Mid-Year Media Review. June 19, 2007

Transcription

1 Mid-Year Media Review June 19, 2007

2 Steve Smith Chairman and Chief Executive Officer, Journal Communications, Inc. 2

3 Forward-Looking Statements Certain statements in this presentation are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of These forward-looking statements generally include all statements other than statements of historical fact, including statements regarding our future financial position, business strategy, budgets, projected revenues and expenses, expected regulatory actions and plans and objectives of management for future operations. These statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by the forward-looking statements. Some of such risks, uncertainties and other factors are contained in our periodic filings under the Securities Exchange Act of

4 Statement About EBITDA and FCF We use EBITDA, among other things, to evaluate our operating performance and to value prospective acquisitions. EBITDA is not a measure of performance calculated in accordance with U.S. generally accepted accounting principles. EBITDA should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance or cash flows from operating activities as a measure of liquidity. EBITDA, as we calculate it, may not be comparable to EBITDA measures reported by other companies. Discussion of EBITDA and/or Free Cash Flow in this presentation may be referenced to our EBITDA and Free Cash Flow reconciliations, which are contained in the Appendix of this presentation. 4

5 Strategic Focus Journal Communications, Inc. is focused on Publishing, Broadcasting and Interactive Media in mid-sized local markets 5

6 Strategic Focus Growing Local Audiences Enhance relevant products in traditional media Create a deeper presence in our local markets Create targeted local new media Leverage our brand-building capabilities Achieving Local Market Leadership 6

7 Strategic Characteristics for Expansion Current markets have priority Mid-sized markets with growing diversified economies Media products with value-building opportunities Appropriate financial screens Internet products bought and built 7

8 Journal Communications Broadcasting 35 radio stations and 11 television stations in 12 states* Publishing Serves Southeast Wisconsin with Sunday circulation of 400,317** Manages 48 websites 45 weekly newspapers and shoppers clustered in Wisconsin and Florida*** Printing Services/ Other Printing and direct marketing serving a diverse group of markets 8 * Ten television stations owned and one television station operated under LMA ** Milwaukee Journal Sentinel s March 2007 Six-Month Publisher s Statement (unaudited) *** Reflects pending sales of New England, Ohio and Louisiana operations

9 Focused on Local Markets, Audiences and Customers 1 TV 5 Radio 1 TV 2 TV* 2 Radio 1 TV 1 Daily Newspaper 39 Publications 1 Printing Plant 1 TV 6 Radio Boise Twin Falls Green Bay Omaha Milwaukee Lansing 1 TV 1 Printing Plant Publishing Radio 9 1 TV Television Printing Palm Las Vegas Springs 1 TV Tucson 3 Radio Wichita Springfield Tulsa Knoxville 1 TV 6 Publications 4 Radio 1 TV 6 Radio 4 Radio 5 Radio Ft. Myers/Naples Note: Map reflects pending sales of New England, Ohio and Louisiana publishing/printing operations *Green Bay MyNetwork operated under LMA

10 10 Building Local Brands in Great Markets

11 2007 Corporate Priorities Execute performance plans Pursue new media initiatives Repurchase shares In-market media acquisitions New market broadcast acquisitions Prudent use of balance sheet and cash flow 11

12 2007 Operating Priorities Publishing: targeted local online initiatives non-traditional revenue growth cost control expand community newspaper footprint in target geographies Broadcasting: developmental and interactive initiatives cost control TV ratings upside in Ft. Myers, Tucson and Omaha growth in radio revenue 12

13 Management Focus Doug Kiel Broadcast Group Betsy Brenner Publishing Group 1 daily newspaper 11 TV stations 35 radio stations 45 publications* 46 websites and 2 secondary Digital TV platforms 29 websites 13 * Reflects pending sales of New England, Ohio and Louisiana operations

14 Elizabeth (Betsy) Brenner Executive Vice President, Journal Communications, Inc. Chief Operating Officer Publishing Group 14

15 Journal Sentinel 2007 Snapshot Through 5 Periods: total ad revenues -5.5% -- includes online revenues, which were +47.4% other products/services +24.1% expenses -2.7% non-newsprint cash costs -1.1% Daily newspaper was 27% of 2006 local advertiser spend* * Source: 2006 Ad$pend based of Q2 data. 15

16 Journal Sentinel Ad Revenue vs. Industry JRN Industry 1Q 07 Apr. 07 1Q 07 Apr. 07 Retail -2.8% -3.0% -1.1% -4.1% Classified -5.2% -4.8% -9.5% -11.0% Real Estate -8.9% -9.0% -11.3% -9.2% Help Wanted -1.9% -3.1% -7.8% -8.9% * Source: Deutsche Bank, Publishing & Advertising Newspaper Publishers, June 1,

17 Milwaukee Journal Sentinel: Automobile Advertising Comps, % 12.0% 5% -29.6% -33.8% -31.4% -16.7% -15.7% -5% -15% -25% -35% Q1 '06 Q2 '06 Q3 '06 Q4 '06 Q1 '07 P4 & P5 '07 17

18 Journal Sentinel: Audience Leadership #1 in Sunday readership penetration among top 50 metros past 3 years; #1 or #2 position past 8 years #2 daily readership penetration among top 50 metros; top 10 past 7 years Combined products (print & online) have 86% weekly reach of four-county adults JSOnline 5th highest unique visitor penetration rate among newspaper websites in top 50 Internet DMAs Journal Interactive websites reached one in five Milwaukee-area internet users in April 18 Sources: Scarborough Multi-Market Reports; 2007 Scarborough Report Release 1, Milwaukee MSA; and April 2007 ComScore

19 Publishing Strategies Business integration: daily, weeklies, non-traditional revenue sources Diversify revenues Deepen offerings in higher-growth areas Use premium journalism and high-utility brands to differentiate JS products Leverage independence for best online partnerships Acquisitions, consolidations tighten market focus Rigorous cost controls and continued efficiencies 19

20 Wisconsin Business Integration Product community weeklies and 26 companion websites more user-generated content consolidated TMC products Advertising classified cross-sales exceed $1.4 million web/print packages new sales pressure; expanded product portfolio Cost Reductions shared systems, technology, expertise combined printing, circulation operations consolidated commercial printing 20

21 Daily Newspaper: Revenue Mix Change, $ % $ % $ % $ % Traditional Products Other Products Traditional Products Other Products 21

22 Daily Newspaper: Other Products Revenue Mix Change, $ % $3.9 17% $4.6 11% $ % $4.8 12% $2.3 10% $1.4 6% $2.3 10% $3.7 9% $4.0 10% $9.6 23% Interactive Commercial Dist. Shared & Solo Mail Commercial Printing Specialty Pubs. All Other Interactive Commercial Dist. Shared & Solo Mail Commercial Printing Specialty Pubs. All Other 22

23 Deepen Offerings in Higher-Growth Areas Sunday Home Delivery Growth in Key ZIP Codes Top 25 ZIP codes: Dec ,585 papers June ,696 papers circulation increase of 2.7% 23

24 Major Metro Ranking of Top 30 Sunday Circulation, Percent Variance Rank New spaper Nam e Total Paid Circulation As of 03/31/07 As of 03/31/06 % Change 1 NEW YORK POST 439, , % 2 INDIANAPOLIS STAR 354, , % 3 ST. PETERSBURG TIMES 430, , % 4 DENVER POST/ROCKY MOUNTAIN 704, , % 5 MILWAUKEE JOURNAL SENTINEL 400, , % 6 CHICAGO TRIBUNE 940, , % 7 CLEVELAND PLAIN DEALER 442, , % 8 HOUSTON CHRONICLE 677, , % 9 KANSAS CITY STAR 359, , % 10 PORTLAND OREGONIAN 375, , % 24 * Source: Audit Bureau of Circulations

25 Deeper Offerings in High-Growth Markets Print + Online + Special Publications + Events

26 Premium Online Content Online revenue growth projected to reach $12 million in 2007 estimated increase of approximately 30% over 2006 Non-traditional revenue streams custom sites for high-profile events mobile and wireless applications Collaboration with Journal Broadcast channels Video, slideshows, podcasts enhance in-depth print coverage 26

27 High-Utility Online Brands Page View Trends: JSOnline (millions) December '06 May '07 27 Source: Omniture Site Catalyst

28 High-Utility Online Brands Page View Trends: MyCommunityNOW, MKE and Milwaukee Moms/MetroParent (thousands) Feb. 07 Dec % +11% May 07 May 07 May % Dec MyCommunityNOW MKE Milwaukee Moms/Metroparent 28 Source: Omniture Site Catalyst. (Milwaukee Moms/MetroParent data available beginning February, 2007.)

29 Leveraging Independence for the Best Partnerships Journal Sentinel and Monster: recognized market leadership superior platform extends our product and revenue capabilities complements existing/desired functions establishes an online leadership position creates greater competitive advantage 29

30 Powerful Employment Site Reach Milwaukee 5-County Unique Visitors (past month) M o nst er ( +) JS Online Jo b s 8 8, ,10 0 M ilwaukeejo b s 6 2,4 0 0 C areerb uilder 4 3,8 0 0 Y aho o! Ho t jo b s 3 3,4 0 0 W isconsinjo b s 3 1, , , , , Source: The Media Audit Spring 2007, Milwaukee 5-County Area

31 Going Deep With Acquisitions MilwaukeeMoms.com region s leading parenting website complements existing MetroParent magazine Wisconsin Trails Wisconsin s leading outdoors and travel publication Milwaukee Home and Fine Living city s high-end lifestyle publication good life for Baby Boomers 31

32 JCPG Consolidations Divested non-strategic regional clusters in Ohio, New England and Louisiana Focused on growth in Northern and Southern Wisconsin and in Florida 32

33 Strength in Wisconsin Publishing Journal Community Publishing Group Milwaukee Journal Sentinel Lake Country Publications CNI 33

34 Consistent Cost Management Circulation DC consolidation 48 web cut-down Circulation route consolidation and rate alignment Consolidation of Wisconsin commercial printing Two press scenario enables USA Today commercial contract Transportation fleet reduced and outsourced Workers compensation claims reduced Bad debt collection expense -40% Tighten papers, efficient space usage 34

35 Cost Controls and Continued Efficiencies 1750 Average Journal Sentinel FTE s * 54* P * FTE s transferred from CNI and Homes/Trails

36 Doug Kiel President, Journal Communications, Inc. Chief Executive Officer, Journal Broadcast Group 36

37 Broadcast Strategies Become the leader in news, entertainment and advertising in each of our markets Serve our audiences with differentiated and relevant local content Create compelling opportunities to meet advertiser needs Acquire stations to form additional cross-media platforms in existing markets and to enter new growth markets 37

38 38 Population Growth % 18.8% 15% 16.2% 15.8% 10% 10.7% 9.6% 5% 5.3% 4.9% 4.0% 3.8% 0% 2.2% 2.2% 1.8% 0.3% Milwaukee Wichita Lansing U.S. Mean: 4.8% Las Vegas Palm Springs Ft. Myers Boise Tucson Springfield Knoxville Omaha Green Bay Tulsa Source: 2006 Claritas DMAs

39 39 45% 38.3% 37.2% 34.2% 30% 29.8% 29.0% 25.6% 24.9% 23.8% 23.4% 21.2% 20.8% 15% 0% 20.5% 18.3% Wichita Retail Sales Growth U.S. Mean: 23.0% Las Vegas Ft. Myers Palm Springs Boise Tucson Knoxville Springfield Green Bay Omaha Tulsa Lansing Milwaukee Source: 2006 Claritas DMAs

40 Broadcast Growth Markets, 2006 Percent of Total Broadcast Operating Earnings and Revenue 20% 18.8% 15% 12.6% 15.5% 11.5% 11.5% 52.6% of 2006 Broadcast Operating Earnings from Growth Markets 10% 8.3% 5.8% 5% 4.0% 2.7% 3.5% 0% Las Vegas Tucson* Ft. Myers Boise* Palm Springs 40 * Cross-media market Op. Earnings Revenue

41 Television Acquisition Multiple Target Achieved in Year One Purchase price multiple of 13.8x EDITDA (blended ) did not reflect tax shield from step-up in value $40 million, which drives EBITDA multiple to 11.3x FY 2006: revenue: $54.8 million, including $3.9 million from political/issue operating earnings: $18.2 million 12.3x actual blended EBITDA With step-up for taxes, blended EBITDA multiple of 10.1x 41

42 Future TV Revenue Opportunities: Retransmission and Political Satellite and telecommunications providers currently paying retransmission fees No retransmission fees currently paid by cable providers Most cable contracts expire late in million cable subscribers in our markets Early primaries/caucuses in Nevada, Florida, California 2008 political swing states expected to include Wisconsin, Nevada, Florida, Michigan, Missouri 2008 Senate races: Nebraska, Michigan, Idaho, Kansas, Tennessee and Oklahoma 42

43 Strength in Radio Markets Market Milwaukee, WI Omaha, NE Tucson, AZ Springfield, MO Wichita, KS Boise, ID Tulsa, OK Knoxville, TN Total Number of Stations Financial Performance Strong Strong Strong lead station / Develop. Strong lead station / Develop. Strong lead station Strong lead station Strong lead station / Develop. Strong lead station / Develop. 43

44 Radio Revenue, ($ Millions) $100 $75 $78.2 $77.9 $82.3 $84.3 $87.5 $50 $25 44 $

45 Radio Operating Earnings and Margin Enhancement, Operating Earnings Operating Earnings Margin $30 $ % 31% $24 $ % $18 $15.2 $16.8 $ % 19% 22% 24% $12 12% $6 $ % CAGR = 15.6% CAGR = 12.3% 45

46 Broadcast Interactive & Convergence $600,000 in broadcast interactive revenue in Q Modest amount of interactive revenue in Q Targeting specific advertising verticals across multiple markets Advertisers new to the broadcast space 46

47 New/Upgraded Digital/Interactive Platforms HD radio on 10 stations with 7 more planned by mid-2007 Weather Plus on WTMJ and KTNV digital channels News on Demand on WTMJ Digital traffic channel on KTNV New digital infrastructure at several of our television operations Building new KTNV digital broadcast center 47

48 Paul Bonaiuto Executive Vice President and Chief Financial Officer 48

49 Long Track Record of FCF Generation*... Continuing in 2007 EBITDA ($ Millions) $160 EBITDA ($ Millions) $30 $120 $64 $20 $11 $8 $80 $22 $40 $56 $51 $40 $73 $57 $58 $53 $74 $10 $15 $17 $ $0 3 Mos. '06 3 Mos. '07 Capex, net other income and expense and taxes Free Cash Flow* 49 * Free cash flow defined as EBITDA less capex, net other income and expense and taxes

50 Details of Norlight Divestiture Maximizes value for shareholders Partners Norlight with vibrant telecom company with contiguous assets Sold to Q-Comm Corporation on February 26, 2007 Sale price of $175.9 million* Net proceeds, after taxes, of approximately $130 million After-tax gain on discontinued operations of $64.8 million recorded in first quarter 2007 Proceeds used to reduce debt * Net of transaction expenses 50

51 Details of Community Publishing Divestitures Recently announced pending sale of Ohio and New England printing and publishing operations and Louisiana publishing operations Aggregate sales price approximately $30.0 million, subject to certain working capital adjustments Aggregate 2006 revenues $43.1 million Aggregate 2006 operating earnings $3.3 million All three clusters classified as discontinued operations beginning Q

52 Strong Balance Sheet ($ Millions) At Dec. 31, 2006 At Apr. 1, 2007 Cash and cash equivalents Total debt Shareholders equity Debt/EBITDA $ 7.9 $ $ x $ 5.8 $ $ x* * Trailing 12 months, from continuing operations 52

53 Capital Structure Target Debt Debt Capacity 2006 EBITDA Suggested Target Debt Suggested Debt Capacity Debt at April 1, x Debt/EBITDA 3x Debt/EBITDA ~ $140 mm ~ $280 mm ~ $420 mm $105.3 mm 53

54 Shareholder Value Share Repurchases First 5-million-share repurchase authorization completed June 2006 Second 5-million-share repurchase authorization approved April 2006 Third 5-million-share repurchase authorization approved April 2007 To date, 8.9 million shares have been repurchased in aggregate from the first two share repurchase programs Dividend Increase Feb dividend 15% increase, from $0.065 to $0.075 quarterly Reflects our strong cash flow and financial position Underscores our commitment to delivering shareholder value 54

55 Revised Second Quarter 2007 Outlook Publishing revenues should be flat to down compared to 2007* Radio revenue should be flat to down slightly Television revenue should be down * Reflects a favorable comparison to a litigation settlement at the daily newspaper offset by ongoing weakness in automotive advertising 55

56 Q & A

57 Appendix

58 Reconciliation of Consolidated Net Earnings to Consolidated EBITDA, and First Quarter 2006, 2007 ($Thousands) Year Ended 1st Quarter Ended /26/06 4/1/07 Net earnings 57,920 66,793 78,480 66,243 64,373 12,273 73,331 Total other (income) and expense (269) 1,503 2,057 3,798 15,570 3,632 2,995 Provision for income taxes 30,753 26,866 33,872 29,528 36,556 6,126 5,606 (Gain) from disc. ops., net (27,598) (26,914) (27,721) (21,483) (8,636) (2,908) (64,759) Cumulative effect of accounting change, net 6, Depreciation 25,709 26,919 26,129 25,078 27,897 6,576 7,225 Amortization 1,909 2,241 1,372 1,006 2, EBITDA 94,933 97, , , ,820 26,187 24,887 58

59 Reconciliation of Consolidated EBITDA to Consolidated FCF, and First Quarter 2006, 2007 ($Thousands) Year Ended 1st Quarter Ended /26/06 4/1/07 EBITDA 94,933 97, , , ,820 26,187 24,887 Less: Capital expenditures 42,293 29,130 22,199 19,530 22,223 5,388 7,855 Provision for income taxes 30,753 26,866 33,872 29,528 36,556 6,126 5,606 Other (income) and expense, net (269) 1,503 2,057 3,798 15,570 3,632 2,995 Free Cash Flow 22,156 39,090 56,061 51,314 63,471 11,041 8,431 59