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Journal Communications Inc. Reports Operating Results (10-Q)

May 01, 2009 | About:
10qk

Journal Communications Inc. (JRN) filed Quarterly Report for the period ended 2009-03-29.

Journal Communications is a diversified media and communications company with operations in newspaper publishing radio and television broadcasting telecommunications and printing services. In addition they operate a label printing business and a direct marketing services business. Journal Communications Inc. has a market cap of $83.5 million; its shares were traded at around $1.55 with a P/E ratio of 3.6 and P/S ratio of 0.2. The dividend yield of Journal Communications Inc. stocks is 5.2%.

Highlight of Business Operations:

Results of Operations First Quarter Ended March 29, 2009 compared to the First Quarter Ended March 30, 2008 Our consolidated revenue in the first quarter of 2009 was $106.8 million, a decrease of $27.5 million, or 20.4%, compared to $134.3 million in the first quarter of 2008. Our consolidated operating costs and expenses in the first quarter of 2009 were $70.2 million, a decrease of $7.7 million, or 9.9%, compared to $77.9 million in the first quarter of 2008. Our consolidated selling and administrative expenses in the first quarter of 2009 were $37.2 million, a decrease of $6.6 million, or 14.9%, compared to $43.8 million in the first quarter of 2008.

Retail advertising revenue in the first quarter of 2009 was $21.0 million, a decrease of $5.6 million, or 21.0%, compared to $26.6 million in the first quarter of 2008. The $4.8 million decrease at our daily newspaper was primarily due to a decrease in ROP and preprint advertising in consumer-driven categories. As consumers have less discretionary income, advertisers are decreasing their spending. The most significant decreases were in the furniture and furnishings, finance/insurance, home improvement, dining and entertainment, small-retailers, health services and real estate categories. The same trends persisted in our community newspapers and shoppers business. The $0.8 million decrease at our community newspapers and shoppers was primarily due to decreases in automotive and real estate advertising, partially offset by revenue from publications acquired in Northern Wisconsin and Florida in 2008.

Classified advertising is generally the most sensitive to economic cycles because it is driven by the demand of employment, real estate transactions and automotive sales. As a result of the current economic recession and the on going secular trend of classified advertising transitioning to the internet, our publishing business experienced a significant decrease in classified advertising revenue in the first quarter of 2009 compared to the first quarter of 2008. Classified advertising revenue in the first quarter of 2009 was $6.9 million, a decrease of $6.6 million, or 49.2%, compared to $13.5 million in the first quarter of 2008. At our daily newspaper, print and online classified advertising revenue decreased by over 50% from the first quarter of 2008. Specifically, the employment category decreased $3.5 million, or 66.4%; automotive decreased $1.5 million, or 61.7%; and real estate decreased $1.3 million, or 50.2%. At our community newspapers and shoppers business, an increase in classified advertising revenue from newly acquired publications in Northern Wisconsin and Florida in 2008 was partially offset by a decrease in classified advertising revenue from the other publications.

Interactive advertising revenue is reported in the various advertising revenue categories. Total retail and classified interactive advertising revenue at our publishing business was $2.0 million in the first quarter of 2009, a decrease of $1.6 million, or 44.3%, compared to $3.6 million in the first quarter of 2008. Interactive classified advertising revenue at the daily newspaper was $1.0 million in the first quarter of 2009, a decrease of $1.1 million, or 54.3%, compared to $2.1 million in the first quarter of 2008. The $1.1 million decrease was primarily due to decreases in automotive classified advertising of $0.6 million, or 85.6% and employment classified advertising of $0.5 million, or 45.7%. The current economic recession has negatively impacted automotive and employment online advertising revenue. In the first quarter of 2009, revenue from automotive online classified advertising at our daily newspaper was negatively impacted by the transition to a new franchise relationship with CarSoup.com.

Direct marketing revenue, consisting of revenue from the sale of direct mail products of our daily newspaper, was $0.3 million in the first quarter of 2009, a decrease of $0.5 million, or 56.7%, compared to $0.8 million in the first quarter of 2008. This revenue category was also negatively impacted by the current economic recession as the demand for direct marketing advertising continues to decrease. In March 2009, we announced that we will be ceasing the operations of our Milwaukee-area direct marketing facility. The near-term and long-term business prospects did not support continuing this product offering. We are now focusing our direct marketing efforts on our total market coverage product. We will transition from a mail-delivered product to a carrier-delivered product beginning in the second quarter of 2009. We expect to save $1.5 million annually in costs by eliminating postal delivery. We anticipate being able to increase the weight of each package without concern regarding increased delivery costs.

Publishing operating loss in the first quarter of 2009 was $1.6 million compared to operating earnings of $4.3 million in the first quarter of 2008. The decrease in operating earnings was due to the impact of the decrease in advertising revenue. Our publishing business continues to reduce its expense platform to align it with the reduced revenue base. Total expenses decreased $6.7 million, or 11.9%, in the first quarter of 2009 compared to the first quarter of 2008 primarily due to a decrease of $4.2 million in payroll-related costs. Since the end of 2007, our full-time employee count for our publishing business has decreased by 15.2%. Variable costs decreased $1.2 million in the first quarter of 2009 compared to the first quarter of 2008, the most significant of which was newsprint and paper costs. Total newsprint and paper costs for our publishing businesses in the first quarter of 2009 were $5.3 million, a decrease of $0.5 million, or 9.3%, compared to $5.8 million in the first quarter of 2008 primarily due to a 24.9% decrease in newsprint consumption, partially offset by a 22.7% increase in average newsprint pricing per metric ton. Consumption of metric tonnes of newsprint in the first quarter of 2009 decreased primarily due to decreases in editorial pages, ROP advertising and average net paid circulation. Online fees decreased by $0.5 million in the first quarter of 2009 compared to the first quarter of 2008 primarily due to the daily newspapers transition to a new franchise relationship with CarSoup.com. Bad debt expense increased $0.4 million at our publishing business in the first quarter of 2009 compared to the first quarter of 2008. Due to the current economic recession, our publishing business is encountering an increase in slow-paying customers as well as customers who have filed bankruptcy.

Read the The complete ReportJRN is in the portfolios of Third Avenue Management.

Rating: 3.0/5 (1 vote)

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