Yardley, PA – Journal Register Company (PINKSHEETS: JRCO) today reported a net loss of $72.2 million or $(1.84) per diluted share, for the first quarter ended March 30, 2008, as compared to income from continuing operations of $1.5 million, or $0.04 per diluted share, for the prior year quarter ended April 1, 2007. The net loss for the period includes a $95.4 million, $70.2 million net of tax, or $(1.78) per share, non-cash charge for the impairment of assets under the methodology prescribed by Statement of Financial Accounting Standards No. 142. This charge primarily relates to a write-down of the carrying value of mastheads and goodwill for the Michigan and New York clusters.

The first quarter of 2007 included a loss from discontinued operations and a gain on the sales of our New England cluster properties in February of 2007.  Net income for the 2007 first quarter was $29.1 million, or $0.74 per diluted share.

Excluding non-cash impairment charges and the other items discussed above, the 2008 first quarter loss would have been $2.0 million or $(0.06) per share, as compared to net income from continuing operations of $1.5 million, or $0.04 per diluted share for the prior year quarter ended April 1, 2007.

Chairman & Chief Executive Officer James W. Hall said, “Our first quarter 2008 operating results – while disappointing - reflect industry-wide declines in advertising revenues.  Ongoing economic concerns have reduced both local and classified advertising spend, with the latter continuing its migration to digital/online channels.  Although our online and circulation revenues are relative bright spots, much of the progress and improvements resulting from the change in our business model and the repositioning of our resources remain obscured by the effects of the economic cycle.  Nevertheless, we inexorably continue our transformation in order to position ourselves to enter the next up-cycle as a leaner, fitter and more relevant organization.”

Revenue

Total revenues for the Company’s first quarter ended March 30, 2008 were $102.4 million, as compared to total revenues from continuing operations of $114.1 million for the first quarter of 2007, a 10.3 percent decrease. 

Revenue Performance by Category:

Total Advertising Revenue

Total advertising revenues for the first quarter of 2008 were $75.9 million, a decrease of 12.1 percent, compared to the first quarter of 2007.

Online Revenue

The Company continues to post solid gains in online revenues in 2008.  Total online revenues increased by 22.8 percent for the first quarter 2008 compared to the prior year.   All clusters showed growth, with the Greater Cleveland cluster increasing more than 84 percent.  Online revenues accounted for 6.4 percent of total advertising revenue for the first quarter of 2008 compared to 4.6 percent in the prior year.  The Company’s Web sites generated 103.7 million page views during the first quarter of 2008 and in March reported 4.3 million unique visitors to its Web sites.

Retail

For the first quarter 2008, retail advertising revenues decreased 9.9 percent, as compared to the first quarter of 2007.  Top advertisers in the financial/insurance and grocery/food/drug stores advertising revenue categories were down in the first quarter, partially offset by sporting goods stores revenue category gains. 

Classified

Classified advertising revenues were down 14.4 percent for the first quarter of 2008 compared to the prior year period.  Within the category, classified other advertising revenues were up slightly for the first quarter of 2008, which was more than offset by declines in classified employment advertising, classified auto advertising, and classified real estate advertising which declined by 17.3 percent, 14.9 percent and 24.7 percent, respectively, compared to the first quarter of 2007. 

National

National advertising revenues, which account for less than 4.0 percent of total advertising revenues, were down 16.9 percent for the first quarter 2008 compared to the first quarter 2007.

 

Circulation

Circulation revenues for the first quarter 2008, as compared to the prior year period were down 1.1 percent.   Increases in subscription rates essentially offset equivalent declines in the number of subscribers.

Operating Expenses

The Company continued its tradition of tightly controlled operating expenses.  Total operating expenses, excluding depreciation and amortization, for the first quarter of 2008 were down $6.5 million, or 6.8 percent when compared to the first quarter of 2007. 

The Company’s same store non-newsprint cash operating expenses decreased 5.0 percent for the first quarter 2008 period, compared to the prior year.  Excluding the investment in online operations, the full year non-newsprint cash operating expenses were down 5.8 percent, as compared to 2007.  The Company continues to make investments in its technological resources and the development and promotion of its online products.

Newsprint expense for the first quarter 2008 declined 18.5 percent, reflecting a decrease in average unit cost of 7.2 percent and a decrease of approximately 12.2 percent in consumption as compared to the first quarter of 2007.  Salaries and employee benefit costs declined $2.5 million, or 5.3 percent on a quarter to quarter comparison basis largely due to headcount reductions.  Selling, general and administrative expenses declined $1.4 million, or 7.1 percent comparing the first quarter of 2008 with the same prior year period.  Increases in professional fees and costs associated with new online programs were more than offset by declines in other operating expenses.

Impairment Charges

Under generally accepted accounting principles, based upon changes in circumstances of the business, which, among many factors, included a continued decline in revenue and the decline in the market price of the common stock, the Company determined that it was more likely than not that the carrying values of the goodwill and the mastheads of its reporting units were impaired. As such, the Company recorded an aggregate, non-cash impairment charge of $95.4 million, $70.2 million net of tax, for its Michigan and New York clusters in the first quarter of 2008. The impairment charge does not affect the Company’s cash flow, debt covenants or liquidity.  There was no impairment charge in the first quarter of the prior year.

Debt, Interest Expense and other Financial Information

The Company again amended its credit facility and covenants to increase liquidity during these difficult times for the newspaper industry.  The Company’s next debt amortization payment is due in the second quarter of 2009. The Company’s effective interest rate was 7.3 percent for the first quarter 2008 compared to 7.0 percent for fourth quarter and 6.2 percent for the first quarter of 2007, respectively. 

 

The Company’s capital expenditures were $0.8 million for the first quarter of 2008.  Those expenditures included production equipment and spending for technological and online improvements.  Additionally, during the first quarter of 2008, the Company sold its distribution center property in Milford, CT for a gain of $0.4 million.

Additional Information

The Company today filed its quarterly report on Form 10-Q for the first quarter 2008 with the Securities and Exchange Commission. The Form 10-Q contains additional information regarding the Company and its first quarter financial results.  The Form 10-Q is available on the Company’s Web site at www.JournalRegister.com under the Investors Relations tab.  Investors may also request a paper copy of the Form 10-Q by contacting the Company’s investor relations department.

About Journal Register Company

Journal Register Company is a leading U.S. media company. Journal Register Company owns 22 daily newspapers and 302 non-daily publications. Journal Register Company currently operates 229 individual Web sites that are affiliated with the Company's daily newspapers, non-daily publications and its network of employment Web sites. These Web sites can be accessed at www.JournalRegister.com. All of the Company's operations are strategically clustered in six geographic areas: Greater Philadelphia; Michigan; Connecticut; Greater Cleveland; and the Capital-Saratoga and Mid-Hudson regions of New York. The Company owns JobsInTheUS, a network of 20 employment Web sites.

Safe-Harbor

This release contains forward-looking information about Journal Register Company that is intended to be covered by the safe harbor for forward-looking statements provided by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not historical facts. These statements can be identified by the use of forward-looking terminology such as "believe," "expect," "may," "will," "should," "project," "plan," "seek," "intend," or "anticipate" or the negative thereof or comparable terminology, and include discussions of strategy, financial projections and estimates and their underlying assumptions, the extent or timing of cost savings, charges, the extent of employees impacted, and statements about the future performance, operations, products and services of the Company. These forward-looking statements involve a number of risks and uncertainties, which could cause actual results to differ materially. These risks and uncertainties include, but are not limited to, the success of the Company's asset sales and divestiture activities, the ability of the Company to achieve cost reductions and integrate acquisitions, competitive pressures including competition from non-newspaper forms of media, general or regional economic conditions and advertising trends, the unavailability or a material increase in the price of newsprint and increases in interest rates, changes in performance that affect financial covenant compliance or funds available for borrowing, technological changes and the adoption of new accounting standards or changes in accounting standards. These and additional risk factors are outlined in the Company's most recent Annual Report on Form 10-K filed with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events, or otherwise.

Non-GAAP Financial Measures

In this release, financial measures are presented both in accordance with United States generally accepted accounting principles ("GAAP") and also on a non-GAAP basis. All EBITDA, Free Cash Flow, Adjusted Net Income and Net Income excluding special items figures in this release are non-GAAP financial measures. EBITDA is defined as net income plus provision for income taxes, net interest expense, depreciation, amortization, and other non-cash, special or non-recurring charges. Free cash flow is defined as EBITDA minus capital expenditures, cash interest and cash income taxes. Adjusted Net Income excludes the special item that is described elsewhere in this release. EBITDA Margin is defined as EBITDA divided by total revenues. The Company believes that the use of certain non-GAAP financial measures enables the Company and its investors to evaluate and compare the Company's results from operations and cash resources generated from its business in a more meaningful and consistent manner and provides an analysis of operating results using the same measures used by the Company's chief operating decision makers to measure the performance of the Company. The emphasis on measures of cash flow is appropriate given the short period of time it takes to convert new orders to cash. Please see the financial summary below for information reconciling non-GAAP financial measures to comparable GAAP financial measures.

Financial summary to follow:

Results presented in the accompanying financial summary are from continuing operations only and exclude the performance of the Company’s Massachusetts and Rhode Island properties, which were sold in February 2007. The Massachusetts and Rhode Island properties are shown as discontinued operations and their results are excluded from revenues, operating expenses and operating income, but are included in the 2007 net income and earnings per share.