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

October 30, 2009 | About:
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10qk

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Journal Communications Inc. (JRN) filed Quarterly Report for the period ended 2009-09-27.

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 $213 million; its shares were traded at around $3.89 with a P/E ratio of 29.9 and P/S ratio of 0.3.

Highlight of Business Operations:

Our publishing businesses continued to be challenged in the third quarter of 2009 due to the difficult economic environment and the secular and cyclical influences affecting the newspaper industry. We have seen advertisers reduce their advertising spending in virtually all revenue categories. In addition, due to the changing mix of revenue categories, frequency and placement of advertising in the newspaper and customer choices to reduce or eliminate the use of color in their ads, we have seen a decrease in the average rate per inch of advertising. Classified advertising revenue, specifically for employment, real estate and automotive, decreased in the third quarter of 2009 compared to the third quarter of 2008. Retail advertising also decreased in the third quarter of 2009 compared to the third quarter of 2008 with weakness in a number of consumer-driven categories, including the automotive, furniture and furnishings, health services, finance/insurance, home improvement, dining and entertainment, communications, food and department stores categories. Interactive revenue decreased at our publishing businesses in the third quarter of 2009 compared to the third quarter of 2008. In addition to the impact of the difficult economic environment, revenue from automotive online classifieds was negatively impacted by our daily newspaper s transition to a new franchise relationship with CarSoup.com. Our publishing businesses remained profitable in the third quarter of 2009 despite recording $3.7 million in workforce reduction charges. Notwithstanding these challenges, our publishing businesses continue to reduce their expense platforms to better align with a reduced revenue base. Total expenses decreased $12.6 million, or 21.5%, in the third quarter of 2009 compared to the third quarter of 2008 primarily due to a decrease of $6.5 million in payroll-related costs and a decrease of $3.5 million in newsprint and paper costs.

Revenue from broadcasting decreased in the third quarter of 2009 compared to the third quarter of 2008 due to decreases in local, national, political and issue and Olympic advertising revenue, partially offset by increases in retransmission and developmental revenue and revenue from the television stations acquired in 2008 and 2009. The difficult economic environment has negatively impacted our broadcasting advertising revenue across most categories, the most significant being our largest revenue category ­— automotive. The significant decline in automotive advertising negatively impacts our average unit rates even if our inventory sell-out levels are high. Our broadcasting business posted operating earnings of $3.7 million in the third quarter of 2009 compared to an operating loss of $29.1 million in the third quarter of 2008, which included a $38.8 million non-cash broadcast license impairment charge. Total expenses decreased $44.4 million, or 53.3%, in the third quarter of 2009 compared to the third quarter of 2008, primarily due to the non-cash broadcast license impairment charge in the third quarter of 2008. Our broadcasting business continues to reduce its expense platforms to reflect a reduced revenue base.

Our consolidated revenue in the third quarter of 2009 was $105.1 million, a decrease of $31.2 million, or 22.9%, compared to $136.3 million in the third quarter of 2008. Our consolidated operating costs and expenses in the third quarter of 2009 were $65.9 million, a decrease of $15.3 million, or 18.8%, compared to $81.2 million in the third quarter of 2008. Our consolidated selling and administrative expenses in the third quarter of 2009 were $35.5 million, a decrease of $7.8 million, or 17.9%, compared to $43.3 million in the third quarter of 2008. Broadcast license impairment was $38.8 million in the third quarter of 2008.

At our broadcasting business, advertising revenue decreased in the third quarter across most categories, the most significant being our largest revenue category ­— automotive. Automotive advertising revenue decreased $4.3 million, or 41.4%, in the third quarter of 2009 compared to the third quarter of 2008 as the domestic automobile industry is experiencing an unprecedented decrease in automotive sales. 2009 is generally considered to be a non-election year and, while there will be some political and issue advertising revenue in 2009, we will experience a significant decrease in the political and issue advertising revenue category throughout the year in our comparisons to 2008. In the third quarter of 2009, political and issue advertising revenue decreased $2.9 million compared to the third quarter of 2008. This is part of the normal two-year advertising cycle which affects our television stations in particular. Olympic advertising revenue decreased $2.3 million due to the broadcast of the 2008 Summer Olympics on our NBC affiliates in the third quarter of 2008. Partially offsetting the decrease in advertising revenue, retransmission revenue increased $0.8 million in the third quarter of 2009 compared to the third quarter of 2008. These contracts will continue to generate incremental revenue through the remainder of 2009 and into the next several years. Developmental revenue increased $0.6 million in the third quarter of 2009 compared to the third quarter of 2008.

Our consolidated operating earnings in the third quarter of 2009 were $3.7 million compared to an operating loss of $27.0 million in the third quarter of 2008. The following table presents our operating earnings (loss) by segment for the third quarter of 2009 and the third quarter 2008:

Revenue from publishing in the third quarter of 2009 was $46.5 million, a decrease of $13.0 million, or 21.8%, compared to $59.5 million in the third quarter of 2008. Operating earnings from publishing in the third quarter of 2009 were $0.7 million, a decrease of $0.4 million, or 40.3%, compared to $1.1 million in the third quarter of 2008.

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

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