# UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

# FORM 10-Q

# [X]  QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES           EXCHANGE ACT OF 1934

# For the quarterly
period ended: July 1, 2007

or

# [_]  TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT           OF 1934

| | For
the transition period from _______________________ to ____________________ 
Commission File Number: 1-31805
| | ---------------------------------------------------------------------------------------------------------------

|JOURNAL COMMUNICATIONS, INC.                          
|------------------------------------------------------
|(Exact name of registrant as specified in its charter)

|WISCONSIN                                     | 20-0020198                          
|--------------------------------------------- | ------------------------------------
|(State or other jurisdiction of incorporation | (I.R.S. Employer Identification No.)
|or organization)                             
|333 W. State Street, Milwaukee, Wisconsin     | 53203                               
|(Address of principal executive offices)      | (Zip Code)                          

|414-224-2000                                      
|--------------------------------------------------
|Registrants telephone number, including area code

Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.

# Yes [X] No [   ]

Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act.

# Large Accelerated Filer
[   ]     Accelerated Filer [X]     Non-accelerated Filer [   ]

Indicate by check mark whether the
registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

# Yes [   ] No [X]

Number of shares outstanding of each
of the issuers classes of common stock as of July 27, 2007 (excluding 8,676,705
shares of class B common stock held by our subsidiary, The Journal Company):

|Class                | Outstanding at July 27, 2007
|-------------------- | ----------------------------
|Class A Common Stock | 48,301,201                  
|Class B Common Stock | 15,503,327                  
|Class C Common Stock | 3,264,000                   

---

# JOURNAL
COMMUNICATIONS, INC.

# INDEX

|         |                       |                                                             
|-------- | --------------------- | ------------------------------------------------------------
|         |                       |                                                             
|Part I.  | Financial Information |                                                             
|         | Item 1.               | Financial Statements                                        
|         |                       | Consolidated Condensed Balance Sheets as of                 
|         |                       | July 1, 2007 (Unaudited) and December 31, 2006              
|         |                       | Unaudited Consolidated Condensed Statements of Earnings     
|         |                       | for the Second Quarter and Two Quarters Ended               
|         |                       | July 1, 2007 and June 25, 2006                              
|         |                       | Unaudited Consolidated Condensed Statement of               
|         |                       | Shareholders Equity for the Two Quarters Ended July 1, 2007
|         |                       | Unaudited Consolidated Condensed Statements of              
|         |                       | Cash Flows for the Two Quarters Ended July 1, 2007          
|         |                       | and June 25, 2006                                           
|         |                       | Notes to Unaudited Consolidated Condensed                   
|         |                       | Financial Statements as of July 1, 2007                     
|         | Item 2.               | Managements Discussion and Analysis of Financial Condition 
|         |                       | and Results of Operations                                   
|         | Item 3.               | Quantitative and Qualitative Disclosure of Market Risk      
|         | Item 4.               | Controls and Procedures                                     
|Part II. | Other Information     |                                                             
|         | Item 1.               | Legal Proceedings                                           
|         | Item 1A.              | Risk Factors                                                
|         | Item 2.               | Unregistered Sales of Equity Securities and Use of Proceeds 
|         | Item 3.               | Defaults Upon Senior Securities                             
|         | Item 4.               | Submission of Matters to a Vote of Security Holders         
|         | Item 5.               | Other Information                                           
|         | Item 6.               | Exhibits                                                    

1

---

# PART I. FINANCIAL
INFORMATION

# ITEM 1. FINANCIAL
STATEMENTS

JOURNAL COMMUNICATIONS,
INC. Consolidated Condensed Balance Sheets(in thousands, except share and per share
amounts)

|                                                                     | July 1, 2007 | December 31, 2006
|-------------------------------------------------------------------- | ------------ | -----------------
|(unaudited)                                                         
|Current assets:                                                      |              |                  
|Cash and cash equivalents                                            |              |                  
|Receivables, less allowance for doubtful accounts                    |              |                  
|of $3,785 and $3,885                                                 |              |                  
|Inventories, net                                                     |              |                  
|Prepaid expenses and other current assets                            |              |                  
|Deferred income taxes                                                |              |                  
|Assets of discontinued operations                                    |              |                  
|                                                                     |              |                  
|TOTAL CURRENT ASSETS                                                 |              |                  
|Property and equipment, at cost, less accumulated depreciation       |              |                  
|of $212,848 and $201,848                                             |              |                  
|Goodwill                                                             |              |                  
|Broadcast licenses                                                   |              |                  
|Other intangible assets, net                                         |              |                  
|Other assets                                                         |              |                  
|Non-current assets of discontinued operations                        |              |                  
|                                                                     |              |                  
|TOTAL ASSETS                                                         |              |                  
|                                                                     |              |                  
|LIABILITIES AND SHAREHOLDERS EQUITY                                 |              |                  
|Current liabilities:                                                 |              |                  
|Accounts payable                                                     |              |                  
|Accrued compensation                                                 |              |                  
|Accrued employee benefits                                            |              |                  
|Deferred revenue                                                     |              |                  
|Accrued income taxes                                                 |              |                  
|Other current liabilities                                            |              |                  
|Current liabilities of discontinued operations                       |              |                  
|Current portion of long-term liabilities                             |              |                  
|                                                                     |              |                  
|TOTAL CURRENT LIABILITIES                                            |              |                  
|Accrued employee benefits                                            |              |                  
|Long-term notes payable to banks                                     |              |                  
|Deferred income taxes                                                |              |                  
|Other long-term liabilities                                          |              |                  
|Shareholders equity:                                                |              |                  
|Preferred stock, $0.01 par - authorized 10,000,000 shares; no shares |              |                  
|outstanding at July 1, 2007 and December 31, 2006                    |              |                  
|Common stock, $0.01 par:                                             |              |                  
|Class C - authorized 10,000,000 shares; issued and outstanding:      |              |                  
|3,264,000 shares at July 1, 2007 and December 31, 2006               |              |                  
|Class B - authorized 120,000,000 shares; issued and outstanding:     |              |                  
|15,762,118 shares at July 1, 2007 and 18,231,716                     |              |                  
|shares at December 31, 2006                                          |              |                  
|Class A - authorized 170,000,000 shares; issued and outstanding:     |              |                  
|48,040,402 shares at July 1, 2007 and 48,140,935                     |              |                  
|shares at December 31, 2006                                          |              |                  
|Additional paid-in capital                                           |              |                  
|Accumulated other comprehensive loss                                 |              |                  
|Retained earnings                                                    |              |                  
|Treasury stock, at cost (8,676,705 class B shares)                   |              |                  
|                                                                     |              |                  
|TOTAL SHAREHOLDERS EQUITY                                           |              |                  
|                                                                     |              |                  
|TOTAL LIABILITIES AND SHAREHOLDERS EQUITY                           |              |                  
|                                                                     |              |                  

Note: The balance sheet at December
31, 2006 has been derived from the audited financial statements at that date, but does not
include all the information and footnotes required by generally accepted accounting
principles in the United States for complete financial statements.

See accompanying notes
to unaudited consolidated condensed financial statements.

2

---

JOURNAL COMMUNICATIONS,
INC. Unaudited Consolidated Condensed Statements of Earnings(in thousands, except per
share amounts)

|                                               | Second Quarter Ended | Two Quarters Ended
|---------------------------------------------- | -------------------- | ------------------
|
|Continuing operations:                         |                      |                   
|Revenue:                                       |                      |                   
|Publishing                                     |                      |                   
|Broadcasting                                   |                      |                   
|Printing services                              |                      |                   
|Other                                          |                      |                   
|                                               |                      |                   
|Total revenue                                  |                      |                   
|Operating costs and expenses:                  |                      |                   
|Publishing                                     |                      |                   
|Broadcasting                                   |                      |                   
|Printing services                              |                      |                   
|Other                                          |                      |                   
|                                               |                      |                   
|Total operating costs and expenses             |                      |                   
|Selling and administrative expenses            |                      |                   
|                                               |                      |                   
|Total operating costs and expenses and selling |                      |                   
|and administrative expenses                    |                      |                   
|                                               |                      |                   
|Operating earnings                             |                      |                   
|Other income and expense:                      |                      |                   
|Interest income                                |                      |                   
|Interest expense, net                          |                      |                   
|                                               |                      |                   
|Total other income and (expense)               |                      |                   
|                                               |                      |                   
|Earnings from continuing operations before     |                      |                   
|income taxes                                   |                      |                   
|Provision for income taxes                     |                      |                   
|                                               |                      |                   
|Earnings from continuing operations            |                      |                   
|Gain from discontinued operations, net         |                      |                   
|of tax expense of $683, $1,844,                |                      |                   
|$42,473 and $4,044, respectively               |                      |                   
|                                               |                      |                   
|Net earnings                                   |                      |                   
|                                               |                      |                   
|Earnings available to class A and B            |                      |                   
|common shareholders                            |                      |                   
|                                               |                      |                   
|Earnings per share:                            |                      |                   
|Basic:                                         |                      |                   
|Continuing operations                          |                      |                   
|Discontinued operations                        |                      |                   
|                                               |                      |                   
|Net earnings                                   |                      |                   
|                                               |                      |                   
|Diluted:                                       |                      |                   
|Continuing operations                          |                      |                   
|Discontinued operations                        |                      |                   
|                                               |                      |                   
|Net earnings                                   |                      |                   
|                                               |                      |                   

See accompanying notes
to unaudited consolidated condensed financial statements.

3

---

Journal Communications,
Inc.                                      Unaudited Consolidated Condensed Statement of
Shareholders Equity            For the Two Quarters Ended July 1, 2007        (dollars
in thousands, except per-share amounts)

|                                        | Preferred | Common Stock | AdditionalPaid-in- | Accumulated
Other
Comprehensive | Retained | Treasury
Stock, |    | Comprehensive
|--------------------------------------- | --------- | ------------ | ------------------ | ------------------------------- | -------- | --------------- | -- | -------------
|
|Balance at December 31, 2006            |           |              | $                  | --                              |          | $               | 33 |              
|Net earnings                            |           |              |                    |                                 |          |                 |    |              
|Amortization of prior service cost, net |           |             
|(gain) loss and transition obligation   |           |             
|of pension and post-retirement          |           |             
|liabilities (net of tax of $233)        |           |              |                    |                                 |          |                 |    |              
|                                        |           |              |                    |                                 |          |                 |    |              
|                                        |           |              |                    |                                 |          |                 |    |              
|                                        |           |              |                    |                                 |          |                 |    |              
|Dividends declared:                     |           |             
|Class C ($0.142 per share)              |           |              |                    |                                 |          |                 |    |              
|Class B ($0.075 per share)              |           |              |                    |                                 |          |                 |    |              
|Class A ($0.075 per share)              |           |              |                    |                                 |          |                 |    |              
|Issuance of shares:                     |           |             
|Conversion of class B to class A        |           |              |                    |                                 |          |                 |    |              
|Stock grants                            |           |              |                    |                                 |          |                 |    |              
|Shares purchased and retired            |           |              |                    |                                 |          |                 |    |              
|Adoption of FIN 48                      |           |              |                    |                                 |          |                 |    |              
|Stock-based compensation                |           |              |                    |                                 |          |                 |    |              
|                                        |           |              |                    |                                 |          |                 |    |              
|Balance at April 1, 2007                |           |              |                    | --                              |          |                 | 33 |              
|                                        |           |              |                    |                                 |          |                 |    |              
|Net earnings                            |           |              |                    |                                 |          |                 |    |              
|Amortization of prior service cost, net |           |             
|(gain) loss and transition obligation   |           |             
|of pension and post-retirement          |           |             
|liabilities (net of tax of $211)        |           |              |                    |                                 |          |                 |    |              
|                                        |           |              |                    |                                 |          |                 |    |              
|                                        |           |              |                    |                                 |          |                 |    |              
|                                        |           |              |                    |                                 |          |                 |    |              
|Dividends declared:                     |           |              |                    |                                 |         
|Class C ($0.142 per share)              |           |              |                    |                                 |          |                 |    |              
|Class B ($0.075 per share)              |           |              |                    |                                 |          |                 |    |              
|Class A ($0.075 per share)              |           |              |                    |                                 |          |                 |    |              
|Issuance of shares:                     |           |             
|Conversion of class B to class A        |           |              |                    |                                 |          |                 |    |              
|Stock grants                            |           |              |                    |                                 |          |                 |    |              
|Employee stock purchase plan            |           |              |                    |                                 |          |                 |    |              
|Shares purchased and retired            |           |              |                    |                                 |          |                 |    |              
|Stock-based compensation                |           |              |                    |                                 |          |                 |    |              
|                                        |           |              |                    |                                 |          |                 |    |              
|Balance at July 1, 2007                 |           |              | $                  | --                              |          | $               | 33 |              
|                                        |           |              |                    |                                 |          |                 |    |              

See accompanying notes
to unaudited consolidated condensed financial statements.

4

---

JOURNAL COMMUNICATIONS,
INC.  Unaudited Consolidated Condensed Statements of Cash Flows(in thousands)

|                                                                  | Two Quarters Ended
|----------------------------------------------------------------- | ------------------
|
|Cash flow from operating activities:                              |                   
|Net earnings                                                      |                   
|Less gain from discontinued operations                            |                   
|                                                                  |                   
|Earnings from continuing operations                               |                   
|Adjustments for non-cash items:                                   |                   
|Depreciation                                                      |                   
|Amortization                                                      |                   
|Provision (credit) for doubtful accounts                          |                   
|Deferred income taxes                                             |                   
|Non-cash compensation                                             |                   
|Net loss (gain) from disposal of assets                           |                   
|Net operating activities of discontinued operations               |                   
|Net changes in operating assets and liabilities, excluding effect |                   
|of sales of businesses:                                           |                   
|Receivables                                                       |                   
|Inventories                                                       |                   
|Accounts payable                                                  |                   
|Other assets and liabilities                                      |                   
|                                                                  |                   
|NET CASH PROVIDED BY OPERATING ACTIVITIES                         |                   
|Cash flow from investing activities:                              |                   
|Capital expenditures for property and equipment                   |                   
|Proceeds from sales of assets                                     |                   
|Proceeds from sales of businesses                                 |                   
|Acquisition of businesses                                         |                   
|Net investing activities of discontinued operations               |                   
|                                                                  |                   
|NET CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES              |                   
|Cash flow from financing activities:                              |                   
|Proceeds from long-term notes payable to banks                    |                   
|Payments on long-term notes payable to banks                      |                   
|Proceeds from issuance of common stock                            |                   
|Redemption of common stock                                        |                   
|Cash dividends                                                    |                   
|                                                                  |                   
|NET CASH USED FOR FINANCING ACTIVTIES                             |                   
|                                                                  |                   
|NET DECREASE IN CASH AND CASH EQUIVALENTS                         |                   
|Cash and cash equivalents:                                        |                   
|Beginning of year                                                 |                   
|                                                                  |                   
|At July 1, 2007 and June 25, 2006                                 |                   
|                                                                  |                   

See accompanying notes
to unaudited consolidated condensed financial statements.

5

---

JOURNAL COMMUNICATIONS,
INC. Notes to Unaudited Consolidated Condensed Financial Statements(in thousands, except
per share amounts)

|1 | BASIS
OF PRESENTATION
|- | ---------------------

| | The
accompanying unaudited consolidated condensed financial statements have been prepared by
Journal Communications, Inc. and its wholly owned subsidiaries in accordance with U.S.
generally accepted accounting principles for interim financial information and pursuant
to the rules and regulations of the Securities and Exchange Commission and reflect normal
and recurring adjustments, which we believe to be necessary for a fair presentation. As
permitted by these regulations, these statements do not include all of the information
and footnotes required by U.S. generally accepted accounting principles for annual
financial statements. However, we believe that the disclosures are adequate to make the
information presented not misleading. The operations of Norlight Telecommunications,
Inc., our former telecommunications segment, and three regional publishing and printing
operations of our community newspapers and shoppers business in Ohio, New England and
Louisiana have been reflected as discontinued operations in our consolidated condensed
financial statements for all periods presented. The operating results for the second
quarter and two quarters ended July 1, 2007 are not necessarily indicative of the results
that may be expected for the fiscal year ending December 30, 2007. You should read these
unaudited consolidated condensed financial statements in conjunction with the
consolidated financial statements and the notes thereto included in our Annual Report on
Form 10-K for the year ended December 31, 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2 | ACCOUNTING
PERIODS
|- | ------------------

| | Our
fiscal year is a 52-53 week year ending on the last Sunday of December in each year. In
addition, we have four quarterly reporting periods, each consisting of 13 weeks and
ending on a Sunday, provided that once every six years, the fourth quarterly reporting
period will be 14 weeks.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 | NEW
ACCOUNTING STANDARDS
|- | ------------------------

| | On
February 15, 2007, the FASB issued Statement No. 159, The Fair Value Option for
Financial Assets and Financial Liabilities  Including an Amendment of FASB
Statement No. 115.This standard permits an entity to choose to measure many
financial instruments and certain other items at fair value that were not previously
allowed. Statement No. 159 is effective for fiscal years beginning after November 15,
2007. Early adoption is permitted as of the beginning of the previous fiscal year
provided that the entity makes that choice in the first 120 days of that fiscal year and
also elects to apply the provisions of FASB Statement No. 157, Fair Value
Measurements. We will adopt Statement No. 159 in the first quarter of 2008. We do
not believe the effect of adopting Statement No. 159 will have a material impact on our
financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4 | EARNINGS
PER SHARE
|- | ------------------

| | Basic
earnings per share is computed by dividing net earnings available to class A and B common
shareholders by the weighted average number of class A and B shares outstanding during
the period and excludes non-vested restricted stock. Diluted earnings per share is
computed based upon the assumption that the class C shares outstanding were converted
into class A and B shares, common shares are issued upon exercise of our non-statutory
stock options, all of which have a current exercise price that is less than the market price of our common shares,
and common shares will be outstanding upon expiration of the vesting periods for our
non-vested restricted stock.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

---

JOURNAL COMMUNICATIONS,
INC.  Notes to Unaudited Consolidated Condensed Financial Statements(in thousands, except
per share amounts)

|4 | EARNINGS
PER SHARE continued
|- | ----------------------------

| | Basic
and diluted earnings per share are computed as follows:
| | -------------------------------------------------------------

|                                             | Second Quarter Ended | Two Quarters Ended
|-------------------------------------------- | -------------------- | ------------------
|
|Basic earnings:                              |                      |                   
|Earnings from continuing operations          |                      |                   
|Discontinued operations                      |                      |                   
|                                             |                      |                   
|Net earnings                                 |                      |                   
|Less dividends on class C common stock       |                      |                   
|                                             |                      |                   
|Earnings available to class A and B          |                      |                   
|common shareholders                          |                      |                   
|                                             |                      |                   
|Weighted average class A and B               |                      |                   
|shares outstanding                           |                      |                   
|Basic earnings per share:                    |                      |                   
|Continuing operations                        |                      |                   
|Discontinued operations                      |                      |                   
|                                             |                      |                   
|Net earnings                                 |                      |                   
|                                             |                      |                   
|Diluted earnings:                            |                      |                   
|Earnings available to class A and B          |                      |                   
|common shareholders                          |                      |                   
|Plus dividends on class C common stock       |                      |                   
|                                             |                      |                   
|Net earnings                                 |                      |                   
|                                             |                      |                   
|Weighted average shares outstanding          |                      |                   
|Impact of restricted stock                   |                      |                   
|Conversion of class C common stock           |                      |                   
|                                             |                      |                   
|Adjusted weighted average shares outstanding |                      |                   
|                                             |                      |                   
|Diluted earnings per share:                  |                      |                   
|Continuing operations                        |                      |                   
|Discontinued operations                      |                      |                   
|                                             |                      |                   
|Net earnings                                 |                      |                   
|                                             |                      |                   

| | Each
of the 3,264,000 class C shares outstanding is convertible at any time at the option of
the holder into either (i) 1.363970 class A shares (or a total of 4,451,998 class A
shares) or (ii) 0.248243 class A shares (or a total of 810,265 class A shares) and
1.115727 class B shares (or a total of 3,641,733 class B shares).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|5 | STOCK-BASED
COMPENSATION
|- | ------------------------

| | 2007
Journal Communications, Inc. Omnibus Incentive Plan
| | --------------------------------------------------------

| | Our
shareholders approved the 2007 Journal Communications, Inc. Omnibus Incentive Plan (2007
Plan) at the Annual Meeting of Shareholders held on May 3, 2007. The purpose of the 2007
Plan is to promote our success by linking personal interests of our employees, officers
and directors to those of our shareholders, and by providing participants with an
incentive for outstanding performance. The 2007 Plan is also intended to enhance our
ability to attract, motivate and retain the services of employees, officers, and
directors upon whose judgment, interest, and special effort the successful conduct of our
operation is largely dependent.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Subject
to adjustment as provided in the 2007 Plan, the aggregate number of shares of class A
common stock or class B common stock reserved and available for issuance pursuant to
awards granted under the 2007 Plan is 4,800,000 shares in the form of nonstatutory or
incentive stock options, SARs, restricted stock, restricted or deferred stock units,
performance awards, dividend equivalents, other stock-based awards and cash-based awards.
As of May 3, 2007 all future equity grants will be made from the 2007 Plan. We will not
grant any additional awards under the 2003 Plan. There were no awards granted under the
2007 Plan between May 3, 2007 and July 1, 2007. As of July 1, 2007, there are 4,800,000
shares available for issuance under the 2007 Plan.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

JOURNAL COMMUNICATIONS,
INC.  Notes to Unaudited Consolidated Condensed Financial Statements (in thousands,
except per share amounts)

|5 | STOCK-BASED
COMPENSATION continued
|- | ----------------------------------

| | 2003
Equity Incentive Plan
| | --------------------------

| | Our
2003 Equity Incentive Plan (2003 Plan) rewarded key employees for achieving designated
corporate and individual performance goals and allowed for issuances to outside directors
as part of their board compensation package. In February 2007, our board of directors
approved and adopted an amendment to our 2003 Plan to provide for the inclusion of
stock-settled stock appreciation rights as a permitted form of award under the Plan.
Awards to outside directors could have been granted in any one or a combination of stock
appreciation rights, stock grants, non-statutory stock options, performance unit grants
and stock unit grants. Incentive stock options could have been granted to employees.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the second quarter and two quarters ended July 1, 2007, we recognized $883 and $1,230,
respectively, in stock-based compensation expense, including $0 and $96, respectively, recorded in gain from
discontinued operations. Total income tax benefit recognized related to stock-based
compensation for the second quarter and two quarters ended July 1, 2007 was approximately
$306 and $444, respectively. We recognize compensation expense on a straight-line basis
over the service period based upon the fair value of the award on the grant date. There
was no impact on cash flows from operating or financing activities associated with
stock-based compensation during the two quarters of 2007. As of July 1, 2007, total
unrecognized compensation cost related to stock-based compensation awards was
approximately $2,373, net of estimated forfeitures, which we expect to recognize over a
weighted average period of approximately 2.4 years. Stock-based compensation expense is
included in selling and administrative expenses and gain on discontinued operations in
our consolidated condensed statements of earnings.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Non-statutory
stock options
| | ---------------------------

| | The
compensation committee of our board of directors granted non-statutory stock options to
employees and directors at a purchase price equal to at least the fair market value of
our class B common stock on the grant date for an exercise term determined by the
committee, not to exceed 10 years from the grant date. It is our policy to issue new
class B common stock upon the exercise of non-statutory stock options.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
2003 and 2004, our directors and certain of our employees were granted options to
purchase class B common stock. These options become exercisable three years from the
grant date and will remain exercisable for a period of up to seven years. There have been
no options granted since 2004.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
summary of stock option activity during the two quarters of 2007 is:
| | ----------------------------------------------------------------------

|                                
|--------------------------------
|Outstanding at December 31, 2006
|Expired                         
|                                
|Outstanding at July 1, 2007     
|                                
|Exercisable at July 1, 2007     
|                                

| | The
aggregate intrinsic value of stock options outstanding and exercisable at the end of the
second quarter is zero because the fair market value of our class B common stock on July
1, 2007 was lower than the weighted average exercise price of the options.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Stock
appreciation rights
| | -------------------------

| | A
stock appreciation right (SAR) represents the right to receive an amount equal to the
excess of the fair market value of a share of our class B common stock on the exercise
date over the base value of the SAR, which shall not be less than the fair market value
of a share of our class B common stock on the grant date. Each SAR will be settled only
in shares of our class B common stock. The term during which any SAR may be exercised
will be 10 years from the grant date, or such shorter period as determined by the
compensation committee of our board of directors.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
February 16, 2007, the compensation committee of our board of directors granted a
combination of 453,000 fixed price and 155,000 escalating price SARs to certain of our
named executive officers under the 2003 Plan. Each SAR has a term of 10 years from the
date of grant and is subject to annual pro-rata vesting over a three year period. It is
our policy to recognize compensation cost for awards with graded vesting on a
straight-line basis over the vesting period for the entire award.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
fixed price SARs have a fixed base value equal to the closing price of our class A common
stock on the date of grant. The escalating price SARs have an escalating base value that
starts with the closing price of our class A common stock on the date of
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

---

JOURNAL COMMUNICATIONS,
INC.  Notes to Unaudited Consolidated Condensed Financial Statements(in thousands, except
per share amounts)

|5 | STOCK-BASED
COMPENSATION continued
|- | ----------------------------------

| | grant
and increases by six percent per year for each year that the SARs remain outstanding,
starting on the first anniversary of the grant date.
| | ------------------------------------------------------------------------------------------------------------------------------------------------

| | Fair
value for SARs granted in the two quarters of 2007 was calculated using the Black-Scholes
option pricing model, with the following weighted-average assumptions:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------

|Dividend yield                                               | 2.60% 
|------------------------------------------------------------ | ------
|Expected volatility                                          | 21.00%
|Risk-free rate of return                                     | 4.44% 
|Expected life of SARs (in years)                             | 6     
|Weighted average fair value of fixed price SARs granted      | $2.85 
|Weighted average fair value of escalating price SARs granted | $1.36 

| | The
expected life was based on the midpoint between the vesting date and the end of the
contractual term.  The risk free rate of return was based on the United States
Treasury yield curve in effect on the date of grant for the respective life of the SAR.
 The dividend yield was based on the most recent quarterly dividend payment divided by
the average trailing twelve-month daily stock price and annualizing the rate.  The
expected volatility was based on the historical volatility of our common stock and was
benchmarked to our peers historical volatility over the same time period.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
summary of SAR activity during the two quarters of 2007 is:
| | -------------------------------------------------------------

|                                
|--------------------------------
|Outstanding at December 31, 2006
|Granted                         
|                                
|Outstanding at July 1, 2007     
|                                
|Exercisable at July 1, 2007     
|                                

| | Stock
grants
| | ------------

| | Each
stock grant may have been accompanied by restrictions, or may have been made without any
restrictions, as the compensation committee of our board of directors determined. Such
restrictions could have included requirements that the participant remain in our
continuous employment for a specified period of time, or that we or the participant meet
designated performance goals. We value nonvested restricted stock grants at the closing
market prices of our class A common stock on the grant date.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
summary of stock grant activity during the two quarters of 2007 is:
| | ---------------------------------------------------------------------

|                                          
|------------------------------------------
|Outstanding at December 31, 2006          
|Granted                                   
|Vested                                    
|Forfeited                                 
|                                          
|Outstanding and non-vested at July 1, 2007
|                                          
|Fully vested at July 1, 2007              
|                                          

| | Our
non-vested restricted stock grants vest either three or five years from the grant date. We
expect our non-vested restricted stock grants to fully vest over the weighted average
remaining service period of 1.7 years. The total fair value of shares vesting during the
two quarters of 2007 was $856. There were 105,718 vested and non-vested restricted stock
grants issued to our directors and employees in the two quarters of 2006 at a weighted
average fair value of $12.44, of which 32,603 shares have since vested with a total fair
value of $391.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

---

JOURNAL COMMUNICATIONS,
INC.  Notes to Unaudited Consolidated Condensed Financial Statements(in thousands, except
per share amounts)

|5 | STOCK-BASED
COMPENSATION continued
|- | ----------------------------------

| | Employee
stock purchase plan
| | ----------------------------

| | The
2003 Employee Stock Purchase Plan permits eligible employees to purchase our class B
common stock at 90% of the fair market value measured as of the closing market price of
our class A common stock on the day of purchase. We recognize compensation expense equal
to the 10% discount of the fair market value. Subject to certain adjustments, 3,000,000
shares of our class B common stock are authorized for sale under this plan. There were
27,514 class B common shares sold to employees under this plan in the two quarters of
2007 at a weighted average fair value of $11.71. As of July 1, 2007, there are 2,734,116 shares
available for sale under the plan.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6 | INCOME
TAXES
|- | ------------

| | We
file tax returns in the United States federal jurisdiction, as well as approximately 35
state and local jurisdictions. The statute of limitations for assessing additional taxes
is three years for federal purposes and typically between three and four years for state
and local purposes. Accordingly, our 2003 through 2006 tax returns are open for federal
purposes, and our 2002 through 2006 tax returns still remain open for state tax purposes,
unless the statute of limitations has been previously extended. Currently, we are under
audit in Wisconsin, Michigan, and Kansas. During the two quarters of 2007, we deposited
$10.4 million with the Wisconsin Department of Revenue for an income and franchise tax
audit assessment for the years 1998 through 2002. We are currently disputing the
assessment. We believe our position will be upheld through the appeals process and any
overpayment of tax will be returned to us.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
January 1, 2007, we adopted the provisions of FASB Interpretation No. 48, Accounting
for Uncertainty in Income Taxes  An interpretation of FASB Statement No. 109 (FIN
48). As a result of our adoption of FIN 48, we reduced our liability for
unrecognized tax benefits by $45 and increased the January 1, 2007 retained earnings
balance. As of the date of adoption and after the impact of reducing our liability, we
had total unrecognized tax benefits of $3,088, which, if recognized, would have an impact
on our effective tax rate. It is possible for $772 of unrecognized tax benefits to be
recognized within the next 12 months due to the expiration of the statute of limitations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
recognize penalties and interest related to unrecognized tax benefits in our provision
for income taxes. We had approximately $1,929 accrued for interest and penalties at
January 1, 2007 and we recognized $100 in interest related to unrecognized tax benefits
in the two quarters of 2007. It is possible for approximately $114 of interest expense to
be reversed within the next 12 months due to the expiration of the statute of
limitations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of July 1, 2007, there have been no material changes to our liability for unrecognized
tax benefits.
| | -------------------------------------------------------------------------------------------------------

|7 | INVENTORIES
|- | -----------

| | Inventories
are stated at the lower of cost (first in, first out method) or market. Inventories at
July 1, 2007 and December 31, 2006 consisted of the following:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                          | July 1, 2007 | December 31, 2006
|------------------------- | ------------ | -----------------
|Paper and supplies        |              |                  
|Work in process           |              |                  
|Finished goods            |              |                  
|Less obsolescence reserve |              |                  
|                          |              |                  
|Inventories, net          |              |                  
|                          |              |                  

|8 | NOTES
PAYABLE TO BANKS
|- | ----------------------

| | We
have a $475 million unsecured revolving credit facility that expires on June 2, 2011. The
interest rate on borrowings is either LIBOR plus a margin that ranges from 37.5 basis
points to 87.5 basis points, depending on our leverage, or the base rate, which equals
the higher of the prime rate set by U.S. Bank, N.A. or the Federal Funds Rate plus 100
basis points. As of July 1, 2007, we had borrowings of $118,355 under the facility at a
weighted average rate of 5.79%. Fees in connection with the facility of $1,717 are being
amortized over the term of the facility using the straight-line method which approximates
the effective-interest method.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

JOURNAL COMMUNICATIONS,
INC.  Notes to Unaudited Consolidated Condensed Financial Statements(in thousands, except
per share amounts)

|9 | EMPLOYEE
BENEFIT PLANS
|- | ----------------------

| | The
components of our net periodic benefit costs for our defined benefit and non-qualified
pension plans and our postretirement health benefit plan are as follows:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                            | Pension Benefits
|------------------------------------------- | ----------------
|
|
|Service cost                                |                 
|Interest cost                               |                 
|Expected return on plan assets              |                 
|Amortization of:                            |                 
|Unrecognized prior service cost             |                 
|Unrecognized net loss                       |                 
|Curtailment credit                          |                 
|                                            |                 
|Net periodic benefit cost included in total |                 
|operating costs and expenses,               |                 
|selling and administrative expenses         |                 
|and discontinued operations                 |                 
|                                            |                 
|
|
|
|
|Service cost                                |                 
|Interest cost                               |                 
|Amortization of:                            |                 
|Unrecognized prior service cost             |                 
|Unrecognized net transition obligation      |                 
|Unrecognized net loss                       |                 
|                                            |                 
|Net periodic benefit cost included in total |                 
|operating costs and expenses and            |                 
|selling and administrative expenses         |                 
|                                            |                 

| | In
the first quarter of 2007, a pension plan curtailment gain of $390 was recorded as the
result of the sale of Norlight Telecommunications, Inc. (Norlight) to Q-Comm Corporation
(Q-Comm) on February 26, 2007 and reflects a reduction in future pension benefit accruals
for all non-union employees of Norlight. The curtailment gain was recorded in
discontinued operations and is not reflected in the above table. Due to this pension plan
change, the measurement of the net periodic benefit cost from February 26, 2007 until the
sale of all three regional publishing and printing operations is based upon a 5.75%
discount rate.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the second quarter of 2007, a pension plan curtailment gain of $58 was recorded as a
result of the sale of Journal Community Publishing Groups Central Ohio Advertiser
Network (Ohio publishing and printing) to Gannett Co, Inc. on June 26, 2007. The
curtailment gain reflects a reduction in future pension benefit accruals for the pension
participants of the Ohio publishing and printing operations. The curtailment gain was
recorded in discontinued operations and is not reflected in the above table.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
net periodic pension benefit cost related to the three regional publishing and printing
operations reported in discontinued operations was $78 and $154 for the second quarter
and two quarters of 2007, respectively and $116 and $231 for the second quarter and two
quarters of 2006, respectively. Due to this pension plan change, a remeasurement of the
net periodic pension benefit cost for the remainder of 2007 will be performed after the
sale of all three regional publishing and printing operations.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
curtailment credit in the above table is the result of a pension plan amendment adopted
on April 27, 2006.
| | --------------------------------------------------------------------------------------------------------------

11

---

JOURNAL COMMUNICATIONS,
INC.  Notes to Unaudited Consolidated Condensed Financial Statements(in thousands, except
per share amounts)

|10 | GOODWILL
AND OTHER INTANGIBLE ASSETS
|-- | ------------------------------------

| | Definite-lived
Intangible Assets
| | --------------------------------

| | Our
definite-lived intangible assets consist primarily of network affiliation agreements,
customer lists and non-compete agreements. We amortize the network affiliation agreements
over a period of 25 years based on our good relationships with the networks, our long
history of renewing these agreements and because 25 years is deemed to be the length of
time before a material modification of the underlying contract would occur. We amortize
the customer lists over a period of five to 40 years.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Amortization
expense was $475 and $950 for the second quarter and two quarters ended July 1, 2007,
respectively, and $483 and $955 for the second quarter and two quarters ended June 25,
2006. Estimated amortization expense for our next five fiscal years is $1,903 for 2007,
$1,824 for 2008, $1,576 for 2009, $1,527 for 2010 and $1,169 for 2011.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
gross carrying amount, accumulated amortization and net carrying amount of the major
classes of definite-lived intangible assets as of July 1, 2007 and December 31, 2006 are
as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               | Gross
Carrying
Amount | Accumulated
Amortization | Net
Carrying
Amount
|------------------------------ | --------------------- | ------------------------ | -------------------
|As of July 1, 2007             |                       |                          |                    
|Network affiliation agreements |                       |                          | $                  
|Customer lists                 |                       |                          |                    
|Non-compete agreements         |                       |                          |                    
|Other                          |                       |                          |                    
|                               |                       |                          |                    
|Total                          |                       |                          | $                  
|                               |                       |                          |                    
|As of December 31, 2006        |                       |                         
|Network affiliation agreements |                       |                          | $                  
|Customer lists                 |                       |                          |                    
|Non-compete agreements         |                       |                          |                    
|Other                          |                       |                          |                    
|                               |                       |                          |                    
|Total                          |                       |                          | $                  
|                               |                       |                          |                    

| | Indefinite-lived
Intangibles
| | ----------------------------

| | Broadcast
licenses are deemed to have indefinite useful lives because we have renewed these
agreements without issue in the past and we intend to renew them indefinitely in the
future. Accordingly, we expect the cash flows from our broadcast licenses to continue
indefinitely. Adjustments of $27,258 and ($388) were made to the carrying value of the
broadcast licenses for the acquisition of the KMTV-TV FCC license and the divestiture of
the KOMJ-AM FCC license, respectively, which occurred contemporaneously on March 27,
2007. The net carrying amount of our broadcast licenses was $223,529 and $196,659 as of
July 1, 2007 and December 31, 2006, respectively.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Goodwill
| | --------

| | The
change in the carrying amount of goodwill for the two quarters ended July 1, 2007 is as
follows:
| | ----------------------------------------------------------------------------------------------------

|Reporting unit                  | Goodwill at
December 31, 2006 | Adjustment | Goodwill at
July 1, 2007
|------------------------------- | ----------------------------- | ---------- | ------------------------
|Daily newspaper                 |                               |            | $                       
|Community newspapers & shoppers |                               |            |                         
|Broadcasting                    |                               |            |                         
|Direct marketing services       |                               |            |                         
|                                |                               |            |                         
|Total                           |                               |            | $                       
|                                |                               |            |                         

| | The
change to the carrying amount of goodwill in the two quarters ended July 1, 2007
represents the divestiture of KOMJ-AM, Omaha, Nebraska, to Cochise Broadcasting LLC on
March 27, 2007. Goodwill of the New England, Ohio and Louisiana regional publishing and
printing operations of $13,917 as of December 31, 2006 and of the New England and
Louisiana regional publishing and printing operations of $9,709 as of July 1, 2007 is
reported as current assets of discontinued operations in the consolidated condensed
balance sheet.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

---

JOURNAL COMMUNICATIONS,
INC.  Notes to Unaudited Consolidated Condensed Financial Statements(in thousands, except
per share amounts)

|11 | DISCONTINUED
OPERATIONS
|-- | -----------------------

| | Community
newspapers and shoppers
| | ---------------------------------

| | On
June 13, 2007 and June 19, 2007, we announced the pending sales of our Louisiana
publishing operations and of the New England publishing and printing operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | On
June 25, 2007, Gannett Co., Inc. acquired Journal Community Publishing Groups
Central Ohio Advertiser Network and its commercial printing business. Proceeds, net of
transaction expenses, were $8.9 million and resulted in a gain on discontinued operations
before income taxes of $1.9 million.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
operations of these three regional publishing and printing operations of our community
newspapers and shoppers division have been reflected as discontinued operations in our
consolidated condensed financial statements for all periods presented.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table summarizes the three regional publishing and printing operationsresults
of operations which are included in discontinued operations in our consolidated statement
of earnings for the second quarter and two quarters of 2007 and 2006:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             | Second Quarter Ended | Two Quarters Ended
|---------------------------- | -------------------- | ------------------
|
|Revenue                      |                      |                   
|Earnings before income taxes |                      |                   

| | The
three regional publishing and printing operations current assets and current
liabilities reported as discontinued operations in our consolidated balance sheets at
July 1, 2007 and December 31, 2006 consisted of the following:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             | July 1, 2007 | December 31, 2006
|---------------------------- | ------------ | -----------------
|Receivables                  |              |                  
|Inventories, net             |              |                  
|Prepaid expenses             |              |                  
|Property and equipment, net  |              |                  
|Goodwill                     |              |                  
|Other intangible assets, net |              |                  
|Other assets                 |              |                  
|                             |              |                  
|Total current assets         |              |                  
|                             |              |                  
|Deferred revenue             |              |                  
|Other liabilities            |              |                  
|                             |              |                  
|Total current liabilities    |              |                  
|                             |              |                  

| | The
long-term assets and long-term liabilities as of July 1, 2007 and December 31, 2006 were
classified as current because the sales are expected to occur within one year.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Norlight
Telecommunications, Inc.
| | ---------------------------------

| | On
February 26, 2007, Q-Comm acquired 100% of the stock of Norlight, our former
telecommunications subsidiary, for $185 million in cash, subject to certain working
capital and long-term liability adjustments. Proceeds, net of transaction expenses, were
$175.9 million and resulted in a gain on discontinued operations before income taxes of
$101.8 million. The operations of Norlight have been reflected as discontinued operations
in our consolidated condensed financial statements for all periods presented.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table summarizes Norlights results of operations which are included in
the gain from discontinued operations in our consolidated statement of earnings for the
second quarter and two quarters of 2007 and 2006:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

---

JOURNAL COMMUNICATIONS,
INC.  Notes to Unaudited Consolidated Condensed Financial Statements (in thousands,
except per share amounts)

|11 | DISCONTINUED
OPERATIONS continued
|-- | ---------------------------------

|                                    | Second Quarter Ended | Two Quarters Ended
|----------------------------------- | -------------------- | ------------------
|
|Revenue                             |                      |                   
|(Loss) earnings before income taxes |                      |                   

| | Norlights
current assets and current liabilities reported as discontinued operations in the
consolidated balance sheets at July 1, 2007 and December 31, 2006 consisted of the
following:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                         | July 1, 2007 | December 31, 2006
|---------------------------------------- | ------------ | -----------------
|Receivables                              |              |                  
|Inventories, net                         |              |                  
|Prepaid expenses                         |              |                  
|Property and equipment, net              |              |                  
|Goodwill                                 |              |                  
|Other intangible assets, net             |              |                  
|Other assets                             |              |                  
|                                         |              |                  
|Total current assets                     |              |                  
|                                         |              |                  
|Accounts payable                         |              |                  
|Accrued compensation                     |              |                  
|Current portion of long-term liabilities |              |                  
|Accrued employee benefits                |              |                  
|Other liabilities                        |              |                  
|                                         |              |                  
|Total current liabilities                |              |                  
|                                         |              |                  

| | Norlights
long-term assets and long-term liabilities as of December 31, 2006 were classified as
current because the sale was expected to occur within one year. Accordingly, Norlights
property and equipment and other intangible assets were classified as held-for-sale and
were not depreciated or amortized since November 13, 2006, the date the decision was made
to sell Norlight.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | NorthStar
Print Group, Inc.
| | ---------------------------

| | On
January 25, 2005, we entered into a definitive asset sale agreement with Multi-Color
Corporation pursuant to which Multi-Color Corporation acquired substantially all of the
assets and certain liabilities of NorthStar Print Group, Inc. (NorthStar), our label
printing business. We retained certain real estate and liabilities for environmental
clean-up.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | NorthStars
current and non-current assets and current liabilities reported as discontinued
operations in the consolidated balance sheets at July 1, 2007 and December 31, 2006
consisted of the following:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             | July 1, 2007 | December 31, 2006
|-------------------------------------------- | ------------ | -----------------
|Receivables                                  |              |                  
|                                             |              |                  
|Total current assets                         |              |                  
|                                             |              |                  
|Property and equipment, net                  |              |                  
|                                             |              |                  
|Total non-current assets                     |              |                  
|                                             |              |                  
|Accounts payable (environmental liabilities) |              |                  
|                                             |              |                  
|Total current liabilities                    |              |                  
|                                             |              |                  

14

---

JOURNAL COMMUNICATIONS,
INC.Notes to Unaudited Consolidated Condensed Financial Statements (in thousands,
except per share amounts)

|12 | SEGMENT
INFORMATION
|-- | -------------------

| | Our
business segments are based on the organizational structure used by management for making
operating and investment decisions and for assessing performance. Our reportable business
segments are: (i) publishing; (ii) broadcasting; (iii) printing services; and (iv) other.
Our publishing segment consists of the Milwaukee Journal Sentinel, which serves as
the only major daily newspaper for the Milwaukee metropolitan area, and 44 community
newspapers and shoppers in two states. Our broadcasting segment consists of 35 radio
stations and 10 television stations in 12 states and the operation of one television
station under a local marketing agreement. Our interactive media assets include more than
75 online enterprises that are associated with our publishing and broadcasting segments.
We also provide a wide range of commercial printing services, including printing of
publications, professional journals and documentation material, through our printing
services segment. Our other segment consists of a direct marketing services business and
corporate expenses and eliminations.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following tables summarize revenue, operating earnings, depreciation and amortization and
capital expenditures from continuing operations for the second quarter and two quarters
ended July 1, 2007 and June 25, 2006 and identifiable total assets at July 1, 2007 and
December 31, 2006.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | Second Quarter Ended | Two Quarters Ended
|----------------------------- | -------------------- | ------------------
|
|Revenue                       |                      |                   
|Publishing                    |                      |                   
|Broadcasting                  |                      |                   
|Printing services             |                      |                   
|Other                         |                      |                   
|                              |                      |                   
|                              |                      |                   
|                              |                      |                   
|Operating earnings            |                      |                   
|Publishing                    |                      |                   
|Broadcasting                  |                      |                   
|Printing services             |                      |                   
|Other                         |                      |                   
|                              |                      |                   
|                              |                      |                   
|                              |                      |                   
|Depreciation and amortization |                      |                   
|Publishing                    |                      |                   
|Broadcasting                  |                      |                   
|Printing services             |                      |                   
|Other                         |                      |                   
|                              |                      |                   
|                              |                      |                   
|                              |                      |                   
|Capital expenditures          |                      |                   
|Publishing                    |                      |                   
|Broadcasting                  |                      |                   
|Printing services             |                      |                   
|Other                         |                      |                   
|                              |                      |                   
|                              |                      |                   
|                              |                      |                   

|                                                      | July 1, 2007 | December 31, 2006
|----------------------------------------------------- | ------------ | -----------------
|
|Identifiable total assets                             |              |                  
|Publishing                                            |              |                  
|Broadcasting                                          |              |                  
|Printing services                                     |              |                  
|Other including corporate and discontinued operations |              |                  
|                                                      |              |                  
|                                                      |              |                  
|                                                      |              |                  

15

---

JOURNAL COMMUNICATIONS,
INC.  Notes to Unaudited Consolidated Condensed Financial Statements (in thousands,
except per share amounts)

|13 | SUBSEQUENT
EVENTS
|-- | -----------------

On July 6, 2007, an affiliate of
Target Media Partners purchased the assets of our Louisiana-based publishing operations.
Proceeds, net of transaction expenses, were $4.4 million. The after-tax gain on the sale,
which will be recorded in the third quarter of 2007, is expected to approximately $1.2
million.

On August 2, 2007, our New England
based publishing and printing operations were sold to Hersam Acorn Community Publishing,
LLC. Proceeds, net of transaction expenses, were $15.2 million. The after-tax gain on the
sale, which will be recorded in the third quarter of 2007, is expected to be minimal.

16

---

# ITEM 2.    
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our
financial condition and results of operations should be read together with our unaudited
consolidated condensed financial statements for the second quarter and two quarters ended
July 1, 2007, including the notes thereto.

More information regarding us is
available at our website at www.journalcommunications.com. We are not including the
information contained in our website as a part of, or incorporating it by reference into,
this Quarterly Report on Form 10-Q. Our Annual Report on Form 10-K, quarterly reports on
Form 10-Q, current reports on Form 8-K and any amendments to those reports are made
available to the public at no charge, other than a readers own internet access
charges, through a link appearing on our website. We provide access to such material
through our website as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange Commission.

# Forward-Looking
Statements

We make certain statements in this
Quarterly Report on Form 10-Q (including the information that we incorporate by reference
herein) that are forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. We intend these forward-looking statements to be
covered by the safe harbor provisions for forward-looking statements contained in that
Act, and we are including this statement for purposes of those safe harbor provisions.
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. We often use words such as
may, will, intend, anticipate,
believe, or should and similar expressions in this Quarterly
Report on Form 10-Q to identify forward-looking statements. These forward-looking
statements are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond our control. These risks,
uncertainties and other factors could cause actual results to differ materially from those
expressed or implied by those forward-looking statements. Among such risks, uncertainties
and other factors that may impact us are the following:

| | changes
in advertising demand or the buying strategies of advertisers;
|- | ----------------------------------------------------------------------

| | 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);
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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;
|- | ------------------------------------------

| | 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 our viewers;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | effects
of the loss of commercial inventory resulting from uninterrupted television news coverage
and potential advertising cancellations due to war or terrorist acts;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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 interest rates;
|- | --------------------------

| | the
outcome of pending or future litigation;
|- | --------------------------------------------

| | energy
costs;
|- | -------------

| | the
 availability  and effect of  acquisitions,  investments,  and  dispositions  on our
results of  operations  or  financial          condition; and
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------

| | changes
in general economic conditions.
|- | ---------------------------------------

We caution you not to place undue
reliance on these forward-looking statements, which we have made as of the date of this
Quarterly Report on Form 10-Q.

# Overview

Our business segments are based on
the organizational structure used by management for making operating and investment
decisions and for assessing performance. Our reportable business segments are: (i)
publishing; (ii) broadcasting; (iii) printing services; and (iv) other. Our publishing
segment consists of the Milwaukee Journal Sentinel, which serves as the only major
daily newspaper for the Milwaukee metropolitan area, and 44 community newspapers and
shoppers in two states. Our broadcasting segment consists of 35 radio stations and 10
television stations in 12 states and the operation of one television station under a local
marketing agreement. Our interactive media assets include more than 75 online enterprises
that are associated with our publishing and broadcasting segments. We also provide a wide
range of commercial printing services, including printing of publications, professional
journals and documentation material, through our printing services segment. Our other
segment consists of a direct marketing services business and corporate expenses and
eliminations.

17

---

In the past eighteen months,
fundamentals in the newspaper industry have deteriorated significantly. Continuing
weakness in automotive advertising (driven primarily by the domestic automobile industry),
reductions in retail and classified run-of-press advertising (due in part to department
store consolidation and weakened employment and real estate economics), circulation
declines and online competition have negatively impacted newspaper industry revenues.

Overall, we experienced a challenging
second quarter of 2007. We recorded declines in retail advertising and employment and real
estate classified advertising at our publishing businesses. We continue to face challenges
at our publishing businesses. Second quarter advertising revenue at our daily newspaper
was disappointing, with weakness in a number of categories including other, health
services and building/hardware/lawn and garden. However, total retail and classified
automobile advertising increased 6.6% in the second quarter of 2007 compared to the second
quarter of 2006. Interactive revenue growth, to $3.4 million at the daily newspaper,
continues to be strong with a 46.9% increase in the second quarter of 2007 compared to the
second quarter of 2006. At our community newspapers and shoppers business, revenue
decreased 18.7%. This reflects in large part the product changes that we have made at
Community Newspapers (our Milwaukee area publications group). At our broadcast business,
we experienced a disappointing quarter in both television and radio. The revenue declines
were broad-based across our television markets, with automotive and national advertising
seeing especially large declines. Radio revenue growth slowed compared to the first
quarter of 2007. However, we did report double-digit increases in both revenue and
operating earnings at our Knoxville, Boise and Springfield radio clusters. Operating
earnings increased at our printing services business, reflecting production efficiencies
and a change in business mix.

Results presented in the financial
statements are for continuing operations only and exclude the performance of our former
telecommunications segment, which was sold in February 2007, and three regional publishing
and printing operations of our community newspapers and shoppers business in Ohio, New
England and Louisiana which were either sold in the second quarter of 2007 or have been
announced to be sold. These businesses are shown as discontinued operations and their
results are excluded from revenues, operating expenses and operating earnings but are
included in 2007 and 2006 net earnings and earnings per share. In the second quarter and
two quarters of 2007, net earnings from discontinued operations were $1.5 million and
$66.5 million, respectively compared to $2.7 million and $5.9 million in the second
quarter and two quarters of 2006.

# Subsequent Events

On July 6, 2007, an affiliate of
Target Media Partners purchased the assets of our Louisiana-based publishing operations.
Proceeds, net of transaction expenses, were $4.4 million. The after-tax gain on the sale,
which will be recorded in the third quarter of 2007, is expected to approximately $1.2
million.

On August 2, 2007, our New England
based publishing and printing operations were sold to Hersam Acorn Community Publishing,
LLC. Proceeds, net of transaction expenses, were $15.2 million. The after-tax gain on the
sale, which will be recorded in the third quarter of 2007, is expected to be minimal.

# Results of Operations

| | Second
Quarter Ended July 1, 2007 compared to the Second Quarter Ended June 25, 2006
| | ------------------------------------------------------------------------------------

| | Consolidated
Continuing Operations
| | ----------------------------------

Our consolidated revenue in the
second quarter of 2007 was $147.5 million, a decrease of $6.5 million, or 4.3%, compared
to $154.0 million in the second quarter of 2006. Our consolidated operating costs and
expenses in the second quarter of 2007 were $78.8 million, a decrease of $3.4 million, or
4.2%, compared to $82.2 million in the second quarter of 2006. Our consolidated selling
and administrative expenses in the second quarter of 2007 were $46.0 million, a decrease
of $1.0 million, or 2.3%, compared to $47.0 million in the second quarter of 2006.

18

---

The following table presents our
total revenue by segment, total operating costs and expenses, selling and administrative
expenses and total operating earnings as a percent of total revenue for the second quarter
of 2007 and 2006:

|                                               | 2007 | Percent of
Total
Revenue | 2006 | Percent of
Total
Revenue
|---------------------------------------------- | ---- | ------------------------ | ---- | ------------------------
|
|Continuing Operations:                         |      |                          |      |                         
|Revenue:                                       |      |                         
|Publishing                                     |      |                          | $    | 67.6                    
|Broadcasting                                   |      |                          |      | 56.0                    
|Printing services                              |      |                          |      | 16.5                    
|Other                                          |      |                          |      | 7.4                     
|                                               |      |                          |      |                         
|Total revenue                                  |      |                          |      | 147.5                   
|Total operating costs and expenses             |      |                          |      | 78.8                    
|Selling and administrative expenses            |      |                          |      | 46.0                    
|                                               |      |                          |      |                         
|Total operating costs and expenses and selling |      |                         
|and administrative expenses                    |      |                          |      | 124.8                   
|                                               |      |                          |      |                         
|Total operating earnings                       |      |                          | $    | 22.7                    
|                                               |      |                          |      |                         

The decrease in total revenue was due
to the decrease in retail and classified ROP (run-of-press) advertising at our publishing
business, the decrease in postage amounts billed to customers and the decrease in mailing
services at our direct marketing services business and the decrease in political and issue
and national advertising at our television stations. These revenue decreases were
partially offset by a revenue reduction in the second quarter of 2006 related to a
litigation settlement, an increase in interactive advertising revenue at our daily
newspaper and television and radio stations and commercial printing and delivery revenue
at our daily newspaper.

The decrease in total operating costs
and expenses was due to a decrease in postage and freight expense at our direct marketing
services business, a decrease in paper costs at our publishing businesses and a decrease
in production costs associated with a reduction in waste and other production efficiencies
at our printing services business. These cost decreases were partially offset by an
increase in programming expenses associated with additional newscasts and syndicated
programming expenses at our television stations.

The decrease in selling and
administrative expenses is primarily due to litigation-related expenses associated with a
litigation settlement at the daily newspaper in the second quarter of 2006, a gain on the
sale of the Hartland, Wisconsin printing facility and payroll cost reductions at our
community newspapers and shoppers and our other businesses. These decreases were partially
offset by a pension plan curtailment credit at our publishing and broadcast businesses and
insurance proceeds from a business interruption claim related to Hurricane Katrina at our
community newspapers and shoppers business, both in the second quarter of 2006, increases
in payroll and payroll-related expenses and sales program expenses at our radio stations,
an increase in payroll, payroll-related and sales expenses at our television operations
and an increase in corporate expenses.

Our consolidated operating earnings
in the second quarter of 2007 were $22.7 million, a decrease of $2.1 million, or 8.2%,
compared to $24.8 million in the second quarter of 2006. The following table presents our
operating earnings by segment for the second quarter of 2007 and 2006:

|                         | 2007 | Percent of
Total
Operating
Earnings | 2006 | Percent of
Total
Operating
Earnings
|------------------------ | ---- | ----------------------------------- | ---- | -----------------------------------
|
|Publishing               |      |                                     | $    | 10.2                               
|Broadcasting             |      |                                     |      | 11.3                               
|Printing services        |      |                                     |      | 1.0                                
|Other                    |      |                                     |      | 0.2                                
|                         |      |                                     |      |                                    
|Total operating earnings |      |                                     | $    | 22.7                               
|                         |      |                                     |      |                                    

The decrease in total operating
earnings was primarily due to the operating earnings impact from the decrease in
television advertising revenue and the increase in programming expenses associated with
additional newscasts and syndicated programming expenses at our television stations, a
decrease in retail and classified ROP advertising revenue at our publishing businesses and
an increase in payroll, payroll-related and sales program expenses at our radio stations.
Partially offsetting these operating earnings decreases were a revenue reduction for a
litigation settlement in the second quarter of 2006, a decrease in paper costs at our
publishing businesses and production efficiencies at our printing services business.

19

---

Our consolidated EBITDA in the second
quarter of 2007 was $30.0 million, a decrease of $1.9 million, or 5.9%, compared to $31.9
million in the second quarter of 2006. We define EBITDA as net earnings excluding gain
from discontinued operations, net, provision for income taxes, total other expense (which
is entirely comprised of interest income and expense), depreciation and amortization. Our
management uses 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 accounting principles generally accepted in the United States. 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.

The following table presents a
reconciliation of our consolidated net earnings to consolidated EBITDA for the second
quarter of 2007 and 2006:

|                                       | 2007 | 2006
|-------------------------------------- | ---- | ----
|
|Net earnings                           |      |     
|Gain from discontinued operations, net |      |     
|Provision for income taxes             |      |     
|Total other expense, net               |      |     
|Depreciation                           |      |     
|Amortization                           |      |     
|                                       |      |     
|EBITDA                                 |      |     
|                                       |      |     

The decrease in EBITDA is consistent
with decreases in operating earnings in our broadcasting and other segments, partially
offset by increases in operating earnings at our publishing and printing services
segments for the reasons described above.

| | Publishing
| | ----------

Revenue from publishing in the second
quarter of 2007 was $67.6 million, a decrease of $0.3 million, or 0.5%, compared to $67.9
million in the second quarter of 2006. Operating earnings from publishing were $10.2
million, an increase of $2.9 million, or 40.3%, compared to $7.3 million in the second
quarter of 2006.

The following table presents our
publishing revenue by category and operating earnings for the second quarter of 2007 and
2006:

|                            | 2007 | 2006
|--------------------------- | ---- | ----
|
|
|Advertising revenue:        |      |     
|Retail                      |      |     
|Classified                  |      |     
|National                    |      |     
|Direct Marketing            |      |     
|Other                       |      |     
|                            |      |     
|Total advertising revenue.. |      |     
|Circulation revenue         |      |     
|Other revenue               |      |     
|                            |      |     
|Total revenue               |      |     
|                            |      |     
|Operating earnings          |      |     
|                            |      |     

Advertising revenue in the second
quarter of 2007 accounted for 75.1% of total publishing revenue compared to 75.7% in the
second quarter of 2006.

Retail advertising revenue in the
second quarter of 2007 was $30.5 million, an increase of $2.5 million, or 9.1%, compared
to $28.0 million in the second quarter of 2006. The $4.2 million increase at our daily
newspaper was due to the $5.1 million revenue reduction from a litigation settlement in
the second quarter of 2006 and increases in Interactive and specialty magazine
advertising, partially offset by a decrease in ROP advertising primarily in the other,
health services and building/hardware/lawn and garden categories. The $1.7 million
decrease at our community newspapers and shoppers was primarily due to revenue from a
mid-week shared mail product previously reported within the division that is now reported
under the daily newspaper and a decrease in automotive advertising.

20

---

Classified advertising revenue in the
second quarter of 2007 was $17.2 million, a decrease of $1.8 million, or 9.7%, compared to
$19.0 million in the second quarter of 2006. Decreases in ROP classified advertising at
our daily newspaper were partially offset by an increase in Interactive and Marketplace
(our TMC or Total Market Coverage product) classified advertising. The $1.2 million
decrease in classified advertising revenue at our daily newspaper was primarily due to
decreases in real estate advertising of $0.7 million, employment advertising of $0.5
million and automotive advertising of $0.1 million, partially offset by an increase in
other advertising of $0.1 million. Employment advertising accounted for 41.1% of
classified advertising revenue at the daily newspaper in the second quarter of 2007. The
$0.6 million decrease in classified advertising revenue at our community newspapers and
shoppers is primarily due to a mid-week shared mail product previously reported by that
division and now reported under the daily newspaper.

The total increase in retail and
classified automotive advertising at our daily newspaper in the second quarter of 2007 was
$0.3 million, or 6.6%, compared to the second quarter of 2006.

Total retail and classified
Interactive revenue at our daily newspaper was $3.4 million in the second quarter of 2007,
an increase of $1.1 million, or 46.9%, compared to $2.3 million in the second quarter of
2006.

National advertising revenue in the
second quarter of 2007 was $1.9 million, a decrease of $0.8 million, or 28.8%, compared to
$2.7 million in the second quarter of 2006.

The following table presents our
daily newspapers core newspaper advertising linage by category and core newspaper
and shared mail preprint pieces for the second quarter of 2007 and 2006:

|                               | 2007 | 2006 | Percent
Change
|------------------------------ | ---- | ---- | --------------
|Advertising linage (inches):   |      |      |               
|Full run                       |      |     
|Retail                         |      |      |               
|Classified                     |      |      |               
|National                       |      |      |               
|                               |      |      |               
|Total full run                 |      |      |               
|Part run                       |      |      |               
|                               |      |      |               
|Total advertising linage       |      |      |               
|                               |      |      |               
|Preprint pieces (in thousands) |      |      |               
|                               |      |      |               

Total advertising linage in the
second quarter of 2007 decreased 15.8% compared to the second quarter of 2006. Full run
advertising linage in 2006 decreased 11.4% compared to the second quarter of 2006
primarily due to a reduction in classified and retail advertising linage. The decrease in
classified advertising linage is primarily due to a decrease in the real estate,
employment and automotive categories and the decrease in retail advertising linage is
primarily due to decreases in the other, health services and building/hardware/lawn and
garden categories. National advertising linage decreased primarily due to decreases in the
other, movies and entertainment categories. Part run advertising linage decreased 66.7% in
the second quarter of 2007 due to the elimination of daily zoned editions. Preprint
advertising pieces decreased 5.1% in the second quarter of 2007 compared to the second
quarter of 2006 primarily due to decrease in both retail and national preprints.

The following table presents total
pages and revenue per page for our community newspapers and shoppers and specialty
products for the second quarter of 2007 and 2006:

|Total pages:                    |  |  |   |        |  |   |        |  |  |       |  
|------------------------------- |  |  | - | ------ |  | - | ------ |  |  | ----- | -
|Community newspapers            |  |  |   | 12,412 |  |   | 19,832 |  |  | (37.4 | )
|Shoppers and specialty products |  |  |   | 13,043 |  |   | 15,810 |  |  | (17.5 | )
|                                |  |  |   |        |  |  
|Total pages                     |  |  |   | 25,455 |  |   | 35,642 |  |  | (28.6 | )
|                                |  |  |   |        |  |  
|Revenue per page                |  |  | $ | 336.57 |  | $ | 297.10 |  |  | 13.3  |  
|                                |  |  |   |        |  |  

Total pages for our community
newspapers and shoppers business in the second quarter of 2007 decreased 28.6% compared to
the second quarter of 2006. The decrease was primarily due to the reduction of 18 weekly
Milwaukee-area community newspapers to eight and a mid-week shared mail product previously
reported as a community shopper and now reported under the daily newspaper. Revenue per
page increased 13.3% primarily due to the decrease in total full pages of advertising.

Direct marketing revenue, consisting
of revenue from direct mail efforts for our daily newspaper, was $1.1 million in the
second quarter of 2007, a decrease of $0.4 million, or 26.9%, compared to $1.5 million in
the second quarter of 2006. The decrease was due to The Bon-Ton Stores, Inc.s
consolidation of all Boston Store mail programs and a decrease in postage revenue billed
to our solo mail customers.

Other advertising revenue, consisting
of revenue from company-sponsored event advertising at our community newspapers and
shoppers, was $0.1 million in the second quarter of 2007, a decrease of $0.1 million, or
61.8%, compared to $0.2 million in the second quarter of 2006.

21

---

Circulation revenue in the second
quarter of 2007 accounted for 19.4% of total publishing revenue compared to 19.7% in the
second quarter of 2006. Circulation revenue of $13.1 million in the second quarter of 2007
decreased $0.3 million, or 2.1%, compared to $13.4 million in the second quarter of 2006
primarily due to decreases in daily and Sunday average net paid circulation and a decrease
in the Sunday average rate per copy at our daily newspaper and a change to a free
distribution model of the community newspapers in the Milwaukee area at our community
newspapers and shoppers.

Other revenue, which consists of
revenue from commercial printing at the printing plants for our community newspapers and
shoppers and promotional, distribution and commercial printing revenue at our daily
newspaper, accounted for 5.5% of total publishing revenue in the second quarter of 2007
compared to 4.6% in the second quarter of 2006. Other revenue in the second quarter of
2007 was $3.7 million, an increase of $0.6 million, or 15.5%, compared to $3.1 million in
the second quarter of 2006. The increase was primarily due to an increase in commercial
printing due to an agreement signed by our daily newspaper in late 2006 to print the
USA Today in northern Illinois and eastern Wisconsin and an increase in commercial
delivery revenue at the daily newspaper.

Publishing operating earnings in the
second quarter of 2007 were $10.2 million, an increase of $2.9 million, or 40.3%, compared
to $7.3 million in the second quarter of 2006. Operating earnings increased $3.9 million
in the second quarter of 2007 at the daily newspaper primarily due to the second quarter
of 2006 impact from the decrease in revenue related to a $5.1 million litigation
settlement, a $1.7 million decrease in paper costs and $1.0 million decrease in legal and
professional services, partially offset by the impact from the decrease in retail and
classified (ROP) advertising and a $0.8 million pension plan curtailment credit in second
quarter of 2006. Operating earnings decreased $1.0 million in the second quarter of 2007
at our community newspapers and shoppers primarily due to $1.1 million in insurance
proceeds from a business interruption claim from the impact of Hurricane Katrina and a
$0.4 million pension plan curtailment credit, both in the second quarter of 2006,
partially offset by a $0.9 million gain on the sale of the Hartland, Wisconsin printing
facility. Total newsprint and paper costs for our publishing businesses in the second
quarter of 2007 were $7.0 million, a decrease of $1.8 million, or 20.6%, compared to $8.8
million in the second quarter of 2006, primarily due to a 13.9% decrease in newsprint
consumption and a 9.7% decrease in average newsprint pricing per metric ton. Consumption
of metric tonnes of newsprint in the second quarter of 2007 decreased primarily due to
decreases in ROP advertising, editorial content, web-width and average net paid
circulation at our daily newspaper.

| | Broadcasting
| | ------------

Revenue from broadcasting in the
second quarter of 2007 was $56.0 million, a decrease of $2.4 million, or 4.1%, compared to
$58.4 million in the second quarter of 2006. Operating earnings from broadcasting in the
second quarter of 2007 were $11.3 million, a decrease of $4.9 million, or 30.1%, compared
to $16.2 million in the second quarter of 2006.

The following table presents our
broadcasting revenue and operating earnings for the second quarter of 2007 and 2006:

|                   | 2007 | 2006 | Percent
|------------------ | ---- | ---- | -------
|
|
|Revenue            |      |      | $      
|                   |      |      |        
|Operating earnings |      |      | $      
|                   |      |      |        

Revenue from our radio stations in
the second quarter of 2007 was $22.0 million, a decrease of $0.1 million, or 0.5%,
compared to $22.1 million in the second quarter of 2006. The decrease was primarily due to
a $0.2 million decrease in local advertising revenue, partially offset by a $0.1 million
increase in national advertising.

Operating earnings from our radio
stations were $5.3 million in the second quarter of 2007, a decrease of $1.5 million, or
22.1%, compared to $6.8 million in the second quarter of 2006. The decrease in operating
earnings was due to an increase in payroll and payroll-related expenses, sales program
expenses and a $0.2 million pension plan curtailment credit in the second quarter of 2006.

Revenue from our television stations
in the second quarter of 2007 was $34.0 million, a decrease of $2.3 million, or 6.3%,
compared to $36.3 million in the second quarter of 2006. The decrease was primarily due to
a $1.2 million decrease in political and issue advertising, a $1.0 million decrease in
national advertising primarily in the automotive category and $0.1 million decrease in
local advertising.

Operating earnings from our
television stations in the second quarter of 2007 were $6.0 million, a decrease of $3.4
million, or 36.2%, compared to $9.4 million in the second quarter of 2006. The decrease in
operating earnings was primarily due to the decrease in revenue, an increase in
programming expenses associated with additional newscasts and syndicated programming
costs, an increase in payroll, payroll-related and sales expenses and a $0.3 million
pension plan curtailment credit in the second quarter of 2006.

22

---

| | Printing
Services
| | -----------------

Revenue from printing services in the
second quarter of 2007 was $16.5 million, a decrease of $0.2 million, or 1.0%, compared to
$16.7 million in the second quarter of 2006. Operating earnings from printing services in
the second quarter of 2007 were $1.0 million, an increase of $0.5 million, or 97.9%,
compared to $0.5 million in the second quarter of 2006.

The decrease in printing services
revenue was primarily due to a $0.6 million decrease in revenue from the printing of
publications and manuals, partially offset by a $0.4 million increase in revenue from
computer-related customers. In the second quarter of 2007, we recorded $1.9 million in
revenue from new printing customers.

The increase in printing services
operating earnings was primarily due to production efficiencies gained from new printing
equipment and a change in business mix.

| | Other
| | -----

Other revenue in the second quarter
of 2007 was $7.4 million, a decrease of $3.6 million, or 33.0%, compared to $11.0 million
in the second quarter of 2006. Other operating earnings in the second quarter of 2007 were
$0.2 million, a decrease of $0.6 million, or 75.4%, compared to $0.8 million in the second
quarter of 2006.

The following table presents our
other revenue and operating earnings for the second quarter of 2007 and 2006:

|                          | 2007 | 2006
|------------------------- | ---- | ----
|
|
|Revenue                   |      |     
|                          |      |     
|Operating earnings (loss) |      |     
|                          |      |     

The decrease in other revenue in the
second quarter of 2007 compared to the second quarter of 2006 was primarily due to a
decrease in postage amounts billed to customers and mailing services at our direct
marketing services business. Included in revenue and operating costs and expenses from our
direct marketing services business is $4.1 million and $6.4 million of postage amounts
billed to customers in the second quarter of 2007 and 2006, respectively.

The decrease in other operating
earnings was primarily due to a favorable adjustment of an incentive compensation accrual
at corporate in the second quarter of 2006.

| | Other
Income and Expense and Taxes
| | ----------------------------------

Interest income was insignificant in
the second quarter of 2007 and 2006. Interest expense was $1.9 million in the second
quarter of 2007 compared to $3.9 million in the second quarter of 2006. The decrease is
primarily due to a decrease in debt outstanding, which was reduced with the proceeds from
the sale of Norlight Telecommunications, Inc. (Norlight), our former telecommunications
subsidiary. Amortization of deferred financing costs was $0.1 million in the second
quarter of 2007 and 2006.

The effective tax rate for continuing
operations was 38.8% in the second quarter of 2007 compared to 40.1% in the second quarter
of 2006.

| | Discontinued
Operations
| | -----------------------

On February 26, 2007, Q-Comm acquired
100% of the stock of Norlight, our former telecommunications subsidiary. On June 13, 2007
and June 19, 2007, we announced the pending sales of our Louisiana publishing operations
and of our New England publishing and printing operations, respectively. On June 26, 2007,
we sold our Ohio publishing and printing operations. The operations of Norlight and the
three regional publishing and printing operations of our community newspapers and shoppers
division have been reflected as discontinued operations in our consolidated condensed
financial statements for all periods presented.

Gain from discontinued operations,
net of income taxes, was $1.5 million in the second quarter of 2007 compared to $2.7
million in the second quarter of 2006. Income tax expense was $0.7 million in the second
quarter of 2007 compared to $1.8 million in the second quarter of 2006.

Revenue from discontinued operations
in the second quarter of 2007 was $10.5 million compared to $43.4 million in the second
quarter of 2006. We recorded a $1.3 million net gain on the sale of the Ohio publishing
and printing operations and a $0.1 million net gain from the operating results of our
discontinued operations in the second quarter of 2007 compared to $2.7 million net gain
from the operating results of our discontinued operations in the second quarter of 2006.

23

---

| | Net
Earnings
| | ------------

Our net earnings in the second
quarter of 2007 were $14.2 million, a decrease of $1.0 million, compared to $15.2 million
in the second quarter of 2006. The decrease was primarily due to the decrease in operating
earnings from continuing operations and the decrease in the gain from discontinued
operations, partially offset by the decrease in interest expense in the second quarter of
2007 for the reasons described above.

| | Earnings
per Share
| | ------------------

Basic and diluted earnings per share
from continuing operations were $0.19 for both in the second quarter of 2007 compared to
$0.18 and $0.17, respectively in the second quarter of 2006. Basic and diluted earnings
per share from discontinued operations were $0.03 and $0.02, respectively, in the second
quarter of 2007 compared to $0.04 for both in the second quarter of 2006. Basic and
diluted net earnings per share were $0.22 and $0.21, respectively, for both the second
quarters of 2007 and 2006.

# Two Quarters Ended July
1, 2007 compared to the Two Quarters Ended June 25, 2006

| | Consolidated
Continuing Operations
| | ----------------------------------

Our consolidated revenue in the two
quarters of 2007 was $290.7 million, a decrease of $9.9 million, or 3.3%, compared to
$300.6 million in the two quarters of 2006. Our consolidated operating costs and expenses
in the two quarters of 2007 were $159.1 million, a decrease of $3.0 million, or 1.8%,
compared to $162.1 million in the two quarters of 2006. Our consolidated selling and
administrative expenses in the two quarters of 2007 were $92.2 million, a decrease of $2.9
million, or 2.3%, compared to $95.1 million in the two quarters of 2006.

The following table presents our
total revenue by segment, total operating costs and expenses, selling and administrative
expenses and total operating earnings as a percent of total revenue for the two quarters
of 2007 and 2006:

|                                               | 2007 | Percent of
Total
Revenue | 2006 | Percent of
Total
Revenue
|---------------------------------------------- | ---- | ------------------------ | ---- | ------------------------
|
|Continuing Operations:                         |      |                          |      |                         
|Revenue:                                       |      |                         
|Publishing                                     |      |                          | $    | 134.0                   
|Broadcasting                                   |      |                          |      | 107.8                   
|Printing services                              |      |                          |      | 33.4                    
|Other                                          |      |                          |      | 15.5                    
|                                               |      |                          |      |                         
|Total revenue                                  |      |                          |      | 290.7                   
|Total operating costs and expenses             |      |                          |      | 159.1                   
|Selling and administrative expenses            |      |                          |      | 92.2                    
|                                               |      |                          |      |                         
|Total operating costs and expenses and selling |      |                         
|and administrative expenses                    |      |                          |      | 251.3                   
|                                               |      |                          |      |                         
|Total operating earnings                       |      |                          | $    | 39.4                    
|                                               |      |                          |      |                         

The decrease in total revenue was due
to a decrease in retail and classified ROP (run-of-press) advertising at our publishing
business, a decrease in postage amounts billed to customers and a decrease in mailing
services at our direct marketing services business, a decrease in Olympic advertising
revenue at our NBC television affiliates and a decrease in national advertising at our
television stations. These revenue decreases were partially offset by a revenue reduction
in the two quarters of 2006 related to a litigation settlement, an increase in local
advertising revenue at our television stations, an increase in interactive advertising
revenue at our daily newspaper and television and radio stations, commercial printing and
delivery revenue at our daily newspaper, local advertising revenue at our radio stations
and an increase in revenue from the printing of publications and manuals at our printing
services business.

The decrease in total operating costs
and expenses was due to a decrease in postage and freight expense at our direct marketing
services business, a decrease in paper costs at our publishing businesses and a decrease
in production costs at our community newspapers and shoppers due to the consolidation of
our Wisconsin printing plants. These cost decreases were partially offset by an increase
in news and syndicated programming expenses at our television stations.

The decrease in selling and
administrative expenses is primarily due to litigation-related expenses associated with a
litigation settlement at the daily newspaper in the second quarter of 2006, a gain on the
sale of the Hartland, Wisconsin printing facility and payroll cost reductions at our
community newspapers and shoppers and a favorable adjustment from the termination of a
sublease agreement at our printing services business. These decreases were partially
offset by an increase in payroll and payroll-related expenses at our radio and television
stations and an increase in promotion expenses at our radio stations.

24

---

Our consolidated operating earnings
in the two quarters of 2007 were $39.4 million, a decrease of $4.0 million, or 9.2%,
compared to $43.4 million in the two quarters of 2006. The following table presents our
operating earnings by segment for the two quarters of 2007 and 2006:

|                         | 2007 | Percent of
Total
Operating
Earnings | 2006 | Percent of
Total
Operating
Earnings
|------------------------ | ---- | ----------------------------------- | ---- | -----------------------------------
|
|Publishing               |      |                                     | $    | 15.2                               
|Broadcasting             |      |                                     |      | 21.3                               
|Printing services        |      |                                     |      | 2.1                                
|Other                    |      |                                     |      | 0.8                                
|                         |      |                                     |      |                                    
|Total operating earnings |      |                                     | $    | 39.4                               
|                         |      |                                     |      |                                    

The decrease in total operating
earnings was primarily due to the operating earnings impact from the decrease in
television advertising revenue and the increase in programming expenses associated with
additional newscasts at our television stations, a decrease in retail and classified ROP
advertising revenue at our publishing businesses and an increase in payroll and
payroll-related expenses at our radio stations. Partially offsetting these operating
earnings decreases were a revenue reduction for a litigation settlement and
litigation-related expenses in the two quarters of 2006, the decrease in corporate
expenses and production efficiencies at our printing services business.

Our consolidated EBITDA in the two
quarters of 2007 was $54.1 million, a decrease of $3.2 million, or 5.6%, compared to $57.3
million in the two quarters of 2006. We define EBITDA as net earnings excluding gain from
discontinued operations, net, provision for income taxes, total other expense (which is
entirely comprised of interest income and expense), depreciation and amortization. Our
management uses 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 accounting principles generally accepted in the United States. 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.

The following table presents a
reconciliation of our consolidated net earnings to consolidated EBITDA for the two
quarters of 2007 and 2006:

|                                       | 2007 | 2006
|-------------------------------------- | ---- | ----
|
|Net earnings                           |      |     
|Gain from discontinued operations, net |      |     
|Provision for income taxes             |      |     
|Total other expense, net               |      |     
|Depreciation                           |      |     
|Amortization                           |      |     
|                                       |      |     
|EBITDA                                 |      |     
|                                       |      |     

The decrease in EBITDA is consistent
with decreases in operating earnings in our broadcasting segment, partially offset by
increases in operating earnings at our printing services, publishing and other segments
for the reasons described above.

| | Publishing
| | ----------

Revenue from publishing in the two
quarters of 2007 was $134.0 million, a decrease of $3.4 million, or 2.4%, compared to
$137.4 million in the two quarters of 2006. Operating earnings from publishing were $15.2
million, an increase of $0.8 million, or 5.8%, compared to $14.4 million in the two
quarters of 2006.

25

---

The following table presents our
publishing revenue by category and operating earnings for the two quarters of 2007 and
2006:

|                            | 2007 | 2006
|--------------------------- | ---- | ----
|
|
|Advertising revenue:        |      |     
|Retail                      |      |     
|Classified                  |      |     
|National                    |      |     
|Direct Marketing            |      |     
|Other                       |      |     
|                            |      |     
|Total advertising revenue.. |      |     
|Circulation revenue         |      |     
|Other revenue               |      |     
|                            |      |     
|Total revenue               |      |     
|                            |      |     
|Operating earnings          |      |     
|                            |      |     

Advertising revenue in the two
quarters of 2007 accounted for 74.1% of total publishing revenue compared to 75.2% in the
two quarters of 2006.

Retail advertising revenue in the two
quarters of 2007 was $58.4 million, an increase of $0.8 million, or 1.5%, compared to
$57.6 million in the two quarters of 2006. The $3.6 million increase at our daily
newspaper was primarily due to the $5.1 million revenue reduction from a litigation
settlement in the second quarter of 2006 and an increase in Interactive and specialty
magazine advertising, partially offset by a decrease in ROP advertising, primarily in the
other, health services, department stores, finance/insurance and business services
categories. The $2.8 million decrease at our community newspapers and shoppers was due
primarily to revenue from a mid-week shared mail product previously reported within the
division that is now reported under the daily newspaper and a decrease in automotive
advertising.

Classified advertising revenue in the
two quarters of 2007 was $34.2 million, a decrease of $3.1 million, or 8.2%, compared to
$37.3 million in the two quarters of 2006. Decreases in ROP classified advertising at our
daily newspaper were partially offset by an increase in Interactive and Marketplace
classified advertising. The $2.1 million decrease in classified advertising revenue at our
daily newspaper was primarily due to decreases in real estate advertising of $1.1 million,
employment advertising of $0.7 million and automotive advertising of $0.6 million,
partially offset by an increase in other advertising of $0.3 million. Employment
advertising accounted for 43.9% of classified advertising revenue at the daily newspaper
in the two quarters of 2007. The $1.0 million decrease in classified advertising revenue
at our community newspapers and shoppers is primarily due to revenue from a mid-week
shared mail product previously reported within the division that is now reported under the
daily newspaper.

The total decrease in retail and
classified automotive advertising at our daily newspaper in the two quarters of 2007 was
$0.4 million, or 4.6%, compared to the two quarters of 2006.

Total retail and classified
Interactive revenue at our daily newspaper was $6.4 million in the two quarters of 2007,
an increase of $2.1 million, or 47.1%, compared to $4.3 million in the two quarters of
2006.

National advertising revenue in the
two quarters of 2007 was $4.3 million, a decrease of $0.8 million, or 16.0%, compared to
$5.1 million in the two quarters of 2006.

26

---

The following table presents our
daily newspapers core newspaper advertising linage by category and core newspaper
and shared mail preprint pieces for the two quarters of 2007 and 2006:

|                               | 2007 | 2006 | Percent
Change
|------------------------------ | ---- | ---- | --------------
|Advertising linage (inches):   |      |      |               
|Full run                       |      |     
|Retail                         |      |      |               
|Classified                     |      |      |               
|National                       |      |      |               
|                               |      |      |               
|Total full run                 |      |      |               
|Part run                       |      |      |               
|                               |      |      |               
|Total advertising linage       |      |      |               
|                               |      |      |               
|Preprint pieces (in thousands) |      |      |               
|                               |      |      |               

Total advertising linage in the two
quarters of 2007 decreased 16.3% compared to the two quarters of 2006. Full run
advertising linage in 2006 decreased 12.1% compared to the two quarters of 2006 primarily
due to a reduction in classified and retail advertising linage. The decrease in classified
advertising linage is primarily due to a decrease in the real estate, employment and
automotive categories and the decrease in retail advertising linage is primarily due to
decreases in the other, health services, department stores, finance/insurance and business
services categories. National advertising linage decreased primarily due to decreases in
the other and movies categories. Part run advertising linage decreased 67.9% in the two
quarters of 2007 due to the elimination of daily zoned editions. Preprint advertising
pieces decreased 2.1% in the two quarters of 2007 primarily due to a decrease in national
preprints.

The following table presents total
pages and revenue per page for our community newspapers and shoppers and specialty
products for the two quarters of 2007 and 2006:

|                                | 2007 | 2006 | Percent
Change
|------------------------------- | ---- | ---- | --------------
|Total pages:                    |      |      |               
|Community newspapers            |      |      |               
|Shoppers and specialty products |      |      |               
|                                |      |      |               
|Total pages                     |      |      |               
|                                |      |      |               
|Revenue per page                |      |      | $             
|                                |      |      |               

Total pages for our community
newspapers and shoppers business in the two quarters of 2007 decreased 26.3% compared to
the two quarters of 2006. The decrease was primarily due to reducing 18 weekly community
newspapers to eight and a mid-week shared mail product previously reported as a community
shopper and now reported under the daily newspaper. Revenue per page increased 12.8%
primarily due to the decrease in total full pages of advertising.

Direct marketing revenue, consisting
of revenue from direct mail efforts for our daily newspaper, was $2.2 million in the two
quarters of 2007, a decrease of $0.7 million, or 24.5%, compared to $2.9 million in the
two quarters of 2006. The decrease was due to The Bon-Ton Stores, Inc.s
consolidation of all Boston Store mail programs and a decrease in postage revenue billed
to our solo mail customers.

Other advertising revenue, consisting
of revenue from company-sponsored event advertising at our community newspapers and
shoppers, was $0.2 million in the two quarters of 2007, a decrease of $0.2 million, or
43.5%, compared to $0.4 million in the two quarters of 2006.

Circulation revenue in the two
quarters of 2007 accounted for 19.5% of total publishing revenue compared to 19.6% in the
two quarters of 2006. Circulation revenue of $26.1 million in the two quarters of 2007
decreased $0.8 million, or 2.9%, compared to $26.9 million in the two quarters of 2006
primarily due to decreases in daily and Sunday average net paid circulation and a decrease
in the Sunday average rate per copy at our daily newspaper and a change to a free
distribution model of the community newspapers in the Milwaukee area at our community
newspapers and shoppers.

Other revenue, which consists of
revenue from commercial printing at the printing plants for our community newspapers and
shoppers and promotional, distribution and commercial printing revenue at our daily
newspaper, accounted for 6.4% of total publishing revenue in the two quarters of 2007
compared to 5.2% in the two quarters of 2006. Other revenue in the two quarters of 2007
was $8.6 million, an increase of $1.4 million, or 18.5%, compared to $7.2 million in the
two quarters of 2006. The increase was primarily due to an increase in commercial printing
due to an agreement signed by our daily newspaper in late 2006 to print the USA
Today in northern Illinois and eastern Wisconsin and an increase in commercial
delivery revenue at the daily newspaper.

27

---

Publishing operating earnings in the
two quarters of 2007 were $15.2 million, an increase of $0.8 million, or 5.8%, compared to
$14.4 million in the two quarters of 2006. Operating earnings increased $3.1 million in
the two quarters of 2007 at the daily newspaper primarily due to the impact of the revenue
reduction related to a $5.1 million litigation settlement in the two quarters of 2006, a
$2.7 million decrease in paper costs and a $1.5 million decrease in litigation-related
expenses, partially offset by the impact of the decrease in retail and classified (ROP)
advertising, a $0.8 million pension plan curtailment credit in the two quarters of 2006, a
vacation accrual adjustment and costs associated with reducing the web-width of the
Milwaukee Journal Sentinel from 50 inches to 48 inches. Operating earnings
decreased $2.3 million in the two quarters of 2007 at our community newspapers and
shoppers primarily due to the decrease in revenue, costs associated with a lease
termination, a $1.1 million in insurance proceeds from a business interruption claim from
the impact of Hurricane Katrina and a $0.4 million pension plan curtailment credit, both
in the two quarters of 2006, partially offset by a $0.9 million gain on the sale of the
Hartland, Wisconsin printing facility. Total newsprint and paper costs for our publishing
businesses in the two quarters of 2007 were $13.9 million, a decrease of $2.9 million, or
17.2%, compared to $16.8 million in the two quarters of 2006 primarily due to a 13.6%
decrease in newsprint consumption and a 6.9% decrease in average newsprint pricing per
metric ton. Consumption of metric tonnes of newsprint in the two quarters of 2007
decreased primarily due to decreases in ROP advertising, editorial content, web-width and
average net paid circulation at our daily newspaper.

| | Broadcasting
| | ------------

Revenue from broadcasting in the two
quarters of 2007 was $107.8 million, a decrease of $2.3 million, or 2.1%, compared to
$110.1 million in the two quarters of 2006. Operating earnings from broadcasting in the
two quarters of 2007 were $21.3 million, a decrease of $6.5 million, or 23.2%, compared to
$27.8 million in the two quarters of 2006.

The following table presents our
broadcasting revenue and operating earnings for the two quarters of 2007 and 2006:

|                   | 2007 | 2006 | Percent
|------------------ | ---- | ---- | -------
|
|
|Revenue            |      |      | $      
|                   |      |      |        
|Operating earnings |      |      | $      
|                   |      |      |        

Revenue from our radio stations in
the two quarters of 2007 was $40.2 million, an increase of $0.5 million, or 1.3%, compared
to $39.7 million in the two quarters of 2006. The increase was primarily due to a $0.4
million increase in local advertising revenue primarily from developmental revenue, which
refers to non-transactional revenue that targets non-traditional advertisers, and
Interactive revenue and $0.1 million in national advertising.

Operating earnings from our radio
stations in the two quarters of 2007 were $9.1 million, a decrease of $1.5 million, or
14.2%, compared to $10.6 million in the two quarters of 2006. The decrease in operating
earnings is due to an increase in payroll and payroll-related expenses, sales program
expenses, promotion expenses, a $0.2 million pension plan curtailment credit in the two
quarters of 2006 and a $0.1 million loss on the sale of KOMJ-AM in Omaha, Nebraska.

Revenue from our television stations
in the two quarters of 2007 was $67.6 million, a decrease of $2.8 million, or 4.0%,
compared to $70.4 million in the two quarters of 2006. The decrease was primarily due to a
$3.3 million decrease in Olympic advertising revenue at our NBC affiliates, a $1.0 million
decrease in political and issue advertising revenue and a $0.8 million decrease in
national advertising revenue primarily in the automotive category, partially offset by a
$2.2 million increase in local advertising revenue primarily from developmental and
interactive revenue and a $0.1 million increase in other revenue.

Operating earnings from our
television stations in the two quarters of 2007 were $12.2 million, a decrease of $5.0
million, or 29.1%, compared to $17.2 million in the two quarters of 2006. The decrease in
operating earnings was primarily due to the decrease in revenue, an increase in
programming expenses associated with additional newscasts and syndicated programming
costs, an increase in sales expenses and a $0.3 million pension plan curtailment credit in
the two quarters of 2006.

| | Printing
Services
| | -----------------

Revenue from printing services in the
two quarters of 2007 was $33.4 million, an increase of $0.4 million, or 1.2%, compared to
$33.0 million in the two quarters of 2006. Operating earnings from printing services in
the two quarters of 2007 were $2.1 million, an increase of $1.1 million, or 100.3%,
compared to $1.0 million in the two quarters of 2006.

The increase in printing services
revenue was primarily due to an increase in revenue from the printing of publications and
manuals, partially offset by a $0.7 million decrease in revenue from Dell Computer
Corporation and other computer-related customers. In the second quarter of 2007, we
recorded $3.7 million in revenue from new printing customers.

The increase in printing services
operating earnings was primarily due to the increase in revenue, production efficiencies
gained from new printing equipment, a favorable adjustment from the termination of a
sublease agreement and a change in business mix.

28

---

| | Other
| | -----

Other revenue in the two quarters of
2007 was $15.5 million, a decrease of $4.6 million, or 22.9%, compared to $20.1 million in
the two quarters of 2006. Other operating earnings in the two quarters of 2007 were $0.8
million, an increase of $0.6 million compared to $0.2 million in the two quarters of 2006.

The following table presents our
other revenue and operating earnings for the two quarters of 2007 and 2006:

|                          | 2007 | 2006
|------------------------- | ---- | ----
|
|
|Revenue                   |      |     
|                          |      |     
|Operating earnings (loss) |      |     
|                          |      |     

The decrease in other revenue in the
two quarters of 2007 compared to the two quarters of 2006 was primarily due to a decrease
in postage amounts billed to customers and mailing services at our direct marketing
services business. Included in revenue and operating costs and expenses from our direct
marketing services business is $8.4 million and $11.3 million of postage amounts billed to
customers in the two quarters of 2007 and 2006, respectively.

The increase in other operating
earnings was primarily due to a favorable adjustment of an incentive compensation accrual
at corporate in the two quarters of 2006.

| | Other
Income and Expense and Taxes
| | ----------------------------------

Interest income was insignificant in
the two quarters of 2007 and 2006. Interest expense was $5.0 million in the two quarters
of 2007 compared to $7.5 million in the two quarters of 2006. The decrease is primarily
due to a decrease in debt outstanding, which was reduced with the proceeds from the sale
of Norlight, our former telecommunications subsidiary. Amortization of deferred financing
costs was $0.2 million in the two quarters of 2007 and 2006.

The effective tax rate for continuing
operations was 39.1% in the two quarters of 2007 and 39.9% in the two quarters of 2006.

| | Discontinued
Operation
| | ----------------------

Gain from discontinued operations,
net of income taxes, was $66.5 million in the two quarters of 2007 compared to $5.9
million in the two quarters of 2006. Income tax expense was $42.5 million in the two
quarters of 2007 compared to $4.0 million in the two quarters of 2006.

Revenue from discontinued operations
in the two quarters of 2007 was $38.6 million compared to $86.0 million in the two
quarters of 2006. We recorded a $62.0 million net gain on the sale of Norlight and $1.3
million net gain on the sale of the Ohio publishing and printing operations in the two
quarters of 2007. The net gain from the operating results from discontinued operations was
$3.2 million in the two quarters of 2007 compared to $5.9 million in the two quarters of
2006.

| | Net
Earnings
| | ------------

Our net earnings in the two quarters
of 2007 were $87.5 million, an increase of $60.0 million, compared to $27.5 million in the
two quarters of 2006. The increase was primarily due to the gain from discontinued
operations of Norlight and the decrease in interest expense in the two quarters of 2007
for the reasons described above partially offset by the decrease in operating earnings
from continuing operations.

| | Earnings
per Share
| | ------------------

Basic and diluted earnings per share
from continuing operations were $0.31 and $0.30, respectively, in the two quarters of
2007 compared to $0.30 for both in the two quarters of 2006. Basic and diluted earnings
per share from discontinued operations were $1.03 and $0.97, respectively, in the two
quarters of 2007 compared to $0.09 and $0.08, respectively, in the two quarters of 2006.
Basic and diluted net earnings per share were $1.34 and $1.27, respectively, for the two
quarters of 2007 compared to $0.39 and $0.38, respectively, in the two quarters of 2007.

# Liquidity and Capital
Resources

We have a $475 million unsecured
revolving credit facility that expires on June 2, 2011. The interest rate on borrowings is
either LIBOR plus a margin that ranges from 37.5 basis points to 87.5 basis points,
depending on our leverage, or the base rate, which equals the higher of the prime rate set
by U.S. Bank, N.A. or the Federal Funds Rate plus 100 basis points. As of July 1, 2007, we
had borrowings of $118.4 million under the facility at a weighted average rate of 5.79%.
Fees in connection with the facility of $1.7 million are being amortized over the term of
the facility using the straight-line method which approximates the effective-interest
method. The material covenants of this agreement include the following:

29

---

| | A
consolidated funded debt ratio as determined for the four fiscal quarter period preceding
the date of determination.
|- | ----------------------------------------------------------------------------------------------------------------------

| | An
interest coverage ratio as determined for the four fiscal quarter period preceding the
date of determination.
|- | ----------------------------------------------------------------------------------------------------------------

As of July 1, 2007, we are in
compliance with both of these material covenants.

| | Dividends
| | ---------

On February 13, 2007, our board of
directors increased the quarterly dividend on our class A and class B shares from $0.065
to $0.075 per share.

| | Divestitures
| | ------------

On February 26, Q-Comm acquired 100%
of the stock of Norlight, our former telecommunications subsidiary. Proceeds, net of
transaction expenses, were $175.9 million. The sale of Norlight improves our financial
flexibility and allows us to focus on our diversified media businesses. To date, we have
used the proceeds to reduce our obligations under our unsecured revolving credit facility.
We expect to pay quarterly estimated income taxes on the gain related to the sale
throughout 2007.

On March 27, 2007, Journal Broadcast
Group, our broadcasting subsidiary, completed the sale of KOMJ-AM in Omaha, Nebraska to
Cochise Broadcasting LLC (Cochise) and recorded a $0.1 million loss on the sale. The
divestiture of KOMJ-AM is part of Journal Broadcast Groups compliance with the
FCCs cross-ownership rules as a result of our December 2005 agreement to acquire
KMTV-TV, Omaha, Nebraska from Emmis Communications Corporation (Emmis). Concurrently with
the sale of KOMJ-AM, we completed the purchase of the KMTV-TV FCC license and remitted to
Emmis a final purchase payment of $10.0 million.

On June 26, 2007, Journal Community
Publishing Group, our community newspaper and shopper subsidiary, completed the sale of
the Central Ohio Advertiser Network, its Ohio publishing and printing operations, to
Gannett Co., Inc. Proceeds, net of transaction expenses, were $8.9 million. To date, we
have used the proceeds to reduce our obligations under our unsecured revolving credit
facility. The divestiture of the Ohio publishing and printing operations will allow us to
concentrate on growing our community newspaper and shopper business in our Wisconsin and
Florida markets.

| | Share
Repurchase Programs
| | -------------------------

In April 2006, our Board of Directors
authorized the repurchase of up to five million shares of our class A common stock over
the following 18 months. Under the program, share purchases may be made at our discretion,
from time to time, in the open market and/or in private transactions. Our share purchases
will depend on market conditions, share price, trading volume and other factors. In the
two quarters of 2007, we repurchased 2.7 million of our class A shares pursuant to the
April 2006 authorization.

In May 2007, our Board of Directors
authorized the repurchase of up to five million additional shares of our class A common
stock over the following 18 months. Between May 2007 and July 1, 2007, we have not
repurchased any of our class A shares pursuant to the May 2007 authorization.

# Cash Flow

Cash balances were $6.4 million at
July 1, 2007. We believe our expected cash flows from operations and borrowings available
under our credit facility will adequately meet our needs for the foreseeable future.

Cash provided by operating activities
was $2.2 million in the two quarters of 2007 compared to $48.3 million in the two quarters
of 2006. The decrease was primarily due to $27.0 million in estimated tax payments on the
gain on the sale of Norlight, a $10.4 million deposit with the Wisconsin Department of
Revenue for an income tax assessment in the two quarters of 2007 and a decrease in cash
provided by the operations of Norlight due to its sale in the two quarters of 2007
compared to the two quarters of 2006.

Cash provided by investing activities
was $158.3 million in the two quarters of 2007 compared to cash used by investing
activities of $17.4 million in the two quarters of 2006. Proceeds from the sale of
Norlight, KOMJ-AM and the Ohio publishing and printing operations were $185.3 million in
the two quarters of 2007. We remitted the final purchase payment of $10.0 million to Emmis
to acquire the FCC license of KMTV-TV and our daily newspaper acquired two magazines for
$1.4 million in the two quarters of 2007. Capital expenditures were $16.9 million in the
two quarters of 2007 compared to $9.7 million in the two quarters of 2006. Our capital
expenditures at our daily newspaper are primarily targeted towards equipment and building
improvements, including the web-width reduction project and consolidating certain
distribution centers and our capital expenditures in our broadcasting segment are targeted
towards technology upgrades, including investments in digital radio and tapeless news for
our television stations, and a new building for our television station in Las Vegas,
Nevada. We believe these expenditures will help us to optimize our results. The cash used
for investing activities of discontinued operations in the two quarters of 2007 includes
capital expenditures of $0.7 million primarily for Norlight compared to $7.7 million in
the two quarters of 2006.

30

---

Cash used for financing activities
was $162.0 million in the two quarters of 2007 compared to $31.2 million in the two
quarters of 2006. Borrowings under our credit facility in the two quarters of 2007 were
$175.9 million and we made payments of $292.5 million, reflecting the immediate use of
proceeds received from the sale of Norlight and the Ohio publishing and printing
operations, compared to borrowings of $115.9 million and payments of $115.8 million in the
two quarters of 2006. In the two quarters of 2007 and 2006, we paid $35.1 million and
$22.1 million, respectively, to purchase our class A common stock. We paid cash dividends
of $10.6 million and $9.8 million in the two quarters of 2007 and 2006, respectively.

# New Accounting Standard

On February 15, 2007, the FASB issued
Statement No. 159, The Fair Value Option for Financial Assets and Financial
Liabilities  Including an Amendment of FASB Statement No. 115.This
standard permits an entity to choose to measure many financial instruments and certain
other items at fair value that were previously not allowed. Statement No. 159 is effective
for fiscal years beginning after November 15, 2007.  Early adoption is permitted as
of the beginning of the previous fiscal year provided that the entity makes that choice in
the first 120 days of that fiscal year and also elects to apply the provisions of FASB
Statement No. 157, Fair Value Measurements. We will adopt Statement No. 159 in
the first quarter of 2008. We do not believe the effect of adopting Statement No. 159 will
have a material impact on our financial statements.

# Critical Accounting
Policies

There are no material changes to the disclosures
regarding critical accounting policies made in our Annual Report on Form 10-K for the year
ended December 31, 2006.

# ITEM 3.    QUANTITATIVE AND
QUALITATIVE DISCLOSURE OF MARKET RISK

There are no material changes to the
disclosures regarding interest rate risk and foreign currency exchange risk made in our
Annual Report on Form 10-K for the year ended December 31, 2006.

# ITEM 4.    CONTROLS AND
PROCEDURES

We carried out an evaluation, under
the supervision and with the participation of our Disclosure Committee, including our
Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the
design and operation of our disclosure controls and procedures, as defined in Exchange Act
Rules 13a-14(c) and 15d-14(c) as of the end of the period covered by this Quarterly Report
on Form 10-Q. Based on that evaluation, the Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures are effective to ensure that
information required to be disclosed in our Exchange Act reports is recorded, processed,
summarized and reported within the time periods specified in the SECs rules and
forms, and that such information is accumulated and communicated to them to allow timely
decisions regarding required disclosure.

There has been no change in our
internal control over financial reporting that occurred during our last fiscal quarter
that has materially affected, or is reasonably likely to materially affect, our internal
control over financial reporting.

# PART II. OTHER
INFORMATION

# ITEM 1.    LEGAL PROCEEDINGS

Russ Darrow Group, Inc. and Kings
Way Homes Litigation.On December 27, 2006, a lawsuit was filed by Russ Darrow Group,
Inc. against Journal Sentinel, Inc., a subsidiary of Journal Communications, Inc., in
Milwaukee County Circuit Court.  The plaintiff chose to opt-out of the class action
settlement in Shorewest v. Journal Sentinel Inc. (Shorewest) and filed this
separate lawsuit against Journal Sentinel Inc. repeating in large part the allegations
related to overstated circulation in the Shorewest class action case.  The claims
include: violation of the Wisconsin Deceptive Trade Practices Act; breach of contract and
implied duty of good faith and fair dealing; strict misrepresentation; intentional
misrepresentation; negligent misrepresentation; negligence; unjust enrichment; equitable
recession; and punitive damages.  A hearing on the Motion to Dismiss the
plaintiffs tort claims was held on May 7, 2007. The judge declined to dismiss any of
the claims.  On June 14, 2007, Journal Sentinel filed a petition for leave to appeal
with the Wisconsin Court of Appeals based on the following three issues: (i)  
the plaintiffs tort claims are barred by the economic loss doctrine; (ii) the
plaintiff is barred from bringing its Wisconsin deceptive trade practices claim by its
on-going contractual relationship with Journal Sentinel Inc.; and (iii) the
plaintiffs unjust enrichment claim is precluded by its contract claim. The plaintiff
filed its opposition brief on June 29, 2007. We believe the lawsuit is without merit and
intend to defend the action vigorously.

31

---

On June 21, 2007, another opt-out
from the Shorewest class action litigation, Kings Way Homes, filed
suit.  The claims in the case mirror those in the Darrow case, except for an
additional set of claims alleging in effect that Journal Sentinels refusal to enter
into a new commercial advertising contract without a waiver of Shorewest-related
claims is anti-competitive.  We do not believe that these additional claims are
meritorious and intend to defend the action vigorously.

Our insurance carrier has accepted
these claims under a reservation of rights and the amount that will be paid by the
carrier, if any, is uncertain at this point in time.

# ITEM 1A.    RISK FACTORS

There are no material changes to the
disclosures regarding risk factors made in our Annual Report on Form 10-K for the year
ended December 31, 2006.

# ITEM 2.    UNREGISTERED
SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

The following table provides
information about our repurchases of our class A common stock in the second quarter ended
July 1, 2007:

# Issuer Purchases of
Equity Securities

|                          | (a)                              | (b)                          | (c)                                                                                  | (d)                                                                           
|------------------------- | -------------------------------- | ---------------------------- | ------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------
|Period                    | Total Number of
Shares Purchased | Average Price
Paid Per Share | Total Number of
Shares Purchased as
Part of Publicly
Announced Plans
Or Programs (1) | Maximum Number
Of Shares that May
Yet Be Purchased
Under the Plans
or Programs
|April 2 to April 29, 2007 | 533,600                          | $13.02                       | 3,949,100                                                                            | 1,050,900                                                                     
|April 30 to May 27, 2007  | --                               | $      --                    | 3,949,100                                                                            | 6,050,900                                                                     
|May 28 to July 1, 2007    | --                               | $      --                    | 3,949,100                                                                            | 6,050,900                                                                     

| | (1) | All
shares of class A common stock purchased by us were purchased pursuant to a
               repurchase program publicly announced on April 25, 2006 and commenced on
June                15, 2006, pursuant to which our board of directors authorized the
repurchase of                up to 5,000,000 class A shares. These shares will remain
authorized but                unissued. The repurchase program will expire in October
2007.
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (2) | On
May 3, 2007, our Board of Directors authorized and we publicly announced the
               repurchase of up to 5,000,000 additional shares of our class A common
stock over                the subsequent 18 months. This repurchase program will expire
in November 2008.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ITEM 3.    DEFAULTS UPON
SENIOR SECURITIES

None.

32

---

# ITEM 4.    SUBMISSION OF MATTERS
TO A VOTE OF SECURITY HOLDERS

On May 3, 2007, we held our annual
meeting of shareholders for the purpose of voting on the following items:

| | The
election of three Class I directors: Don H. Davis, Jr., David G. Meissner and Ellen F.
Siminoff, and
|- | --------------------------------------------------------------------------------------------------------

| | The
approval of the Journal Communications, Inc. 2007 Omnibus Incentive Plan.
|- | -----------------------------------------------------------------------------

Steven J. Smith and Douglas G. Kiel,
as the designated proxies, voted the shares of Journal Communications, Inc. common stock
as they were instructed by the shareholders of Journal Communications, Inc. Approximately
75% of all shares of common stock eligible to vote were represented at the meeting in
person or by proxy. The votes were:

|                 
|-----------------
|Don H. Davis, Jr.
|Votes For        
|Votes Withheld   
|                 
|Total Votes      
|                 

|                     
|---------------------
|Term Expiring in 2008
|                     
|                     
|                     
|                     

The proposal to approve Journal
Communications, Inc. 2007 Omnibus Incentive Plan (the 2007 Plan) passed with 137,035,599
shares voting FOR the 2007 Plan, 18,308,324 shares voting AGAINST the 2007 Plan and
7,718,526 shares ABSTAINING.

# ITEM 5.    OTHER INFORMATION

None.

# ITEM 6.    EXHIBITS

(a) Exhibits

|Exhibit No. | Description
|----------- | -----------

|(31.1) | Certification
by Steven J. Smith, Chairman and Chief Executive Officer of                Journal
Communications, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act                of
2002.
|------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(31.2) | Certification
by Paul M. Bonaiuto, Executive Vice President and Chief Financial                Officer
of Journal Communications, Inc., pursuant to Section 302 of the
               Sarbanes-Oxley Act of 2002.
|------ | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(32) | Certification
of Steven J. Smith, Chairman and Chief Executive Officer and Paul                M.
Bonaiuto, Executive Vice President and Chief Financial Officer of Journal
               Communications, Inc., pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to                Section 906 of the Sarbanes-Oxley Act of 2002.
|---- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

33

---

SIGNATURES

Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.

|                     | JOURNAL COMMUNICATIONS, INC.                                          
|-------------------- | ----------------------------------------------------------------------
|                     | Registrant                                                            
|Date: August 2, 2007 | /s/ Steven J. Smith                                                   
|                     | Steven J. Smith, Chairman and Chief Executive Officer                 
|Date: August 2, 2007 | /s/ Paul M. Bonaiuto                                                  
|                     | Paul M. Bonaiuto, Executive Vice President and Chief Financial Officer

34