Journal Communications Reports Second Quarter 2013 Results
Journal Communications Reports Second Quarter 2013 Results
Second Quarter 2013 compared to Second Quarter 2012:
- Revenue of $101.2 million, up 6.0%
- Broadcast revenue up 15.3% , up 6.1% on a same-station basis and excluding political revenue
- Political revenue of $0.3 million compared to $5.7 million
- Daily newspaper retail advertising revenue up 2.8%
- Publishing revenue down 6.5%, down 0.5% excluding northern Wisconsin community publications sold in December 2012
- Operating earnings of $13.1 million, down 2.6% primarily due to lower political revenue
- Closed on acquisition of WNOX-FM in Knoxville, Tennessee for $5.96 million in cash
- Diluted EPS of $0.13 in both years
"Journal Communications had a solid second quarter, driven by revenue gains in our broadcast group, as well as improving advertising revenue trends in publishing. Total revenue of $101.2 million was up 6% year over year," said Steven J. Smith, Chairman and CEO of Journal Communications. "Operating earnings decreased 2.6% as lower political revenue offset operating earnings increases in broadcast, driven by NewsChannel 5 in Nashville, as well as higher earnings at our daily newspaper."
"Within the Broadcast group, we continue to see core revenue growth. On a same-station basis and excluding political advertising, revenue was up 6%, with television up 7% and radio up 5%."
"On the publishing side of the business, we continue to align costs with revenue. An emphasis on cost savings, coupled with improved revenue, drove second quarter operating earnings for the Milwaukee Journal Sentinel of $2.7 million, up nearly 36% year over year."
Second Quarter 2013 Results
Note that unless otherwise indicated, all comparisons are to the second quarter ended June 24, 2012. Same-station comparisons exclude the operations of NewsChannel 5 in Nashville, Tennessee, which we purchased in December 2012.
For the second quarter, revenue of $101.2 million increased 6.0% and operating earnings of $13.1 million decreased 2.6%. Net earnings were $6.6 million, a decrease of 13.3%.
In the second quarter, basic and diluted net earnings per share of class A and B common stock were $0.13 in both years.
The operating margin was 13.0% for the second quarter compared to 14.1%. Adjusted EBITDA, as defined in Table 4, was $20.4 million, a decrease of 1.6% from $20.7 million.
Consolidated and Segment Results
The following table presents our revenue and operating earnings (loss) by segment for the second quarters of 2013 and 2012 (dollars in millions).
|Operating earnings (loss):|
|Total operating earnings||$||13.1||$||13.5||(2.6)|
For the second quarter, total expenses of $88.1 million increased 7.4% compared to $82.0 million, driven by the acquisition of NewsChannel 5 in Nashville.
For the second quarter, broadcasting revenue increased 15.3% to $62.9 million, or 6.1% on a same-station basis, excluding political. Total broadcast political advertising revenue decreased 94.3% to $0.3 million, compared to $5.7 million. Local advertising revenue, excluding political, was up 25.7%, or 6.0% on a same-station basis. National advertising revenue, excluding political, increased 23.3%, and declined 1.8% on a same-station basis. Retransmission revenue increased 103.3% to $5.5 million, or 51.7% on a same-station basis. Broadcasting operating earnings of $12.3 million decreased 6.1%, and 37.8% on a same-station basis, excluding acquisition costs, both due to the loss of high-margin political revenue in 2013.
Revenue from television stations for the second quarter increased 22.5% to $43.0 million, or 6.9% on a same-station basis, excluding political. Television political advertising revenue was $0.2 million compared to $5.2 million. Local advertising revenue, excluding political, increased 43.2%, or 6.8% on a same-station basis, primarily due to an increase in automotive advertising. National advertising revenue, excluding political, increased 31.0%, and declined 1.0% on a same-station basis, primarily due to decreases in media and restaurant advertising. Operating earnings from television stations were $8.5 million, a decrease of 2.2%, or a decrease of 48.2% on a same-station basis, excluding acquisition costs, both due to the loss of high-margin political revenue in 2013. Television operating expenses increased 30.6%, or 4.9% on a same-station basis, excluding acquisition costs, primarily due to increases in network fees and employee-related costs.
For the second quarter, revenue from radio stations increased 2.3% to $19.9 million, or 4.7% excluding political revenue. Radio political advertising revenue was $0.1 million, compared to $0.5 million. Local advertising revenue, excluding political, increased 5.0%, primarily due to an increase in retail advertising. National advertising revenue, excluding political, decreased 4.9% to $1.8 million, primarily due to a decrease in media advertising. Operating earnings from radio stations were $3.8 million compared to $4.4 million, a decrease of 13.8% or a decrease of 19.0% excluding acquisition costs in both years. Radio operating expenses increased 7.1%, or 9.3% excluding acquisition costs in both years, primarily due to employee-related expense increases and the impact of credits received from an industry-wide music licensing fee settlement in 2012.
For the second quarter, publishing revenue decreased 6.5% to $38.4 million, or 0.5% excluding the sale of the northern Wisconsin community publications in December 2012. Operating earnings from publishing were $3.1 million, an increase of 27.0%. Total newsprint and paper expense of $3.9 million decreased 7.2% driven mainly by a reduction in newsprint consumption.
Revenue at the daily newspaper for the second quarter decreased 1.9% to $34.6 million. Total advertising revenue of $18.7 million increased 0.6%. Retail advertising revenue increased 2.8% due to successful programs that have grown share with local advertisers. Classified advertising revenue decreased 5.4% driven by a decrease in employment and automotive advertising. Digital advertising revenue of $3.3 million increased 10.7%, primarily due to an increase in sponsorship revenue. Circulation revenue of $11.9 million was down 5.4% driven by volume declines. Other revenue of $3.9 million decreased 2.4%. Operating earnings from the daily newspaper were $2.7 million, an increase of 35.7%, primarily due to lower depreciation expense and employee-related costs. Daily newspaper operating expenses decreased 4.1%.
Community newspapers revenue for the second quarter decreased 34.1% to $3.8 million, primarily due to the sale of the northern Wisconsin community publications in December 2012. Excluding revenue of $2.5 million related to the northern Wisconsin community publications in 2012, revenue increased by 13.8%, driven by commercial print revenue from the northern Wisconsin publications that we continue to print following the sale. Operating earnings from community newspapers and shoppers were $0.4 million in both years. Operating expenses declined to $3.5 million compared to $5.4 million as a result of the divestiture.
The operating loss for the second quarter was $2.3 million compared to $2.0 million.
For the second quarter, other expense, which primarily consists of interest expense, was $2.1 million compared to $0.7 million. The increase in interest expense was driven by an increase in average borrowings for the quarter as the result of the Nashville NewsChannel 5 acquisition in December 2012.
The second quarter effective tax rate was 40.1% compared to 40.5%.
Notes Payable to Banks and Cash Flows
At the end of the second quarter, total debt was $231.4 million. Of the $231.4 million debt, $215.5 million was drawn on our senior secured credit facilities and an additional $15.9 million was outstanding in unsecured subordinated notes payable to the former holders of our class C shares. Year-to-date through the second quarter, we reduced our total debt by $14.6 million as compared to the 2012 year-end, after funding the acquisition of WNOX-FM in Knoxville, Tennessee. Our consolidated funded debt ratio, as defined in our credit agreement, was 2.28-to-1. Year-to-date cash from operating activities was $25.2 million compared to $27.2 million due to a decrease in net earnings. Year-to-date capital expenditures were $5.6 million compared to $5.1 million.
Third Quarter 2013 Outlook
In the third quarter of 2013, on a same-station basis excluding political, Olympic and retransmission revenue, we expect total broadcast revenue to be up in the mid-single digits as compared to the third quarter of 2012. This outlook excludes any potential negative impact of the Time Warner Cable negotiations. In publishing, excluding the northern Wisconsin community publications, we anticipate revenue declines in the low-single digits as compared to the third quarter of 2012.
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) 280-4960 (domestic) or (857) 244-7317 (international) at least 10 minutes prior to the scheduled start of the call. The access code for the conference call is 19642190. A live webcast of the second 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 August 7, 2013. Replays of the conference call will also be available through August 7, 2013. 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 45837849. 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 15 television stations and 35 radio stations in 12 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.
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, changes in advertising demand or the buying strategies of advertisers or the migration of advertising to the internet; changes in newsprint prices and other costs of materials; 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); changes in legislation or customs relating to the collection, management and aggregation and use of consumer information through telemarketing and electronic communication efforts; the availability of quality broadcast programming at competitive prices; changes in network affiliation agreements, including increased costs as networks seek a greater share of retransmission revenue; 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; effects of the loss of commercial inventory resulting from uninterrupted television news coverage and potential advertising cancellations due to war or terrorist acts; and 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. 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, as filed with the Securities and Exchange Commission.
|Table No. 1|
|Journal Communications, Inc.|
|Consolidated Statements of Operations (unaudited)|
|(dollars in thousands, except for shares and per-share amounts)|
|Second Quarter (A)||Two Quarters (B)|
|2013||2012||% Change||2013||2012||% Change|
|Operating costs and expenses:|
|Total operating costs and expenses||55,137||49,236||12.0||108,338||97,685||10.9|
|Selling and administrative expenses||32,962||32,811||0.5||66,001||60,888||8.4|
Total operating costs and expenses and selling and administrative expenses
|Other income and (expense):|
|Total other income and (expense)||(2,095||)||(678||)||U||(4,228||)||(1,406||)||U|
|Earnings from continuing operations before income taxes||11,017||12,782||(13.8||)||17,340||17,794||(2.6||)|
|Provision for income taxes||4,416||5,171||(14.6||)||6,946||7,264||(4.4||)|
|Weighted average number of shares-Class A and B common stock:|
|Weighted average number of shares-Class C common stock||-||3,264,000||-||3,264,000|
|Net earnings per share:|
|Basic - Class A and B common stock:||$||0.13||0.13||$||0.21||0.18|
|Diluted - Class A and B common stock:||$||0.13||0.13||$||0.21||0.18|
|Basic and diluted - Class C common stock:||$||-||0.28||$||-||0.46|
# The two-class method of diluted EPS is no longer applicable in the second quarter and two quarters ended of 2013, therefore the impact of non-vested restricted shares is included in diluted weighted average shares.
|(A) 2013 second quarter: April 1, 2013 to June 30, 2013|
|2012 second quarter: March 26, 2012 to June 24, 2012|
|(B) 2013 two quarters: December 31, 2012 to June 30, 2013|
|2012 two quarters: December 26, 2011 to June 24, 2012|
|U Greater than 100% unfavorable variance|