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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)
|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 26, 2004
OR
|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 1-12955
JOURNAL REGISTER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 22-3498615
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
50 WEST STATE STREET
TRENTON, NEW JERSEY 08608-1298
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES, INCLUDING ZIP CODE)
Registrant's telephone number, including area code: (609) 396-2200
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
Common Stock, par value $0.01 per share New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). [X] Yes [ ] No
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of June 27, 2004 was $803.9 million.
As of March 15, 2005, 42,015,728 shares of the registrant's Common Stock,
par value $0.01 per share, were outstanding (excluding treasury shares).
DOCUMENTS INCORPORATED BY REFERENCE. The information called for by Part III
is incorporated by reference to the definitive Proxy Statement for the Company's
2005 Annual Meeting of Stockholders, which will be filed on or before April 25,
2005.
================================================================================
CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING STATEMENTS
STATEMENTS IN THIS ANNUAL REPORT ON FORM 10-K THAT ARE NOT PURELY
HISTORICAL ARE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF SECTION 27A OF
THE SECURITIES ACT OF 1933, AS AMENDED, AND SECTION 21E OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED, INCLUDING STATEMENTS REGARDING THE COMPANY'S
EXPECTATIONS, FORECASTS, PROJECTIONS, HOPES, INTENTIONS OR STRATEGIES REGARDING
THE FUTURE. FORWARD-LOOKING STATEMENTS INCLUDE STATEMENTS REGARDING THE PLANS
AND OBJECTIVES OF THE COMPANY FOR FUTURE OPERATIONS AND TRENDS AFFECTING THE
COMPANY'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS. IN ADDITION, THE WORDS
"ANTICIPATES," "PROJECTS," "PLANS," "INTENDS," "ESTIMATES," "EXPECTS," "MAY,"
"BELIEVES" AND SIMILAR WORDS ARE INTENDED TO IDENTIFY THESE FORWARD-LOOKING
STATEMENTS. ALL FORWARD-LOOKING STATEMENTS IN THIS REPORT ARE BASED ON
INFORMATION AVAILABLE TO THE COMPANY (AS HEREINAFTER DEFINED) AS OF THE DATE
THIS REPORT IS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, AND THE
COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH FORWARD-LOOKING STATEMENTS,
EXCEPT AS REQUIRED BY LAW. ALL FORWARD-LOOKING STATEMENTS INVOLVE RISKS AND
UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR
IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS
INCLUDING, BUT NOT LIMITED TO, THE UNAVAILABILITY OR A MATERIAL INCREASE IN THE
PRICE OF NEWSPRINT, THE SUCCESS OF THE COMPANY'S ACQUISITION STRATEGY, INCLUDING
THE ACQUISITION OF 21ST CENTURY NEWSPAPERS, INC., DISPOSITIONS, THE ABILITY OF
THE COMPANY TO ACHIEVE COST REDUCTIONS AND INTEGRATE ACQUISITIONS, INCLUDING THE
ACQUISITION OF 21ST CENTURY NEWSPAPERS, INC., COMPETITIVE PRESSURES, GENERAL OR
REGIONAL ECONOMIC CONDITIONS, ADVERTISING TRENDS AND MATERIAL INCREASES IN
INTEREST RATES, AMONG OTHER THINGS. THESE AND OTHER FACTORS ARE DISCUSSED IN
MORE DETAIL BELOW UNDER "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CERTAIN FACTORS WHICH MAY AFFECT
THE COMPANY'S FUTURE PERFORMANCE." SUCH FACTORS SHOULD NOT BE CONSTRUED AS
EXHAUSTIVE. THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY THE RESULTS
OF ANY FUTURE REVISIONS IT MAY MAKE TO FORWARD-LOOKING STATEMENTS TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
PART I
ITEM 1. BUSINESS.
GENERAL
Journal Register Company (the "Company") is a leading U.S. newspaper
publisher that owns and operates 27 daily newspapers and 338 non-daily
publications strategically clustered in seven geographic areas: Greater
Philadelphia, Michigan, Connecticut, Greater Cleveland, Central New England, and
the Capital-Saratoga and Mid-Hudson regions of New York. The Company's total
paid circulation is approximately 653,000 daily and 700,000 Sunday, and total
non-daily distribution is approximately 5 million. The Company's mission is for
its newspapers to be the number one provider of local information in the markets
they serve, both in print and online.
The Company's newspapers are characterized by their intense focus on
the coverage of local news and local sports, their compelling graphic design and
their colorful, reader-friendly packages. The Company is also committed to
expanding its business through its Internet initiatives, and currently operates
195 Websites that are affiliated with the Company's daily newspapers and
non-daily publications.
The principal elements of the Company's strategy are to: (i) expand
advertising revenues and readership; (ii) grow by acquisition; (iii) capture
synergies from geographic clustering; and (iv) implement consistent operating
policies and standards. The Company's objective is to produce high quality
products every day that enable the Company to grow its revenues, cash flows and
net income.
The Company is a leader in the newspaper industry in executing a
clustering strategy. The Company believes that its clustering strategy creates
significant synergies and cost savings within each cluster, including
cross-selling of advertising, centralized news gathering and consolidation of
printing, production and back office activities. The Company also believes that
its clustering strategy enables it to improve print quality and distribution,
introduce new products and services in a cost-effective manner and increase
readership. In addition, clustering enables the Company's advertisers to expand
their reach and target their message both geographically and demographically.
1
From September 1993 through December 2004, the Company successfully
completed 30 acquisitions and two dispositions.
During fiscal year 2004, the Company completed four acquisitions,
highlighted by the August 12, 2004 acquisition of 21st Century Newspapers, Inc.
("21st Century"), which operates one of the largest newspaper clusters in the
United States. Located in Michigan, the Company's 21st Century subsidiary owns
four daily newspapers with combined average daily net paid circulation of
approximately 134,000 and combined average Sunday net paid circulation of
approximately 176,500. The daily newspapers owned by 21st Century include THE
OAKLAND PRESS in Pontiac, THE MACOMB DAILY in Mt. Clemens, THE DAILY TRIBUNE in
Royal Oak, and THE MORNING SUN in Mt. Pleasant. The Company's 21st Century
subsidiary also owns 85 non-daily publications with approximately 1.5 million
non-daily distribution. The purchase price for the acquisition was $415 million
and was paid in cash with the proceeds of a new senior credit facility provided
by JPMorgan.
The majority of the Company's daily newspapers have been published for
more than 100 years and are established franchises with strong identities in the
communities they serve. For example, the NEW HAVEN REGISTER, the Company's
largest newspaper based on daily circulation, has roots in the New Haven,
Connecticut area dating back to 1755. In many cases, the Company's daily
newspapers are the only general circulation daily newspapers published in their
respective communities. The Company's non-daily publications serve well-defined
suburban areas.
The Company manages its newspapers to best serve the needs of its local
readers and advertisers. The editorial content of its newspapers is tailored to
the specific interests of each community served and includes coverage of local
youth, high school, college and professional sports, as well as local business,
politics, entertainment and culture. The Company maintains high product quality
standards and uses extensive process color and compelling graphic design to more
fully engage existing readers and to attract new readers. The Company's
newspapers typically are produced using advanced prepress pagination technology,
and are printed on efficient, high-speed presses.
The Company's revenues are derived from advertising (76.0 percent of
fiscal year 2004 revenues), paid circulation (20.3 percent of fiscal year 2004
revenues), including single copy sales and subscription sales, and commercial
printing and other activities (3.7 percent of fiscal year 2004 revenues). The
Company's advertiser base is predominantly local. The Company's newspapers seek
to produce desirable results for local advertisers by targeting readers based on
certain geographic and demographic characteristics. The Company seeks to
increase readership, and thereby generate traffic for its advertisers, by
focusing on high product quality, compelling and often proprietary local content
and creative and interactive promotions. The Company promotes single copy sales
of its newspapers because it believes that such sales have even higher
readership than subscription sales, and that single copy readers tend to be more
active consumers of goods and services, as indicated by a Newspaper Association
of America ("NAA") study. Single copy sales also tend to generate higher profit
margins than subscription sales, as single copy sales generally have higher per
unit prices and lower distribution costs. Subscription sales, which provide
readers with the convenience of home delivery, are an important component of the
Company's circulation base. The Company also publishes numerous special
sections, as well as niche and special interest publications. Such publications
tend to increase readership within targeted demographic groups and geographic
areas. The Company's management believes that as a result of these strategies,
its newspapers represent an attractive and cost-effective medium for its readers
and advertisers.
The Company's advertising revenues in 2004 were derived primarily from
a broad group of local retailers (approximately 55 percent) and classified
advertisers (approximately 40 percent). No single advertiser accounted for more
than one percent of the Company's total fiscal year 2004 revenues. The Company's
management believes that its advertising revenues tend to be relatively stable
because its newspapers rely primarily on a broad base of local retail and local
classified advertising, rather than the generally more volatile national and
major account advertising that accounts for only approximately five percent of
the Company's advertising revenues.
Substantially all of the Company's operations relate to newspaper
publishing. In addition to its daily newspapers and non-daily publications, the
Company currently owns three commercial printing operations that complement and
enhance its publishing operations.
2
OVERVIEW OF OPERATIONS
The Company's operations are clustered in seven geographic areas:
GREATER PHILADELPHIA. The suburban Philadelphia area is one of the
fastest growing and most affluent areas in Pennsylvania. Since 1990, the
population of the areas covered by the Company's Greater Philadelphia Cluster
has increased approximately 10 percent, and average household income has
increased approximately 58 percent.
The Company owns seven daily newspapers and 123 non-daily publications
serving areas surrounding Philadelphia. These publications include, in
Pennsylvania: the DELAWARE COUNTY DAILY AND SUNDAY TIMES (Primos); the DAILY
LOCAL NEWS (West Chester); THE MERCURY (Pottstown); THE TIMES HERALD
(Norristown); THE REPORTER (Lansdale); THE PHOENIX (Phoenixville); Montgomery
Newspapers, a group of 25 non-daily publications; News Gleaner Publications,
which includes eight weekly publications serving Northeast Philadelphia and
seven monthly publications serving Montgomery County, Pennsylvania; the
InterCounty Newspaper Group, a group of 18 weekly newspapers serving suburban
Philadelphia and central and southern New Jersey; Chesapeake Publishing, a group
of 15 non-daily publications; Town Talk Newspapers (Media), a group of seven
non-daily publications; Acme Newspapers, a group of four non-daily newspapers,
including the MAIN LINE TIMES, serving Philadelphia's affluent Main Line, and
the NEWS OF DELAWARE COUNTY, one of the largest community newspapers in the
United States audited by the Audit Bureau of Circulations ("ABC"); and the Penny
Pincher Shopper publications (Pottstown). Also, in New Jersey, the Company owns
THE TRENTONIAN (Trenton, NJ), a daily newspaper operation. The Company also owns
two commercial printing companies in Pennsylvania, one of which prints more than
60 of the Company's non-daily publications in addition to printing for other
non-affiliated customers, and the other is a premium quality sheet-fed printing
operation.
The seven Greater Philadelphia Cluster daily newspapers have aggregate
daily and aggregate Sunday circulation of approximately 180,000. The Company's
aggregate non-daily distribution in the Company's Greater Philadelphia Cluster
is approximately 1.3 million.
In October 2004, the Company purchased Berks-Mont Newspapers, a group
of nine non-daily publications serving the western suburbs of Philadelphia.
These publications are adjacent to other Company publications, including THE
MERCURY (Pottstown) and Montgomery Newspapers. The acquisition expanded the
Company's publications into an area with a population of 765,417 which has grown
18 percent since 1990. The population in the area has an average household
income of $66,395, which is 5 percent above the national average.
In October 2003, the Company launched EL LATINO EXPRESO, a weekly
Spanish-language publication distributed in the Trenton, New Jersey market. This
publication was originally launched as a monthly and the distribution frequency
was subsequently increased to twice monthly and, in September 2004, to weekly.
In 2003, the Company launched HUNTERDON COUNTY TOWN & Country Living Magazine, a
quarterly publication with distribution of approximately 20,000 serving affluent
and fast-growing Hunterdon County, New Jersey, as part of the Company's Town and
Country Magazine division.
In 2002, the Company launched the Lansdale edition of THE SUNDAY TIMES
HERALD, adding circulation of approximately 15,000 on Sunday in Montgomery
County. This edition provides advertisers with a local Sunday newspaper to reach
the desirable Lansdale market. The Company also expanded its Greater
Philadelphia Cluster with the completion of two strategic acquisitions in 2002,
acquiring the News Gleaner publications and the County Press publications.
3
The following table sets forth information regarding the Company's
publications in Greater Philadelphia:
YEAR YEAR PRINCIPAL DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)
DELAWARE COUNTY DAILY AND
SUNDAY TIMES............. 1876 1998 Primos, PA 45,718 44,105
DAILY LOCAL NEWS.......... 1872 1986 West Chester, PA 28,779 29,393
THE MERCURY............... 1930 1998 Pottstown, PA 24,203 26,502
THE TIMES HERALD.......... 1799 1993 Norristown, PA 16,501 29,306
THE REPORTER.............. 1870 2001 Lansdale, PA 17,872 15,496
THE PHOENIX............... 1888 1986 Phoenixville, PA 3,694
THE TRENTONIAN............ 1945 1985 Trenton, NJ 43,925 34,622
Montgomery Newspapers
25 publications........ 1872 2001 Ft. Washington, PA 274,382
News Gleaner Publications
15 publications........ 1882 2002 Philadelphia, PA 167,946
Berks-Mont Newspapers
9 publications......... 1857 2004 Quakertown, PA 147,950
Chesapeake Publishing
15 publications........ 1869 2001 Kennett Square, PA 85,468
Town Talk Newspapers
7 publications......... 1964 1998 Ridley, PA 85,200
InterCounty Newspaper
Group
18 publications........ 1869 1997 Newtown, PA 73,651
Penny Pincher Shoppers
7 publications......... 1988 1998 Pottstown, PA 57,200
Acme Newspapers
4 publications......... 1930 1998 Ardmore, PA 53,907
Suburban Publications
3 publications......... 1885 1986 Wayne, PA 30,007
County Press Publications
6 publications......... 1931 2002 Newtown Square, PA 21,575
TRI-COUNTY RECORD......... 1975 1986 Morgantown, PA 40,200
REAL ESTATE TODAY......... 1978 1998 Pottstown, PA 35,000
THE HOMES MAGAZINE........ 1988 1988(4) West Chester,PA 18,053
CHESTER COUNTY KIDS....... 2001 2001(4) West Chester, PA 18,000
THE VILLAGE NEWS.......... 1980 1986 Downingtown, PA 18,000
TOWNSHIP VOICE............ 1991 1991 Phoenixville, PA 15,000
EL LATINO EXPRESO......... 2004 2004(4) Trenton, NJ 14,300
THE TIMES RECORD.......... 1980 1986 Kennett Sq., PA 9,000
BLUE BELL JOURNAL......... 1999 1999(4) Blue Bell, PA 5,225
Total Market Coverage
("TMC") (5 publications).. 103,100
- -----------------------------------------------------------------------------------------------------------------------
TOTAL 180,692 179,424 1,273,164
=======================================================================================================================
(1) For merged newspapers and newspaper groups, the year given reflects the
date of origination for the earliest publication.
(2) Circulation averages are according to the most recently released Audit
Bureau of Circulation ("ABC") Audit Reports.
(3) Non-daily distribution includes both paid and free distribution.
(4) Represents the year the Company started the publication.
4
The majority of the Company's Pennsylvania publications are located
within a 30-mile radius of Philadelphia. The Company's newspapers serve
geographic areas with highly desirable demographics. The DELAWARE COUNTY DAILY
AND SUNDAY TIMES serves an area that has a population of 588,276. The population
grew slightly from 1980 to 2004. The DELAWARE COUNTY DAILY AND SUNDAY TIMES'
market area has average household income of $76,477, which is 21 percent above
the national average. The DAILY LOCAL NEWS serves an area which has a population
of 449,075 and had population growth of approximately 52 percent from 1980 to
2004. The DAILY LOCAL NEWS serves an area that has average household income of
$91,966, which is 46 percent above the national average. THE MERCURY, located
west of Philadelphia, serves an area that has a population of 487,749 and had
population growth of approximately 32 percent from 1980 to 2004. The area THE
MERCURY serves has average household income of $76,255, which is 21 percent
above the national average. THE TIMES HERALD serves an area that has a
population of 191,643 and had population growth of approximately 20 percent from
1980 to 2004. THE TIMES HERALD's market area has average household income of
$82,494, which is 31 percent above the national average. The Reporter serves an
area that has a population of 416,058 and had population growth of approximately
25 percent from 1990 to 2004. THE REPORTER's market area has an average
household income of $89,463, which is 42 percent above the national average. THE
PHOENIX serves an area that has a population of 141,570 and had population
growth of approximately 54 percent from 1980 to 2004. The Phoenix's market area
has average household income of $98,529, which is 56 percent above the national
average. The Company's weekly newspaper group, Suburban Publications, which is
located on the Main Line in suburban Philadelphia, serves an area that has a
population of 347,470 and had population growth of approximately 28 percent from
1980 to 2004. The market area served by Suburban Publications has average
household income of $108,316, which is 71 percent above the national average.
The MAIN LINE TIMES, the flagship of the Company's Acme Newspapers group, serves
an area that has a population of 401,357 and had population growth of
approximately three percent from 1980 to 2004. The MAIN LINE TIMES' market area
has average household income of $101,472, which is 61 percent above the national
average. The majority of the Company's Pennsylvania properties are located
within 20 miles of the area's largest retail complex, the King of Prussia Mall,
which is the largest shopping center in the United States based on retail square
footage.
THE TRENTONIAN is published in Trenton, the capital of New Jersey,
which is located 35 miles northeast of Philadelphia and 65 miles southwest of
New York City. THE TRENTONIAN serves an area that has a population of 299,422
and had population growth of approximately 12 percent from 1980 to 2004. This
area has average household income of $73,890, which is 17 percent above the
national average.
As a result of the synergies in the Company's Greater Philadelphia
Cluster, the Company has been able to cross-sell advertising into multiple
publications. The nature of the cluster also allows for the implementation of
significant cost savings programs. For example, in December 2001, the Company
commenced operations at a new production facility, Journal Register Offset,
located in Exton, Pennsylvania. This plant produces five of the Company's seven
dailies - the DAILY LOCAL NEWS, THE MERCURY, THE TIMES HERALD, THE REPORTER and
THE PHOENIX - and 57 of the Company's 123 non-daily publications in the
Company's Greater Philadelphia Cluster. The Exton facility produces
award-winning product quality and generates significant cash operating expense
savings. In addition, the Company's publications in its Greater Philadelphia
Cluster share several news gathering resources.
MICHIGAN. In August 2004, the Company acquired 21st Century, which
publishes four daily newspapers and 85 non-daily publications. The daily
newspapers are THE OAKLAND PRESS (Pontiac), THE MACOMB DAILY (Mt. Clemens), THE
DAILY TRIBUNE (Royal Oak), and THE MORNING SUN (Mt. Pleasant). The non-daily
publications are primarily aggregated in four groups: the Lapeer Group (Lapeer);
Morning Star Group (Mt. Pleasant); Independent Newspapers (Mt. Clemens); and
Heritage Newspapers (Southgate). The aggregate circulation of the daily
newspapers is approximately 134,000 daily and approximately 176,500 Sunday. The
non-daily publications have an aggregate distribution of approximately 1.5
million.
The following table sets forth information regarding the Company's
publications in Michigan:
5
PUBLICATION YEAR YEAR PRINCIPAL DAILY SUNDAY NON-DAILY
ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)
OAKLAND PRESS................. 1844 2004 Pontiac 65,581 81,526
MACOMB DAILY.................. 1839 2004 Mt. Clemens 44,076 66,912
DAILY TRIBUNE................. 1902 2004 Royal Oak 12,676 15,120
THE MORNING SUN............... 1879 2004 Mt. Pleasant 11,654 12,866
Morning Star Group
27 publications............. 1947 2004 Mt. Pleasant 400,456
Heritage Group
21 publications............. 1869 2004 Southgate 374,095
Independent Newspapers
16 publications............. 1902 2004 Mt. Clemens 275,176
Lapeer Group
15 publications............. 1879 2004 Lapeer 210,840
HOMES FOR SALE................ 1982 2004 Pontiac 56,500
METRO DETROIT JOB SEARCH...... 2001 2004 Pontiac 50,323
TMC (4 publications).......... 156,014
- ------------------------------------------------------------------------------------------------------------------
TOTAL 133,987 176,424 1,523,404
==================================================================================================================
(1) For merged newspapers and newspaper groups, the year given reflects the
date of origination for the earliest publication.
(2) Circulation averages are according to the most recently released ABC Audit
Reports.
(3) Non-daily distribution includes both paid and free distribution.
THE OAKLAND PRESS and THE DAILY TRIBUNE are in Oakland County, located
in the northwest suburbs of Detroit and one of the most affluent counties in
Michigan. Oakland County has a population of 1,204,736 and had population growth
of 11 percent from 1990 to 2004. The county has an average household income of
$89,969, which is 42 percent above the national average. THE MACOMB DAILY is in
Macomb County, which is in the northern suburbs of Detroit. The county has a
population of 820,704 and had population growth of 14 percent from 1990 to 2004.
It has an average household income of $66,903, which is approximately six
percent above the national average. THE MORNING SUN is in Isabella County, which
is located in the central part of the state. Isabella County has a population of
65,334 and had population growth of 20 percent from 1990 to 2004. The county has
an average household income of about $49,026. Heritage Newspapers serves an area
in the southern and southwestern suburbs of Detroit. The area has a population
of 1,016,313 and had population growth of seven percent from 1990 to 2004. The
area has an average household income of $65,799, which is four percent above the
national average. Independent Newspapers serves an area in the northern part of
the Detroit metro area. The area has a population of 610,492 and had population
growth of 26 percent from 1990 to 2004. The area has an average household income
of $71,720, which is 13 percent above the national average. The Lapeer Group
serves an area in the Lake area of the state that includes Lapeer, Sanilac,
Huron, Tuscola and Saginaw counties. The area has a population of 563,729 and
had population growth of 14 percent from 1990 to 2004. The area has an average
household income of $62,313. The Morning Star Group serves a large area in the
central and northern part of Michigan. The area has a population of 966,565 and
had population growth of 18 percent from 1990 to 2004. The area has an average
household income of $52,615.
CONNECTICUT. In Connecticut, the Company owns the NEW HAVEN REGISTER, a
small metropolitan daily newspaper with daily circulation of approximately
94,000 and Sunday circulation of approximately 98,000, four suburban daily
newspapers, 74 suburban non-daily publications and one commercial printing
company. The suburban daily newspapers in the Connecticut Cluster are THE HERALD
(New Britain), THE BRISTOL PRESS, THE REGISTER CITIZEN (Torrington) and THE
MIDDLETOWN PRESS. The five daily newspapers have aggregate daily and Sunday
circulation of approximately 140,000. The non-daily publications have aggregate
distribution of approximately 1.6 million. Included in the non-daily
publications is CONNECTICUT MAGAZINE, the state's premier lifestyle magazine
that was acquired in September 1999. The Company's Connecticut daily newspapers
and non-daily publications serve a statewide audience with concentrations in
western Connecticut (Litchfield and Fairfield counties) to Hartford and its
suburban areas, to the Greater New Haven area, as well as the Connecticut
shoreline from New Haven northeast to New London.
6
In March 2004, the NEW HAVEN REGISTER launched PLAY, a weekly
entertainment and lifestyle publication targeting readers 18 to 34 years old in
the Greater New Haven market. PLAY has a distribution of approximately 24,000.
In November 2004, the NEW HAVEN REGISTER launched LUXURY LIVING, a quarterly
lifestyle magazine with distribution of 30,000 serving selected affluent markets
in the Greater New Haven and the Connecticut Shoreline areas. In 2003, the
Company launched PASSPORT, a quarterly regional lifestyle magazine serving the
fast-growing and affluent areas of Litchfield and Fairfield counties in
Connecticut, Dutchess and Columbia counties in New York, and the Berkshire
Mountains region of Massachusetts. PASSPORT has distribution of 18,900 and was
launched by the Litchfield County Times Group, which is based in New Milford,
Connecticut. In May 2004, the Company launched EL LATINO EXPRESO, a weekly
Spanish-language publication distributed in the New Britain market. This
publication was originally launched as a monthly and the distribution frequency
was subsequently increased to twice monthly and, in September 2004, to weekly.
The following table sets forth information regarding the Company's
publications in Connecticut:
YEAR YEAR PRINCIPAL DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)
NEW HAVEN REGISTER............... 1755 1989 New Haven 94,126 98,432
THE HERALD....................... 1881 1995 New Britain 14,479 29,538(5)
THE BRISTOL PRESS................ 1871 1994 Bristol 12,091 (5)
THE REGISTER CITIZEN............. 1889 1993 Torrington 9,709 8,972
THE MIDDLETOWN PRESS............. 1884 1995 Middletown 8,273 (5)
CONNECTICUT MAGAZINE
3 publications................. 1938 1999 Trumbull 620,434
Shore Line Newspapers
10 publications................ 1877 1995 Guilford 150,678
Imprint Newspapers
12 publications................ 1880 1995 Bristol 93,630
Litchfield County Times Group
3 publications................. 1981 2001 New Milford 52,545
Elm City Newspapers
6 publications................. 1931 1995 Milford 47,066
Housatonic Publications
7 publications................. 1825 1998 New Milford 37,321
Minuteman Newspapers
2 publications................. 1993 1998 Westport 35,283
LUXURY LIVING.................... 2004 2004(4) New Haven 30,000
PLAY............................. 2004 2004(4) New Haven 24,000
EL LATINO EXPRESO................ 2004 2004(4) New Britain 10,000
Gamer Publications
3 publications................. 1981 1995 Bristol 55,000
FOOTHILLS TRADER
3 publications................. 1965 1995 Torrington 49,113
CONNECTICUT COUNTY KIDS
2 publications................. 1989 1996 Westport 40,000
MAIN STREET NEWS
3 publications................. 1989 2002 Essex 24,251
EAST HARTFORD GAZETTE............ 1885 1995 East Hartford 19,100
HOMEFINDER....................... 1976 1995 New Britain 16,065
THOMASTON EXPRESS................ 1874 1994 Thomaston 1,511
TMC (14 publications)............ 310,257
- ------------------------------------------------------------------------------------------------------------------
TOTAL 138,678 136,942 1,616,254
==================================================================================================================
(1) For merged newspapers and newspaper groups, the year given reflects the
date of origination for the earliest publication.
(2) Circulation averages are according to the most recently released ABC Audit
Reports.
(3) Non-daily distribution includes both paid and free distribution. The
CONNECTICUT VACATION GUIDE, one of CONNECTICUT MAGAZINE's publications,
which is published annually, has annual distribution of 500,000. Another
CONNECTICUT MAGAZINE publication, CONNECTICUT BRIDE, is published twice per
year with distribution of 30,000 per issue.
(4) Represents the year the Company started the publication.
(5) The SUNDAY HERALD PRESS is a combined Sunday newspaper that serves the
markets served by THE HERALD, THE BRISTOL PRESS and THE MIDDLETOWN PRESS
with three zoned editions.
7
The Company's Connecticut publications serve communities with
attractive demographics. The NEW HAVEN REGISTER is the Company's largest
newspaper based on daily circulation and is the second largest daily circulation
newspaper in Connecticut. The NEW HAVEN REGISTER serves a primary circulation
area comprised of the majority of New Haven County and portions of Fairfield,
Middlesex and New London counties. This area (including the portions of
Fairfield County, which are also served by related non-daily publications) has a
population of 819,364 and had population growth of approximately 18 percent from
1980 to 2004. This area has average household income of $76,909, which is 22
percent above the national average, and a retail environment comprised of
approximately 7,200 stores. The NEW HAVEN REGISTER's primary circulation area is
home to a number of large and well-established institutions, including Yale
University and Yale-New Haven Hospital. As a result of its proximity to the
large media markets of New York City, Boston and Hartford, New Haven has only
two locally licensed television stations (which serve a statewide, rather than a
local, audience). The radio market in New Haven is also fragmented.
Consequently, the Company's management believes that the NEW HAVEN REGISTER is a
very powerful local news and advertising franchise for the Greater New Haven
area.
THE HERALD, THE BRISTOL PRESS and THE MIDDLETOWN PRESS serve contiguous
areas between New Haven and Hartford. THE BRISTOL PRESS serves an area that has
a population of 340,384 and had population growth of approximately nine percent
from 1980 to 2004. The BRISTOL PRESS' market area has average household income
of $82,857, which is 31 percent above the national average. THE MIDDLETOWN PRESS
serves an area that has a population of 109,201 and had population growth of
approximately 28 percent from 1980 to 2004. The area served by THE MIDDLETOWN
PRESS has average household income of $76,283, which is 21 percent above the
national average. THE HERALD serves an area that has a population of 109,004,
and had population growth of approximately six percent from 1980 to 2004. THE
HERALD's market area has average household income of $56,502. THE REGISTER
CITIZEN serves an area that has a population of 258,188 and had population
growth of approximately 18 percent from 1980 to 2004. THE REGISTER CITIZEN'S
market area has average household income of $82,489, which is 31 percent above
the national average.
The Company's Connecticut publications benefit from cross-selling of
advertising, as well as from editorial, production and back office synergies.
For example, the NEW HAVEN REGISTER gathers statewide news for all of the
Company's Connecticut newspapers; the newspapers cross-sell advertising through
a one-order, one-bill system; and THE HERALD and THE MIDDLETOWN PRESS are
printed at one facility, as are THE REGISTER CITIZEN and THE BRISTOL PRESS.
Moreover, in August 1996, in order to take advantage of the contiguous nature of
the geographic areas served by THE HERALD, THE BRISTOL PRESS and THE MIDDLETOWN
PRESS, the Company launched a combined Sunday newspaper, THE HERALD PRESS, which
serves the readers of these three daily newspapers with three zoned editions and
has a Sunday circulation of approximately 30,000 as of September 30, 2003,
according to the ABC Audit Report.
GREATER CLEVELAND. The Company owns two Cleveland, Ohio area newspaper
operations, THE NEWS-HERALD (Willoughby) and THE MORNING JOURNAL (Lorain). The
aggregate daily and aggregate Sunday circulation of the Cleveland-area
newspapers is approximately 76,000 and 91,000, respectively. The five non-daily
publications in the Greater Cleveland cluster have aggregate distribution of
approximately 141,000.
The following table sets forth information regarding the Company's
publications in Greater Cleveland:
YEAR YEAR PRINCIPAL DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)
THE NEWS-HERALD............... 1878 1987 Willoughby 45,571 56,000
THE MORNING JOURNAL........... 1921 1987 Lorain 30,860 35,034
COUNTY KIDS Willoughby
2 publications............. 1997 1997(4) and Lorain 33,702
EL LATINO EXPRESO............. 2004 2004(4) Lorain 10,000
TMC (2 publications).......... 97,011
- -------------------------------------------------------------------------------------------------------------------
TOTAL 76,431 91,034 140,713
===================================================================================================================
(1) For merged newspapers and newspaper groups, the year given reflects the
date of origination for the earliest publication.
(2) Circulation averages are according to the most recently released ABC
Audit Reports.
(3) Non-daily distribution is free distribution.
(4) Represents the year the Company started the publication.
8
In May 2004, the Company launched EL LATINO EXPRESO, a weekly
Spanish-language publication distributed in THE MORNING JOURNAL'S market area.
This publication was originally launched as a monthly and the distribution
frequency was subsequently increased to twice monthly and, in September 2004, to
weekly.
THE NEWS-HERALD and THE MORNING JOURNAL serve areas located directly
east and west of Cleveland, respectively. THE NEWS-HERALD, which is one of
Ohio's largest suburban newspapers, serves communities located in Lake and
Geauga counties, two of Ohio's five most affluent counties. Lake and Geauga
counties have populations of 229,769 and 94,462, respectively, and had
population growth of approximately nine percent and 36 percent, respectively,
from 1980 to 2004. Lake and Geauga counties have average household incomes of
$63,398 and $87,092, respectively, which are 0.3 percent and 38 percent above
the national average. THE MORNING JOURNAL serves an area that has a population
of 154,049 with population growth of approximately five percent from 1980 to
2004. Average household income is $62,430 in the area served by THE MORNING
JOURNAL. The Greater Cleveland Cluster benefits from a variety of synergies,
including advertising cross-sell arrangements and certain news gathering
resources.
CENTRAL NEW ENGLAND. The Company owns five daily and 26 non-daily
publications in the central New England area. The Company's publications in this
cluster include THE HERALD NEWS (Fall River, MA), the TAUNTON DAILY GAZETTE
(Taunton, MA), THE CALL (Woonsocket, RI), THE TIMES (Pawtucket, RI) and the KENT
COUNTY DAILY TIMES (West Warwick, RI), each of which is published daily, and two
groups of weekly newspapers serving southern Rhode Island, including South
County, THE NORTH ATTLEBOROUGH FREE PRESS (North Attleborough, MA), and O JORNAL
(Fall River, MA), a Portuguese-language weekly newspaper acquired in January
2004. The five daily newspapers have aggregate daily circulation of
approximately 64,000 and aggregate Sunday circulation of approximately 54,000.
The non-daily publications in this cluster have total distribution of
approximately 313,000.
The following table sets forth information regarding the Company's
publications in Central New England:
PUBLICATION YEAR YEAR PRINCIPAL DAILY SUNDAY NON-DAILY
ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)
1872 1985 Fall River, MA 22,930 24,401
THE HERALD NEWS...........
TAUNTON DAILY GAZETTE..... 1848 1996 Taunton, MA 10,661 10,073
THE CALL.................. 1892 1984 Woonsocket, RI 14,131 19,223
THE TIMES................. 1885 1984 Pawtucket, RI 11,929
KENT COUNTY DAILY TIMES... 1892 1999 West Warwick, RI 4,142
Southern Rhode Island
Newspapers
8 publications........ 1854 1995 Wakefield, RI 38,363
Hometown Newspapers
6 publications........ 1969 1999 West Warwick, RI 44,030
Fall River, MA,
COUNTY KIDS Taunton, MA and
3 publications......... 1997 1997(4) Pawtucket, RI 49,509
Pawtucket and
NEIGHBORS................. 1999 1999(4) Woonsocket, RI 22,085
NORTHWEST NEIGHBORS....... 2002 2002 Woonsocket, RI 9,000
THE NORTH ATTLEBOROUGH North
FREE PRESS............. 1987 2003 Attleborough, MA 17,300
O JORNAL.................. 1975 2004 Fall River, MA 14,296
EL LATINO EXPRESO......... 2004 2004(4) Fall River, MA 13,500
HEALTHBEAT................ 2004 2004(4) Fall River, MA 22,219
TMC (3 publications)...... 83,066
- --------------------------------------------------------------------------------------------------------------------
TOTAL 63,793 53,697 313,368
====================================================================================================================
9
(1) For merged newspapers and newspaper groups, the year given reflects the
date of origination for the earliest publication.
(2) Circulation averages are according to the most recently released ABC
Audit Reports.
(3) Non-daily distribution includes both free and paid.
(4) Represents the year the Company started the publication.
THE HERALD NEWS and the TAUNTON DAILY GAZETTE are situated 14 miles
apart. Each is less than 40 miles south of Boston, Massachusetts and 25 miles
east of Providence, Rhode Island. The region's second largest shopping mall,
located in Taunton, contains one million square feet of retail space and
approximately 150 stores. THE HERALD NEWS serves an area that has a population
of 168,361 and had population growth of approximately four percent from 1980 to
2004. The market area served by THE HERALD NEWS has average household income of
$53,552. The TAUNTON DAILY GAZETTE serves an area that has a population of
143,972 and had population growth of approximately 39 percent from 1980 to 2004.
The TAUNTON DAILY GAZETTE's market area has average household income of $68,470.
THE CALL serves an area that has a population of 193,806 and had population
growth of approximately 19 percent from 1980 to 2004. THE CALL'S market area has
average household income of $69,402, which is 10 percent above the national
average. THE TIMES serves an area that has a population of 204,272 and had
population growth of approximately 16 percent from 1980 to 2004. The market area
served by THE TIMES has average household income of $58,640. Southern Rhode
Island Newspapers serve an area that has a population of 168,731 and had
population growth of approximately 38 percent from 1980 to 2004. The market area
served by Southern Rhode Island Newspapers has average household income of
$79,375, which is 26 percent above the national average.
In August 2004, the Company launched EL LATINO EXPRESO, a weekly
Spanish-language publication distributed in the Fall River market. In January
2004, the Company expanded its reach to the large Portuguese community in
Central New England by acquiring O JORNAL, a weekly Portuguese-language
newspaper based in Fall River, Massachusetts, with distribution of approximately
14,300. O JORNAL serves a Portuguese community in Massachusetts and Rhode Island
estimated to have a population of 370,000. In 2003, the Company added to its
Central New England cluster with the acquisition of THE NORTH ATTLEBOROUGH FREE
PRESS, a weekly newspaper based in North Attleborough, Massachusetts, which has
distribution of approximately 17,300.
No local television stations exist in the communities served by the
Company's Central New England newspapers. Furthermore, the Company believes that
its Central New England properties benefit from the fragmentation of local radio
markets. The Company believes that each of its newspapers is a significant media
outlet in its respective community, and is an effective vehicle for area
advertisers.
The Central New England newspapers benefit from advertising cross-sell
arrangements, as well as significant production and editorial synergies. For
example, THE TIMES, THE CALL and the KENT COUNTY DAILY TIMES are printed at the
same facility, as are the TAUNTON DAILY GAZETTE, THE HERALD NEWS and O JORNAL.
Southern Rhode Island Newspapers are printed at the Company's NEW HAVEN REGISTER
facility.
CAPITAL-SARATOGA REGION OF NEW YORK. The Company owns three daily and
seven non-daily publications in the Capital-Saratoga Region of New York. The
Company's publications in this cluster include THE RECORD (Troy), THE SARATOGIAN
(Saratoga Springs), THE ONEIDA DAILY DISPATCH and the weekly COMMUNITY NEWS,
serving Clifton Park. In 2004, the Company expanded its Capital-Saratoga cluster
with the acquisition of Mohawk Valley Media, a group of three non-daily
publications based in Rome, New York, with distribution of approximately 28,600.
The daily newspapers have aggregate daily circulation of approximately 37,000
and aggregate Sunday circulation of approximately 34,000. The non-daily
publications in this cluster have total distribution of approximately 127,000.
The following table sets forth information regarding the Company's
publications in the Capital-Saratoga Region of New York:
10
YEAR YEAR PRINCIPAL DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3
THE RECORD.................. 1896 1987 Troy 19,776 21,551
Saratoga
THE SARATOGIAN.............. 1855 1998 Springs 10,924 12,303
THE ONEIDA DAILY DISPATCH.. 1850 1998 Oneida 6,795
Mohawk Valley Media
3 publications........... 1993 2004 Rome 28,600
COMMUNITY NEWS.............. 1969 1998 Clifton Park 30,475
Oneida-Chittenango
Pennysaver................ 1957 1998 Oneida 23,085
TMC (2 publications)........ 45,270
- ---------------------------------------------------------------------------------------------------------------------
TOTAL 37,495 33,854 127,430
=====================================================================================================================
(1) For merged newspapers and newspaper groups, the year given reflects the
date of origination for the earliest publication.
(2) Circulation averages are according to the most recently released ABC
Audit Reports.
(3) Non-daily distribution includes both paid and free distribution.
THE RECORD and THE SARATOGIAN are situated approximately 26 miles apart
in the Capital-Saratoga region of New York. THE RECORD serves an area that has a
population of 175,541, which has remained relatively stable since 1980. THE
RECORD's market has average household income of $54,407. THE SARATOGIAN serves
an area that has a population of 213,455 and had population growth of
approximately 27 percent from 1980 to 2004. THE SARATOGIAN'S market area has
average household income of $66,062. THE ONEIDA DAILY DISPATCH serves an area
that has a population of 73,526, and had population growth of approximately two
percent from 1980 to 2004. THE ONEIDA DAILY DISPATCH's market area has average
household income of $57,100. No local television stations exist in the
communities that the Company's Capital-Saratoga Region newspapers serve.
Furthermore, the Company believes that its Capital-Saratoga Region properties
benefit from the fragmentation of local radio markets. As a result, the Company
believes that its newspapers in the region are significant media outlets in
their respective communities, thereby making these newspapers attractive
vehicles for area advertisers. THE RECORD, THE SARATOGIAN and the COMMUNITY NEWS
benefit from significant cross-selling of advertising. These newspapers also
benefit from significant production and news gathering synergies. For example,
THE RECORD, THE SARATOGIAN and the COMMUNITY NEWS are printed at the Company's
operating facility in Troy, taking advantage of that facility's excess capacity
and achieving significant cost efficiencies.
MID-HUDSON REGION OF NEW YORK. The Company owns one daily newspaper and
17 non-daily publications in the Mid-Hudson Region of New York. The daily
newspaper in this cluster is the DAILY FREEMAN in Kingston. The Company's
non-daily publications in this cluster are: the Taconic Press group, a group of
12 non-daily newspapers serving Dutchess and Westchester counties in New York,
and THE PUTNAM COUNTY COURIER, serving Putnam County, New York; and Roe Jan
Independent Publishing, which includes two non-daily publications. The
Mid-Hudson Region cluster has daily circulation of approximately 21,500, Sunday
circulation of approximately 27,000 and total non-daily distribution of
approximately 690,000.
The following table sets forth information regarding the Company's
publications in the Mid-Hudson Region of New York:
YEAR YEAR PRINCIPAL DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)
DAILY FREEMAN.................. 1871 1998 Kingston 21,492 27,407
Taconic Press
12 publications.............. 1846 1998 Millbrook 585,242
Roe Jan Independent Publishing
2 publications............. 1973 2001 Hillsdale 19,431
WHEELS......................... 2001 2001(4) Kingston 38,463
DOORWAYS....................... 1983 1998 Kingston 29,244
TMC (1 publication)............ 19,902
- --------------------------------------------------------------------------------------------------------------------
TOTAL 21,492 27,407 692,282
====================================================================================================================
11
(1) For merged newspapers and newspaper groups, the year given reflects the
date of origination for the earliest publication.
(2) Circulation averages are according to the most recently released ABC
Audit Reports.
(3) Non-daily distribution includes both paid and free distribution.
(4) Represents the year the Company started the publication.
The DAILY FREEMAN and TACONIC PRESS serve markets in the Mid-Hudson
region of New York. THE DAILY FREEMAN serves an area that has a population of
283,106 and had population growth of approximately 13 percent from 1980 to 2004.
THE DAILY FREEMAN'S market area has average household income of $59,472. The
Taconic Press newspaper group based in Dutchess County serves an area that has a
population of 103,738 and had population growth of approximately 17 percent from
1980 to 2004. The Taconic Press publications serve markets with average
household income of $76,366, which is 21 percent above the national average. THE
PUTNAM COUNTY COURIER, the largest Taconic Press non-daily publication, serves
an area that has a population of 99,830 and had population growth of
approximately 35 percent from 1980 to 2004. THE PUTNAM COUNTY COURIER'S market
area has average household income of $99,321, which is 57 percent above the
national average. Roe Jan Independent Publishing, Inc., which is based in
Hillsdale, New York, publishes two non-daily publications. Markets served by Roe
Jan have average household income of $67,792, which is seven percent above the
national average. Roe Jan's publications serve an area that has a population of
162,311.
The Company's management believes that its Mid-Hudson Region properties
are the leading sources of local information in the markets they serve and
provide an attractive vehicle for area advertisers. Only one independent
television station (which serves a regional, rather than a local, audience)
exists in the communities that the Mid-Hudson Region publications serve, and the
local radio markets are fragmented.
The Mid-Hudson Region newspapers benefit from significant cross-selling
of advertising, as well as production and editorial synergies. Certain
publications in this cluster also benefit from advertising cross-selling with
certain newspapers in the Company's Connecticut cluster, including THE REGISTER
CITIZEN (Torrington, CT) and certain of the Housatonic Publications (New
Milford, CT), which serve Litchfield County, Connecticut.
ONLINE OPERATIONS
Journal Register Company operates 195 Websites, which are affiliated
with the Company's daily newspapers and non-daily publications, as well as
portal sites for each of its seven geographic clusters. The Company's online
objective is to have its Websites complement its print publications by providing
certain content from these publications, as well as unique content and
interactive features. The Company's Websites also provide an online marketplace
for its advertisers.
A number of the Websites can be accessed individually, through the
Company's "cluster" portal sites, which combine publications within a specific
geographic area, or through the Company's Corporate Website
(WWW.JOURNALREGISTER.COM). The remaining Company newspapers, along with
CONNECTICUT MAGAZINE, have individual Websites.
The following is a list of the Company's cluster/portal Websites:
GEOGRAPHIC CLUSTER CLUSTER/PORTAL SITE
(number of individual Websites)
Greater Philadelphia................................www.allaroundphilly.com (79)
Michigan............................................www.micentral.com (24)
Connecticut.........................................www.ctcentral.com (46)
Greater Cleveland...................................www.allaroundcleveland.com (6)
Central New England.................................www.ricentral.com (16)
Capital-Saratoga Region of New York.................www.capitalcentral.com (9)
Mid-Hudson Region of New York.......................www.midhudsoncentral.com (14)
12
The primary source of online revenue is classified advertising. For
the year ended December 26, 2004, the Company's Websites generated approximately
$6.2 million of revenue as compared to approximately $4.7 million for the fiscal
year ended December 28, 2003, an increase of 31.0 percent.
ADVERTISING
Substantially all of the Company's advertising revenues are derived
from a diverse group of local retailers and classified advertisers. The
Company's management believes that its advertising revenues tend to be
relatively stable because its newspapers rely on a broad base of local retail
and local classified advertising, rather than the generally more volatile
national and major account advertising. Local advertising is typically more
stable than national advertising because a community's need for local services
provides a stable base of local businesses and because local advertisers
generally have fewer effective advertising vehicles from which to choose.
Advertising revenues accounted for approximately 76 percent of the
Company's total revenues for fiscal year 2004. The Company's advertising rate
structures vary among its publications and are a function of various factors,
including advertising effectiveness, local market conditions and competition, as
well as circulation, readership, demographics and type of advertising (whether
display, classified or national). In fiscal year 2004, local and regional
display advertising accounted for the largest share of the Company's advertising
revenues (approximately 55.0 percent), followed by classified advertising
(approximately 39.7 percent) and national advertising (approximately 5.3
percent). The Company's advertising revenues are not reliant upon any one
company or industry, but rather are supported by a variety of companies and
industries, including financial institutions, realtors, car dealerships, grocery
stores, universities, hospitals and many other local businesses. No single
advertiser accounted for more than one percent of the Company's total fiscal
year 2004 revenues.
The Company's corporate management works with its local newspaper
management to approve advertising rates and to establish goals for each year
during a detailed annual budget process. As a result, local management is given
little latitude for discounting from the approved rates. Corporate management
also works with local advertising staffs to develop marketing kits and
presentations utilizing the results of third-party research studies and internal
marketing resources. A portion of the compensation for the Company's publishers
is based upon increasing advertising revenues. The Company stresses the timely
collection of receivables. Compensation of the Company's sales personnel depends
in part upon performance relative to goals and timely collection of advertising
receivables. Additionally, corporate management facilitates the sharing of
advertising resources and information across the Company's publications, and the
Company's publishers aggressively pursue cross-selling of advertising within
their respective geographic areas. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Certain Factors Which May Affect
the Company's Future Performance - Dependence on Local Economies."
CIRCULATION
The Company's circulation revenues are derived from home delivery sales
of publications to subscribers and single copy sales made through retailers and
vending racks. Circulation accounted for approximately 20.3 percent of the
Company's total revenues in fiscal year 2004. Approximately 62 percent of fiscal
year 2004 circulation revenues were derived from subscription sales and
approximately 38 percent from single copy sales. Single copy rates range from
$0.35 to $0.50 per daily copy and $0.75 to $1.75 per Sunday copy. The Company
promotes single copy sales of its newspapers because it believes that such sales
have even higher readership than subscription sales, and that single copy
readers tend to be more active consumers of goods and services, as indicated in
an NAA readership study. Single copy sales also tend to generate a higher profit
margin than subscription sales, as single copy sales generally have higher per
unit prices and lower distribution costs. As of December 26, 2004, the Company
had total daily paid circulation of approximately 653,000, paid Sunday
circulation of approximately 700,000 and non-daily distribution of approximately
5 million, most of which is distributed free of charge.
The Company's corporate management works with its local newspaper
management to establish subscription and single copy rates. In addition, the
Company tracks rates of newspaper returns and customer service calls in an
effort to optimize the number of newspapers available for sale and to improve
delivery and customer service. The Company also implements creative and
interactive programs and promotions to increase readership through both
subscription and single copy sales. The most recent Fall 2004 Scarborough
Research studies, which measured all 27 of the Company's daily newspapers and
several of its non-daily publications, reported a 2.1 percent average gain in
overall daily readership and a 3.1 percent average gain in overall Sunday
readership as compared to the results from Scarborough Research's Spring 2004
studies for the Company's publications that were measured.
13
In recent years, circulation has generally declined throughout the newspaper
industry, and the Company's newspapers have generally experienced this trend.
The Company believes that recent changes in telemarketing rules and regulations
have impacted the ability of the Company to solicit new subscribers, as well as
the cost of such solicitation. Other methods to attract and retain subscribers
have been, and remain, in use by the Company. The Company seeks to maximize its
overall operating performance rather than maximizing circulation of its
individual newspapers.
OTHER OPERATIONS
As of December 26, 2004, the Company owned and operated three
commercial printing facilities: Imprint Print in North Haven, Connecticut;
Nittany Valley Offset in State College, Pennsylvania; and InterPrint in Bristol,
Pennsylvania. Certain of the Company's publications are printed at these
facilities, in addition to the products printed for non-affiliated entities.
Commercial printing operations and other revenues accounted for approximately
3.7 percent of the Company's total revenues in fiscal year 2004.
EMPLOYEES
As of December 26, 2004, the Company employed approximately 6,200
full-time and part-time employees, or 5,400 full-time equivalents ("FTEs").
Approximately 20 percent of the Company's employees are employed under
collective bargaining agreements. The Company anticipates that collective
bargaining agreements at nine newspapers, representing approximately 25 percent
of the employees covered by collective bargaining agreements, will be
renegotiated in 2005.
RAW MATERIALS
The basic raw material for newspapers is newsprint. In fiscal year
2004, the Company consumed approximately 56,000 metric tons of newsprint,
excluding paper consumed in its commercial printing operations. The average
price per metric ton of newsprint based on East Coast transactions prices in
2004, 2003 and 2002 was approximately $550, $503 and $465, respectively, as
reported by the trade publication, PULP AND PAPER WEEKLY. The Company purchases
the majority of its newsprint through its central purchasing group, Journal
Register Supply. The Company has no long-term contracts to purchase newsprint.
Generally, Journal Register Supply purchases most of its newsprint from one or
two suppliers, although in the future the Company may purchase newsprint from
other suppliers. Historically, the percentage of newsprint from each supplier
has varied. The Company's management believes that concentrating its newsprint
purchases in this way provides a more secure newsprint supply and lower unit
prices. The Company's management also believes that it purchases newsprint at
price levels lower than those that are available to individually owned small
metropolitan and suburban newspapers, and consistent with price levels generally
available to the largest newsprint purchasers. The available sources of
newsprint have been, and the Company believes will continue to be, adequate to
supply the Company's needs. The inability of the Company to obtain an adequate
supply of newsprint in the future could have a material adverse effect on the
financial condition and results of operations of the Company.
Historically, the price of newsprint has been cyclical and subject to
price fluctuations. The Company's average price per ton of newsprint for the
full fiscal year increased approximately nine percent in 2004, increased
approximately eight percent in 2003 and decreased approximately 22 percent in
2002, each as compared to the preceding year. The Company believes that if any
price decrease or increase is sustained in the industry, the Company will also
be impacted by such change. The Company seeks to manage the effects of increases
in prices of newsprint through a combination of, among other things, technology
improvements, inventory management and advertising and circulation price
increases. In fiscal year 2004, the Company's newsprint cost (excluding paper
consumed in the Company's commercial printing operations) was approximately
seven percent of the Company's newspaper revenues.
COMPETITION
While most of the Company's newspapers do not have daily newspaper
competitors that are published in the same city, in certain of the Company's
markets, there is such direct competition. Most of the Company's newspapers
compete with other newspapers published in nearby cities and towns and with free
distribution and paid advertising weeklies, as well as other print and non-print
media. Competition for advertising and paid circulation comes from local,
regional and national newspapers, shoppers, television, radio, direct mail,
online services and other forms of communication and advertising media.
Competition for advertising revenue is largely based upon advertiser results,
readership, advertising rates, demographics and circulation levels, while
competition for
14
circulation and readership is based largely upon the content of the newspaper,
its price and the effectiveness of its distribution. The Company's management
believes that its publications generally have been able to compete effectively
with other publications and other forms of media advertising. Commercial
printing, a highly competitive business, is largely driven by price and quality.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations - Certain Factors Which May Affect the Company's Future Performance -
Newspaper Industry Competition."
SEASONALITY
Newspaper companies tend to follow a distinct and recurring seasonal
pattern. The first quarter of the year (January-March) tends to be the weakest
quarter because advertising volume is then at its lowest level. Correspondingly,
the fourth quarter (October-December) tends to be the strongest quarter, as it
includes heavy holiday season advertising.
ENVIRONMENTAL MATTERS
As is the case with other newspaper and similar publishing companies,
the Company is subject to a wide range of federal, state and local environmental
laws and regulations pertaining to air and water quality, storage tanks and the
management and disposal of waste at its facilities. To the best of the Company's
knowledge, its operations are in material compliance with applicable
environmental laws and regulations as currently interpreted. Management believes
that continued compliance with these laws and regulations will not have a
material adverse effect on the Company's financial condition or results of
operations.
REGULATION
Paid or requestor circulation newspapers with "periodical" mailing
privileges are required to obtain a "periodical" permit from, and file an annual
Statement of Ownership, Mailing and Circulation with the United States Postal
Service. Recent changes in telemarketing rules and regulations have impacted the
ability of the Company to solicit new subscribers, as well as the cost of such
solicitation. There is no significant regulation with respect to acquisition of
newspapers other than filings under the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended.
CORPORATE GOVERNANCE AND AVAILABLE INFORMATION
The Company's Board of Directors has elected a lead independent
director, who will preside over executive sessions of the Board. Currently,
seven of the nine members of the Board of Directors, constituting all of the
non-management directors, are independent under the listing standards adopted by
the New York Stock Exchange, and all directors who serve on the Board's Audit
Committee, Compensation Committee and Corporate Governance Committee are
independent. Pursuant to the Company's pre-approval policy, the Audit Committee
approves in advance the services to be provided by the Company's independent
auditors. The Company has filed the required certifications under Section 302 of
the Sarbanes-Oxley Act of 2002 regarding the quality of the Company's public
disclosures, and the Company's Chairman, President and Chief Executive Officer
has certified to the New York Stock Exchange that he is not aware, as of the
date of such certification, of any violation by the Company of the New York
Stock Exchange Corporate Governance Listing Standards.
The Company makes available a wide variety of information free of
charge on its Website at WWW.JOURNALREGISTER.COM. The Company's filings with the
U.S. Securities and Exchange Commission (the "SEC") are available on the
Company's Website as soon as reasonably practicable after the reports are
electronically filed with the SEC. The Company's Website also contains news
releases, financial information, Company profiles and certain corporate
governance information, including copies of the Company's Corporate Governance
Guidelines, the Company's Code of Business Conduct and Ethics, the Company's
Code of Ethics for CEO and Other Senior Financial Officers, the Company's Audit
Committee Pre-Approval Policy, the charters of each of the Committees of the
Board of Directors, and information regarding how interested parties may contact
the Board, the lead director or the non-management directors as a group. Mailed
copies of such information can be obtained free of charge by writing to the
Company at Journal Register Company, Investor Relations, State Street Square, 50
West State Street, Trenton, NJ 08608-1298, Attention: Corporate Secretary. The
contents of the Company's Websites are not incorporated into this filing.
15
ITEM 2. PROPERTIES.
As of December 26, 2004, the Company operated approximately 200
facilities in the course of producing and publishing its daily and non-daily
publications. Approximately 150 of these facilities are leased for terms ranging
from month-to-month to eleven years. These leased facilities range in size from
approximately 180 to approximately 60,000 square feet. Except as otherwise
noted, the facilities identified below are utilized for office space. The
location and approximate size of the principal physical properties used by the
Company at December 26, 2004, as well as the expiration date of the leases
relating to such properties that the Company leases, are set forth below:
OWNED LEASED LEASE
LOCATION SQUARE FEET SQUARE FEET EXPIRATION DATE
- -----------------------------------------------------------------------------------------------------------------
Ardmore, PA........................... 25,250
Bristol, CT........................... 40,000
Bristol, PA........................... 70,000(1)
Clinton Twp., MI...................... 33,550(1)
Exton, PA............................. 86,395(1)
Fall River, MA........................ 53,371(1)
Fort Washington, PA................... 23,490 7,500 9/30/05
Kingston, NY.......................... 25,800(1)
Lansdale, PA.......................... 22,400
Lapeer, MI............................ 10,000(1)
Lorain, OH............................ 68,770(1)
Madison Heights, MI................... 41,247 2/28/07
Middletown, CT........................ 30,000
Mt. Clemens, MI....................... 30,125 8/16/14
Mt. Pleasant, MI...................... 60,000(1) 7/31/15
New Britain, CT....................... 33,977(1)
New Haven, CT......................... 205,000(1)
Norristown, PA........................ 40,000
North Haven, CT....................... 24,000(1) 10,000(1)(2) 12/31/04
Oneida, NY............................ 24,000(1)
Pawtucket, RI......................... 41,096
Pontiac, MI........................... 79,762(1)
Pottstown, PA......................... 48,000
Primos, PA............................ 85,000(1)
State College, PA..................... 23,365(1) 3,000(2) 7/31/05
Southgate, MI......................... 19,735 10/31/09
Taunton, MA........................... 21,100
Torrington, CT........................ 41,370(1)
Trenton, NJ........................... 51,489(1) 22,172 11/30/10
Troy, NY.............................. 50,000(1)
West Chester, PA...................... 34,000
Willoughby, OH........................ 80,400(1)
Woonsocket, RI........................ 50,938(1)
- -----------------------------------------------------------------------------------------------------------------
(1) Production facility
(2) Warehouse
Management believes that all of its properties are in good condition,
are generally well maintained and are adequate for their current operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."
ITEM 3. LEGAL PROCEEDINGS.
The Company is involved in a number of litigation matters that have
arisen in the ordinary course of business. The Company believes that the outcome
of these legal proceedings will not have a material adverse effect on the
Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
16
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information as of March 15, 2005
with respect to each person who is an executive officer of the Company:
OFFICER POSITION
Robert M. Jelenic Chairman, President and Chief Executive Officer
Jean B. Clifton Executive Vice President, Chief Financial Officer and Director
Thomas E. Rice Senior Vice President, Operations
Allen J. Mailman Senior Vice President, Technology
Marc S. Goldfarb Vice President, General Counsel and Corporate Secretary
ROBERT M. JELENIC is Chairman, President and Chief Executive Officer
of the Company. He has been President and Chief Executive Officer since the
inception of the Company, and has been a director of the Company and its
predecessors for over ten years. A Chartered Accountant, Mr. Jelenic began his
business career with Arthur Andersen in Toronto, Canada. Mr. Jelenic has 29
years of senior management experience in the newspaper industry, including 12
years with the Toronto Sun Publishing Corp. Mr. Jelenic graduated Honors,
Bachelor of Commerce from Laurentian University, Sudbury, Ontario. Mr. Jelenic
is a director of the Audit Bureau of Circulations ("ABC") and Lamar Advertising
Company. Mr. Jelenic is 54 years old.
JEAN B. CLIFTON is Executive Vice President and Chief Financial Officer
of the Company, positions she has held since the Company's inception. Ms.
Clifton has also been a director of the Company and its predecessors for over
ten years. Ms. Clifton, a Certified Public Accountant, began her business career
at Arthur Young & Co. (a predecessor to Ernst & Young LLP). Ms. Clifton has 19
years of senior management experience in the newspaper industry. Ms. Clifton is
a member of the Board of Directors of the NAA, as well as a member of the Board
of Directors of the Fresh Air Fund, and the Board of Directors of the Lower
Bucks County Chapter of the American Red Cross. Ms. Clifton received a Bachelor
of Business Administration in 1983 from the University of Michigan. Ms. Clifton
is 44 years old.
THOMAS E. RICE is Senior Vice President of Operations of the Company, a
position he has held since November 2000. From the inception of the Company to
November 2000, Mr. Rice was located in St. Louis, Missouri, where he was
President and Chief Executive Officer of Suburban Newspapers of Greater St.
Louis and THE TELEGRAPH in Alton, Illinois, which the Company sold in 2000. Mr.
Rice began his career with Lee Enterprises in 1963 and has held senior
management positions with Tribune Company, The Times Mirror Company, MediaNews
Group and the Chicago Sun Times. Mr. Rice has 42 years of experience in the
newspaper industry. Mr. Rice is a member of the Newsprint Committee of the NAA.
Mr. Rice attended the University of Nebraska and Roosevelt University in
Chicago. Mr. Rice is 60 years old.
ALLEN J. MAILMAN is Senior Vice President of Technology of the Company,
a position he has held since February 1999. From March 1994 to February 1999, he
was Vice President of Technology of the Company. From the Company's inception in
1990 to March 1994, Mr. Mailman was Corporate Director of Information Services
of the Company. Mr. Mailman has 30 years of management experience in the
newspaper industry, including 14 years with Advance Publications, Inc. Mr.
Mailman received a Bachelor of Arts degree in Economics and Mathematics from the
University of Oklahoma. Mr. Mailman is 58 years old.
MARC S. GOLDFARB is Vice President, General Counsel and Corporate
Secretary of the Company. He has been Vice President and General Counsel since
January 2003, and was appointed Corporate Secretary of the Company in May 2003.
From July 1998 to January 2003, he served as Managing Director and General
Counsel of The Vertical Group, an international private equity firm. Prior to
that, Mr. Goldfarb was a Partner at Bachner, Tally, Polevoy & Misher LLP. Mr.
Goldfarb has 17 years of diverse legal, financial and strategic experience. Mr.
Goldfarb earned his Juris Doctor from the University of Pennsylvania and his
Bachelor of Science degree from Cornell University. Mr. Goldfarb is 41 years
old.
17
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's common stock, par value $0.01 per share (the "Common
Stock"), commenced trading on the New York Stock Exchange on May 8, 1997 under
the symbol "JRC." The following table reflects the high and low sale prices for
the Common Stock, based on the daily composite listing of stock transactions for
the New York Stock Exchange, for the periods indicated:
YEAR QUARTER LOW HIGH
-----------------------------------------------------
2003 First $14.85 $18.26
Second $15.10 $18.90
Third $17.90 $19.49
Fourth $18.69 $20.40
-----------------------------------------------------
2004 First $19.60 $21.31
Second $19.08 $22.10
Third $18.50 $20.66
Fourth $17.65 $19.62
On March 15, 2005, there were approximately 60 stockholders of record
of the Company's Common Stock. The Company believes that there are approximately
7,900 beneficial owners of its shares of Common Stock.
The Company has not historically paid dividends on its Common Stock,
although the Company may elect to pay such dividends in the future. The
Company's Credit Agreement (as hereinafter defined) places certain limitations
on the Company's ability to pay dividends or make any other distributions on the
Common Stock. See Note 4 of "Notes to Consolidated Financial Statements." Any
future determination as to the payment of dividends will be subject to such
prohibitions and limitations, will be at the discretion of the Company's Board
of Directors and will depend on the Company's results of operations, financial
condition, capital requirements and other factors deemed relevant by the Board
of Directors.
Journal Register Company conducts its operations through direct and
indirect subsidiaries. The Company's available cash will depend upon the cash
flow of its subsidiaries and the ability of such subsidiaries to make funds
available to the Company in the form of loans, dividends or otherwise. The
subsidiaries are separate and distinct legal entities and have no legal
obligation, contingent or otherwise, except as required by the Credit Agreement,
to make funds available to the Company, whether in the form of loans, dividends
or otherwise. The Credit Agreement is secured by substantially all of the assets
of the Company and the common stock and assets of the Company's subsidiaries. In
addition, the Company's subsidiaries may, subject to limitations contained in
the Credit Agreement, become parties to financing arrangements that may contain
limitations on the ability of such subsidiaries to pay dividends or to make
loans or advances to the Company. In the event of any insolvency, bankruptcy or
similar proceeding of a subsidiary, creditors of such subsidiary would generally
be entitled to priority over the Company with respect to assets of the affected
subsidiary.
18
Item 6. Selected Financial Data.
The following selected financial data (except number of publications)
has been derived from the audited financial statements of the Company and should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and notes thereto included elsewhere in this report:
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) DEC. 26, DEC. 28, DEC. 29, DEC. 30, DEC. 31,
FISCAL YEAR ENDED(1) 2004 2003 2002 2001 2000
- ------------------------------------------------------------------------------------------------------------------------------
STATEMENT OF INCOME DATA:
REVENUES:
Advertising $ 361,591 $ 298,986 $ 297,056 $ 287,859 $ 343,130
Circulation 96,770 90,034 91,123 87,737 96,852
- ------------------------------------------------------------------------------------------------------------------------------
Newspaper revenues 458,361 389,020 388,179 375,596 439,982
Commercial printing and other 17,366 16,966 19,575 18,809 23,987
- ------------------------------------------------------------------------------------------------------------------------------
TOTAL 475,727 405,986 407,754 394,405 463,969
- ------------------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES:
Salaries and employee benefits 181,888 155,355 150,614 140,522 155,161
Newsprint, ink and printing charges(2) 38,678 31,181 32,023 37,741 46,533
Selling, general and administrative(2) 66,389 51,932 52,976 47,810 47,008
Depreciation and amortization 17,153 15,447 14,927 26,317 27,616
Other 66,339 58,334 56,866 53,474 58,395
- ------------------------------------------------------------------------------------------------------------------------------
370,447 312,249 307,406 305,864 334,713
- ------------------------------------------------------------------------------------------------------------------------------
OPERATING INCOME 105,280 93,737 100,348 88,541 129,256
- ------------------------------------------------------------------------------------------------------------------------------
Net interest expense and other (19,362) (15,627) (23,677) (30,490) (48,020)
Gains on sales of newspaper properties - - - 32,212 180,720
Write-off of debt issuance costs (1,211) - - - -
- ------------------------------------------------------------------------------------------------------------------------------
Income before provision for income taxes and
equity interest 84,707 78,110 76,671 90,263 261,956
Provision (benefit) for income taxes (31,806) 6,120 27,444 10,818 90,951
- ------------------------------------------------------------------------------------------------------------------------------
Income before equity interest 116,513 71,990 49,227 79,445 171,005
Equity interest - - - (1,313) (1,624)
- ------------------------------------------------------------------------------------------------------------------------------
NET INCOME $ 116,513 $ 71,990 $ 49,227 $ 78,132 $ 169,381
==============================================================================================================================
Net income per common share:
Basic $ 2.78 $ 1.75 $ 1.18 $ 1.85 $ 3.74
Diluted $ 2.74 $ 1.72 $ 1.16 $ 1.83 $ 3.72
==============================================================================================================================
OTHER DATA:
EBITDA(3) $ 122,433 $ 109,184 $ 115,275 $ 114,858 $ 156,871
EBITDA Margin(3) 25.7% 26.9% 28.3% 29.1% 33.8%
Free cash flow, as adjusted(3) $ 71,388 $ 58,916 $ 61,631 $ 57,136 $ 86,701
Free cash flow, as adjusted, per diluted share(3) $ 1.68 $ 1.41 1.46 1.34 1.91
Capital expenditures(4) $ 14,893 $ 15,129 $ 13,010 $ 34,929 $ 21,550
Number of publications, end of period:
Daily 27 23 23 23 24
Non-Daily 338 236 233 206 158
==============================================================================================================================
BALANCE SHEET DATA:
Total current assets
$ 94,034 $ 58,087 $ 65,383 66,573 $ 79,359
Property, plant and equipment, net $ 158,005 $ 126,013 $ 125,680 $ 124,440 $ 104,178
Total assets $ 1,183,518 $ 693,060 $ 701,703 $ 711,171 $ 657,350
Total current liabilities, less current
maturities of long-term debt $ 76,884 $ 45,632 $ 52,069 $ 62,877 $ 51,542
Total senior debt, including current maturities $ 778,300 $ 418,345 $ 483,369 $ 522,771 $ 494,635
Stockholders' equity (deficit) $ 200,320 $ 72,344 $ (3,879) (36,198) $ (55,726)
19
- ------------------------
(1) The Company has a 52/53 week fiscal year generally ending on the Sunday
closest to the end of the calendar year. The Company's fiscal year ended
December 31, 2000 consisted of 53 weeks. All other fiscal years included
above consisted of 52 weeks.
(2) Certain operating expenses related to certain of the Company's
acquisitions have been reclassified in 2002 and 2003 to conform to the
Company's financial presentation. The reclassification had no impact on
total operating expenses, operating income, EBITDA or net income.
(3) EBITDA is defined by the Company as net income plus provision for income
taxes, net interest expense, depreciation, amortization and other
non-cash, special or non-recurring charges. Free cash flow is defined as
EBITDA minus capital expenditures, interest and cash income taxes. EBITDA
Margin is defined as EBITDA divided by total revenues, and is widely used
within the Company's industry to illustrate the percentage of revenue that
is converted into EBITDA. These non-GAAP financial measures should not be
considered as alternatives to measures of performance calculated in
accordance with generally accepted accounting principles in the United
States ("GAAP"), such as operating income or net income.
The Company believes that the use of certain non-GAAP financial measures
enables the Company and its analysts, investors and other interested
parties to evaluate and compare the Company's results from operations and
cash resources generated from its business in a more meaningful and
consistent manner. Accordingly, this information has been disclosed in
this report to permit a more complete comparative analysis of the
Company's operating performance and capitalization relative to other
companies in the industry and to provide an analysis of operating results
using certain principal measures used by Journal Register Company's chief
operating decision makers to measure the operating results and performance
of the Company and its field operations. The Company believes the use of
EBITDA is appropriate given the generally predictable cash flow generated
by the Company's operations and the short period of time it takes to
convert new orders to cash. EBITDA is also the basis of certain covenants
contained in the Company's Credit Agreement. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations." In
addition, the Company believes that free cash flow is useful as a
supplemental measure of evaluating financial performance because it
provides an alternative measure of the cash generated by the Company after
payment of expenses, including investments, and therefore available for
further investment in the business, including acquisitions, or for other
uses such as repayment of indebtedness or repurchases of outstanding
equity securities.
However, not all companies calculate EBITDA (and EBITDA margin) and free
cash flow using the same methods; therefore, the EBITDA and free cash flow
figures set forth above may not be comparable to EBITDA and free cash flow
reported by other companies. Free cash flow per share is calculated using
the weighted-average shares outstanding on a fully diluted basis.
See "Management's Discussion and Analysis of Financial Condition and
Results of Operations - Reconciliation of Certain Non-GAAP Financial
Measures" for a reconciliation of non-GAAP financial measures used in this
report to the most directly comparable GAAP financial measures.
(4) Capital expenditures, excluding capitalized interest, related to the
Company's Philadelphia printing facility (Journal Register Offset) were
$22.8 million and $10.8 million in fiscal years 2001 and 2000,
respectively. Capitalized interest associated with Journal Register Offset
was $1.3 million in fiscal year 2001 and $601,000 in fiscal year 2000.
These expenditures have been excluded from the calculation of free cash
flow due to the large and non-recurring nature of the Journal Register
Offset project. Journal Register Offset began operating in December 2001.
20
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION
WITH THE HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND THE
OTHER FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS REPORT.
GENERAL
The Company's principal business is publishing newspapers in the United
States, and its publications are primarily daily and non-daily newspapers. The
Company's revenues are derived primarily from advertising, paid circulation and
commercial printing.
As of December 26, 2004, the Company owned and operated 27 daily
newspapers and 338 non-daily publications strategically clustered in seven
geographic areas: Greater Philadelphia; Michigan; Connecticut; the Greater
Cleveland area of Ohio; Central New England; and the Capital-Saratoga and
Mid-Hudson regions of New York. The Company has total paid daily circulation of
approximately 653,000, total paid Sunday circulation of approximately 700,000
and total non-daily distribution of approximately 5 million.
The principal elements of the Company's strategy are to: (i) expand
advertising revenues and readership; (ii) grow by acquisition; (iii) capture
synergies from geographic clustering; and (iv) implement consistent operating
policies and standards.
As part of its strategy, the Company focuses on increasing advertising
and circulation revenues and expanding readership at its existing and newly
acquired properties. The Company has also developed certain operating policies
and standards, which it believes have resulted in significant improvements in
the cash flow and profitability of its existing and acquired newspapers,
including: (i) focusing on local content; (ii) maintaining and improving product
quality; (iii) enhancing distribution; and (iv) promoting community involvement.
The Company is a leader in the newspaper industry in executing a
clustering strategy. The Company believes that its clustering strategy creates
significant synergies and cost savings within each cluster, including
cross-selling of advertising, centralized news gathering and consolidation of
printing, production and back office activities. The Company also believes that
its clustering strategy enables it to improve print quality and distribution,
introduce new products and services in a cost-effective manner and increase
readership. In addition, clustering enables the Company's advertisers to expand
their reach and target their message both geographically and demographically.
The Company's revenues are derived from advertising (76.0 percent of
fiscal year 2004 revenues), paid circulation (20.3 percent of fiscal year 2004
revenues), including single copy sales and subscription sales, and commercial
printing and other activities (3.7 percent of fiscal year 2004 revenues).
Advertising revenues are comprised of three basic categories: retail
(approximately 55.0 percent of fiscal year 2004 advertising revenues);
classified (approximately 39.7 percent of fiscal year 2004 advertising
revenues); and national (approximately 5.3 percent of fiscal year 2004
advertising revenues). The Company's advertiser base is predominantly local. The
Company's newspapers seek to produce desirable results for local advertisers by
targeting readers based on certain geographic and demographic characteristics.
The Company seeks to increase readership, and thereby generate traffic for its
advertisers, by focusing on high product quality, compelling and often
proprietary local content and creative and interactive promotions.
The Company's advertising revenues are derived primarily from a broad
group of local advertisers. No single advertiser accounted for more than one
percent of the Company's total fiscal year 2004 revenues. The Company's
management believes that its advertising revenues tend to be relatively stable
because its newspapers rely on a broad base of local retail and local classified
advertising, rather than the generally more volatile national and major account
advertising. However, the Company's advertising revenues are susceptible to
economic swings, particularly those that affect the local economies in the
markets in which the Company operates, and can be difficult to predict.
In addition, the Company is committed to expanding its business through
its Internet initiatives. Online revenues of $6.2 million are included in
advertising revenues for the fiscal year ended December 26, 2004 and constituted
approximately 1.7 percent of total advertising revenues during the year. The
Company's online objective is to make its Websites, all of which are accessible
through WWW.JOURNALREGISTER.COM, the local
21
information portal for their respective markets by establishing such Websites as
the indispensable source of useful and reliable community news, sports,
information and advertising in their markets. The Company currently operates 195
Websites, which are affiliated with the Company's daily newspapers and non-daily
publications.
The Company promotes single copy sales of its newspapers because it
believes that such sales have even higher readership than subscription sales,
and that single-copy readers tend to be more active consumers of goods and
services, as indicated by an NAA study. Single copy sales also tend to generate
higher profit margins than subscription sales, as single copy sales generally
have higher per unit prices and lower distribution costs. Subscription sales,
which provide readers with the convenience of home delivery, are an important
component of the Company's circulation base.
The Company also publishes numerous special sections and niche and
special interest publications. Such publications tend to increase readership
within targeted demographic groups and geographic areas. The Company's
management believes that as a result of these strategies, its newspapers
represent an attractive and cost-effective medium for its readers and
advertisers.
ACQUISITIONS
On August 12, 2004, the Company completed the acquisition of 21st
Century Newspapers, Inc., a privately-held operator of one of the largest
newspaper clusters in the United States. Located in Michigan, 21st Century owns
four daily newspapers with combined average daily net paid circulation of
approximately 132,000 and combined average Sunday net paid circulation of
approximately 177,000, and 85 non-daily publications with approximately 1.5
million non-daily distribution. The 21st Century newspaper cluster is the
Company's second largest cluster based on annualized revenues, after the
Company's Greater Philadelphia cluster. THE OAKLAND PRESS and THE MACOMB DAILY,
two of 21st Century's daily newspapers, are the Company's second and third
largest newspapers, respectively, with the NEW HAVEN REGISTER remaining the
Company's flagship and largest newspaper.
The Company completed three additional acquisitions during 2004 and one
acquisition during 2003. On January 28, 2004, the Company completed the
acquisition of O JORNAL, a weekly Portuguese-language newspaper based in Fall
River, Massachusetts, with circulation of approximately 14,300 serving more than
30 communities in Massachusetts and Rhode Island. On May 4, 2004, the Company
completed the acquisition of the assets of Mohawk Valley Media, a group of
non-daily publications based in Rome, New York serving Rome and neighboring
communities. On October 4, 2004, the Company acquired the assets of Berks-Mont
Newspapers, Inc., a privately held non-daily newspaper group, based in
Boyertown, Pennsylvania, that includes nine non-daily publications with combined
circulation of approximately 148,000. On November 17, 2003, the Company
completed the acquisition of the assets of THE NORTH ATTLEBOROUGH FREE PRESS,
based in North Attleborough, Massachusetts. This acquisition included a weekly
newspaper serving North Attleborough, Attleboro Falls and certain neighboring
communities, including Plainville, South Attleboro and Attleboro.
From September 1993 through December 2004, the Company completed 30
strategic acquisitions (including those described above), acquiring 18 daily
newspapers, 294 non-daily publications and four commercial printing companies.
Three of the four commercial printing facilities owned by the Company print a
number of the Company's non-daily publications and the fourth is a premium
quality sheet-fed printing company.
RESULTS OF OPERATIONS
FISCAL YEAR ENDED DECEMBER 26, 2004 COMPARED TO FISCAL YEAR ENDED DECEMBER 28,
2003
FOR COMPARISON PURPOSES, WHERE NOTED, THE COMPANY'S FISCAL YEAR 2004
AND 2003 RESULTS ARE PRESENTED ON A SAME-STORE BASIS, WHICH EXCLUDES THE
COMPANY'S ACQUISITIONS COMPLETED IN 2004 AND 2003.
SUMMARY. Net income for the fiscal year ended December 26, 2004
("fiscal year 2004") was $116.5 million, or $2.74 per diluted share, as compared
to $72.0 million, or $1.72 per diluted share, for the fiscal year ended December
28, 2003 ("fiscal year 2003"). Excluding the reversal of certain tax accruals in
fiscal year 2004 and in fiscal year 2003, which increased net income by $64.9
million in fiscal year 2004 and $22.8 million in fiscal year 2003, as well as a
special charge of approximately $0.7 million (net of tax effect) recorded in
fiscal year 2004 related to the extinguishment of the Company's refinanced
credit facility and a charge of $0.6 million (net of tax effect) recorded in
fiscal year 2003 related to a potential acquisition that was not consummated,
earnings for fiscal
22
year 2004 were $52.3 million, or $1.23 per diluted share, as compared to $49.8
million, or $1.19 per diluted share, for fiscal year 2003, an increase in net
income of 5.1 percent.
REVENUES. The Company's reported revenues were $475.7 million for
fiscal year 2004 as compared to $406.0 million for fiscal year 2003, an increase
of 17.2 percent. Newspaper revenues for fiscal year 2004 as compared to the
prior year period increased approximately $69.3 million, or 17.8 percent,
primarily as a result of an increase in revenues associated with the Company's
acquisitions of $60.7 million, an increase in same-store advertising revenues of
$10.9 million, or 3.7 percent, and an increase in reported circulation revenues
of $6.7 million, or 7.5 percent. The increase in circulation revenues was
related to the Company's acquisitions, partially offset by a 1.0 percent
decrease in same-store circulation revenues. Online revenues for fiscal year
2004, which are included in advertising revenues, were approximately $6.2
million, an increase of approximately 31.0 percent as compared to the prior year
period. Commercial printing and other revenues for fiscal year 2004 increased
$0.4 million, or 2.4 percent, to $17.4 million as compared to the prior year
period, and represented approximately 3.7 percent of the Company's revenues for
fiscal year 2004.
The following table sets forth the Company's total advertising
revenues, by category, for fiscal years 2004 and 2003:
FISCAL YEAR ENDED
-------------------------------------------------------------------
(IN THOUSANDS) DEC. 26, 2004 DEC. 28, 2003 INCREASE
---------------------------------------------------------------------------------------------------------------
Local $ 199,092 $ 164,882 20.7%
Classified 143,441 119,591 19.9%
National 19,058 14,513 31.3%
---------------------------------------------------------------------------------------------------------------
Total advertising revenues $ 361,591 $ 298,986 20.9%
===============================================================================================================
SAME-STORE NEWSPAPER REVENUES. On a same-store basis, total newspaper
revenues for fiscal year 2004 increased 2.6 percent to $399.0 million from
$389.0 million in fiscal year 2003. Same-store advertising revenues for fiscal
year 2004 were $309.9 million, a 3.7 percent increase over same-store
advertising revenues of $298.9 million in fiscal year 2003, primarily as a
result of increases in all categories of advertising revenues, including: retail
advertising revenues, up 1.7 percent; classified advertising revenues, up 4.9
percent; and national advertising revenues, up 15.8 percent, in each case as
compared to fiscal year 2003. The increase in classified advertising revenues
during fiscal year 2004 resulted primarily from a 13.4 percent increase in
classified real estate advertising revenues and a 10.5 percent increase in
classified employment advertising revenues, partially offset by a 7.4 percent
decrease in classified automotive advertising revenues. Same-store circulation
revenues decreased 1.0 percent in fiscal year 2004 to $89.1 million from $90.0
million in fiscal year 2003.
SALARIES AND EMPLOYEE BENEFITS. Salaries and employee benefit expenses
were 38.2 percent of the Company's total revenues for fiscal year 2004, compared
to 38.3 percent for fiscal year 2003. Salaries and employee benefits increased
$26.5 million, or 17.1 percent, in fiscal year 2004 to $181.9 million, primarily
as a result of the Company's acquisitions. Same-store salaries and employee
benefits increased $1.0 million, or 0.7 percent, primarily due to an increase in
cash compensation partially offset by a decrease in employee benefit expense.
NEWSPRINT, INK AND PRINTING CHARGES. For fiscal year 2004, newsprint,
ink and printing charges were 8.1 percent of the Company's revenues, as compared
to 7.7 percent for fiscal year 2003. Newsprint, ink and printing charges
increased $7.5 million, or 24.0 percent, for fiscal year 2004 to $38.7 million
as compared to the prior year, due principally to the Company's acquisitions and
an increase in the unit cost of newsprint of approximately nine percent. On a
same-store basis, newsprint, ink and printing charges increased approximately
$1.4 million, or 4.5 percent, primarily due to the increase in newsprint
expense. The increase in newsprint expense was due to an increase in newsprint
prices of approximately nine percent, partially offset by a decrease in
newsprint consumption.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses were 14.0 percent and 12.8 percent of the Company's
revenues for fiscal years 2004 and 2003, respectively. Selling, general and
administrative expenses increased $14.5 million, or 27.8 percent, for fiscal
year 2004 to $66.4 million as compared to the prior year, primarily due to the
Company's acquisitions and expenses associated with the Company's com