Newspaper & Mailroom

Journal Communications Reports First Quarter 2011 Results

Wednesday 20. April 2011 - First Quarter 2011 compared to First Quarter 2010 (Continuing Operations)

Revenue of $83.9 million, down 3.5%
Broadcast revenue down 1.2%, up 4.1% excluding 2010 Olympics
Operating earnings of $6.0 million, down 35.8%
Diluted EPS of $0.05, down from $0.09
Notes payable to banks of $72.6 million, a reduction of $2.0 million from year end 2010
Funded debt ratio of 0.92-to-1
Journal Communications, Inc. (NYSE:JRN) today announced results for its first quarter ended March 27, 2011.
“Journal Communications reported a solid first quarter. While overall revenue was down in the first quarter compared to the first quarter of 2010, we were pleased to report both local and national advertising revenue growth in broadcast,” said Steven Smith, Chairman of the Board and Chief Executive Officer of Journal Communications. “We benefited from additional revenue at both our broadcast and publishing businesses related to the Green Bay Packers’ ‘Road to the Super Bowl’ and the political battles in the state of Wisconsin. Our complete coverage of these events has driven record level page views on JSOnline.com.
“We continue to focus on growing our revenue share in each of our broadcast markets, building our digital business, and producing high quality local content that drives viewers, listeners, on-line visitors and readers.”
First Quarter 2011 Results
Note that unless otherwise indicated, all comparisons are to the first quarter ended March 28, 2010.
For the first quarter, revenue of $83.9 million decreased 3.5% compared to $86.9 million. Operating earnings of $6.0 million decreased 35.8% compared to $9.4 million. Earnings from discontinued operations were $0.3 million. Net earnings were $3.4 million compared to $5.3 million.
In the first quarter, basic and diluted net earnings per share of class A and B common stock were $0.05. This compares to basic and diluted net earnings per share of $0.09 in 2010. There was no impact on basic and diluted earnings per share of class A and B common stock from discontinued operations in 2011 or 2010.
The operating margin was 7.2% for the first quarter compared to 10.8%. EBITDA (net earnings (loss) excluding the earnings/loss from discontinued operations, net; total other expense, net; provision (benefit) for income taxes; depreciation; amortization; and, if any, non-cash impairment charges) was $11.8 million compared to $15.6 million, a decrease of 24.6%.
Consolidated and Segment Results
The following table presents our revenue and operating earnings (loss) by segment for the first quarter of 2011 and 2010 (dollars in millions).
1Q
2011
1Q
2010
%
Change
Revenue:
Publishing $ 41.8 $ 44.5 (6.2 )
Broadcasting 42.1 42.6 (1.2 )
Corporate eliminations — (0.2 ) —
Total Revenue $ 83.9 $ 86.9 (3.5 )
Operating earnings (loss):
Publishing $ 1.8 $ 3.4 (46.1 )
Broadcasting 6.0 7.7 (22.6 )
Corporate (1.8 ) (1.7 ) (2.5 )
Total operating earnings $ 6.0 $ 9.4 (35.8 )


For the first quarter, total expenses of $77.9 million increased 0.4% compared to $77.6 million.
Publishing
For the first quarter, publishing revenue decreased 6.2% to $41.8 million compared to $44.5 million, largely due to continued decreases in the retail and classified advertising categories and other revenue. Operating earnings from publishing were $1.8 million compared to $3.4 million, a decrease of 46.1%. Total newsprint and paper expense in publishing was $4.1 million compared to $3.9 million, a 5.5% increase primarily due to an increase in the price per ton of newsprint.
Revenue at the daily newspaper for the first quarter decreased 5.8% to $35.4 million compared to $37.5 million. Retail advertising revenue decreased 6.9%. Classified advertising revenue decreased 12.1% driven primarily by a decrease in the real estate category. Interactive advertising revenue increased 11.6% to $2.6 million compared to $2.3 million, primarily due to an increase in retail sponsorships and classified advertising packages. Circulation revenue of $12.5 million was essentially flat. Operating earnings from the daily newspaper were $2.0 million compared to $3.5 million, a decrease of 43.7%. Daily newspaper operating expenses decreased 1.8%, primarily due to a decrease in employee related costs partially offset by an increase in newsprint and paper expense.
Community newspapers and shoppers revenue for the first quarter decreased 8.4% to $6.4 million compared to $7.0 million. Retail advertising revenue decreased by 8.2%. Classified advertising revenue decreased by 20.5%. The operating loss from community newspapers and shoppers was $0.2 million compared to $0.1 million. Operating expenses were down 7.8%, primarily due to cost savings from previous workforce reductions and lower operating costs associated with lower revenue.
Broadcasting
For the first quarter, broadcasting revenue decreased 1.2% to $42.1 million compared to $42.6 million. Excluding Olympics advertising revenue of $2.2 million in 2010, broadcasting revenue increased 4.1%. Total broadcast political and issue advertising revenue was $0.9 million compared to $0.7 million. Local and national advertising revenue increased 3.7% and 1.5%, respectively primarily due to an increase in automotive and other media advertising and increased local inventory availability in a non-Olympic year. Retransmission revenue was $1.8 million compared to $1.6 million. Broadcasting operating earnings of $6.0 million decreased 22.6% compared to $7.7 million.
Revenue from television stations for the first quarter decreased 3.4% to $27.5 million compared to $28.4 million. Excluding Olympics advertising revenue of $2.2 million in 2010, revenue from television stations increased 4.6%. Television political and issue advertising revenue was $0.8 million compared to $0.6 million. Local advertising revenue increased 4.7% primarily due to an increase in automotive and casino advertising. Operating earnings were $3.8 million compared to $5.1 million, a decrease of 26.9%. Television operating expenses increased 1.8% primarily due to increases in employee related expenses and network fees.
For the first quarter, revenue from radio stations increased 3.4% to $14.6 million from $14.2 million. Radio political and issue advertising revenue was $0.1 million in each of 2011 and 2010. Operating earnings from radio stations were $2.2 million compared to $2.6 million. Radio operating expenses increased 7.2% primarily due to an increase in broadcast rights fees.
Corporate
The operating loss for the first quarter was $1.8 million compared to $1.7 million, primarily due to an increase in professional services fees.
Discontinued Operations
For the first quarter, earnings from discontinued operations were $0.3 million compared to $0.04 million. Earnings from discontinued operations in 2011 were driven by a gain on the sale of real estate holdings in Green Bay, Wisconsin related to our former label printing business. Earnings from discontinued operations in 2010 were related to our former direct marketing and printing services businesses.
Non-Operating Items
For the first quarter, other expense, which primarily consists of interest expense, was $1.1 million compared to $0.6 million. This increase in interest expense reflects an increase in borrowing rates under our amended and extended credit agreement entered into on August 13, 2010 partially offset by a decrease in average borrowing levels for the quarter.
The first quarter effective tax rate was 38.7% compared to 40.3%.
Notes Payable to Banks and Cash Flows
At the end of the first quarter, our notes payable to banks were $72.6 million. During the first quarter, we reduced our notes payable to banks by $2.0 million as compared to the 2010 year-end. Our consolidated funded debt ratio, as defined in our credit agreement, was 0.92-to-1. Cash from operating activities was $3.5 million compared to $16.2 million. Cash from operating activities has decreased due to an increase in income tax payments, a decrease in operating earnings and an increase in incentive compensation payments. Year-to-date capital expenditures were $2.7 million compared to $1.8 million.
Second Quarter 2011 Outlook
For the second quarter of 2011, we anticipate that publishing revenues will be down compared to the prior year period reflecting continued challenges with publishing advertising revenue. Excluding political and issue advertising in broadcast, broadcast revenues are expected to be up compared to the prior year period.