Media General’s combined newsprint interests make the Company the United States’ largest producer of recycled newsprint. A wholly owned mill in Garfield, New Jersey, has a capacity of 242,000 short tons of newsprint per year, while a one-third owned mill in Dublin, Georgia, has a capacity of 535,000 short tons annually.

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A Higher selling prices certainly were responsible for the majority of our turnaround in 1998, but there were other major contributing factors as well. We produced 234,000 tons of newsprint, a strong production rate for the Garfield mill, and we also benefitted from greater operating efficiencies as the result of capital improvements made over the past years.

Q Could you describe some of your specific cost-saving activities?

A Energy is one of the major cost items in the production of newsprint. Add to this our Mid-Atlantic location — with electrical rates that are among the highest in the country — and it’s easy to understand our near obsession with energy cost reduction. This year we were able to negotiate favorable gas and gas transportation rates with our gas utility supplier. The savings were significant. Additionally, capital improvements to increase our boilers’ efficiency saved nearly another $1 million, and we reduced our total energy costs by $2.5 million. Our plans for further energy reductions in 1999 include positioning ourselves properly for New Jersey’s deregulation of the electrical market to ensure that we benefit from daily and seasonal rate changes and fluctuations.

Q Consolidation in the publishing industry continued in 1998. Has this trend significantly affected your operations?

A Our customer base really hasn’t changed that much. We still sell half of our newsprint to major newspaper companies and continue to find those small independent newspapers that we serve so well. But the big companies are certainly getting bigger — and they are becoming more and more demanding. They want to print color everywhere, they want electronic transmission of data and they want the registration — or set-up — on their presses to stay the same between our paper and newsprint they just bought from some foreign supplier. We are constantly finding ways to improve our product, address our customers’ needs, improve our efficiency, and solve the joint challenges shared by both publisher and papermaker.

Q The word “quality” frequently comes up during our conversation. Is quality really that critical since you offer a 100 percent recycled product?

A Publishers know their advertisers and readers are not likely to accept a poor printing job on recycled newsprint just because it is recycled newsprint. It is important that we constantly improve our product. I seriously doubt that we could sell much of the paper we made 30 years ago, or 15 years ago or even five years ago. Our customers’ needs have changed and they demand that our product perform well, particularly on their color work.

Q Some time ago there were occasional spot shortages of your essential raw material. Has that continued?

A Our raw material is still ordinary old used newspapers (ONP), and we are not experiencing supply problems. What has changed is that we’ve become far more demanding in what we will accept to supply the mill. We’ve implemented a quality measurement and monitoring program that assigns a numerical ranking to each load delivered to the mill. We have also made capital improvements at our recycling centers to ensure that we can supply our mill with a stable supply of high quality ONP.

Q What are your capital outlay plans for 1999 and going forward?

A Our capital improvement plans for 1999 begin with a 20 percent increase in our deinking capacity by adding two new washer lines. This project began in 1998 and will result in reduced chemical costs and improved finished quality. We anticipate a second quarter start-up. Another major project we want to implement in 1999 will capture, process and burn the remaining unusable fiber and ink that now goes into our industrial sewer. This project should substantially reduce our multimillion dollar annual sewer bill. In combination, these projects will address existing problem areas of the mill and set the stage for increased production, higher sales and more favorable operating results in the years ahead.

Q You mentioned earlier that strengthened newsprint prices were largely responsible for your strong turnaround in 1998. What do you see for 1999?

A Economic conditions precluded further selling price increases in the latter part of 1998 and none appear likely in the near future. Labor disputes in Canada last year did not result in significantly reduced U.S. newsprint availability. In fact, inventories may have increased as a result of rising imports, particularly from South Korea. The Asian financial crisis certainly contributed to this situation, and we see no indication that it will improve this year. Predictions are that newsprint consumption will be flat or grow modestly in 1999 as publishers continue to operate highly effective conservation programs.