Business News
Journal Communications Reports First Quarter 2010 Results
Friday 23. April 2010 - Journal Communications, Inc. (NYSE:JRN) today announced results for its first quarter ended March 28, 2010.
“We generated a significant increase in operating earnings in the first quarter despite a decline in publishing and printing services revenue,” said Steve Smith, Chairman and Chief Executive Officer of Journal Communications. “Ongoing discipline in expense management and aggressive action throughout the last year has substantially driven down our overall cost platform. In addition, the high operating leverage of the broadcast segment has allowed much of our increase in revenue to drop directly to operating earnings, further improving our financial results.
“We also reduced debt by another $16.7 million this quarter following a $63 million reduction in 2009, continuing our financial discipline and enhancing our financial flexibility.
“Even with improved revenue expected in our broadcast segment in the second quarter of 2010, we expect overall company revenue in the second quarter to lag the prior year period with challenges in publishing advertising and printing services revenue. However, our results will benefit from our lower cost structure and we intend to execute our local market business strategy in order to position Journal for a return to top-line growth.”
First Quarter 2010 Results
Note that unless otherwise indicated, all comparisons are to the first quarter ended March 29, 2009. In February 2010, the sales of certain PrimeNet operations were completed. PrimeNet has been reported as a discontinued operation in this earnings release for both periods.
In addition, the company has adopted FASB guidance which promulgates new guidance for consolidating variable interest entities (VIEs). The impact of adopting this new standard is not reflected in this earnings release; however, management does not believe the effects of adoption will have a material impact on our consolidated financial position or results of operations. The companys consolidated financial statements contained in its Quarterly Report for the first quarter ended March 28, 2010 on Form 10-Q will include the required presentation and disclosures required by this guidance.
For the first quarter, revenue from continuing operations of $98.5 million decreased 3.0% compared to $101.5 million. Operating earnings of $10.1 million are compared to an operating loss of $0.4 million. The loss from discontinued operations of $0.4 million is compared to a loss of $0.1 million. Net earnings were $5.3 million compared to $0.1 million.
In the first quarter 2010, basic and diluted net earnings per share of class A and B common stock were $0.09 for both. This compared to basic and diluted net loss per share of $0.01 for both in 2009. Basic and diluted earnings per share of class A and B common stock from continuing operations were $0.10 for both. This compared to basic and diluted loss per share from continuing operations of $0.01 for both in 2009. Basic and diluted loss per share of class A and B common stock from discontinued operations were $0.01 for both in 2010.
The operating margin was 10.2% for the first quarter of 2010 compared to a negative 0.4% margin last year. EBITDA (net earnings (loss) excluding the gain/loss from discontinued operations, net; total other expense, net; provision (benefit) for income taxes; depreciation; amortization; and if any, non-cash impairment charges) was $16.8 million compared to $6.7 million, an increase of 152.8%.
Consolidated and Segment Results
With the reporting of PrimeNet as a discontinued operation, the previously reported “Other” segment has been changed to “Corporate” and now reflects unallocated costs primarily related to corporate executive management and corporate governance. The prior year period has been revised to conform to this change.
The following table presents our revenue and operating earnings (loss) by segment for the first quarters of 2010 and 2009.
1Q
2010
1Q
2009
% Change
Revenue:
Publishing $44.6 $48.1 (7.4)
Broadcasting 42.6 39.2 8.6
Printing services 11.6 14.3 (18.6)
Corporate eliminations (0.3) (0.1) (138.4)
Total Revenue $98.5 $101.5 (3.0)
Operating earnings (loss):
Publishing $3.4 $(0.6) N/A
Broadcasting 7.7 1.7 348.5
Printing services 0.6 0.3 129.1
Corporate (1.6) (1.8) 8.8
Total operating earnings (loss) $10.1 $(0.4) N/A
Overall, total operating expenses of $88.4 million decreased 13.2% compared to $101.9 million, primarily driven by workforce reductions and permanent cost saving initiatives implemented in 2009 and reduced expenses related to revenue declines.
Publishing
For the first quarter, publishing revenue decreased 7.4% to $44.6 million compared to $48.1 million, largely due to continued decreases in all advertising categories offset by an increase in commercial print revenue. Operating earnings from publishing were $3.4 million compared to an operating loss of $0.6 million. Total newsprint and paper expense in publishing was $3.9 million compared to $5.2 million, a 25.7% decrease primarily due to a reduction in the price per ton of newsprint.
Revenue at the daily newspaper for the first quarter decreased 5.3% to $37.5 million compared to $39.6 million. Classified advertising revenue decreased 13.7% largely due to decreases in the employment, real estate and other advertising categories. Retail advertising revenue decreased 9.0%. Interactive advertising revenue at the daily newspaper increased 20.1% to $2.3 million compared to $2.0 million, primarily due to an increase in retail sponsorships. Operating earnings from the daily newspaper were $3.5 million compared to an operating loss of $0.1 million. Daily newspaper operating expenses were down 14.4%, primarily due to the reduction in employee related costs and newsprint expense, other cost reduction initiatives and reduced expenses related to revenue declines.
Community newspapers and shoppers revenue for the first quarter decreased 17.3% to $7.0 million compared to $8.5 million. The decrease was primarily due to declines in real estate and automotive retail and classified advertising revenue. The operating loss from community newspapers and shoppers was $0.1 million compared to a loss of $0.5 million. Operating expenses were down 20.7%, primarily due to cost savings from previous workforce reductions and production efficiency initiatives, a decrease in newsprint expense and reduced expenses related to revenue declines.
Broadcasting
For the first quarter, broadcasting revenue increased 8.6% to $42.6 million compared to $39.2 million. Local advertising revenue increased 0.6% and national advertising revenue decreased 2.3%. Olympic revenue was $2.2 million. Total broadcast political and issue advertising revenue was $0.7 million compared to $0.1 million. Retransmission revenue was $1.6 million compared to $1.3 million. Broadcasting operating earnings were $7.7 million compared to $1.7 million.
Revenue from television stations for the first quarter increased 9.4% to $28.4 million compared to $26.0 million. Television political and issue advertising revenue was $0.7 million in 2010. Operating earnings were $5.1 million compared to $0.6 million. Television operating expenses (including KNIN-TV acquired in April 2009) were down 8.2% compared to last year due to the reduction in employee related costs and other cost reduction initiatives implemented in 2009.
For the first quarter, revenue from radio stations increased 7.1% to $14.2 million from $13.2 million. Radio political and issue advertising revenue was $0.1 million in 2010 and 2009. Operating earnings from radio stations were $2.6 million compared to $1.1 million. Radio operating expenses decreased 4.3% due to the reduction in employee related costs and other cost saving initiatives.
Printing Services
For the first quarter, revenue from printing services decreased 18.6% to $11.6 million compared to $14.3 million due to continued weakness in the printing industry and the anticipated reduction in revenue from certain printing customers. Operating earnings were $0.6 million compared to $0.3 million, an increase of 129.1%, which was primarily due to the employee, operating and production related cost reduction initiatives partially offset by the reduction in revenue.
Corporate
For the first quarter, revenue eliminations were $0.3 million compared to $0.1 million. The operating loss was $1.6 million compared to $1.8 million.
Discontinued Operations
For the first quarter, the loss from the discontinued operations of PrimeNet Marketing Services was $0.4 million compared to $0.1 million.
Non-Operating Items
For the first quarter, other expense, which primarily consists of interest expense, was $0.6 million compared to $0.8 million. Interest expense decreased due to a decline in both the average borrowings during the quarter and the interest rate on our borrowings.
The first quarter effective tax rate was 40.1% compared to an effective tax benefit primarily related to the settlement reached last year on an income and franchise tax audit assessment issued by the Wisconsin Department of Revenue.
Debt and Cash Flows
At quarter end, our debt of $134.7 million represented 1.95 times the trailing four quarters of EBITDA. During the quarter, debt was reduced by $16.7 million. Cash from operating activities was $17.5 million compared to $17.6 million which included income tax refunds of $4.9 million. Capital expenditures were $2.0 million compared to $2.2 million.
Second Quarter 2010 Outlook
For the second quarter of 2010, we anticipate that publishing and printing services segment revenues will be down compared to the prior year period reflecting continued challenges with publishing advertising revenue and printing volumes. Broadcasting segment revenues are expected to be up compared to the prior year period helped by local, national and political television advertising.