Annual Report Index

Thomas M. Hahn, president, Garden State Paper Company

A: There are several areas that present opportunities to further enhance the quality of our product, while simultaneously reducing operating costs. One area we are working on is a more efficient ink removal system. We are also looking at the possibility of installing continuous color sensors on the paper machines to reduce the amount of off-color paper produced as well as the amount of roll-to-roll color variation. Additionally, a change in bleaching technology holds the promise of improving our chemical and energy costs as well as the water balance in the mill. There is no single item of more importance to our customers than the quality of our newsprint, and we are strongly committed to high-quality products.

Q: What trends do you see in newsprint pricing for 1998 and beyond?

A: Newsprint pricing has been and continues to be cyclical in nature. In 1996 pricing declined to levels close to those of 1984. In 1997, pricing improved only modestly late in the year. We expect this upward trend to continue in 1998 providing a much needed boost to our Division’s profitability.

Q: Has Garden State Paper considered converting to higher printing grades?

A: While some mills of our size and age have chosen to convert to higher quality printing grades, we do not see this as a particularly attractive option, especially if we continue to use old newspapers as our primary raw material. Essentially we would be moving out of one commodity market and into another, one that has significant capital cost requirements.

Q: What are the measures of success for Media General’s Newsprint Division?

A: Our basic business and mission have remained the same since the Company’s founding — to satisfy our customers by providing quality products and excellent service. In order to be successful, we must achieve the following: our mill must produce at efficient volume levels; we must work safely; we must sell the mill output; and we must be a low cost producer relative to our competition. We took several initiatives in 1997 to fulfill our mission, including a reorganization of certain operations and several capital improvements.

Q: Please outline those steps you took to reorganize during 1997.

A: Our raw materials operation underwent a major reorganization in 1997. We opened a new state-of-the-art sorting and bailing recycling center in Paterson, New Jersey and closed two older, less efficient plants in Hackensack. We moved to a dedicated carrier transportation arrangement, downsized, reorganized and merged the accounting functions of the recycling group with that of the mill, and made major management changes to the group. These changes better position us to provide the mill with a stable, high-quality, low-cost supply of old newspaper.

Q: What are some of the advantages you have over the competition?

A: Our centrally located mill in New Jersey is certainly one of our key advantages over the competition. We are close to our raw material supply, which directly translates to lower transportation costs, especially when one considers that most of our competition for old newspaper comes from the Far East. In addition, our customers are concentrated in the major northeastern metropolitan markets, and therefore, we have the ability to provide short notice service to customers in these areas.

Q: What measures have you taken to improve efficiency?

A: Improved efficiency is the heart of our strategic plan for growth. We are continually looking for ways to make cost-effective improvements that allow us to increase the operating speed and efficiency of our existing paper machines. There are several areas with the potential for further improvement including production, sales, energy, and reduced solid waste losses. Whatever the means, our goal remains the same — to find ways to improve our efficiency.