23,547		24,475		24,474
Operating Expenses
Operating costs, exclusive of depreciation		13,702		13,824		13,117
Selling, general and administrative expenses,
exclusive of depreciation		3,799		3,719		3,601
Depreciation		567		589		612
Total		18,068		18,132		17,330
Income before income taxes		5,479		6,343		7,144
Provision for income taxes		2,197		2,544		2,865
Net income	$	3,282	$	3,799	$	4,279

The accompanying notes are an integral part of these financial statements.

Ex 99.1 - 3

STATEMENTS OF CASH FLOWS

(Huntington) Herald–Dispatch

(Carved-out Newspaper of GateHouse Media, Inc.)

In thousands of dollars

	Fiscal Year Ended
	December 31, 2006			December 25, 2005			December 26, 2004
Cash flows from operating activities:
Net Income	$	3,282		$	3,799		$	4,279
Adjustments to reconcile net income to net cash
flow from operations:
Depreciation		567			589			612
Trade receivables		339			(142	)		(336	)
Inventories		(86	)		114			(271	)
Prepaid expenses		34			(25	)		(12	)
Accounts payable		(101	)		(222	)		206
Compensation and other accruals		9			(25	)		57
Deferred income		(121	)		40			63
Deferred income taxes		26			(95	)		(40	)
Net cash flow from operating activities		3,949			4,033			4,558
Cash flows used in investing activities:
Purchase of property, plant and equipment		(667	)		(686	)		(554	)
Disposals of property, plant and equipment		-			22			-
Net cash used in investing activities		(667	)		(664	)		(554	)
Cash flows used in financing activities
Distributions to Parent		(3,245	)		(3,378	)		(3,919	)
Net cash used in financing activities		(3,245	)		(3,378	)		(3,919	)
Net increase (decrease) in cash and cash equivalents		37			(9	)		85
Balance of cash and cash equivalents at
beginning of period		163			172			87
Balance of cash and cash equivalents at end of period	$	200		$	163		$	172

 

The accompanying notes are an integral part of these financial statements.

Ex 99.1 - 4

STATEMENTS OF PARENT EQUITY

(Huntington) Herald–Dispatch

(Carved-out Newspaper of GateHouse Media, Inc.)

In thousands of dollars

Balance as of December 28, 2003	$	6,743
Net income, 2004		4,279
Distributions to Parent		(3,919	)
Balance as of December 26, 2004	$	7,103
Net income, 2005		3,799
Distributions to Parent		(3,378	)
Balance as of December 25, 2005	$	7,524
Net income, 2006		3,282
Distributions to Parent		(3,245	)
Balance as of December 31, 2006	$	7,561

The accompanying notes are an integral part of these financial statements.

Ex 99.1 - 5

NOTES TO FINANCIAL STATEMENTS

December 31, 2006

NOTE 1 – Organization, basis of presentation and business

These financial statements reflect the financial position, results of operation and cash flows of the (Huntington) Herald–Dispatch (the Company).  For all years presented, the Company was a subsidiary of Gannett Co., Inc. (the Parent), a leading international news and information company.  The financial statements are presented as if the Company existed as a separate entity from the remaining businesses of the Parent during the years presented.

The allocations and estimates included in the financial statements are determined using the methodologies described in Note 3.

NOTE 2 – Summary of significant accounting policies

Fiscal year: The Company’s fiscal year ends on the last Sunday of the calendar year.  The Company’s 2006 fiscal year ended on December 31, 2006, and encompassed a 53-week period.  The Company’s 2005 and 2004 fiscal years encompassed 52-week periods.

Use of estimates: The Company prepares its financial statements in accordance with generally accepted accounting principles which require the use of estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and related disclosure of contingent matters.  The Company bases its estimates on historical experience, and other assumptions, as appropriate.  The Company re-evaluates its estimates on an ongoing basis.  Actual results could differ from these estimates.

Cash and cash equivalents:  Cash and cash equivalents consist of highly liquid investments purchased with an original maturity of three months or less.  The Company participates in the centralized cash management system of the Parent, wherein cash receipts are transferred to and cash disbursements are funded by the Parent on a daily basis.  The net funding to or from the Parent is presented as a cash flow from financing activities in the accompanying statements of cash flows.  The amount of cash and cash equivalents and deposit accounts reported separately by the Company primarily represent deposits made after the daily sweep of cash to the Parent or accounts which are not part of the cash management system.

Trade receivables and allowances for doubtful accounts: Trade receivables are recorded at invoiced amounts and generally do not bear interest.  The allowance for doubtful accounts reflects the Company’s estimate of credit exposure, determined principally on the basis of its collection experience.

Inventories: Inventories, consisting principally of newsprint, printing ink, plate material and production film for the Company’s operations, are valued at the lower of cost (first-in, first-out) or market.

Property and depreciation: Property, plant and equipment is recorded at cost, and depreciation is provided generally on a straight-line basis over the estimated useful lives of the assets.  The principal estimated useful lives are: buildings and improvements, 10 to 40 years; and machinery, equipment and fixtures, four to 30 years.  Major renewals and improvements and interest incurred during the construction period of major additions are capitalized.  Expenditures for maintenance, repairs and minor renewals are charged to expense as incurred.

Goodwill: Goodwill represents the excess of acquisition cost of the Company over the fair value of other assets acquired net of liabilities assumed at the time the Company was purchased by the Parent.  The Company follows Statement of Financial Accounting Standards (SFAS) No. 142 Goodwill and Other Intangible Assets (SFAS No. 142).  SFAS No. 142 prohibits the amortization of goodwill and other intangibles with indefinite useful lives unless the intangible asset is deemed to be impaired.  SFAS No. 142 requires that goodwill be tested for impairment at the reporting unit level at least annually.  The Company annually performs an impairment test of its goodwill and has determined that no impairment of goodwill existed at December 31, 2006, December 25, 2005 and December 26, 2004.

Valuation of long-lived assets: In accordance with Statement of Financial Accounting Standards No. 144, Accounting for the Impairment or Disposal of Long-lived Assets, the Company evaluates the carrying value of long-lived assets to be held and used whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.  The carrying value of a long-lived asset group is considered impaired when the projected undiscounted future cash flows are less than its carrying value.  The Company measures impairment based on the amount by which the carrying value exceeds the fair market value.  Fair market value is determined primarily using the projected future cash flows discounted at a rate commensurate with the risk involved.  Losses on long-lived assets to be disposed of are determined in a similar manner, except that fair market values are reduced for the cost to dispose.

Fair value: The Company estimates that the amount reported on the balance sheets for financial instruments, including cash, trade and other receivables, and other long-term liabilities, approximates fair value.

Ex 99.1 - 6

Revenue recognition: The Company’s revenues include amounts charged to customers for space purchased in the Company’s newspapers, ads placed on its Web sites, and amounts charged to customers for commercial printing jobs.  Newspaper revenues also include circulation revenues for newspapers purchased by readers or distributors reduced by the amount of discounts taken.  Advertising revenues are recognized, net of agency commissions, in the period when advertising is printed or placed on Web sites.  Commercial printing revenues are recognized when the job is delivered to the customer.  Certain commercial printing services were provided by the Company to Gannett and represented approximately $2.9 million, $3.4 million and $2.1 million during 2006, 2005, and 2004, respectively.  Circulation revenues are recognized when purchased newspapers are distributed.  Amounts received from customers in advance of revenue recognition are deferred as liabilities.

Non-cash stock compensation: Non-cash stock compensation includes compensation expense associated with the Parent’s restricted common stock and stock options issued under the Parent Omnibus Incentive Compensation Plan.

Prior to December 26, 2005, the Company accounted for stock-based compensation using the intrinsic value-based method in accordance with Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees (APB No. 25).  Under APB No. 25, the Company generally did not recognize stock-based compensation for stock options in its statements of income, because the options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.  As permitted, the Company elected to adopt the disclosure-only provisions of SFAS No. 123, Accounting for Stock-Based Compensation (SFAS No. 123).  Under those provisions, the Company disclosed in the notes to its financial statements what the effect would have been on its results of operations and related per share amounts had compensation costs for the Parent’s stock options been recorded based on the fair value at grant date.

Effective December 26, 2005, the first day of its 2006 fiscal year, the Company adopted the fair value recognition provisions of SFAS No. 123(R), Share-Based Payments (SFAS No. 123(R)), using the modified prospective transition method.  Under this transition method, stock-based compensation costs recognized in the income statement for 2006 include (a) compensation expense for all unvested stock-based awards that were granted through December 25, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (b) compensation expense for all share-based payments granted after December 25, 2005, based on grant date fair value estimated in accordance with the provisions of SFAS No. 123(R).  The Company’s stock option awards have graded vesting terms and the Company recognizes compensation expense for these options on a straight-line basis over the requisite service period for the entire award (generally four years).  Restricted shares are accounted for similarly under both SFAS No. 123(R) and APB 25.

The effect of adopting SFAS No. 123(R) for the year ended December 31, 2006 was a reduction in income before income taxes of $35,000 ($21,000 reduction in net income). See Note 6 for further discussion.

NOTE 3 – Allocation methodology

Allocations:  The following allocation policies have been established by management of the Company.  Unless otherwise noted, these policies have been consistently applied in the historical financial statements of the Company.  In the opinion of management, the methods for allocating these costs are reasonable.  It is not practicable to estimate the costs that would have been incurred by the Company if they had been operated on a stand-alone basis.

Specifically identifiable operating expenses - Costs which relate entirely to the operations of the Company are attributed entirely to them.  These expenses consist of costs of personnel who are 100% dedicated to operations, and amounts paid to third parties for services rendered.

Shared operating expenses - The Parent allocates the cost of certain corporate general and administrative services and shared services, including shared personnel, to each location based on a variety of allocation methods.  These shared services include newspaper executive management, legal, accounting, telecommunications, human resources, pension, medical, disability and insurance amounts.  These costs have been allocated to the Company based on one of the following allocation methods:  (1) pro rata portion of payroll (2) pro rata portion based on management’s assessment of usage of services, or (3) as a percent of revenue.  Management determined which allocation method was appropriate based on the nature of the shared service being provided.  See Note 9 for additional discussion on related party transactions.

Ex 99.1 - 7

Allocated charges - Allocations of the specifically identifiable operating expenses and shared operating expenses have been included in the statements of income in operating costs and selling, general and administrative expenses of the Company as follows:

In thousands of dollars	Fiscal Year
	2006		2005		2004
Corporate expenses	$	471	$	490	$	489
Pension expense		288		274		261
Other postretirement benefits		563		688		666
Contributions to 401(k) savings plan		85		84		81
Insurance expense		1,467		1,540		1,421
Medical disability expense		33		31		29
Non-cash stock compensation		49		1		-
Allocated charges from the Parent	$	2,956	$	3,108	$	2,947

Taxes - The Company’s allocated share of the Parent’s consolidated Federal tax provision is determined using the stand-alone method.  Under the stand-alone method, tax expense or benefit is calculated as if the Company filed its own tax returns.  State income taxes are allocated in a similar manner.  Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax bases of assets and liabilities carried by the Company, and are measured using the enacted tax rates that are expected to be in effect in the period in which these differences are expected to reverse.

Intercompany accounts between the Company and the Parent have been included in Parent equity.

NOTE 4 – Recently issued accounting standards

In July 2006, the Financial Accounting Standards Board (FASB) issued Interpretation Number 48, Accounting for Uncertainty in Income Taxes (FIN No. 48), which will become effective for the Company’s first quarter of 2007.  Under FIN No. 48, companies are required to make disclosures about uncertainties in their income tax positions, including a roll-forward analysis of tax benefits taken that do not qualify for financial statement recognition.  Under FIN No. 48, the recognition of a tax benefit would only occur when it is “more-likely-than-not” that the position would be sustained upon examination.  Management adopted this standard in the first quarter of 2007.  The standard did not have a material impact on its financial accounting and reporting.

In September 2006, the FASB issued SFAS No. 157 Fair Value Measurements (SFAS No. 157).  SFAS No. 157 establishes a common definition for fair value, creates a framework for measuring fair value, and expands disclosure requirements about such fair value measurements.  SFAS No. 157 will become effective for the Company’s first quarter of 2008.  Management is in the process of studying the impact of this standard on the Company’s financial accounting and reporting.

In February 2007, the FASB issued SFAS No. 159 The Fair Value Option for Financial Assets and Financial Liabilities (SFAS No. 159). This statement will become effective for the Company at the beginning of fiscal year 2008.  SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value.  Additionally, SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities.  Management is currently evaluating this standard and the impact on its financial accounting and reporting.

Ex 99.1 - 8

NOTE 5 – Income taxes

The Company’s provision for income taxes consists of the following:

In thousands of dollars	Fiscal Year
	2006		2005			2004
Current:
Federal	$	1,889	$	2,296		$	2,527
State		282		343			378
		2,171		2,639			2,905
Deferred:
Federal		23		(83	)		(35	)
State		3		(12	)		(5	)
		26		(95	)		(40	)
Provision for income taxes	$	2,197	$	2,544		$	2,865

All tax payments are made by the Parent.  As such, there are no cash payments for taxes by the Company.  The deferred tax liability is primarily a timing difference in the recognition of depreciation expense on fixed assets.

The provision for income taxes varies from the U.S. federal statutory tax rate as a result of the following differences:

Ex 99.1 - 9

Fiscal Year	2006			2005			2004
U.S. statutory tax rate		35.0	%		35.0	%		35.0	%
Increase in taxes resulting from:
State/other income taxes net of federal
income tax benefit		5.0			5.0			5.0
Other, net		0.1			0.1			0.1
Effective tax rate		40.1	%		40.1	%		40.1	%

NOTE 6 – Stock-based compensation

Certain employees receive benefits under the Parent’s Omnibus Incentive Compensation Plan, which replaced the 1978 Long-Term Executive Incentive Plan.

Prior to December 26, 2005, the Company accounted for stock-based compensation using the intrinsic value-based method in accordance with APB No. 25.  Under APB No. 25, the Company generally did not recognize stock-based compensation for stock options in its statements of income prior to December 26, 2005 because the options granted had an exercise price equal to the market value of the underlying common stock on the date of grant.  As permitted, the Company elected to adopt the disclosure-only provisions of SFAS No. 123.  Under those provisions, the Company is required to disclose in the notes to its financial statements what the effect would have been on its results of operations had compensation costs for the stock options been determined based on the fair value at grant date.  Such amounts for 2005 totaled $330,000 of pre-tax stock-based compensation or $200,000 on an after-tax basis, and for 2004 totaled $510,000 of pre-tax stock-based compensation or $310,000 on an after-tax basis.

Effective December 26, 2005, the first day of its 2006 fiscal year, the Company adopted the fair value recognition provisions of SFAS No. 123(R), using the modified prospective transition method.  Under this transition method, stock-based compensation costs recognized in the income statement for 2006, include (a) compensation expense for all unvested stock-based awards that were granted prior to December 25, 2005 based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (b) compensation expense for all share-based payments granted on or after December 25, 2005 based on grant date fair value estimated in accordance with the provisions of SFAS No. 123(R).  The impact of adoption of SFAS No. 123(R) was to reduce 2006 pre-tax operating results by $35,000 ($21,000 after-tax). Results for prior periods have not been restated.  The Parent’s stock option awards have graded vesting terms and the Company recognizes compensation expense for these options on a straight-line basis over the requisite service period for the entire award (generally four years).

Determining Fair Value

Valuation and amortization method– The Parent determines the fair value of stock options granted using the Black-Scholes option-pricing formula.  This fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period.

Expected term– The expected term represents the period that the Parent’s stock-based awards are expected to be outstanding and was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior.

Expected volatility–The fair value of stock-based awards reflects a volatility factor calculated using historical market data for the Parent’s common stock.

Expected dividend– The dividend assumption is based on the Parent’s current expectations about its dividend policy.  The Parent has paid an increasing dividend in past years and anticipates continuing that practice into the future.

Risk-free interest rate– At the time of the stock option grant, the Parent bases the risk-free interest rate on the yield to maturity on zero-coupon U.S. government bonds having a remaining life equal to the option’s expected life.

Estimated forfeitures – When estimating forfeitures, the Parent considers voluntary termination behavior as well as analysis of actual option forfeitures.

For the year ended December 31, 2004, options were granted for 10,900 shares (no options granted in 2005 and 2006).  The following assumptions were used to estimate the fair value of those options.

Ex 99.1 - 10

	Fiscal Year
	2004
Average expected term	7 yrs.
Expected volatility	13.62-19.16%
Weighted average volatility	13.95%
Risk-free interest rates	3.71-3.83%
Expected dividend yield	1.24-1.33%
Weighted average expected dividend	1.25%

For 2006, the Company recorded stock-based compensation expense of $49,000, comprising $35,000 for nonqualified stock options and $14,000 for restricted shares.  The related tax benefit for stock compensation was $20,000.  On an after tax basis, total non-cash compensation expense was $29,000.

The following table illustrates the impact of adopting the fair value recognition provisions of SFAS No. 123(R) on income from operations, income before income taxes and net income for 2006.  The tables reflect the impact of expensing stock options only.  Restricted shares are accounted for similarly under both SFAS No. 123(R) and APB 25.

(amounts in thousands)	As Reported Under SFAS No. 123(R)		Impact of Stock-option Compensation Expense		Accounted for Under APB 25
Income before income taxes	$	5,479	$	35	$	5,514
Net income	$	3,282	$	21	$	3,303

Options outstanding to employees of the Company as of December 31, 2006, December 25, 2005 and December 26, 2004 were 52,938, 55,038 and 56,239, respectively.  The weighted average exercise price was $75.81, $75.23 and $74.94 as of December 31, 2006, December 25, 2005 and December 26, 2004, respectively.

Ex 99.1 - 11

NOTE 7 – Retirement plans (pension)

The Company is part of the Gannett Retirement Plan which is the Parent’s principal retirement plan and covers most U.S. employees.  The Company recognized expense of $288,000, $274,000 and $261,000, respectively, related to its retirement plans during the fiscal years 2006, 2005 and 2004.  This expense reflects an allocation from the Parent.

NOTE 8 – Postretirement benefits other than pension

The Parent provides health care and life insurance benefits to certain retired employees who meet age and service requirements.  Most retirees contribute to the cost of these benefits and retiree contributions are increased as actual benefit costs increase.  The Parent’s policy is to fund benefits as claims and premiums are paid.  The Company recognized postretirement benefit costs for health care of $563,000, $688,000 and $666,000 respectively, for the fiscal years 2006, 2005 and 2004.  This expense reflects an allocation from the Parent.

NOTE 9 – Related party transactions

Corporate Expenses

Certain corporate overhead expenses incurred by the Parent have been allocated to the Company and are reflected in the statements of income.  These overhead costs relate to general management oversight, financial management, including public-company reporting, consolidated tax filings, the Parent benefit plan administration, risk management and consolidated treasury services and costs to support the Parent information technology infrastructure.  The Parent also allocates a portion of its annual audit and tax return review costs provided by an independent public accounting firm to the Company.  These costs are allocated to the Company based on one of the following allocation methods:  (1) pro rata portion of payroll, or (2) pro rata portion based on management’s assessment of usage of services, or (3) as a percent of revenue.  Management believes the basis for the allocations is reasonable.  The amounts allocated to the Company in fiscal years 2006, 2005 and 2004 were approximately $471,000, $490,000 and $489,000, respectively.

Retirement Plans Administered by the Parent

The Parent allocated to its divisions or subsidiaries costs associated with the retirement plan that the Parent administers.  The Company was allocated approximately $288,000, $274,000, and $261,000 in fiscal years 2006, 2005 and 2004 respectively, by the Parent related to this retirement plan.  The Company is allocated pension expense for coverage based on its pro-rata portion of the Parent’s total payroll to the total cost of the Parent.   Had this retirement plan been administered by the Company as a separate entity, the amounts may have been different than those allocated to the Company by the Parent.

The Parent administers a 401(k) savings plan for which all employees (other than those covered by a collective bargaining agreement) who are scheduled to work a minimum number of hours in a year are eligible.  The Company matches 50% of the first 6% of employee contributions.  The Company recognized expense related to the Company match of approximately $85,000, $84,000 and $81,000 in fiscal years 2006, 2005 and 2004, respectively.

Insurance Programs Administered by the Parent

The Parent allocates to its divisions or subsidiaries costs associated with certain insurance programs that the Parent administers.  The insurance programs for which the related costs are allocated primarily include medical, automobile liability, workers’ compensation, general liability, property and libel insurance.  The Company was allocated approximately $1,467,000, $1,540,000 and $1,421,000 in fiscal years 2006, 2005 and 2004, respectively, by the Parent related to these insurance programs.  These amounts are allocated by the Parent using various methodologies, as described below.  Had these insurance programs been administered by the Company as a separate entity, the amounts may have been different than those allocated to the Company by the Parent.

Included within the insurance cost allocation are claims allocations related to medical and non-property casualty programs (automobile liability, workers’ compensation and general liability) for which the Parent is self-insured up to a certain amount.  For the self–insured component, costs are allocated to the Company based on incurred claims of the Company.  The Parent has premium based policies which cover amounts in excess of the self-insured retentions.  The Company is allocated expenses based on its pro-rata portion of the Parent’s total underlying exposure items (i.e., number and type of vehicles, sales, payroll dollars, etc.) to the total insurance cost to be incurred by the Parent.

Also included within the insurance allocation is coverage related to property insurance.  The Company is allocated premium expense for coverage based on its pro-rata portion of the Parent’s total insured property values to the total insurance cost of the Parent.

Ex 99.1 - 12

Medical Disability Programs Administered by the Parent

The Parent allocated to its divisions or subsidiaries costs associated with medical disability programs that the Parent administers.  The Company was allocated approximately $33,000, $31,000 and $29,000 in fiscal years 2006, 2005 and 2004, respectively, by the Parent related to these medical disability programs.  These amounts were allocated by the Parent using the Company’s pro-rata portion of payroll to the total disability expense.  Had these medical disability programs been administered by the Company as a separate entity, the amounts may have been different than those allocated to the Company by the Parent.

Non-cash Stock Compensation

Non-cash stock compensation includes compensation expenses associated with the Parent restricted common stock and stock options issued under the Gannett Co. Inc., Omnibus Incentive Compensation plan.  The Company was allocated approximately $49,000 and $1,000 in fiscal years 2006 and 2005, respectively, by the Parent related to non-cash stock compensation expense.  See Note 6 for further discussion of stock awards.

NOTE 10 – Commitments, contingent liabilities and other matters

Leases:  Approximate future minimum annual rentals payable under non-cancelable operating leases, primarily real estate-related, are as follows:

In thousands of dollars
2007	$	50
2008		-
2009		-
2010		-
2011		-
Later years		-
Total	$	50

Total rental costs reflected in operating expenses were $28,000 in 2006, $27,000 in 2005 and $27,000 in 2004.

Litigation:  The Company is not involved in any material litigation.

There are no other material contingent liabilities or other matters associated with the Company.

NOTE 11 – Subsequent event

On May 7, 2007, GateHouse Media, Inc. completed the purchase of the Company and three other newspapers owned by Gannett Co., Inc. for approximately $410 million.  The purchase price is subject to adjustment based upon a final determination of the amount of net working capital as of the date of acquisition.

On June 28, 2007 GateHouse Media, Inc. signed a definitive asset purchase agreement to sell the Company to Champion Industries, Inc. for a purchase price of approximately $77 million.  The transaction was completed on September 14, 2007.

Ex 99.1 - 13

EX-99.2

EXHIBIT 99.2

UNAUDITED BALANCE SHEET

(Huntington) Herald-Dispatch

Unaudited, in thousands of dollars

	June 30, 2007
	(Successor)
ASSETS
Current assets
Cash and cash equivalents	$	875
Trade receivables, net of allowance (2007 - $106)		2,102
Inventories		689
Prepaid expenses		98
Total current assets		3,764
Property, plant and equipment
Land		72
Buildings and improvements		1,508
Machinery, equipment and fixtures		3,987
Total property, plant and equipment		5,567
Intangible assets
Goodwill		36,813
Other intangible assets		33,536
Total intangible assets		70,349
Total assets	$	79,680
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities
Accounts payable	$	200
Compensation and other accruals		398
Deferred income		381
Due to GateHouse Media, Inc.		78,045
Total current liabilities		79,024
Stockholders’ Equity
Retained earnings		656
Total liabilities and Stockholders’ equity	$	79,680

The accompanying notes are an integral part of these financial statements.

Ex 99.2 - 1

UNAUDITED STATEMENTS OF INCOME

(Huntington) Herald-Dispatch

Unaudited, in thousands of dollars

	Period from		Period from		Six months
	May 7, 2007  to June 30, 2007		January 1, 2007  to May 6, 2007		Ended June 30, 2006
	(Successor)		(Predecessor)		(Predecessor)
Net Operating Revenues
Newspaper advertising	$	2,161	$	4,565	$	7,021
Newspaper circulation		597		1,430		2,218
Commercial printing and other		541		1,028		2,573
Total		3,299		7,023		11,812
Operating Expenses
Operating costs, exclusive of depreciation		1,712		4,221		6,804
Selling, general and administrative expenses,
exclusive of depreciation		528		1,159		1,906
Depreciation		-		202		281
Total		2,240		5,582		8,991
Income before income taxes		1,059		1,441		2,821
Provision for income taxes		403		578		1,131
Net income	$	656	$	863	$	1,690

The accompanying notes are an integral part of these financial statements.

Ex 99.2 - 2

UNAUDITED STATEMENTS OF CASH FLOWS

(Huntington) Herald-Dispatch

Unaudited, in thousands of dollars

	Period from			Period from			Six months
	7-May-07			1-Jan-07			Ended
	to June 30, 2007			to May 6, 2007			30-Jun-06
	(Successor)			(Predecessor)			(Predecessor)
Cash flows from operating activities:
Net Income	$	656		$	863		$	1,690
Adjustments to reconcile net income to net
cash flows from operations:
Depreciation		-			202			281
Trade receivables		133			118			338
Other receivables		-			179			168
Inventories		(57	)		81			77
Prepaid expenses		3			(73	)		(933	)
Accounts payable		(16	)		(428	)		(405	)
Compensation and other accruals		290			(53	)		404
Deferred income		(104	)		98			56
Due to GateHouse Media, Inc.		(22	)		-			-
Deferred income taxes		-			(531	)		(505	)
Net cash flow from operating activities		883			456			1,171
Cash flows provided by (used in) investing activities:
Purchase of property, plant and equipment		(10	)		(198	)		(157	)
Goodwill		1			2,439			2,399
Net cash provided by (used in) investing activities		(9	)		2,241			2,242
Cash flows used in financing activities
Net distribution to Gannett Co., Inc.		-			(2,896	)		(3,504	)
Net cash used in financing activities		-			(2,896	)		(3,504	)
Net increase (decrease) in cash and cash equivalents		874			(199	)		(91	)
Balance of cash and cash equivalents at
beginning of period		1			200			163
Balance of cash and cash equivalents at end of period	$	875		$	1		$	72

The accompanying notes are an integral part of these financial statements.

Ex 99.2 - 3

NOTES TO FINANCIAL STATEMENTS

NOTE 1 – Organization, basis of presentation and business

These unaudited financial statements reflect the financial position, results of operations and cash flows of the (Huntington) Herald–Dispatch (the “Company”).  On May 7, 2007, GateHouse Media, Inc. (“GateHouse”) completed the purchase of the Company for approximately $77 million.

The purchase transaction resulted in a new basis of accounting under Statement of Financial Accounting Standards (“SFAS”) No. 141, Business Combinations (“SFAS No. 141”).  This change creates many differences between reporting for the Company before the purchase, as predecessor, and the Company after the purchase, as successor.  The accompanying financial statements and the notes to the financial statements reflect separate reporting periods for the predecessor and successor company.  During the predecessor periods the Company was owned by Gannett Co., Inc. (“Gannett”), a leading international news and information company.  The financial statements for the predecessor periods are presented as if the Company existed as a separate entity from the remaining businesses of Gannett.

These unaudited financial statements reflect all adjustments which, in the opinion of the Company, are necessary for a fair presentation of the Company’s financial position, results of operations and cash flows as of the dates and for the periods presented.

The allocations and estimates included in the financial statements are determined using the methodologies described in Note 3.

All amounts as of and for the successor period ended June 30, 2007; and for the predecessor periods from January 1, 2007 to May 6, 2007 and for the six months ended June 30, 2006, included herein, are unaudited.

NOTE 2 – Summary of significant accounting policies

Use of estimates: The Company prepares its financial statements in accordance with generally accepted accounting principles which require the use of estimates and assumptions that affect the reported amount of assets, liabilities, revenues and expenses and related disclosure of contingent matters.  The Company bases its estimates on historical experience, and other assumptions, as appropriate.  The Company re-evaluates its estimates on an ongoing basis.  Actual results could differ from these estimates.

Cash and cash equivalents:  Cash and cash equivalents consist of highly liquid investments purchased with an original maturity of three months or less.  During the predecessor periods the Company participated in the centralized cash management system of Gannett, wherein cash receipts are transferred to and cash disbursements were funded by Gannett on a daily basis.  The net distribution to Gannett is presented as cash used in financing activities in the accompanying statements of cash flows.  After the acquisition by GateHouse, the Company continued to participate in the cash management system of GateHouse.  The amount of cash and cash equivalents and deposit accounts reported by the Company as of June 30, 2007 primarily represents deposits made after the daily sweep of cash by GateHouse or accounts which are not part of the cash management system.

Trade receivables and allowances for doubtful accounts: Trade receivables are recorded at invoiced amounts and generally do not bear interest.  The allowance for doubtful accounts reflects the Company’s estimate of credit exposure, determined principally on the basis of its collection experience.

Inventories: Inventories, consisting principally of newsprint, printing ink, plate material and production film for the Company’s operations, are valued at the lower of cost (first-in, first-out) or market.

Property and depreciation: Property, plant and equipment is recorded at cost, and depreciation is provided generally on a straight-line basis over the estimated useful lives of the assets.  The principal estimated useful lives are: buildings and improvements, 10 to 40 years; and machinery, equipment and fixtures, four to 30 years.  Major renewals and improvements and interest incurred during the construction period of major additions are capitalized.  Expenditures for maintenance, repairs and minor renewals are charged to expense as incurred.  The balance of property, plant and equipment as of June 30, 2007 represents mainly the appraised values of fixed assets acquired from Gannett as of May 7, 2007.

Goodwill and intangible assets:  Goodwill and intangible assets represent the excess of acquisition cost of the Company over the fair value of other assets acquired net of liabilities assumed at the time the Company was purchased by GateHouse.  The Company follows SFAS No. 142 “Goodwill and Other Intangible Assets (“SFAS No. 142”).  SFAS No. 142 prohibits the amortization of goodwill and other intangibles with indefinite useful lives unless the intangible asset is deemed to be impaired.  The Company annually performs an impairment test of its goodwill and indefinite-lived intangible assets and has determined that no impairment of goodwill or indefinite-lived intangible assets existed at December 31, 2006.  Intangible assets that have finite useful lives are amortized over those useful lives.  See additional details in Note 5.

Ex 99.2 - 4

Fair value: The Company estimates that the amount reported on the balance sheet for financial instruments, including cash, trade and other receivables, and other long-term liabilities, approximates fair value.

Revenue recognition: The Company’s revenues include amounts charged to customers for space purchased in the Company’s newspapers, ads placed on its Web sites, and amounts charged to customers for commercial printing jobs.  Newspaper revenues also include circulation revenues for newspapers purchased by readers or distributors reduced by the amount of discounts taken.  Advertising revenues are recognized, net of agency commissions, in the period when advertising is printed or placed on Web sites.  Commercial printing revenues are recognized when the job is delivered to the customer.  Certain commercial printing services were provided by the Company to Gannett and represented $0.9 million and $1.6 million during the period from January 1, 2007 to May 6, 2007 and the six months ended June 30, 2006, respectively.  Circulation revenues are recognized when purchased newspapers are distributed.  Amounts received from customers in advance of revenue recognition are deferred as liabilities.

Non-cash stock compensation: Non-cash stock compensation includes compensation expense associated with Gannett’s restricted common stock and stock options issued under Gannett Omnibus Incentive Compensation Plan.

Effective December 26, 2005, the first day of its 2006 fiscal year, the Company adopted the fair value recognition provisions of SFAS No. 123(R), “Share-Based Payments (“SFAS No. 123(R)”) using the modified prospective transition method.  Under this transition method, stock-based compensation costs recognized in the statement of income for the six months ended June 30, 2006 include (a) compensation expense for all unvested stock-based awards that were granted through December 25, 2005, based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (b) compensation expense for all share-based payments granted after December 25, 2005, based on grant date fair value estimated in accordance with the provisions of SFAS No. 123(R).  The Company’s stock option awards have graded vesting terms and the Company recognizes compensation expense for these options on a straight-line basis over the requisite service period for the entire award (generally four years).  See Note 6 for further discussion.

NOTE 3 – Allocation methodology

Allocations:  The following allocation policies have been established by management of the Company.  Unless otherwise noted, these policies have been consistently applied in the historical financial statements of the Company.  In the opinion of management, the methods for allocating these costs are reasonable.  It is not practicable to estimate the costs that would have been incurred by the Company if they had been operated on a stand-alone basis.

Specifically identifiable operating expenses - Costs which relate entirely to the operations of the Company are attributed entirely to them.  These expenses consist of costs of personnel who are 100% dedicated to operations, and amounts paid to third parties for services rendered.

Shared operating expenses - Gannett (for the predecessor periods) and GateHouse (for the successor period) allocate the cost of certain corporate general and administrative services and shared services, including shared personnel, to the Company based on a variety of allocation methods.  These shared services include newspaper executive management, legal, accounting, telecommunications, human resources, pension, medical, disability and insurance amounts.  These costs have been allocated to the Company based on one of the following allocation methods:  (1) pro rata portion of payroll or (2) pro rata portion based on management’s assessment of usage of services, or (3) as a percent of revenue.  Management determined which allocation method was appropriate based on the nature of the shared service being provided.  See Note 9 for additional discussion on related party transactions.

Allocated charges - Allocations of the specifically identifiable operating expenses and shared operating expenses have been included in the statements of income in operating costs and selling, general and administrative expenses of the Company as follows:

In thousands of dollars	Period from		Period from		Six Months
	May 7, 2007		January 31, 2007		Ended
	to June 30, 2007		to May 6, 2007		June 30, 2006
	(Successor)		(Predecessor)		(Predecessor)
Corporate expenses	$	-	$	141	$	236
Pension expense		-		100		144
Other postretirement benefits		-		167		167
Contributions to 401(k) savings plan		-		28		43
Insurance expense		6		38		28
Health Insurance		98		-		-
Medical disability expense		-		11		16
Non-cash stock compensation		-		9		24
Total Allocated charges	$	104	$	494	$	658

Ex 99.2 - 5

Taxes - The Company’s allocated share of Gannett’s and GateHouse consolidated Federal tax provision during the predecessor and successor periods, respectively, is determined using the stand-alone method.  Under the stand-alone method, tax expense or benefit is calculated as if the Company filed its own tax returns.  State income taxes are allocated in a similar manner.

NOTE 4 – Recently issued accounting standards

In July 2006, the Financial Accounting Standards Board (“FASB”) issued Interpretation Number 48, “Accounting for Uncertainty in Income Taxes” (“FIN No. 48”), effective for the Company’s first quarter of 2007.  Under FIN No. 48, companies are required to make disclosures about uncertainties in their income tax positions, including a roll-forward analysis of tax benefits taken that do not qualify for financial statement recognition.  Under FIN No. 48, the recognition of a tax benefit would only occur when it is “more-likely-than-not” that the position would be sustained upon examination.  Management adopted this standard in the first quarter of 2007.  The standard did not have a material impact on its financial accounting and reporting.

In September 2006, the FASB issued SFAS Statement No. 157 “Fair Value Measurements” (“SFAS No. 157”).  SFAS No. 157 establishes a common definition for fair value, creates a framework for measuring fair value, and expands disclosure requirements about such fair value measurements.  SFAS No. 157 will become effective for the Company’s first quarter of 2008.  Management is in the process of studying the impact of this interpretation on the Company’s financial accounting and reporting.

In February 2007, the FASB issued SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities” (“SFAS No. 159”). This statement will become effective for the Company at the beginning of fiscal year 2008.  SFAS No. 159 provides companies with an option to report selected financial assets and liabilities at fair value.  Additionally, SFAS No. 159 also establishes presentation and disclosure requirements designed to facilitate comparisons between companies that choose different measurement attributes for similar types of assets and liabilities.  Management is currently evaluating this standard and the impact on its financial accounting and reporting.

NOTE 5 – Goodwill and intangible assets

Pursuant to SFAS No. 142, goodwill and indefinite-lived intangible assets are not amortized but are reviewed at least annually for impairment.  Recognized intangible assets that have finite useful lives are amortized over their useful lives and are subject to tests for impairment in accordance with the provisions of SFAS No. 144.

SFAS No. 142 requires that goodwill and indefinite-lived intangible assets be tested for impairment at the reporting unit level at least annually.  The Company has performed an impairment test of its goodwill and indefinite-lived intangible assets at December 31, 2006, and determined that no impairment of goodwill or indefinite-lived intangible assets existed.

The following table displays goodwill, indefinite-lived intangible assets, and amortized intangible assets at June 30, 2007.  Indefinite-lived intangible assets include mastheads.

In thousands of dollars	June 30, 2007
	(Successor)
Goodwill	$	36,813
Indefinite-lived intangible assets		5,543
Amortized intangible assets		27,993
	$	70,349

Amortized intangible assets consist of advertiser relationships ($21,879) and subscriber relationships ($6,114) and are amortized on a straight-line basis over 16 years.

NOTE 6 – Stock-based compensation

Certain employees receive benefits under Gannett’s Omnibus Incentive Compensation Plan, which replaced the 1978 Long-Term Executive Incentive Plan.

Ex 99.2 - 6

Effective December 26, 2005, the first day of its 2006 fiscal year, the Company adopted the fair value recognition provisions of SFAS No. 123(R), using the modified prospective transition method.  Under this transition method, stock-based compensation costs recognized in the income statement for 2006, include (a) compensation expense for all unvested stock-based awards that were granted prior to December 25, 2005 based on the grant date fair value estimated in accordance with the original provisions of SFAS No. 123 and (b) compensation expense for all share-based payments granted on or after December 25, 2005 based on grant date fair value estimated in accordance with the provisions of SFAS No. 123(R).  The impact of adoption of SFAS No. 123(R) was to reduce 2006 pre-tax operating results by $35,000 ($21,000 after-tax).  Results for prior periods have not been restated.  Gannett’s stock option awards have graded vesting terms and the Company recognizes compensation expense for these options on a straight-line basis over the requisite service period for the entire award (generally four years).

During the period from January 1, 2007 to May 6, 2007, the Company recorded stock-based compensation expense of $9,000 for restricted shares.  The related tax benefit for stock compensation was $4,000.  On an after tax basis, total non-cash compensation expense was $5,000.

During the six months ended June 30, 2006, the Company recorded stock-based compensation expense of $18,000 for nonqualified stock options and $6,000 for restricted shares.  The related tax benefit for stock compensation was $10,000.  On an after tax basis, total non-cash compensation expense was $14,000.

Options outstanding to employees of the Company as of May 6, 2007 and June 30, 2006 were 50,538 and 52,938, respectively.  The weighted average exercise price was $75.55 and $75.81 as of May 6, 2007 and June 30, 2006, respectively.

NOTE 7 – Retirement plans (pension)

The Company was part of the Gannett Retirement Plan which is Gannett’s principal retirement plan and covers most U.S. employees.  The Company recognized expense of $100,000 and $144,000, respectively, related to its retirement plans during the periods from January 1, 2007 to May 6, 2007 and the six months ended June 30, 2006.  This expense reflects an allocation from Gannett.

NOTE 8 – Postretirement benefits other than pension

Gannett provided health care and life insurance benefits to certain retired employees who meet age and service requirements.  Most retirees contribute to the cost of these benefits and retiree contributions are increased as actual benefit costs increase.  Gannett’s policy was to fund benefits as claims and premiums are paid.  The Company recognized postretirement benefit costs for health care of $167,000 and $167,000, respectively, for the periods from January 1, 2007 to May 6, 2007 and the six months ended June 30, 2006.  This expense reflects an allocation from Gannett.

NOTE 9 – Related party transactions

Predecessor Periods:

Corporate Expenses

Certain corporate overhead expenses incurred by Gannett have been allocated to the Company and are reflected in the statements of income for the period from January 1, 2007 to May 6, 2007 and for the six months ended June 30, 2006.  These overhead costs relate to general management oversight, financial management, including public-company reporting, consolidated tax filings, Gannett benefit plan administration, risk management and consolidated treasury services and costs to support Gannett information technology infrastructure.  Gannett also allocated a portion of its annual audit and tax return review costs provided by an independent public accounting firm to the Company.  These costs are allocated to the Company based on one of the following allocation methods:  (1) pro rata portion of payroll or (2) pro rata portion based on management’s assessment of usage of services, or (3) as a percent of revenue.  Management believes the basis for the allocations is reasonable.  The amounts allocated to the Company were $141,000 and $236,000 for the period from January 1, 2007 to May 6, 2007 and for the six months ended June 30, 2006, respectively.

Retirement Plans Administered by Gannett

Gannett allocated to its divisions or subsidiaries costs associated with the retirement plan that Gannett administers.  The Company was allocated by Gannett $100,000 and $144,000, respectively, for the period from January 1, 2007 to May 6, 2007 and for the six months ended June 30, 2006 related to this retirement plan.  The Company is allocated pension expense for coverage based on its pro-rata portion of Gannett’s total payroll to the total cost of Gannett.  Had this retirement plan been administered by the Company as a separate entity, the amounts may have been different than those allocated to the Company by Gannett.

Ex 99.2 - 7

Gannett administers a 401(k) savings plan for which all employees (other than those covered by a collective bargaining agreement) who are scheduled to work a minimum number of hours in a year are eligible.  The Company matches 50% of the first 6% of employee contributions.  The Company recognized expense related to the Company match of $28,000 and $43,000 in the period from January 1, 2007 to May 6, 2007 and for the six months ended June 30, 2006, respectively.

Insurance Programs Administered by Gannett

Gannett allocated to the Company costs associated with certain insurance programs that Gannett administers.  These programs primarily include automobile liability, workers’ compensation, general liability, property and libel insurance.  The Company was allocated $38,000 and $28,000 in the period from January 1, 2007 to May 6, 2007 and for the six months ended June 30, 2006, respectively, by Gannett related to these insurance programs.  These amounts are allocated by Gannett using various methodologies, as described below.  Had these insurance programs been administered by the Company as a separate entity, the amounts may have been different than those allocated to the Company by Gannett.

Included within the insurance cost allocation are claims allocations related to non-property casualty programs (automobile liability, workers’ compensation and general liability) for which Gannett is self-insured up to a certain amount.  For the self-insured component, costs are allocated to the Company based on incurred claims of the Company.  Gannett has premium based policies which cover amounts in excess of the self-insured retentions.  The Company is allocated expense based on its pro-rata portion of Gannett’s total underlying exposure items (i.e., number and type of vehicles, sales, payroll dollars, etc.) to the total insurance cost to be incurred by Gannett.

Also included within the insurance allocation is coverage related to property insurance.  The Company is allocated premium expense for coverage based on its pro-rata portion of Gannett’s total insured property values to the total insurance cost of Gannett.

Medical Disability Programs Administered by Gannett

Gannett allocated to the Company costs associated with medical disability programs that Gannett administers.  The Company was allocated $11,000 and $16,000 in the period from January 1, 2007 to May 6, 2007 and for the six months ended June 30, 2006, respectively, by Gannett related to these medical disability programs.  These amounts were allocated by Gannett using the Company pro-rata portion of payroll to the total disability expense.  Had these medical disability programs been administered by the Company as a separate entity, the amounts may have been different than those allocated to the Company by Gannett.

Non-cash Stock Compensation

Non-cash stock compensation includes compensation expenses associated with Gannett restricted common stock and stock options issued under the Gannett Co. Inc., Omnibus Incentive Compensation plan.  The Company was allocated $9,000 and $24,000 in the period from January 1, 2007 to May 6, 2007 and for the six months ended June 30, 2006, respectively, by Gannett related to non-cash stock compensation expense.  See Note 6 for further discussion of stock awards.

Successor Period:

Corporate Expenses

Certain corporate expenses incurred by GateHouse have been allocated to the Company and are reflected in the statement of income for the period from May 7, 2007 to June 30, 2007.  These expenses mainly include health and business insurance.  These costs are allocated to the Company based on one of the following allocation methods:  (1) pro rata portion of payroll or (2) pro rata portion based on management’s assessment of usage of services.  Management believes the basis for the allocations is reasonable.  The amounts allocated to the Company were $104,000 for the period from May 7, 2007 to June 30, 2007.

NOTE 10 – Subsequent event

On June 28, 2007 GateHouse Media, Inc. signed a definitive asset purchase agreement to sell the (Huntington) Herald-Dispatch and related publications which are located in Huntington, West Virginia, to Champion Industries, Inc. for a purchase price of approximately $77 million.  The transaction was completed on September 14, 2007.

Ex 99.2 - 8

EX-99.3

EXHIBIT 99.3

UNAUDITED PRO FORMA COMBINED BALANCE SHEET
	Actual April 30, 2007 Champion			Actual June 30, 2007 HHD		Pro forma Adjustments					Pro Forma as Adjusted
Current  assets:
Cash	$	4,091,855		$	875,000	-					$	4,966,855
Accounts receivable, net		19,994,410			2,102,000	-						22,096,410
Inventories		10,909,049			689,000	-						11,598,049
Other assets		1,094,916			98,000	-						1,192,916
Deferred income tax asset		1,235,599			-	-						1,235,599
Total  current assets		37,325,829			3,764,000		-					41,089,829
Property and equipment, at cost:
Land		2,023,375			72,000		25,314		(5	)		2,120,689
Building & improvements		9,005,022			1,508,000		1,407,027		(5	)		11,920,049
Machinery & equipment		48,177,308			3,987,000		500,000		(5	)		52,664,308
Furniture & fixtures		3,696,232			-		985,470		(5	)		4,681,702
Vehicles & other		3,427,669			-		97,389		(5	)		3,525,058
		66,329,606			5,567,000		3,015,200					74,911,806
Less accumulated depreciation		(46,968,674	)		-		-					(46,968,674	)
		19,360,932			5,567,000		3,015,200		(1	)		27,943,132
Cash surrender value		1,202,696			-		-					1,202,696
Goodwill		3,411,511			36,813,000		(36,813,000	)	(3	)		38,735,190
							35,323,679		(1	)
Other intangibles, net of accumulated amortization		2,950,969			33,536,000		32,556,568		(1	)		35,507,537
							(33,536,000	)	(3	)
Other assets		327,027			-		-					327,027
Total other assets		7,892,203			70,349,000		(2,468,753	)				75,772,450
Total assets	$	64,578,964		$	79,680,000	$	546,447				$	144,805,411
Current  liabilities:
Notes payable, line of credit	$	-		$	-		-				$	-
Accounts payable		4,125,451			200,000		-					4,325,451
Accrued payroll		1,760,766			398,000		-					2,158,766
Taxes accrued & withheld		1,345,323			-		-					1,345,323
Accrued income taxes		337,024			-		-					337,024
Accrued expenses		962,704			-		-					962,704
Deferred income		-			381,000		-					381,000
Current portion of long-term debt:
Notes payable, term		1,560,468			-		-					1,560,468
Total current liabilities		10,091,736			979,000		-					11,070,736

Ex 99.3 - 1

Long-term debt, net of current portion:
Notes payable, line of credit		213,000		-		-					213,000
Notes payable, term		4,051,267		-		79,247,447		(7	)		83,298,714
Intercompany		-		78,045,000		(78,045,000	)	(4	)		-
Other liabilities		388,047		-		-					388,047
Deferred income tax liability		3,468,136		-		-					3,468,136
Total liabilities		18,212,186		79,024,000		1,202,447					98,438,633
Shareholders' equity:
Common stock		9,962,913		-		-					9,962,913
Additional paid-in capital		22,722,680		-		-					22,722,680
Retained earnings/Parent Equity		13,681,185		656,000		(656,000	)	(2	)		13,681,185
Total shareholders' equity		46,366,778		656,000		(656,000	)				46,366,778
	$	64,578,964	$	79,680,000	$	546,447				$	144,805,411

See accompanying notes to unaudited pro forma combined financial statements.

Ex 99.3 - 2

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
	Actual for the			Actual for the
	Year ended			Year ended
	October 31, 2006			December 31, 2006			Pro Forma					Pro Forma
	Champion			HHD			Adjustments					As Adjusted
Revenues:
Printing	$	106,413,663		$	3,561,000		-					$	109,974,663
Office products & office furniture		38,774,213			-		-						38,774,213
Newspaper advertising		-			15,650,000		-						15,650,000
Newspaper circulation		-			4,336,000		-						4,336,000
Total revenues		145,187,876			23,547,000			-					168,734,876
Cost of sales:
Printing		75,015,978			-			-					75,015,978
Office products & office furniture		26,777,539			-			-					26,777,539
HHD operating costs, exclusive of depreciation		-			13,702,000			-					13,702,000
Total cost of sales		101,793,517			13,702,000			-					115,495,517
Gross profit:		43,394,359			9,845,000			-					53,239,359
Selling, general & administrative
expenses:		34,018,288			4,366,000			702,063		(6	)		38,596,459
								(851,000	)	(8	)
								361,108		(5	)
Hurricane & relocation costs (income)		(377,276	)		-			-					(377,276	)
Income from operations:		9,753,347			5,479,000			(212,171	)				15,020,176
Other income (expenses):
Interest income		28,251			-			-					28,251
Interest expense		(609,881	)		-			(6,327,769	)	(7	)		(7,270,236	)
								(332,586	)	(7	)
Other		31,694			-			-					31,694
Total other		(549,936	)		-			(6,660,355	)				(7,210,291	)
Income before income taxes		9,203,411			5,479,000			(6,872,526	)				7,809,885
Income taxes		(3,729,563	)		(2,197,000	)		4,184,717		(9	)		(1,741,846	)
Net income	$	5,473,848		$	3,282,000		$	(2,687,809	)			$	6,068,039
Earnings per share
Basic	$	0.56										$	0.62
Diluted	$	0.55										$	0.61
Weighted average shares outstanding:
Basic		9,818,000											9,818,000
Diluted		9,972,000											9,972,000

See accompanying notes to unaudited pro forma combined financial statements.

Ex 99.3 - 3

UNAUDITED PRO FORMA COMBINED STATEMENTS OF OPERATIONS
	Actual for the six			Actual for the six
	months ended			months ended
	April 30, 2007			June 30, 2007			Pro Forma					Pro Forma
	Champion			HHD			Adjustments					As Adjusted
Revenues:
Printing	$	51,157,662		$	1,569,000		-					$	52,726,662
Office products & office furniture		17,595,548			-		-						17,595,548
Newspaper advertising		-			6,726,000		-						6,726,000
Newspaper circulation		-			2,027,000		-						2,027,000
Total revenues		68,753,210			10,322,000			-					79,075,210
Cost of sales:
Printing		35,990,905			-			-					35,990,905
Office products & office furniture		12,219,956			-			-					12,219,956
HHD operating costs, exclusive of depreciation		-			5,933,000			-					5,933,000
Total cost of sales		48,210,861			5,933,000			-					54,143,861
Gross profit:		20,542,349			4,389,000			-					24,931,349
Selling, general & administrative
expenses:		15,899,643			1,889,000			351,031		(6	)		18,129,900
								(267,000	)	(8	)
								257,226		(5	)
Income from operations:		4,642,706			2,500,000			(341,257	)				6,801,449
Other income (expenses):
Interest income		18,073			-			-					18,073
Interest expense		(286,066	)		-			(3,163,884	)	(7	)		(3,616,243	)
								(166,293	)	(7	)
Other		18,880			-			-					18,880
Total other		(249,113	)		-			(3,330,177	)				(3,579,290	)
Income before income taxes		4,393,593			2,500,000			(3,671,434	)				3,222,159
Income taxes		(1,735,691	)		(981,000	)		2,186,427		(9	)		(530,264	)
Net income	$	2,657,902		$	1,519,000		$	(1,485,007	)			$	2,691,895
Earnings per share
Basic	$	0.27										$	0.27
Diluted	$	0.26										$	0.27
Weighted average shares outstanding:
Basic		9,950,000											9,950,000
Diluted		10,121,000											10,121,000

See accompanying notes to unaudited pro forma combined financial statements.

Ex 99.3 - 4

NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. Champion acquired substantially all of the net assets of the Huntington Herald Dispatch (HHD) for a purchase price of $77.0 million consisting of cash. The acquisition will result in an excess of the purchase price over the historical net assets to be acquired, which will be allocated to the net assets as follows:
Purchase Price	$	79,247,447
Historical carrying value of net assets:
Total net assets		656,000
Less: net assets not assumed
Goodwill and other intangibles		(70,349,000	)
Add: net liabilities not assumed
Due to Gatehouse Media, Inc.		78,045,000
Historical carrying value of net assets acquired		8,352,000
Excess of net purchase price over net assets
acquired	$	70,895,447
Allocation of excess purchase price:
Excess fair value of property, plant and equipment	$	3,015,200
Goodwill		35,323,679
Other intangible assets		32,556,568
Total allocation of excess purchase price	$	70,895,447
The purchase price on a pro forma basis as of June 30, 2007, includes a cash payment of $77.0 million plus acquisition costs of approximately $300,000 and a working capital adjustment of approximately $1,947,447 at the pro forma date. The purchase price was financed by Champion through a term debt facility and a revolving credit facility.
The final determination of the HHD purchase price will be based on the contractual payment of $77.0 million plus an amount to be paid for working capital pursuant to a predetermined working capital payment of $837,554 plus or minus any change in working capital from the index working capital base of $1,675,107 at the closing date of September 14, 2007.
2. To eliminiate the historical net book value of the HHD:
Parent Equity	$	656,000
3. To reflect the write-off of HHD intangibles
Goodwill	$	36,813,000
Other intangibles	$	33,536,000
4. To reflect the write-off of Intercompany liability	$	78,045,000

Ex 99.3 - 5

5. To reflect additional depreciation due to write up in fair value of property, plant, equipment and land.
					Depreciation			Depreciation
	Fair value		Life		for the			for the
	Adjustment		(Years)		Year ended			six Months ended
Land	$	25,314
Building and improvements		1,407,027		20-39.5	$	14,048		$	16,453
Machinery and equipment		500,000		3-10		326,284			219,849
Furniture and fixtures		985,470		7		(16,232	)		2,420
Vehicles		97,389		5		37,008			18,504
Total	$	3,015,200			$	361,108		$	257,226
6. To reflect Pro forma adjustments for amortization of intangible assets
					Amortization			Amortization
					For the			For the six
	Amount		Life		Year ended			Months ended
Trademarks & Masthead	$	18,515,316	Indefinite			-			-
Subscriber Base asset		3,427,755		20	$	171,388		$	85,694
Advertiser Base asset		10,613,497		20		530,675			265,337
Goodwill		35,323,679	Indefinite			-			-
Total intangible based assets	$	67,880,247			$	702,063		$	351,031
7. To reflect the purchase adjustments related to the utilization of debt to finance the acquisiton of HHD.
								Interest expense		Adjustment
	Historical		Pro Forma		Pro Forma			For the		For the six
	Amount		Adjustments		As adjusted			Year ended		Months Ended
Total acquisition related debt		-	$	79,247,447	$	79,247,447		$	6,327,769	$	3,163,885
Deferred financing costs		-	$	1,853,495	$	1,853,495			332,586		166,293
Net increase in interest expense								$	6,660,355	$	3,330,178
Deferred financing costs consist of costs incurred in connection with debt financings. Such costs are amortized to interest expense on a straight-line basis over the remaining terms of the related debt. The weighted average life of of such costs is 5.74 years. The interest expense for the acquisition related debt utilized an average rate of 4.78% plus a margin of 2.75% this effectively converted a component of the borrowing to a fixed rate loan under a three year interest swap agreement for a notional amount of $25.0 million. The remaining components of the acquisition related debt are subject to floating interest rates of Libor plus a margin, the rate utilized for calculation purposes was Libor at June 30, 2007 plus 2.75%.  Champion also included interest costs associated with unused commitment fees based on $15.0 million of the revolving credit facility being unused with actual availability subject to borrowing base limitations.

Ex 99.3 - 6

8. To reflect the elimination of certain expenses associated with pension, other post retirement benefits not assumed by Champion and corporate overhead allocations from Gannett.
	For the			For the six
	Year ended			Months ended
Retirement Plans	$	288,000		$	100,000
Postretirement benefits other than pension		563,000			167,000
Total	$	851,000		$	267,000
9. To reflect the income tax provision based on applying the pro forma estimated effective tax rate of the combined companies.
10. Conforming adjustments to adjust the HHD Statements of Operations to the Champion's format for classification purposes.
	For the			For the six
	Year ended			Months ended
Selling, general and administrative expenses	$	567		$	202
Depreciation		(567	)		(202	)
Net adjustment	$	-		$	-

Ex 99.3 - 7