JOURNAL REGISTER CO, 10-K405, 1999-03-30

JOURNAL REGISTER CO
10-K405, 1999-03-30
NEWSPAPERS: PUBLISHING OR PUBLISHING & PRINTING

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

--------------------

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 31, 1998

|_| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number : 1-12955

JOURNAL REGISTER COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 22-3498615
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

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:
Common Stock, par value $0.01 per share

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].

The aggregate market value of the voting stock held by non-affiliates of the
registrant as of March 23, 1999 was approximately $122,242,340.

As of March 23 1999, 47,295,781 shares of the registrant's Common Stock, par
value $0.01 per share, were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE. The information called for by Part III
is incorporated by reference to the definitive Proxy Statement for the Company's
1999 Annual Meeting of Stockholders, which will be filed on or before April 30,
1999.

================================================================================

<PAGE>

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 AND SECTION 21E OF THE SECURITIES EXCHANGE ACT OF
1934, INCLUDING STATEMENTS REGARDING THE COMPANY'S EXPECTATIONS, HOPES,
INTENTIONS OR STRATEGIES REGARDING THE FUTURE. FORWARD-LOOKING STATEMENTS
INCLUDE: THE PLANS AND OBJECTIVES OF THE COMPANY FOR FUTURE OPERATIONS AND
TRENDS AFFECTING THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
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. FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS INCLUDE, BUT ARE NOT LIMITED TO, (I) A DECLINE IN
GENERAL ECONOMIC CONDITIONS, (II) THE UNAVAILABILITY OR MATERIAL INCREASE IN THE
PRICE OF NEWSPRINT, (III) AN ADVERSE JUDGMENT IN PENDING OR FUTURE LITIGATION,
AND (IV) INCREASED COMPETITIVE PRESSURE FROM CURRENT COMPETITORS AND FUTURE
MARKET ENTRANTS. SEE "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS -- CERTAIN FACTORS WHICH MAY AFFECT THE
COMPANY'S FUTURE PERFORMANCE." 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 (together with all of its subsidiaries and their
respective predecessors (the "Company") is a leading U.S. newspaper publisher,
with total paid daily circulation of 652,866 and total non-daily distribution of
approximately 3.7 million. As of December 31, 1998, the Company owned and
operated 24 daily newspapers and 185 non-daily publications strategically
clustered in seven geographic areas: Connecticut; Philadelphia and its
surrounding areas; Ohio; the greater St. Louis area; central New England; and
the Capital-Saratoga and Mid-Hudson, New York regions. The Company's newspapers
are characterized by an intense focus on coverage of local news and local sports
and offer compelling graphic design in colorful, reader-friendly packages.

From 1993 through 1998, the Company successfully completed 13 strategic
acquisitions, acquiring 12 daily newspapers, 117 non-daily publications and
three commercial printing companies. The Company has generally increased the
revenues and significantly increased the cash flow and profitability of its
acquired newspapers. For the fiscal year ended December 31, 1998, the Company
generated revenues of $426.8 million, EBITDA (as hereinafter defined) of $146.7
million (excluding special charges and an extraordinary item recorded in the
third quarter of 1998), net income of $41.1 million and net income, excluding
the special charges and extraordinary item, of $48.0 million. In 1997, the
Company's EBITDA was $133.4 million (excluding the 1997 special charge). From
1993 through 1998, the Company recorded compound annual growth in revenues and
EBITDA (excluding special charges in 1997 and 1998 and the extraordinary item in
1998), of approximately 9.4% and 11.4%, respectively. The Company has achieved
this growth through a combination of expanding revenues in existing geographic
areas, strategic acquisitions and implementing cost controls and ongoing expense
reduction efforts at existing and acquired newspapers.

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 circulation areas and include the St. Louis, Missouri SUBURBAN JOURNALS
(the "JOURNALS"), the largest group of weekly newspapers in the United States
based on total distribution.

<PAGE>

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, using extensive process color and compelling graphic design to
attract new readers and to more fully engage existing 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 (approximately 73.3%
of 1998 revenues), paid circulation, including single copy sales and
subscription sales (21.0% of 1998 revenues), and commercial printing and other
(5.7% of 1998 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, local content
and creative and interactive promotions. The Company promotes single copy sales
of its newspapers because it believes that such sales have 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 profits
than subscription sales, as single copy sales generally have higher per unit
prices and lower associated 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 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 1998 were derived primarily from a
broad group of local retailers (approximately 57%) and classified advertisers
(approximately 41%). No advertiser accounted for more than 2% of the Company's
1998 advertising revenues. The Company believes that because its newspapers rely
on a broad base of local retail and local classified advertising rather than
more volatile national and major account advertising, its advertising revenues
tend to be relatively stable.

Substantially all of the Company's operations relate to newspaper
publishing. In addition to its daily newspapers and non-daily publications, the
Company owns other businesses that complement and enhance its publishing
operations, consisting of four commercial printing operations as well as a
company which develops application software for the newspaper industry.

<PAGE>

OVERVIEW OF OPERATIONS

The Company's operations are currently clustered in seven geographic
areas:

CONNECTICUT. The Company owns the NEW HAVEN REGISTER, a daily newspaper
with circulation of more than 100,000, four suburban daily newspapers, 62
non-daily publications and one commercial printing company. The suburban daily
newspapers in this 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 163,000
and 166,000, respectively. The 62 suburban and community non-daily publications
have aggregate distribution of approximately 889,000. Combined, the Company's
Connecticut daily newspapers and non-daily publications serve a state-wide
audience with concentrations in western Connecticut (Litchfield and Fairfield
counties) through Hartford and its suburban areas to the greater New Haven area;
and the Connecticut shoreline from New Haven northeast to New London.

The following table sets forth information regarding the Company's
publications in Connecticut:

YEAR YEAR DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)

<S> <C> <C> <C> <C> <C> <C>
NEW HAVEN REGISTER.......... 1755 1989 New Haven 100,062 112,318
THE HERALD.................. 1881 1995 New Britain 23,198 42,271(4)
THE BRISTOL PRESS........... 1871 1994 Bristol 15,936 (4)
THE REGISTER CITIZEN........ 1889 1993 Torrington 12,573 11,554
THE MIDDLETOWN PRESS........ 1884 1995 Middletown 10,832 (4)
Imprint Newspapers
14 publications.......... 1880 1995 Bristol 121,204
Shore Line Newspapers
13 publications.......... 1877 1995 Guilford 120,410
Elm City Newspapers
8 publications.......... 1931 1995 Milford 82,063
Minuteman Newspapers
3 publications.......... 1993 1998 Westport 73,870
Housatonic Publications
9 publications.......... 1825 1998 New Milford 57,183
CONNECTICUT'S COUNTY KIDS... 1989 1996 Westport 41,425
Foothills Trader
3 publications.......... 1965 1995 Torrington 37,354
EAST HARTFORD GAZETTE....... 1885 1995 East Hartford 19,700
THOMASTON EXPRESS........... 1874 1994 Thomaston 1,565
TMC (9 publications)........ 333,925
------- ------- -------
TOTALS...................... 162,601 166,143 888,699
======= ======= =======

</TABLE>

(1) For merged properties and newspaper groups, the year given reflects the
date of origination for the earliest publication.

(2) Circulation averages for the six months ended September 30, 1998, according
to ABC Fas-Fax Report.

(3) Non-daily distribution includes both paid and free distribution. Paid
distribution for Housatonic Valley and Minuteman Newspapers reflects the
1998 Certified Audit of Circulations ("CAC") audit. All other non-daily
distribution reflects average distribution for December 1998.

(4) In August 1996, the Company commenced publication of a Sunday newspaper,
THE HERALD PRESS, serving readers of THE HERALD, THE BRISTOL PRESS and THE
MIDDLETOWN PRESS.

<PAGE>

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 Middlesex and New London
Counties. This area (including portions of Fairfield County which are served by
related non-daily publications) has a population of 769,033 and had population
growth of approximately 6% from 1980 to 1997. This area has an average household
income of $68,611, which is 24% above the national average of $55,449, and a
retail environment of more than 6,600 stores. This area features 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 one locally licensed
television station (which serves a state-wide, rather than a local, audience)
and a fragmented radio market. Consequently, the Company believes that the NEW
HAVEN REGISTER is a 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 which has
a population of 319,951 and had population growth of approximately 5% from 1980
to 1997. This area has an average household income of $77,156, which is 39%
above the national average. THE MIDDLETOWN PRESS serves an area which has a
population of 99,882 and had population growth of approximately 16% from 1980 to
1997. This area has an average household income of $65,408, which is 18% above
the national average. THE HERALD serves an area which has a population of
104,425, which is essentially unchanged since 1980. This area has an average
household income of $55,664. THE REGISTER CITIZEN serves an area which has a
population of 240,515 and had population growth of approximately 11% from 1980
to 1997. This area has an average household income of $74,956, which is 35%
above the national average.

The Connecticut publications benefit from considerable cross-selling of
advertising as well as from news-gathering and production synergies. The NEW
HAVEN REGISTER gathers state-wide 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 started a
Sunday newspaper, THE HERALD PRESS, serving readers of these three dailies with
three zoned editions and having Sunday circulation of approximately 42,271 as of
September 30, 1998.

PHILADELPHIA AND SURROUNDING AREAS. The Company owns six daily newspapers
and 47 non-daily publications serving areas surrounding Philadelphia,
Pennsylvania. These publications include, in Pennsylvania, the DAILY LOCAL NEWS
(West Chester), THE TIMES HERALD (Norristown), THE PHOENIX (Phoenixville), a
group of non-daily newspapers serving Philadelphia's affluent Main Line and a
group of 16 weekly newspapers, the InterCounty Newspaper Group, serving suburban
Philadelphia and central and southern New Jersey; and also in New Jersey, THE
TRENTONIAN (Trenton). The Company also owns two commercial printing companies,
acquired with the InterCounty Newspapers in December 1997, one of which prints
the 16 weekly newspapers and one of which is a premium quality sheet-fed
printing operation. The daily newspapers, acquired in the July 1998 Goodson
Acquisition (as hereinafter defined) include, both in Pennsylvania, The Delaware
County DAILY TIMES and THE MERCURY, Pottstown. The Goodson Acquisition non-daily
publications include, also in Pennsylvania, Acme Newspapers (Ardmore), including
THE MAIN LINE TIMES, serving the affluent Main Line, and NEWS OF DELAWARE
COUNTY, one of the largest audited community newspapers in the United States;
Town Talk Newspapers (Media); and Penny Pincher Shoppers (Pottstown). The six
daily newspapers have aggregate daily and Sunday circulation of approximately
195,000 and 171,000, respectively. This non-daily distribution totals
approximately 583,000.

<PAGE>

The following table sets forth information regarding the Company's
publications in Philadelphia and surrounding areas:

YEAR YEAR DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)

<S> <C> <C> <C> <C> <C> <C>
DAILY TIMES (4)............ 1876 1998 Delaware County, PA 50,746 48,178
DAILY LOCAL NEWS........... 1872 1986 West Chester, PA 33,420 31,047
THE MERCURY (4)............ 1930 1998 Pottstown, PA 26,904 27,815
THE TIMES HERALD........... 1799 1993 Norristown, PA 22,601 19,050
THE PHOENIX................ 1888 1986 Phoenixville, PA 4,032
THE TRENTONIAN............. 1945 1985 Trenton, NJ 57,517 45,035
Suburban Publications
3 publications........... 1885 1986 Wayne, PA 32,917
Suburban Philadelphia
5 publications........... 1885 1986 Suburban Philadelphia 64,285
InterCounty Newspaper
Group
16 publications.......... 1869 1997 Bristol, PA 85,830
Acme Newspapers
4 publications (4)....... 1930 1998 Ardmore, PA 84,515
Penny Pincher Shoppers
6 publications (4)....... 1988 1998 Pottstown, PA 64,077
Town Talk Newspapers
4 publications (4)....... 1964 1998 Media, PA 47,500
TMC (9 publications)....... 203,877
------- ------- -------
TOTALS............ 195,220 171,125 583,001
======= ======= =======
</TABLE>

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(1) For merged properties and newspaper groups, the year given reflects the
date of origination for the earliest publication.

(2) Circulation averages for the six months ended September 30, 1998, according
to ABC Fas-Fax Report.

(3) Non-daily distribution includes both paid and free distribution. Non-daily
distribution reflects average distribution for December 1998, with the
following exceptions: Suburban Publications, which includes three
publications (THE SUBURBAN & WAYNE TIMES, SUBURBAN ADVERTISER and KING OF
PRUSSIA COURIER) and reflects the CAC audit for the 24 months ended
September 30, 1997; Acme Newspapers, which includes four publications (MAIN
LINE TIMES, NEWS OF DELAWARE COUNTY, GERMANTOWN COURIER and MT. AIRY TIMES
EXPRESS) and reflects the CAC audit for the 24 months ended September 30,
1997.

(4) Part of the Goodson Acquisition, completed July 15, 1998.

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 TIMES serves
an area which has a population of 604,009 and had population growth of
approximately 3% from 1980 to 1997. This area has an average household income of
$73,685, which is 33% above the national average. The DAILY LOCAL NEWS serves an
area which has a population of 387,524 and had population growth of
approximately 31% from 1980 to 1997. This area has an average household income
of $83,894, which is 51% above the national average. THE (Pottstown) MERCURY,
located approximately 40 miles west of Philadelphia, serves an area which has a
population of 434,287 and had population growth of approximately 14% from 1980
to 1997. This area has an average household income of $70,374, which is 27%
above the national average. THE TIMES HERALD serves an area which has a
population of 167,590 and had population growth of approximately 2% from 1980 to
1997. This area has an average household income of $80,001, which is 44% above
the national average. THE PHOENIX serves an area which has a population of
102,854 and had population growth of approximately 17% from 1980 to 1997. This
area has an average household income of $86,362, which is 56% above the national

<PAGE>
average. The Company's weekly newspaper group in suburban Philadelphia serves an
area which has a population of 327,196 and had population growth of
approximately 21% from 1980 to 1997. This area has an average household income
of $102,987, which is 86% above the national average. MAIN LINE Times, the
flagship of the Acme Newspapers group, serves an area which has a population of
398,094 and had population growth of approximately 3% from 1980 to 1997. This
area has an average household income of $102,005, which is 84% 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 Plaza and Court, which is the largest mall on the East Coast of the
United States in terms of total square footage.

THE TRENTONIAN is published in Trenton, the capital of New Jersey, located
40 miles north of Philadelphia and 75 miles south of New York City. THE
TRENTONIAN serves an area which has a population of 294,051 and had population
growth of approximately 8% from 1980 to 1997. This area has an average household
income of $67,766, which is 22% above the national average.

The Company's Philadelphia cluster cross-sells advertising. The nature of
the cluster has allowed for the implementation of significant cost saving
programs. For example, THE TIMES HERALD and several non-daily suburban
publications share printing facilities, as do the DAILY LOCAL NEWS and THE
PHOENIX. Acme Newspapers, part of the Goodson Acquisition, are printed at the
DAILY LOCAL NEWS plant and at the Company's commercial printing company in
Bristol, Pennsylvania. THE TRENTONIAN'S television guide is also printed at the
Bristol plant. All of these publications share certain news-gathering resources.
The Company believes that the continued integration of the Goodson Acquisition
newspapers into this cluster will result in considerable additional
cross-selling of advertising, as well as additional cost saving programs. The
Company further believes that the integration of the Goodson Acquisition
newspapers into this cluster allows the Company to compete more effectively in
the areas it serves. The Company believes that the construction of a centralized
printing facility in the Philadelphia area, scheduled to begin in late 1999,
will result in considerable additional cost savings.

OHIO. The Company owns four daily newspapers and a commercial printing
operation in Ohio. The daily newspapers are THE NEWS-HERALD (Lake County), THE
MORNING JOURNAL (Lorain), THE TIMES REPORTER (Dover-New Philadelphia) and,
acquired in the Goodson Acquisition, THE INDEPENDENT (Massillon). The Company
has aggregate daily and Sunday circulation of approximately 125,000 and 127,000,
respectively. Non-daily distribution in the Ohio cluster is approximately
113,000.

The following table sets forth information regarding the Company's
publications in Ohio:
<TABLE>
<CAPTION>
YEAR YEAR DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)

<S> <C> <C> <C> <C> <C> <C>
THE NEWS-HERALD 1878 1987 Lake County 50,022 61,250
THE MORNING JOURNAL... 1921 1987 Lorain 36,340 40,287
THE TIMES REPORTER.... 1903 1987 Dover-New 23,906 25,909
Philadelphia
THE INDEPENDENT (4)... 1871 1998 Massillon 14,926
COUNTY KIDS........... 1997 1997(5) Lake County 16,000
TMC (4 publications).. 96,945
------- ------- -------
TOTALS................ 125,194 127,446 112,945
======= ======= =======
</TABLE>

(1) For merged properties and newspaper groups, the year given reflects the
date of origination for the earliest publication.

(2) Circulation averages for the six months ended September 30, 1998, according
to ABC Fas-Fax Report.

(3) Non-daily distribution is solely free distribution and reflects average
distribution for December 1998.

(4) Part of the Goodson Acquisition, completed July 15, 1998.

(5) Established by the Company in 1997.

<PAGE>
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 224,529 and 85,051, respectively, and had population growth
of approximately 6% and 14%, respectively, from 1980 to 1997. Lake and Geauga
Counties have average household incomes of $57,443 and $86,148, respectively.
THE MORNING JOURNAL serves an area which has a population of 149,475 and had
population growth of approximately 3% from 1980 to 1997. This area has an
average household income of $50,296. THE TIMES REPORTER and THE INDEPENDENT
serve contiguous markets primarily in Tuscarawas and western Stark counties. THE
TIMES REPORTER serves the rural communities of Dover and New Philadelphia, which
are located approximately 80 miles south of Cleveland. THE TIMES REPORTER serves
an area which has a population of 104,567 and had population growth of
approximately 6% from 1980 to 1997. This area has an average household income of
$38,638. THE INDEPENDENT (Massillon) serves western Stark County, at the
southern edge of the Northeast Ohio industrial area, which is located
approximately 60 miles south of Cleveland and 20 miles north of Dover-New
Philadelphia. THE INDEPENDENT serves an area which has a population of 239,053
and had population growth of approximately 3% from 1980 to 1997. This area has
an average household income of approximately $50,422. The Company believes that
each of its Ohio newspapers benefits from a fragmented local media environment.
The Company further believes that THE NEWS-HERALD and THE MORNING JOURNAL
compete effectively with Cleveland's major metropolitan newspaper due to the
focus on coverage of local news and local sports. The Company's Ohio cluster
benefits from a variety of synergistic opportunities, including the
cross-selling of advertising and editorial coverage. In addition, THE TIMES
REPORTER and THE INDEPENDENT benefit from commercial printing synergies, as both
operations include commercial printing.

GREATER ST. LOUIS AREA. The Company owns the JOURNALS, the largest group
of suburban and community non-daily newspapers in the United States (in terms of
total distribution); one daily newspaper; the LADUE NEWS, a weekly newspaper
acquired in December 1997; and five other non-daily publications in the greater
St. Louis area. The JOURNALS are a group of 40 newspapers which are distributed
two to three times each week in the St. Louis suburban areas, including
communities in Illinois, with total weekly distribution of approximately 1.6
million. The Company's daily newspaper in this cluster, THE TELEGRAPH (Alton,
IL), has daily and Sunday circulation of approximately 28,000 and 30,000,
respectively.

The following table sets forth information regarding the Company's publications
in the greater St. Louis area:
<TABLE>
<CAPTION>
YEAR YEAR DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)
<S> <C> <C> <C> <C> <C> <C>
Suburban Newspapers
of Greater St.
Louis (73 editions
of 40 JOURNALS).... 1922 1984 St. Louis, MO 1,555,623
THE TELEGRAPH........ 1836 1985 Alton, IL 27,950 30,164
LADUE NEWS........... 1981 1997 Ladue, MO 40,000
PERFORMANCE NOTES. 1992 1997 Ladue, MO 33,000
DIRECT DECOR...... 1994 1997 Ladue, MO 3,000
GENTLEMEN'S CLUB.. 1997 1997 Ladue, MO 5,000
COUNTY KIDS....... 1996 1996(4) St. Louis, MO 30,000
TMC (1 publication).. 20,000
------ ------ ---------
TOTALS............... 27,950 30,164 1,686,623
====== ====== =========
</TABLE>
- --------------------------
(1) For merged properties and newspaper groups, the year given reflects the
date of origination for the earliest publication.

(2) Circulation averages for the six months ended September 30, 1998, according
to ABC Fas-Fax Report.

(3) Non-daily distribution includes both paid 7,335 and free 1,679,288
distribution, and reflects December 1998 net distribution.

(4) Established by the Company in 1996.

<PAGE>

The JOURNALS have total distribution of approximately 930,000 mid-week and
approximately 630,000 on Sunday, for total weekly distribution of approximately
1.6 million. The JOURNALS reach approximately 90% of the homes in the greater
St. Louis area. The JOURNALS serve an area which has a population of
approximately 2.4 million and had population growth of approximately 5% from
1980 to 1997. This area has an average household income of $60,583. According to
EDITOR & PUBLISHER magazine, St. Louis is the 17th largest metropolitan area in
the United States. The JOURNALS have received national recognition and have been
studied by domestic and foreign publishers as a model of successful neighborhood
newspapers. Due to St. Louis' characterization as a city of neighborhoods (92
municipalities comprise St. Louis County alone), the Company believes the
JOURNALS offer local retailers a cost-effective way to reach targeted
demographic groups, which enables the JOURNALS to compete effectively with the
major metropolitan daily and other weekly newspapers in the area. The Company
believes that the area's largest radio station competes primarily for major
accounts rather than small advertisers and, thus, is not a significant direct
competitor. The Company believes that the JOURNALS' targeted, highly localized
approach places the JOURNALS in a strong competitive position. LADUE NEWS serves
the affluent suburbs west of St. Louis, an area with an average household income
of $123,636, 123% above the national average. This area has a population of
approximately 176,372 and had population growth of approximately 28% from 1980
to 1997. THE TELEGRAPH serves a community located in southeast Illinois, within
the greater St. Louis area and which is connected to St. Louis by the Clark
Bridge. THE TELEGRAPH serves an area which has a population of 119,256 and had a
decline in population of approximately 1% since 1980. This area has an average
household income of $44,035.

Suburban and community non-daily newspapers, such as the JOURNALS, have
several advantages over national and major metropolitan daily newspapers,
including an intrinsically lower cost structure, the ability to publish only on,
what are for dailies, the most profitable days (i.e. one midweek day and one
weekend day) and the ability to avoid expensive wire services and syndicated
feature material. Moreover, suburban and community non-daily newspapers provide
an alternative outlet for local merchants and advertisers to advertise in their
own local areas at costs lower than those of national and major metropolitan
newspapers. Thus, the JOURNALS have a broader advertiser base and do not rely on
major accounts for advertising revenue to the same degree as national and major
metropolitan daily newspapers.

CENTRAL NEW ENGLAND. The Company owns four daily and 10 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 a group
of weekly newspapers serving the Narragansett, Rhode Island area. The four daily
newspapers have aggregate daily circulation of approximately 75,000 and
aggregate Sunday circulation of approximately 60,000. The non-daily publications
in this cluster have total distribution of approximately 132,000.

The following table sets forth information regarding the Company's
publications in central New England.

YEAR YEAR DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)

<S> <C> <C> <C> <C> <C> <C>
THE HERALD NEWS........ 1872 1985 Fall River, MA 27,168 29,148
TAUNTON DAILY GAZETTE.. 1848 1996 Taunton, MA 14,536 13,703
THE CALL............... 1892 1984 Woonsocket, RI 17,774 17,432
THE TIMES.............. 1885 1984 Pawtucket, RI 15,671
Southern Rhode
Island Newspapers
6 publications...... 1854 1995 Wakefield, RI 36,115
TMC (4 publications)... 95,989
------ ------ -------
TOTALS................. 75,149 60,283 132,104
====== ====== =======

</TABLE>

(1) For merged properties and newspaper groups, the year given reflects the
date of origination for the earliest publication.

(2) Circulation averages for the six months ended September 30, 1998, according
to ABC Fas-Fax Report.

(3) Non-daily distribution includes both paid and free distribution. Paid and
free non-daily distribution for Southern Rhode Island Newspapers (except
THE WESTERLY SHOPPER) reflects the June 30, 1997 CAC Audit report. The
other non-daily distribution figures reflect average distribution for
December 1998.

<PAGE>

THE HERALD NEWS and the TAUNTON DAILY GAZETTE are situated 14 miles apart.
Each is approximately 50 miles south of Boston, Massachusetts and 20 miles east
of Providence, Rhode Island. The region's largest shopping mall, located in
Taunton, contains one million square feet of retail space and approximately 150
stores. THE HERALD NEWS serves an area which has a population of 159,776, and
had a decline in population of approximately 1% since 1980. This area has an
average household income of $45,290. The TAUNTON DAILY GAZETTE serves an area
which has a population of 124,752 and had population growth of approximately 20%
from 1980 to 1997. This area has an average household income of $52,719. THE
CALL serves an area which has a population of 174,186 and had population growth
of approximately 10% from 1980 to 1997. This area has an average household
income of $56,687. THE TIMES serves an area which has a population of 184,356
and had population growth of approximately 4% from 1980 to 1997. This area has
an average household income of $50,069. Southern Rhode Island Newspapers serve
an area which has a population of 152,199 and had population growth of
approximately 24% from 1980 to 1997. This area has an average household income
of $69,747, which is 26% above the national average. No local television
stations exist in the communities which the central New England newspapers
serve. Further, the Company believes that its central New England properties
benefit from fragmented local radio markets. As a result, the Company believes
that each of its newspapers is a significant media outlet in its respective
community, thereby making these newspapers attractive vehicles for area
advertisers. The central New England newspapers benefit from advertising
cross-selling; moreover, the Company's Massachusetts and Rhode Island newspapers
benefit from significant production and editorial synergies. For example, THE
TIMES and THE CALL are printed at the same facility, as are the TAUNTON DAILY
GAZETTE and THE HERALD NEWS. Additionally, THE TIMES, THE CALL and the group of
paid suburban and community non-daily newspapers serving southern Rhode Island
all share certain news gathering resources.

CAPITAL-SARATOGA REGION OF NEW YORK. The Company owns three daily and four
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 weekly COMMUNITY NEWS, serving Clifton Park, and, acquired as part
of the Goodson Acquisition, THE ONEIDA DAILY DISPATCH. The daily newspapers have
aggregate daily circulation of approximately 44,000 and aggregate Sunday
circulation of approximately 40,000. The non-daily publications in this cluster
have total distribution of approximately 63,000.

The following table sets forth information regarding the Company's
publications in the Capital-Saratoga Region of New York:

YEAR YEAR DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)

<S> <C> <C> <C> <C> <C> <C>
THE RECORD........... 1896 1987 Troy 25,002 26,910
THE SARATOGIAN....... 1855 1998 Saratoga Springs 11,582 13,502
COMMUNITY NEWS....... 1969 1998 Clifton Park 26,908
THE ONEIDA DAILY
DISPATCH (4)......... 1850 1998 Oneida 7,717
ONEIDA-CHITTENANGO
PENNYSAVERS
2 publications (4).. 1957 1998 Oneida 24,515
TMC (1 publication).. 12,000
------ ------ ------
TOTALS............... 44,301 40,412 63,423
====== ====== ======
</TABLE>

(1) or merged properties and newspaper groups, the year given reflects the date
of origination for the earliest publication.

(2) irculation averages for the six months ended September 30, 1998, according
to ABC Fas-Fax Report, with the exception of THE ONEIDA DAILY DISPATCH,
which reflects the December 1997 Publisher's Statement.

(3) Non-daily distribution is free and reflects average distribution for
December 1998.

(4) Part of the Goodson Acquisition, completed July 15, 1998.

<PAGE>
THE RECORD and THE SARATOGIAN are situated approximately 26 miles apart.
THE RECORD serves an area which has a population of 180,117 and had population
growth of approximately 4% from 1980 to 1997. This area has an average household
income of $48,777. THE SARATOGIAN serves an area which has a population of
201,913 and had population growth of approximately 23% from 1980 to 1997. This
area has an average household income of $58,760. THE ONEIDA DAILY DISPATCH
serves an area which has a population of 74,372 and had population growth of
approximately 5% from 1980 to 1997. This area has an average household income of
$47,054. No local television stations exist in the communities which the
Capital-Saratoga Region newspapers serve. Further, the Company believes that its
Capital-Saratoga Region properties benefit from fragmented local radio markets.
As a result, the Company believes that each of its newspapers is a significant
media outlet in its respective community, 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 synergies. Directly
following the March 9, 1998 acquisition of THE SARATOGIAN and the COMMUNITY
NEWS, the newspapers began printing at THE RECORD plant in Troy, taking
advantage of that plant's excess capacity and achieving significant cost
efficiencies. The three newspapers also share certain news-gathering functions,
and the Company believes that additional synergies may be available between
them.

MID-HUDSON REGION OF NEW YORK. The Company owns one daily newspaper and 11
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 Taconic Press, a group of 10 non-daily
newspapers in Dutchess County, New York, acquired September 21, 1998, and THE
PUTNAM COUNTY COURIER, serving Putnam County, New York, which the Company
acquired as part of its January 1998 acquisition of HVM, LLC. The Mid-Hudson
Region cluster has aggregate daily circulation of approximately 22,000,
aggregate Sunday circulation of approximately 30,000 and total non-daily
distribution of approximately 198,000.

The following table sets forth information regarding the Company's
publications in the Mid-Hudson Region of New York:
<TABLE>
<CAPTION>
YEAR YEAR DAILY SUNDAY NON-DAILY
PUBLICATION ORIGINATED(1) ACQUIRED LOCATION CIRCULATION(2) CIRCULATION(2) DISTRIBUTION(3)
<S> <C> <C> <C> <C> <C> <C>
DAILY FREEMAN....... 1871 1998 Kingston 22,451 29,888
Taconic Press
10 publications..... 1846 1998 Dutchess County 193,476
THE PUTNAM
COUNTY COURIER...... 1841 1998 Putnam County 4,029
------ ------ -------
TOTALS.............. 22,451 29,888 197,505
====== ====== =======
</TABLE>
(1) For merged properties and newspaper groups, the year given reflects the
date of origination for the earliest publication.

(2) Circulation averages for the six months ended September 30, 1998, according
to ABC Fas-Fax Report.

(3) Non-daily distribution is both paid and free and reflects average
distribution for December 1998.

(4) Part of the Goodson Acquisition, completed July 15, 1998.

THE DAILY FREEMAN, Taconic Press and THE PUTNAM COUNTY COURIER serve
markets in the Mid-Hudson Region of New York. THE DAILY FREEMAN serves an area
which has a population of 265,747 and had population growth of approximately 8%
from 1980 to 1997. This area has an average household income of $54,228. Taconic
Press newspapers serve an area which has a population of 88,322 and had
population growth of approximately 2% from 1980 to 1997. This area has an
average household income of $69,442. THE PUTNAM COUNTY COURIER serves an area
which has a population of 92,113 and had population growth of approximately 19%
from 1980 to 1997. This area has an average household income of $91,234. One
independent television station (which serves a regional, rather than a local,
audience) exists in the communities which the Mid-Hudson Region newspapers
serve. Further, the Company believes that its Mid-Hudson Region properties
benefit from fragmented local radio markets. As a result, the Company believes

<PAGE>
that each of these newspapers is a significant media outlet in its respective
community, thereby making these newspapers attractive vehicles for area
advertisers. The Company believes that the Mid-Hudson Region newspapers benefit
from significant cross-selling of advertising, and from significant production
synergies. The Company also believes that there will be sharing of
news-gathering resources as this new cluster is developed. Certain publications
in this cluster also benefit from advertising cross-selling with THE REGISTER
CITIZEN (Torrington, CT) and Housatonic Publications (New Milford, CT), which
serve Litchfield County, Connecticut.

ADVERTISING

Substantially all the Company's advertising revenues are derived from a
diverse group of local retailers and classified advertisers. The Company
believes that because its newspapers rely on a broad base of local retail and
local classified advertising rather than more volatile national and major
account advertising, its advertising revenues tend to be relatively stable.
Local advertising is 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 73.3% of the
Company's total revenues for 1998. The Company's advertising rate structures
vary among its publications and are a function of various factors, including
results achieved for advertisers, local market conditions and competition, as
well as circulation, readership, demographics and type of advertising (whether
classified or display). In 1998, local and regional advertising accounted for
the largest share of the Company's advertising revenues (57.3%), followed by
classified advertising (38.2%), legal advertising (2.4%) and national
advertising (2.1%). 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 realtors, car dealerships, grocery stores and other local
businesses. No advertiser accounted for more than 2% of the Company's total 1998
advertising 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. Local management is given
little latitude for discounting from the approved rates. Corporate management
also works with local advertising staff to develop marketing kits, presentations
and third-party research studies. A portion of the compensation for the
Company's publishers is based upon increasing advertising revenues. The Company
stresses the timely collection of receivables, and sales compensation 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. 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

Substantially all of 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
21.0% of the Company's total revenues in 1998. Approximately 68.3% of 1998
circulation revenues were derived from subscription sales and approximately
31.7% from single copy sales. Single copy sales rates currently range from $.25
to $.50 per daily copy and $.75 to $1.75 per Sunday copy. The Company promotes
single copy sales of its newspapers because it believes that such sales have
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 a higher profit than subscription sales,
as single copy sales generally have higher per unit prices and lower associated
distribution costs. In 1998, the Company had total paid daily circulation of
652,866, paid Sunday circulation of 625,461 and non-daily distribution of
approximately 3.7 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 through formal reports
which are reviewed weekly 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. Circulation has
generally declined throughout the newspaper industry in recent years, and the
Company's newspapers have generally experienced this trend, even as overall
operating performance of its newspapers has improved. The Company seeks to
maximize the overall operating performance rather than maximizing circulation of
its individual newspapers.

<PAGE>

OTHER OPERATIONS

The Company owns and operates four commercial printing facilities: Imprint
Printing in North Haven, Connecticut; Midwest Offset in New Philadelphia, Ohio;
Nittany Valley Offset in State College, Pennsylvania; and InterPrint in Bristol,
Pennsylvania. These operations also print certain of the Company's publications.
The commercial printing operations accounted for approximately 5.7% of the
Company's 1998 revenues. The Company also owns Integrated Newspaper Systems,
Inc., a company which develops application software for the newspaper industry.

EMPLOYEES

The Company employs approximately 5,500 employees.

RAW MATERIALS

The basic raw material for newspapers is newsprint. The Company's
newsprint consumption (excluding paper consumed in the Company's commercial
printing operations) totaled approximately $39.4 million in 1998, which was
approximately 9.2% of the Company's newspaper revenues. In 1998, the Company
consumed approximately 79,000 metric tons of newsprint, including paper consumed
in its commercial printing operations. The Company has no long-term contracts to
purchase newsprint. Generally, the Company has in the past and currently
purchases all of its newsprint from two suppliers, although in the future the
Company may purchase newsprint from other suppliers. The Company believes that
concentrating its newsprint purchases in this way provides a more secure
newsprint supply and lower per unit newsprint prices. The Company also believes
that it purchases newsprint at price levels lower than those which are available
to individually owned small metropolitan and suburban daily newspapers and
suburban and community non-daily publications 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 volatile. The
Company's average cost of newsprint reflected an increase of approximately 13%
in 1996, a decrease of approximately 18% in 1997 and an increase of
approximately 8% in 1998, in each case compared to the previous 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, including web-width reductions,
inventory management and advertising and circulation price increases. The
Company also has reduced fringe circulation in response to increased newsprint
prices, as it is the Company's experience that such circulation does not provide
adequate response for advertisers. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Certain Factors Which May
Affect the Company's Future Performance -- Price and Availability of Newsprint."

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.

COMPETITION

While many of the Company's metropolitan and suburban daily newspapers are
the only daily newspapers of general circulation published in their respective
communities, they compete within their own geographic areas with other daily
newspapers of general circulation published in adjacent or nearby cities and
towns. Competition for advertising expenditures and paid circulation comes from
local, regional and national newspapers, shoppers, television, radio, direct
mail, on-line services and other forms of communication and advertising media.
Since 1995, the Company has been developing on-line publications based on its
newspapers and attracts advertising for its on-line publications. The Company
has published an on-line version of the NEW HAVEN REGISTER since 1995. In
addition, by December 31, 1998, the Company had established an on-line editorial
presence and a full on-line classified advertising service for each of its daily

<PAGE>

newspapers and the majority of its weekly newspaper groups. Competition for
newspaper advertising expenditures is largely based upon advertiser results,
readership, advertising rates, demographics and circulation levels, while
competition for circulation and readership is based largely upon the content of
the newspaper, its price and the effectiveness of its distribution. The
Company's non-daily publications, including shoppers and real estate guides,
primarily compete with direct mail advertising, shared mail packages and other
private advertising delivery services. As with daily newspapers, competition for
advertising expenditures for suburban and community non-daily publications is
largely based upon advertiser results, readership, advertising rates,
demographics and circulation levels. The Company believes that, because of the
relative competitive position of its suburban and community non-daily
publications in the communities which they serve, such publications generally
have been able to compete effectively with 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."

ENVIRONMENTAL MATTERS

As is the case with other newspaper and similar publication 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 wastes 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. The Company
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. The Company is in the process of monitoring groundwater
contamination which has been detected at one of its facilities. The Company
believes that the remediation of any such groundwater contamination, if
required, will not have a material adverse effect on its financial condition or
results of operations. In May 1998, one of the Company's subsidiaries, acquired
as part of the Goodson Acquisition, received a notice of potential liability in
connection with a landfill superfund site. The Company is fully indemnified for
all costs and liabilities arising out of this issue by the seller as part of the
Goodson Acquisition purchase agreement. See "Management's Discussion and
Analysis of Financial Condition and Results of Operations -- Certain Factors
Which May Affect the Company's Future Performance -- Environmental Matters."

REGULATION

Paid circulation newspapers which are delivered by second-class mail are
required to obtain permits from, and file an annual statement of ownership and
circulation with, the United States Postal Service. 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, if certain
threshold requirements under such Act are satisfied.

<PAGE>

ITEM 2. PROPERTIES.

The Company owns and operates 114 facilities used in the course of
producing and publishing its daily and non-daily publications. Approximately 70
of the Company's facilities are leased for terms ranging from one to six years.
These leased facilities range in size from approximately 250 to 70,000 square
feet. The location and approximate size of the principal physical properties
used by the Company at December 31, 1998, as well as the expiration date of the
leases relating to such properties which the Company leases are set forth below:

APPROXIMATE AREA IN SQUARE FEET LEASE
------------------------------------- EXPIRATION
LOCATION OWNED SQUARE FEET LEASED SQUARE FEET DATE
-------- ----------------- ------------------ ------------
New Haven, CT............. 205,000(1)(3)
New Britain, CT........... 33,977(1)(3)
Bristol, CT............... 40,000(1)(3)
Torrington, CT............ 36,120(1)(3)
Middletown, CT............ 30,000(1)(3)
North Haven, CT........... 24,000(3) 10,000(3) 12/31/99
Guilford, CT.............. 18,400(1) 1,532(1) 5/31/01
Colchester, CT............ 1,900(1) 12/31/99
Westport, CT.............. 3,200(1) 12/31/99
Milford, CT............... 11,745(1)
New Milford, CT........... 6,840(1) 8/15/03
Willoughby, OH............ 80,400(1)(3)
Lorain, OH................ 68,770(1)(3)
New Philadelphia, OH...... 85,567(1)(3)
Trenton, NJ............... 54,642(1)(3) 18,889(2) 11/30/00
Turnersville, NJ.......... 11,032(1)
West Chester, PA.......... 34,000(1)(3)
Norristown, PA............ 40,000(1)(3)
Phoenixville, PA.......... 10,696(1)(3)
Wayne, PA................. 11,980(1)(3)
State College, PA......... 23,365(1)(3) 2,800(4) 8/31/00
Bristol, PA............... 70,000(1)(5) 12/31/04
Fall River, MA............ 57,571(1)(3)
Taunton, MA............... 21,100(1)(3)
Troy, NY.................. 50,000(1)(3)
Saratoga, NY.............. 11,000(1)
Woonsocket, RI............ 49,338(1)(3)
Pawtucket, RI............. 41,096(1)(3)
Wakefield, RI............. 11,750(1)(3)
St. Louis, MO............. 69,415(1)(3) 22,043(1) 12/31/00
Warrenton, MO............. 1,900(1) 8/31/03
Festus, MO................ 3,500(1) 4/30/00
Woodson Terrace, MO....... 5,000(1) 02/09/99
St. Charles, MO........... 4,298(1) 06/30/99
Collinsville, IL.......... 14,587(1)
Granite City, IL.......... 17,550(1)
Belleville, IL............ 8,400(1)
Alton, IL................. 53,000(1)(3)

<PAGE>

ITEM 2. PROPERTIES. (CONTINUED)

- -------------------
(1) Offices
(2) Corporate headquarters
(3) Production facility
(4) Warehouse

The Company 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."

<PAGE>

ITEM 3. LEGAL PROCEEDINGS.

The Company is involved in a number of litigation matters which 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. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Certain Factors Which May Affect the Company's Future Performance -
Environmental Matters."

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

None.

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information as of March 23, 1999
with respect to each person who is an executive officer of the Company:

NAME POSITION
Robert M. Jelenic...................... Chairman, President and Chief
Executive Officer
Jean B. Clifton........................ Executive Vice President, Chief
Financial Officer, Treasurer and
Secretary
Allen J. Mailman....................... Senior Vice President, Technology
William J. Higginson................... Vice President, Production

ROBERT M. JELENIC is the 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 more than the past five years. A Chartered Accountant, Mr.
Jelenic began his business career with Arthur Andersen in Toronto, Canada. Mr.
Jelenic has 23 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 NAA and Chairman of the NAA's Technology Committee.
Mr. Jelenic is 48 years old.

JEAN B. CLIFTON is Executive Vice President, Chief Financial Officer,
Treasurer and Secretary of the Company, positions she has held since the
inception of the Company, and has been a director of the Company and its
predecessors for more than the past five years. Prior to joining the Company,
Ms. Clifton, a Certified Public Accountant, had been employed by Arthur Young &
Co. (a predecessor to Ernst & Young LLP). She has 13 years of senior management
experience in the newspaper industry. Ms. Clifton is a graduate of the
University of Michigan School of Business Administration. Ms. Clifton is a
member of the Postal Affairs Committee and the Employee Benefits Committee of
the NAA. Ms. Clifton is 38 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. He has 24 years of management experience in the newspaper
industry, including 14 years with Newhouse Publications. Mr. Mailman received a
Bachelor of Arts Degree in Economics and Mathematics from the University of
Oklahoma. Mr. Mailman is 52 years old.

WILLIAM J. HIGGINSON is Vice President of Production of the Company, a
position he has held since July 1995. From January 1994 to July 1995, he was
Corporate Production Director of the Company and, from 1991 to January 1994, was
Production Director of the NEW HAVEN REGISTER. Mr. Higginson has 26 years of
experience in the newspaper industry. Mr. Higginson is 43 years old.

<PAGE>

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:

HIGH LOW
---- ---
(Per Share)
YEAR ENDED DECEMBER 31, 1998

Fourth Quarter $16 3/16 $12 1/8
Third Quarter 18 7/8 13 3/4
Second Quarter 23 7/8 16 5/16
First Quarter 21 18

YEAR ENDED DECEMBER 31, 1997

Fourth Quarter 21 1/16 16 1/16
Third Quarter 19 11/16 15 5/8
Second Quarter (commencing
May 8) 20 1/2 14

On March 23, 1999, there were approximately 46 stockholders of record of
the Common Stock. The Company believes that it has approximately 1,900
beneficial owners.

The Company has not paid dividends on the Common Stock and does not
currently anticipate paying dividends on the Common Stock in the foreseeable
future. The Company intends to retain future earnings for reinvestment in the
Company. In addition, the Credit Agreement (as hereinafter defined) places
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.

The Company is a holding company which 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 obligation,
contingent or otherwise, to make funds available to the Company, whether in the
form of loans, dividends or otherwise. The Credit Agreement is secured by the
common stock and certain assets of the Company's operating subsidiaries. In
addition, the Company's subsidiaries may, subject to limitations contained in
the Credit Agreement, become parties to financing arrangements which 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 proceedings of a subsidiary, creditors of such subsidiary would
generally be entitled to priority over the Company with respect to assets of the
affected subsidiary.

ITEM 6. SELECTED FINANCIAL DATA.

The following selected combined data (except number of newspapers and per
share amounts) for (i) the combined balance sheet of the Company as of December
31, 1994 and the related combined statement of income and cash flows for the
year then ended have been derived from unaudited financial statements which
include audited financial statements of the Company's material subsidiaries, and
(ii) the combined balance sheet of the Company as of December 31, 1995 and the
consolidated balance sheets of the Company as of December 31, 1998, 1997 and

<PAGE>

1996 and the related consolidated statements of income and cash flows for each
of the four years in the period ended December 31, 1998 have been derived from
the audited financial statements of the Company. The selected financial data
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.

YEAR ENDED DECEMBER 31,
----------------------------------------------------------------
1998 1995 1994 1997 1996
---- ---- ---- ---- ----
(IN THOUSANDS, EXCEPT NUMBER OF NEWSPAPERS AND PER SHARE AMOUNTS)

<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Revenues:
Advertising................. $ 312,908 $ 266,914 $ 256,971 $ 249,534 $ 224,071
Circulation................. 89,388 80,211 79,776 73,797 65,204
--------- --------- --------- --------- ---------
Newspaper revenues............. 402,296 347,125 336,747 323,331 289,275
Commercial printing and other.. 24,484 12,282 14,373 15,626 10,875
--------- --------- --------- --------- ---------
426,780 359,407 351,120 338,957 300,150
Operating expenses:
Salaries and employee
benefits.................. 139,216 114,302 111,626 110,651 105,607
Newsprint, ink and printing
charges................... 53,594 40,452 50,110 48,243 36,481
Selling, general and
administrative............ 39,047 30,450 30,993 28,678 25,312
Depreciation and
amortization.............. 23,844 20,480 20,525 19,178 18,605
Other....................... 52,012 40,783 38,976 38,743 34,187
Special charge(1)........... -- 31,899 -- -- --
--------- --------- --------- --------- ---------
307,713 278,366 252,230 245,493 220,192
--------- --------- --------- --------- ---------
Operating income............... 119,067 81,041 98,890 93,464 79,958
Net interest and other expense. (45,321) (42,288) (56,472) (64,028) (42,049)
--------- --------- --------- --------- ---------

Income before provision for
income taxes and
extraordinary items ........ 73,746 38,753 42,418 29,436 37,909
Provision for income taxes..... 28,112 15,784 14,309 2,653 4,126
--------- --------- --------- --------- ---------
Income before extraordinary
items..................... 45,634 22,969 28,109 26,783 33,783
Extraordinary items (2)..... (4,495) -- -- -- (13,100)
--------- --------- --------- --------- ---------
Net income .................... $ 41,139 $ 22,969 $ 28,109 $ 26,783 $ 20,683
========= ========= ========= ========= =========

Income before extraordinary
item per common share $ .94 $ .51 $ -- $ -- $ --
Net income per common share $ .85 $ .51 $ -- $ -- $ --
Proforma net income per common
share(3)..................... $ -- $ -- $ .74 $ -- $ --

OTHER DATA:
EBITDA(4) (5).................. $ 146,706 $ 133,420 $ 119,415 $ 112,642 $ 98,563
EBITDA Margin(4)............... 34.4% 37.1% 34.0% 33.2% 32.8%
Net income as adjusted, per
common share(4).............. $ .99
Tangible net income, as
adjusted(4)(5)............... $ 55,537 $ 46,042 $ 31,905 $ 30,931 $ 37,325
Tangible net income, as
adjusted, per common
share(4)(5).................. $ 1.14 $ 1.02

Capital expenditures........... $ 12,914 $ 9,727 $ 7,675 $ 4,859 $ 8,326
Net cash provided by operating
activities................... 78,905 66,030 60,065 26,778 46,268
Net cash used in investing
activities................... 352,774 19,447 25,700 50,557 22,614
Net cash provided by (used
in) financing activities....... 274,228 (46,946) (34,441) 24,384 (33,361)
Number of daily newspapers,
end of period................ 24 18 18 17 16
Number of non-daily
publications, end of
period...................... 185 141 118 114 68

BALANCE SHEET DATA:
Total current assets........... $ 81,878 $ 77,833 $ 66,035 $ 73,456 $ 56,959
Property, plant and equipment,
net.......................... 99,978 92,620 91,713 99,036 100,842
Total assets................... 671,869 327,931 305,985 306,434 245,290
Total current liabilities,
less current maturities of
long-term debt.............. 50,124 39,034 37,720 44,582 33,734
Total debt, including current
maturities................... 765,000 490,774 654,825 689,256 664,298
Stockholders'/members' (225,313) (266,242) (423,658) (451,767) (478,548)
deficit(6)...................

</TABLE>

<PAGE>
ITEM 6. SELECTED FINANCIAL DATA (CONTINUED)

- -----------------
(1) The special charge of $31.9 million (before benefit for income taxes of
$13.0 million) was comprised of $28.4 million for a management bonus and
$3.5 million for the discontinuance of a management incentive plan. The
management bonus was comprised of 1.1 million shares of Common Stock and a
cash portion to satisfy the recipients' tax obligations arising from the
management bonus.

(2) Extraordinary items represent gains or losses related to debt
extinguishment. In connection with certain refinancings, the Company
recognized a loss of $4.5 million (net of tax) in 1998 and a loss of $13.1
million in 1994 on extinguishment of debt.

(3) Proforma net income per common share for 1996 was calculated reflecting
the 37,962,500 shares which were issued and outstanding prior to the
Company's initial public offering, but subsequent to December 31, 1996.

(4) The 1998 other data excludes the effects of special charges ($3.8 million,
before tax benefit, $3.2 million of which was recorded in Selling, general
and administrative and approximately $630,000 in Other expenses) related
to the cancellation of the Company's convertible debt offering,
integration of the Goodson Acquisition, and an increase to certain
receivable reserves and an extraordinary item ($4.5 million, net of tax)
for the write-off of deferred financing charges relating to the Company's
prior credit agreement. The 1997 other data excludes the effect of the
special charge of $31.9 million (before benefit for income taxes of $13.0
million) comprised of $28.4 million for a management bonus and $3.5
million for the discontinuance of a management incentive plan. See Note 5
of "Notes to Consolidated Financial Statements."

(5) EBITDA is defined by the Company as operating income (loss) plus
depreciation, amortization and other non-cash, special or non-recurring
charges. Tangible net income is defined as net income plus after-tax
amortization. EBITDA and tangible net income are not intended to represent
cash flow from operations and should not be considered as alternatives to
operating or net income computed in accordance with generally accepted
accounting principles ("GAAP"), as indicators of the Company's operating
performance, as alternatives to cash from operating activities (as
determined in accordance with GAAP) or as measures of liquidity. The
Company believes that EBITDA is a standard measure commonly reported and
widely used by analysts, investors and other interested parties in the
media industry. Accordingly, this information has been disclosed herein to
permit a more complete comparative analysis of the Company's operating
performance relative to other companies in the industry. However, not all
companies calculate EBITDA and tangible net income using the same methods;
therefore, the EBITDA and tangible net income figures set forth above may
not be comparable to EBITDA and tangible net income reported by other
companies. Certain covenants contained in the Company's Credit Agreement
are based upon EBITDA. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations." Tangible net income per
share is calculated using the weighted average shares outstanding on a
diluted basis.

(6) During 1994, the Company was converted into a limited liability company
and in March 1997 the Company was converted into a C corporation. In
connection with such conversion, the Company's preferred stock and
dividends in arrears thereon were redeemed for approximately $61.6
million.

<PAGE>

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 business is publishing newspapers in the United States,
where 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 31, 1998, the Company owned and operated 24 daily
newspapers and 185 non-daily publications strategically clustered in seven
geographic areas: Connecticut; Philadelphia and its surrounding areas; Ohio; the
greater St. Louis area; central New England; and the Capital-Saratoga and
Mid-Hudson, New York regions. As of December 31, 1998, the Company had total
paid daily circulation of 652,866, total paid Sunday circulation of 625,461 and
total non-daily distribution of approximately 3.7 million.

The Company's objective is to continue its growth in revenues, EBITDA and
net income. 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. From 1993 through 1998, the Company successfully
completed 13 strategic acquisitions, acquiring 12 daily newspapers, 117
non-daily publications and three commercial printing companies, two of which
print a number of the non-daily publications. The third is a premium quality
sheet-fed printing company.

The Company believes that its newspapers are generally effective in
addressing the needs of local readers and advertisers. The Company believes that
because its newspapers rely on a broad base of local retail and local classified
advertising rather than more volatile national and major account advertising,
its advertising revenues tend to be relatively stable.

As part of the Company's 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.

YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997

REVENUES. In 1998, revenues increased $67.4 million, or 18.8%, to $426.8
million, due to acquisitions. Newspaper revenues increased $55.2 million, or
15.9%, to $402.3 million in 1998, principally due to increased advertising
revenue as a result of acquisitions. Circulation revenues increased
approximately $9.2 million, or 11.4%, to $89.4 million in 1998. Commercial
printing and other represented 5.7% of the Company's revenues in 1998, as
compared to 3.4% in 1997 due to the commercial printing operations acquired as
part of the InterCounty acquisition in December of 1997.

SALARIES AND EMPLOYEE BENEFITS. Salaries and employee benefit expenses
were 32.6% of the Company's revenues in 1998 and 31.8% in 1997. Salaries and
employee benefits increased $24.9 million, or 21.8%, in 1998 to $139.2 million,
due to acquisitions.

NEWSPRINT, INK AND PRINTING CHARGES. In 1998, newsprint, ink and printing
charges were 12.6% of the Company's revenues, as compared to 11.3% in 1997.
Newsprint, ink and printing charges increased $13.1 million, or 32.5%, in 1998
as compared to 1997, primarily as a result of volume increases due to the
Company's acquisitions and an approximately 8.0% increase in the price per ton
of newsprint in 1998 as compared with 1997.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were 9.1% and 8.5% of the Company's revenues for 1998 and 1997,
respectively. Selling, general and administrative expenses for 1998 increased
$8.6 million, or 28.2%, to $39.0 million, due to the Company's acquisitions and
the special charges incurred during the third quarter of 1998 of $3.2 million
(see Note 4 to Selected Financial Data). Excluding the special charges, selling,

<PAGE>

general and administrative expenses for 1998 increased $5.4 million from the
prior-year primarily due to acquisitions and represented 8.4% of the Company's
revenues for 1998.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses were
5.6% of the Company's revenues in 1998 as compared to 5.7% in 1997. Depreciation
and amortization expenses increased $3.4 million, or 16.4%, to $23.8 million in
1998, primarily due to increased amortization resulting from the Company's
acquisitions. This increase was partially offset by a decrease in depreciation
expense related to certain assets that became fully depreciated during 1998 and
in the third and fourth quarters of 1997.

OTHER EXPENSES. Other expenses accounted for 12.2% of the Company's
revenues in 1998 as compared to 11.3% in 1997. Other expenses increased $11.2
million, or 27.5%, to $52.0 million in 1998, primarily due to acquisitions,
increased circulation promotion expenses, increased postage expense related to
the Company's preprint advertising sales and $630,000 in special charges
incurred in the third quarter of 1998 (see Note 4 to Selected Financial Data).
Excluding the $630,000 in special charges, other expenses for 1998 increased
$10.6 million and represented 12.0% of the Company's revenues for 1998.

OPERATING INCOME. Operating income increased $38.0 million in 1998 to
$119.1 million, including special charges of $3.8 million, from $81.0 million in
1997, which included a special charge of $31.9 million related to the Company's
Initial Public Offering ("IPO") in May 1997.

INTEREST EXPENSE. Interest expense increased $3.2 million, or 7.5%, from
1997 to 1998 as a result of increased borrowing in connection with the Company's
acquisitions including the Goodson Acquisition, offset in part by a decrease in
average borrowing rates.

PROVISION FOR INCOME TAXES. The Company reported effective tax rates of
38.1% and 40.7% for the years ended December 31, 1998 and 1997, respectively.
The reduction in the effective tax rate is a result of the Company's corporate
restructuring implemented January 1, 1998 offset in part by an increase in the
rate as a result of the Goodson Acquisition.

EXTRAORDINARY ITEM. The Company recorded an extraordinary item related to
the write-off of deferred financing charges in connection with the Company's
prior credit agreement in the amount of $7.3 million ($4.5 million, net of $2.8
million income tax benefit) in the third quarter of 1998.

NET INCOME. Net income was $41.1 million, or $.85 per share, basic and
diluted, for 1998, which reflects $6.8 million (net of $4.3 million of income
tax benefit) of special charges and an extraordinary item, as compared to $23.0
million, or $.51 per share, basic and diluted, for 1997, which included a
special charge of $18.9 million (net of $13.0 million of income tax benefit)
related to the IPO.

OTHER INFORMATION. EBITDA as adjusted for the special charges noted above
in both years, increased $13.3 million, or 10.0%, to $146.7 million from $133.4
million in 1997. Net income in 1998 excluding the special charges and
extraordinary item was $48.0 million or $.99 per share.

YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996

REVENUES. In 1997, revenues increased $8.3 million, or 2.4%, to $359.4
million, primarily due to an increase in advertising revenues. Newspaper
revenues increased $10.4 million, or 3.1%, to $347.1 million in 1997,
principally due to increased classified advertising revenues and the December
1996 acquisition of the TAUNTON DAILY GAZETTE (the "Taunton acquisition").
Circulation revenues increased approximately $435,000, or 0.5%, to $80.2 million
in 1997. Commercial printing and other represented 3.4% of the Company's
revenues in 1997, as compared to 4.1% in 1996.

SALARIES AND EMPLOYEE BENEFITS. Salaries and employee benefit expenses
were 31.8% of the Company's revenues in both 1997 and 1996. Salaries and
employee benefits increased $2.7 million, or 2.4%, in 1997 to $114.3 million,
primarily due to the Taunton acquisition.

NEWSPRINT, INK AND PRINTING CHARGES. In 1997, newsprint, ink and printing
charges were 11.3% of the Company's revenues, as compared to 14.3% in 1996.
Newsprint, ink and printing charges decreased $9.7 million, or 19.3%, in 1997 as

<PAGE>

compared to 1996, primarily due to a decrease of approximately 18.0% in the
average price per ton of newsprint in 1997 as compared with 1996, which accounts
for approximately $7.8 million of this decrease, and a decrease in the
consumption of paper in the Company's commercial printing operations.

SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses accounted for 8.5% of the Company's revenues in 1997, as compared to
8.8% in 1996. Selling, general and administrative expenses decreased by
approximately $543,000, or 1.8%, to $30.5 million in 1997. This decrease was due
primarily to higher expenses in 1996 related to the Company's Web site
development.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense was
5.7% of the Company's revenues in 1997 as compared to 5.8% in 1996, and was
basically flat in 1997 at $20.5 million as compared to 1996.

OTHER EXPENSES. Other expenses accounted for 11.3% of the Company's
revenues in 1997 as compared to 11.1% in 1996. Other expenses increased $1.8
million, or 4.6% in 1997, primarily due to (i) increased circulation expenses
and (ii) an increase in postage expense due primarily to an increase in preprint
volume.

SPECIAL CHARGE. In connection with the Company's initial public offering
of Common Stock, the Company incurred a special charge in 1997 of $31.9 million
(before benefit for income taxes of $13.0 million) comprised of $28.4 million
for a management bonus and $3.5 million for the discontinuance of a management
incentive plan. The management bonus was comprised of 1.1 million shares of
Common Stock and a cash portion to satisfy the recipients' tax obligations
arising from the management bonus.

OPERATING INCOME. Reflecting the effect of the 1997 special charge
described above, operating income decreased $17.8 million, or 18.0%, to $81.0
million as compared to 1996 operating income. On the same basis, operating
income was 22.5% of revenues in 1997 and 28.2% in 1996. Excluding the 1997
special charge, operating income increased $14.1 million, or 14.2%, to $112.9
million in 1997. On the same basis, as a percentage of revenues, operating
income increased to 31.4% in 1997 as compared to 28.2% in 1996.

INTEREST EXPENSE. Interest expense decreased by $14.1 million, or 25.0%,
from 1996 to 1997 reflecting a decrease in average borrowing rates and a
decrease of approximately $124 million in average debt outstanding in 1997 as
compared to 1996. The decrease in average borrowing rates is primarily a result
of a decrease in the applicable margin due to: (i) reduced leverage and (ii) the
revised terms of the Company's Credit Agreement. Interest expense as adjusted to
reflect the effects of the Company's initial public offering and Credit
Agreement as if they had occurred on January 1, 1997 would have been $36.1
million for 1997. See "-- Liquidity and Capital Resources."

PROVISION FOR INCOME TAXES. The Company reported effective tax rates of
40.7% and 33.7% for the years ended December 31, 1997 and 1996, respectively. In
1996, the effective tax rate was lower than the combined federal and state
statutory rates primarily due to recognition of tax benefits which had been
offset by a valuation allowance in previous years

NET INCOME. Net income as reported on an historical basis was $23.0
million, or $.51 per share, for the year ended December 31, 1997. See "Other
information," below, for net income, as adjusted for the effects of the
Company's initial public offering and tax savings related to the Company's
January 1, 1998 corporate restructuring.

OTHER INFORMATION. EBITDA rose $14.0 million, or 11.7%, to $133.4 million
in 1997, excluding the 1997 special charge. On the same basis, the Company's
EBITDA Margin reached 37.1% for 1997, as compared to 34.0% for the prior year.

Net income as adjusted for the effects of the Company's initial public
offering and the Company's January 1, 1998 corporate restructuring as if they
had occurred and been implemented, respectively, as of January 1, 1997 and
excluding the 1997 special charge described above, would have been $48.4
million, or $1.00 per share, in 1997.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operations have historically generated strong positive cash
flow. The Company believes cash flows from operations will be sufficient to fund
its operations, capital expenditures and long-term debt obligations. The Company

<PAGE>

also believes that cash flows from operations and future borrowings and its
ability to issue common stock as consideration for future acquisitions, will
provide it with the flexibility to fund its acquisition strategy while
continuing to meet its operating needs, capital expenditures and long-term debt
obligations.

CASH FLOWS FROM OPERATIONS. Net cash provided by operating activities
increased $12.9 million to $78.9 million in 1998. Net cash provided by operating
activities in 1998 primarily resulted from net income before non-cash expenses
(i.e., depreciation and amortization), of $65.0 million.

CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing
activities increased $333.3 million to $352.8 million in 1998. The increase in
investing activities was primarily due to the Company's investment in the
purchase of newspaper properties of $341.3 million. In 1998 the Company's
capital expenditures increased by $3.2 million, and proceeds from the sale of
property, plant and equipment increased by $301,000 as compared to 1997. The
Company has a capital expenditure program (excluding future acquisitions) of
approximately $17.0 million in place for 1999, which includes spending on
technology, including prepress and business systems, computer hardware and
software, other machinery and equipment, plants and property, vehicles and other
assets. The Company believes its capital expenditure program is sufficient to
maintain its current level and quality of operations. The Company reviews its
capital expenditure program periodically and modifies it as required to meet
current needs. It is expected that the 1999 capital expenditure program will be
funded from operating cash flow. The success of the Company's operations in
Philadelphia and surrounding areas has necessitated the construction of a
centralized production facility, scheduled to begin in the first quarter of
2000. Costs for this facility are currently estimated to be approximately $35.0
million. The Company expects to fund this construction project with cash flows
from operations and borrowings.

CASH FLOWS FROM FINANCING ACTIVITIES. Net cash provided by financing
activities was $274.2 million in 1998 as compared to net cash used in financing
activities of $46.9 million in 1997. The 1998 activity reflects net proceeds of
approximately $808.0 million from the issuance of senior secured debt in
connection with the Company's new credit facility, $533.8 million which was used
to repay outstanding debt.

On July 15, 1998, the Company entered into a new credit agreement (the
"Credit Agreement") with the banks and other financial institutions, signatories
thereto and The Chase Manhattan Bank, as administrative agent for the lenders
thereunder. The Credit Agreement provides for $500.0 million in term loans and a
$400.0 million revolving credit facility. The proceeds from the Credit Agreement
were used to repay amounts outstanding under the prior senior facilities and to
fund the Goodson Acquisition. The term loans mature on March 31, 2006 and
September 30, 2006, and the revolving credit facility matures on March 31, 2006.

The amounts outstanding under the Credit Agreement bear interest at (i) 1
3/4% to 1/2% above LIBOR (as defined in the Credit Agreement) or (ii) 1/2% to 0%
above the higher of (a) the Prime Rate (as defined in the Credit Agreement) or
(b) 1/2% above the Federal Funds Rate (as defined in the Credit Agreement). The
interest rate spreads ("the applicable margins") are dependent upon the ratio of
debt to trailing four quarters Cash Flow (as defined in the Credit Agreement)
and reduce as such ratio declines.

The Company generally manages its exposure to interest rate fluctuations
for its variable rate debt by entering into interest rate protection agreements.
The Company was required under the prior credit agreement and is required under
the Credit Agreement to maintain interest rate protection agreements for a
certain percentage of its outstanding debt, based upon the Total Leverage Ratio
(as defined in the Credit Agreement). Interest rate protection agreements
relating to the Company's borrowings at December 31, 1998 included a SWAP
agreement with a notional principal amount of $300.0 million which matured on
January 29, 1999. As of December 31, 1998, if the SWAP was marked to market, it
would result in a net loss of approximately $756,000. In 1998, the Company
entered into interest rate protection agreements as required which took effect
in January of 1999 when its existing interest rate protection agreement expired,
exchanging floating LIBOR rate plus the applicable margin for a fixed LIBOR rate
of approximately 5.85% plus the applicable margin on $400.0 million of debt, in
the aggregate. The $400.0 million interest rate protection agreements reduce by
$75.0 million per year and expire in October 2002. If the new SWAP agreements on
December 31, 1998 were marked to market, they would have resulted in an
aggregate loss of approximately $7.7 million. If such SWAP agreements were
marked to market on March 9, 1999 they would have resulted in an aggregate loss
of $3.3 million. For the year ended December 31, 1998, the Company's weighted
average effective interest rate on its outstanding debt balance was
approximately 7.2%. This takes into account the interest rate protection
agreements in effect during that period.

As of December 31, 1998, the Company had outstanding indebtedness under
the Credit Agreement, due and payable in installments through 2006, of $765.0
million, of which $265.0 million was outstanding under the revolving credit

<PAGE>

facility. There was $135.0 million of unused and available funds under the
revolving credit facility at December 31, 1998.

YEAR 2000

In 1996, the Company began the initial planning of a comprehensive
initiative to address the Year 2000 issue. The Company organized a Year 2000
oversight team led by the Company's senior information technology officer to
develop a strategy of evaluation, implementation, testing and contingency
planning to address the Company's Year 2000 readiness. The evaluation phase,
which began in September 1996, involved performing a complete, company-wide
inventory to identify all internal, general purpose and production hardware and
software systems, commonly referred to as information technology ("IT")
systems, that required modification to become Year 2000 compliant. In
conjunction with the Company's internal assessment, the Company communicated
with key third parties, namely suppliers of production equipment as well as
financial institutions to determine their state of Year 2000 readiness,
implementation of Year 2000 compliant systems and related contingency plans.
The Company has received responses from approximately 70% of such key third
parties and is evaluating their impact on the Company. The Company will
continue to correspond with critical vendors and modify the Company's
contingency plans as necessary.

In January of 1997, the Company began the implementation phase of
replacing or modifying system hardware and software as required. The Company
believes the majority of the general business systems will be modified or
determined to be Year 2000 compliant. The Company is developing contingency
plans to address potential non-compliance both internally and externally.

In accordance with GAAP, the Company's direct Year 2000 costs, including
modifying computer software or converting to new programs, are expensed as
incurred. Additionally, a majority of the hardware costs for replacement systems
will be capitalized as ordinarily accounted for in the normal course of
business. These system replacements represent upgrades consistent with the
Company's goal to maintain and improve operational efficiencies. The Company has
capitalized approximately $3.0 million related to new hardware and software in
connection with its Year 2000 compliance plan as of December 31, 1998 and an
additional $6.0 million is expected to be capitalized in 1999.

Although the Company believes it has taken all of the necessary steps to
ensure that the Company will be Year 2000 compliant, there can be no assurances
that the Company will be able to complete all of the modifications in the
required time frame, that all third parties will be Year 2000 compliant or that
unforeseen Year 2000 issues will not arise. The Company expects to complete its
Year 2000 compliance project by September 30, 1999. The Company's assessment at
this time is that the failure of any of the Company's IT or non-IT systems, or
failure by a third party to become Year 2000 compliant would not have a material
adverse effect on the Company, although there can be no assurances that a
material adverse effect could not result.

INFLATION

The Company's results of operations and financial condition have not been
significantly affected by inflation. Subject to normal competitive conditions,
the Company generally has been able to pass along rising costs through increased
advertising and circulation rates.

RECENT EVENTS

On January 11, 1999 the Company announced that its Board of Directors
authorized a share repurchase program of up to 2 million shares of the Company's
common stock. As of March 11, 1999, the Company has repurchased 1,141,800 shares
on the open market. Shares under the program are to be repurchased at
management's discretion, either in the open market or in privately negotiated
transactions.

The decision to repurchase stock depends on price, market conditions and
other factors. The Company indicated that there is no minimum number of shares
to be purchased under the program.

<PAGE>

Purchases under the program will be financed with the Company's free cash
flow or borrowings under the Company's revolving credit facility.

INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS

Management's Discussion and Analysis of Financial Condition and Results of
Operations and other sections of this Form 10-K include forward-looking
statements, which may be identified by use of terms such as "believes,"
"anticipates," "plans," "will," "likely," "continues," "intends" or "expects."
These forward-looking statements relate to the plans and objectives of the
Company for future operations. In light of the risks and uncertainties inherent
in all future projections, the inclusion of forward-looking statements herein
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved. Many factors could
cause the Company's actual results to differ materially from those in the
forward-looking statements, including, among other things, the factors discussed
below under "Certain Factors Which May Affect the Company's Future Performance."
The following 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.

NEW ACCOUNTING PRONOUNCEMENT

In June of 1998, Statement No. 133, "Accounting for Derivative Instruments
and Hedging Activities" ("SFAS 133"), was issued by the Financial Accounting
Standards Board. The statement is effective for years beginning after June 15,
1999, with early adoption permitted in any fiscal quarter following its
issuance. SFAS 133 will require the Company to recognize all derivatives on the
balance sheet at fair market value. Derivatives that are not hedges must be
adjusted to fair value through income. If the derivative is a hedge, depending
on the nature of the hedge, changes in the fair values of the derivatives will
either be offset against the change in fair value of the hedged assets or
liabilities through earnings or recognized in other comprehensive income until
the hedged item is recognized in earnings. The ineffective portion of a
derivative's change in fair value will be immediately recognized in earnings.
The Company has not yet determined what the effect of SFAS 133 will be on the
earnings and financial position of the Company.

CERTAIN FACTORS WHICH MAY AFFECT THE COMPANY'S FUTURE PERFORMANCE

NEWSPAPER INDUSTRY COMPETITION

The Company's business is concentrated in newspapers and other
publications located primarily in small metropolitan and suburban areas in the
United States. Revenues in the newspaper industry primarily consist of
advertising and paid circulation. Competition for advertising expenditures and
paid circulation comes from local, regional and national newspapers, shopping
guides, television, radio, direct mail, on-line services and other forms of
communication and advertising media. Competition for newspaper advertising
expenditures is based largely upon advertiser results, readership, advertising
rates, demographics and circulation levels, while competition for circulation
and readership is based largely upon the content of the newspaper, its price and
the effectiveness of its distribution. Many of the Company's competitors are
larger and have greater financial resources than the Company.

DEPENDENCE ON LOCAL ECONOMIES

The Company's advertising revenues and, to a lesser extent, circulation
revenues are dependent on a variety of factors specific to the communities which
the Company's newspapers serve. These factors include, among others, the size
and demographic characteristics of the local population, local economic
conditions in general, and the related retail segments in particular, and local
weather conditions.

INDEBTEDNESS

The Company has a substantial amount of indebtedness. As of December 31,
1998, the consolidated indebtedness of the Company was approximately $765.0
million, which represents a multiple of 5.2 times the Company's twelve months
trailing EBITDA of approximately $146.7 million (excluding the 1998 special
charge). As of December 31, 1998, the Company had a net stockholders' deficit of
approximately $225.3 million and a total capitalization of $539.7 million, and,

<PAGE>

thus, the percentage of the Company's indebtedness to total capitalization was
141.7%. The Company may incur additional indebtedness to fund operations,
capital expenditures or future acquisitions.

The Company believes that cash provided by operating activities will be
sufficient to fund its operations and to meet payment requirements under its
Term Loan and the Revolver under the Credit Agreement. However, a decline in
cash provided by operating activities, which could result from factors beyond
the Company's control, such as unfavorable economic conditions, an overall
decline in advertising expenditures or increased competition, could impair the
Company's ability to service its debt. The Credit Agreement requires the
maintenance of certain financial ratios and imposes certain operating and
financial restrictions on the Company which restrict, among other things, the
Company's ability to declare dividends, redeem stock, incur indebtedness, create
liens, sell assets, consummate mergers and make capital expenditures,
investments and acquisitions.

ENVIRONMENTAL MATTERS

The Company's operations are subject to 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. The
Company cannot predict with any certainty whether future events, such as changes
in existing laws and regulations or the discovery of conditions not currently
known to the Company, may give rise to additional costs which could be material.
Furthermore, actions by federal, state and local governments concerning
environmental matters could result in laws or regulations that could have a
material adverse effect on the financial condition or results of operations of
the Company. The Company is not aware of any pending legislation by federal,
state or local governments relating to environmental matters which, if enacted,
would reasonably be expected to have a material adverse effect on the financial
condition or results of operations of the Company. The Company is in the process
of monitoring groundwater contamination which has been detected at one of its
facilities. The Company believes the remediation of any such groundwater
contamination, if required, will not have a material adverse effect on its
financial condition or results of operations. In May 1998, one of the Company's
subsidiaries, acquired as part of the Goodson Acquisition, received a Notice of
Potential Liability in connection with a landfill superfund site. The Company is
fully indemnified for all costs and liabilities arising out of this issue by the
seller as part of the Goodson Acquisition purchase agreement.

ACQUISITION STRATEGY

The Company has grown through, and anticipates that it will continue to
grow through, acquisitions of daily and non-daily newspapers and similar
publications. Acquisitions may expose the Company to particular risks,
including, without limitation, diversion of management's attention, assumption
of liabilities and amortization of goodwill and other acquired intangible
assets, some or all of which could have a material adverse effect on the
financial condition or results of operations of the Company. Depending on the
value and nature of the consideration paid by the Company for acquisitions, such
acquisitions may have a dilutive impact on the Company's earnings per share. In
making acquisitions, the Company competes for acquisition targets with other
companies, many of which are larger and have greater financial resources than
the Company. There can be no assurance that the Company will continue to be
successful in identifying acquisition opportunities, assessing the value,
strengths and weaknesses of such opportunities, evaluating the costs of new
growth opportunities at existing operations or managing the publications it owns
and improving their operating efficiency. Historically, the Company has financed
acquisitions through cash on hand and borrowings, which borrowings have
increased the Company's indebtedness. The Company anticipates that it will
finance future acquisitions through cash on hand, borrowings and issuances of
capital stock. The Credit Agreement limits acquisitions to certain permitted
investments and newspapers in the United States, and requires that acquisitions
be financed through certain permitted sources. In addition, the financial
covenants contained in the Credit Agreement may limit the Company's ability to
make acquisitions.

PRICE AND AVAILABILITY OF NEWSPRINT

<PAGE>

two suppliers. Historically, the percentage of the Company's newsprint supplied
by each of such suppliers has varied. The Company believes that it would not be
materially adversely effected if it were no longer able to purchase its
newsprint supply from its two current suppliers and that, in such event, other
newsprint suppliers would be readily available to the Company. In the future,
the Company may purchase newsprint from other suppliers. 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 or results of operations of
the Company. Historically, the price of newsprint has been cyclical and
volatile. The Company's average cost of newsprint consumed increased
approximately 8% in 1998, decreased approximately 18% in 1997, and increased
approximately 13% in 1996, in each case compared to the previous year. The
Company believes that if any price increase or decrease is sustained in the
industry, the Company will also be impacted by such increase or decrease. The
Company is unable to predict whether, or to what extent, any increase or
decrease will be sustained. Significant increases in newsprint costs could have
a material adverse effect on the financial condition or results of operations of
the Company. The Company has managed the effects of increases in prices of
newsprint through a combination of, among other things, technology improvements,
including web-width reductions, inventory management and advertising and
circulation price increases. The Company also has reduced fringe circulation in
response to increased newsprint prices, as it is the Company's experience that
such circulation does not provide adequate response for advertisers.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The Company is exposed to market risk arising from changes in interest
rates associated with its long-term debt obligations. The Company's long-term
debt is at variable interest rates based on certain interest rate spreads
applied to LIBOR, the Prime Rate or Federal Funds Rate as defined in the Credit
Agreement. To manage its exposure to fluctuations in interest rates, the
Company, as required by its Credit Agreement, enters into certain interest rate
protection agreements, which allows the Company to exchange variable rate
interest for fixed rate, maturing at specific intervals. The difference to be
paid or received as interest rates change is accrued and recognized as an
adjustment of interest expense related to the debt. The related amount payable
to or receivable from counterparties is included in accrued interest. The
Company's use of these agreements is limited to hedging activities and not for
trading or speculative activity.

At December 31, 1998, the Company had in effect a SWAP agreement for a
notional amount of $300 million. The fair market value of the SWAP at December
31, 1998 had the SWAP been marked to market, would have resulted in a loss of
approximately $756,000. In addition, during 1998, the Company entered into SWAP
agreements in an aggregate notional amount of $400 million which became
effective January 29, 1999. The agreements reduce by $75 million per year and
expire on October 29, 2002. At December 31, 1998, had these SWAP agreements been
marked to market, they would have resulted in an aggregate loss of approximately
$7.7 million. However, if such SWAP agreements were marked to market at March 9,
1999, they would have resulted in an aggregate loss of approximately $3.3
million. Assuming a ten percent increase or reduction in interest rates for the
year ended December 31, 1998, the effect on the Company's pre-tax earnings and
cash flows would be approximately $2.3 million.

<PAGE>

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

INDEX TO FINANCIAL STATEMENTS

PAGE
FINANCIAL STATEMENTS:

Report of Independent Auditors....................................... 29
Consolidated Balance Sheets.......................................... 30
Consolidated Statements of Income.................................... 31
Consolidated Statements of Stockholders'/Members' Deficit............ 32
Consolidated Statements of Cash Flows................................ 33
Notes to Consolidated Financial Statements........................... 34

FINANCIAL STATEMENT SCHEDULE:

Schedule II, Valuation and Qualifying Accounts.......................S-1

All other schedules are omitted because they are not applicable or the
requested information is shown in the consolidated financial statements or
related notes.

<PAGE>

REPORT OF INDEPENDENT AUDITORS

The Board of Directors
Journal Register Company

We have audited the accompanying consolidated balance sheets of Journal
Register Company as of December 31, 1998 and 1997, and the related consolidated
statements of income, stockholders'/members' deficit, and cash flows for each of
the three years in the period ended December 31, 1998. Our audits also included
the financial statement schedule listed in the Index at Item 14(a). These
financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
Journal Register Company, as of December 31, 1998 and 1997 and the consolidated
results of its operations and its cash flows for each of the three years in the
period ended December 31, 1998, in conformity with generally accepted accounting
principles. Also, in our opinion, the related financial statement schedule, when
considered in relation to the basic financial statements taken as a whole,
present fairly in all material respects the information set forth therein.

ERNST & YOUNG LLP

February 9, 1999
MetroPark, New Jersey

<PAGE>

JOURNAL REGISTER COMPANY
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
December 31,
---------------------
1998 1997
--------- ---------
ASSETS
Current assets:
Cash and cash equivalents $ 8,542 $ 8,183
Accounts receivable, less allowance for doubtful
accounts of $4,632 in 1998 and $4,055 in 1997 58,244 48,675
Inventories 8,440 9,865
Deferred income taxes 2,522 6,444
Other current assets 4,130 4,666
--------- ---------
Total current assets 81,878 77,833

Property, plant and equipment:
Land 8,810 7,567
Buildings and improvements 65,127 60,685
Machinery and equipment 156,223 148,605
--------- ---------
230,160 216,857
Less accumulated depreciation (130,182) (124,237)
--------- ---------
Property, plant and equipment, net 99,978 92,620
Intangible and other assets, net of accumulated
amortization of $28,297 in 1998 and $23,973 in 1997 490,013 157,478
--------- ---------
Total assets $671,869 $327,931
========= =========

LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ -- $ 57,060
Accounts payable 12,107 9,277
Income taxes payable 829 535
Accrued interest 6,374 5,067
Deferred subscription revenue 8,290 6,539
Accrued salaries and vacation 5,231 3,838
Other accrued expenses and current liabilities 17,293 13,778
--------- ---------
Total current liabilities 50,124 96,094

Senior debt, less current maturities 765,000 433,714
Deferred income taxes 14,029 8,049
Accrued retiree benefits and other liabilities 17,078 20,641
Income taxes payable 50,951 35,675

Commitments and contingencies

Stockholders' deficit:
Common stock, $.01 par value per share, 300,000,000
shares authorized, 48,437,581 and 48,437,500
issued and outstanding at December 31, 1998
and 1997, respectively 484 484
Additional paid-in capital 358,236 358,234
Accumulated deficit (583,821) (624,960)
Accumulated other comprehensive loss, net of
tax of $153 (212) --
--------- ---------
Net stockholders' deficit (225,313) (266,242)
--------- ---------
Total liabilities and stockholders' deficit $671,869 $327,931
========= =========

SEE ACCOMPANYING NOTES.

<PAGE>

JOURNAL REGISTER COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Year Ended December 31,
------------------------------------
1998 1997 1996
---------- ----------- ----------
Revenues:
Advertising $312,908 $266,914 $ 256,971
Circulation 89,388 80,211 79,776
-------- -------- ---------
Newspaper revenues 402,296 347,125 336,747
Commercial printing and other 24,484 12,282 14,373
-------- -------- ---------
426,780 359,407 351,120

Operating expenses:
Salaries and employee benefits 139,216 114,302 111,626
Newsprint, ink and printing 53,594 40,452 50,110
Selling, general and
administrative 39,047 30,450 30,993
Depreciation and amortization 23,844 20,480 20,525
Other 52,012 40,783 38,976
Special charge -- 31,899 --
-------- -------- ---------
307,713 278,366 252,230
-------- -------- ---------
Operating income 119,067 81,041 98,890

Other income (expense):
Interest expense (45,465) (42,282) (56,410)
Interest income 60 46 107
Other 84 (52) (169)
-------- -------- ---------
Income before provision for income
taxes and extraordinary item 73,746 38,753 42,418
Provision for income taxes 28,112 15,784 14,309
-------- -------- ---------
Income before extraordinary item 45,634 22,969 28,109
Extraordinary item, net of tax of
$2,755 4,495 -- --
-------- -------- ---------
Net income $ 41,139 $ 22,969 $ 28,109
======== ======== =========

Net Income per common share (basic
and diluted):
Income before extraordinary item $ .94 $ .51 $ --
Net income $ .85 $ .51 $ --
Proforma net income (unaudited) $ -- $ -- $ .74

SEE ACCOMPANYING NOTES.

<PAGE>

JOURNAL REGISTER COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'/MEMBERS' DEFICIT
(IN THOUSANDS)

TOTAL
ADDITIONAL OTHER STOCKHOLDERS'/
COMMON MEMBERSHIP PAID-IN COMPREHENSIVE ACCUMULATED MEMBERS'
STOCK INTEREST CAPITAL INCOME(LOSS) DEFICIT DEFICIT

<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 1996 $ -- $ 2,104 $ 22,167 $ -- $(676,038) $(451,767)
Net income 28,109 28,109
------ --------- --------- ------- --------- ---------
Balance at December 31, 1996 -- 2,104 222,167 -- (647,929) (423,658)

Net income 22,969 22,969
Conversion of
membership interest 379 (2,104) 1,725 -- -- --
Issuance of common
stock 105 -- 134,342 -- -- 134,447
------ --------- --------- ------- --------- ---------
Balance at December 31, 1997 484 -- 358,234 -- (624,960) (266,242)

Net income 41,139 41,139

Minimum pension
liability adjustment,
net of tax of $153 (212) (212)
---------
Comprehensive income 40,927
---------
Exercise of stock
options for common stock -- -- 2 -- -- 2
------ --------- --------- ------- --------- ---------
Balance at December 31, 1998 $ 484 $ -- $ 358,236 $ (212) $(583,821) $(225,313)
====== ========= ========= ======= ========= =========

</TABLE>

SEE ACCOMPANYING NOTES.

<PAGE>

JOURNAL REGISTER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------
1998 1997 1996
---------- ---------- ----------

CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 41,139 $ 22,969 $ 28,109
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for losses on accounts
receivable 4,464 3,291 3,914
Depreciation and amortization 23,844 20,480 20,525
Net gain on disposal of property,
plant and equipment and other
assets (1,074) (464) (110)
Extraordinary loss on extinguishment
of deferred debt costs 7,250 -- --
Non-cash portion of special charge -- 15,400 --
Increase in income taxes payable 15,570 8,526 14,693
Increase (decrease) in accrued
interest 1,307 (2,431) (2,068)
Increase (decrease) in deferred
taxes 7,928 4,779 (4,836)
Increase in accounts receivable (5,885) (4,546) (3,972)
Decrease (increase) in inventories 2,412 (2,431) 10,476
Increase (decrease) in accounts
payable 1,427 2,001 (2,664)
(Decrease) increase in deferred
subscription revenue (126) 310 (401)
(Decrease) increase in accrued
retiree benefits and other
liabilities (6,877) 1,964 (1,227)
(Increase) decrease in other assets,
net of increase (decrease) in other
current liabilities (12,474) (3,818) (2,374)
--------- --------- ---------
Net cash provided by operating activities 78,905 66,030 60,065

CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and
equipment (12,914) (9,727) (7,675)
Net proceeds from sale of property,
plant and equipment and other assets 1,487 1,186 237
Purchase of newspaper properties, net of
cash acquired (341,347) (10,906) (18,262)
--------- --------- ---------
Net cash used in investing activities (352,774) (19,447) (25,700)

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from issuance of debt:
Senior facilities 808,000 4,000 7,000
Accretion on subordinated notes -- 1,205 3,029
Repayments of:
Senior debt ( 533,774) (136,674) (44,470)
Subordinated notes -- (34,524) --
Exercise of stock options for common
stock 2 -- --
Net proceeds from issuance of common
stock -- 119,047 --
--------- --------- ---------
Net cash provided by (used in) financing
activities 274,228 (46,946) (34,441)
--------- --------- ---------
Increase (decrease) in cash and cash
equivalents 359 (363) (76)
Cash and cash equivalents, beginning of
year 8,183 8,546 8,622
--------- --------- ---------
Cash and cash equivalents, end of year $ 8,542 $ 8,183 $ 8,546
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest $ 44,158 $ 44,713 $ 54,244
Income taxes 1,719 2,479 4,452

SUPPLEMENTAL DISCLOSURES OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Issuance of additional subordinated
notes $ -- $ 1,205 $ 3,029
Issuance of note payable in
connection with an acquisition -- 2,884 --
Comprehensive loss - minimum pension
liability, net of tax 212 -- --

</TABLE>

SEE ACCOMPANYING NOTES.

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998

1. ORGANIZATION AND BASIS OF PRESENTATION

The accompanying consolidated financial statements include Journal
Register Company (the "Company") and all of its wholly owned subsidiaries. The
Company was incorporated on March 11, 1997 and became a publicly traded company
in May of 1997.

In March of 1997, certain entities (namely, JRC, LLC, JRNI and INSI) were
combined and JRC, LLC was converted into a C corporation, Journal Register
Company. Substantially all of the membership interests and equity securities of
these entities were owned by affiliates of E.M. Warburg, Pincus & Co., LLC
(collectively, "Warburg, Pincus"). Since the companies were under common
control, this transaction was accounted for on a basis similar to a pooling of
interests. The accompanying financial statements include the accounts and
operations of JRC (or its predecessor JRC, LLC), JRNI and INSI for all periods
presented.

Journal Register Company (through its consolidated subsidiaries) primarily
publishes daily and non-daily newspapers serving markets in Connecticut,
Philadelphia and its surrounding areas, Ohio, the greater St. Louis area,
central New England and the Capital-Saratoga and Mid-Hudson, New York regions;
and has commercial printing operations in Connecticut, Ohio and Pennsylvania.

The Company has authorized 1,000,000 shares of Preferred Stock, none of
which were issued or outstanding as of December 31, 1998.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

PRINCIPLES OF CONSOLIDATION

The consolidated financial statements include the accounts of the Company
and all of its wholly owned subsidiaries. All significant intercompany activity
has been eliminated.

USE OF ESTIMATES

The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Such estimates would include the allowance for doubtful
accounts and valuation allowance for deferred taxes. Actual results could differ
from those estimates.

CONSOLIDATED STATEMENTS OF CASH FLOWS

For purposes of the accompanying consolidated statements of cash flows,
the Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The carrying value of
cash equivalents approximates fair value due to the short-term maturity of these
instruments.

INVENTORIES

Inventories, consisting of newsprint, ink and supplies, are stated at the
lower of cost (primarily first-in, first-out method) or market.

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PROPERTY, PLANT AND EQUIPMENT

Property, plant and equipment are stated at cost. Maintenance and repairs
are charged to expense as incurred; costs of major additions and betterments are
capitalized.

Depreciation is provided for financial reporting purposes primarily by the
straight-line method over the following estimated useful lives:

Buildings and improvements 5 to 30 years
Machinery and equipment 3 to 20 years

INTANGIBLE ASSETS AND OTHER ASSETS

Intangible assets recorded in connection with the acquisition of
newspapers generally consist of the values assigned to subscriber lists and the
excess of cost over the value of identifiable net assets of the companies
acquired. These assets are carried at the lower of amortized cost or the amount
expected to be recovered by projected future operations after considering
attributable general and administration expense and interest on debt allocated
to the various newspapers. If, in the opinion of management, an impairment in
value occurs, any necessary write-downs will be charged to expense.

The balance of intangible assets at December 31, 1998 and 1997 was
comprised of subscriber lists and excess cost over the value of identifiable net
assets of companies acquired. These assets are being amortized over a period of
4 to 40 years and are amortized by the straight-line method.

In accordance with SFAS No. 121"Accounting for the Impairment of Long
Lived Assets and for Long-Lived Assets to be Disposed Of", the Company reviews
the recoverability of intangibles and other long-lived assets whenever events
and circumstances indicate that the carrying amount may not be recoverable. The
carrying amount of the long-lived assets is reduced by the difference between
the carrying amount and estimated fair value.

Other assets consist principally of capitalized costs associated with the
term loans and the revolver (as defined in Note 4, Long-Term Debt) that are
being amortized over the terms of such loans.

INCOME TAXES

The Company uses the liability method of accounting for income taxes.
Under this method, deferred tax assets and liabilities are determined based on
differences between financial reporting and tax basis of assets and liabilities
and are measured using the currently enacted tax rates and laws that will be in
effect when the differences are expected to reverse.

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

DEFERRED SUBSCRIPTION REVENUE

Deferred subscription revenue arises from subscription payments made in
advance of newspaper delivery. Revenue is recognized in the period in which it
is earned.

INTEREST-RATE PROTECTION AGREEMENTS

The Company enters into Interest-Rate Protection Agreements ("IRPAs") to
modify the interest characteristics of its outstanding debt. Each IRPA is
designated for all or a portion of the principal balance and term of a specific
debt obligation. Certain of these agreements involve the exchange of amounts
based on a fixed interest rate for amounts based on variable interest rates over
the life of the agreement without an exchange of the notional amount upon which
the payments are based. The differential to be paid or received as interest
rates change is accrued and recognized as an adjustment of interest expense
related to the debt. The related amount payable to or receivable from
counterparties is included in accrued interest. The fair values of IRPAs are not
recognized in the financial statements. Gains and losses on terminations of
IRPAs would be deferred as an adjustment to the carrying amount of the
outstanding debt and amortized as an adjustment to interest expense related to
the debt over the remaining term of the original contract life of the IRPAs. In
the event of the early extinguishment of a designated debt obligation, any
realized or unrealized gain or loss from the IRPA would be recognized in income
coincident with the extinguishment. Any IRPAs that were not designated with
outstanding debt or notional amounts (or durations) of IRPAs in excess of the
principal amounts (or maturities) of the underlying debt would be recorded as an
asset or liability at fair value, with changes in fair value recorded in other
income (expense).

STOCK OPTION PLAN

The Company has elected to follow Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees" ("APB 25") and related
interpretations in accounting for its employee stock options. Under APB 25, when
the exercise price of the Company's employee stock options equals the market
price of the underlying stock on the date of grant, no compensation expense is
recognized.

EARNINGS PER SHARE

The Company, in accordance with Financial Accounting Standards Board
Statement No. 128, "Earnings Per Share", discloses earnings per share on a basic
and diluted basis. Basic earnings per share excludes any dilutive effects of
options, warrants and convertible securities. Diluted earnings per share is very
similar to the previously required fully diluted earnings per share. The
pronouncement had no impact on the proforma earnings per share amount for 1996.

CONCENTRATION OF RISK

Certain employees of the Company's newspapers are employed under
collective bargaining agreements.

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

SEGMENTS REPORTING

In 1998, the Company adopted the Financial Accounting Standards Board's
Statement of Financial Accounting Standards No. 131, "Disclosure About Segments
of an Enterprise and Related Information" ("SFAS 131"). SFAS 131 superceded SFAS
14, "Financial Reporting for Segments of a Business Enterprise". The adoption of
SFAS 131 did not effect the results of operations or financial position and did
not effect the disclosure of segment information.

The Company is exclusively a newspaper company. The Company publishes 24
daily and 185 non-daily newspapers in the U.S. It maintains operations and local
management in the markets that it serves. Revenue is earned from the sale of
advertising, circulation and related activities. Newspapers are distributed
through local distribution channels consisting of contract carriers and single
copy outlets.

The Company conducts business in one operating segment. The Company
determined its operating segment based on individual operations that the chief
operating decision maker reviews for purposes of assessing performance and
making operational decisions. These individual operations have been aggregated
into one segment because the Company believes it helps the users understand the
Company's performance. The combined operations have similar economic
characteristics and each operation has similar products, services, customers,
production processes and distribution systems.

EFFECT OF NEW PRONOUNCEMENT

RECLASSIFICATIONS

Certain reclassifications were made to the 1997 financial statements to
conform to the 1998 presentation.

3. INTANGIBLE AND OTHER ASSETS

Intangible and other assets as of December 31, net of accumulated
amortization, are summarized as follows:

(in thousands)
1998 1997
------------- -------------
Excess of cost over the value of identifiable
net assets and subscriber lists $473,245 $138,370
Prepaid pension cost 8,434 7,784
Other 8,334 11,324
-------------- -------------
$490,013 $157,478
============== =============

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

4. LONG-TERM DEBT

The Company's long-term debt as of December 31 was comprised of the
following:

(in thousands)
1998 1997
-------------- ------------

Senior Secured Term Loans $500,000 $364,890
Senior Secured Revolving Credit Facility 265,000 123,000
Other debt -- 2,884
-------------- ------------
765,000 490,774
Less current portion -- (57,060)
============== ============
$765,000 $433,714
============== ============

On July 15, 1998, the Company entered into a new credit agreement with a
group of lenders led by The Chase Manhattan Bank as administrative agent. The
Credit Agreement provides a 7 3/4-year term loan facility ("Term Loan A") in the
aggregate amount of $250.0 million, an 8 1/4-year term loan facility ("Term Loan
B") in the aggregate amount of $250.0 million and a 7 3/4-year revolving credit
facility in the aggregate amount of $400.0 million (the "Revolving Credit
Facility"). Proceeds under these loan facilities were used to repay existing
debt and to fund the Goodson Acquisition. In May 1997, the Company's prior
credit facility ("prior credit facility") was amended to include $398.0 million
in senior secured term loans and a $235.0 million senior secured revolving
credit facility (the "prior revolver"). The Company had $135.0 million unused
and available under the Revolving Credit Facility at December 31, 1998 and
$112.0 million unused and available under the prior revolver at December 31,
1997. During 1998 and in conjunction with the new Credit Agreement, the Company
borrowed approximately $808.0 million of which $533.8 million was used to repay
outstanding debt.

The Term Loan A Facility matures on March 31, 2006 and is repayable in
quarterly installments commencing on June 30, 2000. The Term Loan B Facility
matures on September 30, 2006 and is repayable in quarterly installments
commencing on June 30, 2000.

The aggregate annual maturities of long-term debt payable under the
term loans are as follows:

(in thousands)

1999....................................$ --
2000......................................19,500
2001......................................30,688
2002......................................36,937
2003......................................43,188
Thereafter...............................369,687

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

4. LONG-TERM DEBT (CONTINUED)

The Revolving Credit Facility is available on a revolving basis until
March 31, 2006. Availability will be reduced by consecutive quarterly
reductions, commencing on June 30, 2002 and ending on March 31, 2006, in an
aggregate amount for each twelve month period commencing on the date set forth
below equal to the amount set forth opposite such date (with reductions during
each such period being equal in amount):

PRINCIPAL AMOUNT (IN THOUSANDS)
June 30, 2002 $ 55,000
June 30, 2003 65,000
June 30, 2004 100,000
June 30, 2005 180,000

The Credit Agreement also provides for an uncommitted multiple draw term
loan facility (the "Incremental Facility") in the amount of up to $500.0 million
as permitted by the Agent to be repaid under conditions as defined in the
agreement.

The Senior Facilities are secured by substantially all of the assets of
the Company and the common stock and assets of the Company's subsidiaries. The
Senior Facilities require compliance with certain covenants, which require,
among other things, maintenance of certain financial ratios, and restricts the
Company's ability to declare dividends, redeem stock, incur additional
indebtedness, create liens, sell assets, consummate mergers and make capital
expenditures, investments and acquisitions.

The amounts outstanding under the credit facilities bear interest at (i) 1
3/4% to 1/2% above LIBOR or (ii) 1/2% to 0% above the higher of (a) the Prime
Rate or (b) 1/2% above the Federal Funds Rate. The interest rate spreads are
dependent upon the ratio of debt to trailing four quarters Cash Flow (as defined
in the Credit Agreement) and reduce as such ratio declines.

An annual commitment fee is incurred on the average daily unused portion
of the Revolving Credit Facility, payable quarterly in arrears, at a percentage
which varies from 0.375% to 0.250% based on the quarterly calculation of the
Total Leverage Ratio. At December 31, 1998, the Company's commitment fee was
0.375%.

The Credit Agreement also requires the Company, in order to manage
interest rate risk, to maintain interest rate protection agreements for a
certain percentage of the outstanding debt, based upon the Total Leverage Ratio
(as defined in the Credit Agreement). In accordance with this requirement, the
Company participates in certain interest rate protection agreements whereby the
Company has assumed a fixed rate of interest and a counterparty has assumed the
variable rate (the "SWAP"). Pursuant to the SWAP agreement, the Company agrees
to exchange with certain banks at specific dates the difference between the
fixed rate in the SWAP agreement and the LIBOR floating rate applied to the
notional principal amount. Prior to and during 1997, the Company, in connection
with the prior credit agreement, also entered into interest rate collar
agreements which expired on various dates between April 30, 1998 and June 30,
1998. The interest rate collar agreements had an aggregate notional principal
amount of $286.0 million with ceiling interest rates ranging from 7.29% through
7.41% and floor interest rates of 5.48%.

Interest rate protection agreements relating to the Company's borrowings
at December 31, 1998 included a SWAP agreement with a notional principal amount
of $300.0 million which matured on January 29, 1999. As of December 31, 1998, if
the SWAP was marked to market, it would result in a net loss of approximately
$756,000. Upon expiration of the SWAP agreement on January 29,1999, the
Company's new SWAP agreements,

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

4. LONG-TERM DEBT (CONTINUED)

for an aggregate notional principal amount of $400.0 million, which reduce by
$75.0 million per year, became effective. The new SWAP agreements will expire on
October 29, 2002. At December 31, 1998, if the new SWAP agreements, although not
in effect, were marked to market, they would have resulted in a loss of
approximately $7.7 million. The fair value as of December 31, 1998 of the IRPAs
were obtained from the Company's bank. The fixed LIBOR rate of such SWAP
agreements is approximately 5.85%.

The estimated fair value of the Term Loans and Revolving Credit Facility
approximates their carrying value since the interest rates are variable.

In 1997, the Company repaid $33.3 million of subordinated notes owed to
affiliates of Warburg, Pincus.

5. INITIAL PUBLIC OFFERING AND SPECIAL CHARGE

In May 1997, the Company completed an initial public offering of 9,375,000
shares (the "Offering") of its common stock, par value $0.01 per share (the
"Common Stock"), at a price of $14 per share. The Common Stock began trading on
the New York Stock Exchange under the symbol "JRC" on May 8, 1997. The net
proceeds to the Company from the Offering were approximately $119.0 million,
which the Company used to repay a portion of the amounts outstanding under the
term loan and to retire all of the outstanding principal amount of and accrued
and unpaid interest on the Company's subordinated notes.

On June 6, 1997, pursuant to an agreement with the underwriters of the
Offering (the "Underwriting Agreement"), the underwriters exercised their option
to purchase 1,406,250 additional shares of Common Stock at a price of $14 per
share. In accordance with the Underwriting Agreement, these shares were
purchased directly from Warburg, Pincus and were purchased solely for the
purpose of covering over-allotments made in connection with the Offering.

In connection with the Offering, in the second quarter of 1997 the Company
incurred a special charge of $31.9 million (before benefit for income taxes of
$13.0 million) comprised of $28.4 million for a management bonus and $3.5
million for the discontinuance of a management incentive plan. The management
bonus was comprised of 1,100,000 shares of Common Stock and a cash portion to
satisfy the recipients' tax obligations arising from the management bonus.

6. STOCK INCENTIVE PLAN

Prior to the completion of the Offering (see Note 5), the Company's Board
of Directors (the "Board") adopted and the stockholders approved the Company's
1997 Stock Incentive Plan (the "1997 Plan"). Subject to adjustment as provided
in the 1997 Plan, the 1997 Plan authorizes the granting of up to 4,843,750
shares of the Common Stock through: (i) incentive stock options and
non-qualified stock options (in each case, with or without stock appreciation
rights), to acquire Common Stock; (ii) awards of restricted shares of Common
Stock; and (iii) performance units, to such directors, officers and other
employees of, and consultants to, the Company and its subsidiaries and
affiliates as may be designated by the Compensation Committee of the Board or
such other committee of the Board as the Board may designate.

Incentive stock options are granted at no less than fair market value of
the Common Stock on the date of grant. The option price per share of Common
Stock for all other stock options are established by the Compensation Committee.
Stock options are exercisable at cumulative intervals of 20% commencing on the
first anniversary after issuance, continuing through the fifth anniversary, at
which time 100% may be exercised. These options expire 10 years after issuance.

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

6. STOCK INCENTIVE PLAN (CONTINUED)

Proforma information regarding net income and earnings per share is
required by FASB Statement No. 123, "Accounting for Stock-Based Compensation",
and has been determined as if the Company had accounted for its employee stock
options under the fair value method of that Statement. The fair value for these
options was estimated at the date of grant using a Black-Scholes option pricing
model with the following weighted-average assumptions for 1998 and 1997:
risk-free interest rate of 5.49% and 5.76%, respectively; dividend yield of 0%
for both years; volatility factor of the expected market price of the Common
Stock of .38 and .31, respectively; and a weighted-average expected life of the
option of seven years for both 1998 and 1997.

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options which have no vesting restrictions
and are fully transferable. In addition, option valuation models require the
input of highly subjective assumptions including the expected stock price
volatility. Because the Company's employee stock options have characteristics
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.

For purposes of proforma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period. The Company's
proforma information, had compensation costs for the Company's stock option
plans been determined in accordance with FASB No. 123, for the years ended
December 31, 1998 and 1997 is as follows:

(in thousands)

1998 1997
---- ----

Net income attributable to common stockholder:
As reported $41,139 $22,969
Proforma 39,135 22,259

Net income per share
As reported
Basic $ .85 $ .51
Diluted .85 .51
Proforma
Basic .81 .50
Diluted .80 .49

A summary of the Company's stock option activity and related information
for the years ended 1998 and 1997 are as follows:

1998 1997
WEIGHTED-AVERAGE WEIGHTED-AVERAGE
OPTIONS EXERCISE PRICE OPTIONS EXERCISE PRICE

<S> <C> <C> <C> <C>
Outstanding-beginning of year 1,825,189 $17.50 -- --
Granted 925,700 $22.45 1,959,992 $17.50
Exercised 5,174 $14.00 -- --
Forfeited 158,548 $17.59 134,803 $17.52
--------- ---------
Outstanding-end of year 2,587,167 $19.27 1,825,189 $17.50
========= =========

Exercisable at end of year 332,973 $17.51 -- --
Weighted-average fair
value of options granted
during the year $11.13 $5.42

</TABLE>

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

6. STOCK INCENTIVE PLAN (CONTINUED)

Exercise prices for options outstanding as of December 31, 1998 ranged
from $14.00 to $22.50 per share. The weighted-average remaining contractual life
of those options is 8.7 years.

7. EXTRAORDINARY ITEM

In July 1998, in connection with the Credit Agreement, the Company
expensed approximately $7.3 million of deferred financing costs associated with
the extinguishment of the Company's prior credit facility, resulting in an
extraordinary charge of $4.5 million, net of tax (See Note 4, Long-Term Debt).

8. EARNINGS PER COMMON SHARE

The following table sets forth the computation of weighted-average shares
outstanding for calculating basic and diluted earnings per share for the years
ended December 31, 1998 and 1997.

1998 1997
---------- -----------
Weighted-average shares for basic earnings per share 48,437,521 44,792,774
Effect of diluted securities:
employee stock options 188,935 190,747
---------- ----------
Adjusted weighted-average shares for diluted
earnings per share 48,626,456 44,983,521
========== ==========

Options to purchase 1.7 million shares of common stock at a range of
$18.00 to $22.50 were outstanding during 1998 but were not included in the
computation of the diluted EPS because the options' exercise price was greater
than the average market price of the common shares.

PROFORMA NET INCOME PER COMMON SHARE (UNAUDITED):

Proforma net income per common share for 1996 was calculated reflecting
the 37,962,500 shares which were issued and outstanding prior to the Offering,
but subsequent to December 31, 1996.

9. PENSION AND POST RETIREMENT PLANS

The Company and its subsidiaries have separate defined benefit pension
plans, certain of which are successors to prior plans. The benefits are based on
years of service and primarily on the employees' career average pay. The
Company's funding policy is to contribute annually an amount that can be
deducted for federal income tax purposes under a different actuarial cost method
and different assumptions from those used for financial reporting. Assets of the
plans consist principally of short-term investments, equity securities and
corporate and U.S. Government obligations.

In 1997, the Company changed the date it uses to measure pension plan
assets and liabilities from December 31 to September 30, in order to meet the
Company's reporting requirements.

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

9. PENSION AND POST RETIREMENT PLANS (CONTINUED)

The following table sets forth the plans' funded status and the amount
recognized in the Company's consolidated balance sheet:

<TABLE>
<CAPTION>
(in thousands)
PENSION BENEFITS POST-RETIREMENT BENEFITS
1998 1997 1998 1997
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Change in benefit obligation
Benefit obligation at beginning of year $ 57,697 $55,130 $ 6,850 $ 7,103
Service cost 1,588 1,328 15 13
Interest cost 4,516 4,115 500 519
Actuarial (gain)/loss 3,377 931 197 (277)
Benefits paid (4,201) (3,807) (487) (508)
Business combinations 11,301 -- 216 --
-------- ------- ------- -------
Benefit obligation at end of year $ 74,278 $57,697 $ 7,291 $ 6,850

Change in plan assets
Fair value of trust assets at
beginning of year $ 78,365 $69,054 $ -- $ --
Actual return on plan assets (2,099) 13,034 -- --
Employer contributions 114 84 487 508
Benefits paid (4,201) (3,807) (487) (508)
Business combinations 11,777 -- -- --
-------- ------- ------- -------
Fair value of trust assets at
end of year $ 83,956 $78,365 $ -- $ --

Reconciliation of funded status
Funded status $ 9,678 $20,668 $(7,291) $(6,850)
Unrecognized net
Transition (asset)/obligation 240 341 -- --
Prior service cost (3,073) (3,440) (622) (704)
(Gain)/loss 2,151 (10,895) (367) (581)
Contributions after measurement date 34 28 -- --
-------- ------- ------- -------
Net amount recognized $ 9,030 $ 6,702 $(8,280) $(8,135)

Amounts recognized in statement of
financial position
Prepaid benefit cost $ 9,466 $ 7,128 $ -- $ --
(Accrued) benefit cost (1,032) (657) (8,280) (8,135)
Adjustment required to
recognize minimum liability 231 231 N/A N/A
Accumulated other comprehensive
loss 365 -- N/A N/A
-------- ------- ------- -------
Net amount recognized $ 9,030 $ 6,702 $(8,280) $(8,135)

Separate disclosures for pension
plans with accumulated benefit
obligation in excess of plan
assets
Projected benefit obligation at
end of year $ 3,811 $ 1,958 N/A N/A
Accumulated benefit obligation
at end of year $ 3,578 $ 1,898 N/A N/A
Fair value of assets at end of
year $ 3,019 $ 1,788 N/A N/A

</TABLE>

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

9. PENSION AND POST RETIREMENT PLANS (CONTINUED)

<TABLE>
<CAPTION>
(in thousands)
PENSION BENEFITS POST-RETIREMENT BENEFITS
1998 1997 1998 1997
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Components of net periodic benefit cost
Service cost $ 1,588 $ 1,328 $ 15 $ 13
Interest cost 4,516 4,115 500 519
Expected return on plan assets (7,273) (6,051) -- --
Amortization of net
Transition obligation 101 101 -- --
Prior service cost (367) (367) (82) (82)
(Gain)/loss (297) 1 (17) (18)
-------- ------- ------- -------
Net periodic benefit (income) cost $(1,732) $ (873) $ 416 $ 432

Actuarial assumptions
Discount rate 7.00% 7.50% 7.00% 7.50%
Expected long-term return on
plan assets 9.00% 9.00% N/A N/A
Rate of compensation increase 3.00% 3.00% 3.00% 3.00%
Rate of increase in health
benefit costs
Immediate rate 8.00% 9.00%
Ultimate rate 6.50% 6.50%
Year ultimate rate reached 2000 2000

Effects of a change in the assumed
rate of health benefit costs
Effect of a 1% increase on
Total of service cost and
interest cost $33 $30
Post-Retirement benefit obligation $390 $353
Effect of a 1% decrease on
Total of service cost and
interest cost $(31) N/A
Post-Retirement benefit obligation $(350) N/A

</TABLE>

The Company also has defined contribution plans covering certain
employees. Contributions to these plans are based on a percentage of
participants' salaries and amounted to approximately $377,000, $325,000, and
$417,000 in 1998, 1997 and 1996, respectively.

The Company contributes to various multi-employer union administered
pension plans. Contributions to these plans amounted to approximately $110,000,
$68,000, and $71,000 in 1998, 1997, and 1996, respectively.

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

10. INCOME TAXES

The provision for income taxes on income before extraordinary item is as
follows:

(in thousands)
1998 1997 1996
----------- ------------ -----------
Current tax expense:
Federal $ 16,492 $ 8,035 $ 9,812
State 3,389 2,970 9,333
----------- ------------ -----------
Total current 19,881 11,005 19,145
Deferred tax expense (benefit):
Federal 10,157 5,027 (4,322)
State (1,926) (248) (514)
----------- ------------ -----------
Total deferred 8,231 4,779 (4,836)
=========== ============ ===========
Total provision for taxes $ 28,112 $ 15,784 $ 14,309
=========== ============ ===========

The reconciliation of income tax computed at the U.S. federal statutory
tax rate to income tax expense is as follows:

(in thousands)
1998 1997 1996
----------- ------------ -----------
Tax at U.S. statutory rates $25,811 $13,564 $14,846
State taxes, net of federal effect 951 1,769 5,732
Reduction in valuation allowance -- -- (6,632)
Other 1,350 451 363
=========== ============ ===========
$28,112 $15,784 $14,309
=========== ============ ===========

The reduction in the valuation allowance in 1996 reflects the recognition
of approximately $4.3 million in deferred tax benefits expected to be realized
in future years, as well as the reversal of certain temporary differences.

State net operating loss carryforwards were utilized as follows: $13.5
million in 1998, $700,000 in 1997 and $300,000 in 1996.

At December 31, 1998, certain subsidiaries had net operating loss
carryforwards available ranging from approximately $100,000 to $25.0 million in
various state and local jurisdictions. Substantial portions of the related
deferred tax assets are offset by valuation allowances. The carryforwards at
December 31, 1998 expire in various years through 2013.

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

10. INCOME TAXES (CONTINUED)

Deferred income taxes reflect the net effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of
the Company's deferred tax liabilities and assets as of December 31 are as
follows:

(in thousands)
1998 1997
-----------------------------
Deferred tax liabilities:
Property, plant and equipment $13,966 $ 14,333
Intangibles 4,891 --
------- ----------
Total deferred tax liabilities 18,857 14,333
Deferred tax assets:
Intangibles -- 2,042
Retiree benefits 54 793
Net operating loss carryforwards 3,251 1,915
Deferred interest expense -- 4,121
Other 5,127 5,649
------- ----------
Total deferred tax assets 8,432 14,520
Valuation allowance 1,082 1,792
------- ----------
Net deferred tax assets 7,350 12,728
------- ----------
Net deferred tax liabilities $11,507 $ 1,605
======= ==========

As part of the acquisition of the Goodson properties, the Company recorded
net deferred tax liabilities of approximately $2.0 million.

The Company's valuation allowances for deferred tax assets decreased by
approximately $700,000 and $600,000 in 1998 and 1997, respectively.

The Company's federal income tax returns, which consisted, prior to the
Offering, of three separate consolidated groups and two individual entities,
have not been examined by the Internal Revenue Service. Effective with the
Offering that occurred in May of 1997, the Company files its federal income tax
return as one consolidated group.

11. COMMITMENTS AND CONTINGENCIES

The Company leases office space and equipment under noncancellable
operating leases. These leases contain several renewal options for periods up to
five years. The Company's future minimum lease payments under operating leases
at December 31, 1998 are as follows:

(in thousands)

1999..........................................$2,416
2000..........................................$1,952
2001..........................................$ 902
2002..........................................$ 532
2003..........................................$ 476
Thereafter....................................$ 368

Total rent expense was $3.1 million, $2.0 million and $1.4 million for the
years ended December 31, 1998, 1997 and 1996, respectively.

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

11. COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company is involved in certain litigation matters which have arisen in
the ordinary course of business. In the opinion of management, the outcome of
these legal proceedings should not have a material adverse impact on the
Company's financial position or results of operations.

12. ACQUISITIONS

On January 2, 1998, the Company acquired for approximately $3.8 million
certain assets and liabilities of HVM, L.L.C. in New Milford, Connecticut, which
publishes a group of newspapers, shoppers and monthly magazines. The Company
applied the purchase method of accounting for this transaction.

On March 9, 1998, the Company acquired THE SARATOGIAN, a daily newspaper
in Saratoga Springs, New York and the COMMUNITY NEWS, a weekly newspaper serving
Clifton Park, New York. The Company applied the purchase method of accounting
for this transaction.

On July 15, 1998, the Company completed its acquisition of the
Pennsylvania, New York and Ohio newspaper businesses of The Goodson Newspaper
Group (including Mark Goodson Enterprises, Ltd.) for approximately $300 million
in cash (the "Goodson Acquisition"). The Company applied the purchase method of
accounting for this transaction. Accordingly, the total acquisition cost, on a
preliminary basis, was allocated to the tangible assets and liabilities acquired
based upon their estimated fair market value on the effective date of the
acquisition of approximately $17.1 million and $7.9 million, respectively.
Intangible assets of approximately $300 million were recorded for the subscriber
lists and excess of the purchase price over the value of identifiable net assets
and are being amortized in accordance with the Company's policy.

The following table presents the unaudited proforma results of operations
of the Company as though the Goodson Acquisition occurred on January 1, 1997.

(in thousands)

1998 1997
---- ----
Net Revenues $ 464,330 $ 428,416
Income before extraordinary item 40,413 12,024
Net Income 35,918 12,024

Net income per share (basic and diluted):
Income before extraordinary item $ .83 $ .27
Net income $ .74 $ .27

The proforma results are not necessarily indicative of what actually would
have occurred if the acquisition had been in effect for the entire periods
presented and are not intended to be a projection of future results.

On September 21, 1998, the Company completed its acquisition of Taconic
Media, Dutchess County, NY. The Company applied the purchase method of
accounting for this transaction. Accordingly, the total acquisition cost, on a
preliminary basis, was allocated to the assets and liabilities based on the
relative estimated fair values on the effective date of the acquisition.

Intangible assets of $344.0 million related to the aforementioned 1998
acquisitions were recorded and are being amortized according to the Company's
policy. The results of the acquired companies have been included in the
consolidated financial statements since the acquisition date.

On December 22, 1997, the Company acquired for approximately $12.8 million
certain assets and liabilities of the InterCounty Newspaper Group. The
InterCounty Newspaper Group includes 17 weekly

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

12. ACQUISITIONS (CONTINUED)

newspapers in suburban Philadelphia and central and southern New Jersey with
total weekly distribution of approximately 100,000. The Company applied the
purchase method of accounting for this transaction.

Accordingly, the total acquisition cost was allocated to the tangible
assets and liabilities, respectively, of InterCounty Newspaper Group based on
their relative estimated fair values on the effective date of the acquisition of
approximately $6.2 million and $1.8 million, respectively.

On December 12, 1997, the Company acquired certain assets and liabilities
of the LADUE NEWS in Ladue, MO, a 44 times-per-year newspaper serving suburban
St. Louis. The Company applied the purchase method of accounting for this
transaction. Accordingly, the total acquisition cost was preliminarily allocated
to the assets and liabilities, respectively, of the LADUE NEWS based on their
relative estimated fair values on the effective date of the acquisition.

Intangible assets of $14.1 million related to the aforementioned 1997
acquisitions were recorded for the excess of the purchase price over the value
of identifiable net assets and are being amortized according to the Company's
policy.

On December 13, 1996, the Company acquired for approximately $18.0 million
certain assets and liabilities of a daily newspaper, published in Taunton,
Massachusetts. The Company applied the purchase method of accounting for this
transaction. Accordingly, the total acquisition cost was allocated to the
tangible assets and liabilities of the TAUNTON DAILY GAZETTE based on their
relative estimated fair values on the effective date of the acquisition of $1.8
million and $500,000, respectively. Intangible assets of approximately $17.0
million were recorded for the subscriber list and excess of the purchase price
over the value of identifiable net assets and are being amortized according to
the Company's policy.

13. MEMBERSHIP INTERESTS

Membership interests at December 31, 1996 are summarized as follows:

<TABLE>
<CAPTION>
Membership Interests Additional
Par --------------------------------- Membership Paid-in
Value Authorized Issued Outstanding Interest Capital
-------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Journal Register Company, LLC:
Class A Membership Interest $ 1.00 1,000,000 1,000,000 1,000,000 $ 1,000,000
Class B Membership Interest $ 1.00 1,000,000 1,000,000 1,000,000 1,000,000
Additional paid-in capital -- $216,982,319
----------- --------------
2,000,000 216,982,319
INS Holdings, Inc.:
Common stock voting $ .10 2,000 2,000 2,000 200
Common stock non-voting $ .10 1,000,000 1,000,000 1,000,000 100,000
Preferred Stock, Class A $ 1.00 4,000 4,000 4,000 4,000
Additional paid-in capital -- 5,185,016
--------------
104,200 5,185,016
----------- --------------
$ 2,104,200 $222,167,335
=========== ==============
</TABLE>

On March 11, 1997, membership interests in JRC, LLC and the capital stock
of INSI Holdings, Inc. were converted to 37,962,500 shares of Common Stock (see
Note 1).

<PAGE>

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1998

14. SUBSEQUENT EVENTS (UNAUDITED)

On January 11, 1999, the Company announced that its Board of Directors
authorized a share repurchase program of up to 2 million shares of the Company's
common stock. As of March 11, 1999, the Company has purchased 1,141,800 shares
on the open market. Shares under the program are to be repurchased at
management's discretion, either in the open market or in privately negotiated
transactions.

The decision to repurchase stock depends on price, market conditions and
other factors. There is no minimum number of shares to be purchased under the
program. Purchases under the program will be financed with the Company's free
cash flow or borrowings under the Company's revolving credit facility.

15. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for
years ended December 31, 1998 and 1997:

Mar. 31 June 30 Sept. 30 Dec. 31
----------- ------------ ------------ ------------
(In thousands, except per share data)

1998
- ----
<S> <C> <C> <C> <C>
Revenues $ 89,661 $101,881 $114,046 $121,192
Operating income $ 22,302 $ 31,739 $ 27,807 $ 37,219
Net income $ 8,563 $ 14,606 $ 3,615 $ 14,355

Net income per common share:
(basic and diluted)
Income before extraordinary item(1) $ 0.18 $ 0.30 $ .17 $ .30
Net income $ 0.18 $ 0.30 $ .07 $ .30

1997
- ----
Revenues $ 83,040 $ 92,651 $ 89,493 $ 94,223
Operating income (loss) $ 22,644 $ (566) $ 27,438 $ 31,525
Net income (loss) $ 5,724 $ (7,267) $ 10,968 $ 13,544

Net income (loss) per common share:
(basic and diluted) $ -- $ (0.16) $ 0.23 $ 0.28
Proforma net income per common share(2) $ 0.15 -- -- --

</TABLE>

(1) Extraordinary item recorded in the third quarter of 1998 was related to
the extinguishment of debt.

(2) Proforma net income per common share for the first quarter of 1997 was
calculated reflecting the 37,962,500 shares which were issued and
outstanding prior to the Offering.

<PAGE>

JOURNAL REGISTER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS

<TABLE>
<CAPTION>
BALANCE AT CHARGES TO BALANCE AT
BEGINNING OF COSTS AND END OF
DESCRIPTION PERIOD ADJUSTMENTS(1) EXPENSES DEDUCTIONS(2) PERIOD
----------- ------------ -------------- ----------- ------------- ----------
(in thousands)
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1998
Allowance for doubtful accounts $ 4,055 $1,092 $4,464 $4,979 $4,632
Valuation allowance for deferred tax assets $ 1,792 -- -- $ 710 $1,082

YEAR ENDED DECEMBER 31, 1997
Allowance for doubtful accounts $ 4,173 $ 847 $3,291 $4,256 $4,055
Valuation allowance for deferred tax assets $ 2,350 -- -- $ 558 $1,792

YEAR ENDED DECEMBER 31, 1996
Allowance for doubtful accounts $ 2,874 -- $3,914 $2,615 $4,173
Valuation allowance for deferred tax assets $10,034 -- -- $7,684 $2,350

</TABLE>

- ----------------------------

(1) Allowance for doubtful accounts additions related to 1998 and 1997
acquisitions.

(2) Write-off of uncollectable accounts to the allowance for doubtful accounts
and reduction of the valuation allowance for deferred tax assets.

S-1

<PAGE>

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

Information with respect to executive officers of the Company is presented
in Item 4 of this Report under the caption "Executive Officers of the
Registrant."

The information appearing under the captions "Proposal 1 - Election of
Directors", "Certain Transactions" and "Section 16(a) Beneficial Ownership
Reporting Compliance" in the Company's Proxy Statement for its 1999 Annual
Meeting of Stockholders (the "1999 Proxy Statement") is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION.

Information appearing under the caption "Executive Compensation" in the
1999 Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

Information appearing under the caption "Security Ownership of Beneficial
Owners and Management" in the 1999 Proxy Statement is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information appearing under the caption "Certain Transactions" in the 1999
Proxy Statement is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(A) 1. FINANCIAL STATEMENTS.

The financial statements are included in Part II, Item 8. of this Report.

2. FINANCIAL STATEMENT SCHEDULES AND SUPPLEMENTARY INFORMATION
REQUIRED TO BE SUBMITTED.

Schedule of Valuation and Qualifying Accounts as attached hereto on
Schedule II.

All other schedules have been omitted because they are inapplicable or the
required information is shown in the consolidated financial statements or
notes.

(B) REPORTS ON FORM 8-K.

No Reports on Form 8-K were filed by the Company during the fourth quarter
of 1998.

<PAGE>

The following is a list of all Exhibits filed as part of this Report:

EXHIBIT NO. DESCRIPTION

*2.1 Master Agreement, dated as of May 17, 1998, by and among each of
the persons listed on Annex A and Annex B thereto, Richard G.
Schneidman, as Designated Stockholder, and the Company (filed as
Exhibit 99.2 to the Company's Current Report on Form 8-K/A,
dated June 30, 1998).
*3(i) Amended and Restated Certificate of Incorporation (filed as
Exhibit 3(i) to Journal Register Company's Form 10-Q/A Amendment
No. 1 for the fiscal quarter ended June 30, 1997 (the "June 1997
Form 10-Q")).
*3(ii) Amended and Restated By-laws (filed as Exhibit 3(ii) to the
June 1997 Form 10-Q).
*4.1 Company Common Stock Certificate (filed as Exhibit 4.1 to
Journal Register Company's Registration Statement on Form S-1,
Registration No. 333-23425 (the "Form S-1")).
*10.1 1997 Stock Incentive Plan (filed as Exhibit 10.2 to the June
1997 Form 10-Q).+
*10.2 Management Bonus Plan (filed as Exhibit 10.3 to the June 1997
Form 10-Q).+
*10.3 Supplemental 401(k) Plan (filed as Exhibit 10.4 to the Form
S-1).+
*10.4 Voting Agreement by and among Journal Register Company,
Warburg, Pincus Capital Company, L.P., Warburg, Pincus Capital
Partners, L.P. and Warburg, Pincus Investors, L.P. (filed as
Exhibit 10.5 to the June 1997 Form 10-Q).
*10.5 Registration Rights Agreement by and among Journal Register
Company, Warburg, Pincus Capital Company, L.P., Warburg,
Pincus Capital Partners, L.P. and Warburg, Pincus Investors,
L.P. (filed as Exhibit 10.6 to the June 1997 Form 10-Q).
*10.6 Credit Agreement among Journal Register Company, each of the
banks and other financial institutions that is a signatory
thereto or which, pursuant to Section 2.01 (c) or Section (b)
thereto, becomes a "Lender" thereunder and the Chase Manhattan
Bank, as administrative agent for the lenders (filed as Exhibit
10.7 to the September 30, 1998 Form 10-Q).
**21.1 Subsidiaries of Journal Register Company.
**23.1 Consent of Ernst & Young LLP.
**24 Power of Attorney (appears on signature page).
**27.1 Financial Data Schedule.

- -------------
+ Management contract or compensatory plan or arrangement.
* Incorporated by reference.
** Filed herewith.

<PAGE>

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Trenton,
State of New Jersey, on the 29th day of March, 1999.

JOURNAL REGISTER COMPANY

By: /S/ ROBERT M. JELENIC
----------------------------------------
Chairman, President and Chief Executive
Officer

KNOWN BY ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints both Robert M. Jelenic and Jean B.
Clifton his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments to this Annual Report on
Form 10-K, and to file the same, with all exhibits thereto and other documents
in connection therewith, with the Securities and Exchange Commission, granting
unto said attorney-in-fact and agent, full power and authority to do and perform
each and every act and thing requisite and necessary to be done in and about the
premises, as fully as he might or could do in person, hereby ratifying and
confirming all that said attorney-in-fact and agent or their or his substitutes
or substitute, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on the 29th day of March, 1999.

SIGNATURE TITLE(S)

/S/ ROBERT M. JELENIC Chairman, President, Chief Executive
- ------------------------------- Officer and Director (Principal
Robert M. Jelenic Executive Officer)

/S/ JEAN B. CLIFTON Executive Vice President, Chief
- ------------------------------- Financial Officer (Principal Financial
Jean B. Clifton and Accounting Officer), Treasurer and
Secretary

/S/ JOHN L. VOGELSTEIN Director
- -------------------------------
John L. Vogelstein

/S/ DOUGLAS M. KARP Director
- -------------------------------
Douglas M. Karp

/S/ SIDNEY LAPIDUS Director
- -------------------------------
Sidney Lapidus

/S/ JOHN R. PURCELL Director
- -------------------------------
John R. Purcell

/S/ JOSEPH A. LAWRENCE Director
- -------------------------------
Joseph A. Lawrence

<PAGE>
EXHIBIT INDEX

EXHIBIT NO. DESCRIPTION

- -------------
+ Management contract or compensatory plan or arrangement.
* Incorporated by reference.
** Filed herewith.

EXHIBIT 21.1

LIST OF SUBSIDIARIES OF JOURNAL REGISTER COMPANY

The following is a list of the corporations that are subsidiaries of Journal
Register Company, a Delaware corporation. If indented, the corporation listed is
a wholly-owned subsidiary of the corporation under which it is listed.

NAME OF CORPORATION STATE OF
INCORPORATION

Journal News, Inc. Delaware
Journal Register East, Inc.(1) Delaware
Northeast Publishing Company, Inc.(2) Delaware
Central Acquisition, LLC Delaware
Mark I Communications Delaware
The Goodson Holding Company(3) Delaware
OMMA Acquisition, LLC Delaware
Mark Goodson Enterprises, Ltd.(4) New York
New Haven Register, LLC(5) Delaware
Suburban Newspapers of Greater St. Louis, LLC(6) Delaware
The Saratogian, LLC(7) Delaware

- -------------------

(1) Doing business as The Herald, The Herald Press, The Bristol Press, The
Register Citizen, Shore Line Times, Pictorial Gazette, The Dolphin, Branford
Review, Clinton Recorder, Regional Standard, Regional Express, The County
Trader, Pennysaver, Shoreliner West, Shoreliner East, Shoreliner Shopper East,
Shoreliner Shopper West, Milford Reporter, Milford Sunday, Hamden Chronicle, The
Stratford Bard, The Post, The Orange Bulletin, The Advertiser, West Haven News,
West Hartford News, Weathersfield Post, Newington Town Crier, Windsor Journal,
Valley News, Rocky Hill Post, Bloomfield Journal, Windsor Locks Journal, East
Hartford Gazette, Thomaston Express, Connecticut's County Kids, Tradewinds,
Rhode Island Homes, Homes Pictorial, Hartford Homes, Springfield Homes,
Foothills Trader, Daily Local News, The Phoenix, The Suburban & Wayne Times, The
Suburban Advertiser, The King of Prussia Courier, The Village News, The Times
Record, The Tri-County Record, The Tri-County Record-Pottstown, The Weekly
Saver, The Record, The Narragansett Times, The Standard Times, The East
Greenwich Pendulum, The Chariho Times, The Coventry Courier, The Westerly
Shopper, The Telegraph, US Express, Press Plus, Herald Extra, Voice, Township
Voice, Suburban Extra, Alton Cover Story, Edwardsville Cover Story, The
Independent and Quality Time.

(2) Doing business as The News-Herald, The Morning Journal, The Times Reporter,
The Herald News, The Call, The Times, Closer Look, Chatter, Express Line, Cover
Story, Cumberland Cover Story, Cover Story (The Herald News) and Times Plus.

(3) Doing business as The Mercury, Penny Pincher Shoppers, Daily Times, Times
Extra, US Express and Marketplace.

(4) Doing business as the Daily Freeman.

(5) Doing business as the New Haven Register, Valley Express, Shoreline
Express and Hamden Express.

(6) Doing business as the Cahokia-Dupo Journal, Collinsville Herald Journal,
County Journal, Edwardsville Journal, Granite City Press Record, Enterprise
Journal, O'Fallon Journal, Belleville Journal, Collinsville Herald, East St.
Louis News Journal, Fairview Heights Journal, Granite City Press Record Journal,
Clarion Journal, Granite City Journal, Central West End Journal, Citizen
Journal, Jefferson County Journal, Meramec Journal, News Democrat Journal, Press
Journal, South County Journal, Southwest City Journal, St. Charles Journal,
Tri-County Journal, Webster-Kirkwood Journal, County Star Journal - (East
Edition), County Star Journal - (West Edition), West County Journal,
Chesterfield Journal, Mid-County Journal, North Side Journal, Oakville-Mehlville
Journal, South City Journal, South Side Journal, Southwest County Journal, St.
Peters Journal, Warrenton Journal, Wentzville Journal, North County Journal
(East Edition), North County Journal (West Edition), West County Kids and St.
Charles County Kids.

(7) Doing business as The Saratoginan and Community News.

EXHIBIT 23.1

Consent of Independent Auditors

We consent to the incorporation by reference in the Registration Statement (Form
S-8 No. 333-27555) pertaining to the 1997 Stock Incentive Plan of Journal
Register Company of our report dated February 9, 1999, with respect to the
consolidated financial statements and schedule of Journal Register Company
included in the Annual Report (Form 10-K) of Journal Register Company for the
year ended December 31, 1998.

Ernst & Young LLP

MetroPark, New Jersey
March 25, 1999

<ARTICLE>5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET OF JOURNAL REGISTER COMPANY AT DECEMBER 31, 1998 AND
THE CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 8,542
<SECURITIES> 0
<RECEIVABLES> 62,876
<ALLOWANCES> 4,632
<INVENTORY> 8,440
<CURRENT-ASSETS> 81,878
<PP&E> 230,160
<DEPRECIATION> 130,182
<TOTAL-ASSETS> 671,869
<CURRENT-LIABILITIES> 50,124
<BONDS> 765,000
0
0
<COMMON> 484
<OTHER-SE> (225,797)
<TOTAL-LIABILITY-AND-EQUITY> 671,869
<SALES> 0
<TOTAL-REVENUES> 426,780
<CGS> 0
<TOTAL-COSTS> 244,822
<OTHER-EXPENSES> 23,844
<LOSS-PROVISION> 4,464
<INTEREST-EXPENSE> 45,465
<INCOME-PRETAX> 73,746
<INCOME-TAX> 28,112
<INCOME-CONTINUING> 45,634
<DISCONTINUED> 0
<EXTRAORDINARY> 4,495
<CHANGES> 0
<NET-INCOME> 41,139
<EPS-PRIMARY> 0.85
<EPS-DILUTED> 0.85

</TABLE>