Journal Communications Reports Third Quarter 2014 Results

Journal Communications, Inc. (NYSE:JRN) today announced results for its third quarter ended September 28, 2014.

“We are pleased to report that Journal Communications third quarter revenue of $105 million grew more than 8%, driving an operating earnings increase of 40%. Earnings per share in the quarter were $0.14 compared to $0.09 last year,” said Steven J. Smith, Chairman and CEO of Journal Communications.

“Journal benefitted from continued growth in television retransmission revenue along with significant political and issue advertising spending in a number of our markets.

“Our focused broadcast sales efforts grew both television and radio revenue, excluding retransmission and political, by approximately 3% and drove television and radio digital revenue up 22% and 31%, respectively.

“Publishing experienced a soft quarter due to lower retail and classified spending and circulation volume declines. A publishing expense reduction initiative in the fourth quarter will create a lower expense base in the business going forward.

Journal Communications continues to work with The E.W. Scripps Company to complete our previously announced transaction. We expect to close the transaction in the first half of 2015.”

Third Quarter 2014 Results

Note that unless otherwise indicated, all comparisons are to the third quarter ended September 29, 2013.

For the third quarter, revenue of $105.1 million increased 8.5%. Digital revenue of $5.0 million grew 9.9%. Operating earnings of $14.2 million increased 40.4%. Total expenses of $91.0 million were up 4.8%, or 1.2% excluding transaction and workforce reduction costs.

The operating margin was 13.5% for the third quarter compared to 10.4%. Adjusted EBITDA, as defined in Table 4, was $23.0 million, an increase of 43.5%.

Net earnings of $7.0 million increased 54.5%. In the third quarter, basic and diluted net earnings per share of class A and B common stock were $0.14 compared to $0.09.

Consolidated and Segment Results

The following table presents our revenue and operating earnings (loss) by segment for the third quarters of 2014 and 2013 (dollars in millions).

Television

Revenue from television for the third quarter increased 22.8% to $47.9 million. Retransmission revenue of $9.6 million grew 82.0%. Television political advertising revenue was $3.9 million compared to $0.3 million. Local advertising revenue, excluding political, increased 1.8%. Digital revenue, which is reported in local revenue, was $1.0 million, up 22.4%. National advertising revenue, excluding political, increased 4.2%, primarily due to an increase in the professional services and telecommunications advertising categories. Total revenue, excluding political and retransmission revenue was $34.4 million, up 2.8%.

Operating earnings from television were $12.1 million, an increase of 134.8%. Television operating expenses increased 5.8%, primarily due to higher network fees.

Radio

For the third quarter, revenue from radio increased 5.1% to $21.6 million. Radio political advertising revenue was $0.4 million in 2014 compared to $0.1 million in 2013. Local advertising revenue, excluding political, increased 3.3% to $18.5 million, primarily due to an increase in automotive and medical advertising. Digital revenue, which is reported in local revenue, was $0.8 million, up 30.8%. National advertising revenue, excluding political, decreased 1.6%. Excluding political revenue, total revenue was $21.2 million, up 3.4%.

Operating earnings from radio were $4.1 million compared to $3.5 million, an increase of 16.1%. Radio operating expenses increased 2.8% on higher employee related costs and sports rights fees.

Publishing

For the third quarter, publishing revenue decreased 5.4% to $35.6 million. Retail advertising revenue decreased 7.0% driven by the loss of a large retailer in the market and lower communications category spending and department store spending. Classified advertising revenue decreased 4.2% driven by a decrease in real estate and employment advertising. Digital advertising revenue of $3.1 million increased 2.0%, primarily due to an increase in sponsorship revenue that offset classified employment revenue declines. Circulation revenue of $12.1 million was down 4.0% on lower volumes that off-set price increases. Other revenue of $5.1 million decreased 4.4% driven by lower commercial print volumes.

Operating earnings from publishing were $2.6 million, a decrease of 19.0%. Total publishing expenses were $33.1 million, down 4.2%. Total newsprint and paper expense of $3.4 million decreased 11.5% on lower printing volumes and paper costs.

Corporate

The operating loss for the third quarter was $4.6 million compared to $1.8 million, primarily due to transaction related costs of $3.2 million in the third quarter of 2014.

Non-Operating Items

For the third quarter, other expense, which primarily consists of interest expense, was $1.4 million compared to $1.9 million, reflecting lower average borrowings and lower rates for the quarter.

The third quarter effective tax rate was 44.6% compared to 39.2%. The higher 2014 effective tax rate was driven by non-deductible transaction related costs incurred in 2014.

Notes Payable to Banks and Cash Flows

At the end of the third quarter, total debt was $143.8 million of which $130.5 million was drawn on our senior secured credit facilities and an additional $13.3 million was outstanding in the form of unsecured subordinated notes payable to the former holders of our class C shares. Year-to-date through the third quarter, we reduced our total debt by $64.4 million as compared to the 2013 year-end. Our consolidated funded debt ratio, as defined in our credit agreement, was 1.62-to-1. Year-to-date cash from operating activities was $56.4 million compared to $35.3 million due to increased cash from working capital and higher net earnings. Year-to-date capital expenditures were $6.4 million compared to $8.4 million.

Fourth Quarter 2014 Outlook

In the fourth quarter of 2014, excluding political revenue, we expect total television revenue to be up in the mid to high single-digits as compared to the fourth quarter of 2013. In radio, excluding political revenue, we expect revenue increases in the low-single digits as compared to the fourth quarter of 2013. In publishing, we anticipate revenue declines in the mid-single digits as compared to the fourth quarter of 2013.

Conference Call and Webcast

The company will hold an earnings conference call today at 10:00 a.m. Central Time (11:00 a.m. ET, 8:00 a.m. PT). To access the call, dial (877) 474-9505 (domestic) or (857) 244-7558 (international) at least 10 minutes prior to the scheduled start of the call. The access code for the conference call is 65843448. A live webcast of the third 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 November 6, 2014. Replays of the conference call will also be available through November 6, 2014. 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 97818983. Pre-registration for the conference call is now available at www.journalcommunications.com/investors.

About Journal Communications

Journal Communications, Inc., headquartered in Milwaukee, Wisconsin, was founded in 1882. We are a diversified media company with operations in television and radio broadcasting, publishing and digital media. We own and operate or provide services to 14 television stations and 35 radio stations in 11 states. We publish the Milwaukee Journal Sentinel, which serves as the only major daily newspaper for the Milwaukee metropolitan area, and several community publications in Wisconsin. Our digital media assets build on our strong publishing and broadcasting brands.

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 that could cause actual results to differ materially from the expectations expressed in the forward-looking statements, including, but not limited to, the possibility that the proposed spin and merger transactions with The E. W. Scripps Company do not close (including, but not limited to, due to the failure to satisfy closing conditions), disruption from the proposed transactions making it more difficult to maintain our business and operational relationships, and the risk that unexpected costs will be incurred during this process; changes in network affiliation agreements, including increased costs; the availability of quality broadcast programming at competitive prices; quality and rating of network over-the-air broadcast programs, including programs changing networks and changing competitive dynamics regarding how and when programs are made available to viewers; changes in video programming distribution channels, including new Internet and mobile programming competitors; the effects of the rapidly changing nature of the publishing, broadcasting and printing industries, including general business issues, competitive issues and the introduction of new technologies; changes in federal or state laws and regulations or their interpretations (including changes in regulations governing the number and types of broadcast and cable system properties, newspapers and licenses that a person may control in a given market or in total or changes in spectrum allocation policies); effects of the loss of commercial inventory resulting from uninterrupted television news coverage and potential advertising cancellations due to war or terrorist acts, or other significant events; changes in advertising demand or the buying strategies of advertisers or the migration of advertising to digital platforms; changes in newsprint prices and other costs of materials; and, changes in legislation or customs relating to the collection, management and aggregation and use of consumer information through telemarketing and electronic communication efforts. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty. Our written policy on forward-looking statements can be found in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, as filed with the Securities and Exchange Commission.

Tables Follow