50 West State Street
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.
The Journal Register Company (JRC) owns and operates 24 daily newspapers and 185 nondaily publications in seven geographic areas: Connecticut, Philadelphia, Ohio, St. Louis, central New England, and the Capital-Saratoga and Mid-Hudson, New York, regions. Its flagship newspaper is the New Haven Register, first published in Connecticut in 1755. Between 1993 and 1998 JRC completed 13 strategic acquisitions that involved 12 daily newspapers, 117 nondaily publications, and three commercial printing companies. The company followed a strategy of increasing the cash flow and profitability of the newspapers it acquired. More than half of the company's daily newspapers have been published for more than 100 years. Its acquisitions were guided by a geographic cluster strategy, which enabled JRC to become the number-one provider of local news and sports and advertising in the majority of markets it served. Geographic clustering was a key element of a strategy that had four major points: to expand advertising revenues and leadership, grow by acquisition, capture synergies from geographic clustering, and implement consistent operating policies and standards in its acquired properties. As a result of the high levels of debt incurred by its predecessor corporation, Ingersoll Publications Co., in the 1980s, approximately three-fourths of the common shares of the JRC are controlled by the investment firm E.M. Warburg, Pincus & Co.
Background and Early History: 1980s
The Journal Register Company was established in 1990 from the remnants of Ralph Ingersoll II's collapsed newspaper empire. During the 1980s Ingersoll had assembled a family of newspapers through his company, Ingersoll Publications Co., using high-risk junk bonds to finance his acquisitions. He overpaid for some papers and amassed a large amount of debt. When the stock market experienced a severe downturn in 1987, the 1980s way of financing acquisitions came to an end. One of Ingersoll's last acquisitions was the historic New Haven Register of New Haven, Connecticut, which had been published since 1755.
In July 1990 investment firm E.M. Warburg, Pincus & Co., which was Ingersoll's partner and financier, bought him out of the U.S. newspaper market, with Ingersoll gaining ownership of Warburg, Pincus's European newspaper properties. Robert Jelenic, who was president of the U.S. newspaper companies at Ingersoll Publications, became CEO of the newly incorporated Journal Register Company. After JRC went public in 1997, Warburg, Pincus remained a majority shareholder with a 72 percent ownership interest.
Acquisitions Guided by Geographic Clustering Strategy in the 1990s
When the JRC was formed in 1990, it already owned newspapers in Philadelphia, Ohio, St. Louis, central New England, and the Capital-Saratoga region of New York, in addition to the New Haven Register. For the next decade JRC would acquire more publications in those regions as part of its geographic clustering strategy, through which the company hoped to enjoy operating synergies.
In 1993 JRC took over the Times Herald of Norristown, Pennsylvania, a western Philadelphia suburb, adding to its stable of four daily and nine weekly newspapers in the Philadelphia region. The Times Herald was a historic newspaper that was founded in June 1799 as the Norristown Gazette. Six months later it published George Washington's obituary.
The JRC immediately reduced the Times Herald's sales and marketing staff by about 25 or 30 people. Responding to charges that the JRC "ran roughshod over the staff," Jelenic said, "In our opinion the Times Herald was overstaffed." He asserted that each JRC acquisition is evaluated on a case-by-case basis and that JRC did not have a policy of reducing staff in every case. In any event, the Philadelphia Newspaper Guild staged a one-day strike in September 1993 to protest cuts in jobs, benefits, and pay that were imposed by the JRC. Although its acquisition agreement did not require it to do so, the JRC agreed to negotiate with the union.
Additional newspapers were acquired in Connecticut in 1993 and 1994, including the dailies Torrington Register Citizen and the Bristol Press, along with Thomaston Express. For 1994 JRC reported net income of $20.7 million on combined revenues of $300.2 million. For the next five years the company's revenues and net income would grow steadily, except for 1997 when it incurred a one-time charge related to its initial public offering (IPO), which reduced net income from the previous year.
JRC's largest acquisition in 1995 involved 42 nondaily publications in Connecticut and Rhode Island and one commercial printing plant in Connecticut, which was acquired from Capital Cities/ABC Inc. for $31 million. JRC also paid $11 million for the Herald of New Britain, Connecticut and $5.5 million for the Middletown (Ct.) Press in separate transactions. For 1995 JRC reported net income of $26.8 million on combined revenues of $339.0 million. The company's total debt was $689.3 million, compared with $306 million in assets, and interest and other nonoperating expenses were a record $64 million.
In 1996 JRC paid $18 million for the Taunton (Mass.) Daily Gazette. By the end of 1996 JRC's debt level was still at $655 million. Revenues were up to $351 million, and net income rose to $28.1 million.
Initial Public Offering in 1997 Set Stage for Aggressive Acquisitions Program
On May 8, 1997, the company's common stock began trading on the New York Stock Exchange for $14 a share. The IPO raised $130 million, which would be used mainly for acquisitions. Jelenic was quoted as saying, "We went public so we could acquire. That was the main reason." Of the $130 million, about $34.5 million was used to repay obligations to Warburg, Pincus. At the time it went public, JRC owned and operated 18 daily newspapers and 118 nondaily publications in five geographic regions: Connecticut, Ohio, Philadelphia, St. Louis, and central New England.
In December 1997 JRC announced three major acquisitions. It added to its St. Louis cluster with the purchase of the Ladue News of Ladue, Missouri, which served the suburbs of St. Louis. JRC also expanded its presence in Philadelphia by acquiring the Intercounty Newspaper Group for $12.8 million. The acquisition included 17 weekly newspapers published in the Philadelphia, central New Jersey, and south New Jersey regions. Also included in the sale were two printing plants located in State College and Bristol, Pennsylvania. A third acquisition involved HVM LLC of New Milford, Connecticut, for $3.8 million. The acquisition added another eight weekly newspapers, two shoppers, and three monthly magazines.
For 1997 JRC reported combined revenues of $359.4 million. Net income fell to $23.0 million as a result of a one-time pretax charge of $31.9 million related to management bonuses and incentive plans in connection with the IPO. For 1997 Jelenic received $11 million in executive compensation, including a one-time $10.5 million bonus and a salary of $825,000. It was nearly nine times more than the $1.35 million he earned in 1997. In 1996 he received about $1 million in salary and bonus, comparable with salaries of some of the newspaper industry's biggest players.
The Future of Journal Register Company: Will the Size of Acquisitions Keep Growing?
In its biggest acquisition to date, JRC acquired five daily newspapers, including the Delaware County Daily Times, and 20 nondaily publications in Pennsylvania, New York, and Ohio for $300 million in cash from the Goodson Newspaper Group of Lawrenceville, New Jersey. The acquisition resulted in JRC having a combined circulation of more than 197,000 daily and 600,000 Sunday publications in suburban Philadelphia.
The price of the acquisition was estimated to be 14 times the newspapers' 1997 cash flow, a substantial premium considering recent newspaper deals were accomplished at ten to 12 times cash flow. Jelenic predicted, however, that the acquisition cost would be less than 11 times 1999 cash flow after the company improved the newspapers' cash flow and cut expenses by integrating them into JRC's clusters.
At the same time JRC started a new geographic cluster around Kingston, New York, with the acquisition of Taconic Media in Dutchess County, New York. Taconic owned seven weeklies with a combined circulation of 321,600 in Dutchess County.
As a result of the Goodson acquisition, combined revenues rose significantly in 1998 to $426.8 million. Net income nearly doubled to $41.1 million, but JRC's debt level rose to $765 million. Operating as a pubic company since 1997, JRC's management and strategy seem firmly in place to guide the company toward future growth and increased profitability, as long as its combined revenues allow it to service its relatively high level of debt.
Principal Operating Units: New Haven Register; The Herald; The Bristol Press; The Register Citizen; The Middletown Press; Daily Times; Daily Local News; The Mercury; The Times Herald; The Phoenix; The Trentonian; The News-Herald; The Morning Journal; The Times Reporter; The Independent; The Telegraph; Ladue News; The Herald News; Taunton Daily Gazette; The Call; The Times; The Record; The Saratogian; The Oneida Daily Dispatch; Daily Freeman.