Freedom's two community newspaper divisions, which ended 1998 with a record of growth and accomplishment, will begin 1999 with a new, unified structure under the leadership of Jonathan Segal.

For the past eight years, Community Newspapers had been divided into two divisions, with Scott Fischer overseeing the Western Division and Segal responsible for the Eastern papers.

"Consolidating our community newspapers into a single division strengthens and streamlines our operations," explained CEO Jim Rosse. "The reorganization will better serve our publishers, our associates, our board of directors and most importantly the readers and advertisers of our products."

Segal will retain responsibility for some of the division's larger newspapers including the Colorado Springs Gazette; The Rio Grande Valley group of McAllen, Harlingen and Brownsville; and the Florida group consisting of Panama City, Fort Walton Beach, Fort Pierce and The Walton Sun. He will continue to lead the division's acquisitions efforts, oversee training and development initiatives, and coordinate Freedom's annual Key Executives Conference.

The reorganization included the naming of three division vice presidents from the ranks of publishers.

Tom Mullen, a 40-year Freedom veteran and current publisher of The Lima News, was selected to head the Central Group consisting of daily papers in Sedalia, MO; Seymour, IN; Crawfordsville, IN; Jacksonville, IL; Greenville, MS and Lima, OH.

The North Carolina group will be led by Steve Buckley, publisher in Burlington, NC. In addition to Burlington, he will be responsible for the division's papers in Gastonia, Shelby, Kinston, New Bern, Jacksonville and Havelock, NC.

Tom Porter left his position as publisher of The Victorville (CA) Daily Press to move to corporate headquarters. Porter will oversee Freedom's California community newspapers as well as the papers in Odessa, TX and Clovis/Portales, NM. He will also assume some divisional duties overseeing the group's Newspaper in Education program (NIE), the Freedom Classified Network and the Freedom Wire. He will also coordinate new media development, department head meetings and assist with equipment negotiations. "The reorganization puts key management people closer to the field where much of the real action takes place," said Segal. "The East-West structure worked quite well from a strategic perspective and in terms of the big picture. However, the reorganization gives us an opportunity to take advantage of some natural geographic opportunities with the regional structure."

1998 REVIEW

Growth and accomplishment were, indeed, hallmarks of the two community divisions in 1998. (Since they have been unified for 1999, their results have been consolidated for the purposes of this report.)

Despite facing an increase of almost 10% in the cost of newsprint and ink, Freedom's 26 daily and four weekly papers were able to increase cash flow (EBITDA) from the previous year's record performance.

Advertising revenues, led by the preprint category, increased by 4% while circulation revenues grew 2%. Other revenues, including job printing, niche publications and new media endeavors grew by 17%.

Completing the year with particularly strong showings were Harlingen, Burlington, Fort Walton Beach, Lima and McAllen. The division's most recent daily acquisition, The Shelby (NC) Star, finished its first full year as a Freedom paper with a much-improved product, an energized staff and not incidentally, a cash flow 48% over budget.

Another of the division's accomplishments in 1998 was the improvement of its balance sheet management to better utilize its capital resources.

Along those lines, it succeeded in reducing its newsprint inventories by three days and accounts receivables by two days. At the same time, it extended its accounts payables and disposed of a great deal of surplus equipment.

The circulation of the division ended the year with a daily average of 614,280 and a Sunday average of 664,255. Posting solid gains were Colorado Springs, Fort Pierce, Burlington, Odessa, Greenville, Sedalia and Crawfordsville.

NIE CIRCULATION GREW BY 50%

While the combined circulation of the division was flat in 1998, the Newspaper in Education program was tremendously successful. The group's program, which had grown dramatically over the last few years, posted gains of over 50% in 1998.

Working with teachers, volunteers and local school systems, NIE coordinators provide curriculum information and copies of Freedom's newspapers to more than a thousand schools. By the fall of 1998, students were using 148,000 copies of Freedom papers each month.

A.M. CONVERSIONS

Seeking to better serve their readers, three Freedom papers successfully made the switch from afternoon to morning publication -- Greenville, Sedalia and Kinston. The Free Press in Kinston added a Saturday edition at the time of its a.m. conversion, making it a seven-day publication.

One new publisher joined Freedom's ranks during the year. Duane McCallister, a well-respected veteran from the Gannett organization, became publisher of The Gaston Gazette.

STRATEGIC ACQUISITIONS

The division made several small but strategic acquisitions in 1998, purchasing three weekly newspapers located near its Eastern North Carolina daily papers in New Bern, Jacksonville and Kinston. The newly-acquired papers are The Jones Post, The Havelock News and The Topsail Island Advertiser. Also included with the Havelock weekly was a contract to print the military paper for Cherry Point Marine Corps Air Station.

Because of their proximity to each other, the management staffs of the Eastern North Carolina group initiated a strategic planning process, to be completed in early 1999, designed to find ways of combining their substantial resources to achieve more operational and marketing efficiency.

With a wary eye on avoiding Year 2000 problems, the community newspaper division embarked on a fast paced -- and some might say frenzied -- campaign to replace and improve its computer systems. New typesetting equipment was installed in most papers enabling them to continue their progress toward complete pagination. Indeed, pagination allowed the division to improve prepress productivity by 9% in 1998.

While editorial and classified departments wrestled with front-end equipment, the business departments converted to new, Year 2000-compliant accounting systems. It was truly a year in which there was much focus on internal systems issues. To the relief of everyone in the division, there is light at the end of the tunnel. The new year promises to be one in which more attention can be directed to serving customers and less to replacing computer systems.

Along the lines of better serving our customers, the community newspapers continued to upgrade their staffs and their products.

PROTECTING FIRST AMENDMENT RIGHTS

While relatively small, the community papers vigorously asserted their First Amendment rights. Time and again, Freedom papers fought for open meetings and open records.

An example of a vigorous defense of the First Amendment was evident in Greenville, where a courthouse reporter was jailed in 1997 for contempt by a judge who forbade her from reporting information she heard during a trial.

The reporter was eventually freed from jail upon an appeal filed by the Delta Democrat-Times. The case was subsequently heard by the Supreme Court of Mississippi in 1998, which not only ruled that the reporter had the right to publish the trial information and vacated the contempt charge, it removed the judge from the bench!

SERVING COMMUNITIES

The community newspapers were widely recognized by their peers in press competition. The awards are far too numerous to cite in this report. In North Carolina, for example, Freedom papers took home 46 writing and photography awards.

Awards are appreciated. But the ultimate goal of each of the community newspapers is to be a trusted and indispensable source of entertainment and information in communities they serve.

It is clear the year 1998 marked a steady course toward those goals and the unification of the division at the beginning of the new year will accelerate the progress.

-- Jonathan Segal,
President of Community Newspapers