Katrina Helps Blow Down Journal Communications Profit

By: E&P Staff Journal Communications reported Tuesday a 27.2% decline in its third-quarter net earnings to $14 million, the result of soft advertising in its television and radio business aggravated by $1.6 million in costs attributed to the damage from Hurricane Katrina.

Journal Communications Chairman and CEO Steven J. Smith said its flagship daily, the Milwaukee Journal, "finished the quarter with an upswing in earnings as it continues to improve margins."

Basic and diluted earnings per share from continuing operations were both 19 cents per share, compared to basic and diluted earnings per share from continuing operations of $0.25 and $0.24, respectively, for the third quarter of 2004, Journal Communications said.

Earnings from continuing operations were $14 million compared to $18.5 million, a decrease of 24.2%, the company said.

Revenue from continuing operations decreased 2.5% to $184.6 million compared to revenue of $189.4 million.

Journal Communication's third-quarter 2005 operating earnings margin was 13.1%, compared to 16.5% for the 2004 period.

"Continued weakness in advertising, especially in television, and the anticipated reduction in earnings at the telecommunications business caused a challenging third quarter for Journal Communications," Smith said in a prepared statement. "Our comparables were formidable because third quarter 2004 political, issue and Olympic revenues were very strong. We also faced an unusual loss of business at our Louisiana-based publishing and printing operations due to Hurricane Katrina in late August, which negatively impacted our revenue and operating earnings at the community publishing business."

The Louisiana-based businesses in the subsidiary company Journal Community Publishing Group (JCPG) were damaged and interrupted by Hurricane Katrina. The company said it recorded pre-tax costs of $1.6 million in the third quarter, reflecting reserves for uncollectible receivables, operating losses, and building damages.

"Because the Dixie Web Printing facility in New Orleans had been experiencing persistent weakness in its business prior to the impacts of the hurricane and its customers were widely dispersed after the storm, the company decided to close this facility," the company noted. It said that in the fourth quarter of 2005 it would take an estimated additional pre-tax charge for shut-down-related costs of between $2.9 million and $3.4 million, including a $1.8 million non-cash charge from the write off of goodwill.

Third -quarter publishing revenue of $81.9 million was essentially flat compared to $81.5 million. Operating earnings from publishing decreased 5.3% to $10.4 million compared to $11.0 million, which Journal Communications said reflected pre-tax hurricane-related costs.

Third-quarter broadcasting revenue decreased 7.8% to $40.5 million compared to $44.0 million. Broadcasting operating earnings decreased 39.0% to $7.2 million compared to $11.8 million. "The decrease was caused by challenging comparatives for the 2004 Summer Olympics, political and issue advertising primarily for television and continued overall softness in advertising, particularly at our NBC television stations," the company said.

It said revenue from radio stations increased 0.8% to $22.0 million, while operating earnings from radio stations increased 4.9% to $6.2 million.

For the fourth quarter of 2005, Journal Communications said it currently anticipates revenue to be between $186 million and $191 million and net earnings to be between $14 million and $17 million, including an estimated after-tax charge for facility shut-down-related costs due to Hurricane Katrina of between $1.7 million to $2.0 million.