JOURNAL REGISTER CO - 10-K Annual Report

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

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FORM 10-K

FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO
SECTIONS 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
(MARK ONE)

|X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 29, 2002

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

Commission File Number: 1-12955

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

DELAWARE 22-3498615

(STATE OR OTHER JURISDICTION (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:

Name of Each Exchange
Title of Each Class On Which Registered
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Common Stock, par value $0.01 per share New York Stock Exchange

SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: None

Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. [X] Yes [ ] No

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K [X]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). [X] Yes [ ] No

The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 18, 2003, was approximately $567,166,902.

As of March 18, 2003, 41,157,534 shares of the registrant's Common Stock,
par value $0.01 per share, were outstanding (excluding treasury shares).

DOCUMENTS INCORPORATED BY REFERENCE. The information called for by Part III
is incorporated by reference to the definitive Proxy Statement for the Company's
2003 Annual Meeting of Stockholders, which will be filed on or before April 28,
2003.

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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 STATEMENTS REGARDING THE PLANS AND OBJECTIVES OF THE COMPANY FOR FUTURE
OPERATIONS AND TRENDS AFFECTING THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF
OPERATIONS. IN ADDITION, THE WORDS "ANTICIPATES," "PROJECTS," "PLANS,"
"INTENDS," "ESTIMATES," "EXPECTS," "MAY," "BELIEVES" AND SIMILAR WORDS ARE
INTENDED TO IDENTIFY THESE FORWARD-LOOKING STATEMENTS. ALL FORWARD-LOOKING
STATEMENTS IN THIS REPORT ARE BASED ON INFORMATION AVAILABLE TO THE COMPANY (AS
HEREINAFTER DEFINED) AS OF THE DATE THIS REPORT IS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION, AND THE COMPANY ASSUMES NO OBLIGATION TO UPDATE ANY SUCH
FORWARD-LOOKING STATEMENTS, EXCEPT AS REQUIRED BY LAW. ALL FORWARD-LOOKING
STATEMENTS INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS AS A RESULT
OF CERTAIN FACTORS INCLUDING, BUT NOT LIMITED TO, THE UNAVAILABILITY OR A
MATERIAL INCREASE IN THE PRICE OF NEWSPRINT, THE SUCCESS OF THE COMPANY'S
ACQUISITION STRATEGY, DISPOSITIONS, THE ABILITY OF THE COMPANY TO ACHIEVE COST
REDUCTIONS AND INTEGRATE ACQUISITIONS, COMPETITIVE PRESSURES, GENERAL OR
REGIONAL ECONOMIC CONDITIONS, ADVERTISING TRENDS AND MATERIAL INCREASES IN
INTEREST RATES, AMONG OTHER THINGS. THESE AND OTHER FACTORS ARE DISCUSSED IN
MORE DETAIL BELOW UNDER "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - CERTAIN FACTORS WHICH MAY AFFECT
THE COMPANY'S FUTURE PERFORMANCE." SUCH FACTORS SHOULD NOT BE CONSTRUED AS
EXHAUSTIVE. THE COMPANY UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY THE RESULTS
OF ANY FUTURE REVISIONS IT MAY MAKE TO FORWARD-LOOKING STATEMENTS TO REFLECT
EVENTS OR CIRCUMSTANCES AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.

PART I

ITEM 1. BUSINESS.

GENERAL

Journal Register Company (the "Company") is a leading U.S. newspaper
publisher with total paid daily circulation of approximately 550,000 and total
non-daily distribution of approximately 3.7 million, as of December 29, 2002.
The Company currently owns and operates 23 daily newspapers and 233 non-daily
publications strategically clustered in six geographic areas: Greater
Philadelphia, Connecticut, Greater Cleveland, Central New England, and the
Capital-Saratoga and Mid-Hudson regions of New York. The Company's newspapers
are characterized by an intense focus on the coverage of local news and local
sports and offer compelling graphic design in colorful, reader-friendly
packages. The Company also operates 147 Web sites, which represent each of the
Company's publications.

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.

The Company has been a leader in executing its clustering strategy. The
Company believes that its clustering strategy creates significant synergies and
cost savings within each cluster, including cross-selling of advertising,
centralized news gathering and consolidation of printing, production and back
office activities. The Company also believes that its clustering strategy
enables it to improve print quality and distribution, introduce new products and
services in a cost-effective manner and increase readership. In addition,
clustering allows the Company to offer its advertisers expanded reach both
geographically and demographically.

From September 1993 through December 2002, the Company successfully
completed (i) 25 strategic acquisitions, acquiring 14 daily newspapers, 192
non-daily publications and four commercial printing companies; and (ii) two
dispositions.

In 2002, the Company completed three strategic acquisitions. On March
18, 2002, the Company completed the acquisition of the assets of News Gleaner
Publications, Inc. and Big Impressions Web Printing, Inc., which are based in
Northeast Philadelphia, Pennsylvania. This acquisition included eight weekly
newspapers, with total circulation of approximately 121,000, serving Northeast
Philadelphia, seven monthly publications, with total circulation of
approximately 59,000, serving Montgomery County, Pennsylvania, and a commercial
printing operation. On March 22, 2002, the Company completed the acquisition of
the assets of the Essex, Connecticut-

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based Hull Publishing, Inc. This acquisition included one weekly newspaper with
total circulation of 5,000 and two annual magazines with total distribution of
approximately 20,000. On October 14, 2002, the Company completed the acquisition
of seven weekly newspapers serving Delaware County, Pennsylvania, with total
circulation of approximately 24,000.

In 2001, the Company completed five strategic acquisitions. On January
31, 2001, the Company completed the acquisition of the Pennsylvania and New
Jersey newspaper operations from Chesapeake Publishing Corporation's
Mid-Atlantic Division. This acquisition included 13 publications with non-daily
distribution of approximately 90,000. On June 7, 2001, the Company completed the
acquisition of the operations of Montgomery Newspaper Group's community
newspapers and magazines, which are based in Fort Washington, Pennsylvania, from
Metroweek Corporation. Total distribution of the 24 non-daily publications
acquired from Metroweek Corporation is approximately 285,000. On August 1, 2001,
the Company completed the acquisition of the assets of Roe Jan Independent
Publishing, Inc., which is based in Hillsdale, New York. Total distribution of
the two non-daily publications included in this purchase is approximately
21,000. On September 14, 2001, the Company completed the acquisition of the
assets of The Reporter, a 19,000-circulation daily newspaper based in Lansdale,
Pennsylvania. On October 25, 2001, the Company completed the acquisition of The
Litchfield County Times, a weekly newspaper based in New Milford, Connecticut,
with circulation of approximately 12,000. The acquisition also included three
lifestyle magazines serving Litchfield and Fairfield counties in Connecticut and
Westchester County, New York, with total monthly distribution of approximately
90,000.

In order to achieve a strategic repositioning in six geographic
clusters and a reduction in the Company's leverage, the Company sold its
operations in the greater St. Louis area in 2000 and two daily newspapers and a
commercial printing operation in the southern part of central Ohio in early
2001. The proceeds from these sales were used to reduce the Company's
outstanding debt, repurchase Company stock and for strategic acquisitions.

In December 2001, the Company commenced operations at its newly
constructed production facility, Journal Register Offset, located in Exton,
Pennsylvania. The plant currently produces five of the Company's seven daily
newspapers and 32 of the Company's 113 non-daily publications in the Greater
Philadelphia cluster. The new facility generated approximately $1.1 million of
cash expense savings in fiscal year 2002, and the Company expects to achieve
additional savings and to continue to produce excellent product quality at the
Exton facility.

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.

The Company manages its newspapers to best serve the needs of its local
readers and advertisers. The editorial content of its newspapers is tailored to
the specific interests of each community served and includes coverage of local
youth, high school, college and professional sports, as well as local business,
politics, entertainment and culture. The Company maintains high product quality
standards, and uses extensive process color and compelling graphic design to
more fully engage existing readers and to attract new readers. The Company's
newspapers typically are produced using advanced prepress pagination technology,
and are printed on efficient, high-speed presses.

The Company's revenues are derived from advertising (72.9 percent of
2002 revenues), paid circulation (22.3 percent of 2002 revenues), including
single copy sales and subscription sales, and commercial printing and other
activities (4.8 percent of fiscal year 2002 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 as well as 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 profit margins than subscription sales, as single copy sales
generally have higher per unit prices and lower distribution costs. Subscription
sales, which provide readers with the convenience of home delivery, are an
important component of the Company's circulation base. The Company also
publishes numerous special sections and niche and special interest publications.
Such publications tend to increase readership within

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targeted demographic groups and geographic areas. The Company's management
believes that as a result of these strategies, its newspapers represent an
attractive and cost-effective medium for its readers and advertisers.

The Company's advertising revenues in 2002 were derived primarily from
a broad group of local retailers (approximately 55.2 percent) and classified
advertisers (approximately 39.6 percent). No single advertiser accounted for
more than 1 percent of the Company's total fiscal year 2002 revenues. The
Company's management believes that its advertising revenues tend to be
relatively stable because its newspapers rely on a broad base of local retail
and local classified advertising, rather than more volatile national and major
account advertising.

Substantially all of the Company's operations relate to newspaper
publishing. In addition to its daily newspapers and non-daily publications, the
Company owns four commercial printing operations that complement and enhance its
publishing operations.

OVERVIEW OF OPERATIONS

The Company's operations are clustered in six geographic areas:

GREATER PHILADELPHIA. The suburban Philadelphia area is one of the
fastest growing and most affluent areas in Pennsylvania. Since 1990, the
population of the areas covered by the Company's Greater Philadelphia Cluster
has increased approximately eight percent, and average household income has
increased approximately 62 percent.

The Company owns seven daily newspapers and 113 non-daily publications
serving areas surrounding Philadelphia. These publications include: in
Pennsylvania, the Delaware County Daily and Sunday Times (Primos); the Daily
Local News (West Chester); The Mercury (Pottstown); The Times Herald
(Norristown); The Reporter (Lansdale); The Phoenix (Phoenixville); Montgomery
Newspapers, a group of 24 non-daily publications; News Gleaner Publications,
which includes eight weekly publications serving Northeast Philadelphia and
seven monthly publications serving Montgomery County, Pennsylvania; the
InterCounty Newspaper Group, a group of 18 weekly newspapers serving suburban
Philadelphia and central and southern New Jersey; Chesapeake Publishing, a group
of 15 non-daily publications; Town Talk Newspapers (Media); Acme Newspapers, a
group of non-daily newspapers, including the Main Line Times, serving
Philadelphia's affluent Main Line; the News of Delaware County, one of the
largest audited community newspapers in the United States; and the Penny Pincher
Shoppers (Pottstown). Also, in New Jersey, the Company owns The Trentonian
(Trenton, NJ), a daily newspaper operation. The Company also owns three
commercial printing companies in Pennsylvania, two of which print more than 30
of the Company's non-daily publications in addition to printing for other
non-affiliated customers, and one of which is a premium quality sheet-fed
printing operation.

The seven Greater Philadelphia Cluster daily newspapers have aggregate
daily and aggregate Sunday circulation of approximately 189,000 and 167,000,
respectively. The Company's aggregate non-daily distribution in the Company's
Greater Philadelphia Cluster is approximately 1.2 million.

In 2002, the Company launched the Lansdale edition of The Sunday Times
Herald, adding circulation of approximately 15,000 on Sunday in Montgomery
County. This edition provides advertisers with a local Sunday newspaper to reach
the desirable Lansdale market. The Company also added to its Greater
Philadelphia Cluster with the completion of two strategic acquisitions in 2002,
acquiring the News Gleaner publications and the County Press publications.

In 2001, the Company commenced operations at its newly constructed
production facility, Journal Register Offset, located in Exton, Pennsylvania.
The plant produces five of the Company's seven daily newspapers and 32 of the
Company's 113 non-daily publications in the Company's Greater Philadelphia
Cluster. The new facility generated approximately $1.1 million of cash expense
savings in fiscal year 2002 and the Company expects to achieve additional cost
savings and to continue to produce excellent product quality at the Exton
facility. The Company also completed three strategic acquisitions in its Greater
Philadelphia Cluster in 2001, acquiring the Chesapeake Publishing publications,
the Montgomery Newspapers publications, and The Reporter (Lansdale).

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

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

(2) Circulation averages according to the most recently released Audit Bureau
of Circulations ("ABC") Audit Report. The Times Herald Sunday circulation
is from the ABC Publisher Statement for September 30, 2002 in order to
include the new Sunday Lansdale edition.

(3) Non-daily distribution includes both paid and free distribution. Non-daily
distribution reflects average distribution for December 2002, with the
following exceptions: Suburban Publications, which includes three
publications, two of which, Suburban Advertiser and King of Prussia
Courier, reflect the Certified Audit of Circulations ("CAC") Publisher's
Statements for the 12 months ended March 2002, and The Suburban & Wayne
Times which reflects the ABC audit for the 24-month period ended September
30, 2001; Acme Newspapers, which includes four publications, three of which
(News of Delaware County, Germantown Courier and Mt. Airy Times Express)
reflect the CAC Newspaper Audit Report for the 12 months ended March 31,
2002, and Main Line Times, which reflects the ABC Newspaper Audit Report
for the 24 months ended September 30, 2001; the News Gleaner Publications,
which includes eight weekly publications, reflects the CAC Audit for the 12
months ended June 30, 2002; and Montgomery Newspapers, which includes 16
weekly newspapers, reflects the CAC Audit for the 12 months ended September
30, 2002.

(4) Represents the year the Company started the publication.

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The majority of the Company's Pennsylvania publications are located
within a 30-mile radius of Philadelphia. The Company's newspapers serve
geographic areas with highly desirable demographics. The Delaware County Daily
and Sunday Times serves an area that has a population of 597,300 and had
population growth of approximately two percent from 1980 to 2002. The Delaware
County Daily and Sunday Times market area has average household income of
$75,500, which is 18 percent above the national average. The Daily Local News
serves an area which has a population of 431,400 and had population growth of
approximately 46 percent from 1980 to 2002. The Daily Local News serves an area
that has average household income of $91,600, which is 43 percent above the
national average. The Mercury, located approximately 40 miles west of
Philadelphia, serves an area that has a population of 470,600 and had population
growth of approximately 27 percent from 1980 to 2002. The area The Mercury
serves has average household income of $72,000, which is 13 percent above the
national average. The Times Herald serves an area that has a population of
184,000 and had population growth of approximately 15 percent from 1980 to 2002.
The Times Herald's market area has average household income of $79,200, which is
24 percent above the national average. The Phoenix serves an area that has a
population of 128,100 and had population growth of approximately 40 percent from
1980 to 2002. The Phoenix's market area has average household income of $90,700,
which is 42 percent above the national average. The Reporter serves an area that
has a population of 381,700 and had population growth of approximately 21
percent from 1990 to 2002. The Reporter's market area has an average household
income of $82,600, which is 29 percent above the national average. The Company's
weekly newspaper group, Suburban Publications, which is located on the Main Line
in suburban Philadelphia, serves an area that has a population of 340,300 and
had population growth of approximately 25 percent from 1980 to 2002. The market
area served by Suburban Publications has average household income of $119,500,
which is 87 percent above the national average. The Main Line Times, the
flagship of the Company's Acme Newspapers group, serves an area that has a
population of 399,900 and had population growth of approximately three percent
from 1980 to 2002. The Main Line Times' market area, which is also on the Main
Line, has average household income of $115,000, which is 80 percent above the
national average. The majority of the Company's Pennsylvania properties are
located within 20 miles of the area's largest retail complex, the King of
Prussia Plaza and Court, which is the largest mall in the United States based on
retail square footage.

The Trentonian is published in Trenton, the capital of New Jersey,
which is located 35 miles north of Philadelphia and 65 miles south of New York
City. The Trentonian serves an area that has a population of 293,200 and had
population growth of approximately 10 percent from 1980 to 2002. This area has
average household income of $76,900, which is 20 percent above the national
average.

As a result of the synergies in the Company's Greater Philadelphia
Cluster, the Company has been able to cross-sell advertising into multiple
publications. The nature of the cluster also allows for the implementation of
significant cost savings programs. For example, in December 2001, the Company
commenced operations at its new production facility, Journal Register Offset,
located in Exton, Pennsylvania. This plant produces five of the Company's seven
dailies - the Daily Local News, The Mercury, The Times Herald, The Reporter and
The Phoenix - and thirty-two of the Company's 113 non-daily publications in the
Company's Greater Philadelphia Cluster. The new facility generated approximately
$1.1 million of cash expense savings in 2002 and the Company expects to achieve
additional savings and to continue to produce excellent product quality at the
Exton facility. In addition, the Company's publications in its Greater
Philadelphia Cluster share several news gathering resources.

CONNECTICUT. In Connecticut, the Company owns the New Haven Register, a
small metropolitan daily newspaper with daily circulation of nearly 100,000 and
Sunday circulation of over 100,000, four suburban daily newspapers, 73 suburban
non-daily publications and one commercial printing company. The suburban daily
newspapers in the Connecticut Cluster are The Herald (New Britain), The Bristol
Press, The Register Citizen (Torrington) and The Middletown Press. The five
daily newspapers have aggregate daily and Sunday circulation of approximately
149,000 and 143,000, respectively. The 73 non-daily publications have aggregate
distribution of approximately 1.7 million. Included in the non-daily
publications is Connecticut Magazine, the state's premier lifestyle magazine
that was acquired in September 1999. Combined, the Company's Connecticut daily
newspapers and non-daily publications serve a statewide audience with
concentrations in western Connecticut (Litchfield and Fairfield counties) to
Hartford and its suburban areas, to the greater New Haven area, as well as the
Connecticut shoreline from New Haven northeast to New London.

In 2002, the Company added to its Connecticut Cluster with the
acquisition of a weekly newspaper, Main Street News, based in Essex,
Connecticut, with approximately 5,000 distribution, and two annual magazines
with total distribution of approximately 20,000.

In 2001, the Company acquired The Litchfield County Times, a weekly
newspaper based in New Milford, Connecticut, with circulation of approximately
12,000. This acquisition also included three lifestyle magazines

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serving Litchfield and Fairfield counties in Connecticut and Westchester County,
New York, with total monthly distribution of approximately 90,000. These
publications cover Litchfield and Fairfield counties in Connecticut and
Westchester County, New York.

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

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

(2) Circulation averages are according to the most recently released ABC Audit
Report.

(3) Non-daily distribution is solely free distribution and reflects average
distribution for December 2002.

(4) Represents the year the Company started the publication.

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 228,100 and 92,200, respectively, and had
population growth of approximately eight percent and 33 percent, respectively,
from 1980 to 2002. Lake and Geauga counties have average household incomes of
$65,900 and $85,200, respectively. The Morning Journal serves an area that has a
population of 150,700 with population growth of approximately three percent from
1980 to 2002. Average household income is $59,700 in the area served by The
Morning Journal. The Company's management 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
Greater Cleveland Cluster benefits from a variety of synergies, including
advertising cross-sell arrangements and certain news gathering resources.

CENTRAL NEW ENGLAND. The Company owns five daily and 23 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), the Kent
County Daily Times (West Warwick, RI), and two groups of weekly newspapers
serving southern Rhode Island, including South County. The five daily newspapers
have aggregate daily circulation of approximately 70,000 and aggregate Sunday
circulation of approximately 57,000. The non-daily publications in this cluster
have total distribution of approximately 276,000.

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The following table sets forth information regarding the Company's
publications in Central New England:

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

(2) Circulation averages according to the most recently released ABC Audit
Report.

(3) Non-daily distribution reflects average distribution for December 2002,
with the exception of The Coventry Courier, The East Greenwich Pendulum,
The Narragansett Times, The Standard Times, and The Chariho Times (all
Southern Rhode Island Newspapers), which reflect the CAC Audit Report for
the 12 month period ended June 30, 2002.

(4) Represents the year the Company started the publication.

The Herald News and the Taunton Daily Gazette are situated 14 miles
apart. Each is less than 40 miles south of Boston, Massachusetts and 25 miles
east of Providence, Rhode Island. The region's second largest shopping mall,
located in Taunton, contains one million square feet of retail space and
approximately 150 stores. The Herald News serves an area that has a population
of 166,900 and had population growth of approximately three percent from 1980 to
2002. The Herald News' market area has average household income of $54,700. The
Taunton Daily Gazette serves an area that has a population of 138,200 and had
population growth of approximately 33 percent from 1980 to 2002. The Taunton
Daily Gazette's market area has average household income of $64,100. The Call
serves an area that has a population of 188,600 and had population growth of
approximately 16 percent from 1980 to 2002. The Call's market area has average
household income of $71,000, which is 11 percent above the national average. The
Times serves an area that has a population of 198,400 and had population growth
of approximately 13 percent from 1980 to 2002. The Times' market area has
average household income of $62,800. Southern Rhode Island Newspapers serve an
area that has a population of 165,000 and had population growth of approximately
35 percent from 1980 to 2002. The Southern Rhode Island Newspaper market area
has average household income of $71,300, which is 12 percent above the national
average.

No local television stations exist in the communities served by the
Company's Central New England newspapers. Furthermore, the Company believes that
its Central New England properties benefit from the fragmentation of local radio
markets. 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, as well as significant
production and editorial synergies. For example, The Times, The Call and the
Kent County Daily Times are printed at the same facility, as are the Taunton
Daily Gazette and The Herald News. Southern Rhode Island Newspapers are printed
at the Company's New Haven Register facility.

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CAPITAL-SARATOGA REGION OF NEW YORK. The Company owns three daily and
five non-daily publications in the Capital-Saratoga Region of New York. The
Company's publications in this cluster include The Record (Troy), The Saratogian
(Saratoga Springs), The Oneida Daily Dispatch and the weekly Community News,
serving Clifton Park. The daily newspapers have aggregate daily circulation of
approximately 40,000 and aggregate Sunday circulation of approximately 36,000.
The non-daily publications in this cluster have total distribution of
approximately 98,000.

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

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

(2) Circulation averages according to the most recently released ABC Audit
Report.

(3) Non-daily distribution includes both paid and free distribution and is
based on the average distribution for December 2002.

(4) Represents the year the Company started the publication.

The Daily Freeman and Taconic Press serve markets in the Mid-Hudson
region of New York. The Daily Freeman serves an area that has a population of
279,500 and had population growth of approximately 11 percent from 1980 to 2002.
The Daily Freeman's market area has average household income of $50,700. The
Taconic Press newspaper group based in Dutchess County serves an area that has a
population of 97,000 and had population growth of approximately ten percent from
1980 to 2002. The Taconic Press publications serve markets with average
household income of $73,300, which is 15 percent above the national average. The
Putnam County Courier serves an area that has a population of 98,000 and had
population growth of approximately 33 percent from 1980 to 2002. The Putnam
County Courier's market area has average household income of $82,200, which is
29 percent above the national average. On August 1, 2001, the Company added two
non-daily publications to the cluster with the acquisition of the assets of Roe
Jan Independent Publishing, Inc., which is based in Hillsdale, New York.

One independent television station (which serves a regional, rather
than a local audience) exists in the communities that the Mid-Hudson Region
publications serve. The Company's management believes that its Mid-Hudson Region
properties benefit from the fragmentation of local radio markets. Consequently,
each of these newspapers is a significant media outlet in its respective
community, thereby making these newspapers attractive vehicles for area
advertisers. The Mid-Hudson Region newspapers benefit from significant
cross-selling of advertising, as well as production and editorial synergies.
Certain publications in this cluster also benefit from advertising cross-selling
with The Register Citizen (Torrington, CT) and certain of the Housatonic
Publications (New Milford, CT), which serve Litchfield County, Connecticut.

ONLINE OPERATIONS

Since 1995, the Company has been developing Web sites, which attract
readers and advertisers. Journal Register Company operates 147 Web sites, which
represent each of its publications, as well as portal sites for each of its six
geographic clusters. The Company's online objective is to have its Web sites
complement its print publications by providing certain content from these
publications, as well as unique content and interactive features. The Company's
Web sites also provide an online marketplace for its advertisers.

A number of the Web sites can be accessed individually, through the
Company's "cluster" portal sites, which combine publications within a specific
geographic area, or through the Company's home page at www.journalregister.com.
The remaining Company newspapers, along with Connecticut Magazine, have
individual Web sites. All Web sites can be accessed through the corporate Web
site (www.journalregister.com). The following is a list of the Company's
cluster/portal Web sites:

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Cluster/Portal site (number
Geographic cluster of individual Web sites)
------------------ -----------------------------

Connecticut........................... www.ctcentral.com (43)

Greater Philadelphia.................. www.allaroundphilly.com (70)

Greater Cleveland..................... www.allaroundcleveland.com (5)

Capital-Saratoga Region of New York... www.capitalcentral.com (5)

Central New England................... www.ricentral.com (12)

Mid-Hudson Region of New York......... www.midhudsoncentral.com (11)

The primary source of online revenue is classified advertising. For the
year ended December 29, 2002, the Company's Web sites generated approximately $4
million of revenue as compared to approximately $3.5 million for the year ended
December 30, 2001.

ADVERTISING

Substantially all of the Company's advertising revenues are derived
from a diverse group of local retailers and classified advertisers. The
Company's management believes that its advertising revenues tend to be
relatively stable because its newspapers rely on a broad base of local retail
and local classified advertising, rather than more volatile national and major
account advertising. Local advertising is typically more stable than national
advertising because a community's need for local services provides a stable base
of local businesses and because local advertisers generally have fewer effective
advertising vehicles from which to choose.

Advertising revenues accounted for approximately 72.9 percent of the
Company's total revenues for fiscal year 2002. The Company's advertising rate
structures vary among its publications and are a function of various factors,
including advertising effectiveness, local market conditions and competition, as
well as circulation, readership, demographics and type of advertising (whether
classified or display). In fiscal year 2002, local and regional display
advertising accounted for the largest share of the Company's advertising
revenues (55.2 percent), followed by classified advertising (39.6 percent) and
national advertising (5.2 percent). The Company's advertising revenues are not
reliant upon any one company or industry, but rather are supported by a variety
of companies and industries, including realtors, car dealerships, grocery stores
and other local businesses. No single advertiser accounted for more than 1
percent of the Company's total fiscal year 2002 revenues.

The Company's corporate management works with its local newspaper
management to approve advertising rates and to establish goals for each year
during a detailed annual budget process. As a result, local management is given
little latitude for discounting from the approved rates. Corporate management
also works with local advertising staff to develop marketing kits and
presentations utilizing the results of 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.
Compensation of the Company's sales personnel depends in part upon performance
relative to goals and timely collection of advertising receivables.
Additionally, corporate management facilitates the sharing of advertising
resources and information across the Company's publications. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Certain Factors Which May Affect the Company's Future Performance - Dependence
on Local Economies."

CIRCULATION

The Company's circulation revenues are derived from home delivery sales
of publications to subscribers and single copy sales made through retailers and
vending racks. Circulation accounted for approximately 22.3 percent of the
Company's total revenues in fiscal year 2002. Approximately 64 percent of fiscal
year 2002 circulation revenues were derived from subscription sales and
approximately 36 percent from single copy sales. Single copy rates range from
$.35 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

13

in a Newspaper Association of America readership study. Single copy sales also
tend to generate a higher profit margin than subscription sales, as single copy
sales generally have higher per unit prices and lower distribution costs. As of
December 29, 2002, the Company had total daily paid circulation of 550,000, paid
Sunday circulation of 526,000 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. The most
recent Fall 2002 Scarborough Research studies, which measured 19 of the
Company's 23 daily newspapers and several of its non-daily publications,
reported a gain in overall readership of approximately three percent as compared
to the results from Scarborough Research's Spring 2002 studies for the papers
measured. In recent years, circulation has generally declined throughout the
newspaper industry and the Company's newspapers have generally experienced this
trend. The Company seeks to maximize the overall operating performance rather
than maximizing circulation of its individual newspapers.

OTHER OPERATIONS

As of December 29, 2002, the Company owned and operated four commercial
printing facilities: Imprint Print in North Haven, Connecticut; Nittany Valley
Offset in State College, Pennsylvania; InterPrint in Bristol, Pennsylvania; and
Big Impressions Web Printing in Northeast Philadelphia, Pennsylvania. With the
exception of Nittany Valley Offset, which is a premium quality sheet-fed
operation, these facilities also print certain of the Company's publications.
Commercial printing operations and other revenues accounted for approximately
4.8 percent of the Company's total revenues in fiscal year 2002.

EMPLOYEES

As of December 29, 2002, the Company employed approximately 4,800
full-time and part-time employees, or 4,100 full-time equivalents ("FTEs").
Approximately 20 percent of the Company's employees are employed under
collective bargaining agreements.

RAW MATERIALS

The basic raw material for newspapers is newsprint. In fiscal year
2002, the Company consumed approximately 49,000 metric tons of newsprint,
excluding paper consumed in its commercial printing operations. The average
price per metric ton of newsprint based on East Coast transactions prices in
2002, 2001 and 2000 was $465, $585 and $565, respectively, as reported by the
trade publication, Pulp and Paper Weekly. The Company purchases the majority of
its newsprint through its central purchasing group, Journal Register Supply. The
Company has no long-term contracts to purchase newsprint. Generally, Journal
Register Supply purchases most of its newsprint requirements from one or two
suppliers, although in the future the Company may purchase newsprint from other
suppliers. Historically, the percentage of newsprint from each supplier has
varied. The Company's management believes that concentrating its newsprint
purchases in this way provides a more secure newsprint supply and lower unit
prices. The Company's management also believes that it purchases newsprint at
price levels lower than those that are available to individually owned small
metropolitan and suburban newspapers, and consistent with price levels generally
available to the largest newsprint purchasers. The available sources of
newsprint have been, and the Company believes will continue to be, adequate to
supply the Company's needs. The inability of the Company to obtain an adequate
supply of newsprint in the future could have a material adverse effect on the
financial condition and results of operations of the Company. Historically, the
price of newsprint has been cyclical and volatile. The Company's average price
per ton of newsprint for the full fiscal year decreased approximately 22 percent
in 2002, increased approximately nine percent in 2001 and increased
approximately six percent in 2000, each as compared to the preceding year. The
Company believes that if any price decrease or increase is sustained in the
industry, the Company will also be impacted by such change. The Company seeks to
manage the effects of increases in prices of newsprint through a combination of,
among other things, technology improvements, 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. In fiscal year 2002, the Company's newsprint
cost (excluding paper consumed in the Company's commercial printing operations)
was approximately 5.5 percent of the Company's newspaper revenues.

14

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 and weekly newspapers of general circulation published in adjacent
or nearby cities and towns. Competition for advertising and paid circulation
comes from local, regional and national newspapers, shoppers, television, radio,
direct mail, online services and other forms of communication and advertising
media. Competition for advertising revenue is largely based upon advertiser
results, readership, advertising rates, demographics and circulation levels,
while competition for 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,
compete primarily with direct mail advertising, shared mail packages and other
private advertising delivery services. The Company's management believes that,
because of the relative competitive position of its suburban and community
non-daily publications in the communities that 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."

SEASONALITY

Newspaper companies tend to follow a distinct and recurring seasonal
pattern. The first quarter of the year (January-March) tends to be the weakest
quarter because advertising volume is then at its lowest level. Correspondingly,
the fourth quarter (October-December) tends to be the strongest quarter as it
includes heavy holiday season advertising.

ENVIRONMENTAL MATTERS

As is the case with other newspaper and similar publishing companies,
the Company is subject to a wide range of federal, state and local environmental
laws and regulations pertaining to air and water quality, storage tanks and the
management and disposal of 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. Management believes
that continued compliance with these laws and regulations will not have a
material adverse effect on the Company's financial condition or results of
operations.

REGULATION

Paid or requestor circulation newspapers with "periodical" mailing
privileges are required to obtain a "periodical" permit from, and file an annual
Statement of Ownership, Mailing and Circulation with the United States Postal
Service. 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.

AVAILABLE INFORMATION

The Company makes available all of its filings with the U.S. Securities
and Exchange Commission, along with any amendments thereto, free of charge on
its Web site at www.journalregister.com as soon as reasonably practicable after
the reports and amendments are electronically filed with the SEC. The contents
of the Web site are not incorporated into this filing.

15

ITEM 2. PROPERTIES.

As of December 29, 2002, the Company operated 139 facilities used in
the course of producing and publishing its daily and non-daily publications.
Approximately 96 of these facilities are leased for terms ranging from one to
five years. These leased facilities range in size from approximately 160 to
70,000 square feet. Except as otherwise noted, the facilities are utilized for
office space. The location and approximate size of the principal physical
properties (greater than 1,500 square feet) used by the Company at December 29,
2002, as well as the expiration date of the leases relating to such properties
that the Company leases are set forth below:

(1) Corporate headquarters
(2) Production facility
(3) Warehouse

Management believes that all of its properties are in good condition,
are generally well maintained and are adequate for their current operations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Liquidity and Capital Resources."

16

ITEM 3. LEGAL PROCEEDINGS.

The Company is involved in a number of litigation matters that have
arisen in the ordinary course of business. The Company believes that the outcome
of these legal proceedings will not have a material adverse effect on the
Company's financial condition or results of operations.

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

None.

17

EXECUTIVE OFFICERS OF THE REGISTRANT

The following table sets forth certain information as of January 2,
2003 with respect to each person who is an executive officer of the Company as
of such date:

Officer Position
- ------- --------
Robert M. Jelenic............ Chairman, President and Chief Executive Officer
Jean B. Clifton.............. Executive Vice President, Chief Financial
Officer and Secretary
Thomas E. Rice............... Senior Vice President, Operations
Allen J. Mailman............. Senior Vice President, Technology
Marc S. Goldfarb............. Vice President and General Counsel

ROBERT M. JELENIC is Chairman, President and Chief Executive Officer of
the Company. He has been President and Chief Executive Officer since the
inception of the Company, and has been a director of the Company and its
predecessors for more than the past ten years. A Chartered Accountant, Mr.
Jelenic began his business career with Arthur Andersen in Toronto, Canada. Mr.
Jelenic has 27 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 member of the Technology Committee of the Newspaper Association of
America ("NAA"). Mr. Jelenic is 52 years old.

JEAN B. CLIFTON is Executive Vice President, Chief Financial Officer
and Secretary of the Company, positions she has held since the Company's
inception. Ms. Clifton has also been a director of the Company and its
predecessors for more than the past ten years. Ms. Clifton, a Certified Public
Accountant, began her business career at Arthur Young & Co. (a predecessor to
Ernst & Young LLP). Ms. Clifton has 17 years of senior management experience in
the newspaper industry. Ms. Clifton is a member of the Board of Directors of the
NAA, as well as a member of the Board of Directors of the Fresh Air Fund, and
the Board of Directors of the Lower Bucks Chapter of the American Red Cross. Ms.
Clifton received a Bachelor of Business Administration in 1983 from the
University of Michigan. Ms. Clifton is 41 years old.

THOMAS E. RICE is Senior Vice President of Operations of the Company, a
position he has held since November 2000. From the inception of the Company to
November 2000, Mr. Rice was located in St. Louis, Missouri, where he was
President and Chief Executive Officer of Suburban Newspapers of Greater St.
Louis and The Telegraph in Alton, Illinois, which the Company sold in 2000. Mr.
Rice began his career with Lee Enterprises in 1963 and has held senior
management positions with Tribune Company, The Times Mirror Company, MediaNews
Group and the Chicago Sun Times. Mr. Rice has 40 years of experience in the
newspaper industry. Mr. Rice is a member of the Newsprint Committee of the NAA.
Mr. Rice attended the University of Nebraska and Roosevelt University in
Chicago. Mr. Rice is 58 years old.

ALLEN J. MAILMAN is Senior Vice President of Technology of the Company,
a position he has held since February 1999. From March 1994 to February 1999, he
was Vice President of Technology of the Company. From the Company's inception in
1990 to March 1994, Mr. Mailman was Corporate Director of Information Services
of the Company. Mr. Mailman has 28 years of management experience in the
newspaper industry, including 14 years with Advance Publications, Inc. Mr.
Mailman received a Bachelor of Arts degree in Economics and Mathematics from the
University of Oklahoma. Mr. Mailman is 55 years old.

MARC S. GOLDFARB is Vice President and General Counsel of the Company,
positions he has held since January 2003. From July 1998 to January 2003, he
served as Managing Director and General Counsel of The Vertical Group, an
international private equity firm. Prior to that, Mr. Goldfarb was a Partner at
Bacher, Tally, Polevoy & Misher LLP. Mr. Goldfarb has 15 years of diverse legal,
financial and strategic experience. Mr. Goldfarb earned his Juris Doctor from
the University of Pennsylvania and his Bachelor of Science from Cornell
University. Mr. Goldfarb is 39 years old.

18

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The Company's common stock, par value $0.01 per share (the "Common
Stock"), commenced trading on the New York Stock Exchange on May 8, 1997 under
the symbol "JRC." The following table reflects the high and low sale prices for
the Common Stock, based on the daily composite listing of stock transactions for
the New York Stock Exchange, for the periods indicated:

YEAR QUARTER LOW HIGH
- ----------------- -------------------- --------------- ------------------
2001 First $15.75 $17.63
Second $15.13 $18.25
Third $15.69 $18.25
Fourth $15.00 $21.13
- ----------------- -------------------- --------------- ------------------

2002 First $19.30 $21.55
Second $19.85 $21.86
Third $16.14 $19.99
Fourth $17.00 $19.47

On March 18, 2003, there were approximately 75 stockholders of record
of the Common Stock. The Company believes that it has approximately 4,200
beneficial owners.

The Company has not paid dividends on its Common Stock and does not
currently anticipate paying dividends. The Company currently intends to retain
future cash flow to increase shareholder value by acquiring additional
newspapers, reducing debt, repurchasing the Company's stock and reinvesting in
the Company's operations. In addition, the Company's 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.

Journal Register Company conducts its operations through direct and
indirect subsidiaries. The Company's available cash will depend upon the cash
flow of its subsidiaries and the ability of such subsidiaries to make funds
available to the Company in the form of loans, dividends or otherwise. The
subsidiaries are separate and distinct legal entities and have no legal
obligation, contingent or otherwise, except as required by the Credit Agreement,
to make funds available to the Company, whether in the form of loans, dividends
or otherwise. The Credit Agreement is secured by substantially all of the assets
of the Company and the common stock and assets of the Company's subsidiaries. In
addition, the Company's subsidiaries may, subject to limitations contained in
the Credit Agreement, become parties to financing arrangements that may contain
limitations on the ability of such subsidiaries to pay dividends or to make
loans or advances to the Company. In the event of any insolvency, bankruptcy or
similar proceedings of a subsidiary, creditors of such subsidiary would
generally be entitled to priority over the Company with respect to financial
assets of the affected subsidiary.

19

ITEM 6. SELECTED FINANCIAL DATA.

The following selected financial data (except number of publications)
has been derived from the audited financial statements of the Company and should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Consolidated Financial Statements
and notes thereto included elsewhere in this report:

20

ITEM 6. SELECTED FINANCIAL DATA. (CONTINUED)

(1) In 1999, the Company changed its fiscal year from a calendar year to a
52/53 week fiscal year ending on the nearest Sunday to the end of the
calendar year. As a result of this change, the Company's fiscal year ended
December 26, 1999 consisted of 360 days. The Company's fiscal year ended
December 31, 2000 consisted of 53 weeks.

(2) The 1998 extraordinary item represents a charge of $4.5 million (net of
tax) related to the early extinguishment of debt in connection with the
Company's prior credit agreement.

(3) The 1998 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, the
integration of the acquired assets of the Goodson Newspaper Group, and an
increase to certain receivable reserves and the extraordinary item ($4.5
million, net of tax) discussed in Note (2) above.

(4) EBITDA is defined by the Company as operating income plus depreciation,
amortization and other non-cash, special or non-recurring charges. Free
cash flow is defined as EBITDA minus capital expenditures, interest and
cash taxes. The Company's cash taxes prior to 2001 were reduced
substantially as a result of the utilization of net operating loss
carry-forwards. Tangible net income is defined as net income, excluding
after tax gains on sales of newspaper properties, reversals of certain tax
accruals and equity interest, plus after-tax amortization. EBITDA, free
cash flow 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 accounting principles generally
accepted in the United States ("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, free cash flow and tangible net income
are standard measures 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, free cash flow and tangible net income using the same methods;
therefore, the EBITDA, free cash flow and tangible net income figures set
forth above may not be comparable to EBITDA, free cash flow 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."
Free cash flow and tangible net income per share are calculated using the
weighted-average shares outstanding on a fully diluted basis.

(5) Capital expenditures, excluding capitalized interest, associated with the
Company's new Philadelphia printing facility (Journal Register Offset)
were $22.8 million, $10.8 million and $1.8 million in fiscal years 2001,
2000 and 1999, respectively. Capitalized interest associated with Journal
Register Offset was $1.3 million in fiscal year 2001 and $601,000 in
fiscal year 2000. Journal Register Offset began operating in December
2001.

21

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

The following discussion and analysis should be read in conjunction
with the historical consolidated financial statements and notes thereto and the
other financial information appearing elsewhere in this Report.

GENERAL

The Company's principal business is publishing newspapers in the United
States, where its publications are primarily daily and non-daily newspapers and
similar publications. The Company's revenues are derived primarily from
advertising, paid circulation and commercial printing.

As of December 29, 2002, the Company owned and operated 23 daily
newspapers and 233 non-daily publications strategically clustered in six
geographic areas: Greater Philadelphia; Connecticut; Greater Cleveland; Central
New England; and the Capital-Saratoga and Mid-Hudson, New York regions. As of
December 29, 2002, the Company had total paid daily circulation of approximately
550,000, total paid Sunday circulation of approximately 526,000 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.

The Company has been a leader in executing its clustering strategy. The
Company believes that its clustering strategy creates significant synergies and
cost savings within each cluster, including cross-selling of advertising,
centralized news gathering and consolidation of printing and production and back
office activities. The Company also believes that its clustering strategy
enables it to improve print quality and distribution, introduce new products and
services in a cost-effective manner and increase readership. In addition,
clustering allows the Company to offer its advertisers expanded reach both
geographically and demographically.

From 1993 through 2002, the Company successfully completed 25 strategic
acquisitions, acquiring 14 daily newspapers, 192 non-daily publications and four
commercial printing companies. Three of the four commercial printing facilities
owned by the Company print a number of the Company's non-daily publications; the
fourth is a premium quality sheet-fed printing company.

On March 18, 2002, the Company completed the acquisition of the assets
of News Gleaner Publications, Inc. and Big Impressions Web Printing, Inc., based
in Northeast Philadelphia, Pennsylvania. This acquisition includes eight weekly
newspapers, with total circulation of 121,000, serving Northeast Philadelphia,
seven monthly publications, with total circulation of 59,000, serving Montgomery
County, Pennsylvania, and a commercial printing operation. On March 22, 2002,
the Company completed the acquisition of the assets of the Essex,
Connecticut-based Hull Publishing, Inc. This acquisition includes a weekly
newspaper with total circulation of 5,000 and two annual magazines with total
distribution of approximately 20,000. On October 14, 2002, the Company completed
the acquisition of County Press Publications, which includes seven weekly
newspapers serving Delaware County, Pennsylvania, with total circulation of
24,000.

On January 31, 2001, the Company completed the acquisition of the
Pennsylvania and New Jersey newspaper operations from Chesapeake Publishing
Corporation, which included 13 publications with non-daily distribution of
approximately 90,000. On June 7, 2001, the Company completed the acquisition of
Montgomery Newspaper Group's community newspaper and magazine operations, which
are based in Fort Washington, Pennsylvania, from Metroweek Corporation. Total
distribution of these 24 non-daily publications is approximately 285,000. On
August 1, 2001, the Company completed the acquisition of the assets of Roe Jan
Independent Publishing, Inc., which is based in Hillsdale, New York. Total
distribution of the two non-daily publications included in this purchase is
approximately 21,000. On September 14, 2001, the Company completed the
acquisition of The Reporter, a 19,000-circulation daily newspaper based in
Lansdale, Pennsylvania. On October 25, 2001, the Company completed the
acquisition of The Litchfield County Times, a weekly newspaper based in New
Milford, Connecticut, with circulation of approximately 12,000. The acquisition
also included three lifestyle magazines serving Litchfield and Fairfield
counties in Connecticut and Westchester County, New York, with total monthly
distribution of approximately 90,000.

The Company sold its operations in the Greater St. Louis area in two
transactions in August and October of 2000. The Company also sold two daily
newspapers and a commercial printing operation in the southern part of

22

central Ohio on January 31, 2001. These dispositions resulted in a strategic
repositioning of the Company's operations in six geographic clusters.

The Company's management believes that its newspapers are effective in
addressing the needs of local readers and advertisers. The Company's management
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 that 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.

In addition, the Company is committed to expanding its business through
its Internet initiatives. The Company's online objective is to make its Web
sites, all of which are accessible through www.journalregister.com, the
indispensable source of useful and reliable community news, sports and
information in their markets by making the Web sites the local information
portal for their markets. As of December 29, 2002, the Company operated 147 Web
sites, which represent each of the Company's publications.

In 1999, the Company elected to change its fiscal year from a calendar
year end to a fiscal year ending on the nearest Sunday to the end of the
calendar year. Accordingly, the Company's recent fiscal years ended on December
29, 2002, December 30, 2001, and December 31, 2000.

FISCAL YEAR ENDED DECEMBER 29, 2002 COMPARED TO FISCAL YEAR ENDED DECEMBER 30,
2001

FOR COMPARISON PURPOSES, WHERE NOTED, THE COMPANY'S FISCAL YEAR 2002 AND 2001
RESULTS ARE PRESENTED ON A SAME-STORE BASIS, WHICH EXCLUDES THE RESULTS OF THE
OHIO NEWSPAPERS SOLD IN 2001 AND THE COMPANY'S ACQUISITIONS COMPLETED IN 2002
AND 2001.

Summary. Net income for the year ended December 29, 2002 ("fiscal year
2002") was $49.2 million, or $1.16 per diluted share, versus $78.1 million, or
$1.83 per diluted share, for the year ended December 30, 2001 ("fiscal year
2001"). Excluding the gain on the sale of the Company's two Ohio properties in
fiscal year 2001, the reversal of certain tax accruals in fiscal years 2002 and
2001, and the elimination of goodwill amortization as if SFAS No. 142 had been
adopted on January 1, 2001, earnings for fiscal year 2002 were $1.14 per diluted
share as compared to $1.03 per diluted share for fiscal year 2001.

Revenues. Reported revenues were $407.8 million for fiscal year 2002 as
compared to $394.4 million for fiscal year 2001. The increase was mainly due to
acquisitions. On a same-store basis, total newspaper revenues for fiscal year
2002 decreased one percent to $354.2 million from $357.6 million in fiscal year
2001. Advertising revenues, on a same-store basis, for fiscal year 2002
decreased by 1.6 percent to $268.2 million from $272.7 million in fiscal year
2001. Circulation revenues, on a same-store basis, increased by 1.2 percent in
fiscal year 2002 to $86.0 million from $84.9 million in fiscal year 2001. Online
revenues, which are included in advertising revenues, increased approximately
12.8 percent to $4.0 million in fiscal year 2002 as compared to fiscal year
2001.

Salaries and employee benefits. Salaries and employee benefit expenses
were 36.9 percent of the Company's total revenues for fiscal year 2002, compared
to 35.6 percent for fiscal year 2001. Salaries and employee benefits increased
$10.1 million, or 7.2 percent, in fiscal year 2002 to $150.6 million, primarily
due to acquisitions. Same-store salaries and employee benefits increased $1.8
million, or 1.4 percent, primarily due to increased pension and medical benefit
costs.

Newsprint, ink and printing charges. For fiscal year 2002, newsprint,
ink and printing charges were 7.6 percent of the Company's revenues, as compared
to 9.6 percent for fiscal year 2001. Newsprint, ink and printing charges
decreased $6.9 million, or 18.4 percent, for fiscal year 2002 as compared to the
prior year due principally to a decrease in newsprint prices of approximately 22
percent, partially offset by an increase in newsprint consumption related
primarily to the Company's acquisitions. On a same-store basis, newsprint, ink
and printing charges decreased approximately $9.3 million, or 26.0 percent,
primarily due to a decrease in newsprint expense which resulted from the
decrease in newsprint prices and a decrease in newsprint consumption on a
same-store basis of approximately one percent.

23

Selling, general and administrative. Selling, general and
administrative expenses were 13.3 percent and 12.1 percent of the Company's
revenues for fiscal years 2002 and 2001, respectively. Selling, general, and
administrative expenses increased $6.4 million, or 13.3 percent, for fiscal year
2002 as compared to the prior year, primarily due to acquisitions. On a
same-store basis, selling, general and administrative expenses for fiscal year
2002 increased $1.7 million, or 3.7 percent, principally as a result of
increased general insurance costs.

Depreciation and amortization. Depreciation and amortization expenses
were 3.7 percent and 6.7 percent of the Company's revenues for fiscal years 2002
and 2001, respectively. Depreciation and amortization expenses decreased $11.4
million, or 43.3 percent, to $14.9 million for fiscal year 2002 as compared to
fiscal year 2001. This decrease was primarily due to the implementation of SFAS
No. 142, which was implemented in the beginning of fiscal year 2002 and
eliminated the amortization of goodwill and indefinite-lived intangible assets,
resulting in a reduction in amortization expense of approximately $12 million
for fiscal year 2002, partially offset by increased depreciation related to
capital expenditures, particularly the Company's new production facility in its
Greater Philadelphia Cluster.

Other expenses. Other expenses increased to $56.9 million in fiscal
year 2002 from $53.5 million in fiscal year 2001, primarily as a result of
acquisitions. On a same-store basis, other expenses increased approximately
$428,000, or 0.8 percent, to $51.1 million.

Operating income. Operating income increased $11.8 million, or 13.3
percent, for fiscal year 2002 to $100.3 million as compared to $88.5 million in
fiscal year 2001 primarily due to the reduction in amortization expense
resulting from the implementation of SFAS No. 142 and an increase in EBITDA, the
components of which are described above.

Net interest expense and other. Net interest expense and other
decreased $6.8 million, or 22.3 percent, from $30.5 million in fiscal year 2001
to $23.7 million in fiscal year 2002. This decrease was due to lower interest
expense, which resulted from lower interest rates and a reduction in the
Company's weighted average debt outstanding during fiscal year 2002 as compared
to fiscal year 2001.

Provision for income taxes. The Company's effective tax rate was 37.3
percent for fiscal year 2002 as compared to 38.9 percent for fiscal year 2001,
excluding the reversals of certain tax accruals in each year which were
determined to no longer be required and excluding the effect of the gain on sale
of newspaper properties in fiscal year 2001. The decrease in the effective tax
rate for fiscal year 2002 as compared to fiscal year 2001 is principally a
result of the adoption of SFAS No. 142 at the beginning of fiscal year 2002.

Other information. EBITDA for fiscal year 2002 was $115.3 million as
compared to $114.9 million for fiscal year 2001. Free cash flow was $61.6
million, or $1.46 per diluted share, for fiscal year 2002 as compared to $57.1
million, or $1.34 per diluted share, for fiscal year 2001. Tangible net income
for fiscal year 2002 was $49.2 million, or $1.16 per share, as compared to $46.6
million, or $1.09 per share, for fiscal year 2001. During fiscal year 2002, the
Company made a $10.9 million cash contribution ($6.9 million after tax) to its
defined benefit pension plans.

FISCAL YEAR ENDED DECEMBER 30, 2001 COMPARED TO FISCAL YEAR ENDED DECEMBER 31,
2000

FOR COMPARISON PURPOSES, WHERE NOTED, THE COMPANY'S RESULTS FOR FISCAL YEARS
2001 AND 2000 ARE PRESENTED ON A SAME-STORE BASIS, WHICH EXCLUDES THE RESULTS OF
THE GREATER ST. LOUIS CLUSTER NEWSPAPERS SOLD IN 2000, THE OHIO NEWSPAPERS SOLD
IN FISCAL YEAR 2001, AND THE COMPANY'S ACQUISITIONS COMPLETED IN FISCAL YEAR
2001. ALSO, WHERE NOTED, THE COMPANY'S RESULTS ARE PRESENTED ON A COMPARABLE DAY
BASIS, WHICH REFLECTS AN ADJUSTMENT TO ELIMINATE THE ESTIMATED IMPACT OF THE
ADDITIONAL WEEK INCLUDED IN THE COMPANY'S FISCAL YEAR 2000 RESULTS. IN 2000, THE
COMPANY HAD A 53-WEEK FISCAL YEAR AS COMPARED TO A 52-WEEK FISCAL YEAR IN 2001.

Summary. Net income for fiscal year 2001 was $78.1 million, or $1.83
per diluted share, versus $169.4 million, or $3.72 per diluted share, for the
year ended December 31, 2000 ("fiscal year 2000"). Excluding special items,
earnings per diluted share were $0.80 and $1.07 for fiscal years 2001 and 2000,
respectively.

The special items reported in the 2001 and 2000 results include a $32.2
million pre-tax ($42.1 million after-tax) gain on the sale of the Company's Ohio
operations in 2001, a $180.7 million pre-tax ($113.0 million after-tax) gain on
the sale of the Company's St. Louis cluster operations in 2000 and reversals of
certain tax accruals in both years.

24

Revenues. Reported revenues were $394.4 million for fiscal year 2001 as
compared to $464.0 million for fiscal year 2000. The decline was mainly due to
the sale of the Company's St. Louis cluster and Ohio operations, a 52-week
fiscal year in 2001 versus a 53-week fiscal year in 2000, and lower advertising
revenues resulting from a decline in the U.S. economy.

Same-store revenues. Same-store revenues decreased by 6.7 percent to
$375.5 million. On a same-store, comparable day basis, revenues decreased
approximately 4.9 percent. On a same-store, comparable day basis, advertising
revenues decreased 6.0 percent, circulation revenues decreased 1.4 percent and
commercial print revenues decreased 4.3 percent. Online revenues included in
advertising revenues increased approximately 15.5 percent to $3.5 million on a
same-store, comparable day basis.

Salaries and employee benefits. Salaries and employee benefit expenses
were 35.6 percent of the Company's revenues for fiscal year 2001, compared to
33.4 percent for fiscal year 2000. Salaries and employee benefits decreased
$14.6 million, or 9.4 percent, in 2001 to $140.5 million. Same-store salaries
and employee benefits decreased $6.1 million, or 4.5 percent, primarily due to a
reduction in headcount, lower cost of retiree benefits, and one less week in
fiscal year 2001.

Newsprint, ink and printing charges. For fiscal year 2001, newsprint,
ink and printing charges were 9.6 percent of the Company's revenues, as compared
to 10.0 percent for fiscal year 2000. Newsprint, ink and printing charges
decreased $8.8 million, or 18.9 percent, for fiscal year 2001 as compared to the
prior year due to the dispositions of certain newspaper properties. On a
same-store, comparable day basis, newsprint, ink and printing charges increased
approximately $1.2 million, or 3.6 percent, primarily due to an increase of
approximately 9.2 percent in newsprint prices, offset partially by a decrease in
newsprint consumption of approximately 7.0 percent.

Selling, general and administrative. Selling, general and
administrative expenses were 12.1 percent and 10.1 percent of the Company's
revenues for fiscal years 2001 and 2000, respectively. On a same-store basis,
selling, general and administrative expenses for fiscal year 2001 increased $4.2
million from $40.7 million to $44.9 million, due primarily to increased
promotional activity associated with the Company's focus on increasing revenues.

Depreciation and amortization. Depreciation and amortization expenses
were 6.7 percent and 6.0 percent of the Company's revenues for fiscal years 2001
and 2000, respectively. Depreciation and amortization expenses decreased $1.3
million, or 4.7 percent, to $26.3 million for fiscal year 2001 primarily due to
the dispositions of certain newspaper properties. On a same-store basis,
depreciation and amortization expense was flat for fiscal year 2001 as compared
to fiscal year 2000.

Other expenses. Other expenses were $53.5 million for fiscal year 2001
as compared to $58.4 million for fiscal year 2000. On a same-store basis, other
expenses increased approximately $700,000, or 1.4 percent, to $50.7 million due
in part to increases in promotional expenses.

Operating income. Operating income decreased $40.7 million, or 31.5
percent, for fiscal year 2001 to $88.5 million as compared to $129.3 million in
fiscal year 2000. Same-store operating income decreased $26.2 million, or 23.1
percent, to $87.1 million.

Net interest and other expenses. Net interest and other expense
decreased $17.5 million for fiscal year 2001 as compared to fiscal year 2000,
principally due to a reduction in average net debt outstanding and lower
weighted average interest rates during fiscal year 2001 as compared to fiscal
year 2000. The reduction in average net debt is due primarily to the sales of
the St. Louis cluster and Ohio properties and strong free cash flow generated
from operations, partially offset by funds used for share repurchases,
acquisitions and the Philadelphia plant in 2001.

Gains on the sales of newspaper properties. On August 10, 2000, the
Company completed its sale of substantially all of the assets of the Suburban
Newspapers of Greater St. Louis and all of the issued and outstanding capital
stock of The Ladue News, Inc. (collectively, "St. Louis") and reported a pre-tax
gain of $141.1 million ($88.4 million after-tax) on the sale. On October 24,
2000, the Company sold substantially all the assets of its Alton, Illinois
newspaper, The Telegraph ("Alton") and reported a pre-tax gain of $39.6 million
on the sale ($24.6 million after-tax). On January 31, 2001, the Company
completed the sale of the assets of The Times Reporter, Dover/New Philadelphia,
Ohio (including Midwest Offset, one of the Company's commercial printing
companies co-located with The Times Reporter), and The Independent, Massillon,
Ohio and reported a pre-tax gain of $32.2 million ($42.1 million gain
after-tax).

25

Provision for income taxes. The provision for income taxes was $10.8
million for fiscal year 2001 as compared to $91.0 million for fiscal year 2000.
Included in the tax provision for fiscal year 2001 is a $9.9 million tax benefit
on the gain on sale of the Company's Dover/New Philadelphia and Massillon
properties, which was recorded due to the realization of previously unrecognized
book/tax differences and a $1.8 million reversal of certain accruals which were
determined to no longer be required. Included in the provision for fiscal year
2000 is $67.7 million of income taxes provided for the sale of the St. Louis
cluster partially offset by a $8.0 million reversal of certain accruals which
were determined to be no longer required. Excluding these special items in each
year, the Company's effective tax rate for fiscal years 2001 and 2000 were 38.9
percent and 38.4 percent, respectively.

Equity interest. The loss on equity interest of $1.3 million recorded
for fiscal year 2001 represents the Company's pro rata share (7.56 percent) of
the net loss for the period of AdOne, LLC, a provider of classified advertising
on the Internet, and compares to a loss on equity interest of $1.6 million in
the prior year.

Other information. Tangible net income for fiscal year 2001 was $46.6
million, or $1.09 per share, as compared to $61.0 million, or $1.34 per share,
for fiscal year 2000.

LIQUIDITY AND CAPITAL RESOURCES

The Company's operations have historically generated strong positive
cash flow. The Company believes that cash flows from operations, future
borrowings and its ability to issue common stock will be sufficient to fund its
operating needs, capital expenditure requirements and long-term debt obligations
and will provide it with the flexibility to finance its acquisition strategy and
share repurchase program. See Note 4 of "Notes to Consolidated Financial
Statements."

Cash flows from operating activities. Net cash provided from operating
activities was $59.0 million for fiscal year 2002 as compared to $77.7 million
in the prior year. Current assets were $65.4 million and current liabilities,
excluding $32.9 million of current maturities of long-term debt, were $52.1
million as of December 29, 2002. The Company manages its working capital through
the utilization of its Revolving Credit Facility. The outstanding balance on the
Revolving Credit Facility is classified as a long-term liability. During fiscal
year 2002, the Company made a $10.9 million cash contribution ($6.9 million
after tax) to its pension plans.

Cash flows from investing activities. For fiscal year 2002, net cash
used in investing activities was $21.3 million. Cash used in investing
activities in 2002 was for funding the Company's acquisitions and for
investments in property, plant and equipment. Cash used in investing activities
in 2001 was to fund the Company's acquisitions and for investment in property,
plant and equipment, partially offset by the proceeds from the January 2001 sale
of the assets of two of the Company's newspapers and a commercial printing
operation in Ohio. In December 2001, the Company completed the construction of
its new Philadelphia printing facility, Journal Register Offset. The total cost
of the project was $35.4 million, excluding capitalized interest. Capital
expenditures in connection with the construction of Journal Register Offset were
$22.8 million in fiscal year 2001, excluding capitalized interest.

The Company has a capital expenditure program of approximately $15
million in place for 2003, which includes spending on buildings; technology,
including prepress and business systems, computer hardware and software;
machinery; equipment; and vehicles. 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.

Cash flows from financing activities. Net cash used in financing
activities was $37.7 million in fiscal year 2002 as compared to $25.9 million in
fiscal year 2001. The increase in net cash used in financing activities in
fiscal year 2002 results primarily from net long-term debt reductions of $39.4
million in fiscal year 2002 versus net increases in long-term debt of $28.1
million in 2001, partially offset by greater stock repurchase activity in fiscal
year 2001.

Debt and derivative activity. On July 15, 1998, the Company entered
into a credit agreement (the "Credit Agreement") with a group of banks and other
financial institutions, led by The Chase Manhattan Bank (the predecessor to J.P.
Morgan Chase & Co.) as administrative agent for the lenders thereunder. The
Credit Agreement provided for $500 million in Term Loans and a $400 million
Revolving Credit Facility. The proceeds from the Credit Agreement were used to
repay amounts outstanding under the prior senior facilities and to purchase the
Pennsylvania, New York and Ohio newspaper businesses of The Goodson Newspaper
Group for approximately $300 million. The Credit Agreement also provides for an
uncommitted, multiple draw term loan facility (the

26

"Incremental Facility") in the amount of up to $500 million, as permitted by the
administrative agent, to be repaid under conditions as defined in the Credit
Agreement.

The Term Loans mature on March 31, 2006 and September 30, 2006, and the
Revolving Credit Facility matures on March 31, 2006. The Term Loans are
repayable in quarterly installments and the availability of the Revolving Credit
Facility is subject to certain quarterly reductions that commenced in 2002. In
addition, under the terms of the Company's Credit Agreement, net proceeds, as
defined in the Credit Agreement, from the sale of newspaper properties which are
not reinvested within 365 days must be used to prepay debt. Accordingly, the
Company's excess borrowing capacity under the Term Loans was reduced in the
first quarter of 2002 by approximately $30 million in connection with the
Company's January 2001 asset sale.

The amounts outstanding under the Credit Agreement bear interest at (i)
1 3/4 percent to 1/2 percent above LIBOR (as defined in the Credit Agreement) or
(ii) 1/2 percent to 0 percent above the higher of (a) the Prime Rate (as defined
in the Credit Agreement) or (b) 1/2 percent 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 the trailing four quarters
Cash Flow (as defined in the Credit Agreement) and are reduced as such ratio
declines. The estimated fair value of the Term Loans and Revolving Credit
Facility approximates their carrying value.

An annual commitment fee is incurred on the average daily unused
portion of the Revolving Credit Facility, payable quarterly in arrears, at a
percentage that varies from 0.375 percent to 0.25 percent based on the quarterly
calculation of the Total Leverage Ratio (as defined in the Credit Agreement). At
December 29, 2002, the Company's commitment fee was 0.25 percent.

The terms of the Credit Agreement require the Company to maintain
certain Interest Rate Protection Agreements ("IRPAs") on a portion of its debt,
to reduce the potential exposure of the Company's future cash flows due to
fluctuations in the variable interest rates. The minimum requirement varies
depending on the Company's Total Leverage Ratio (as defined in the Credit
Agreement).

Pursuant to the terms of the Credit Agreement, the Company entered into
certain interest rate collar hedges ("the Collars") on November 9, 2001 which
became effective on October 29, 2002. The Collars establish an interest rate
ceiling ("CAP") and an interest rate floor. The CAP on the Company's collars,
which became effective on October 29, 2002, is 6.0 percent and the floor
averages approximately 2.66 percent. These rates are based upon the 90-day
LIBOR. In the event 90-day LIBOR exceeds 6.0 percent, the Company will receive
cash from the issuers to compensate for the rate in excess of the 6.0 percent
CAP. If the 90-day LIBOR is lower than 2.66 percent, the Company will pay cash
to the issuers to compensate for the rate below the floor. The Collars, which
began at a notional amount of $170 million, amortize over two years to a
notional aggregate amount of $135 million and terminate on October 29, 2004. On
October 10, 2002, the Company entered into additional interest rate collars
("Additional Collars"). The effective date of the Additional Collars is January
29, 2003. The Additional Collars are for a notional aggregate amount of $150
million, which does not amortize over its two-year term. Similar to the existing
Collars, the Additional Collars establish an interest rate ceiling ("CAP") and
an interest rate floor. The CAP on the Additional Collars is 4.0 percent and the
floor averages approximately 1.54 percent. These rates are also based upon the
90-day LIBOR. In the event that 90-day LIBOR exceeds 4.0 percent, the Company
will receive cash from the issuers to compensate for the rate in excess of the
4.0 percent CAP. If the 90-day LIBOR is lower than 1.54 percent, the Company
will pay cash to the issuers to compensate for the rate below the floor. From
time to time the Company may enter into additional IRPAs. The Company
anticipates that each IRPA will be designated for all or a portion of the
principal balance and term of a specific debt obligation.

As of January 1, 2001, the Company adopted Financial Accounting
Standard No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133") as amended. Upon adoption of SFAS 133, the fair market value of the
derivative is reported as a transition adjustment to Other Comprehensive
Income/Loss ("OCI"). Accordingly, on January 1, 2001, the Company recorded a
deferred pre-tax transition gain of $198,600 (approximately $120,000 after-tax)
as an adjustment to OCI. The IRPAs were fully effective in hedging the changes
in cash flows related to the debt obligation during the fiscal years 2002 and
2001. The total deferred loss reported in OCI as of December 29, 2002 and
December 30, 2001 was approximately $3.4 million and $3.7 million, respectively
(net of $1.8 and $2.0 million of deferred taxes, respectively).

The Company's weighted-average effective interest rate for fiscal year
2002 was approximately 4.6 percent. This interest rate includes the effect of a
$6.2 million pre-tax expense realized and reported as a component of interest
expense for the IRPAs in place during fiscal year 2002.

27

Contractual Obligations and Commitments. As of December 29, 2002, the
Company had outstanding indebtedness under the Credit Agreement, due and payable
in installments through 2006, of $483.4 million, of which $149.3 million was
outstanding under the Revolving Credit Facility and $334.1 million was
outstanding under the Term Loans. In addition, the Company had approximately
$223.2 million of unused Revolving Credit Facility funds available subject to
the terms of the Credit Agreement at December 29, 2002. The remaining aggregate
maturities payable under the Term Loans are as follows (dollars in thousands):

2003..................................................$ 32,912
2004.................................................. 37,853
2005.................................................. 86,875
2006.................................................. 176,417

The Revolving Credit Facility is available until March 31, 2006.
Availability reduces each quarter through March 31, 2006, in an aggregate amount
for each twelve-month period commencing on the dates set forth below, equal to
the amount set forth opposite such date, with reductions during each such period
being equal in amount (dollars in thousands):

June 30, 2002......................................... $ 55,000
June 30, 2003......................................... 65,000
June 30, 2004......................................... 100,000
June 30, 2005......................................... 180,000

The Term Loans and Revolving Credit Facility are secured by
substantially all of the assets of the Company and the common stock and assets
of the Company's subsidiaries. The Term Loans and Revolving Credit Facility
require compliance with certain covenants, which require, among other things,
maintenance of certain financial ratios, which may restrict among other things,
the Company's ability to declare dividends, repurchase Company stock, incur
additional indebtedness, create liens, sell assets, consummate mergers and make
capital expenditures, investments and acquisitions.

The Company leases office space and equipment under non-cancellable
operating leases. These leases contain several renewal options for periods
typically ranging up to five years. The Company's future minimum lease payments
under non-cancellable operating leases in effect as of December 29, 2002, are as
follows (dollars in thousands):

2003...........................................$2,179
2004........................................... 1,699
2005........................................... 1,064
2006........................................... 366
2007........................................... 32
Thereafter..................................... 24

Total rent expense was $3.3 million, $3.1 million and $3.0 million for
fiscal years 2002, 2001 and 2000, respectively.

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.

28

SIGNIFICANT ACCOUNTING POLICIES AND ESTIMATES

General

The Company's discussion and analysis of its financial condition and
results of operations are based upon the Company's consolidated financial
statements, which have been prepared in accordance with accounting principles
generally accepted in the United States. The preparation of these financial
statements requires the Company to make estimates and judgments that affect the
reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. On an on-going basis, the
Company evaluates its estimates, including those related to bad debts,
inventories, investments, remaining useful lives of long-lived assets, income
taxes, pensions and other post-retirement benefits, as well as contingencies and
litigation. The Company bases its estimates on historical experience and on
various other assumptions that are believed to be reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying values of assets and liabilities that are not readily apparent from
other sources. Actual results may differ from these estimates under different
assumptions or conditions.

The Company believes the following critical accounting policies affect
its more significant judgments and estimates used in the preparation of its
consolidated financial statements.

Accounts Receivable and Bad Debt

Accounts receivable consist primarily of amounts due to the Company
from normal business activities. Allowances for doubtful accounts are reserves
for the estimated loss from the inability of customers to make required
payments. The Company uses historical experience as well as current market
information in determining the estimate. If the financial condition of the
Company's customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.

Long-Lived Assets

Identifiable intangible assets, such as customer lists and covenants
not to compete, were amortized on the straight-line method over their estimated
useful lives for the years presented in the Company's consolidated financial
statements. In addition, goodwill associated with the excess purchase price over
the fair value of assets acquired is currently reviewed for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Under SFAS 142, goodwill and indefinite-lived intangible
assets are no longer amortized but are reviewed annually, or more frequently if
required, for impairment. Separable intangible assets that are not deemed to
have an indefinite life will continue to be amortized over their useful lives.
The Company adopted SFAS 142 at the beginning of fiscal year 2002. See further
discussions, under "New Accounting Pronouncements" herein, of SFAS 141 and SFAS
142 issued in June 2001 and SFAS 144 issued in October 2001.

Pension and Post-retirement Benefits

Pension and post-retirement benefit costs and credits are developed
from actuarial valuations. Inherent in these valuations are key assumptions
including discount rates and expected return on plan assets. The Company is
required to consider current market conditions, including changes in interest
rates, in selecting these assumptions. Changes in the related pension and
post-retirement benefit costs or credits may occur in the future as a result of
fluctuations in the Company's headcount and changes in actuarial assumptions.

Litigation

The Company is involved in a number of litigation matters that have
arisen in the ordinary course of business. The Company believes that the outcome
of these legal proceedings will not have a material adverse effect on the
Company's financial condition or results of operations.

29

Revenue Recognition

Revenue is earned from the sale of advertising, circulation and
commercial printing. Advertising revenues are recognized, net of agency
commissions in the period when advertising is printed or placed on the Company's
Web sites. Circulation revenues are recognized when purchased newspapers are
distributed. Amounts received from customers in advance of revenue recognition
are deferred as liabilities.

NEW ACCOUNTING PRONOUNCEMENTS

On July 25, 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") 141, Business
Combinations, and SFAS 142, Goodwill and Other Intangible Assets. SFAS 141
eliminates the pooling-of-interest method of accounting for business
combinations and clarifies the criteria to recognize intangible assets
separately from goodwill. Under SFAS 142, goodwill and indefinite-lived
intangible assets are no longer amortized but are reviewed annually, or more
frequently if required, for impairment. Separable intangible assets that are not
deemed to have an indefinite life will continue to be amortized over their
useful lives. The amortization provisions of SFAS No. 142 apply to goodwill and
intangible assets acquired after June 30, 2001.

The Company adopted SFAS No. 142 at the beginning of fiscal year 2002.
If the provisions of SFAS No. 142 were applied to the Company's fiscal year 2001
results, the Company's amortization expense would have been reduced by
approximately $12 million and, correspondingly, the Company's earnings per
diluted share would have increased by $0.23 per diluted share.

In October 2001, the FASB issued SFAS No. 144, Accounting for
Impairment or Disposal of Long-Lived Assets. SFAS No. 144 supersedes SFAS No.
121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of, and addresses financial accounting and reporting for
the impairment or disposal of long-lived assets. This statement is effective for
fiscal years beginning after December 15, 2001. Adoption of this statement did
not have a current impact on the Company's financial position or results of
operations.

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 and paid
circulation comes from local, regional and national newspapers, shopping guides,
television, radio, direct mail, online services and other forms of communication
and advertising media. Competition for advertising revenues 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.

Capitalization

As of December 29, 2002, the consolidated indebtedness of the Company
was $483.4 million, which represents a multiple of 4.2 times the Company's
twelve months trailing EBITDA of approximately $115.3 million. As of December
29, 2002, the Company had a net stockholders' deficit of $3.9 million and total
capitalization of $479.5 million and, thus, the percentage of the Company's
indebtedness to total capitalization was 101 percent. The Company may incur
additional indebtedness to fund operations, capital expenditures, future
acquisitions or share repurchases.

30

The Company's management believes that cash provided by operating
activities, future borrowings and its ability to issue common stock will be
sufficient to fund its operations and to meet payment requirements under its
Term Loans and the Revolving Credit Facility of 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 revenues 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 may restrict, among other things,
the Company's ability to declare dividends, repurchase Company stock, incur
indebtedness, create liens, sell assets, consummate mergers and make capital
expenditures, investments and acquisitions.

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 risks, including, without
limitation, diversion of management's attention, assumption of unidentified
liabilities and assimilation of the operations and personnel of acquired
businesses, 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 available cash, free cash flow, borrowings and sales of
non-strategic properties. The Company anticipates that it will finance future
acquisitions through these same resources. 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

The basic raw material for newspapers is newsprint. In fiscal year
2002, the Company consumed approximately 49,000 metric tons of newsprint,
excluding paper consumed in its commercial printing operations. The average
price per metric ton of newsprint based on East Coast transactions prices in
2002, 2001 and 2000 was $465, $585 and $565, respectively, as reported by the
trade publication, Pulp and Paper Weekly. The Company purchases the majority of
its newsprint through its central purchasing group, Journal Register Supply. The
Company has no long-term contracts to purchase newsprint. Generally, Journal
Register Supply purchases most of its newsprint from one or two suppliers,
although in the future the Company may purchase newsprint from other suppliers.
Historically, the percentage of newsprint from each supplier has varied. The
Company's management believes that concentrating its newsprint purchases in this
way provides a more secure newsprint supply and lower unit prices. The Company's
management also believes that it purchases newsprint at price levels lower than
those that are generally available to individually-owned small metropolitan and
suburban newspapers, and consistent with price levels generally available to the
largest newsprint purchasers. The available sources of newsprint have been, and
the Company believes will continue to be, adequate to supply the Company's
needs. The inability of the Company to obtain an adequate supply of newsprint in
the future could have a material adverse effect on the financial condition and
results of operations of the Company. Historically, the price of newsprint has
been cyclical and volatile. The Company's average price per ton of newsprint
decreased approximately 22 percent for fiscal year 2002, increased approximately
nine percent for fiscal year 2001 and increased approximately six percent for
fiscal year 2000, each as compared to the preceding year. The Company believes
that if any price decrease or increase is sustained in the industry, the Company
will also be impacted by such change. The Company seeks to manage the effects of
increases in prices of newsprint through a combination of, among other things,
technology improvements, 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. In fiscal year 2002, the Company's newsprint cost (excluding
paper consumed in the Company's commercial printing operations) was
approximately 5.5 percent of the Company's newspaper revenues.

31

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 that 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.

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 the LIBOR, the Prime Rate or the
Federal Funds Rate, plus a certain interest rate spread as defined in the Credit
Agreement. To manage its exposure to fluctuations in interest rates as required
by its Credit Agreement, the Company enters into certain IRPAs on a portion of
its debt, which minimizes the effect of changes in variable interest rates. The
Company's objective with respect to these agreements is for hedging activities
and not for trading or speculative activity.

At December 29, 2002, the Company had in place no-cost collars with an
aggregate notional amount of $170 million, which became effective when certain
SWAP agreements expired in October 2002. On October 10, 2002, the Company
entered into additional interest rate collars ("Additional Collars") which
became effective on January 29, 2003. The Additional Collars are for a notional
amount of $150 million. Assuming a 10 percent increase or reduction in interest
rates for the year ended December 29, 2002, the effect on the Company's pre-tax
earnings would have been approximately $0.9 million.

Newsprint, which is the principal raw material for the Company's
newspapers, is exposed to commodity price changes. 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."

32

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

INDEX TO FINANCIAL STATEMENTS

Page
----
FINANCIAL STATEMENTS:

Report of Independent Auditors................................. 34
Consolidated Balance Sheets.................................... 35
Consolidated Statements of Income.............................. 36
Consolidated Statements of Stockholders' Deficit............... 37
Consolidated Statements of Cash Flows.......................... 38
Notes to Consolidated Financial Statements..................... 39

FINANCIAL STATEMENT SCHEDULE:

Schedule II - Valuation and Qualifying Accounts............... 55

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

33

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 29, 2002 and December 30, 2001, and the related
consolidated statements of income, stockholders' deficit, and cash flows for
each of the three years in the period ended December 29, 2002. Our audits also
included the financial statement schedule listed in the Index at Item 15(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 auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. 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 29, 2002 and December 30, 2001 and the
consolidated results of its operations and its cash flows for each of the three
years in the period ended December 29, 2002, in conformity with accounting
principles generally accepted in the United States. Also, in our opinion, the
related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly in all material respects
the information set forth therein.

As discussed in Note 2 to the financial statements, in 2002 the Company changed
its method of accounting for goodwill and other indefinite-lived intangible
assets.

/s/ ERNST & YOUNG LLP

MetroPark, New Jersey
January 29, 2003

34

JOURNAL REGISTER COMPANY
CONSOLIDATED BALANCE SHEETS

See accompanying notes.

35

JOURNAL REGISTER COMPANY
CONSOLIDATED STATEMENTS OF INCOME

See accompanying notes.

36

JOURNAL REGISTER COMPANY
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT

See accompanying notes.

37

JOURNAL REGISTER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS

See accompanying notes.

38

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. ORGANIZATION

The accompanying consolidated financial statements include Journal
Register Company and all of its wholly owned subsidiaries (the "Company").
Journal Register Company primarily publishes daily and non-daily newspapers
serving markets in Philadelphia and its surrounding areas, Connecticut, the
Greater Cleveland area of Ohio, Central New England and the Capital-Saratoga and
Mid-Hudson regions of New York. The Company also owns and manages commercial
printing operations in Connecticut and Pennsylvania. The Company was
incorporated on March 11, 1997 and became a publicly traded company in May of
1997.

The Company has authorized 1,000,000 shares of Preferred Stock, none of
which were issued or outstanding during the periods presented.

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. Investments over which the
Company does not have voting control but exerts significant influence are
accounted for by the equity method. All significant intercompany activity has
been eliminated.

Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. On an on-going basis, the Company evaluates
its estimates, including those related to bad debts, inventories, investments,
long-lived assets, income taxes, pensions and other post-retirement benefits,
contingencies and litigation. The Company bases its estimates on historical
experience and on various other assumptions that are believed to be reasonable
under the circumstances, the results of which form the basis for making
judgments about the carrying values of assets and liabilities that are not
readily apparent from other sources. Actual results could differ from those
estimates.

Cash and Cash Equivalents
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.

Accounts Receivable and Bad Debt
Accounts receivable consist primarily of amounts due to the Company
from normal business activities. Allowances for doubtful accounts are reserves
for the estimated loss from the inability of customers to make required
payments. The Company uses historical experience as well as current market
information in determining this estimate. If the financial condition of the
Company's customers were to deteriorate, resulting in an impairment of their
ability to make payments, additional allowances may be required.

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

Accounting for Stock Option Plan
In December 2002, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 148, "Accounting
for Stock-Based Compensation - Transition and Disclosure," to provide
alternative methods of transition for a voluntary change to the fair value
method of accounting for stock-based employee compensation. In addition, SFAS
No. 148 amends the disclosure requirements of SFAS No. 123 to require more
prominent disclosures in both annual and interim financial statements about the
method of accounting for stock-based employee compensation and the effect of the
method used on reported results. The additional disclosure requirements of SFAS
No. 148 are effective for fiscal years ending after December 15, 2002. The
Company has

39

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

elected to continue to follow the intrinsic value method of accounting as
prescribed by Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees" ("APB 25"), and related interpretations in accounting for
its employee stock options. SFAS No. 148 did not require the Company to change
to the fair value based method of accounting for stock-based compensation.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the vesting period for such options. The
Company's fiscal year pro forma information, had compensation costs for the
Company's stock option plans been determined in accordance with SFAS 123, is as
follows:

Long-Lived Assets
On December 31, 2001, which was the first day of fiscal year 2002, the
Company adopted SFAS No. 144, "Accounting for the Impairment or Disposal of
Long-Lived Assets," which superceded SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets To Be Disposed Of." In
accordance with SFAS No. 144, 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 asset is reduced by the difference between the carrying amounts
and estimated fair value with a corresponding charge to expense.

Property, plant and equipment are stated at cost less any required
impairment reserve. Maintenance and repairs are charged to expense as incurred,
while costs of major additions and betterments are capitalized. Depreciation is
provided for financial reporting purposes primarily on the straight-line method
over the following estimated useful lives:

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

40

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Intangible assets recorded in connection with the acquisition of
newspapers generally consist of the values assigned to subscriber lists,
mastheads, non-competition covenants and the excess of cost over the fair value
of identifiable net assets of the companies acquired. These assets are carried
at the lower of unamortized 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, impairment in value occurs, any necessary
write-downs will be charged to expense in accordance with SFAS No. 142. The
balance of intangible assets at December 29, 2002 and December 30, 2001 was
comprised principally of debt issuance costs, subscriber lists, non-compete
covenants, mastheads and the excess cost over the fair value of identifiable net
assets of companies acquired. Intangible assets excluding goodwill and mastheads
are being amortized using the straight-line method over a period of their useful
life, up to 40 years. Deferred financing cost associated with the Term Loans and
the Revolving Credit Facility (as defined in Note 4, Long-Term Debt) is
amortized over the terms of such loans.

During fiscal year 2001, the Company adopted the amortization
provisions of SFAS No. 142 which apply to goodwill and intangible assets
acquired after June 30, 2001. In addition, SFAS No. 141, which became effective
July 1, 2001, eliminated the pooling-of-interest method of accounting for
business combinations.

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.

Revenue Recognition
Revenue is earned from the sale of advertising, circulation and
commercial printing. Advertising revenues are recognized, net of agency
commissions, in the period when advertising is printed or placed on the
Company's Web sites. Circulation revenues are recognized when purchased
newspapers are distributed. Amounts received from customers in advance of
revenue recognition are deferred as liabilities.

Segment Reporting
As of December 29, 2002, the Company published 23 daily newspapers and
233 non-daily publications in the United States. The Company maintains
operations and local management in the markets that it serves. Newspapers are
distributed through local distribution channels consisting of contract carriers
and single copy outlets. The Company conducts business in one operating segment.
The operating segment consists of individual operations that the executive
management team reviews for purposes of assessing performance and making
operational decisions. These individual operations have been aggregated into one
segment because management believes it helps the users understand the Company's
performance and is consistent with the manner in which the individual operations
are managed. The combined operations have similar economic characteristics and
each operation has similar products, services, customers, production processes
and distribution systems.

Concentration of Credit Risk
Approximately 20% of the Company's employees are employed under
collective bargaining agreements. In 2002, no one customer accounted for more
than 1 percent of total revenues or 2 percent of accounts receivable.

Derivative Risk Management Policy and Strategy
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities" ("SFAS 133"), as amended by SFAS No. 137 and No. 138, specifies the
accounting and disclosure requirements for such instruments. In accordance with
these pronouncements, as of January 1, 2001, all effective hedges, as defined,
are recorded as an asset or liability with a corresponding offset to Other
Comprehensive Income ("OCI") in the equity section of the balance sheet. Any
ineffective portion of a hedging instrument or trading derivatives would be
recorded as an asset

41

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

or liability with a corresponding charge or credit to the income statement. The
information below describes the Company's derivative risk management policy and
strategy as required by SFAS 133, as amended.

In accordance with the requirements of its Credit Agreement (as defined
in Note 4, Long-Term Debt) dated July 15, 1998, the Company is required to
maintain certain Interest Rate Protection Agreements ("IRPAs") on a portion of
its debt, to reduce the potential exposure of the Company's future cash flows to
fluctuations in variable interest rates on which the interest on the outstanding
debt is calculated. The minimum requirement varies depending on the Company's
Total Leverage Ratio, as defined in the Credit Agreement. From time to time, the
Company may enter into additional IRPAs for nominal amounts on the outstanding
debt that will, at a minimum, meet the requirements of the Credit Agreement.
Each IRPA is designated for all or a portion of the principal balance and term
of a specific debt obligation.

Under the Company's current IRPAs, the Company pays to or receives from
the issuer to compensate for the rate below the interest rate floor or in excess
of the interest rate ceiling, respectively. These rates are based on the 90-day
LIBOR.

The Company currently considers its current IRPAs to be highly
effective cash flow hedges. The Company measures the effectiveness of each IRPA
quarterly. As specified in SFAS 133, any gain or loss on the effective portion
of the IRPA is recorded in OCI and the ineffective portion would be recorded
directly to current earnings. Amounts in accumulated OCI are reclassified into
earnings in the same period in which the hedged forecasted transactions affect
earnings. In the event of the early extinguishment of a designated debt
obligation, any unrealized gain or loss included in OCI is recognized in the
income statement coincident with the extinguishment.

3. INTANGIBLE AND OTHER ASSETS

On July 25, 2001, the FASB issued SFAS No. 141, Business Combinations,
and SFAS No. 142, Goodwill and Other Intangible Assets. SFAS No. 141, which
became effective July 1, 2001, eliminated the pooling-of-interest method of
accounting for business combinations and clarified the criteria to recognize
intangible assets separately from goodwill. Under SFAS No. 142, goodwill and
indefinite-lived intangible assets are no longer amortized, however they are
reviewed annually or more frequently, if required, for impairment. Separable
intangible assets that are not deemed to have an indefinite life will continue
to be amortized over their useful lives. During fiscal year 2001, the Company
adopted the amortization provisions of SFAS No. 142 which apply to goodwill and
intangible assets acquired after June 30, 2001. With respect to goodwill and
intangible assets acquired prior to July 1, 2001, the Company adopted SFAS No.
142 at the beginning of fiscal year 2002. The required transitional analysis of
the Company's goodwill and indefinite-lived intangible assets was completed as
of June 30, 2002. The Company has also performed the annual impairment tests as
of the first day of the fourth quarter of fiscal year 2002, and a determination
was made that such assets were not impaired. Additionally, during fiscal year
2002, the Company finalized certain purchase accounting adjustments and closing
costs related to certain of its acquisitions, resulting in a direct reduction of
goodwill. Changes in the carrying amounts of intangible assets are as follows:

42

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. INTANGIBLE AND OTHER ASSETS (CONTINUED)

Identifiable intangible assets include customer and subscriber lists,
non-compete covenants and debt issuance costs, which have an estimable useful
life and are amortizable on a straight-line basis over their useful lives.
Indefinite-lived intangible assets include Goodwill and Mastheads. Mastheads are
included in Other intangible assets on the balance sheet. For the year ended
December 29, 2002, the change in Goodwill relates to the acquisitions of
newspaper properties and the finalization of certain purchase accounting
adjustments (see Note 10) during the period. For fiscal years 2002 and 2001,
amortization expense for intangible assets was approximately $1.3 million and
$14.3 million, respectively. Estimated amortization expense for each of the five
succeeding fiscal years for Identifiable intangible assets and other assets is
as follows (dollars in thousands):

2003........................................ $1,384
2004........................................ 1,384
2005........................................ 1,361
2006........................................ 902
2007........................................ 131
Thereafter.................................. 847

43

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3. INTANGIBLE AND OTHER ASSETS (CONTINUED)

The pro forma results of operations for fiscal years 2001 and 2000,
assuming the amortization provisions of SFAS No. 142 were applied retroactively
at January 1, 2001, are as follows:

The changes in the carrying amount of goodwill for the fiscal year
ended December 29, 2002, are as follows:

Dollars in thousands
- --------------------------------------------------------------------------------
Balance as of December 30, 2001, net of accumulated amortization $ 492,349
Goodwill acquired during year 3,299
Adjustments/reclassifications related to the purchase of businesses (4,263)
- --------------------------------------------------------------------------------
Balance as of December 29, 2002, net accumulated amortization $ 491,385
- --------------------------------------------------------------------------------

Included in other assets is the Company's investment in PowerOne Media,
Inc. ("PowerOne"), a provider of classified advertising on the internet.
PowerOne was created as a result of the merger in November 2001 between
PowerAdz, LLC ("PowerAdz") and AdOne, LLC ("AdOne"). The Company was an investor
in AdOne prior to the merger. In the ordinary course of business, the Company
has related party sales with PowerOne which amounted to approximately $4.5 and
$4.2 million for fiscal years 2002 and 2001, respectively.

4. LONG-TERM DEBT

The Company entered into a credit agreement in July 1998 with a group
of lenders, led by Chase Manhattan Bank (the predecessor to J.P. Morgan Chase &
Co.) as administrative agent (the "Credit Agreement"). The Credit Agreement
provided for two secured term loan facilities ("Term Loan A" and "Term Loan B"
or collectively the "Term Loans") each at a face amount of $250 million, and a
secured revolving credit facility (the "Revolving Credit Facility") for $400
million. Proceeds under these loan facilities were used to repay existing debt
and to fund the acquisition of the Pennsylvania, New York, and Ohio newspaper
businesses of The Goodson Newspaper Group (the "Goodson Acquisition") in July
1998. The Credit Agreement also provides for an uncommitted, multiple draw term
loan facility (the "Incremental Facility") in the amount of up to $500 million,
as permitted by the administrative agent, to be repaid under conditions as
defined in the Credit Agreement. To date, the Company has not drawn down on the
Incremental Facility.

Under the terms of the Credit Agreement, net proceeds, as defined in
the Credit Agreement, from the sale of newspaper properties which are not
reinvested within 365 days must be used to prepay debt. Accordingly, the
Company's excess borrowing capacity under the Term Loans was reduced in the
first quarter of 2002 by approximately $30 million in connection with the
Company's January 2001 sale of two of its Ohio newspaper properties. The
Company's long-term debt as of December 29, 2002 and December 30, 2001 was
comprised of the following:

(Dollars in thousands) 2002 2001
- --------------------------------------------------------------------------------
Term Loan A $ 138,367 $ 179,064
Term Loan B 195,690 212,524
Revolving Credit Facility 149,312 131,183
- --------------------------------------------------------------------------------
Total Long-term debt 483,369 522,771
Less Current Portion (32,912) (30,254)
- --------------------------------------------------------------------------------
Total Long-term debt, less current portion $ 450,457 $ 492,517
- --------------------------------------------------------------------------------

44

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. LONG-TERM DEBT (CONTINUED)

The Term Loan A Facility matures on March 31, 2006 and is repayable in
quarterly installments that commenced on June 30, 2000. The Term Loan B Facility
matures on September 30, 2006 and is repayable in quarterly installments that
commenced on June 30, 2000. The remaining aggregate annual maturities payable
under the Term Loans by fiscal year are as follows (dollars in thousands):

2003....................................... $ 32,912
2004....................................... 37,853
2005....................................... 86,875
2006....................................... 176,417

The Revolving Credit Facility is available until March 31, 2006.
Availability will be reduced by equal 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 dates set forth below, equal to
the amount set forth opposite such date (dollars in thousands):

June 30, 2002............................................... $ 55,000
June 30, 2003............................................... 65,000
June 30, 2004............................................... 100,000
June 30, 2005............................................... 180,000

The Term Loans and Revolving Credit Facility are secured by
substantially all of the assets of the Company and the common stock and assets
of the Company's subsidiaries. The Term Loans and Revolving Credit Facility
require compliance with certain covenants, including the maintenance of certain
financial ratios, which may restrict, among other things, the Company's ability
to declare dividends, repurchase Company stock, incur additional indebtedness,
create liens, sell assets, consummate mergers and make capital expenditures,
investments and acquisitions.

The amounts outstanding under the Credit Agreement bear interest at (i)
1 3/4 percent to 1/2 percent above LIBOR (as defined in the Credit Agreement) or
(ii) 1/2 percent to 0 percent above the higher of (a) the Prime Rate (as defined
in the Credit Agreement) or (b) 1/2 percent above the Federal Funds Rate (as
defined in the Credit Agreement). The interest rate spreads ("the applicable
margins") are dependent upon the Total Leverage Ratio (as defined in the Credit
Agreement) and are reduced as such ratio declines. Capitalized interest during
fiscal year 2001 was $1.3 million. There was no capitalized interest during
fiscal year 2002. The estimated fair value of the Term Loans and Revolving
Credit Facility approximates their carrying value.

An annual commitment fee is incurred on the average daily-unused
portion of the Revolving Credit Facility, payable quarterly in arrears, at a
percentage that varies from 0.375 percent to 0.250 percent based on the
quarterly calculation of the Total Leverage Ratio (as defined in the Credit
Agreement). At December 29, 2002, the Company's commitment fee was 0.25 percent.

The terms of the Credit Agreement require the Company to maintain
certain Interest Rate Protection Agreements ("IRPAs") on a portion of its debt,
to reduce the potential exposure of the Company's future cash flows due to
fluctuations in the variable interest rates on which the interest on the
outstanding debt is calculated. The minimum requirement varies depending on the
Company's Total Leverage Ratio, as defined in the Credit Agreement. To fulfill
this requirement, the Company participated in certain IRPAs. The Company had
IRPAs in effect during 2002 pursuant to which the Company assumed a fixed rate
of interest and a counter party had assumed the variable rate (the "SWAP").
Pursuant to the SWAP agreement, the Company agreed 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.
These IRPAs expired in October 2002.

45

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

4. LONG-TERM DEBT (CONTINUED)

In addition, pursuant to the terms of the Credit Agreement, the Company
entered into an interest rate collar hedge ("the collar") on November 9, 2001.
The collar establishes an interest rate ceiling ("CAP") and an interest rate
floor at no initial cost to the Company.

The CAP on the Company's collar, which became effective October 29,
2002, is 6.0 percent and the floor averages approximately 2.66 percent. These
rates are based upon the 90-day LIBOR. In the event 90-day LIBOR exceeds 6.0
percent, the Company will receive cash from the issuer to compensate for the
rate in excess of the 6.0 percent CAP. If the 90-day LIBOR is lower than 2.66
percent, the Company will pay cash to the issuer to compensate for the rate
below the floor. The collar became effective on October 29, 2002 beginning at a
notional amount of $170 million. The collar amortizes over two years to a
notional aggregate amount of $135 million and terminates on October 29, 2004. On
October 10, 2002, the Company entered into additional interest rate Collars
("Additional Collars"). The effective date of the Additional Collars is January
29, 2003. The Additional Collars are for a notional aggregate amount of $150
million, which is fixed for a two-year term. Similar to the existing Collar, the
Additional Collars establish an interest rate ceiling ("Cap") and an interest
rate floor at no initial cost to the Company. The Cap on the Additional Collars
is 4.0 percent and the floor averages approximately 1.54 percent. These rates
are based upon the 90-day LIBOR. In the event that 90-day LIBOR exceeds 4.0
percent, the Company will receive cash from the issuer to compensate for the
rate in excess of the 4.0 percent Cap. If the 90-day LIBOR is lower than 1.54
percent, the Company will pay cash to the issuer to compensate for the rate
below the floor. From time to time, the Company may enter into additional IRPAs.
The Company expects that each IRPA will be designated for all or a portion of
the principal balance and term of a specific debt obligation.

As of January 1, 2001, the Company adopted the Financial Accounting
Standard No. 133 "Accounting for Derivative Instruments and Hedging Activities"
("SFAS 133") as amended. Upon adoption of SFAS 133, the fair market value of the
derivative is reported as a transition adjustment to Other Comprehensive
Income/Loss. Accordingly, on January 1, 2001, the Company recorded a deferred
pre-tax transition gain of $198,600 ($120,000 after-tax) as an adjustment to
OCI. The interest rate SWAPs were fully effective in hedging the changes in cash
flows related to the debt obligation during the years ending December 29, 2002
and December 30, 2001. The total deferred loss reported in OCI as of December
29, 2002 and December 30, 2001 was approximately $3.4 million and $3.7 million,
respectively (net of $1.8 and $2.0 million of deferred taxes, respectively).

The Company's weighted-average effective interest rate for fiscal year
2002 was approximately 4.6 percent. This interest rate includes the effect of a
$6.2 million pre-tax expense realized and reported as a component of interest
expense for the Interest Rate Protection Agreements in place during fiscal year
2002. Net interest expense and other includes interest expense of approximately
$23.1 million, $30.7 million and $49.4 million for fiscal years 2002, 2001 and
2000, respectively.

As of December 29, 2002, the Company had outstanding indebtedness under
the Credit Agreement, due and payable in installments through 2006, of $483.4
million, of which $149.3 million was outstanding under the Revolving Credit
Facility and $334.1 million was outstanding under the Term Loans. There were
$223.2 million of unused Revolving Credit Facility funds subject to the terms of
the Credit Agreement at December 29, 2002.

5. STOCK PLANS

Stock Incentive Plan
During 1997, the Company's Board of Directors (the "Board") adopted and
the stockholders approved the Company's 1997 Stock Incentive Plan (the "1997
Plan"). The 1997 Plan, as amended on March 27, 2001, authorizes grants of up to
6,383,750 shares of 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.

46

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. STOCK PLANS (CONTINUED)

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 is established by the Compensation Committee
of the Board. Stock options vest evenly over a five year period at a rate of 20
percent per year commencing on the first anniversary after issuance, continuing
through the fifth anniversary, at which time 100 percent may be exercised. These
options expire ten years after issuance. The following table summarizes the
Company's stock option activity for the fiscal years presented:

Further information about stock options outstanding at December 29,
2002, as follows:

The Company adopted the disclosure requirements of SFAS No. 123 as
amended by SFAS No. 148. Accordingly, the Company discloses pro forma net income
and earnings per share determined as if the Company had accounted for its
employee stock options under the fair value method of that statement. The fair
value of these options was estimated at the date of grant using a Black-Scholes
option pricing model assuming a weighted average risk-free interest rate of 4.86
percent, 5.32 percent and 5.16 percent, and expected common stock market price
volatility factors of 0.21, 0.19 and 0.48 for the years 2002, 2001 and 2000,
respectively. A seven-year weighted average expected life of each option granted
and no dividend yield was assumed.

47

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

5. STOCK PLANS (CONTINUED)

The Black-Scholes option valuation model was developed for use in
estimating the fair value of traded options that 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.

Stock Rights Plan

Effective July 17, 2001, the Company adopted a Stockholder Rights Plan
(the "Plan") and declared a dividend of one preferred share purchase right (the
"Rights") on each outstanding share of the Company's common stock held by
stockholders of record on July 27, 2001. The rights are exercisable if a person
or group acquires 15 percent or more of the Company's common stock, or commences
a tender offer with that goal. The rights will expire July 27, 2011.

6. 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
fiscal years ended:

Options to purchase the Company's common stock that were not included
in the computation of the diluted earnings per share because the options'
exercise price was greater than the average market price of the common shares
during:

Fiscal Year Options Exercise Price Range
----------- ------- --------------------
2002 2,199 $21.00 to $22.50
2001 1,497 $17.00 to $22.50
2000 1,533 $15.94 to $22.50

48

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. PENSION AND POST-RETIREMENT PLANS

The Company and its subsidiaries maintain defined benefit pension
plans. The benefits are based on years of service and employee compensation,
primarily on career average pay. The Company's funding policy is to contribute
annually an amount that can be deducted for federal income tax purposes using
assumptions that differ from those used for financial reporting. Assets of the
plans consist principally of short-term investments, annuity contracts, equity
securities and corporate and U.S. Government obligations. The Company uses
information as of September 30 to measure the value of pension plan assets and
liabilities. On September 30, 2002, although not required under pension laws,
the Company made a $10.9 million tax-deductible cash contribution to its
qualified pension plans. The tax benefit related to this contribution was
approximately $4 million. Certain of the Company's subsidiaries provide retiree
health and life insurance benefits. The following table sets forth the plans'
funded status and the amount recognized in the Company's consolidated balance
sheet:

49

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. PENSION AND POST-RETIREMENT PLANS (CONTINUED)

50

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7. PENSION AND POST-RETIREMENT PLANS (CONTINUED)

The Company also has defined contribution plans covering certain
employees. Company contributions to these plans are based on a percentage of
participants' salaries and amounted to approximately $632,700, $570,800 and
$668,300 in fiscal years 2002, 2001 and 2000, respectively. The Company
contributes to various multi-employer union administered pension plans.
Contributions to these plans amounted to approximately $148,000, $180,300 and
$178,100 in fiscal years 2002, 2001 and 2000, respectively.

8. INCOME TAXES

The annual provision for taxes on income, in thousands, is as follows:

The reconciliation of income taxes computed at the U.S. federal
statutory tax rate to income tax expense, in thousands for the years presented,
is as follows:

The Company utilized state net operating loss carryforwards of $6.2
million in 2001 and $235.0 million in 2000. At December 29, 2002, certain
subsidiaries had net operating loss carryforwards available ranging from
approximately $1.6 million to $115.7 million in various state jurisdictions,
which expire in various years through 2022. Substantial portions of the related
deferred tax assets were offset by valuation allowances.

51

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

8. INCOME TAXES (CONTINUED)

Deferred income taxes reflect the net effect 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, in thousands, are as follows:

FISCAL YEAR ENDED DEC. 29, 2002 DEC. 30, 2001
- --------------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment $ 15,291 $ 12,948
Intangibles 33,557 23,472
Retiree benefits 6,941 1,923
- --------------------------------------------------------------------------------
Total deferred tax liabilities 55,789 38,343
- --------------------------------------------------------------------------------

Deferred tax assets:
Net operating loss carry forwards 7,082 5,155
Other comprehensive income 13,869 2,572
Other 4,935 3,640
- --------------------------------------------------------------------------------
Total deferred tax assets 25,886 11,367
Valuation allowance (5,239) (4,995)
- --------------------------------------------------------------------------------
Net deferred tax assets 20,647 6,372
- --------------------------------------------------------------------------------
Net deferred tax liabilities $ 35,142 $ 31,971
================================================================================

The Company's valuation allowances for deferred tax assets increased by
$244,000 in fiscal year 2002 and by $3.0 million in fiscal year 2001. The
Company's federal income tax returns have not been examined by the Internal
Revenue Service.

9. COMMITMENTS AND CONTINGENCIES

The Company leases office space, production facilities, warehouse
space, and equipment under noncancellable operating leases. These leases contain
several renewal options for periods of up to five years. The Company's future
minimum lease payments under noncancellable operating leases at December 29,
2002 are as follows (dollars in thousands):

2003.................................. $2,179
2004.................................. 1,699
2005.................................. 1,064
2006.................................. 366
2007.................................. 32
Thereafter............................ 24

Total rent expense was $3.3 million, $3.1 million, and $3.0 million for
the years ended December 29, 2002, December 30, 2001 and December 31, 2000,
respectively.

The Company is involved in certain litigation matters that 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.

52

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10. ACQUISITIONS AND DISPOSITIONS

The Company applies the purchase method of accounting for acquisitions.
Acquisitions and dispositions of newspaper properties are subject to the
finalization of customary purchase price adjustments and closing costs.

In fiscal year 2002, the Company completed three strategic
acquisitions. On March 18, 2002, the Company completed the acquisition of the
assets of News Gleaner Publications, Inc. and Big Impressions Web Printing,
Inc., which are based in Northeast Philadelphia, Pennsylvania. This acquisition
includes eight weekly newspapers, with total circulation of more than 121,000,
serving Northeast Philadelphia, seven monthly publications, with total
circulation of nearly 59,000, serving Montgomery County, Pennsylvania, and a
commercial printing operation. On March 22, 2002, the Company completed the
acquisition of the assets of the Essex, Connecticut-based Hull Publishing, Inc.
This acquisition includes one weekly newspaper with total circulation of 5,000,
and two annually produced magazines with total distribution of approximately
20,000. On October 14, 2002, the Company completed the acquisition of seven
weekly newspapers serving Delaware County, Pennsylvania, with total circulation
of 24,000.

In fiscal year 2001, the Company completed five strategic acquisitions.
On January 31, 2001, the Company completed the acquisition of the Pennsylvania
and New Jersey newspaper operations from Chesapeake Publishing Corporation's
Mid-Atlantic Division. This acquisition included 13 publications with non-daily
distribution of approximately 90,000. On June 7, 2001, the Company completed the
acquisition of the Montgomery Newspaper Group`s community newspaper and magazine
operations, which is based in Fort Washington, Pennsylvania, from Metroweek
Corporation. Total distribution of the 24 non-daily publications acquired from
Metroweek Corporation is approximately 285,000. On August 1, 2001, the Company
completed the acquisition of the assets of Roe Jan Independent Publishing, Inc.,
which is based in Hillsdale, New York. Total distribution of the two non-daily
publications included in this purchase is approximately 21,000. On September 14,
2001, the Company completed the acquisition of the assets of The Reporter, a
19,000-circulation daily newspaper based in Lansdale, Pennsylvania. On October
25, 2001, the Company completed the acquisition of The Litchfield County Times,
a weekly newspaper based in New Milford, Connecticut, with circulation of
approximately 12,000. The acquisition also included three lifestyle magazines
serving Litchfield and Fairfield counties in Connecticut and Westchester County,
New York, with total monthly distribution of approximately 90,000.

In order to achieve a strategic repositioning in six geographic
clusters and a reduction in the Company's leverage, the Company sold its
operations in the greater St. Louis area of Missouri in two transactions in
August and October of 2000. The Company also sold two daily newspapers and a
commercial printing operation in the southern part of central Ohio in early
2001. The proceeds from these sales were used to reduce the Company's
outstanding debt, repurchase Company stock and for strategic acquisitions.

53

JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

11. QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)

The following is a summary of the quarterly results of operations for
years ended December 29, 2002 and December 30, 2001:

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

(1) The amounts reported above include operating results of acquisitions
and dispositions for the period the operations were owned by the
Company (see Note 10, Acquisitions and Dispositions).

(2) Net income and net income per common share for the first quarter of
2001 include an after-tax gain of $42.1 million on the sale of The
Times Reporter (Dover/New Philadelphia, Ohio) and The Independent
(Massillon, Ohio).

54

JOURNAL REGISTER COMPANY
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)

(1) Allowance for doubtful account adjustments related to acquisitions and
dispositions in the respective periods presented. See Note 10 to the
consolidated financial statements for discussion of acquisitions and
dispositions.

(2) Includes the write-off of uncollectable accounts and a reduction in the
valuation allowance for deferred tax assets in the respective periods
presented.

55

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 Part I 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 2003 Annual
Meeting of Stockholders (the "2003 Proxy Statement") is incorporated herein by
reference.

ITEM 11. EXECUTIVE COMPENSATION.

Information appearing under the caption "Executive Compensation" in the
2003 Proxy Statement is incorporated herein by reference.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND
RELATED STOCKHOLDER MATTERS.

Information appearing under the caption "Security Ownership of
Beneficial Owners and Management and Related Stockholder Matters" in the 2003
Proxy Statement is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Information appearing under the caption "Certain Transactions" in the
2003 Proxy Statement is incorporated herein by reference.

ITEM 14. CONTROLS AND PROCEDURES

Within 90 days prior to the filing date of this report, the Company
carried out an evaluation, under the supervision and with the participation of
the Company's management, including the Company's Chief Executive Officer and
Chief Financial Officer, of the effectiveness of the design and operation of the
Company's disclosure controls and procedures. Based upon that evaluation, the
Chief Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures are effective in alerting them in a timely
manner to material information relating to the Company (including its
consolidated subsidiaries) required to be included in the Company's periodic
filings with the SEC. No significant changes were made in the Company's internal
controls or in other factors that could significantly affect these controls
subsequent to the date of the Company's most recent evaluation.

The Company's disclosure controls and procedures are designed to ensure
that information required to be disclosed by the Company in the reports that the
Company files or submits under the Securities Exchange Act of 1934 is recorded,
processed, summarized and reported within the time periods specified in the
SEC's rules and forms. Disclosure controls and procedures include, without
limitation, controls and procedures designed to ensure that information required
to be disclosed by the Company in the reports that it files under the Exchange
Act is accumulated and communicated to the Company's management, including its
Chief Executive Officer and Chief Financial Officer, as appropriate to allow
timely decisions regarding required disclosure.

56

PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

(a) Financial Statements.

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

Financial Statement Schedules and Supplementary Information Required to
be Submitted.

Schedule of Valuation and Qualifying Accounts on Schedule II is
included in Part II, Item 8 of this report.

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

(b) Reports on Form 8-K.

The Company filed a Current Report on Form 8-K on November 13, 2002
furnishing under Item 9 hereof certain information regarding the
certifications of the Company's Chief Executive Officer and Chief
Financial Officer accompanying the Company's Form 10-Q for the quarter
ended September 29, 2002.

57

(c) Index to Exhibits.

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

Exhibit No. Description of Exhibit
----------- ----------------------

*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, File No. 1-12955).
*3.1 Amended and Restated Certificate of Incorporation
(filed as Exhibit 3(i) to the Company's Form 10-Q/A
Amendment No. 1 for the fiscal quarter ended June 30,
1997, File No. 1-12955 (the "June 1997 Form 10-Q")).
*3.2 Amended and Restated By-laws (filed as Exhibit 3(ii)
to the Company's Form 10-Q for the fiscal quarter
ended September 30, 1999, File No. 1-12955 (the
"September 1999 Form 10-Q)).
*4.1 Company Common Stock Certificate (filed as Exhibit
4.1 the Company's Registration Statement on Form S-1,
Registration No. 333-23425 (the "Form S-1")).
*4.2 Rights Agreement dated as of July 17, 2001 between the
Company and the Bank of New York, as Rights Agent
(filed as Exhibit 4.1 to the Company's Report on Form
8-K dated July 18, 2001, File No. 1-12955).
*10.1(a) 1997 Stock Incentive Plan (filed as Exhibit 10.2 to
the June 1997 Form 10-Q).+
*10.1(b) Amendment to the 1997 Stock Incentive Plan. (filed as
Exhibit 10.1(b) to the Company's Form 10-K for fiscal
year 2001, File No. 1-12955 (the "2001 Form 10-K). +
*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 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).
*10.5 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 1999 Form 10-Q).
*10.6 Executive Incentive Compensation Plan (filed as
Exhibit 10.7 to the 2001 Form 10-K). +
**10.7 Employment Agreement by and between Journal Register
Company and Robert M. Jelenic dated March 5, 2003. +
**10.8 Employment Agreement by and between Journal Register
Company and Jean B. Clifton dated March 5, 2003. +
**21.1 Subsidiaries of Journal Register Company.
**23.1 Consent of Ernst & Young LLP.
**24 Power of Attorney (appears on signature page).
**99.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
**99.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

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

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

58

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 27th day of March 2003.

JOURNAL REGISTER COMPANY

By: /s/ Robert M. Jelenic
-------------------------------
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 or her
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 27th day of March 2003.

SIGNATURE TITLE(S)

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

/s/ Jean B. Clifton
- ------------------------------------ Executive Vice President, Chief
Jean B. Clifton Financial Officer (Principal
Financial and Accounting Officer),
Secretary and Director

/s/ John L. Vogelstein
- ------------------------------------
John L. Vogelstein Director

/s/ Errol M. Cook
- ------------------------------------
Errol M. Cook Director

/s/ Gary D. Nusbaum Director
- ------------------------------------
Gary D. Nusbaum

/s/ John R. Purcell Director
- ------------------------------------
John R. Purcell

/s/ Joseph A. Lawrence Director
- ------------------------------------
Joseph A. Lawrence

/s/ Burton B. Staniar Director
- ------------------------------------
Burton B. Staniar

59

CERTIFICATIONS

I, Robert M. Jelenic, Chairman, President and Chief Executive Officer of Journal
Register Company (the "Registrant"), certify that:

1. I have reviewed this annual report on Form 10-K of the Registrant;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this annual report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's board of directors:
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: March 27, 2003 /s/ Robert M. Jelenic
-----------------------------------------
Robert M. Jelenic
Chairman, President and Chief
Executive Officer

60

I, Jean B. Clifton, Executive Vice President, Chief Financial Officer and
Secretary of Journal Register Company (the "Registrant"), certify that:

1. I have reviewed this annual report on Form 10-K of the Registrant;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which
such statements were made, not misleading with respect to the period
covered by this report;
3. Based on my knowledge, the financial statements, and other financial
information included in this annual report, fairly present in all
material respects the financial condition, results of operations and
cash flows of the Registrant as of, and for, the periods presented in
this annual report;
4. The Registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-14 and 15d-14) for the Registrant and
we have:
a. designed such disclosure controls and procedures to ensure
that material information relating to the Registrant,
including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the
period in which this annual report is being prepared;
b. evaluated the effectiveness of the Registrant's disclosure
controls and procedures as of a date within 90 days prior to
the filing date of this annual report (the "Evaluation Date");
and
c. presented in this annual report our conclusions about the
effectiveness of the disclosure controls and procedures based
on our evaluation as of the Evaluation Date;
5. The Registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the Registrant's auditors and the
audit committee of Registrant's board of directors:
a. all significant deficiencies in the design or operation of
internal controls which could adversely affect the
Registrant's ability to record, process, summarize and report
financial data and have identified for the Registrant's
auditors any material weaknesses in internal controls; and
b. any fraud, whether or not material, that involves management
or other employees who have a significant role in the
Registrant's internal controls; and
6. The Registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation,
including any corrective actions with regard to significant
deficiencies and material weaknesses.

Date: March 27, 2003 /s/ Jean B. Clifton
-----------------------------------------
Jean B. Clifton
Executive Vice President, Chief Financial
Officer and Secretary

61

EXHIBIT INDEX

Exhibit No. Description of Exhibit
----------- ----------------------
*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, File No. 1-12955).
*3.1 Amended and Restated Certificate of Incorporation
(filed as Exhibit 3(i) to the Company's Form 10-Q/A
Amendment No. 1 for the fiscal quarter ended June 30,
1997, File No. 1-12955 (the "June 1997 Form 10-Q")).
*3.2 Amended and Restated By-laws (filed as Exhibit 3(ii)
to the Company's Form 10-Q for the fiscal quarter
ended September 30, 1999, File No. 1-12955 (the
"September 1999 Form 10-Q)).
*4.1 Company Common Stock Certificate (filed as Exhibit
4.1 the Company's Registration Statement on Form S-1,
Registration No. 333-23425 (the "Form S-1")).
*4.2 Rights Agreement dated as of July 17, 2001 between the
Company and the Bank of New York, as Rights Agent
(filed as Exhibit 4.1 to the Company's Report on Form
8-K dated July 18, 2001, File No. 1-12955).
*10.1(a) 1997 Stock Incentive Plan (filed as Exhibit 10.2 to
the June 1997 Form 10-Q).+
*10.1(b) Amendment to the 1997 Stock Incentive Plan. (filed
as Exhibit 10.1(b) to the Company's Form 10-K for
fiscal year 2001, File No. 1-12955 (the "2001 Form
10-K). +
*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 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).
*10.5 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 1999 Form 10-Q).
*10.6 Executive Incentive Compensation Plan (filed as
Exhibit 10.7 to the 2001 Form 10-K). +
**10.7 Employment Agreement by and between Journal Register
Company and Robert M. Jelenic dated March 5, 2003. +
**10.8 Employment Agreement by and between Journal Register
Company and Jean B. Clifton dated March 5, 2003. +
**21.1 Subsidiaries of Journal Register Company.
**23.1 Consent of Ernst & Young LLP.
**24 Power of Attorney (appears on signature page).
**99.1 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
**99.2 Certification pursuant to 18 U.S.C. Section 1350, as
adopted pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.

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

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

62