Journal Communications Reports Second Quarter 2008 Results

Journal Communications, Inc. (NYSE:JRN) today announced results for its second quarter ended June 29, 2008. Note that unless otherwise indicated, all comparisons are to the second quarter ended July 1, 2007. For the second quarter 2008, revenue of $140.1 million decreased 5.0% compared to $147.5 million. Earnings from continuing operations were $9.0 million compared to $12.7 million, a decrease of 29.1%. Net earnings were $9.0 million. This compares to net earnings of $14.2 million in the second quarter of 2007, which included a $1.4 million gain from discontinued operations of certain clusters of our community newspapers and shoppers division. In the second quarter 2008, basic and diluted net earnings per share of class A and B common stock were $0.16 for both basic and diluted compared to $0.21 for both basic and diluted. Basic and diluted earnings per share of class A and B common stock from continuing operations were $0.16 for both compared to $0.19 for both. Basic and diluted earnings per share of class A and B common stock from discontinued operations were $0.00 for both compared to $0.02 for both. "The economy continued to impact advertising revenues at Journal Communications during the second quarter,” said Steven J. Smith, chairman and chief executive officer of Journal Communications. "While television revenue grew in markets like Palm Springs, Omaha, Boise and Lansing and radio revenue grew in Omaha, our larger growth markets continued to experience subdued advertiser spending. Publishing revenue remained soft overall, although our hyper-local community newspapers surrounding Milwaukee grew revenue in the quarter. We were also pleased to see continued increases in online advertising revenues at both the publishing and broadcast sites. Total online revenue was up 15.9% in the second quarter to approximately $4.7 million. "Looking to the second half of the year, we anticipate positive revenue trends driven by political and issue and Olympics advertising spending at our television business. "We believe our company is strong financially because we have maintained a solid balance sheet while prudently using capital to repurchase shares. We remain focused on diligent cost control. Broadcast headcount is down about 6% in 2008 from year end 2007. On July 2, Journal Sentinel announced a plan to reduce its workforce by an additional 10%. We estimate the charge for this to be between $3.8 and $4.0 million, most of which will be recorded in the third quarter. We expect cost savings for the remainder of the year to be between $1.4 and $1.6 million. Full year net savings are expected to be between $5.6 and $6.0 million. "We continue to execute on our growth strategy to grow our total audience and expand our presence in our local markets. So far in 2008, Journal Broadcast Group formed a television duopoly in Palm Springs. We expect to close soon on the acquisition of the assets of KWBA-TV to form a television duopoly in Tucson, and on July 1, we announced an agreement to acquire the assets of KNIN-TV in Boise, subject to regulatory approval, to form another television duopoly in that growth market.” Consolidated For the second quarter, revenue of $140.1 million decreased 5.0% compared to $147.5 million. Operating earnings decreased 26.9% to $16.6 million. Operating earnings margin was 11.9% compared to 15.4%. EBITDA (net earnings excluding the gain/loss from discontinued operations, net; total other expense, net; provision for income taxes; depreciation; and amortization) of $23.9 million decreased 20.2% compared to $30.0 million. Publishing For the second quarter, publishing revenue decreased 8.5% to $61.8 million compared to $67.6 million, largely due to continued weakness across all advertising categories. Interactive advertising revenue at the daily newspaper increased 11.4% to $3.7 million compared to $3.4 million. Operating earnings from publishing decreased 44.0% to $5.7 million compared to $10.2 million. Second quarter 2007 included a $0.9 million gain on the sale of our Hartland, Wisconsin facility. Excluding this gain, publishing operating expenses have decreased by 3.6%. Broadcasting For the second quarter, broadcasting revenue decreased 4.6% to $53.5 million compared to $56.0 million. Total broadcast political and issue advertising revenue was $0.7 million compared to $0.5 million. Broadcasting operating earnings of $9.7 million were down 14.1% compared to $11.3 million. For the second quarter, revenue from television stations decreased 4.3% to $32.6 million compared to $34.0 million. Television political and issue advertising revenue was $0.6 million compared to $0.2 million. Operating earnings from television stations decreased 24.4% to $4.6 million compared to $6.0 million. The decrease in operating earnings largely reflects the declines in revenue at our Tucson, Ft. Myers/Naples, Milwaukee and Las Vegas stations. Overall, television operating expenses (including KPSE-LP that was acquired in January 2008) are essentially flat compared to last year. For the second quarter, revenue from radio stations of $20.9 million was down 5.0% compared to $22.0 million. Operating earnings from radio stations of $5.1 million decreased 2.2% compared to $5.3 million, largely reflecting the declines in revenue partially offset by a 5.9% reduction in radio operating expenses. Printing Services For the second quarter, revenue from printing services increased 1.5% to $16.8 million compared to $16.5 million. Operating earnings from printing services decreased 23.8% to $0.8 million compared to $1.0 million, due to increased employee benefit costs and lower margins for printing documentation materials. Other For the second quarter, revenue for "Other” of $8.0 million increased 9.2% compared to revenue of $7.4 million due to an increase in our Clearwater, Florida direct marketing business. "Other” operating earnings were $0.4 million compared to $0.2 million. Discontinued Operations There were no results from discontinued operations in the second quarter 2008. For the second quarter 2007, the gain from the discontinued operations of certain clusters of our community newspaper and shoppers was $1.4 million. Non-Operating Items For the second quarter, other expense, which primarily consists of interest expense, was $1.9 million compared to $2.0 million. The decrease is attributable in large part to a decrease in borrowing rates partially offset by an increase in the average debt outstanding due to repurchases of the Company’s common stock during the quarter. Stock Repurchase Program During the second quarter and year-to-date 2008, the Company repurchased 1,777,200 and 5,904,800, respectively, of its class A shares. From the time the Company started repurchasing its common stock in March 2005 through June 29, 2008, the Company has repurchased a total of 21,777,200 shares of common stock, of which 18,577,200 were class A shares. Third Quarter 2008 Outlook For the third quarter of 2008, Journal Communications currently anticipates that its publishing revenues will be down compared to the prior year period, reflecting continued challenges in classified advertising, partially offset by continued growth in commercial printing and interactive at the daily newspaper. Television revenues are expected to be up in the low double digit range compared to the prior year period primarily due to political and issue and Olympics advertising. Radio revenues are expected to be slightly down compared to the prior year period. Conference Call and Webcast The company will hold an earnings conference call at 10:00 a.m. Central Time (11:00 a.m. ET, 8:00 a.m. PT). To access the call, dial (888) 680-0890 (domestic) or (617) 213-4857 (international) at least 10 minutes prior to the scheduled start of the call. The access code for the conference call is 52260859. A live webcast of the second 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 August 6, 2008. Replays of the conference call will be available July 22 through July 24. 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 97552646. 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 on page 1 of our most recent Annual Report on Form 10-K 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 52 community newspapers and shoppers in Wisconsin and Florida. We own and operate 35 radio stations and 11 television stations in 12 states and operate an additional television station under a local marketing agreement. Our interactive media assets include 121 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. Tables Follow   Journal Communications, Inc. Consolidated Statements of Earnings (unaudited) (dollars in thousands, except for shares and per-share amounts)               Second Quarter (A) Two Quarters (B) 2008 2007 % Change 2008 2007 % Change     Revenue: Publishing $ 61,830 $ 67,556 (8.5 ) $ 122,541 $ 134,013 (8.6 ) Broadcasting 53,457 56,029 (4.6 ) 102,796 107,725 (4.6 ) Printing services 16,775 16,528 1.5 33,296 33,402 (0.3 ) Other 8,028   7,352   9.2 15,722   15,518   1.3 Total revenue 140,090 147,465 (5.0 ) 274,355 290,658 (5.6 )   Operating costs and expenses: Publishing 34,456 35,476 (2.9 ) 68,365 72,351 (5.5 ) Broadcasting 24,212 23,735 2.0 47,627 46,130 3.2 Printing services 13,872 13,408 3.5 27,631 27,573 0.2 Other 6,680   6,153   8.6 12,874   13,076   (1.5 ) Total operating costs and expenses 79,220 78,772 0.6 156,497 159,130 (1.7 )   Selling and administrative expenses 44,250   45,948   (3.7 ) 88,650   92,155   (3.8 ) Total operating costs and expenses and selling and administrative expenses 123,470   124,720   (1.0 ) 245,147   251,285   (2.4 )   Operating earnings 16,620 22,745 (26.9 ) 29,208 39,373 (25.8 )   Other income and (expense): Interest income 1 1 2 3 Interest expense (1,894 ) (1,984 ) (4,163 ) (4,982 ) Total other income and (expense) (1,893 ) (1,983 ) (4.5 ) (4,161 ) (4,979 ) (16.4 )   Earnings from continuing operations before income taxes 14,727 20,762 (29.1 ) 25,047 34,394 (27.2 )   Provision for income taxes 5,723   8,060   (29.0 ) 9,753   13,452   (27.5 )   Earnings from continuing operations 9,004 12,702 (29.1 ) 15,294 20,942 (27.0 )   Gain from discontinued operations, net of tax -   1,448   N/A 400   66,539   (99.4 )   Net earnings $ 9,004   $ 14,150   (36.4 ) $ 15,694   $ 87,481   (82.1 )   Weighted average number of shares-Class A and B common stock: Basic 52,163,077 63,648,225 53,536,878 64,455,279 Diluted 52,183,248 68,172,403 53,560,433 68,984,541   Weighted average number of shares-Class C common stock 3,264,000 3,264,000 3,264,000 3,264,000   Earnings per share: Basic - Class A and B common stock: Continuing operations $ 0.16 $ 0.19 $ 0.26 $ 0.31 Discontinued operations -   0.02   0.01   0.98   Net earnings $ 0.16   $ 0.21   $ 0.27   $ 1.29     Diluted - Class A and B common stock: Continuing operations $ 0.16 $ 0.19 $ 0.26 $ 0.30 Discontinued operations -   0.02   0.01   0.97   Net earnings $ 0.16   $ 0.21   $ 0.27   $ 1.27     Basic and diluted - Class C common stock: Continuing operations $ 0.22 $ 0.26 $ 0.38 $ 0.44 Discontinued operations -   0.02   0.01   0.98   Net earnings $ 0.22   $ 0.28   $ 0.39   $ 1.42         (A) 2008 second quarter: March 31, 2008 to June 29, 2008. 2007 second quarter: April 2, 2007 to July 1, 2007. (B) 2008 two quarters: December 31, 2007 to June 29, 2008. 2007 two quarters: January 1, 2007 to July 1, 2007.   Journal Communications, Inc. Segment Information (unaudited) (dollars in thousands)               Second Quarter (A) Two Quarters (B) 2008 2007 % Change 2008 2007 % Change Revenue Publishing $ 61,830 $ 67,556 (8.5 ) $ 122,541 $ 134,013 (8.6 ) Broadcasting 53,457 56,029 (4.6 ) 102,796 107,725 (4.6 ) Printing services 16,775 16,528 1.5 33,296 33,402 (0.3 ) Other 8,028 7,352 9.2 15,722 15,518 1.3 $ 140,090 $ 147,465 (5.0 ) $ 274,355 $ 290,658 (5.6 )   Operating earnings Publishing $ 5,707 $ 10,189 (44.0 ) $ 9,955 $ 15,233 (34.6 ) Broadcasting 9,714 11,303 (14.1 ) 16,846 21,298 (20.9 ) Printing services 799 1,049 (23.8 ) 1,578 2,047 (22.9 ) Other 400 204 96.1 829 795 4.3 $ 16,620 $ 22,745 (26.9 ) $ 29,208 $ 39,373 (25.8 )   Depreciation and amortization Publishing $ 3,163 $ 3,206 (1.3 ) $ 6,392 $ 6,813 (6.2 ) Broadcasting 3,323 3,247 2.3 6,644 6,395 3.9 Printing services 584 535 9.2 1,151 1,025 12.3 Other 237 263 (9.9 ) 474 523 (9.4 ) $ 7,307 $ 7,251 0.8 $ 14,661 $ 14,756 (0.6 )       (A) 2008 second quarter: March 31, 2008 to June 29, 2008. 2007 second quarter: April 2, 2007 to July 1, 2007. (B) 2008 two quarters: December 31, 2007 to June 29, 2008. 2007 two quarters: January 1, 2007 to July 1, 2007.   Journal Communications, Inc. Publishing Segment Information (unaudited) (dollars in thousands)                     Publishing revenue by category:   Second Quarter of 2008 (A) Second Quarter of 2007 (B)   Community Community Daily Newspapers Daily Newspapers % Change % Change % Change Newspaper & Shoppers Total Newspaper & Shoppers Total Daily CN&S Total   Advertising revenue: Retail $ 21,220 $ 7,423 $ 28,643 $ 22,746 $ 7,808 $ 30,554 (6.7 ) (4.9 ) (6.3 ) Classified 12,103 1,558 13,661 15,573 1,638 17,211 (22.3 ) (4.9 ) (20.6 ) National 1,514 -- 1,514 1,892 -- 1,892 (20.0 ) N/A (20.0 ) Direct Marketing 859 -- 859 1,080 -- 1,080 (20.5 ) N/A (20.5 ) Other -- 83 83 -- 63 63 N/A 31.7 31.7 Total advertising revenue 35,696 9,064 44,760 41,291 9,509 50,800 (13.6 ) (4.7 ) (11.9 ) Circulation revenue 12,529 279 12,808 12,831 243 13,074 (2.4 ) 14.8 (2.0 ) Other revenue 3,435 827 4,262 2,560 1,122 3,682 34.2 (26.3 ) 15.8 Total revenue $ 51,660 $ 10,170 $ 61,830 $ 56,682 $ 10,874 $ 67,556 (8.9 ) (6.5 ) (8.5 )   Two Quarters of 2008 (C) Two Quarters of 2007 (D)   Community Community Daily Newspapers Daily Newspapers % Change % Change % Change Newspaper & Shoppers Total Newspaper & Shoppers Total Daily CN&S Total   Advertising revenue: Retail $ 41,186 $ 14,079 $ 55,265 $ 43,511 $ 14,934 $ 58,445 (5.3 ) (5.7 ) (5.4 ) Classified 24,393 2,763 27,156 31,132 3,067 34,199 (21.6 ) (9.9 ) (20.6 ) National 3,520 -- 3,520 4,320 -- 4,320 (18.5 ) N/A (18.5 ) Direct Marketing 1,634 -- 1,634 2,168 -- 2,168 (24.6 ) N/A (24.6 ) Other -- 195 195 -- 251 251 N/A (22.3 ) (22.3 ) Total advertising revenue 70,733 17,037 87,770 81,131 18,252 99,383 (12.8 ) (6.7 ) (11.7 ) Circulation revenue 24,837 540 25,377 25,525 584 26,109 (2.7 ) (7.5 ) (2.8 ) Other revenue 7,725 1,669 9,394 6,461 2,060 8,521 19.6 (19.0 ) 10.2 Total revenue $ 103,295 $ 19,246 $ 122,541 $ 113,117 $ 20,896 $ 134,013 (8.7 ) (7.9 ) (8.6 )       (A) 2008 second quarter: March 31, 2008 to June 29, 2008. (B) 2007 second quarter: April 2, 2007 to July 1, 2007. (C) 2008 two quarters: December 31, 2007 to June 29, 2008. (D) 2007 two quarters: January 1, 2007 to July 1, 2007.     NOTE: Publishing segment information is provided to facilitate comparison of our publishing segment results with those of other publishing companies and is not representative of the overall business of Journal Communications or its operating results.   Journal Communications, Inc. Reconciliation of consolidated net earnings to consolidated EBITDA (unaudited) (dollars in thousands)           Second Quarter (A) Two Quarters (B) 2008 2007 2008 2007   Net earnings $ 9,004 $ 14,150 $ 15,694 $ 87,481 Gain from discontinued operations, net - (1,448 ) (400 ) (66,539 ) Provision for income taxes 5,723 8,060 9,753 13,452 Total other expense, net 1,893 1,983 4,161 4,979 Depreciation 6,803 6,776 13,665 13,805 Amortization 504 475   996   951   EBITDA $ 23,927 $ 29,996   $ 43,869   $ 54,129         (A) 2008 second quarter: March 31, 2008 to June 29, 2008. 2007 second quarter: April 2, 2007 to July 1, 2007. (B) 2008 two quarters: December 31, 2007 to June 29, 2008. 2007 two quarters: January 1, 2007 to July 1, 2007.       We define EBITDA as net earnings excluding gain/loss from discontinued operations, net, provision for income taxes, total other expense (which is entirely comprised of interest income and expense), depreciation and amortization. Our management uses EBITDA, among other things, to evaluate our operating performance, and to value prospective acquisitions. EBITDA is not a measure of performance calculated in accordance with accounting principles generally accepted in the United States. EBITDA should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. EBITDA, as we calculate it, may not be comparable to EBITDA reported by other companies.   Journal Communications, Inc. Consolidated Condensed Balance Sheets (dollars in thousands)     June 29, 2008 December 30, (unaudited) 2007 ASSETS Current assets: Cash and cash equivalents $ 4,218 $ 6,256 Receivables, net 80,199 86,197 Inventories, net 6,423 7,258 Prepaid expenses 9,388 13,066 Deferred income taxes 6,743 6,821 Total current assets 106,971 119,598 Property and equipment, net 218,798 223,800 Goodwill 236,607 232,538 Broadcast licenses 225,507 223,529 Other intangible assets, net 24,978 25,702 Prepaid pension costs 15,861 15,298 Other assets 16,157 16,502 Total assets $ 844,879 $ 856,967   LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 21,192 $ 30,026 Accrued compensation 15,795 16,871 Accrued employee benefits 7,950 10,390 Deferred revenue 14,822 14,936 Accrued income taxes 850 219 Other current liabilities 6,993 7,757 Current portion of long-term liabilities 4,345 4,508 Total current liabilities 71,947 84,707 Accrued employee benefits 24,613 25,157 Long-term notes payable to banks 211,515 178,885 Deferred income taxes 72,185 67,664 Other long-term liabilities 10,523 12,992 Shareholders' equity 454,096 487,562 Total liabilities and shareholders' equity $ 844,879 $ 856,967