Journal Communications Reports Third Quarter 2009 Results

Journal Communications, Inc. (NYSE:JRN) today announced results for its third quarter ended September 27, 2009.

"In the third quarter, we remained diligent about reducing costs and generating cash while operating in an ongoing difficult advertising environment,” said Steven J. Smith, Chairman and Chief Executive Officer of Journal Communications. "We made additional progress on debt reduction by paying down another $6 million in the quarter. Year to date, Journal Communications has reduced its debt by almost $43 million.

"Journal Sentinel continues its restructuring initiative to align employee costs with revenue. In spite of a significant workforce reduction charge, Journal Sentinel was profitable in the quarter.

"Although the advertising environment remains challenged, we did see some improvements in broadcast revenues as the quarter progressed. We also signed two significant long term printing contracts with publishing customers, as we continue to capitalize on our Journal Sentinel production facility.

"We expect to see modest improvement in advertising expenditures as we enter the fourth quarter, yet our focus on expense and debt reduction will continue.”

Third Quarter 2009 Results

Note that unless otherwise indicated, all comparisons are to the third quarter ended September 28, 2008.

For the third quarter, revenue of $105.1 million decreased 22.9% compared to $136.3 million. Operating earnings of $3.7 million included a $4.3 million charge for workforce reductions in the quarter and a $0.8 million increase in a sales and use tax reserve. Excluding these two items and a $38.8 million non-cash impairment charge for broadcast licenses and a $3.7 million charge for workforce reductions, both in the third quarter last year, operating earnings of $8.8 million compared to $15.5 million, a decrease of 42.9%. The net earnings of $1.8 million compares to a net loss of $17.1 million.

In the third quarter 2009, basic and diluted net earnings per share of class A and B common stock were $0.02 for both. Excluding the impact of the $2.6 million after-tax charge for workforce reductions and the $0.5 million after-tax impact of the increase in a sales and use tax reserve, basic and diluted net earnings per share of class A and B common stock were $0.08 for both. This compared to net loss per share of $0.35 for both in 2008. Excluding the impact of the $23.5 million after-tax non-cash impairment charge and the $2.4 million after-tax workforce reduction charge, basic and diluted net earnings per share of class A and B common stock were $0.16 for both.

EBITDA (net earnings (loss) excluding the gain/loss from discontinued operations, net; total other expense, net; provision (benefit) for income taxes; depreciation; amortization; and non-cash impairment charges) of $10.7 million decreased 44.0% compared to $19.1 million.

The operating margin was 3.5% this year. Excluding the charge for workforce reductions and the increase in a sales and use tax reserve this year and the non-cash impairment charge and the charge for workforce reductions last year, the operating margin was 8.4% compared to 11.4%.

Consolidated and Segment Results

The following table presents our total revenue and operating earnings (loss) by segment for the third quarter of 2009 and the third quarter of 2008:

Overall, total operating expenses of $101.4 million decreased 37.9% compared to $163.2 million. Excluding the workforce reduction charge and the increase in the sales and use tax reserve in the third quarter 2009 and the non-cash impairment charge and the workforce reduction charge in the third quarter 2008, total operating expenses were $96.2 million, a reduction of 20.3% primarily driven by workforce reduction initiatives, employee benefit reductions and wage reductions implemented early in 2009 and reduced expenses related to revenue declines.

Publishing

For the third quarter, publishing revenue decreased 21.8% to $46.5 million compared to $59.5 million, largely due to continued weakness in all advertising categories. Operating earnings from publishing of $0.7 million decreased 40.3% compared to $1.1 million. Total newsprint expense in publishing was $3.2 million compared to $6.6 million, a 51.6% decrease due to a reduction in the price per ton of newsprint and reduced consumption.

Revenue at the daily newspaper for the third quarter decreased 23.4% to $38.4 million compared to $50.1 million. Classified advertising revenue decreased 48.7% largely due to decreases in the employment, automotive and real estate advertising categories while retail advertising revenue decreased 22.3%. Interactive advertising revenue at the daily newspaper decreased 36.8% to $2.4 million compared to $3.8 million, primarily due to a decline in automotive and employment online classified advertising. Operating earnings from the daily newspaper were $0.1 million compared to $0.9 million. Daily newspaper operating expenses were down 22.1% primarily due to the reduction in employee related costs and newsprint expense and other cost reduction initiatives partially offset by a $0.8 million increase in a sales and use tax reserve. The charges for workforce reductions were $3.8 million and $3.7 million in the third quarter 2009 and 2008, respectively.

Community newspapers and shoppers revenue for the third quarter decreased 13.5% to $8.1 million compared to $9.4 million. The decrease was primarily due to declines in automotive and real estate retail and classified advertising revenue and was partially offset by $1.1 million in revenue from recent acquisitions. Operating earnings from community newspapers and shoppers were $0.6 million, an increase of $0.4 million primarily from the earnings from recent acquisitions. Operating expenses were down 18.0% primarily due to cost savings from previous workforce reductions and production efficiency initiatives and a decrease in newsprint expense partially offset by expenses relating to acquisitions during 2008.

Broadcasting

For the third quarter, broadcasting revenue decreased 21.4% to $42.4 million compared to $54.0 million. Local advertising revenue decreased 13.2% and national advertising revenue decreased 25.3%. Total broadcast political and issue advertising revenue was $0.6 million compared to $3.4 million. Retransmission revenue was $1.2 million compared to $0.4 million. Broadcasting operating earnings were $3.7 million compared to an operating loss of $29.1 million, which included a $38.8 million non-cash impairment charge for broadcast licenses.

Revenue from television stations for the third quarter decreased 24.1% to $24.5 million compared to $32.3 million. Television political and issue advertising revenue was $0.5 million compared to $3.2 million. The operating results from television stations were essentially breakeven compared to an operating loss of $17.0 million which included a $21.1 million non-cash impairment charge for television broadcast licenses. Television operating expenses (including KNIN-TV acquired in April 2009 but excluding the non-cash impairment charge in 2008) were down 13.2% compared to last year due to the reduction in employee related costs and other cost reduction initiatives.

For the third quarter, revenue from radio stations of $17.9 million was down 17.3% compared to $21.7 million. Operating earnings from radio stations were $3.7 million compared to an operating loss of $12.1 million which included a $17.7 million non-cash impairment charge for radio broadcast licenses. Excluding the non-cash impairment charge last year, operating earnings of $3.7 million decreased 34.8% compared to $5.6 million. The decline in operating earnings were due to declines in revenue partially offset by an 11.2% decrease in radio operating expenses from the reduction in employee related costs and other cost saving initiatives offset by a gain on the sale of two Boise radio stations.

Printing Services

For the third quarter, revenue from printing services decreased 31.1% to $11.1 million compared to $16.1 million due to a general overall decline in sales from all printing segments. The operating loss from printing services of $0.8 million compared to operating earnings of $0.8 million, primarily due to the decline in revenue, partially offset by employee related cost reduction initiatives.

Other (Direct Marketing and Corporate)

For the third quarter, revenue for "Other” of $5.1 million decreased 24.8% compared to revenue of $6.7 million primarily in our mailing services business. "Other” operating earnings were $0.1 million compared $0.2 million, a decrease of 52.2%.

Non-Operating Items

For the third quarter, other expense, which primarily consists of interest expense, was $0.6 million compared to $1.9 million. Interest expense decreased due to a decline in both the average borrowings during the quarter and the interest rate on our borrowings.

The third quarter effective tax rate was 39.8%.

Debt and Cash Flows

At the end of the third quarter, our debt of $172.2 million represented 3.30 times the trailing four quarters of EBITDA. During the first three quarters of 2009, debt was reduced by $42.9 million. Year to date cash from operating activities was $54.0 million compared to $45.9 million, an increase of $8.1 million primarily due to an $8.7 million income tax refund in the settlement of an income tax assessment. Capital expenditures were $5.5 million compared to $15.1 million. There were no share repurchases in 2009 compared to $44.8 million. Dividends paid to shareholders were $1.5 million compared to $14.0 million.

Fourth Quarter 2009 Outlook

For the fourth quarter of 2009, the Company currently anticipates that its publishing, television and radio revenues will be down compared to the prior year period, reflecting continued challenges across its businesses.

Conference Call and Webcast

The company will hold an earnings conference call today at 10:00 a.m. Central Time (11:00 a.m. ET, 8:00 a.m. PT). To access the call, dial (888) 680-0860 (domestic) or (617) 213-4852 (international) at least 10 minutes prior to the scheduled start of the call. The access code for the conference call is 44489974. A live webcast of the third quarter conference call will be accessible through the Journal Communications’ website at www.journalcommunications.com/investors, also beginning at 10:00 a.m. CT this morning. An archive of the webcast will be available on this site today through November 3, 2009. Replays of the conference call will be available October 20 through October 23. To hear the replay, dial (888) 286-8010 (domestic) or (617) 801-6888 (international) at least one hour after the completion of the call. The access code for the replay is 49170088. Pre-registration for the conference call is now available at www.journalcommunications.com/investors.

Forward-looking Statements

This press release contains certain forward-looking statements related to our businesses that are based on our current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties, including changes in advertising demand and other economic conditions that could cause actual results to differ materially from the expectations expressed in forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Our written policy on forward-looking statements can be found in our most recent Quarterly Report on Form 10-Q, as filed with the Securities and Exchange Commission.

About Journal Communications

Journal Communications, Inc., headquartered in Milwaukee, Wisconsin, was founded in 1882. We are a diversified media company with operations in publishing, radio and television broadcasting, interactive media and printing services. We publish the Milwaukee Journal Sentinel, which serves as the only major daily newspaper for the Milwaukee metropolitan area, and more than 50 community newspapers and shoppers in Wisconsin and Florida. We own and operate 33 radio stations and 13 television stations in 12 states and operate an additional television station under a local marketing agreement. Our interactive media assets include about 120 online enterprises that are associated with our daily and community newspapers and television and radio stations. We also provide a wide range of commercial printing services – including printing of publications, professional journals and documentation material – and operate a direct marketing services business.

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