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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended: December 31, 2004

or

For the transition period from              to             

Commission File Number: 333-112246

Morris Publishing Group, LLC

Morris Publishing Finance Co.*

(Exact name of Registrants as specified in their charters)

725 Broad Street

Augusta, Georgia 30901

(Address of principal executive offices)

(706) 724-0851

(Registrants’ Telephone number)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

None

Indicate by check mark whether the Registrants (1) have 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) have been subject to such filing requirements for the past 90 days.    Yes  x    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 the registrants’ 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.  ¨

Indicate by check mark whether the Registrants are accelerated filers (as defined in Exchange Act Rule 12b-2).    Yes  ¨    No  x

The aggregate market value of the voting and non-voting common equity of the registrants held by non-affiliates is $0 as of June 30, 2004 and currently.

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Morris Publishing Group, LLC is a wholly owned subsidiary of Morris Communications Company, LLC, a privately held media company. Morris Publishing Finance Co., a wholly-owned subsidiary of Morris Publishing Group, LLC, was incorporated in 2003 for the sole purpose of serving as a co-issuer of our senior subordinated notes in order to facilitate the offering. Morris Publishing Finance Co. does not have any operations or assets of any kind and will not have any revenues. In this report, “Morris Publishing,” “we,” “us” and “our” refer to Morris Publishing Group, LLC and its subsidiaries. “Morris Communications” refers to Morris Communications Company, LLC. Morris Publishing Group was formed in 2001 and assumed the operations of the newspaper business segment of our parent, Morris Communications. Discussions of Morris Publishing and our operations prior to November 2001 include the business as previously conducted by the Morris Communications newspaper business segment.

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FORWARD LOOKING STATEMENTS

This report contains forward-looking statements. These statements relate to future periods and include statements regarding our anticipated performance. You may find discussions containing such forward-looking statements in “Managements Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of this report.

Generally, the words “anticipates”, “believes”, “expects”, “intends”, “estimates”, “projects”, “plans” and similar expressions identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other important factors that could cause our actual results, performance or achievements or industry results, to differ materially from any future results, performance or achievements expressed or implied by these forward-looking statements.

Although we believe that these statements are based upon reasonable assumptions, we can give no assurance that these statements will be realized. Given these uncertainties, prospective investors are cautioned not to place undue reliance on these forward-looking statements. These forward-looking statements are made as of the date of this report. We assume no obligation to update or revise them or provide reasons why actual results may differ. Important factors that could cause our actual results to differ materially from our expectations include, without limitation:

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Part I

Item 1—Business

Information availability

Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports are available free of charge on our web site, www.morris.com, as soon as feasible after such reports are electronically filed with or furnished to the Securities and Exchange Commission. In addition, information regarding corporate governance at Morris Publishing and our parent, Morris Communications, is also available on our web site. The information on our web site is not incorporated by reference into, or as part of, the Report on Form 10-K.

The company

Morris Publishing is a private company owned by the William S. Morris III family as part of their Morris Communications group of companies. The Morris Publishing Group consists of 26 daily and 12 non-daily newspapers, 4 city magazines and numerous other free publications. Our corporate offices are located at 725 Broad Street, Augusta, Georgia, 30901 and our telephone number at this address is 706-724-0851.

We publish newspapers in the United States. For the year 2004, our newspapers had average daily and Sunday paid circulation (unaudited) aggregating approximately 677,000 and 755,000, respectively. Our largest newspapers are The Florida Times-Union, Jacksonville, Florida, The Augusta Chronicle, Georgia, The Topeka Capital-Journal, Kansas, Savannah Morning News, Georgia, Lubbock Avalanche-Journal, Texas and Amarillo Globe-News, Texas, which combined account for approximately 67% of our average daily circulation.

We also print and distribute periodical publications and operate commercial printing operations in conjunction with our newspapers. In addition, our newspaper operations generate revenues from online media formats.

Our newspapers are geographically diverse, primarily serving mid-sized to small communities in Florida, Georgia, Texas, Kansas, Nebraska, Oklahoma, Michigan, Missouri, Minnesota, Alaska, Arkansas, South Dakota, Tennessee and South Carolina. The majority of our daily newspapers have no significant competition from other local daily newspapers in their respective communities. However, from time to time, each individual newspaper may perform better or worse than our newspaper group as a whole due to certain local conditions, particularly within the retail, auto, housing and labor markets.

We have been consistently profitable in varying economic climates, with generally stable operating results. Our total operating revenues for 2004 were $456 million and have ranged between $433 million and $455 million over the previous four years. Operating income was $81.5 million in 2004 and has ranged between $68.4 million and $88.3 million over the previous four years. Our operating margin was 17.9% in 2004 and has ranged between 15.6% and 20.4% during the previous four years.

We have two primary sources of revenue: advertising and circulation. In 2004, advertising revenue represented 80.7% of total operating revenues. Retail, classified and national advertising revenue represented 53.2%, 39.2% and 7.6%, respectively, of total advertising revenue. Circulation revenue comprised 15.4% of total operating revenue. Our other revenues consist primarily of commercial printing and other online revenues.

Advertising revenue is primarily determined by the linage, rate and mix of advertisement. The advertising rate depends largely on our market reach, primarily through circulation, and market penetration. Circulation revenue is based on the number of copies sold.

Employee and newsprint costs are the primary costs at each newspaper. Labor and employee costs have represented 45- 50% of our total operating expenses while newsprint costs have represented 10 – 15% of

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our total operating expenses. Historically, newsprint has been subject to significant price fluctuations from year to year, unrelated in many cases to general economic trends. Supply and demand has typically controlled pricing. We believe that the current sources for newsprint are adequate to meet our current and foreseeable demand.

History

Morris Publishing was formed in 2001 as “MCC Newspapers, LLC” to own and operate the newspaper business historically operated by our parent, Morris Communications. Discussions of Morris Publishing and our results of operations include the business as previously conducted by the Morris Communications newspaper business segment. We changed our name to Morris Publishing Group, LLC in July 2003.

William S. Morris III joined our business in the 1950s and has been our chairman for more than three decades. William S. Morris IV, his elder son, is president and CEO of Morris Publishing. The Morris family became involved with The Augusta Chronicle in 1929, when William S. Morris, Jr., father of today’s chairman, became its bookkeeper. The Augusta Chronicle was started in 1785 as the Augusta Gazette, the city’s first newspaper. Mr. Morris, Jr. purchased The Augusta Chronicle in the early 1940s with a partner, and later purchased his partner’s half interest. In 1955, Mr. Morris, Jr., purchased Augusta’s afternoon paper The Augusta Herald.

With the Augusta newspapers as a base, our expansion commenced in 1956 with the purchase of a radio and television station in Augusta and an initial public offering of common shares. In the 1960s, we sold the television station and purchased two other daily newspapers in Georgia—one in Savannah and one in Athens. Also, during the 1960’s, our public shares were repurchased and we returned to our current private status. In 1972, we purchased our Texas newspapers in Amarillo and Lubbock. In 1983, we acquired The Florida Publishing Company, which included The Florida Times-Union and other Florida newspapers.

Our expansion continued in 1995 with the purchase of all of the outstanding stock of Stauffer Communications, Inc. This purchase included 20 daily newspapers, non-daily newspapers and shoppers, as well as television and radio stations and other properties that are owned, or have been disposed of, by Morris Communications or its other operating subsidiaries.

Recent events

On February 24, 2005, Morris Publishing Group entered into an amendment with respect to its existing Management and Services Agreement with MSTAR Solutions, LLC (“MSTAR Solutions”), a subsidiary of Morris Communications. The amendment effective as of January 1, 2005, changes the annual fee calculation to the lesser of the existing fee or 2.5% of Morris Publishing Group’s annual total operating revenues. The existing fee was Morris Publishing Group’s allocable share (based upon usage) of the actual annual costs of operations of MSTAR Solutions, including third party costs, as allocated by Morris Communications. The separate 4% management fee payable to Morris Communications Company under the original agreement was not modified.

On February 21, 2005, Morris Publishing Group entered into an amendment with respect to its existing lease on the Savannah newspaper facilities in order to add the administration building, which was recently constructed by the current lessor and is adjacent to the other production facilities currently leased. The annual base rent for the 78,000 square foot administration building is $980,000. The lease was effective as of November 1, 2004 and expires December 31, 2012, concurrent with the termination of the lease of the remainder of the facilities. The lessor is an entity indirectly owned by three of Morris Publishing Group’s directors, William S. Morris IV, J. Tyler Morris and Susie Morris Baker.

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Industry background

Key revenue drivers

The newspaper industry is reported to generate annual revenues of approximately $56 billion primarily based on advertising and circulation. For typical newspapers, 70-75% of their total revenue is derived from advertising, while 15-20% comes from circulation. Other sources account for 5-15%. Other revenue streams may include commercial printing, shoppers and magazines, direct marketing and online revenues, including advertising and web site development.

While newspaper revenue is directly impacted by the level of advertising, it is indirectly impacted by market conditions and factors like demand and interest rates. Newspaper companies can affect, to some extent, the demand for advertising by influencing circulation and readership, and by adjusting advertising rates, sales efforts and customer service.

There are three major classifications of newspaper advertising: retail, classified, and national.

In the past decade, newspapers in general have been reported to have increased advertising revenue but lost advertising market share. In 1990, the newspaper industry was reported to capture $32 billion in advertising revenue and to have garnered a 25% share of advertising market expenditures. Revenue was reported to rise to $45 billion in 2003, but advertising market share was reported to decline to 18% in 2003. While newspapers may continue to lose advertising market share to other media, we believe newspapers should remain competitive.

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Key cost drivers

The two largest costs of a newspaper are labor and newsprint.

Labor: Labor costs represent approximately 35-40% of newspapers’ total revenues. Total industry employment steadily declined in the 1990s, as significant investment in more automated production methods has led to efficiencies and higher productivity per worker. However, industry-wide medical health care insurance and pension benefit costs are rising.

Newsprint: Newsprint costs represent approximately 10-15% of newspapers’ total revenues, and supply and demand has typically controlled its pricing. Since 1990, quarterly average newsprint costs ranged from $420 to $740 per metric ton and averaged $533 per metric ton during the same period. Newsprint prices increased by almost 11% on average during 2004 and 20% on average in 2003 compared to 2002.

Newspapers continue to face volatile newsprint prices. In the first half of 2001, newsprint prices in the U.S. were at their highest point since mid-1996. Prices dropped to their lowest level in a decade in mid-2002, but have trended upward since then. Prices are expected to increase on average from 12% to 14% in 2005. Much of the newsprint consumed in the U.S. comes from Canada and a rise in the value of the Canadian dollar consolidated with production curtailments may offset stable demand and drive prices higher in the near term.

Circulation

Circulation is important to the newspaper industry in two ways. From an editorial perspective, increased circulation demonstrates the quality of the editorial product and the demand for the paper from readers. From a revenue perspective, advertisers are willing to pay higher rates for greater reach.

The newspaper industry has faced circulation and readership declines since the 1980s. Over the past 25 years, the total number of daily newspapers in the United States has decreased from 1,745 in 1980 to 1,468 in 2004. The drop is largely due to a 49% decline in evening newspapers, principally because of the emergence of nightly news broadcasts, 24-hour news channels, and the internet. The total number of morning newspapers has doubled and Sunday newspapers have increased by 24%.

The advertising recession has driven publishing companies to significantly reduce their operating costs. Consequently, the industry is experiencing a trend towards consolidation. By owning multiple properties in specific markets, newspaper publishers can spread costs and achieve greater efficiencies.

Recently enacted telemarketing rules adopted by the Federal Trade commission and Federal Communications Commission, including the National Do-Not-Call Registry and regulations will have an impact on the industry’s ability to source subscriptions through telemarketing.

Online

The internet provides an additional medium through which newspapers reach audiences, and newspapers have ventured online to increase readership and leverage their local brands.

Approximately 62% percent of internet users looking for local news are reported to turn to online newspapers; this has helped newspapers secure a reported 39% of local online advertising spending in 2004. Broadcast television is reported to have collected 5% of internet revenues last year.

The majority of local online advertising dollars comes from classifieds, with the internet accounting for about 33% of all help wanted revenues. While most large newspapers have fallen behind Monster.com in both listings and revenues, the smaller market newspaper listings and total revenues are 2 to 5 times that of Monster.com and other competitors combined.

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Industry and market data

Unless otherwise indicated, information contained in this report concerning the newspaper industry, our general expectations concerning the industry and its segments and our market position and market share within the industry and its segments are derived from data from various third party sources as well as management estimates. Management’s estimates are derived from third party sources as well as data from our internal research and from assumptions made by us, based on such data and our knowledge of the newspaper industry which we believe to be reasonable. We have not independently verified any information from third party sources and cannot assure you of its accuracy or completeness. Our internal research has not been verified by any independent source. While we are not aware of any misstatements regarding any industry or similar data presented herein, such data involves risks and uncertainties, and is subject to change based on various factors.

Data on our market position and market share within our industry is based, in part, on independent industry publications, government publications, reports by market research firms or other published independent sources, including Newspaper Association of America and Audit Bureau of Circulation statistics. Unless otherwise indicated, all circulation information contained in this report for Morris is based upon our internal records, and represents yearly averages for daily or Sunday circulation.

Operating strategy

Our strategy is to be the preeminent source of news, information, advertising and entertainment in our markets by:

Achieving this strategy is based upon the following initiatives:

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We expect these initiatives, combined with our focus on increasing readership, to enhance our opportunities to increase our revenues.

At the end of 2004, we had converted the majority of our larger newspapers’ financial systems to the operating platform. We expect the conversion of our remaining newspapers to be complete by the end of the second quarter 2005. We will complete the conversion to the media platform by the end of 2007.

Our operating strategy may not successfully increase revenues and cash flows, based upon a number of factors. For example, a decline in economic conditions, the effects of competition from newspapers or other forms of advertising, or a decrease in the price of local or national advertising could adversely affect our advertising revenues. Our circulation may be adversely affected by competition from other publications and other forms of media and a declining number of regular newspaper buyers. A decline in circulation could adversely affect both our circulation revenue and our advertising revenue, because advertising rates are dependent upon readership. Further, our efforts to control costs, especially newsprint costs, and to create operating synergies may not be as successful as we anticipate.

Strategic acquisitions

We may, from time to time, seek strategic or targeted investments, including newspaper acquisitions and dispositions and, in that regard, we periodically review newspaper and other acquisition candidates that we believe are underperforming in terms of operating cash flows, are in the same geographic region as one of our existing newspapers where we can achieve an efficient operating cluster of newspapers, or otherwise present us with strategic opportunities for growth. Acquisitions would be made only in circumstances in which management believes that such acquisitions would contribute to our overall growth strategy, whether through revenue growth or cost reduction opportunities, and represent attractive values based on price. In addition, we may, in connection with such acquisitions, or otherwise, dispose of

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or realign our newspapers and this could be accomplished by dispositions, swaps, the exchange of one newspaper for another newspaper, or joint ventures in which we and others may contribute newspaper properties to be owned and operated through a joint venture. We may not control such joint ventures and any contribution of assets to a joint venture may reduce our ability to access cash from those assets contributed to the joint venture. Morris Publishing currently has no present commitments with respect to any material acquisitions, dispositions or joint ventures.

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Newspapers

The following table sets forth our 26 daily newspapers and their web site address:

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The following daily newspapers are in our six largest markets, which together account for approximately 67% of our average daily circulation:

Jacksonville. The Florida Times-Union, which we have operated since 1983, is our largest newspaper and serves the Jacksonville, Florida designated market area of approximately 609,000 households with a population approximately 1.2 million. Moreover, an estimated 396,000 north Floridians read The Florida Times-Union daily, 550,000 read The Florida Times-Union on Sunday and 697,000 read The Florida Times-Union at least once in seven days. In this market, we publish various niche publications such as Jacksonville, a newcomer’s guide; Water’s Edge, a lifestyle publication for affluent readers; and Skirt Magazine, a women’s magazine. We also publish three contract military publications, two of which have been awarded the highest Navy awards for excellence.

Augusta. The Augusta Chronicle, which we have operated since the early 1940s, is our second largest newspaper and serves the Augusta, Georgia community of approximately 207,000 households with a population approximately 553,000. We expect continued growth in Augusta, through a city magazine, and a variety of targeted niche publications, as well as in the surrounding communities, through the purchase in 2003 of The News and Farmer, a weekly newspaper serving Louisville, Georgia, and the launch of the McDuffie Mirror, a new weekly publication serving Thomson, Georgia. In addition, we have launched new publications, including Skirt Magazine, a women’s magazine, and LOUNGE, a young adult publication. The Augusta Chronicle web site has won awards for quality and creativity, including the 2005 Best Automotive Site Award for medium sized newspaper.

Topeka. The Topeka Capital-Journal, which we have operated since 1995, serves the Topeka, Kansas community of approximately 99,000 households with a population approximately 249,000. Through marketing partnerships with other Morris Communications subsidiaries, and through the development of more products such as Hers Kansas and Rock Kansas, the Topeka Capital-Journal has increased its daily and Sunday circulation. The Topeka Capital-Journal also publishes a wide variety of books aimed at serving the community and its visitors, including a pictorial history of Topeka as well as several publications devoted to the University of Kansas sports teams. CJ Online, our online counterpart to The Topeka Capital-Journal, averages over 6.1 million page views per month. CJ Online has won several prestigious awards, including being named the best newspaper internet site by the Newspaper Association of America and Editor and Publisher Magazine.

Savannah. The Savannah Morning News, which we have operated since the 1960s, serves the Savannah, Georgia community of approximately 118,000 households with a population total of approximately 312,000. During 2004 we launched Skirt Magazine, a free distribution women’s magazine. In addition, the newspaper relocated during 2004 to its new state of the art facilities leased from a related third party. The 245,000 square foot facility, which includes a 145,000 square foot production facility, has enhanced newpaper and commercial printing capabilities along with substantial improvements in its packaging and distribution capabilities.

Lubbock. The Lubbock Avalanche-Journal, which we have operated since 1972, serves the Lubbock, Texas community of approximately 139,000 households with a total population of approximately 376,000. Lubbock Online, our online counterpart to The Lubbock Avalanche-Journal, averages over 4.1 million page views per month.

Amarillo. The Amarillo Globe-News, which we have operated since 1972, serves the Amarillo, Texas community of approximately 146,000 households with a population approximately 390,000.

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The following table sets forth our non-daily publications, most of which are in close proximity to daily newspaper markets:

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In addition, Morris Publishing circulates the following free community publications as part of its strategic initiative to maximize penetration in certain markets:

In addition, Morris Publishing owns Flashes Printing, a commercial printing operation located in Michigan, which also prints the Holland Sentinel daily newspaper and publishes the Flashes Shopping Guides.

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During 2004, as part our strategic initiative to increase our presence in niche publications, we acquired Skirt Magazine, a free distribution women’s magazine based in Charleston. Following the acquisition, we started the additional Skirt Magazines located in Augusta, Charlotte, Savannah and Jacksonville.

Morris Publishing management expense

Morris Communications, our parent, provides management and related services to us, as well as its other operating subsidiaries. Currently, a significant portion of Morris Communications’ time is devoted to our affairs.

Morris Communications provides senior executive management services and personnel (including the services of Mr. William S. Morris III, Mr. William S. Morris IV, Craig S. Mitchell and Steve K. Stone), as well as general and administrative services such as legal, accounting, finance and treasury, tax, merger and acquisition, risk management, human resources/personnel, employee benefits, travel and aircraft usage, corporate communications, real estate, online services, architectural and engineering, and external and internal audit functions, purchasing and participation in the Shared Services Center operated by MStar Solutions.

As compensation for these services, beginning August 7, 2003, Morris Communications is entitled to receive annual management fees (payable monthly) equal to the greater of 4.0% of our annual total operating revenues or the amount of actual expenses allocable to the management of our business (such allocations to be based upon time and resources spent on the management of our business by Morris Communications). Prior to August 7, 2003, Morris Communications’ costs of providing these services were allocated among its operating divisions and our allocated share is reflected in our financial statements. From the year 2000 through August 7, 2003, our allocable costs for the services provided by Morris Communications ranged from approximately 3.9% to 4.4% of our annual total operating revenues. For 2004, the fee was $18.2 million, based upon 4.0% of our 2004 total operating revenues.

In addition, as part of the initiatives commenced in 2002 to move to a shared services concept, our parent created MStar Solutions, LLC, an organization that provides savings and cost efficiencies by leveraging purchasing power; centralizing, standardizing and simplifying back office and administrative procedures; creating and implementing an advanced business platform, and leveraging the technology platform. We have paid our allocable share (based upon usage) of the actual costs of operations of MStar Solutions. Commencing in 2005, the services agreement was amended to cap the payment to MStar Solutions at 2.5% of annual total net operating revenues.

The term of the amended services agreement did not change and will still terminate in 2013 on the due date the senior subordinated bonds. Morris Communications may terminate the agreement if Morris Publishing fails to pay the fees or experiences a change in control. We may terminate the agreement if Morris Communications fails to cure a material breach, performs dishonestly, files bankruptcy, or in certain other events.

Employee relations

As of December 31, 2004, Morris Publishing employed approximately 3,412 full-time and 949 part-time employees, none of whom was covered by collective bargaining agreements. We believe that our relations with our employees are generally good.

Seasonality

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

Competition

While most of our daily newspapers are the only daily newspapers of general circulation published in their respective communities, they do compete within their own geographic areas with other weekly

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newspapers in their own or adjacent communities, other daily newspapers of general circulation published in adjacent or nearby cities and towns, as well as regional and national newspapers. Competition for advertising and paid circulation comes from local, regional and national newspapers, shoppers, radio and television broadcasters, cable television (national and local), direct mail, electronic media, including the internet, and other forms of communication and advertising media that operate in our markets. Competition for advertising revenue (the aggregate amounts of which is largely driven by national and regional general economic conditions) 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. Our non-daily publications, including shoppers, compete primarily with direct mail advertising, shared mail packages and other private advertising delivery services.

Regulatory matters

FCC ownership rules. Morris Communications, our parent, owns other subsidiaries which in turn own radio broadcast stations which are subject to regulation by the Federal Communications Commission (“FCC”) under the Communications Act of 1934, as amended (the “Communications Act”). The ownership by such entities of radio broadcast stations may limit our opportunity to acquire additional newspapers in certain geographic locations.

FCC rules include restrictions on the common ownership or control of interests in radio stations and certain other media interests in the same market, including television and radio broadcast stations, as well as daily newspapers.

On June 2, 2003, the FCC by a three-to-two vote adopted new ownership rules, which included significant changes to the previous rules. On June 24, 2004, a three-judge panel of the United States Court of Appeals for the Third Circuit released a split decision on appeal in which it remanded much of the 2003 decision to the agency for further consideration. In addition, the Third Circuit extended a stay on the implementation of the FCC’s revised rules, which originally was imposed by the court following their adoption in 2003. As a result, the ownership restrictions that were in place prior to the FCC’s 2003 decision generally continue to govern media transactions, pending completion of the agency proceedings on remand and/or further judicial review. In January 2005, several parties filed petitions for review by the United States Supreme Court of the Third Circuit decision. Those petitions remain pending. The discussion below provides an overview of the changes to the newspaper/broadcast cross-ownership and local radio ownership rules contemplated in the FCC’s 2003 decision, and the effect of the Third Circuit decision on each rule.

The newspaper/broadcast cross-ownership rule generally prohibits one entity from owning both a commercial broadcast station and a daily newspaper in the same community. The radio/television cross-ownership rule allowed a party to own one or two TV stations and a varying number of radio stations within a single market, depending on the number of independently owned media voices that would remain post combination. In its 2003 decision, the Commission decided to replace both rules with the following less restrictive “cross-media limits”:

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In its June 2004 opinion, the Third Circuit remanded the revised cross-media limits to the FCC. Pursuant to the stay order issued by the court in connection with its decision, the pre-existing newspaper/broadcast cross-ownership ban is currently in effect at the agency.

Morris Communications’ subsidiaries currently hold licenses for radio stations pursuant to waivers of the newspaper/broadcast ban in several of Morris Publishing’s newspaper markets. In both Amarillo, Texas and Topeka, Kansas, the FCC has granted Morris waivers of the cross-ownership restriction pending the final outcome of the agency’s 2003 media ownership proceeding and any related judicial review. In addition, a subsidiary of Morris Communications received a twelve-month waiver to hold a radio broadcast license for a station it acquired in January 2004 with a service contour that includes Newton, Kansas, which is also one of our newspaper markets. That waiver expired on January 30, 2005. Prior to that date, however, Morris filed a request with the agency to make the waiver permanent or, alternatively, to either extend it pending the final outcome of the FCC’s 2003 media ownership proceeding or to extend it for an additional twelve months. That request remains pending.

If the revised media ownership rules adopted by the Commission in 2003 are modified through the agency’s remand proceeding, further judicial review, or congressional action, Morris Communications and Morris Publishing may be required to divest either their radio stations or their newspaper interests in one or more of these markets. If, however, the Third Circuit decision is overturned upon further judicial review and the revised ownership rules are permitted to take effect, we believe that the radio broadcast licenses for the stations in these locations will be able to continue to be held without waivers. Further, FCC cross-ownership rules may have the effect of preventing us from pursuing or consummating a newspaper acquisition that our management would have otherwise pursued in markets in which Morris Communications owns radio stations.

With respect to local radio ownership, the FCC limits the number of radio stations that a single entity may own in a single market. The revised rule retains the current limits on local radio ownership, but modifies the methodology for defining a radio market. Specifically, the Commission opted in its 2003 decision to replace its signal contour method of defining local radio markets with a geographic approach based upon Arbitron market designations. In response to a rehearing petition filed by the agency, the Third Circuit agreed to lift its stay with respect to this aspect of the FCC’s revised ownership rules. Accordingly, the Arbitron methodology is currently in effect. In addition, the FCC has initiated a rulemaking proceeding seeking comment on how to define radio markets not ranked by Arbitron. It does not appear that implementation of the new radio market definitions will require divestiture of any of Morris’ stations, but those definitions could affect Morris’ ability to modify the facilities of or sell such stations in the future.

The U.S. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters that could, directly or indirectly, materially adversely affect the operation and ownership of Morris Publishing. Morris Publishing is unable to predict the outcome of future federal legislation or the impact of any such laws or regulations on our operations.

Environmental matters

Our newspapers use inks, photographic chemicals, solvents and fuels. The use, management and disposal of these substances and our operations in general are regulated by federal, state, local and foreign environmental laws and regulations including those regarding the discharge, emission, storage, treatment, handling and disposal of hazardous or toxic substances as well as remediation of contaminated soil and groundwater. These laws and regulations impose significant capital and operating costs on our business and there are significant penalties for violations.

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Certain environmental laws hold current owners or operators of land or businesses liable for their own and for previous owners’ or operators’ releases of hazardous or toxic substances. Because of our operations, the long history of industrial operations at some of our facilities, the operations of predecessor owners or operators of certain of our businesses, and the use, production and release of regulated materials at these sites and at surrounding sites, we may be subject to liability under these environmental laws. Many of our facilities have never been subjected to phase I environmental audits. Various facilities of ours have experienced some level of regulatory scrutiny in the past and are, or may become, subject to further regulatory inspections, future requests for investigation or liability for past practices.

During 2004, the Savannah newspaper relocated to its new state of the art facilities. The newspaper’s former warehouse was sold in 2004 and the joint administrative and production facility in downtown Savannah is presently under contract for sale. As part of our efforts to complete the sale, we have recently completed the environmental remediation on this production facility at a cost of approximately $700,000.

The federal Comprehensive Environmental Response, Compensation & Liability Act of 1980 as amended (“CERCLA”) and similar state counterpart acts, provide for strict, and under certain circumstances, joint and several liability, for among other things, generators of hazardous substances disposed of at contaminated sites. We have received requests for information or notifications of potential liability from the United States Environmental Protection Agency under CERCLA and states under counterpart acts for a few off-site locations. We have not incurred any significant costs relating to these matters and we have no information to suggest that we will incur material costs in the future in responding to conditions at these sites.

The nature of our operations exposes us to certain risks of liabilities and claims with respect to environmental matters. We believe our operations are currently in material compliance with applicable environmental laws and regulations. In many jurisdictions, environmental requirements may be expected to become more stringent in the future, which could affect our ability to obtain or maintain necessary authorizations and approvals or result in increased environmental compliance costs.

We do not believe that environmental compliance requirements are likely to have a material effect on us in the near future. We cannot predict what additional environmental legislation or regulations will be enacted in the future or how existing or future laws or regulations will be administered or interpreted, or the amount of future expenditures that may be required in order to comply with these laws. There can be no assurance that future environmental compliance obligations or discovery of new conditions will not arise in connection with our operations or facilities and that these would not have a material adverse effect on our business, financial condition or results of operations.

Morris Publishing Finance Co.

Morris Publishing Finance Co., a wholly-owned subsidiary of Morris Publishing Group, LLC, was incorporated in 2003 for the sole purpose of serving as a co-issuer of our senior subordinated notes in order to facilitate the offering. Morris Publishing Finance Co. does not have any operations or assets of any kind and will not have any revenues.

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Item 2 — Properties

Management believes that all of our properties are in generally good condition and suitable for current operations. Our executive offices are located in Augusta, Georgia. Our main facilities are shown on the following table. Our production facilities, which are indicated by the presence of a press line, are in most cases, newspaper office facilities as well. We own all of the following facilities except the facilities located on Chatham Parkway* in Savannah, Georgia, which are operated under a lease with an affiliate. See “Certain relationships and related transactions.”

During the three years ended December 31, 2004, we spent $67.7 million for additions to property, plant and equipment.

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Item 3 — Legal Proceedings

From time to time, we are involved in litigation in the ordinary course of our business. In our opinion, the outcome of any pending legal proceedings will not have a material adverse impact on our financial position or results of operations.

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Item 4 — Submission of Matters to a Vote of Security Holders

None.

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Part II

Item 5 — Market for the Registrant’s Common Equity, Related Stockholders Matters and Issuer Purchases of Equity Securities

Common stock

There is no public trading market for our equity, all of which is held by Morris Communications Company, LLC.

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Item 6 — Selected Financial Data

The selected historical financial data of Morris Publishing set forth below should be read in conjunction with our consolidated financial statements, including the notes thereto, and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this annual report. The consolidated statement of income and other operating and financial information data for each of the years ended December 31, 2004, 2003 and 2002 and the consolidated balance sheet data as of December 31, 2004 and 2003 are derived from our audited consolidated financial statements included elsewhere in this report. We do not have audited financial statements for the year ended December 31, 2000 and, therefore, the consolidated statement of income and other operating and financial information data for the year ended December 31, 2000 and the consolidated balance sheet data as of December 31, 2000 are derived from our unaudited consolidated financial statements.

Morris Publishing was formed in late 2001 as part of a corporate reorganization of our parent, Morris Communications and, therefore, does not have a recent operating history as an independent company. Our historical consolidated financial statements contained in this report reflect periods during which we did not operate as an independent company. See Note 1 to the Consolidated Financial Statements.

The financial information we have included in this report reflects the historical results of operations and cash flows of Morris Publishing with allocations made for corporate and other services provided to us by Morris Communications. Operating costs and expenses reflect our direct costs together with certain allocations by Morris Communications for corporate services, debt and other shared services that have been charged to us based on usage or other methodologies we believe are appropriate for such expenses. In the opinion of management, these allocations have been made on a reasonable basis and approximate all the material incremental costs we would have incurred had we been operating on a stand-alone basis; however, there has been no independent study or any attempt to obtain quotes from third parties to determine what the costs of obtaining such services would have been.

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Item 7—Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with Item 6. Selected Financial Data, and with the consolidated financial statements that appear elsewhere in this Form 10-K.

Recent events

On March 2, 2005, the Securities Exchange Commission extended the compliance dates one year for non-accelerated filers to become compliant with Section 404 of the Sarbanes Oxley Act regarding internal control over financial reporting. Morris Publishing now has until the end of 2006 to become in full compliance with the act.

On February 24, 2005, Morris Publishing Group entered into an amendment with respect to its existing Management and Services Agreement with MSTAR Solutions, LLC (“MSTAR Solutions”), a subsidiary of Morris Communications. The amendment effective as of January 1, 2005, changes the annual fee calculation to the lesser of the existing fee or 2.5% of Morris Publishing Group’s annual total operating revenues. The existing fee was Morris Publishing Group’s allocable share (based upon usage) of the actual annual costs of operations of MSTAR Solutions, including third party costs, as allocated by Morris Communications. The separate 4% management fee payable to Morris Communications Company under the original agreement was not modified.

On February 21, 2005, Morris Publishing Group entered into an amendment with respect to its existing lease on the Savannah newspaper facilities in order to add the administration building, which was recently constructed by the current lessor and is adjacent to the other production facilities currently leased. The annual base rent for the 78,000 square foot administration building is $980,000. The lease was effective as of November 1, 2004 and expires December 31, 2012, concurrent with the termination of the lease of the remainder of the facilities. The lessor is an entity indirectly owned by three of Morris Publishing Group’s directors, William S. Morris IV, J. Tyler Morris and Susie Morris Baker.

Critical accounting policies and estimates

The preparation of consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to allowances for doubtful accounts, intangible assets, management fees, income taxes and post-retirement benefits. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from those estimates.

We believe the following critical accounting policies are our most significant judgments and estimates used in the preparation of our consolidated financial statements.

Inventory — The cost of newsprint inventory is determined by the last in first out method. At year end, the newsprint inventory is evaluated and adjusted to the lower of cost or market. Newsprint purchases are combined with those of other newspaper companies to obtain the best price available. The company considers its relationship with newsprint producers to be good. We have not entered into any derivative contracts for newsprint.

Accounts receivable — We maintain allowances for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances could be required. We assess, at least annually, the adequacy of our allowances for losses on accounts receivable using a combination of specific identification and the aging of accounts receivable. Payment in advance for some advertising and circulation revenue and credit background checks, have assisted us in maintaining historical bad debt losses of less than 1.0% of revenue.

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Goodwill and other intangibles — We have significant intangible assets recorded on our balance sheet. Certain of our newspapers operate in highly competitive markets. Prior to January 1, 2002, we amortized our goodwill and identifiable intangible assets over their estimated useful lives. Upon the adoption, effective January 1, 2002, of a new accounting standard (Statement of Financial Accounting Standards (“SFAS”) No. 142) we ceased amortizing goodwill and now test goodwill and indefinite-lived assets for impairment on an annual basis. Inability to sustain profitable operations in our newspapers could result in a material impairment of our intangible assets in the future.

We are required to test its goodwill and indefinite-lived intangible assets (including mastheads) for impairment on an annual basis, which occurs on December 31st. Additionally, goodwill and other indefinite-lived intangible assets are tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We have performed the required impairment tests of goodwill and indefinite-lived intangible assets, which resulted in no impairments.

Revenue recognition — Advertising revenues are recognized when the advertisements are printed and distributed. Circulation revenues are recorded as newspapers are delivered. Amounts received from customers in advance of revenue recognition are deferred as liabilities. Other revenue is recognized when the related product or service has been delivered.

Allocated costs — Operating costs and expenses reflect our direct charges, together with certain allocations by Morris Communications for corporate services, debt and employee benefits that have been charged to us based on usage or other methodologies deemed by management to be appropriate for such expenses. In the opinion of management, these allocations have been made on a reasonable basis and approximate all the material incremental costs we would have incurred had we been operating on a stand-alone basis; however, there has been no independent study or any attempt to obtain quotes from third parties to determine what costs of obtaining such services would have been. Beginning in August 2003, the costs for these services, debt and employee benefits are based on new agreements and could result in a change in expenses incurred. For 2003, the management expenses allocated to us through August 7, 2003 totaled $7.8 million. The management fee under our new management agreement from August 7, 2003 through the end of the year totaled $7.8 million, for total management fees and expenses for the year of $15.6 million. On a pro forma basis, had the management agreement been in place at the beginning of the years 2002 and 2003, our management fees would have been $17.5 million in 2003, an increase of $1.9 million over our actual 2003 results, and would have been $17.4 million in 2002, which was the same as our actual results. For 2004, the fee was $18.2 million, based upon 4.0% of our 2004 total operating revenues.

Debt — On August 7, 2003, we refinanced substantially all of our long-term indebtedness by issuing $250 million of 7% Senior Subordinated Notes due 2013 and entering into a $400 million credit facility. In September 2003, an additional $50 million of senior subordinated notes were issued. On a pro forma basis, had the refinancing been in place at the beginning of the years 2003 and 2002, our interest expense would have increased by $4.7 million and $6.7 million, respectively. The loss incurred on the extinguishment of the prior debt was $6.0 million.

Retiree healthcare benefits — We have significant retiree healthcare and disability benefit plan costs and obligations that are allocated from Morris Communications. Inherent in these allocations are key assumptions including projected costs, discount rates and expected return on plan assets. We are required to consider current market conditions, including changes in interest rates, in selecting these assumptions. Changes in the related retiree health care and health and disability costs or obligations may occur in the future because of changes resulting from fluctuations in our employee headcount and/or changes in the various assumptions.

Income taxes — We are a single member limited liability company and are not subject to income taxes. However, our results are included in the consolidated federal income tax return of Morris Communications and its parent corporation. Tax provisions are settled through the intercompany account and Morris Communications makes income tax payments based on our results. We have entered into a formal tax sharing agreement with Morris Communications, under which we are required to provide for its portion of income taxes. Under the terms of the agreement, we remit taxes for its current tax liability to Morris Communications. Accordingly, we recognize an allocation of income taxes in our separate financial statements in accordance with the agreement.

We account for income taxes under the provisions of the liability method, which requires the recognition

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of deferred tax assets and liabilities for future tax consequences attributable to differences between the financial statement carrying amount of existing assets and liabilities and their respective tax bases. The recognition of future tax benefits is required to the extent that realization of such benefits is more likely than not.

Executive overview

Morris Publishing was formed in 2001 as “MCC Newspapers LLC” to own and operate the newspaper business historically operated by our parent, Morris Communications Company, LLC. Discussions of Morris Publishing and our results of operations include the business as previously conducted by the Morris Communications’ newspaper business segment. We changed our name to Morris Publishing Group, LLC in July 2003.

Our historical consolidated financial statements contained in this document reflect periods during which we did not operate as an independent company. See Note 1 to consolidated financial statements for the years ended December 31, 2004, 2003, and 2002.

Morris Publishing owns and operates 26 daily and 12 non-daily newspapers, 4 city magazines and numerous other free publications, primarily located in mid-sized to small markets across the United States. While most of our revenue is generated from advertising and circulation from our newspaper operations, we also print and distribute periodical publications and operate commercial printing operations in conjunction with our newspapers. In addition, our newspaper operations generate revenues from both print and online media formats.

From time to time, each individual newspaper may perform better or worse than our newspaper group as a whole due to certain local conditions, particularly within the retail, auto, housing and labor markets.

Linage, rate and mix of advertisement are the primary components of advertising revenues. The advertising rate depends largely on our market reach, primarily through circulation, and market penetration. The number of copies sold and the amount charged to our customers are the primary components of circulation revenues. Our other revenues consist primarily of commercial printing and other online revenues.

Employee and newsprint costs are the primary costs at each newspaper. Labor and employee costs have represented 45-50% of total operating expenses and newsprint costs have represented 10 – 15% of total operating expenses. Historically, newsprint has been subject to significant price fluctuations from year to year, unrelated in many cases to general economic trends. Supply and demand has typically controlled pricing. We believe that current and future sources of newsprint will be sufficient to meet our current and anticipated requirements.

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Current initiatives

Our primary operating strategy is to grow our market share and to operate efficiently in all markets. Our initiatives have been directed at improving our local news and information content, enhancing our online formats to complement our daily newspapers, creating cost saving synergies through our weekly and other niche publications, and investing in technology that enables us to account for, print, produce and deliver our products more efficiently. Since declines in circulation and readership of daily newspapers have resulted in a loss of advertising market share in our industry, we continue to focus on circulation retention efforts through lengthened subscriptions periods, enhanced payment methods, and increased service levels.

Our current initiatives are as follows:

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Overview

The following table summarizes our consolidated financial results for the three years ended December 31, 2004, 2003 and 2002:

Advertising revenues were up $18.8 million, or 5.4%, for the twelve months ended December 31, 2004, a significant improvement from the $5.8 million, or 1.7%, increase in 2003 from 2002. However, circulation continued its negative trend, with revenues decreasing $1.3 million, or 1.8%, in 2004 from 2003, and decreasing $0.4 million, or 0.6%, in 2003 from 2002.

For the twelve months ended December 31, 2004, advertising and circulation revenues represented 80.7% and 15.4%, respectively, of our total net operating revenues. Our advertising revenues consisted of:

To offset the downward trend in circulation revenues, parts of our strategic initiatives have been aimed at enhancing our online formats to complement our daily newspapers and at creating cost savings and readership synergies through acquiring and developing our publications. The table below reflects the contribution by our web sites, niche publications and our recently acquired publications to our revenue growth:

Compared to the prior year, our daily newspapers’ total operating revenue increased 3.9% in 2004 and 1.4% in 2003. All of our major newspapers, with the exception of Topeka, reported increases in revenue during 2004. While Savannah, Amarillo, Topeka and several of our other dailies’ revenues were down in 2003, Topeka was the only daily showing a decrease during both 2004 and 2003.

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Topeka’s total revenues decreased by 5.0% in 2004, primarily from a 9.9% and 6.7% drop in retail advertising and circulation revenues, respectively.

Total operating revenues from all publications owned by Morris for all the years presented increased 3.3% in 2004, compared to a 1.0% increase in 2003 from 2002. Publications acquired since the end of 2001 accounted for 0.8% of our total operating revenues in 2004.

During 2004, operating revenues in Jacksonville and Savannah increased 6.1% and 5.5%, respectively, with Jacksonville accounting for over 47% of our total net operating revenue increase. Savannah’s retail advertising rose 8.9%, while Jacksonville’s classified and national advertising increased 16.2% and 8.4%, respectively. Jacksonville’s strength in national advertising was from the automotive, travel and insurance sectors. We expect increases in retail advertising for Jacksonville during the first quarter 2005 due to its hosting the National Football League’s Super Bowl during February.

Total operating revenues for our niche publications and commercial printing operations for 2004 were up 5.7% primarily due to the acquisition and introduction of Skirt Magazine, a free distribution women’s magazine. Skirt Magazine reported an operating loss of $0.8 million on total net operating revenues of $2.3 million. We expect Skirt Magazine to break even in 2005 on a revenue increase of approximately 40% to 45%.

Total online revenues for 2004 were $18.6 million, up $4.4 million, or 30.3%, from $14.2 million in 2003, compared to a $3.7 million, or 35.3%, increase in 2003 from 2002.

Revenues from our commercial printing operation have decreased 32.1% since 2002.

During 2004, employee, newsprint and other non-depreciation operating costs increased $14.8 million, or 4.4%, compared to the $16.9 million, or 5.3%, increase in 2003 from 2002. Employee costs were up $5.6 million, or 3.3%, in 2004 from 2003, considerably less than the $9.8 million, or 6.0%, increase in 2003 from 2002. Conversely, newsprint, ink and supplement costs were up $3.2 million, or 6.3%, in 2004 from 2003, compared to a $1.8 million, or 3.7%, increase in 2003 from 2002.

During 2004, interest and loan amortization expense increased $6.2 million, or 23.8%, offset somewhat by the $1.2 million interest income earned on the short term loans to our parent company. Interest and loan amortization expense was up $1.0 million, or 4.0%, in 2003 compared to 2002. In 2003, we reported a $6.0 million loss from the extinguishment of debt due to our refinancing.

During 2004, our weighted average debt outstanding was approximately $544.3 million, up from $521.2 million in 2003 and $507.2 million in 2002. Our weighted average interest rate was 5.46% in 2004, up from 4.60% in 2003.

Our effective tax rate was 39.4% for 2004, approximately the same as in 2003 and in 2002.

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Results of operations for the years ended December 31, 2004, 2003 and 2002

The table below presents our total net operating revenue for the twelve month periods ended December 31, 2004, 2003 and 2002:

During 2004, total advertising revenues for our daily newspapers were up $16.1 million, or 4.9%, from $329.8 million in 2003, compared to a $5.9 million, or 1.8%, increase in 2003 from 2002. Our six largest newspaper markets, consisting of Jacksonville, Augusta, Savannah, Lubbock, Amarillo and Topeka, accounted for 70.8% of total advertising revenue and contributed 64.3% of our total advertising revenue growth. Our other dailies and niche publications contributed 22.1% and 13.6%, respectively.

Our Lubbock and Amarillo newspaper markets continued to improve with total advertising revenues increasing 3.7% and 4.4%, respectively, in 2004. Compared to 2002, Lubbock was up 2.6% and Amarillo was flat in 2003. Total advertising revenues in our twenty smaller daily markets increased 5.1% in 2004 compared to an increase of only 1.8% in 2003 from 2002.

Our Augusta newspaper total advertising revenues reported a modest 2.1% increase in advertising revenues in 2004 compared to a 4.3% increase in the 2003 from 2002. While Augusta’s classifieds remained strong with a 6.8% increase in 2004, its retail advertising remained flat in 2004.

Advertising revenues from our niche publications were $21.7 million, up 13.2% from $19.2 million in 2003. The recently acquired Skirt Magazine and Capital City Weekly accounted for all of this growth.

Our dailies’ retail, classified and national advertising revenue categories increased by 2.1%, 7.2% and 12.4%, respectively, in 2004; an improvement over the 0.9%, 3.3% and .1% increase in 2003 from 2002, respectively. Skirt Magazine contributed 41.3% of the 2004 total retail advertising growth.

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The following table presents our changes year over year for the various classified categories:

During 2004, classified advertising grew primarily due to the continued strength of real estate category and due to the improvement in the employment categories. However, automotive classified advertising continued its slump. The all other category, consisting primarily of private party advertising, was up over the last two years.

Total online advertising increased $4.2 million, or 25.3%, to $16.5 million in 2004 from 2003, compared to a $3.6 million, or 40.8%, increase from $8.8 million in 2002. Classified advertising categories accounted for 91.9% of the 2004 online advertising growth.

Daily and Sunday home delivery circulation copies for the quarter were both down approximately 1.5%. The “National Do-Not-Call List” continues to affect our sales pressure efforts.

Other revenues decreased in both 2004 and 2003 primarily due to the decreases in our commercial printing revenues.

The table below presents the total operating expenses and related statistics for the newspaper operations:

During 2004, the increase in employee costs was driven primarily by increases in wages, incentive based compensation and health insurance costs. Health insurance costs accounted for $2.2 million of the increase and were up 17.6% over 2003. Commissions and bonuses were up $1.4 million, or 6.9%, while salaries were up $1.3 million, or 3.3%, from last year. The average number full time employees decreased by 1.0% in 2004 but is expected to rise somewhat in 2005. Salaries, incentive pay and the medical insurance cost categories are each expected to increase between 3% to 4% during 2005.

Compared to 2002, salaries and wages accounted for $5.0 million, or 51.2%, of the $9.7 million overall increase in employee costs during 2003. This represents an overall 3.6% increase in labor costs. The remaining increase was due to an 18.4% increase in health care costs.

Newsprint expense increased $4.0 million, or 9.7%, to $45.4 million in 2004 compared to $41.4 million last year. Compared to 2003, the average purchase price per ton for the period increased 10.7% and consumption increased approximately 1.4%. Price increases are anticipated in March and September of 2005, each increase ranging from 5% to 7%. Consumption is expected to be flat to slightly down in 2005.

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Compared to 2003, the cost of supplements decreased $0.9 million, or 14.0%, in 2004 primarily due to favorable terms negotiated with one major vendor.

During 2003, the average cost per ton of newsprint increased 6.3%, offset by a 3.5% decrease in consumption. This increase was significantly lower than the overall market increase due to our participation in a newsprint consortium beginning in late 2002.

During 2004, the $ 5.9 million, or 5.2%, increase in other operating costs was primarily due to the $3.6 million, or 9.6%, increase in total production, distribution, newsgathering and advertising costs, the $1.4 million, or 12.3%, increase in professional services, the $1.4 million, or 43.9%, increase in insurance costs and the $2.6 million, or 8.8%, increase in other administrative costs, that were offset by the $3.1 million, or 9.2%, decrease in the technology and shared services fee and the management fee we pay to Morris Communication. The combined management fee totaled $30.7 million in 2004.

Production costs increased $1.5 million, or 23.8%, and advertising costs increased $1.6 million, or 24.7%. The introduction of Skirt Magazine contributed $1.6 million to these increases along with $1.4 million to the increase in employee costs. A large part of Skirt Magazine’s other operating costs were contracted printing services.

During the first quarter 2005, we amended the management services agreement with Morris Communications, limiting the maximum technology and shared services fee in 2005 and beyond to 2.5% of our total net operating revenues. The allocable portion (based on usage) of MStar Solutions’ 2005 expenditures should be higher than 2.5% of Morris Publishing’s total net operating revenue, therefore, capping the fee at 2.5% of our total net operating revenue. We expect the combined cost in 2005 for both the technology and shared services fees and the management fees to be flat compared to 2004.

During 2003, other operating costs increased by $5.3 million, or 4.9%, primarily due to allocated costs relating to our shared services initiative.

Acquisitions

During April 2004, Morris Communications contributed the ownership of Skirt Magazine in Charleston, a monthly free women’s publication acquired in late 2003, to Morris Publishing. The transfer was recorded at its historical carrying value, which approximated $1.3 million.

In March 2004, we acquired Capital City Weekly, a weekly newspaper located in Juneau, Alaska. The acquisition was accounted for as a purchase and had an aggregate purchase price, including closing costs of approximately $852,000.

In November 2003, we acquired Girard Press, a weekly newspaper located in Girard, Kansas, for $160,000.

During September 2002, the Company acquired Fall Line Publishing, a weekly newspaper located in Louisville, Georgia for $918,000, including the additional amount of consideration contingent on the newspaper’s first year performance. In 2003, we paid $250,000 in contingent consideration to complete the purchase.

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Liquidity and capital resources

We believe that our principal sources of liquidity, which are existing cash and cash equivalents, cash flows provided from operating activities, and borrowing capacity under revolving credit facilities, will be sufficient to meet our operating requirements for the next three years. Cash flow generated from operations is the company’s primary source of liquidity.

Our primary needs for cash are funding operating expenses, debt service on our bank credit facilities and the senior subordinated notes, capital expenditures, income taxes, dividends and loans to affiliates, acquisitions and working capital. We have pursued, and will continue to pursue, a business strategy that includes selective acquisitions and new product development.

Cash was $20.1 million at December 31, 2004, compared with $7.3 million at December 31, 2003 and $8.1 million at December 31, 2002. During 2004, we used a significant portion of our available cash to make loans and distributions to our Parent.

Operating activities. Net cash provided by operations was $55.7 million in 2004, down $12.9 million from $68.7 million in 2003. The decrease was due to the increases in interest expense, inventory, other assets, trade receivables and receivables due from parent, and the decreases in operating income and accounts payable offset by increases in other liabilities, post retirement obligations and interest income earned from parent.

Net cash flows provided by operating activities increased by $3.9 million in 2003 from $64.8 million in 2002. The net increase was due to increases in accrued interest, accounts payable, post-retirement obligations, other liabilities and a decrease in inventories offset by increases in accounts receivable and other assets.

Investment activities. During 2004, cash required for investing activities was primarily for the purchase of $21.5 million of property, plant and equipment, and the $0.9 million acquisition of Capital City Weekly located in Juneau, Alaska, offset by the $3.0 million in proceeds from the net repayment on the loan to our parent, the $0.9 million in proceeds from the sale of our Savannah warehouse and the $0.5 million in net proceeds from the purchase and sale of other machinery and equipment.

During 2003, cash required for investing activities was primarily for the purchase of $17.7 million of property, plant and equipment, a loan to our parent of $4.5 million and the $0.1 million acquisition of the Girard Press. At the end of 2003, Morris Communications acquired Skirt Magazine Charleston for $1.3 million and subsequently distributed the niche publication to Morris Publishing in April 2004. Our consolidated financial statements have been restated to reflect this change in reporting entity.

During 2002, cash required for investing activities was primarily for the purchase of $28.7 million of property, plant and equipment and other assets offset by the proceeds of $11.9 million from the sale and subsequent leaseback of our Savannah production facility.

We expect that our capital expenditures will be between $20 to $25 million in 2005. These amounts will be used primarily to upgrade existing production facilities and for new technology infrastructure at those locations.

Financing activities. Until August 7, 2003, our revolving credit facilities consisted of a borrowing arrangement with our parent, Morris Communications, which made available to us its borrowing capacity under its credit facility. On August 7, 2003, concurrent with the sale of our 7% Senior Subordinated Notes due 2013 in an aggregate principal amount of $250 million, our borrowing arrangement with Morris Communications was replaced by new credit facilities totaling $400 million, including a $175 million revolving credit facility and a $225 million term loan facility.

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On September 24, 2003, we issued an additional $50 million aggregate principal amount of our 7% Senior Subordinated Notes due 2013.

On July 16, 2004, the Company realigned various aspects of its credit facility. The $225 million Tranche B term loan (“Tranche B”) under the August 7, 2003 agreement was increased by $25 million and split into two pieces, a $100 million Tranche A term loan (“Tranche A”) and a $150 million Tranche C term loan (“Tranche C”). At the same time, the revolving credit line was reduced from $175 million to $150 million. The total facility remained unchanged at $400 million. The immediate impact of the amendment was to reduce interest rates by 0.75% on the Tranche A and 0.50% on the Tranche C, below the rate on the Tranche B. The debt covenants generally remain unchanged. Scheduled principal payments have changed with the replacement of the single term loan with the two term loans (Tranche A and Tranche C). The final payment on the Tranche A and the Tranche C loans are scheduled for September 30, 2010 and March 31, 2011, respectively. The revolving credit loan terminates September 30, 2010.

Total debt was $550 million at December 31, 2004, up $25 million compared to the end of 2003. We had no loans outstanding under our revolving credit facility at the end of 2004 and 2003.

As of December 31, 2004 and 2003, our weighted cost of debt outstanding was approximately 5.68% and 5.47%, respectively. At the end of 2004, we could borrow and use for general corporate purposes $120.6 million under the most restrictive covenants of our debt arrangements.

As of December 31, 2004, the ratings on our 7% Senior Subordinated Notes due 2013 at Moodys and Standard and Poor’s remain at Ba3 and B+, respectively. The fair value of these bonds was quoted at 102.0. The fair value on the Tranche A and C term loans were both estimated at 100.5 and the revolver at par due to its unfunded nature.

The Company paid no principal amortization during the twelve months ended December 31, 2004 and 2003 on the original term loan facility. The modified term loan facility requires the following principal amortization with the final payment due on March 31, 2011:

Our credit facility and indenture allow us to make loans to our Parent. The total loan outstanding at December 31, 2004 was $1.5 million, a $3.0 million decrease from December 31, 2003. The $1.3 million receivable due from parent was from end of the year intercompany allocations. For the twelve month periods ended December 31, 2004, the average net amounts loaned to Morris Communications were $27.5 million at an average interest rate of 3.724%. The loan is repayable on demand and bears the same interest rate as our revolving credit facility—LIBOR plus 2.25% which at December 31, 2004 was 4.6875%.

We, with certain restrictions under our indenture, may make dividend payments to our parent. On August 31, we declared and paid a $50 million dividend to Morris Communications, which in turn, utilized the dividend to reduce its loan outstanding to Morris Publishing. At December 31, 2004, we had approximately $26.5 million available for future restricted payments under the debt indenture.

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Off-balance sheet arrangements

None

Inflation and changing prices

The impact of inflation on our operations was immaterial for all periods presented. In the past, the effects of inflation on operating expenses have been substantially offset by our ability to increase advertising rates. No assurances can be given that we can pass such cost increases through to our customers in the future.

Seasonality

Newspaper companies tend to follow a distinct and recurring seasonal pattern. The first quarter of the year tends to be the weakest quarter because advertising volume is then at its lowest level. Correspondingly, the fourth quarter tends to be the strongest quarter as it includes heavy holiday season advertising. As a result, our consolidated results may not be comparable from quarter to quarter.

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Item 7A—Quantitative and Qualitative Disclosures about Market Risk

Interest rate risk

We are exposed to the impact of interest rate fluctuations, although a large portion of our outstanding debt is at a fixed rate. See Note 5 to our consolidated financial statements for December 31, 2004, 2003, and 2002 regarding long-term debt.

Contractual obligations

At December 31, 2004, the aggregate maturities on our long-term debt for the next five years and thereafter are as follows: