# 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: June 28, 2009

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 has submitted electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted pursuant to Rule 405 of
Regulation S-T during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such files) (Registrant is not yet required to
provide financial disclosure in an Interactive Data File format).

# Yes [   ] No [   ]

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

# Large Accelerated Filer 
   Accelerated Filer X       Non-accelerated Filer              Smaller reporting company

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 30, 2009 (excluding 8,676,705
shares of class B common stock held by our subsidiary, The Journal Company):

|Class                | Outstanding at July 30, 2009
|-------------------- | ----------------------------
|Class A Common Stock | 40,905,110                  
|Class B Common Stock | 10,600,653                  
|Class C Common Stock | 3,264,000                   

---

# JOURNAL
COMMUNICATIONS, INC.

# INDEX

|         |                       |                                                                      
|-------- | --------------------- | ---------------------------------------------------------------------
|         |                       |                                                                      
|Part I.  | Financial Information |                                                                      
|         | Item 1.               | Financial Statements                                                 
|         |                       | Unaudited Consolidated Condensed Balance Sheets as of                
|         |                       | June 28, 2009 and December 28, 2008                                  
|         |                       | Unaudited Consolidated Condensed Statements of Operations            
|         |                       | for the Two Quarters Ended June 28, 2009 and June 29, 2008           
|         |                       | Unaudited Consolidated Condensed Statement of                        
|         |                       | Shareholders Equity for the Two Quarters Ended June 28, 2009        
|         |                       | Unaudited Consolidated Condensed Statements of                       
|         |                       | Cash Flows for the Two Quarters Ended June 28, 2009 and June 29, 2008
|         |                       | Notes to Unaudited Consolidated Condensed                            
|         |                       | Financial Statements as of June 28, 2009                             
|         | 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                                                             

---

# PART I. FINANCIAL
INFORMATION

# ITEM 1. FINANCIAL
STATEMENTS

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

|                                                                           | June 28, 2009 | December 28, 2008
|-------------------------------------------------------------------------- | ------------- | -----------------
|ASSETS                                                                     |               |                  
|Current assets:                                                            |               |                  
|Cash and cash equivalents                                                  |               |                  
|Receivables, less allowance for doubtful accounts of $5,742 and $4,734     |               |                  
|Inventories, net                                                           |               |                  
|Prepaid expenses and other current assets                                  |               |                  
|Syndicated programs                                                        |               |                  
|Deferred income taxes                                                      |               |                  
|                                                                           |               |                  
|TOTAL CURRENT ASSETS                                                       |               |                  
|Property and equipment, at cost, less accumulated depreciation             |               |                  
|of $245,737 and $233,380                                                   |               |                  
|Goodwill                                                                   |               |                  
|Broadcast licenses                                                         |               |                  
|Other intangible assets, net                                               |               |                  
|Deferred income taxes                                                      |               |                  
|Syndicated programs                                                        |               |                  
|Other assets                                                               |               |                  
|                                                                           |               |                  
|TOTAL ASSETS                                                               |               |                  
|                                                                           |               |                  
|LIABILITIES AND SHAREHOLDERS EQUITY                                       |               |                  
|Current liabilities:                                                       |               |                  
|Accounts payable                                                           |               |                  
|Accrued compensation                                                       |               |                  
|Accrued employee benefits                                                  |               |                  
|Deferred revenue                                                           |               |                  
|Accrued income taxes                                                       |               |                  
|Syndicated programs                                                        |               |                  
|Other current liabilities                                                  |               |                  
|Current portion of long-term liabilities                                   |               |                  
|                                                                           |               |                  
|TOTAL CURRENT LIABILITIES                                                  |               |                  
|Accrued employee benefits                                                  |               |                  
|Syndicated programs                                                        |               |                  
|Long-term notes payable to banks                                           |               |                  
|Other long-term liabilities                                                |               |                  
|Shareholders equity:                                                      |               |                  
|Preferred stock, $0.01 par - authorized 10,000,000 shares; no shares       |               |                  
|outstanding at June 28, 2009 and December 28, 2008                         |               |                  
|Common stock, $0.01 par:                                                   |               |                  
|Class C - authorized 10,000,000 shares; issued and outstanding:            |               |                  
|3,264,000 shares at June 28, 2009 and December 28, 2008                    |               |                  
|Class B - authorized 120,000,000 shares; issued and outstanding (excluding |               |                  
|treasury stock): 10,383,434 shares at June 28, 2009 and 9,938,816          |               |                  
|shares at December 28, 2008                                                |               |                  
|Class A - authorized 170,000,000 shares; issued and outstanding:           |               |                  
|40,871,125 shares at June 28, 2009 and 40,553,107 shares at                |               |                  
|December 28, 2008                                                          |               |                  
|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                                 |               |                  
|                                                                           |               |                  

See accompanying notes
to unaudited consolidated condensed financial statements.

2

---

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

|                                               | Second Quarter Ended | Two Quarters Ended
|---------------------------------------------- | -------------------- | ------------------
|
|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            |                      |                   
|Broadcast license impairment                   |                      |                   
|                                               |                      |                   
|Total operating costs and expenses and selling |                      |                   
|and administrative expenses                    |                      |                   
|                                               |                      |                   
|Operating earnings (loss)                      |                      |                   
|Other income and (expense):                    |                      |                   
|Interest income                                |                      |                   
|Interest expense                               |                      |                   
|                                               |                      |                   
|Total other income and (expense)               |                      |                   
|                                               |                      |                   
|Earnings (loss) from continuing operations     |                      |                   
|before income taxes                            |                      |                   
|Provision (benefit) for income taxes           |                      |                   
|                                               |                      |                   
|Earnings (loss) from continuing operations     |                      |                   
|Gain from discontinued operations, net of      |                      |                   
|$0 applicable income tax expense               |                      |                   
|                                               |                      |                   
|Net earnings (loss)                            |                      |                   
|                                               |                      |                   
|Earnings (loss) per share:                     |                      |                   
|Basic - Class A and B common stock:            |                      |                   
|Continuing operations                          |                      |                   
|Discontinued operations                        |                      |                   
|                                               |                      |                   
|Net earnings (loss)                            |                      |                   
|                                               |                      |                   
|Diluted - Class A and B common stock:          |                      |                   
|Continuing operations                          |                      |                   
|Discontinued operations                        |                      |                   
|                                               |                      |                   
|Net earnings (loss)                            |                      |                   
|                                               |                      |                   
|Basic and diluted - Class C common stock:      |                      |                   
|Continuing operations                          |                      |                   
|Discontinued operations                        |                      |                   
|                                               |                      |                   
|Net earnings                                   |                      |                   
|                                               |                      |                   

See accompanying notes
to unaudited consolidated condensed financial statements.

3

---

JOURNAL COMMUNICATIONS,
INC.                           Unaudited Consolidated Statements of Shareholders' Equity
    Two Quarters Ended June 28, 2009       (in thousands, except per share amounts)

|                                                       | Preferred | Common Stock | Additional | Accumulated
Other
Comprehensive | Retained | Treasury
Stock, |   
|------------------------------------------------------ | --------- | ------------ | ---------- | ------------------------------- | -------- | --------------- | --
|
|Balance at December 28, 2008                           |           |              | $          | --                              |          | $               | 33
|Net earnings                                           |           |              |            |                                 |          |                 |   
|Change in pension and postretirement                   |           |             
|(net of deferred tax expense of $962)                  |           |              |            |                                 |          |                 |   
|Dividends declared:                                    |           |             
|Class C ($0.142 per share)                             |           |              |            |                                 |          |                 |   
|Class B ($0.02 per share)                              |           |              |            |                                 |          |                 |   
|Class A ($0.02 per share)                              |           |              |            |                                 |          |                 |   
|Issuance of shares:                                    |           |             
|Conversion of class B to class A                       |           |              |            |                                 |          |                 |   
|Stock grants                                           |           |              |            |                                 |          |                 |   
|Employee stock purchase plan                           |           |              |            |                                 |          |                 |   
|Shares withheld from employees for tax     withholding |           |              |            |                                 |          |                 |   
|Stock-based compensation                               |           |              |            |                                 |          |                 |   
|                                                       |           |              |            |                                 |          |                 |   
|Balance at March 29, 2009                              |           |              |            | --                              |          |                 | 33
|                                                       |           |              |            |                                 |          |                 |   
|Net earnings                                           |           |              |            |                                 |          |                 |   
|Change in pension and postretirement                   |           |             
|(net of deferred tax benefit of $176)                  |           |              |            |                                 |          |                 |   
|Dividends declared:                                    |           |             
|Class C ($0.142 per share)                             |           |              |            |                                 |          |                 |   
|Issuance of shares:                                    |           |             
|Conversion of class B to class A                       |           |              |            |                                 |          |                 |   
|Stock grants                                           |           |              |            |                                 |          |                 |   
|Stock-based compensation                               |           |              |            |                                 |          |                 |   
|                                                       |           |              |            |                                 |          |                 |   
|Balance at June 28, 2009                               |           |              | $          | --                              |          | $               | 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 (loss)                                               |                   
|Less gain from discontinued operations                            |                   
|                                                                  |                   
|Earnings (loss) from continuing operations                        |                   
|Adjustments for non-cash items:                                   |                   
|Depreciation                                                      |                   
|Amortization                                                      |                   
|Broadcast license impairment                                      |                   
|Provision for doubtful accounts                                   |                   
|Deferred income taxes                                             |                   
|Non-cash stock-based compensation                                 |                   
|Curtailment gains for pension plans                               |                   
|(Gain) loss from disposal of assets                               |                   
|Net changes in operating assets and liabilities, excluding effect |                   
|of sales and acquisitions:                                        |                   
|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                   |                   
|Insurance proceeds and proceeds from sales of assets              |                   
|Acquisition of businesses                                         |                   
|                                                                  |                   
|NET CASH 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 June 28, 2009 and June 29, 2008                                |                   
|                                                                  |                   

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 and pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC) 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 balance sheet at December 28, 2008 has been derived from
the audited financial statements at that date, but does not include all the information
and footnotes required by U.S. generally accepted accounting principles for complete
financial statements. Adjustments related to NorthStar Print Group, Inc. have been
reflected as discontinued operations in our consolidated condensed financial statements
for the two quarters of 2008. The operating results for the second quarter and two
quarters ended June 28, 2009 are not necessarily indicative of the operating results that
may be expected for the fiscal year ending December 27, 2009. 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 28, 2008.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|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
|- | ------------------------

| | Future
Adoptions
| | ----------------

| | In
June 2009, the FASB issued FASB Statement No. 168, The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principles-A Replacement
of FASB Statement No. 162. Under Statement No. 168, the FASB Accounting Standards
Codification (Codification) will become the single source of authoritative U.S. generally
accepted accounting principles (GAAP) recognized by the FASB to be applied by
nongovernmental entities. Rules and interpretive releases of the Securities and Exchange
Commission (SEC) under authority of federal security laws are also sources of
authoritative GAAP for SEC registrants. On the effective date of this Statement, the
Codification will supersede all then-existing non-SEC accounting and reporting standards.
All other non-SEC accounting literature not included in the Codification will become
nonauthoritative. The GAAP hierarchy will be modified to include only two levels of GAAP:
authoritative and nonauthoritative. This Statement is effective for financial statements
issued for interim and annual periods ending after September 15, 2009. We will begin to
use the new Codification when referring to GAAP in our quarterly report on Form 10-Q for
the third quarter and three quarters ended September 27, 2009. We do not believe the
effect of adopting Statement No. 168 will have a material impact on our consolidated
financial statements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
December 2008, the FASB issued FASB Staff Position (FSP) FAS 132(R)-1, Employers
Disclosures about Postretirement Benefit Plan Assets, which amends FASB Statement
No. 132 (Revised 2003), Employers Disclosures about Pensions and Other
Postretirement Benefits, to provide guidance on an employers disclosures
about plan assets of a defined benefit pension or other postretirement plan. This
pronouncement is effective for fiscal years ending after December 15, 2009. Upon initial
application, the provisions of this FSP are not required for earlier periods that are
presented for comparative purposes. Earlier application of the provisions is permitted.
We do not believe the effect of adopting FSP FAS 132(R)-1 will have a material impact on
our consolidated financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Current
Adoptions
| | -----------------

| | In
May 2009, the FASB issued FASB Statement No. 165, Subsequent Events. This
Statement provides general standards of accounting for and disclosure of events that
occur after the balance sheet date but before financial statements are issued or are
available to be issued. Specifically, Statement No. 165 provides:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     The
period after the balance sheet date during which management of a reporting entity should
evaluate events or transactions that may occur for potential recognition or disclosure in
the financial statements;
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     The
circumstance under which an entity should recognize events or transactions occurring
after the balance sheet date in its financial statements; and
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------

| |      The
disclosures that an entity should make about events or transactions that occurred after
the balance sheet date.
| | -------------------------------------------------------------------------------------------------------------------------

6

---

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

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

| | Statement
No. 165 is effective for interim or annual financial periods ending after June 15, 2009,
and shall be applied prospectively. We adopted Statement No. 165 in the second quarter of
2009. The adoption of Statement No. 165 did not have a material impact on our
consolidated financial statements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
April 2009, the FASB issued FSP FAS 107-1 and Accounting Principal Board (APB) 28-1,
Interim Disclosures about Fair Value of Financial Instruments. This FSP
amends FASB Statement No. 107, Disclosures about Fair Value of Financial
Instruments,to require an entity to provide disclosures about fair value of
financial instruments in interim financial information. This FSP also amends APB Opinion
No. 28, Interim Financial Reporting, to require those disclosures in
summarized financial information at interim reporting periods. Under this FSP, a publicly
traded company shall include disclosures about the fair value of its financial
instruments whenever it issues summarized financial information for interim reporting
periods. In addition, an entity shall disclose in the body or in the accompanying notes
of its summarized financial information for interim reporting periods and in its
financial statements for annual reporting periods the fair value of all financial
instruments for which it is practicable to estimate that value, whether recognized or not
recognized in the statement of financial position, as required by Statement No. 107. FSP
107-1 and APB 28-1 are effective for interim periods ending after June 15, 2009, with
early adoption permitted for periods ending after March 15, 2009 only if an entity also
elects to early adopt FSP FAS 157-4 and FSP FAS 115-2 and FAS 124-2. We adopted FSP FAS
107-1 and APB 28-1 in the second quarter of 2009. The adoption of FSP FAS 107-1 and APB
28-1 did not have a material impact on our consolidated financial statements.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased and
Identifying Transactions That Are Not Orderly. This FSP:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     Affirms
that the objective of fair value when the market for an asset is not active is the price
that would be received to sell the asset in an orderly transaction.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     Clarifies
and includes additional factors for determining whether there has been a significant
decrease in market activity for an asset when the market for that asset is not active.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     Eliminates
the proposed presumption that all transactions are distressed (not orderly) unless proven
otherwise. The FSP instead requires an entity to base its conclusion about whether a
transaction was not orderly on the weight of the evidence.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     Includes
an example that provides additional explanation on estimating fair value when the market
activity for an asset has declined significantly.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------

| |     Requires
an entity to disclose a change in valuation technique (and the related inputs) resulting
from the application of the FSP and to quantify its effects, if practicable.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |      Applies
to all fair value measurements when appropriate.
| | --------------------------------------------------------------

| | FSP
FAS 157-4 must be applied prospectively and retrospective application is not permitted.
FSP FAS 157-4 is effective for interim and annual periods ending after June 15, 2009,
with early adoption permitted for periods ending after March 15, 2009. An entity early
adopting FSP FAS 157-4 must also early adopt FSP FAS 115-2, FAS 107-1 and FAS 124-2,
Recognition and Presentation of Other-Than-Temporary Impairments. We adopted
FSP FAS 157-4 in the second quarter of 2009. The adoption of FSP FAS 157-4 did not have a
material impact on our consolidated financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

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

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

| | In
April 2009, the FASB issued FSP FAS 141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies. This
FSP amends the guidance in FASB Statement No. 141 (Revised December 2007), Business
Combinations, to:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     Require
that assets acquired and liabilities assumed in a business combination that arise from
contingencies be recognized at fair value if fair value can be reasonably estimated. If
fair value of such an asset or liability cannot be reasonably estimated, the asset or
liability would generally be recognized in accordance with FASB Statement No. 5, Accounting
for Contingencies, and FASB Interpretation (FIN) No. 14, Reasonable
Estimation of the Amount of a Loss. Further, the FASB decided to remove the
subsequent accounting guidance for assets and liabilities arising from contingencies from
Statement No. 141R, and carry forward without significant revision the guidance in FASB
Statement No. 141, Business Combinations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     Eliminate
the requirement to disclose an estimate of the range of outcomes of recognized
contingencies at the acquisition date. For unrecognized contingencies, the FASB decided
to require that entities include only the disclosures required by Statement No. 5 and
that those disclosures be included in the business combination footnote.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     Require
that contingent consideration arrangements of an acquiree assumed by the acquirer in a
business combination be treated as contingent consideration of the acquirer and should be
initially and subsequently measured at fair value in accordance with Statement No. 141R.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | This
FSP is effective for assets or liabilities arising from contingencies in business
combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008. We adopted FSP FAS
141(R)-1 in the first quarter of 2009. The adoption of FSP FAS 141(R)-1 did not have a
material impact on our consolidated financial statements.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
June 2008, the FASB issued EITF 08-3, Accounting by Lessees for Nonrefundable
Maintenance Deposits. EITF 08-3 requires that all nonrefundable maintenance
deposits should be accounted for as a deposit. When the underlying maintenance is
performed, the deposit is expensed or capitalized in accordance with the lessees
maintenance accounting policy. Once it is determined that an amount on deposit is not
probable of being used to fund future maintenance expense, it is recognized as additional
expense at the time such determination is made. EITF 08-3 is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and interim periods
within those fiscal years. Earlier application is not permitted. We adopted EITF 08-3 in
the first quarter of 2009. The adoption of EITF 08-3 did not have a material impact on
our consolidated financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
April 2008, the FASB issued FSP FAS 142-3, Determination of the Useful Life of
Intangible Assets. FSP FAS 142-3 requires that in developing assumptions
about renewal or extension used to determine the useful life of a recognized intangible
asset, an entity shall consider its own historical experience in renewing or extending
similar arrangements; however, these assumptions should be adjusted for entity-specific
factors. In the absence of that experience, an entity shall consider the assumptions that
market participants would use about renewal or extension (consistent with the highest and
best use of the asset by market participants), adjusted for the entity-specific factors.
For a recognized intangible asset, an entity shall disclose information that enables
users of financial statements to assess the extent to which the expected future cash
flows associated with the asset are affected by the entitys intent and/or ability
to renew or extend the arrangement. This guidance is effective for financial statements
issued for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. Early adoption is prohibited. The guidance for determining the useful
life of a recognized intangible asset shall be applied prospectively to intangible assets
acquired after the effective date. The disclosure requirements shall be applied
prospectively to all intangible assets recognized as of, and subsequent to, the effective
date. We adopted FSP FAS 142-3 in the first quarter of 2009. The adoption of FSP FAS
142-3 did not have a material impact on our consolidated financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
February 2008, the FASB issued FSP FAS 157-2, Effective Date of FASB Statement No.
157, which delays the effective date of Statement No. 157 for all nonfinancial
assets and liabilities, except those that are recognized or disclosed at fair value in
the financial statements on a recurring basis (at least annually) to fiscal years
beginning after November 15, 2008. We adopted FSP FAS 157-2 in the first quarter of 2009.
The adoption of FSP FAS 157-2 did not have a material impact on our consolidated
financial statements.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

---

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

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

| | In
December 2007, the FASB issued FASB Statement No. 141 (Revised 2007), Business
Combinations. Statement No. 141R requires that an acquiring entity recognize all
the assets acquired and liabilities assumed in a transaction at the acquisition date fair
value with limited exceptions. Statement No. 141R will change the accounting treatment
for acquisition costs, non-controlling interests, contingent liabilities, in-process
research and development, restructuring costs, and income taxes. In addition, it also
requires a substantial number of new disclosure requirements. Statement No. 141R applies
to business combinations for which the acquisition date is on or after the beginning of
the first annual reporting period beginning on or after December 15, 2008. Earlier
adoption is prohibited. We adopted Statement No. 141R in the first quarter of 2009. The
adoption of Statement No. 141R did not have a material impact on our consolidated
financial statements.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Basic
| | -----

| | We
apply the two-class method for calculating and presenting our basic earnings per share.
As noted in Statement of Financial Accounting Standards No. 128, Earnings per Share
(as amended), the two-class method is an earnings allocation formula that
determines earnings per share for each class of common stock according to dividends
declared (or accumulated) and participation rights in undistributed earnings. Under that
method:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (a) | Income
(loss) from continuing operations (net earnings) is reduced                by
the amount of dividends declared in the current period for each class of
               stock and by the contractual amount of dividends that must be paid during
the                current period.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (b) | The
remaining earnings, which may include earnings from discontinued operations
               (undistributed earnings), are allocated to each class of
common                stock to the extent that each class of stock may share in earnings
if all of the                earnings for the period were distributed.
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (c) | The
remaining losses, which may include losses from discontinued operations                (undistributed
losses), are allocated to the class A and B common                stock.
Undistributed losses are not allocated to the class C common stock and
               non-vested restricted stock because the class C shares and the non-vested
               restricted shares are not contractually obligated to share in the losses.
| | --- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (d) | The
total earnings allocated to each class of common stock are then divided by
               the number of weighted average shares outstanding of the class of common
stock                to which the earnings are allocated to determine the earnings per
share for that                class of common stock.
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (e) | Basic
earnings per share data are presented for class A and B common stock in
               the aggregate and for class C common stock. The basic earnings per share
for                class A and B common stock are the same; hence, these classes are
reported                together.
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
applying the two-class method, we have determined that undistributed earnings should be
allocated equally on a per share basis among each class of common stock due to the lack
of any contractual participation rights of any class to those undistributed earnings.
Undistributed losses are allocated to only the class A and B common stock for the reason
stated above.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
adopted EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities in the first quarter of 2009. Our
non-vested restricted stock awards contain nonforfeitable rights to dividends and are
included in the computation of earnings per share pursuant to the two-class method. The
adoption of EITF 03-6-1 did not have a material effect on our historically reported
earnings per share.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

---

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

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

The
following table sets forth the computation of basic earnings per share under the two-class
method.

|                                                        | Second Quarter Ended | Two Quarters Ended
|------------------------------------------------------- | -------------------- | ------------------
|
|Numerator for basic earnings from continuing            |                      |                   
|operations for each class of common stock               |                      |                   
|and non-vested restricted stock:                        |                      |                   
|Earnings (loss) from continuing                         |                      |                   
|operations                                              |                      |                   
|Less dividends declared:                                |                      |                   
|Class A and B                                           |                      |                   
|Class C                                                 |                      |                   
|Non-vested restricted stock                             |                      |                   
|                                                        |                      |                   
|Total undistributed earnings (loss) from                |                      |                   
|continuing operations                                   |                      |                   
|                                                        |                      |                   
|Class A and B undistributed earnings (loss)             |                      |                   
|from continuing operations                              |                      |                   
|Class C undistributed earnings                          |                      |                   
|from continuing operations                              |                      |                   
|Non-vested undistributed earnings                       |                      |                   
|from continuing operations                              |                      |                   
|                                                        |                      |                   
|Total undistributed earnings (loss)                     |                      |                   
|from continuing operations                              |                      |                   
|                                                        |                      |                   
|Numerator for basic earnings (loss) from continuing     |                      |                   
|operations per class A and B common stock:              |                      |                   
|Dividends on class A and B                              |                      |                   
|Class A and B undistributed                             |                      |                   
|earnings (loss)                                         |                      |                   
|                                                        |                      |                   
|Numerator for basic earnings (loss) from                |                      |                   
|continuing operations per class                         |                      |                   
|A and B common stock                                    |                      |                   
|                                                        |                      |                   
|Numerator for basic earnings from continuing operations |                      |                   
|per class C common stock:                               |                      |                   
|Dividends on class C                                    |                      |                   
|Class C undistributed earnings                          |                      |                   
|                                                        |                      |                   
|Numerator for basic earnings from continuing            |                      |                   
|operations per class C common stock                     |                      |                   
|                                                        |                      |                   
|Denominator for basic earnings (loss) from continuing   |                      |                   
|operations for each class of common stock:              |                      |                   
|Weighted average shares outstanding -                   |                      |                   
|Class A and B                                           |                      |                   
|Class C                                                 |                      |                   
|Basic earnings (loss) per share from continuing         |                      |                   
|operations                                              |                      |                   
|Class A and B                                           |                      |                   
|                                                        |                      |                   
|Class C                                                 |                      |                   
|                                                        |                      |                   

10

---

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

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

|                                                 | Second Quarter Ended | Two Quarters Ended
|------------------------------------------------ | -------------------- | ------------------
|
|Numerator for basic earnings from discontinued   |                      |                   
|operations for each class of common stock        |                      |                   
|and non-vested restricted stock:                 |                      |                   
|Total undistributed earnings from                |                      |                   
|from discontinued opertions                      |                      |                   
|                                                 |                      |                   
|Class A and B undistributed earnings             |                      |                   
|from discontinued opertions                      |                      |                   
|Class C undistributed earnings                   |                      |                   
|from discontinued operations                     |                      |                   
|Non-vested restricted stock undistributed        |                      |                   
|earnings from discontinued operations            |                      |                   
|                                                 |                      |                   
|Total undistributed earnings                     |                      |                   
|from discontinued operations                     |                      |                   
|                                                 |                      |                   
|Denominator for basic earnings from discontinued |                      |                   
|operations for each class of common stock:       |                      |                   
|Weighted average shares outstanding -            |                      |                   
|Class A and B                                    |                      |                   
|Class C                                          |                      |                   
|Basic earnings per share from discontinued       |                      |                   
|operations                                       |                      |                   
|Class A and B                                    |                      |                   
|                                                 |                      |                   
|Class C                                          |                      |                   
|                                                 |                      |                   
|Numerator for basic net earnings (loss) for each |                      |                   
|class of common stock:                           |                      |                   
|Net earnings (loss)                              |                      |                   
|Less dividends declared:                         |                      |                   
|Class A and B                                    |                      |                   
|Class C                                          |                      |                   
|Non-vested restricted stock                      |                      |                   
|                                                 |                      |                   
|Total undistributed net earnings (loss)          |                      |                   
|                                                 |                      |                   
|Class A and B undistributed net earnings (loss)  |                      |                   
|Class C undistributed net earnings               |                      |                   
|Non-vested undistributed net earnings            |                      |                   
|                                                 |                      |                   
|Total undistributed net earnings (loss)          |                      |                   
|                                                 |                      |                   
|Numerator for basic net earnings (loss) per      |                      |                   
|class A and B common stock:                      |                      |                   
|Dividends declared on class A and B              |                      |                   
|Class A and B undistributed net                  |                      |                   
|earnings (loss)                                  |                      |                   
|                                                 |                      |                   
|Numerator for basic net earnings (loss) per      |                      |                   
|class A and B common stock                       |                      |                   
|                                                 |                      |                   
|Numerator for basic net earnings per class C     |                      |                   
|common stock:                                    |                      |                   
|Dividends on class C                             |                      |                   
|Class C undistributed net earnings               |                      |                   
|                                                 |                      |                   
|Numerator for basic net earnings per             |                      |                   
|class C common stock                             |                      |                   
|                                                 |                      |                   

11

---

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

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

|                                              | Second Quarter Ended | Two Quarters Ended
|--------------------------------------------- | -------------------- | ------------------
|
|Denominator for basic net earnings (loss) for |                      |                   
|each class of common stock:                   |                      |                   
|Weighted average shares outstanding -         |                      |                   
|Class A and B                                 |                      |                   
|Class C                                       |                      |                   
|Basic net earnings (loss) per share           |                      |                   
|Class A and B                                 |                      |                   
|                                              |                      |                   
|Class C                                       |                      |                   
|                                              |                      |                   

| | Diluted
| | -------

| | Diluted
earnings per share for the second quarter and the two quarters of 2009 is computed based
upon the assumption that common shares are issued upon exercise of our non-statutory
stock options or stock appreciation rights when the exercise price is less than the
average market price of our common shares. Diluted earnings per share for the second
quarter and the two quarters of 2008 is computed based upon the assumption that common
shares are issued upon exercise of our non-statutory stock options or stock appreciation
rights when the exercise price is less than the average market price of our common shares
and common shares will be outstanding upon expiration of the vesting periods for our
non-vested restricted stock. For the second quarter and two quarters of 2009, 179 and 210
non-vested restricted class B common shares, respectively, are not outstanding upon expiration of the vesting
periods because they are anti-dilutive. The class C
shares are not converted into class A and B shares because they are anti-dilutive for all
periods presented.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table sets forth the computation of diluted net earnings per share for class A
and B common stock:
| | ----------------------------------------------------------------------------------------------------------------

|                                                       | Second Quarter Ended | Two Quarters Ended
|------------------------------------------------------ | -------------------- | ------------------
|
|Numerator for diluted net earnings (loss) per share:   |                      |                   
|Dividends on class A and B                             |                      |                   
|common stock                                           |                      |                   
|Total undistributed earnings                           |                      |                   
|from continuing operations                             |                      |                   
|Total undistributed earnings                           |                      |                   
|from discontinued operations                           |                      |                   
|                                                       |                      |                   
|Net earnings (loss)                                    |                      |                   
|                                                       |                      |                   
|Denominator for diluted net earnings (loss) per share: |                      |                   
|Weighted average shares                                |                      |                   
|outstanding - class A and B                            |                      |                   
|Impact of non-vested restricted stock                  |                      |                   
|                                                       |                      |                   
|Adjusted weighted average                              |                      |                   
|shares outstanding                                     |                      |                   
|                                                       |                      |                   
|Diluted earnings (loss) per share:                     |                      |                   
|Continuing operations                                  |                      |                   
|Discontinued operations                                |                      |                   
|                                                       |                      |                   
|Net earnings                                           |                      |                   
|                                                       |                      |                   

| | Diluted
earnings (loss) per share for the class C common stock is the same as basic earnings
(loss) per share for class C common stock because there are no class C common stock
equivalents.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

---

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

|5 | COMPREHENSIVE
INCOME (LOSS)
|- | ---------------------------

| | The
following table sets forth our comprehensive income (loss):
| | ---------------------------------------------------------------

|                            | Second Quarter Ended | Two Quarters Ended
|--------------------------- | -------------------- | ------------------
|
|Net earnings (loss)         |                      |                   
|Change in pension and post- |                      |                   
|retirement (net of tax)     |                      |                   
|                            |                      |                   
|Comprehensive income (loss) |                      |                   
|                            |                      |                   

|6 | STOCK-BASED
COMPENSATION
|- | ------------------------

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

| | The
purpose of the 2007 Journal Communications, Inc. Omnibus Incentive Plan (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 which may be awarded in the form
of nonstatutory or incentive stock options, stock appreciation rights, restricted stock,
restricted or deferred stock units, performance awards, dividend equivalents and other
stock-based awards. The Plan also provides for cash-based awards. The 2007 Plan replaced the 2003 Equity
Incentive Plan (2003 Plan) and, since May 3, 2007, all equity grants have been made from
the 2007 Plan. We will not grant any additional awards under the 2003 Plan. As of June
28, 2009, there are 3,254,828 shares available for issuance under the 2007 Plan.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Our
2003 Plan, which was replaced in May 2007 by our 2007 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 June 28, 2009, we recognized $411 and $759,
respectively, in stock-based compensation expense. Total income tax benefit recognized
related to stock-based compensation for the second quarter and two quarters ended June
28, 2009 was $219 and $394, respectively. We recognize stock-based compensation expense
on a straight-line basis over the service period based upon the fair value of the award
on the grant date. As of June 28, 2009, total unrecognized compensation cost related to
stock-based compensation awards was $1,807 net of estimated forfeitures, which we expect
to recognize over a weighted average period of 1.4 years. Stock-based compensation
expense is reported in selling and administrative expenses in our consolidated statements
of operations.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | The
compensation committee of our board of directors has 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 are exercisable and will remain exercisable
for a period of up to seven years from the grant date. There have been no options granted
since 2004.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

13

---

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

|6 | STOCK-BASED
COMPENSATION continued
|- | ----------------------------------

| | A
summary of stock option activity during the two quarters of 2009 is:
| | ----------------------------------------------------------------------

|                                            
|--------------------------------------------
|Outstanding at December 28, 2008            
|Expired                                     
|                                            
|Outstanding and exercisable at June 28, 2009
|                                            

| | The
aggregate intrinsic value of stock options outstanding and exercisable at the end of the
second quarter of 2009 is zero because the fair market value of our class B common stock
on June 28, 2009 was lower than the weighted average exercise price of the options.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | A
stock appreciation right, or SAR, represents the right to receive an amount equal to the
excess of the fair 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 value of a share of our
class B common stock on the grant date. Each SAR is settled only in shares of our class B
common stock. The term during which any SAR may be exercised is 10 years from the grant
date, or such shorter period as determined by the compensation committee of our board of
directors.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Our
SARs vest over a three year graded vesting schedule and 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. We ensure the compensation cost recognized at any
date is at least equal to the portion of the grant-date value of the award that is vested
at that date. 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 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.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
summary of SAR activity during the two quarters of 2009 is:
| | -------------------------------------------------------------

|                                
|--------------------------------
|Outstanding at December 28, 2008
|Forfeited                       
|                                
|Outstanding at June 28, 2009    
|                                
|Exercisable at June 28, 2009    
|                                

| | The
aggregate intrinsic value of the SARs outstanding and exercisable at the end of the
second quarter of 2009 is zero because the fair market value of our class B common stock
on June 28, 2009 was lower than the weighted average exercise price of the SARs.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

14

---

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

|6 | STOCK-BASED
COMPENSATION continued
|- | ----------------------------------

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

| | The
compensation committee of our board of directors has granted class B common stock to
employees and directors under our 2003 Plan and our 2007 Plan. 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 non-vested 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 2009 is:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               
|-------------------------------
|Non-vested at December 28, 2008
|Granted                        
|Vested                         
|Forfeited                      
|                               
|Non-vested at June 28, 2009    
|                               

| | Our
non-vested restricted stock grants vest from one to 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 1.6 years. The total fair value of shares vesting during the
two quarters of 2009 was $576. There was an aggregate of 96,770 unrestricted and
non-vested restricted stock grants issued to our directors and employees in the two
quarters of 2008 at a weighted average fair value of $6.73 per share, of which none of
the non-vested restricted shares have since vested.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | 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
85,980 class B common shares sold to employees under this plan in the two quarters of
2009 at a weighted average fair value of $2.21. As of June 28, 2009, there are 2,557,009shares
available for sale under the plan.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7 | INCOME
TAXES
|- | ------------

| | We
file tax returns in the United States federal jurisdiction, as well as approximately 15
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 2005 through 2007 tax returns are open for federal
purposes, and our 2004 through 2007 tax returns remain open for state tax purposes. The
statute of limitations has been extended for the state of Wisconsin and we are currently
under audit for our 2003 through 2007 tax returns.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | As
of June 28, 2009, our liability for unrecognized tax benefits was $982, which, if
recognized, $869 would have an impact on our effective tax rate. We recognize interest
income/expense and penalties related to unrecognized tax benefits in our provision for
income taxes. As of June 28, 2009 we had $288 accrued for interest expense and penalties.
During the two quarters of 2009, we recognized $122 in interest expense.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the second quarter of 2009, as a result of a settlement with the Wisconsin Department of
Revenue, we received a refund of $8,693 of an income and franchise tax audit payment made
in 2007.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the two quarters of 2009, our liability for unrecognized tax benefits and interest and
penalties decreased by $1,496 and $936, respectively, due to a reduction for a state
audit settlement and expiration of statutes of limitations. As of June 28, 2009, it is
possible for $128 of unrecognized tax benefits and related interest to be recognized
within the next 12 months due to settlements with taxing authorities.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

15

---

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

|8 | INVENTORIES
|- | -----------

| | Inventories
are stated at the lower of cost (first in, first out method) or market. Inventories at
June 28, 2009 and December 28, 2008 consist of the following:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------

|                          | June 28, 2009 | December 28, 2008
|------------------------- | ------------- | -----------------
|Paper and supplies        |               |                  
|Work in process           |               |                  
|Finished goods            |               |                  
|Less obsolescence reserve |               |                  
|                          |               |                  
|Inventories, net          |               |                  
|                          |               |                  

|9 | NOTES
PAYABLE TO BANKS
|- | ----------------------

| | We
have a $475,000 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 June 28, 2009 and December 28, 2008, we had borrowings of $178,285
and $215,090, respectively, under the facility at a weighted average rate of 0.99% and
2.10%, respectively. Cash provided by operating activities was used primarily to decrease
our borrowings during the two quarters of 2009. Fees in connection with the facility of
$1,717 are being amortized over the term of the facility using the straight-line method.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
estimate the fair value of our unsecured revolving facility at June 28, 2009 and December
28, 2008 to be $164,417 and $195,375, respectively, based on discounted cash flows using
an interest rate of 5.05% and 6.00%, respectively.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
facility includes the following two financial covenants:
| | ------------------------------------------------------------

| |     A
consolidated funded debt ratio of not greater than 4-to-1, as determined for the four
fiscal quarter period preceding the date of determination. This ratio compares, for any
period, our funded debt to our earnings before interest, taxes, depreciation and
amortization, as adjusted for non-operational impairment charges recorded as a result of
FASB Statement No. 142, Goodwill and Other Intangible Assets. As of June 28,
2009, we were in compliance with this financial covenant.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| |     An
interest coverage ratio of not less than 3-to-1, as determined for the four fiscal
quarter period preceding the date of determination. This ratio compares, for any period,
our earnings before interest, taxes, depreciation and amortization, as adjusted for
non-operational impairment charges recorded as a result of FASB Statement No. 142, Goodwill
and Other Intangible Assets, to our interest expense. As of June 28, 2009, we were
in compliance with this financial covenant.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | If
actual operating and cash flow results over the next 12 months are lower than current
projections, the margins by which we will comply with the covenants will decrease. In a
recessionary economy, a significant risk to achieving our projections is meeting our
revenue and earnings forecasts. To remain in compliance with the terms of our credit
agreement, we could face increased pressure to reduce or delay capital expenditures,
dispose of assets or operations, further reduce the size of our workforce or take other
steps to revise our capital structure or our business operations. In addition, to remain
in compliance with the terms of our credit agreement, we may seek to amend or replace our
current credit facility with one or more capital sources on appropriate terms. We cannot
assure you that we will have the ability to take any of these actions or that these
actions would be successful. If it is determined we are not in compliance with these
financial covenants, the lenders in our credit facility syndicate will be entitled to
take certain actions, including acceleration of all amounts due under the facility. If
the lenders take such action, we may be forced to amend the terms of the credit
agreement, obtain a waiver or find alternative sources of capital. If we are unable to
obtain alternative sources of capital, it may be necessary to significantly restructure
our business.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Given
the current economic crisis, including the current instability of financial institutions,
one or more of the lenders in our credit facility syndicate could fail or be unable to
fund future draws thereunder or take other positions adverse to us. In such an event, our
liquidity could be severely constrained with an adverse impact on our ability to operate
our businesses and we may be forced to take the actions described above. We continue to
monitor our current lenders and compliance with our credit agreement terms and are
working on possible strategies in the event one or more of our lenders is unable or
unwilling to fund future borrowing requests.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

16

---

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

|10 | GUARANTEES
|-- | ----------

| | We
provided a guarantee to the landlord of our former New England community newspapers and
shopper business, which was sold in 2007, with respect to tenant liabilities and
obligations associated with a lease which expires in December 2016. Our maximum potential
obligation pursuant to the guarantee is $1,299 as of June 28, 2009.  As part of the
sales transaction, we received a guarantee from the buyer of our New England business
that they will satisfy all the liabilities and obligations of the assigned lease.  In
the event that they fail to satisfy their liabilities and obligations and the landlord
invokes our guarantee, we have a right to indemnification from the buyer.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|11 | 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 gain                            |                 
|                                            |                 
|Net periodic benefit cost included in total |                 
|operating costs and expenses, selling and   |                 
|administrative expenses                     |                 
|                                            |                 

| | The
pension plan curtailment gain was the result of an amendment to the plans adopted on
March 25, 2009. The amendment suspended benefit accruals in our qualified and
non-qualified plans for all active employees for the 18-month period beginning July 1,
2009. Due to the plan amendment, measurements of both plan assets and obligations were
calculated. The obligations are based upon a 7.1% discount rate. The benefit obligation
and plan assets at the end of the first quarter 2009 were $130,355 and $85,071,
respectively, and the plans were underfunded by $45,284.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
fund our defined benefit pension plan at the minimum amount required by the Pension
Protection Act of 2006. We do not expect to contribute to our qualified defined benefit
pension plan in 2009. We expect to contribute $5,300 to our qualified defined benefit
pension plan in 2010. We expect to contribute $289 and $316 to our unfunded non-qualified
pension plan in 2009 and 2010, respectively.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                            | Other Postretirement Benefits
|------------------------------------------- | -----------------------------
|
|
|Service cost                                |                              
|Interest cost                               |                              
|Amortization of:                            |                              
|Unrecognized prior service cost             |                              
|Unrecognized net transition obligation      |                              
|                                            |                              
|Net periodic benefit cost included in total |                              
|operating costs and expenses and            |                              
|selling and administrative expenses         |                              
|                                            |                              

17

---

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

|12 | GOODWILL
AND OTHER INTANGIBLE ASSETS
|-- | ------------------------------------

| | Interim
Impairment Test
| | -----------------------

| | During
the second quarter, management determined there was a significant adverse change in
projected gross market revenues in the markets where we own television and radio
stations. Therefore, interim impairment tests as of May 31, 2009 were performed on all of
our broadcast licenses. Our interim impairment tests indicated seven of our television
broadcast licenses and 11 of our radio broadcast licenses are impaired. In accordance
with Statement No. 142, broadcast licenses with a carrying amount of $101,120 were
written down to their estimated fair value of $83,348, resulting in an $18,975 non-cash
impairment charge in the second quarter of 2009.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
following table presents the fair value measurement of our broadcast licenses by level of
the fair value hierarchy. In accordance with Statement No. 157, Fair Value
Measurements level 1 inputs are quoted prices in active markets for identical
assets; level 2 inputs are significant other observable inputs; and level 3 inputs are
significant unobservable inputs.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                   |  | Fair Value Measurement Using |  
|------------------ |  | ---------------------------- | -
|
|Broadcast licenses |  |                              | $
|                   |  |                              |  

| | For
broadcast licenses at individual television and radio stations, we used an income
approach to estimate fair value. This approach uses the Greenfield method, which assumes the start up of a
new station by an independent market participant.
The fair value of the broadcast license would be the result of the cash flows, for the
license only, necessary to start up and operate a station, without consideration to any
goodwill or improvement to the station. The fair value estimates of our broadcast
licenses contain significant assumptions incorporating variables that are based on past
experiences and judgments about future performance using industry normalized information
for an average station within a market with the type of signal that each subject station
produces. These variables include, but are not limited to: the forecasted growth rate of
each market (including market population, household income and retail sales), market
share and profit margins of an average station within a market, estimated capital
expenditures and start up costs, risk-adjusted discount rate, likely media
competition within the market and expected growth rates into perpetuity to estimate
terminal values. Adverse changes in significant assumptions such as an increase in
discount rates or a decrease in projected market revenues could result in additional
non-cash impairment charges on our broadcast licenses in future periods, which could have
a material impact on our financial condition and results of operations.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the remainder of 2009, we will continue to monitor events in our businesses and the
economic conditions in our markets.  We cannot predict at this time when, or if, we
will have another triggering event in 2009 which would cause us to test for impairment of
our broadcast licenses, other identifiable intangible assets and goodwill. However, we
are required to perform an annual impairment test in the fourth quarter of 2009.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Definite-lived
Intangibles
| | --------------------------

| | Our
definite-lived intangible assets consist primarily of network affiliation agreements,
customer lists, non-compete agreements and trade names. 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 15 years, the non-compete
agreements and franchise agreement fees over the terms of the contracts and the
tradenames over a period of 25 years. Management determined there were no significant
adverse changes in the value of these assets as of June 28, 2009.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Amortization
expense was $496 and $987 for the second quarter and two quarters ended June 28, 2009,
respectively, and $504 and $996 for the second quarter and two quarters ended June 29,
2008, respectively. Estimated amortization expense for our next five fiscal years is
$1,977 for 2009, $1,937 for 2010, $1,579 for 2011, $1,496 for 2012 and $1,377 for 2013.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

18

---

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

|12 | GOODWILL
AND OTHER INTANGIBLE ASSETS continued
|-- | ----------------------------------------------

| | The
gross carrying amount, accumulated amortization and net carrying amount of the major
classes of definite-lived intangible assets as of June 28, 2009 and December 28, 2008 are
as follows:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               | Gross
Carrying
Amount | Accumulated
Amortization | Net
Carrying
Amount
|------------------------------ | --------------------- | ------------------------ | -------------------
|June 28, 2009                  |                       |                          |                    
|Network affiliation agreements |                       |                          | $                  
|Customer lists                 |                       |                          |                    
|Non-compete agreements         |                       |                          |                    
|Other                          |                       |                          |                    
|                               |                       |                          |                    
|Total                          |                       |                          | $                  
|                               |                       |                          |                    
|December 28, 2008              |                       |                         
|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. The net carrying amount of our broadcast licenses was $83,348 and $101,120
as of June 28, 2009 and December 28, 2008, respectively. The decrease in the net carrying
amount of our broadcast licenses for the two quarters ended June 28, 2009 represents the
impairment charge of $18,975 partially offset by the acquisition of the broadcast license
for KNIN-TV in Boise, Idaho of $1,203.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
costs incurred to renew or extend the term of our broadcast licenses and certain customer
relationships are expensed as incurred.
| | -------------------------------------------------------------------------------------------------------------------------------------

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

| | The
adjustment in the carrying amount of goodwill for the two quarters ended June 28, 2009 is
as follows:
| | ---------------------------------------------------------------------------------------------------------

|                                  | Goodwill at
December 28, 2009 | Adjustment | Goodwill at
June 28, 2009
|--------------------------------- | ----------------------------- | ---------- | -------------------------
|Reporting unit                    |                               |            |                          
|Community newspapers and shoppers |                               |            | $                        
|Broadcasting                      |                               |            |                          
|                                  |                               |            |                          
|Total                             |                               |            | $                        
|                                  |                               |            |                          

| | The
adjustment in the carrying amount of goodwill for the two quarters ended June 28, 2009
represents the acquisition of KNIN-TV      in Boise, Idaho.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------

|13 | ACQUISITIONS
|-- | ------------

| | On
April 23, 2009, Journal Broadcast Group, Inc. and Journal Broadcast Corporation, our
broadcasting businesses, completed the asset purchase of KNIN-TV from Banks Boise, Inc.
for $6,593 in cash. KNIN-TV is the CW Network affiliate serving the Boise, Idaho market.
We own KIVI-TV, the ABC affiliate, and six radio stations in Boise, Idaho. The purchase
of KNIN-TV builds our cross-media business in Boise, Idaho to better serve advertisers
and viewers, builds a stronger community presence in Boise, Idaho, and enhances our
margin with multiple media properties.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
goodwill of $4,824 arising from the acquisition is attributable to the synergies expected
from aligning our television and radio stations in a cluster within the Boise, Idaho market.
We seek to build a unique and
differentiated brand position at each station within a cluster so that we can offer
distinct solutions for a variety of advertisers in any given market. This clustering
strategy has allowed us to target our stations formats and sales efforts to better
serve advertisers and listeners as well as leverage operating expenses to maximize the
performance of each station and the cluster.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

19

---

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

|13 | ACQUISITIONS
continued
|-- | ----------------------

| | The
recognized amounts of identifiable asset acquired and liabilities assumed for KNIN-TV is
as follows:
| | --------------------------------------------------------------------------------------------------------

|                                     | KNIN-TV
Boise, ID
|------------------------------------ | -----------------
|Syndicated programs                  |                  
|Property and equipment               |                  
|Goodwill                             |                  
|Broadcast license                    |                  
|Customer list                        |                  
|Syndicated programs                  |                  
|Other current assets and liabilities |                  
|                                     |                  
|Total purchase price                 |                  
|                                     |                  

| | We
determined the useful life of the acquired customer list to be five years. Our fair value
measurement assumed the period of expected cash flows to be 10 years. However, based upon
our own historical experience and our intentions to renew or extend these customer
relationships, we believe these relationships will contribute to our future cash flows
over the next five years. The KNIN-TV broadcast license expires in 2014 and we expect to
renew the license without issue. The goodwill and broadcast license which we acquired are
not subject to amortization for financial reporting purposes. These intangible assets
are, however, amortized and deductible for income tax purposes.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
acquisition was accounted for using the purchase method. Accordingly, the operating
results and cash flows of the acquired business are included in our consolidated
financial statements from the respective date of acquisition. The impact of the acquired
station on our operating results for the second quarter and two quarters ended June 28,
2009 was:
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                             | Second Quarter and
Two Quarters Ended
June 28, 2009
|---------------------------- | ---------------------------------------------------
|Revenue                      |                                                    
|Earnings before income taxes |                                                    

| | The
pro forma revenue and earnings for the second quarter and two quarters of 2009 and the
second quarter and two quarters of 2008 were immaterial to our results of operations.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|14 | DISCONTINUED
OPERATIONS
|-- | -----------------------

| | In
the first quarter of 2008, we recorded a gain on discontinued operations of $400 for a
reduction in the reserve related to a settlement with the Environmental Protection
Agency. We made payment on this settlement in the third quarter of 2008.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

20

---

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

|15 | WORKFORCE
REDUCTIONS
|-- | --------------------

| | We
continue to align our costs with our declining revenues. During the two quarters of 2009,
we recorded a pre-tax charge of $1,069 for workforce separation benefits. These charges
are recorded in operating costs and expenses and selling and administrative expenses in
the consolidated statement of operations. Activity associated with the workforce
reduction and business initiatives during the two quarters of 2009 was as follows:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                  | Balance at
December 28, 2008 | Charge for
Separation
Benefits | Payments for
Separation
Benefits | Balance at
June 28, 2009
|--------------------------------- | ---------------------------- | ------------------------------ | -------------------------------- | ------------------------
|Publishing                        |                              |                                |                                  |                         
|Daily newspaper                   |                              |                                | $                                | 557                     
|Community newspapers and shoppers |                              |                                |                                  | 53                      
|                                  |                              |                                |                                  |                         
|Total Publishing                  |                              |                                |                                  | 610                     
|Broadcasting                      |                              |                                |                                  | 30                      
|Printing services                 |                              |                                |                                  | --                      
|Direct marketing services         |                              |                                |                                  | 177                     
|                                  |                              |                                |                                  |                         
|Total                             |                              |                                | $                                | 817                     
|                                  |                              |                                |                                  |                         

|16 | 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.
As of June 28, 2009, our publishing segment consisted of the Milwaukee Journal Sentinel,
which serves as the only major daily newspaper for the Milwaukee metropolitan area, and
more than 50 community newspapers and shoppers in Wisconsin and Florida. Our broadcasting
segment consists of 35 radio stations and 13 television stations in 12 states and the
operation of a television station under a local marketing agreement. 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.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

21

---

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

|16 | SEGMENT
INFORMATION continued
|-- | -----------------------------

| | The
following tables summarize revenue, operating earnings (loss), non-cash impairment
charge, depreciation and amortization and capital expenditures for the second quarter and
two quarters ended June 28, 2009 and June 29, 2008 and identifiable total assets at June
28, 2009 and December 28, 2008:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | Second Quarter Ended | Two Quarters Ended
|----------------------------- | -------------------- | ------------------
|
|Revenue                       |                      |                   
|Publishing                    |                      |                   
|Broadcasting                  |                      |                   
|Printing services             |                      |                   
|Other                         |                      |                   
|                              |                      |                   
|                              |                      |                   
|                              |                      |                   
|Operating earnings (loss)     |                      |                   
|Publishing                    |                      |                   
|Broadcasting                  |                      |                   
|Printing services             |                      |                   
|Other                         |                      |                   
|                              |                      |                   
|                              |                      |                   
|                              |                      |                   
|Non-cash impairment charge    |                      |                   
|Broadcasting                  |                      |                   
|                              |                      |                   
|                              |                      |                   
|                              |                      |                   
|Depreciation and amortization |                      |                   
|Publishing                    |                      |                   
|Broadcasting                  |                      |                   
|Printing services             |                      |                   
|Other                         |                      |                   
|                              |                      |                   
|                              |                      |                   
|                              |                      |                   
|Capital expenditures          |                      |                   
|Publishing                    |                      |                   
|Broadcasting                  |                      |                   
|Printing services             |                      |                   
|Other                         |                      |                   
|                              |                      |                   
|                              |                      |                   
|                              |                      |                   

|                          | June 28, 2009 | December 28, 2008
|------------------------- | ------------- | -----------------
|Identifiable total assets |               |                  
|Publishing                |               |                  
|Broadcasting              |               |                  
|Printing service          |               |                  
|Other                     |               |                  
|                          |               |                  
|                          |               |                  
|                          |               |                  

|17 | SUBSEQUENT
EVENTS
|-- | -----------------

| | A
reduction in workforce of 92 positions, or 6.2% of the workforce at our daily newspaper,
was announced on August 4, 2009. This reduction in workforce includes 37 voluntary
buyouts of newsroom employees, as well as layoffs of an additional 55 employees. Most of
the employees affected by the voluntary and involuntary workforce reductions are expected
to leave in August 2009. We expect to record a charge of approximately $4,000
for this workforce reduction.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | We
have evaluated subsequent events through August 4, 2009, the date the accompanying
financial statements were filed with the Securities and Exchange Commission. As of August 4,
2009, there were no subsequent events which required recognition in our consolidated
financial statements.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

22

---

# 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
June 28, 2009, 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 Section 21E
of the Securities Exchange Act of 1934, as amended. 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 as well as those contained in Item
1A, Risk Factors of our Annual Report on Form 10-K for the year ended December
28, 2008:

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

| | changes
in newsprint prices and other costs of materials;
|- | ---------------------------------------------------------

| | changes
in federal or state laws and regulations or their interpretations (including changes in
regulations governing the number and types of broadcast and cable system properties,
newspapers and licenses that a person may control in a given market or in total);
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | an
other than temporary decline in operating results and enterprise value that could lead to
further non-cash impairment charges due to the impairment of goodwill, broadcast
licenses, other intangible assets and property, plant and equipment;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | the
impact of changing economic and financial market conditions and interest rates on our
liquidity, on the value of our pension plan assets and on the availability of capital;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | our
ability to remain in compliance with the terms of our credit agreement;
|- | ---------------------------------------------------------------------------

| | changes
in interest rates;
|- | --------------------------

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

| | energy
costs;
|- | -------------

| | the
availability and effect of acquisitions, investments, dispositions and other capital
expenditures including share repurchases on our results of operations, financial
condition or stock price; 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.

23

---

# 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 more than 50 community newspapers
and shoppers in Wisconsin and Florida. Our broadcasting segment consists of 35 radio
stations and 13 television stations in 12 states and the operation of a television station
under a local marketing agreement. Our interactive media assets include approximately 120
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.

Over the past few years, fundamentals
in the newspaper industry have deteriorated significantly. Continuing weakness in the
automobile industry has resulted in a decline in automotive advertising. Reductions in
retail and classified run-of-press (ROP) advertising (due in part to department store
consolidation, weakened employment and real estate economics and a migration of
advertising to the internet), circulation declines and online competition have also
negatively impacted newspaper industry revenues. Additionally, the continued housing
market downturn has adversely impacted the newspaper industry, including real estate
classified advertising as well as the home improvement, furniture and financial services
advertising categories. These conditions, along with a weak economy, persisted in the
second quarter of 2009 and we have yet to see signs of a sustained recovery as we enter
the third quarter of 2009. In light of this, we anticipate taking additional actions in
order to maintain our progress on expense reductions and to achieve our operating margin
goals.

Our publishing businesses continued
to be challenged in the second quarter of 2009 due to the current economic recession and
the continued softening of business conditions driven by the secular and cyclical
influences affecting the newspaper industry. We have seen advertisers reduce their
advertising spending in virtually all revenue categories. In addition, due to the changing
mix of revenue categories, frequency and placement of advertising in the newspaper and
customer choices to reduce or eliminate the use of color in their ads, we have seen a
decrease in the average rate per inch of advertising. Classified advertising revenue,
specifically for employment, real estate and automotive, decreased
in the second quarter of 2009 compared to the second quarter of 2008. Retail advertising
also decreased in the second quarter of 2009 compared to the second quarter of 2008 with
weakness in a number of consumer-driven categories, including the furniture and
furnishings, finance/insurance, dining and entertainment, automotive, health services,
home improvement, department stores, finance/insurance, small-retailers, food, real estate
and business services categories. Interactive revenue decreased at
our publishing businesses in the second quarter of 2009 compared to the second quarter of
2008. In addition to the impact of the economic recession, revenue from automotive online
classifieds was negatively impacted by our daily newspapers transition to a new
franchise relationship with CarSoup.com. Our publishing businesses returned to
profitability in the second quarter of 2009 after posting an operating loss in the first
quarter of 2009. Notwithstanding these challenges, our publishing businesses continue to
reduce their expense platforms to align them with a reduced revenue base. Total expenses
decreased $10.0 million, or 17.8%, in the second quarter of 2009 compared to the second
quarter of 2008 primarily due to a decrease of $4.5 million in payroll-related costs and a
decrease of $2.3 million in newsprint and paper costs.

Revenues in the broadcast industry
are derived primarily from the sale of advertising time to local, national and political
and issue advertisers and to a lesser extent from barter, digital revenues, retransmission
fees, network compensation and other revenues. Because television and radio broadcasters
rely upon advertising revenue, they are subject to cyclical changes in the economy. The
size of advertisers budgets, which are affected by broad economic trends, affects
the radio industry in general and the revenue of individual television stations, in
particular. The broadcast industry continues to experience softness in television and
radio advertising resulting from general economic pressure now impacting local and
national economies, primarily in the automobile, housing and retail segments. Our
broadcasting business also is affected by audience fragmentation as they have an
increasing number of ways to access news and other programming.

Revenue from broadcasting decreased in the
second quarter of 2009  compared to the second quarter of 2008 due to
decreases in local, national and political and issue advertising revenue, partially offset
by increases in retransmission revenue. The current economic recession has negatively
impacted our broadcasting advertising revenue across most categories, the most significant
being our largest revenue category  automotive. The significant decline in
automotive advertising negatively impacts our average unit rates even if our inventory
sell-out levels are high. Our broadcasting business posted an operating loss in the second
quarter of 2009 primarily due to a $19.0 million non-cash impairment charge. Our
broadcasting business continues to reduce its expense platforms to align it with a reduced
revenue base.

Revenue at our printing services
business decreased in the second quarter of 2009 compared to the second quarter of
2008 primarily due to the effects of the current economic recession and the planned
reduction in revenue from Dell Computer Corporation (Dell). Customers are reducing their
print volumes, ceasing to print and/or are taking their printing needs out for bid in
order to achieve lower pricing. Operating earnings at our printing services business
decreased primarily due to the impact from the decrease in revenue, partially offset by a
decrease in production and payroll-related costs. Revenue at our direct marketing services
business decreased in the second quarter of 2009 compared to the second quarter of
2008 primarily due to a decrease in mailing services and postage revenue. Our direct
marketing services business posted an operating loss in the second quarter of 2009
compared to break even operating earnings in the second quarter of 2008 primarily due to
the operating earnings impact of the decrease in revenue, partially offset by a decrease
in production and payroll-related costs.

24

---

For all of our advertising-based
businesses, we believe that when there is an improvement in the current economic
environment, advertising revenue will begin to stabilize and eventually increase from its
current level. We do not expect, however, that revenues at our daily newspaper will return
to revenue levels reported in the last five years given the secular changes affecting the
newspaper industry.

As we enter the third quarter of
2009, we have started taking actions to reduce additional expenses to achieve our
operating margin goals with the offering of a voluntary newsroom buyout offer to employees
covered by the newspaper guild collective bargaining agreement and additional involuntary reductions in workforce at the daily newspaper, as
well as reductions in workforce at both our printing services and direct marketing
services businesses and additional reductions in workforce at the daily
newspaper. A reduction in workforce of 92 positions, or 6.2% of the workforce at
our daily newspaper, was announced on August 4, 2009. This reduction in
workforce includes 37 voluntary buyouts of newsroom employees, as well as
layoffs of an additional 55 employees. As a result of these and other actions, we are estimating a gross workforce
reduction charge of $4.0 to $5.5 million during the second half of the year. The majority of the
charge will be recorded in the third quarter of 2009, primarily at the daily
newspaper.  By taking these actions now, we estimate the expense reductions realized
for the remainder of 2009 will partially offset the workforce reduction charge and enable
us to reduce our expenses in the second half of 2009, compared to the second half of
2008, at a rate similar to that of the second quarter.  We expect these and
other actions to generate annualized savings of approximately $21 million across our
businesses.

Interim Impairment Test  Due to a
decline in market revenue growth projections in several of our broadcast markets, we
performed an interim impairment test on our broadcast licenses as of May 31, 2009 using
an income approach to estimate fair value. This approach uses the Greenfield method, which assumes the start up of a new station by an
independent market participant. The fair value of the broadcast license would be the result of the cash flows,
for the license only, necessary to start up and operate a station, without consideration
to any goodwill or improvement to the station. The fair value estimates of our broadcast
licenses contain significant assumptions incorporating variables that are based on past
experiences and judgments about future performance using industry normalized information
for an average station within a market with the type of signal that each subject station
produces. These variables include, but are not limited to: the forecasted revenue growth
rate of each market (including market population, household income and retail sales),
market share and profit margins of an average station within a market, estimated capital
expenditures and start up costs, risk-adjusted discount rate, likely media competition
within the market and expected growth rates into perpetuity to estimate terminal values.Our
interim impairment tests in the second quarter of 2009 indicated that seven television
broadcast licenses and 11 radio broadcast licenses are impaired. We recorded a $19.0
million non-cash impairment charge in the second quarter of 2009. Adverse changes in
expected operating results and/or further deterioration of economic, market or business
conditions could result in additional non-cash impairment charges on our broadcast
licenses in future periods, which could have a material impact on our financial condition
and results of operations.

# Results of Operations

# Second Quarter Ended
June 28, 2009 compared to the Second Quarter Ended June 29, 2008

Our consolidated revenue in the
second quarter of 2009 was $109.4 million, a decrease of $30.7 million, or 21.9%, compared
to $140.1 million in the second quarter of 2008. Our consolidated operating costs and
expenses in the second quarter of 2009 were $63.3 million, a decrease of $16.6 million, or
20.7%, compared to $79.9 million in the second quarter of 2008. Our consolidated selling
and administrative expenses in the second quarter of 2009 were $37.1 million, a decrease
of $6.5 million, or 15.0%, compared to $43.6 million in the second quarter of 2008.
Broadcast license impairment was $19.0 million in the second quarter of 2009.

25

---

The following table presents our
total revenue by segment, total operating costs and expenses, selling and administrative
expenses, broadcast license impairment and total operating earnings (loss) as a percent of
total revenue for the second quarter of 2009 and the second quarter of 2008:

|                                               | 2009 | Percent of
Total
Revenue | 2008 | Percent of
Total
Revenue
|---------------------------------------------- | ---- | ------------------------ | ---- | ------------------------
|
|Revenue:                                       |      |                          |      |                         
|Publishing                                     |      |                          | $    | 49.4                    
|Broadcasting                                   |      |                          |      | 43.8                    
|Printing services                              |      |                          |      | 11.2                    
|Other                                          |      |                          |      | 5.0                     
|                                               |      |                          |      |                         
|Total revenue                                  |      |                          |      | 109.4                   
|Total operating costs and expenses             |      |                          |      | 63.3                    
|Selling and administrative expenses            |      |                          |      | 37.1                    
|Broadcast license impairment                   |      |                          |      | 19.0                    
|                                               |      |                          |      |                         
|Total operating costs and expenses and selling |      |                         
|and administrative expenses                    |      |                          |      | 119.4                   
|                                               |      |                          |      |                         
|Total operating earnings (loss)                |      |                          | $    | (10.0                   
|                                               |      |                          |      |                         

In addition to the secular influences
affecting the newspaper industry discussed above, the current economic recession
negatively impacted our publishing, broadcasting and direct marketing services advertising
revenue and commercial printing revenue in the second quarter of 2009.

In the newspaper industry, classified
advertising is generally the most sensitive to economic cycles because it is driven by the
demand for employment, real estate transactions and automotive sales. Newspaper classified
advertising also has been the most impacted by secular changes affecting the newspaper
industry. Classified advertising continues to move away from printed products to online
products. While we offer online products and seek to retain classified advertising, we
face increasing competition for this business and are losing the benefit of a strong base
of print classified advertising against which we can upsell online advertisements. Our
publishing businesses experienced a 46.8% decrease in classified advertising revenue in
the second quarter of 2009 compared to the second quarter of 2008. Retail ROP and preprint
advertising decreased 18.2% in the second quarter of 2009 compared to the second quarter
of 2008, primarily in consumer-driven categories. As consumers have less discretionary
income, our advertisers are decreasing their spending on advertising. The most significant
decreases were in the furniture and furnishings, finance/insurance, dining and
entertainment, automotive, health services, home improvement, department stores,
finance/insurance, small-retailers, food, real estate and business services categories.
Because of secular changes affecting the newspaper industry, we are adjusting our business
model in the face of decreasing revenues.

At our broadcasting business,
advertising revenue decreased in the second quarter across most categories, the most
significant being our largest revenue category  automotive. Automotive advertising
revenue decreased $5.4 million, or 48.8%, in the second quarter of 2009 compared to the
second quarter of 2008 as the domestic automobile industry is experiencing an
unprecedented decrease in automotive sales. Retransmission revenue increased $0.6 million
in the second quarter of 2009 compared to the second quarter of 2008, partially offsetting
the decrease in advertising revenue.

The decrease in printing services
revenue was primarily due to the effects of the current economic recession. Revenue from
printing publications and revenue from Dell and other computer-related customers decreased
in the second quarter of 2009 compared to the second quarter of 2008. At our direct
marketing services business, revenue from mailing services and postage decreased in the
second quarter of 2009 compared to the second quarter of 2008 as as the demand for direct
marketing advertising continues to decrease.

The decrease in total operating costs
and expenses was primarily due to the decrease in revenue, a decrease in payroll-related
costs reflecting the savings from workforce reduction initiatives, a decrease in newsprint
and paper costs and a $1.7 million gain related to insurance proceeds from our tower
replacement in Wichita, Kansas. The decrease in selling and administrative expenses is
primarily due to decreases in payroll-related costs reflecting the savings from workforce
reduction initiatives and overall cost reduction initiatives as our businesses continue to
reduce expense platforms in response to the decrease in revenue. These expense decreases
were partially offset by an increase in bad debt expense at all of our businesses as each
is encountering an increase in slow-paying customers as well as customers who have filed
bankruptcy. We recorded a $19.0 million non-cash broadcast license impairment charge in
the second quarter of 2009 for seven television and 11 radio broadcast licenses.

26

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Our consolidated operating loss in
the second quarter of 2009 was $10.0 million compared to operating earnings of $16.6
million in the second quarter of 2008. The following table presents our operating earnings
(loss) by segment for the second quarter of 2009 and the second quarter 2008:

|                                | 2009 | Percent of
Total
Operating
Loss | 2008 | Percent of
Total
Operating
Earnings
|------------------------------- | ---- | ------------------------------- | ---- | -----------------------------------
|
|Publishing                      |      |                                 | $    | 3.3                                
|Broadcasting                    |      |                                 |      | (12.7                              
|Printing services               |      |                                 |      | (0.4                               
|Other                           |      |                                 |      | (0.2                               
|                                |      |                                 |      |                                    
|Total operating earnings (loss) |      |                                 | $    | (10.0                              
|                                |      |                                 |      |                                    

The decrease in total operating
earnings was primarily due to the $19.0 million non-cash impairment charge for seven
television and 11 radio broadcast licenses and the decrease in revenue at our publishing,
broadcasting, printing services and direct marketing services businesses.

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

Revenue from publishing in the second
quarter of 2009 was $49.4 million, a decrease of $12.4 million, or 20.1%, compared to
$61.8 million in the second quarter of 2008. Operating earnings from publishing in the
second quarter of 2009 was $3.3 million, a decrease of $2.4 million, or 42.2%, compared to
$5.7 million in the second quarter of 2008.

The following table presents our
publishing revenue by category and operating earnings for the second quarter of 2009 and
the second quarter of 2008:

|                            | 2009 | 2008
|--------------------------- | ---- | ----
|
|
|Advertising revenue:        |      |     
|Retail                      |      |     
|Classified                  |      |     
|National                    |      |     
|Direct Marketing            |      |     
|Other                       |      |     
|                            |      |     
|Total advertising revenue.. |      |     
|Circulation revenue         |      |     
|Other revenue               |      |     
|                            |      |     
|Total revenue               |      |     
|                            |      |     
|Operating earnings          |      |     
|                            |      |     

Advertising revenue accounted for
64.9% of total publishing revenue in the second quarter of 2009 compared to 72.4% in the
second quarter of 2008. The current economic recession and ongoing secular changes in the
newspaper industry have caused advertisers to decrease their advertising spending across
all of our advertising revenue categories. In addition, due to the changing mix of revenue
categories, frequency and placement of advertising in the newspaper and customer choices
to reduce or eliminate the use of color in their ads, we have seen a decrease in the
average rate per inch of advertising.

Retail advertising revenue in the
second quarter of 2009 was $23.4 million, a decrease of $5.2 million, or 18.2%, compared
to $28.6 million in the second quarter of 2008. The $4.4 million decrease at our daily
newspaper was primarily due to a decrease in ROP and preprint advertising in
consumer-driven categories. As consumers have less discretionary income, advertisers are
decreasing their spending. The most significant decreases were in the furniture and
furnishings, finance/insurance, dining and entertainment, automotive, health services,
home improvement, department stores, finance/insurance, small-retailers, food, real estate
and business services categories. The same trends persisted in our community newspapers
and shoppers business. The $0.8 million decrease at our community newspapers and shoppers
business was primarily due to decreases in automotive, small-retailers and real estate
advertising, partially offset by revenue from publications acquired in Northern Wisconsin
and Florida in late 2008.

27

---

Classified advertising is generally
the most sensitive to economic cycles because it is driven by the demand of employment,
real estate transactions and automotive sales. As a result of the current economic
recession and the ongoing secular trend of classified advertising transitioning to the
internet, our publishing businesses experienced a significant decrease in classified
advertising revenue in the second quarter of 2009 compared to the second quarter of 2008.
Classified advertising revenue in the second quarter of 2009 was $7.2 million, a decrease
of $6.5 million, or 46.8%, compared to $13.7 million in the second quarter of 2008. At our
daily newspaper, print and online classified advertising revenue decreased by 52.6% from
the second quarter of 2008. Specifically, the employment category decreased $3.4 million,
or 70.5%; automotive decreased $1.4 million, or 55.3%; real estate decreased $1.3 million,
or 47.3% and other decreased $0.3 million, or 14.1%. The average rate per inch of
classified advertising has decreased primarily due to the significant decrease in
employment classified revenue which, historically, has been at a higher rate than other
categories. The same trends persisted in our community newspapers and shoppers business.
At our community newspapers and shoppers business, a decrease in automotive, employment
and real estate classified advertising revenue was partially offset by an increase in
classified advertising revenue from newly acquired publications in Northern Wisconsin and
Florida in late 2008 and an increase in legal classified advertising in Florida due to an
increase in foreclosure notices.

The total decrease in retail and
classified automotive advertising at our daily newspaper in the second quarter of 2009 was
$1.8 million, or 55.6%, compared to the second quarter of 2008. The decrease was due to a
decline in demand for advertising from local dealers and regional dealer associations.
Consumers have decreased their purchases of new automobiles and, in response, local
dealers and regional dealer associations are reducing their costs, including advertising
costs.

Interactive advertising revenue is
reported in the various advertising revenue categories. Total retail and classified
interactive advertising revenue at our publishing businesses was $2.6 million in the
second quarter of 2009, a decrease of $1.2 million, or 32.4%, compared to $3.8 million in
the second quarter of 2008. Interactive classified advertising revenue at the daily
newspaper was $1.0 million in the second quarter of 2009, a decrease of $1.4 million, or
59.9%, compared to $2.4 million in the second quarter of 2008.  The $1.4 million
decrease was primarily due to decreases in automotive classified advertising of $0.7
million, or 78.8%, and employment classified advertising of $0.7 million, or 58.4%. The
current economic recession has negatively impacted automotive and employment online
advertising revenue. In the second quarter of 2009, revenue from automotive online
classified advertising at our daily newspaper was negatively impacted by the transition to
a new franchise relationship with CarSoup.com.

National advertising revenue in the
second quarter of 2009 was $1.2 million, a decrease of $0.3 million, or 20.6%, compared to
$1.5 million in the second quarter of 2008. The decrease was primarily due to a decrease
in ROP advertising in the retail, food and airline and travel categories, which are
predominantly consumer-driven. Partially offsetting these decreases were increases in the
finance/insurance, communications and furniture/furnishings categories.

Direct marketing revenue, consisting
of revenue from the sale of direct mail products of our daily newspaper, was $0.1 million
in the second quarter of 2009, a decrease of $0.8 million, or 85.6%, compared to $0.9
million in the second quarter of 2008 due to ceasing the operations of our Milwaukee-area
direct marketing facility.

Other advertising revenue, consisting
of revenue from company-sponsored event advertising at our community newspapers and
shoppers, was $0.1 million in both the second quarter of 2009 and the second quarter of
2008.

Circulation revenue in the second
quarter of 2009 accounted for 26.9% of total publishing revenue compared to 20.7% in the
second quarter of 2008. The increase as a percentage of total revenue is due to the
decrease in advertising revenue and the overall decline in total revenue. Circulation
revenue of $13.3 million in the second quarter of 2009 increased $0.5 million, or 3.8%,
compared to $12.8 million in the second quarter of 2008. At our daily newspaper,
circulation revenue increased due to an increase in daily single copy revenue, following a
price increase to 75 cents per daily paper in the Milwaukee-metro market in January 2009.
Circulation average rates for the daily and Sunday editions increased on the strength of
pricing gains that more than offset a slight decrease in home delivery and single copy
sales. We believe this demonstates that readers value our newspaper. The Milwaukee
Journal Sentinel ranks number one among newspapers in the top 50 markets in the United
States for integrated newspaper audience, showing strength in print and
online, according to the Scarborough Reports. At our community newspapers and shoppers
business, circulation revenue increased due to the publications acquired in Northern
Wisconsin and Florida in late 2008.

Other revenue, which consists of
revenue from promotional and commercial distribution and commercial printing revenue at
our daily newspaper and commercial printing at the printing plants for our community
newspapers and shoppers, accounted for 8.2% of total publishing revenue in the second
quarter of 2009 compared to 6.9% in the second quarter of 2008. The increase as a
percentage of total revenue is due to the decrease in advertising revenue and the overall
decline in total revenue. Other revenue in the second quarter of 2009 was $4.1 million, a
decrease of $0.1 million, or 5.0%, compared to $4.2 million in the second quarter of 2008.
The $0.1 million decrease at our daily newspaper was primarily due to a decrease in
commercial printing revenue due to volume declines as certain customers reduced page
counts and number of copies and the loss of certain customers. This decrease was partially
offset by an increase in commercial delivery revenue from additional routes for USA
Today.

In July 2009, our daily newspaper
signed a commercial printing contract with The Kenosha News  a seven-day
newspaper located north of the Illinois and Wisconsin border. This is the first newspaper
that has completely outsourced all of its printing and packaging to our production plant.
Our daily newspaper will print 26,000 daily and 29,000 Sunday copies, plus weekly and
community products beginning in the third quarter of 2009.

28

---

Our publishing businesses returned to
profitability in the second quarter of 2009 after posting an operating loss in the first
quarter of 2009. Publishing operating earnings in the second quarter of 2009 were $3.3
million, a decrease of $2.4 million, or 42.2%, compared to operating earnings of $5.7
million in the second quarter of 2008. The decrease in operating earnings was due to the
decrease in advertising revenue. Our publishing businesses continue to reduce their
expense platforms to align them with the reduced revenue base. Total expenses decreased
$10.0 million, or 17.8%, in the second quarter of 2009 compared to the second quarter of
2008, primarily due to a decrease of $4.5 million in payroll-related costs. Since the end
of 2007, our full-time employee count for our publishing businesses has decreased by
20.2%. Excluding payroll-related costs, operating costs and expenses decreased $3.9
million in the second quarter of 2009 compared to the second quarter of 2008, the most
significant of which was newsprint and paper costs and online fees at our daily newspaper.
Total newsprint and paper costs for our publishing businesses in the second quarter of
2009 were $4.5 million, a decrease of $2.3 million, or 34.0%, compared to $6.8 million in
the second quarter of 2008 due to a 27.7% decrease in newsprint consumption and a 10.0%
decrease in average newsprint pricing per metric ton. Consumption of metric tonnes of
newsprint in the second quarter of 2009 decreased primarily due to decreases in average
net paid circulation, ROP advertising and editorial pages. Online fees at our daily
newspaper decreased by $0.6 million in the second quarter of 2009 compared to the second
quarter of 2008 primarily due to the transition to a new franchise relationship with
CarSoup.com and due to the decrease in interactive employment classified advertising.
Legal fees decreased by $0.3 million in the second quarter of 2009 compared to the second
quarter of 2008 due to a $0.4 million contract termination charge in the second quarter of
2008. Partially offsetting the expense decreases, bad debt expense increased $0.2 million
in the second quarter of 2009 compared to the second quarter of 2008. Due to the current
economic recession, our publishing business is encountering an increase in slow-paying
customers as well as customers who have filed bankruptcy.

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

Revenue from broadcasting in the
second quarter of 2009 was $43.8 million, a decrease of $9.7 million, or 18.2%, compared
to $53.5 million in the second quarter of 2008. Operating loss from broadcasting in the
second quarter of 2009 was $12.7 million, including a $19.0 million non-cash broadcast
license impairment charge and a $1.7 million gain related to insurance proceeds from our
tower replacement in Wichita, Kansas. This compared to operating earnings of $9.7 million
in the second quarter of 2008.

The following table presents our
broadcasting revenue, broadcast license impairment and operating earnings (loss) for the
second quarter of 2009 and the second quarter of 2008:

|                          | 2009 | 2008 | Percent
|------------------------- | ---- | ---- | -------
|
|
|Revenue                   |      |      | $      
|                          |      |      |        
|Broadcast license         |      |     
|impairment                |      |      | $      
|                          |      |      |        
|Operating earnings (loss) |      |      | $      
|                          |      |      |        

Revenue from our television stations
in the second quarter of 2009 was $26.7 million, a decrease of $5.9 million, or 18.2%,
compared to $32.6 million in the second quarter of 2008. The revenue decrease was
experienced across all of our television markets, partially offset by revenue of $1.2
million from the acquisitions of KWBA-TV in Sierra Vista, Arizona (Tucson market) in the
third quarter of 2008 and KNIN-TV in Boise, Idaho in the second quarter of 2009. Compared
to the second quarter of 2008, local advertising revenue decreased $3.5 million, or 15.0%;
national advertising revenue decreased $2.8 million, or 35.9%; and political and issue
advertising revenue decreased $0.2 million, or 36.5%. While there will be some political
and issue advertising in 2009, it is generally considered a non-election year, and,
accordingly, we will experience a significant decrease in the political and issue
advertising revenue category throughout the year in our comparisons to 2008. Television
advertising revenue and rates in even-numbered years benefit from political and issue
advertising because there is more pressure on inventory as advertising increases, which
drives rates upward. The current economic recession has negatively impacted our
advertising revenue across most categories, the most significant being our largest revenue
category  automotive, which represented 12.9% of television advertising revenue in
the second quarter of 2009 compared to 23.3% in the second quarter of 2008. Automotive
advertising revenue decreased $4.1 millionin the second quarter of 2009 compared
to the second quarter of 2008 as the automobile industry is experiencing an unprecedented
decrease in automotive sales. The decline in automotive advertising had a negative impact
on the average unit rate we charge our advertisers. National automotive revenue is heavily
placed in prime time, which helps drive average unit rates among other advertisers. When
that placement doesnt occur in prime time, it negatively impacts the rate we can
charge our advertisers even when the sell-out levels are high, which they were in the
second quarter of 2009. The other consumer-driven categories that felt the impact of the
economic recession and caused revenue decreases included furniture and electronics,
communications, medical, professional services, home improvement, entertainment and
restaurants. In an effort to overcome the decrease in automotive and other consumer-driven
advertising revenue, our television stations are working to replace this lost revenue with
developmental revenue. Developmental revenue refers to non-transactional revenue that
targets non-traditional advertisers. While developmental revenue was $3.8 million in the
second quarter of 2009 and the second quarter of 2008, it increased as a percentage of
total revenue from our television stations to 14.4%, up from 11.9%. Interactive revenue
was $0.3 million in the second quarter of 2009, a decrease of $0.1 million, or 12.5%,
compared to $0.4 million in the second quarter of 2008. Both interactive and developmental
revenue are reported in local advertising revenue. Partially offsetting the revenue
decreases was an increase in retransmission revenue and revenue in the financial, media
and casino and gambling categories. Retransmission revenue increased $0.6 million in the
second quarter of 2009 to $1.0 million, compared to $0.4 million in the second quarter of
2008. We are near completion in our discussions to finalize retransmission contracts
covering about 95% of the subscribers in our markets. These contracts will continue to
generate incremental revenue through the remainder of 2009 and into the next several
years.

29

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Operating loss from our television
stations in the second quarter of 2009 was $13.4 million compared to operating earnings of
$4.6 million in the second quarter of 2008. The decrease in operating earnings was
primarily due to a $14.9 million non-cash impairment charge for seven television broadcast
licenses and the impact of the decrease in advertising revenue. Total television expenses
in the second quarter of 2009 were $40.1 million, an increase of $12.1 million compared to
$28.0 million in the second quarter of 2008. The increase in total television expenses was
primarily due to the $14.9 non-cash impairment charge, $0.8 million in additional expenses
from television stations acquired in 2008 and 2009 and a $0.3 million increase in legal
fees. Partially offsetting these expense increases was a decrease of $2.7 million in
payroll-related costs and various other expense reductions, primarily marketing and
vendor-related expenses. Our television stations continue to reduce their expense platform
to align it with a reduced revenue base.

Revenue from our radio stations in
the second quarter of 2009 was $17.1 million, a decrease of $3.8 million, or 18.1%,
compared to $20.9 million in the second quarter of 2008. The revenue decrease was
experienced across all of our radio markets. Compared to the second quarter of 2008, local
advertising revenue decreased $3.3 million, or 18.0% and national advertising revenue
decreased $0.5 million or 29.8%. Political and issue advertising revenue was $0.1 million
in the second quarter of 2009 and the second quarter of 2008. 2009 is generally considered
a non-election year, and therefore, we will experience a decrease in the political and
issue advertising revenue category throughout the remainder of the year in our comparisons
to 2008. The current economic recession has negatively impacted our advertising revenue
across most categories, the most significant being our largest revenue category 
automotive, which represented 13.0% of radio advertising revenue in the second quarter of
2009 compared to 16.6% in the second quarter of 2008. Automotive advertising revenue
decreased $1.3 million in the second quarter of 2009 compared to the second quarter of
2008 as the domestic automobile industry is experiencing an unprecedented decrease in
automotive sales. The other consumer-driven categories that felt the impact of the
economic recession and caused revenue decreases included medical, media, communications,
hotel and gambling, home improvement, restaurants and furniture and electronics, partially
offset by increases in the travel, beverages and financial categories. In an effort to
overcome the decrease in automotive and other consumer-driven advertising revenue, our
radio stations are working to replace this lost revenue with developmental revenue. While
developmental revenue decreased $0.2 million in the second quarter of 2009 compared to the
second quarter of 2008, it actually increased as a percentage of total revenue from our
radio stations to 17.3%, up from 15.0%. Interactive revenue was $0.5 million in the second
quarter of 2009 and the second quarter of 2008. Both interactive and developmental revenue
are reported in local advertising revenue.

Operating earnings from our radio
stations in the second quarter of 2009 were $0.7 million, a decrease of $4.4 million, or
86.5%, compared to $5.1 million in the second quarter of 2008. The decrease in operating
earnings was due to a $4.1 million non-cash impairment charge for 11 radio broadcast
licenses, the impact of the decrease in advertising revenue and an increase in sports
rights fees. Partially offsetting the decrease in operating earnings was a $1.7 million
gain related to insurance proceeds from our tower replacement in Wichita, Kansas that was
destroyed in an ice storm, a decrease of $1.3 million in payroll-related costs, and
various other expense reductions, primarily marketing and vendor-related expenses. Our
radio stations continue to reduce their expense platform to align it with a reduced
revenue base.

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

Revenue from printing services in the
second quarter of 2009 was $11.2 million, a decrease of $5.6 million, or 33.0%, compared
to $16.8 million in the second quarter of 2008. Operating loss from printing services in
the second quarter of 2009 was $0.4 million compared to operating earnings of $0.8 million
in the second quarter of 2008.

The decrease in printing services
revenue was primarily due to the effects of the current economic recession. Revenue from
printing publications and revenue from Dell and other computer-related customers decreased
in the second quarter of 2009 compared to the second quarter of 2008. Our printing
services customers continue to reduce their print volumes, cease to print and/or
take their printing needs out for bid in order to achieve lower pricing. We expect these
trends to continue throughout 2009. We believe our revenue from Dell, which was $0.5
million in the second quarter of 2009, will cease in the second half of 2009.

The decrease in printing services
operating earnings was primarily due to the impact from the decrease in revenue. Total
expenses decreased $4.3 million, or 27.0%, in the second quarter of 2009 compared to the
second quarter of 2008. The decrease in total expenses was primarily due to a decrease of
$2.6 million in raw materials expense, a decrease of $1.7 million in payroll-related
costs, partially offset by an increase of $0.2 million in bad debt expense. Due to the
current economic recession, our printing services business is encountering an increase in
slow-paying customers as well as customers who have filed bankruptcy.

| | Other
| | -----

Other revenue in the second quarter
of 2009 was $5.0 million, a decrease of $3.0 million, or 37.4%, compared to $8.0 million
in the second quarter of 2008. Other operating loss was $0.2 million in the second quarter
of 2009 compared to operating earnings of $0.4 million in the second quarter of 2008.

30

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The following table presents our
other revenue and operating earnings (loss) for the second quarter of 2009 and the second
quarter of 2008:

|                          | 2009 | 2008
|------------------------- | ---- | ----
|
|
|Revenue                   |      |     
|                          |      |     
|Operating earnings (loss) |      |     
|                          |      |     

The decrease in direct marketing
services revenue was primarily due to the effects of the current economic recession.
Revenue from mailing services, offset printing and postage decreased in the second quarter
of 2009 compared to the second quarter of 2008 as the demand for direct marketing
advertising continues to decrease and customers change from first-class mailings to bulk
mailings or third-class mailings. This decrease was partially offset by an increase in
laser printing revenue. Included in revenue and operating costs and expenses from our
direct marketing services business is $2.9 million and $4.7 million of postage amounts
billed to customers in the second quarter of 2009 and the second quarter of 2008,
respectively.

The decrease in operating earnings at
our other segment was primarily due to the operating earnings impact of the
decrease in revenue at our direct marketing services business, partially offset by a
decrease in payroll-related costs at corporate and at our direct marketing services
business.

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

There was no interest income in the
second quarter of 2009 and interest income was insignificant in the second quarter of
2008. Interest expense was $0.7 million in the second quarter of 2009 compared to $1.9
million in the second quarter of 2008. The decrease is due to a decrease in both the
average borrowings during the quarter and the interest rate on our borrowings.
Amortization of deferred financing costs was $0.1 million in the second quarter of 2009
and the second quarter of 2008.

Our effective tax benefit rate was
54.9% in the second quarter of 2009 compared to an effective tax provision rate of 38.9%
in the second quarter of 2008. The effective tax rate was impacted by the operating loss
created by the non-cash impairment charge and a favorable adjustment to our income tax
reserve due to the lapsing of certain open tax years.

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

There were no results from
discontinued operations in the second quarter 2009 and the second quarter of 2008.

| | Net
Earnings (Loss)
| | -------------------

Our net loss in the second quarter of
2009 was $4.8 million compared to net earnings of $9.0 million in the second quarter of
2008. The decrease was due to the decrease in operating earnings from continuing
operations for the reasons described above, partially offset by decreases in interest
expense and provision for income taxes.

| | Diluted
Earnings (Loss) per Share for Class A and B Common Stock
| | ----------------------------------------------------------------

In the second quarter of 2009, basic
and diluted net loss per share of class A and B common stock were $0.11 for both. This
compared to net earnings per share of $0.16 for both in the second quarter of 2008. Basic
and diluted loss per share of class A and B common stock from continuing operations were
$0.11 for both in the second quarter of 2009 compared to earnings per share of $0.16 for
both in the second quarter of 2008. There were no basic and diluted earnings per share of
class A and B common stock from discontinued operations in the second quarter of 2009 and
in the second quarter of 2008.

# Two Quarters Ended June
28, 2009 compared to the Two Quarters Ended June 29, 2008

Our consolidated revenue in the two
quarters of 2009 was $216.3 million, a decrease of $58.1 million, or 21.2%, compared to
$274.4 million in the two quarters of 2008. Our consolidated operating costs and expenses
in the two quarters of 2009 were $133.6 million, a decrease of $24.2 million, or 15.3%,
compared to $157.8 million in the two quarters of 2008. Our consolidated selling and
administrative expenses in the two quarters of 2009 were $74.3 million, a decrease of
$13.1 million, or 14.9%, compared to $87.4 million in the two quarters of 2008. Broadcast
license impairment was $19.0 million in the two quarters of 2009.

31

---

The following table presents our
total revenue by segment, total operating costs and expenses, selling and administrative
expenses, broadcast license impairment and total operating earnings (loss) as a percent of
total revenue for the two quarters of 2009 and the two quarters of 2008:

|                                               | 2009 | Percent of
Total
Revenue | 2008 | Percent of
Total
Revenue
|---------------------------------------------- | ---- | ------------------------ | ---- | ------------------------
|
|Revenue:                                       |      |                          |      |                         
|Publishing                                     |      |                          | $    | 97.6                    
|Broadcasting                                   |      |                          |      | 83.0                    
|Printing services                              |      |                          |      | 25.5                    
|Other                                          |      |                          |      | 10.2                    
|                                               |      |                          |      |                         
|Total revenue                                  |      |                          |      | 216.3                   
|Total operating costs and expenses             |      |                          |      | 133.6                   
|Selling and administrative expenses            |      |                          |      | 74.3                    
|Broadcast license impairment                   |      |                          |      | 19.0                    
|                                               |      |                          |      |                         
|Total operating costs and expenses and selling |      |                         
|and administrative expenses                    |      |                          |      | 226.9                   
|                                               |      |                          |      |                         
|Total operating earnings (loss)                |      |                          | $    | (10.6                   
|                                               |      |                          |      |                         

In addition to the secular influences
affecting the newspaper industry discussed above, the current economic recession
negatively impacted our publishing, broadcasting and direct marketing services advertising
revenue and commercial printing revenue in the two quarters of 2009.

In the newspaper industry, classified
advertising is generally the most sensitive to economic cycles because it is driven by the
demand of employment, real estate transactions and automotive sales. Newspaper classified
advertising also has been the most impacted by secular changes affecting the newspaper
industry. Classified advertising continues to move away from printed products to online
products. While we offer online products and seek to retain classified advertising, we
face increasing competition for this business and are losing the benefit of a strong base
of print classified advertising against which we can upsell online advertisements. Our
publishing business experienced a 48.0% decrease in classified advertising revenue in the
two quarters of 2009 compared to the two quarters of 2008. Retail ROP and preprint
advertising decreased 19.6% in the two quarters of 2009 compared to the two quarters of
2008 primarily in consumer-driven categories. As consumers have less discretionary income,
our advertisers are decreasing their spending on advertising. The most significant
decreases were in the furniture and furnishings, dining and entertainment,
finance/insurance, home improvement, small-retailers, health services, automotive, real
estate, business services, department stores and food categories. Secular changes
affecting the newspaper industry also are resulting in pressure to reduce costs and adjust
our business model in the face of decreasing revenues.

At our broadcasting business,
advertising revenue decreased in the two quarters across most categories, the most
significant being our largest revenue category  automotive. Automotive advertising
revenue decreased $9.7 million, or 47.1%, in the two quarters of 2009 compared to the two
quarters of 2008 as the domestic automobile industry is experiencing an unprecedented
decrease in automotive sales. While there will be some political and issue advertising
revenue in 2009, it is generally considered to be a non-election year, and, accordingly,
we will experience a significant decrease in the political and issue advertising revenue
category throughout the year in our comparisons to 2008. In the two quarters of 2009,
political and issue advertising revenue decreased $1.9 million compared to the two
quarters of 2008. This is part of the normal two-year advertising cycle which affects our
television stations in particular. Retransmission revenue increased $1.6 million in the
two quarters of 2009 compared to the two quarters of 2008, partially offsetting the
decrease in advertising revenue.

The decrease in printing services
revenue was primarily due to the effects of the current economic recession. Revenue from
printing publications and revenue from Dell and other computer-related customers decreased
in the two quarters of 2009 compared to the two quarters of 2008. At our direct marketing
services business, revenue from mailing and list services and postage decreased in the two
quarters of 2009 compared to the two quarters of 2008 as the demand for direct marketing
advertising continues to decrease.

The decrease in total operating costs
and expenses was primarily due to the decrease in revenue, a decrease in payroll-related
costs reflecting the savings from workforce reduction initiatives, a decrease in newsprint
and paper costs and a $1.7 million gain related to insurance proceeds from our tower
replacement in Wichita, Kansas. The decrease in selling and administrative expenses is
primarily due to decreases in payroll-related costs reflecting the savings from workforce
reduction initiatives and overall cost reduction initiatives as our businesses continue to
reduce expense platforms in response to the decrease in revenue. These expense decreases
were partially offset by an increase in bad debt expense at all of our businesses as each
are encountering an increase in slow-paying customers as well as customers who have filed
bankruptcy. We recorded a $19.0 million non-cash broadcast license impairment charge in
the two quarters of 2009 for seven television and 11 radio broadcast licenses.

32

---

Our consolidated operating loss in
the two quarters of 2009 was $10.6 million compared to operating earnings of $29.2 million
in the two quarters of 2008. The following table presents our operating earnings (loss) by
segment for the two quarters of 2009 and the two quarters 2008:

|                                | 2009 | Percent of
Total
Operating
Loss | 2008 | Percent of
Total
Operating
Earnings
|------------------------------- | ---- | ------------------------------- | ---- | -----------------------------------
|
|Publishing                      |      |                                 | $    | 1.7                                
|Broadcasting                    |      |                                 |      | (11.8                              
|Printing services               |      |                                 |      | (0.4                               
|Other                           |      |                                 |      | (0.1                               
|                                |      |                                 |      |                                    
|Total operating earnings (loss) |      |                                 | $    | (10.6                              
|                                |      |                                 |      |                                    

The decrease in total operating
earnings was primarily due to the $19.0 million non-cash impairment charge for seven
television and 11 radio broadcast licenses and the decrease in revenue at our publishing,
broadcasting, printing services and direct marketing services businesses.

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

Revenue from publishing in the two
quarters of 2009 was $97.6 million, a decrease of $25.0 million, or 20.4%, compared to
$122.6 million in the two quarters of 2008. Operating earnings from publishing in the two
quarters of 2009 were $1.7 million, a decrease of $8.3 million, or 83.0%, compared to
$10.0 million in the two quarters of 2008.

The following table presents our
publishing revenue by category and operating earnings for the two quarters of 2009 and the
two quarters of 2008:

|                            | 2009 | 2008
|--------------------------- | ---- | ----
|
|
|Advertising revenue:        |      |     
|Retail                      |      |     
|Classified                  |      |     
|National                    |      |     
|Direct Marketing            |      |     
|Other                       |      |     
|                            |      |     
|Total advertising revenue.. |      |     
|Circulation revenue         |      |     
|Other revenue               |      |     
|                            |      |     
|Total revenue               |      |     
|                            |      |     
|Operating earnings          |      |     
|                            |      |     

Advertising revenue accounted for
63.3% of total publishing revenue in the two quarters of 2009 compared to 71.6% in the two
quarters of 2008. The current economic recession and ongoing secular changes in the
newspaper industry have caused advertisers to decrease their advertising spending across
all of our advertising revenue categories. In addition, due to the changing mix of revenue
categories, frequency and placement of advertising in the newspaper and customer choices
to reduce or eliminate the use of color in their ads, we have seen a decrease in the
average rate per inch of advertising. This rapid decline in advertising revenue has been
partially offset by an increase in circulation revenue and commercial delivery revenue.

Retail advertising revenue in the two
quarters of 2009 was $44.5 million, a decrease of $10.8 million, or 19.6%, compared to
$55.3 million in the two quarters of 2008. The $9.2 million decrease at our daily
newspaper was primarily due to a decrease in ROP and preprint advertising in
consumer-driven categories. As consumers have less discretionary income, advertisers are
decreasing their spending. The most significant decreases were in the furniture and
furnishings, dining and entertainment, finance/insurance, home improvement,
small-retailers, health services, automotive, real estate, business services, department
stores and food categories. The same trends persisted in our community newspapers and
shoppers business. The $1.6 million decrease at our community newspapers and shoppers
business was primarily due to decreases in automotive and real estate advertising,
partially offset by revenue from publications acquired in Northern Wisconsin and Florida
in late 2008.

33

---

Classified advertising is generally
the most sensitive to economic cycles because it is driven by the demand of employment,
real estate transactions and automotive sales. As a result of the current economic
recession and the ongoing secular trend of classified advertising transitioning to the
internet, our publishing businesses experienced a significant decrease in classified
advertising revenue in the two quarters of 2009 compared to the two quarters of 2008.
Classified advertising revenue in the two quarters of 2009 was $14.1 million, a decrease
of $13.1 million, or 48.0%, compared to $27.2 million in the two quarters of 2008. At our
daily newspaper, print and online classified advertising revenue decreased by 53.1% from
the two quarters of 2008. Specifically, the employment category decreased $6.9 million, or
68.3%; automotive decreased $3.0 million, or 58.5%; real estate decreased $2.6 million, or
48.7% and other decreased $0.5 million, or 12.9%. The average rate per inch of classified
advertising has decreased primarily due to the significant decrease in employment
classified revenue which, historically, has been at a higher rate than other categories.
The same trends persisted in our community newspapers and shoppers business. At our
community newspapers and shoppers business, a decrease in automotive, employment and real
estate classified advertising revenue was partially offset by an increase in classified
advertising revenue from newly acquired publications in Northern Wisconsin and Florida in
late 2008 and an increase in legal classified advertising in Florida due to an increase in
foreclosure notices.

The total decrease in retail and
classified automotive advertising at our daily newspaper in the two quarters of 2009 was
$3.4 million, or 53.8%, compared to the two quarters of 2008. The decrease was due to a
decline in demand for advertising from local dealers and regional dealer associations.
Consumers have decreased their purchases of new automobiles and, in response, local
dealers and regional dealer associations are reducing their costs, including advertising
costs.

Interactive advertising revenue is
reported in the various advertising revenue categories. Total retail and classified
interactive advertising revenue at our publishing businesses was $4.6 million in the two
quarters of 2009, a decrease of $2.8 million, or 38.2%, compared to $7.4 million in the
two quarters of 2008. Interactive classified advertising revenue at the daily newspaper
was $1.9 million in the two quarters of 2009, a decrease of $2.6 million, or 57.3%,
compared to $4.5 million in the two quarters of 2008.  The $2.6 million decrease was
primarily due to decreases in automotive classified advertising of $1.3 million, or 81.9%,
and employment classified advertising of $1.3 million, or 52.4%. The current economic
recession has negatively impacted automotive and employment online advertising revenue. In
the two quarters of 2009, revenue from automotive online classified advertising at our
daily newspaper was negatively impacted by the transition to a new franchise relationship
with CarSoup.com.

National advertising revenue in the
two quarters of 2009 was $2.6 million, a decrease of $0.9 million, or 26.3%, compared to
$3.5 million in the two quarters of 2008. The decrease was primarily due to a decrease in
ROP and preprint advertising in the retailers, dining and entertainment and airline and
travel categories, which are predominantly consumer-driven. Partially offsetting these
decreases were increases in the finance/insurance and communications categories.

Direct marketing revenue, consisting
of revenue from the sale of direct mail products of our daily newspaper, was $0.5 million
in the two quarters of 2009, a decrease of $1.1 million, or 71.9%, compared to $1.6
million in the two quarters of 2008. This revenue category was also negatively impacted by
the current economic recession as the demand for direct marketing advertising decreased.
In May 2009, we ceased the operations of our Milwaukee-area direct marketing facility. The
near-term and long-term business prospects did not support continuing this product
offering. We are now focusing our direct marketing efforts on our total market coverage
product. We began our transition from a mail-delivered product to a carrier-delivered
product in the second quarter of 2009 and we expect the transition to be completed by the
end of the third quarter of 2009. We expect to save $1.5 million annually in costs by
eliminating postal delivery. We anticipate being able to increase the weight of each
package without concern regarding increased delivery costs.

Other advertising revenue, consisting
of revenue from company-sponsored event advertising at our community newspapers and
shoppers, was $0.1 million in the two quarters of 2009 compared to $0.2 million in the two
quarters of 2008.

Circulation revenue in the two
quarters of 2009 accounted for 27.0% of total publishing revenue compared to 20.7% in the
two quarters of 2008. The increase as a percentage of total revenue is due to the
decrease in advertising revenue and the overall decline in total revenue. Circulation
revenue of $26.4 million in the two quarters of 2009 increased $1.0 million, or 3.9%,
compared to $25.4 million in the two quarters of 2008. At our daily newspaper,
circulation revenue increased due to an increase in daily single copy revenue, following
a price increase to 75 cents per daily paper in the Milwaukee-metro market in January
2009. Circulation average rates for the daily and Sunday editions increased on the
strength of pricing gains that more than offset a decrease in home delivery.  We believe
this demonstrates that readers value our newspaper. At our community newspapers and
shoppers business, circulation revenue increased due to the publications acquired in
Northern Wisconsin and Florida in late 2008.

Other revenue, which consists of
revenue from promotional and commercial distribution and commercial printing revenue at
our daily newspaper and commercial printing at the printing plants for our community
newspapers and shoppers, accounted for 9.7% of total publishing revenue in the two
quarters of 2009 compared to 7.7% in the two quarters of 2008. The increase as a
percentage of total revenue is due to the decrease in advertising revenue and the overall
decline in total revenue. Other revenue was $9.4 million in the two quarters of 2009 and
in the two quarters of 2008. The $0.1 million increase at our daily newspaper was
primarily due to an increase in commercial delivery revenue from additional routes for
USA Today, partially offset by a decrease in commercial printing revenue due to
volume declines as certain customers reduced page counts and number of copies and the loss
of certain customers. The $0.1 million decrease at our community newspapers and shoppers
was due to the loss of certain customers.

34

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In July 2009, our daily newspaper
signed a commercial printing contract with The Kenosha News  a seven-day
newspaper located north of the Illinois and Wisconsin border. Our daily newspaper will
begin printing in the third quarter of 2009.

Publishing operating earnings in the
two quarters of 2009 were $1.7 million, a decrease of $8.3 million, or 83.0%, compared to
$10.0 million in the two quarters of 2008. The decrease in operating earnings was due to
the impact of the decrease in advertising revenue. Our publishing businesses continue to
reduce their expense platforms to align them with the reduced revenue base. Total expenses
decreased $16.7 million, or 14.8%, in the two quarters of 2009 compared to the two
quarters of 2008 primarily due to a decrease of $8.5 million in payroll-related costs.
Excluding payroll-related costs, operating costs and expenses decreased $5.2 million in
the two quarters of 2009 compared to the two quarters of 2008, the most significant of
which was newsprint and paper costs and online fees at our daily newspaper. Total
newsprint and paper costs for our publishing businesses in the two quarters of 2009 were
$9.8 million, a decrease of $2.9 million, or 22.6%, compared to $12.7 million in the two
quarters of 2008 due to a 26.4% decrease in newsprint consumption, partially offset by a
5.3% increase in average newsprint pricing per metric ton. Consumption of metric tonnes of
newsprint in the two quarters of 2009 decreased primarily due to decreases in average net
paid circulation, ROP advertising and editorial pages. Online fees at our daily newspaper
decreased by $1.1 million in the two quarters of 2009 compared to the two quarters of 2008
primarily due to the daily newspapers transition to a new franchise relationship
with CarSoup.com and due to the decrease in interactive employment classified advertising.
Legal fees decreased by $0.5 million in the two quarters of 2009 compared to the two
quarters of 2008 due to a $0.4 million contract termination charge in the two quarters of
2008. Bad debt expense increased $0.6 million in the two quarters of 2009 compared to the
two quarters of 2008. Due to the current economic recession, our publishing business is
encountering an increase in slow-paying customers as well as customers who have filed
bankruptcy.

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

Revenue from broadcasting in the two
quarters of 2009 was $83.0 million, a decrease of $19.8 million, or 19.3%, compared to
$102.8 million in the two quarters of 2008. Operating loss from broadcasting in the two
quarters of 2009 was $11.8 million, including a $19.0 million non-cash broadcast license
impairment charge and a $1.7 million gain related to insurance proceeds from our tower
replacement in Wichita, Kansas. This compared to operating earnings of $16.8 million in
the second quarter of 2008.

The following table presents our
broadcasting revenue, broadcast license impairment and operating earnings (loss) for the
two quarters of 2009 and the two quarters of 2008:

|                          | 2009 | 2008 | Percent
|------------------------- | ---- | ---- | -------
|
|
|Revenue                   |      |      | $      
|                          |      |      |        
|Broadcast license         |      |     
|impairment                |      |      | $      
|                          |      |      |        
|Operating earnings (loss) |      |      | $      
|                          |      |      |        

Revenue from our television stations
in the two quarters of 2009 was $52.6 million, a decrease of $12.3 million, or 19.0%,
compared to $64.9 million in the two quarters of 2008. The revenue decrease was
experienced across all of our television markets, partially offset by incremental revenue
of $1.9 million from the 2008 acquisitions of KPSE-TV in Palm Springs, California and
KWBA-TV in Sierra Vista, Arizona (Tucson market) and the acquisition of KNIN-TV in Boise,
Idaho in 2009. Compared to the two quarters of 2008, local advertising revenue decreased
$7.3 million, or 15.8%; national advertising revenue decreased $4.8 million or 31.6%; and
political and issue advertising revenue decreased $1.8 million, or 81.6%. 2009 is
generally considered a non-election year, and, accordingly, we will experience a
significant decrease in the political and issue advertising revenue category throughout
the year in our comparisons to 2008. Television advertising revenue and rates in
even-numbered years benefit from political and issue advertising because there is more
pressure on inventory as advertising increases, which drives rates upward. The current
economic recession has negatively impacted our advertising revenue across most categories,
the most significant being our largest revenue category  automotive, which
represented 13.4% of television advertising revenue in the two quarters of 2009 compared
to 22.6% in the two quarters of 2008. Automotive advertising revenue decreased $7.6
millionin the two quarters of 2009 compared to the two quarters of 2008 as the
automobile industry is experiencing an unprecedented decrease in automotive sales. The
decline in automotive advertising had a negative impact on the average unit rate we charge
our advertisers. National automotive revenue is heavily placed in prime time, which helps
drive average unit rates among other advertisers. When that placement doesnt occur
in prime time, it negatively impacts the rate we can charge our advertisers even when the
sell-out levels are high. The other consumer-driven categories that felt the impact of the
economic recession and caused revenue decreases included furniture and electronics,
professional services, medical, restaurants, communications, home products, retail, home
improvement, entertainment and leisure. In an effort to overcome the decrease in
automotive and other consumer-driven advertising revenue, our television stations are
working to replace this lost revenue with developmental revenue. While developmental
revenue decreased $0.4 million in the two quarters of 2009 compared to the two quarters of
2008, it increased as a percentage of total revenue from our television stations to 14.1%,
up from 12.0%. Interactive revenue was $0.7 million in the two quarters of 2009, a
decrease of $0.2 million, or 17.3%, compared to $0.9 million in the two quarters of 2008.
Both interactive and developmental revenue are reported in local advertising revenue.
Partially offsetting the revenue decreases was an increase in retransmission revenue and
revenue in the financial, casino and gambling and supermarkets categories. Retransmission
revenue increased $1.6 million in the two quarters of 2009 to $2.3 million, compared to
$0.7 million in the two quarters of 2008. We are near completion in our discussions to
finalize retransmission contracts covering about 95% of the subscribers in our markets.
These contracts will continue to generate incremental revenue through the remainder of
2009 and into the next several years.

35

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Operating loss from our television
stations in the two quarters of 2009 was $13.3 million compared to operating earnings of
$8.2 million in the two quarters of 2008. The decrease in operating earnings was primarily
due to a $14.9 million non-cash impairment charge for seven television broadcast licenses
and the impact of the decrease in advertising revenue. Total television expenses in the
two quarters of 2009 were $65.9 million, an increase of $9.2 million, or 16.2%, compared
to $56.7 million in the two quarters of 2008. The increase in total television expenses
was primarily due to the $14.9 non-cash impairment charge, $1.3 million in incremental
expenses from television stations acquired in 2008 and 2009 and a $0.5 million increase in
legal fees. Partially offsetting these expense increases was a decrease of $4.6 million in
payroll-related costs and various other expense reductions, primarily marketing and
vendor-related expenses. Our television stations continue to reduce their expense
platforms to align them with a reduced revenue base.

Revenue from our radio stations in
the two quarters of 2009 was $30.4 million, a decrease of $7.5 million, or 19.8%, compared
to $37.9 million in the two quarters of 2008. The revenue decrease was experienced across
all of our radio markets. Compared to the two quarters of 2008, local advertising revenue
decreased $6.5 million, or 19.4%, national advertising revenue decreased $0.9 million or
30.1% and political and issued revenue decreased $0.1 million, or 19.7%. 2009 is generally
considered a non-election year, and therefore, we will experience a decrease in the
political and issue advertising revenue category throughout the remainder of the year in
our comparisons to 2008. The current economic recession has negatively impacted our
advertising revenue across most categories, the most significant being our largest revenue
category  automotive, which represented 12.8% of radio advertising revenue in the
two quarters of 2009 compared to 15.9% in the two quarters of 2008. Automotive advertising
revenue decreased $2.1 million in the two quarters of 2009 compared to the two quarters of
2008 as the domestic automobile industry is experiencing an unprecedented decrease in
automotive sales. The other consumer-driven categories that felt the impact of the
economic recession and caused revenue decreases included medical, communications, media,
home improvement, restaurants, retail, furniture and electronics, hotel and gambling,
education and entertainment. In an effort to overcome the decrease in automotive and other
consumer-driven advertising revenue, our radio stations are working to replace this lost
revenue with developmental revenue. While developmental revenue decreased $0.6 million in
the two quarters of 2009 compared to the two quarters of 2008, it actually increased as a
percentage of total revenue from our radio stations to 19.2%, up from 17.2%. Interactive
revenue was $0.9 million in the two quarters of 2009 and the two quarters of 2008. Both
interactive and developmental revenue are reported in local advertising revenue.

Operating earnings from our radio
stations in the two quarters of 2009 were $1.5 million, a decrease of $7.1 million, or
82.9%, compared to $8.6 million in the two quarters of 2008. The decrease in operating
earnings was due to a $4.1 million non-cash impairment charge for 11 radio broadcast
licenses, the impact of the decrease in advertising revenue and an increase in sports
rights fees. Partially offsetting the decrease in operating earnings was a $1.7 million
gain related to insurance proceeds from our tower replacement in Wichita, Kansas that was
destroyed in an ice storm, a decrease of $2.4 million in payroll-related costs, and
various other expense reductions, primarily marketing and vendor-related expenses. Our
radio stations continue to reduce their expense platforms to align them with a reduced
revenue base.

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

Revenue from printing services in the
two quarters of 2009 was $25.5 million, a decrease of $7.8 million, or 23.3%, compared to
$33.3 million in the two quarters of 2008. Operating loss from printing services in the
two quarters of 2009 was $0.4 million compared to operating earnings of $1.6 million in
the two quarters of 2008.

The decrease in printing services
revenue was primarily due to the effects of the current economic recession. Revenue from
printing publications and revenue from Dell and other computer-related customers decreased
in the two quarters of 2009 compared to the two quarters of 2008. Our printing
services customers continue to reduce their print volumes, cease to print and/or
take their printing needs out for bid in order to achieve lower pricing. We expect these
trends to continue throughout 2009. We believe our revenue from Dell, which was $1.3
million in the two quarters of 2009, will cease in the second half of 2009.

The decrease in printing services
operating earnings was primarily due to the impact from the decrease in revenue. Total
expenses decreased $5.8 million, or 18.2%, in the two quarters of 2009 compared to the two
quarters of 2008. The decrease in total expenses was primarily due to a decrease of $3.1
million in raw materials expense, a decrease of $2.7 million in payroll-related costs,
partially offset by an increase of $0.5 million in postage and freight expense and an
increase of $0.3 million in bad debt expense. Due to the current economic recession, our
printing services business is encountering an increase in slow-paying customers as well as
customers who have filed bankruptcy.

| | Other
| | -----

Other revenue in the two quarters of
2009 was $10.2 million, a decrease of $5.5 million, or 35.0%, compared to $15.7 million in
the two quarters of 2008. Other operating loss was $0.1 million in the two quarters of
2009 compared to operating earnings of $0.8 million in the two quarters of 2008.

36

---

The following table presents our
other revenue and operating earnings (loss) for the two quarters of 2009 and the two
quarters of 2008:

|                          | 2009 | 2008
|------------------------- | ---- | ----
|
|
|Revenue                   |      |     
|                          |      |     
|Operating earnings (loss) |      |     
|                          |      |     

The decrease in direct marketing
services revenue was primarily due to the effects of the current economic recession.
Revenue from mailing and list services and postage decreased in the two quarters of 2009
compared to the two quarters of 2008 as the demand for direct marketing advertising
continues to decrease and customers change from first-class mailings to bulk mailings or
third-class mailings. This decrease was partially offset by an increase in laser printing
revenue. Included in revenue and operating costs and expenses from our direct marketing
services business is $5.8 million and $9.1 million of postage amounts billed to customers
in the two quarters of 2009 and the two quarters of 2008, respectively.

The decrease in operating earnings at
our other segment was primarily due to the operating earnings impact of the
decrease in revenue at our direct marketing services business, partially offset by a
decrease in payroll-related costs at corporate and at our direct marketing services
business.

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

Interest expense was $1.5 million in
the two quarters of 2009 compared to $4.2 million in the two quarters of 2008. The
decrease is due to a decrease in both the average borrowings during the quarter and the
interest rate on our borrowings. Amortization of deferred financing costs was $0.2 million
in the two quarters of 2009 and the two quarters of 2008.

Our effective tax benefit rate was
61.3% in the two quarters of 2009 compared to an effective tax provision rate of 38.9% in
the two quarters of 2008. The effective tax rate was impacted by the operating loss
created by the non-cash impairment charge, a settlement with the Wisconsin Department of
Revenue (WDR) and a favorable adjustment to our income tax reserve due to the lapsing of
certain open tax years. In connection with the settlement with the WDR, we received an
$8.7 million refund in the two quarters of 2009 from the deposit we made with it in 2007.

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

There were no results from
discontinued operations in the two quarters 2009. In the two quarters of 2008, we recorded
a gain on discontinued operations of $0.4 million for a reduction in the reserve related
to a settlement between the Environmental Protection Agency and NorthStar Print Group,
Inc.

| | Net
Earnings (Loss)
| | -------------------

Our net loss in the two quarters of
2009 was $4.7 million compared to net earnings of $15.7 million in the two quarters of
2008. The decrease was due to the decrease in operating earnings from continuing
operations for the reasons described above and the decrease in gain from discontinued
operations, partially offset by decreases in interest expense and provision for income
taxes.

| | Diluted
Earnings (Loss) per Share for Class A and B Common Stock
| | ----------------------------------------------------------------

In the two quarters of 2009, basic
and diluted net loss per share of class A and B common stock were $0.11 for both. This
compared to net earnings per share of $0.27 for both in the two quarters of 2008. Basic
and diluted loss per share of class A and B common stock from continuing operations were
$0.11 for both in the two quarters of 2009 compared to earnings per share of $0.26 for
both in the two quarters of 2008. There were no basic and diluted earnings per share of
class A and B common stock from discontinued operations in the two quarters of 2009
compared to $0.01 for both in the two quarters of 2008.

# Liquidity and Capital
Resources

Cash balances were $3.4 million at
June 28, 2009. We believe our expected cash flows from operations and borrowings available
under our credit facility will meet our needs for the next twelve months.

We have a $475.0 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 June 28, 2009
and December 28, 2008, we had borrowings of $178.3 million and $215.1 million,
respectively, under the facility at a weighted average rate of 0.99% and 2.10%,
respectively. Cash provided by operating activities was used primarily to decrease our
borrowings during the two quarters of 2009. Fees in connection with the facility of $1.7
million are being amortized over the term of the facility using the straight-line method.
The facility includes the following two financial covenants:

37

---

    A consolidated funded debt ratio of
not greater than 4-to-1, as determined for the four fiscal quarter period preceding the
date of determination. This ratio compares, for any period, our funded debt to our
earnings before interest, taxes, depreciation and amortization, as adjusted for
non-operational impairment charges recorded as a result of FASB Statement No. 142,
Goodwill and Other Intangible Assets. As of June 28, 2009, our consolidated
funded debt ratio was 2.94-to-1, resulting in a current maximum borrowing capacity of
$242.7 million. Our future borrowing capacity is subject to change due to changes in our
future operating results.

    An interest coverage ratio of not
less than 3-to-1, as determined for the four fiscal quarter period preceding the date of
determination. This ratio compares, for any period, our earnings before interest, taxes,
depreciation and amortization, as adjusted for non-operational impairment charges recorded
as a result of FASB Statement No. 142, Goodwill and Other Intangible Assets,
to our interest expense. As of June 28, 2009, our interest coverage ratio was
10.93to-1.

We define adjusted EBITDA as net
earnings (loss) excluding gain from discontinued operations, net, provision (benefit) for
income taxes, total other expense, net (which is entirely comprised of interest income and
expense), depreciation and amortization and, if any, non-cash impairment charges. This
calculation of adjusted EBITDA, as defined in our credit facility, is used in our two
financial covenants. Management primarily uses adjusted EBITDA to monitor our borrowing
capacity, a key component to our overall liquidity. Management also uses adjusted EBITDA,
among other things, to evaluate our operating performance compared to our operating plans
and/or prior years and its impact on our borrowing capacity and to value prospective
acquisitions. We believe the presentation of this measure is relevant and useful for
investors because it allows investors to view performance in a manner similar to the
method used by management and our lenders, helps to improve their ability to understand
our operating performance and our borrowing capacity and makes it easier to compare our
results with other companies that have different financing and capital structures or tax
rates. Adjusted EBITDA is also a primary measure used externally by our investors and our
peers in our industry for purposes of valuation and comparing our operating performance to
other companies in the industry. Adjusted EBITDA is not a measure of performance or
liquidity calculated in accordance with accounting principles generally accepted in the
United States. Adjusted 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. Adjusted EBITDA, as we calculate it, may
not be comparable to EBITDA measures reported by other companies.

Our consolidated adjusted EBITDA in
the second quarter of 2009 was $16.1 million, a decrease of $7.8 million, or 32.5%,
compared to $23.9 million in the two quarters of 2008. Our consolidated adjusted EBITDA in
the two quarters of 2009 was $22.7 million, a decrease of $21.2 million, or 48.3%,
compared to $43.9 million in the two quarters of 2008. The following table presents a
reconciliation of our consolidated net earnings to consolidated adjusted EBITDA for the
second quarter and two quarters of 2009 and the second quarter and two quarters of 2008:

|                                       | Second Quarter Ended | Two Quarters Ended
|-------------------------------------- | -------------------- | ------------------
|
|
|Net earnings (loss)                    |                      |                   
|Gain from discontinued operations, net |                      |                   
|Provision (benefit) for income taxes   |                      |                   
|Total other expense, net               |                      |                   
|Depreciation                           |                      |                   
|Amortization                           |                      |                   
|Broadcast license impairment           |                      |                   
|                                       |                      |                   
|Adjusted EBITDA                        |                      |                   
|                                       |                      |                   

Adjusted EBITDA for the four fiscal
quarter period proceeding June 28, 2009 was $60.7 million.

Our ability to remain in compliance with
these financial covenants may be impacted by a number of factors, including our ability to
continue to generate sufficient revenues and cash flows, as well as interest rates and
other risks and uncertainties set forth in Item 1A. Risk Factors of our most
recent Annual Report on Form 10-K. If it is determined we are not in compliance with these
financial covenants, the lenders in our credit facility syndicate will be entitled to take
certain actions, including acceleration of all amounts due under the facility. If actual
operating and cash flow results over the next 12 months are lower than current
projections, the margins by which we will comply with the covenants will decrease. In such
case, we may seek to amend or replace our current credit facility with one or more capital
sources on appropriate terms. If we were unable to remain in compliance with these
covenants or to amend or replace our current facility on appropriate terms, we could face
increased pressure to reduce or delay capital expenditures, dispose of assets or
operations, further reduce the size of our workforce or take other steps to revise our
capital structure or our business operations. We cannot assure you that we will have the
ability to take any of these actions or that these actions would be successful.

38

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Given the current economic crisis,
including the current instability of financial institutions, one or more of the lenders in
our credit facility syndicate could fail or be unable to fund future draws thereunder or
take other positions adverse to us. In such an event, our liquidity could be severely
constrained with an adverse impact on our ability to operate our businesses and we may be
forced to take the actions described above. We continue to monitor our current lenders and
compliance with our credit agreement terms and are working on possible strategies in the
event one or more of our lenders is unable or unwilling to fund future demands.

We have $1.0 million of standby
letters of credit for business insurance purposes.

In February 2009, we suspended our
matching contribution to our 401(k) plan through the remainder of 2009. In March 2009, our
board of directors approved an amendment to our 401(k) plan to suspend the annual employer
contribution for all active employees for 18 months beginning July 1, 2009. In April 2009,
a 6% employee-wage reduction program was initiated for most full-time employees for the
remainder of 2009. Collectively, we expect these actions to save $3.0 million in cash, net
of taxes, in 2009. These actions were taken in order to help maintain financial
flexibility in this difficult economic environment.

As we enter the third quarter of
2009, we have already started taking actions to reduce additional expenses to achieve our
operating margin goals with the offering of a voluntary newsroom buyout package at the
daily newspaper, as well as reductions in workforce at both our printing services and
direct marketing services businesses.  As a result of these and other actions, we are
estimating a gross workforce reduction charge of $4.0 to $5.5 million during the second
half of the year, the majority of which will be recorded in the third quarter of 2009,
primarily throughout the daily newspaper. These costs will impact our ability to
reduce debt at the same pace as in the first half of 2009. Nonetheless, we do expect to be
able to continue to pay down debt and to stay comfortably within our debt covenants.

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

Our board of directors made a
decision to reduce our first quarter 2009 dividend on our class A and class B shares to
$0.02 per share from $0.08 per shares in each quarter of 2008.  The quarterly
dividend on our class C shares remained at its historical level for the first quarter of
2009.  In April 2009, our board of directors suspended dividends on our class A and
class B shares given the challenging economic environment.  Our board of directors
also suspended the cumulative dividend on our class C shares.  The accumulated class
C dividend of approximately $0.14 per share must be paid prior to the payment of any
future dividends on our class A and class B shares.  Our board of directors
consistently reviews our dividend payment policy, as well as our ability to pay cash
dividends, at each quarterly board of directors meeting.

| | Acquisition
| | -----------

On April 23, 2009, Journal Broadcast
Group, Inc. and Journal Broadcast Corporation, our broadcasting businesses, completed the
asset purchase of KNIN-TV from Banks Boise, Inc. for $6.6 million. KNIN-TV is the CW
Network affiliate serving the Boise, Idaho market. We also own KIVI-TV, the ABC affiliate,
and six radio stations in Boise, Idaho. The purchase of KNIN-TV builds our cross-media
business in Boise, Idaho to better serve advertisers and viewers, builds a stronger
community presence in Boise, Idaho, and enhances our margin with multiple media
properties.

| | Sale
| | ----

On July 20, 2009, Journal Broadcast
Group, Inc. and Journal Broadcast Corporation, our broadcasting businesses, entered into
an asset purchase agreement with Salt & Light Radio, Inc., an Idaho non-profit
corporation, for the sale of KGEM-AM and KCID-AM in Boise, Idaho for $1.0 million. The
sale is subject to regulatory approval and customary closing conditions.

# Cash Flow

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

Cash provided by operating activities
was $46.8 million in the two quarters of 2009 compared to $29.7 million in the two
quarters of 2008. The increase was primarily due to cash provided by changes in working
capital and an $8.7 million refund of an income and franchise tax audit payment, which was
made in 2007, due to a settlement with the WDR.

Cash used for investing activities
was $9.4 million in the two quarters of 2009 compared to $14.7 million in the two quarters
of 2008. Capital expenditures were $3.8 million in the two quarters of 2009 compared to
$8.5 million in the two quarters of 2008. Our capital expenditures at our daily newspaper
in the two quarters of 2009 related primarily to building improvements and software
upgrades for production equipment. Our capital expenditures in our broadcasting segment in
the two quarters of 2009 related primarily to technology upgrades, including investments
in television and radio digital infrastructure and building improvements. We believe these
expenditures will help us to better serve our advertisers and viewers and will help to
facilitate our cost control initiatives. In 2009, our capital expenditures are expected to
be significantly less than the amount of capital expenditures in 2008 as all but critical
capital projects have been postponed for now. During the two quarters of 2009, we acquired
KNIN-TV in Boise, Idaho for $6.6 million. During the two quarters of 2008, we acquired
KPSE-LP in Palm Springs, California for $4.7 million and two community newspapers and two
community shoppers for $1.6 million. In the two quarters of 2009, we received $1.0 million
in insurance proceeds for our tower replacement in Wichita, Kansas that was destroyed in
an ice storm. We expect to receive an additional $0.9 million in insurance proceeds by the
end of 2009.

39

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Cash used for financing activities
was $38.1 million in the first quarter of 2009 compared to $17.4 million in the two
quarters of 2008. Borrowings under our credit facility in the first quarter of 2009 were
$69.6 million and we made payments of $106.4 million, reflecting a $36.8 million decrease
in our debt outstanding compared to borrowings of $106.4 million and payments of $73.8
million in the two quarters of 2008. The increase in borrowings in the two quarters of
2008 was used to finance the repurchase our class A common stock for $40.8 million. We
paid cash dividends of $1.5 million and $9.5 million in the two quarters of 2009 and the
two quarters of 2008, respectively.

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

There was no cash provided by
discontinued operations in the two quarters of 2009 compared to $0.4 million in the two
quarters of 2008, which reflected a reduction in the reserve related to a settlement
between the Environmental Protection Agency and NorthStar Print Group, Inc.

# New Accounting Standards

| | Future
Adoptions
| | ----------------

In June 2009, the FASB issued FASB
Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of
Generally Accepted Accounting Principles-A Replacement of FASB Statement No. 162.
Under Statement No. 168, the FASB Accounting Standards Codification (Codification) will
become the single source of authoritative U.S. generally accepted accounting principles
(GAAP) recognized by the FASB to be applied by nongovernmental entities. Rules and
interpretive releases of the Securities and Exchange Commission (SEC) under authority of
federal security laws are also sources of authoritative GAAP for SEC registrants. On the
effective date of this Statement, the Codification will supersede all then-existing
non-SEC accounting and reporting standards. All other non-SEC accounting literature not
included in the Codification will become nonauthoritative. The GAAP hierarchy will be
modified to include only two levels of GAAP: authoritative and nonauthoritative. This
Statement is effective for financial statements issued for interim and annual periods
ending after September 15, 2009. We will begin to use the new Codification when referring
to GAAP in its quarterly report on Form 10-Q for the third quarter and three quarters
ended September 27, 2009. We do not believe the effect of adopting Statement No. 168 will
have a material impact on our consolidated financial statements.

In June 2009, the FASB issued
Accounting Standards Update No. 2009-01, Topic 105-Generally Accepted Accounting
Principles amendments based on Statement of Financial Accounting Standards No. 168 
The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles. Accounting Standards Update No. 2009-01 amends the FASB
Accounting Standards Codification for the issuance of Statement No. 168. Accounting
Standards Update No. 2009-01 includes Statement No. 168 in its entirety, including the
accounting standards update instructions.

In June 2009, the FASB issued
Accounting Standards Update No. 2009-02, Omnibus Update-Amendments to Various Topics
for Technical Corrections. This Accounting Standards Update makes a number of
technical corrections to the various topics in the Codification.

In December 2008, the FASB issued
FASB Staff Position (FSP) FAS 132(R)-1, Employers Disclosures about
Postretirement Benefit Plan Assets, which amends FASB Statement No. 132 (Revised
2003), Employers Disclosures about Pensions and Other Postretirement
Benefits, to provide guidance on an employers disclosures about plan assets of
a defined benefit pension or other postretirement plan. This pronouncement is effective
for fiscal years ending after December 15, 2009. Upon initial application, the provisions
of this FSP are not required for earlier periods that are presented for comparative
purposes. Earlier application of the provisions is permitted. We do not believe the effect
of adopting FSP FAS 132(R)-1 will have a material impact on our consolidated financial
statements.

In May 2009,  the FASB issued FASB
Statement No. 165,  Subsequent  Events. This Statement  provides  general
 standards of accounting for and  disclosure of events that occur after the balance sheet
date but before  financial  statements  are issued or are available to be issued.
 Specifically, Statement No. 165 provides:

    The period after the balance sheet
date during which management of a reporting entity should evaluate events or transactions
that may occur for potential recognition or disclosure in the financial statements;

    The circumstance under which an
entity should recognize events or transactions occurring after the balance sheet date in
its financial statements; and

    The disclosures that an entity
should make about events or transactions that occurred after the balance sheet date.

40

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Statement  No.  165 is  effective
 for  interim  or  annual  financial  periods  ending  after  June 15,  2009,  and  shall
be  applied prospectively.  We  adopted  Statement  No. 165 in the  second  quarter  of
2009.  The  adoption  of  Statement  No. 165 did not have a material impact on our
consolidated financial statements.

In April 2009, the FASB issued FSP
FAS 107-1 and Accounting Principal Board (APB) 28-1, Interim Disclosures about Fair
Value of Financial Instruments. This FSP amends FASB Statement No. 107,
Disclosures about Fair Value of Financial Instruments, to require an entity to
provide disclosures about fair value of financial instruments in interim financial
information. This FSP also amends APB Opinion No. 28, Interim Financial
Reporting, to require those disclosures in summarized financial information at
interim reporting periods. Under this FSP, a publicly traded company shall include
disclosures about the fair value of its financial instruments whenever it issues
summarized financial information for interim reporting periods. In addition, an entity
shall disclose in the body or in the accompanying notes of its summarized financial
information for interim reporting periods and in its financial statements for annual
reporting periods the fair value of all financial instruments for which it is practicable
to estimate that value, whether recognized or not recognized in the statement of financial
position, as required by Statement No. 107. FSP 107-1 and APB 28-1 are effective for
interim periods ending after June 15, 2009, with early adoption permitted for periods
ending after March 15, 2009 only if an entity also elects to early adopt FSP FAS 157-4 and
FSP FAS 115-2 and FAS 124-2. We adopted FSP FAS 107-1 and APB 28-1 in the second quarter
of 2009. The adoption of FSP FAS 107-1 and APB 28-1 did not have a material impact on our
consolidated financial statements.

In April 2009, the FASB issued FSP
FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the
Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not
Orderly. This FSP:

    Affirms that the objective of fair
value when the market for an asset is not active is the price that would be received to
sell the asset in an orderly transaction.

    Clarifies and includes additional
factors for determining whether there has been a significant decrease in market activity
for an asset when the market for that asset is not active.

    Eliminates the proposed presumption
that all transactions are distressed (not orderly) unless proven otherwise. The FSP
instead requires an entity to base its conclusion about whether a transaction was not
orderly on the weight of the evidence.

    Includes an example that provides
additional explanation on estimating fair value when the market activity for an asset has
declined significantly.

    Requires an entity to disclose a
change in valuation technique (and the related inputs) resulting from the application of
the FSP and to quantify its effects, if practicable.

    Applies to all fair value
measurements when appropriate.

FSP FAS 157-4 must be applied
prospectively and retrospective application is not permitted. FSP FAS 157-4 is effective
for interim and annual periods ending after June 15, 2009, with early adoption permitted
for periods ending after March 15, 2009. An entity early adopting FSP FAS 157-4 must also
early adopt FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of
Other-Than-Temporary Impairments. We adopted FSP FAS 157-4 in the second quarter of
2009. The adoption of FSP FAS 157-4 did not have a material impact on our consolidated
financial statements.

In April 2009, the FASB issued FSP
FAS 141(R)-1, Accounting for Assets Acquired and Liabilities Assumed in a Business
Combination That Arise from Contingencies. This FSP amends the guidance in FASB
Statement No. 141 (Revised December 2007), Business Combinations, to:

    Require that assets acquired and
liabilities assumed in a business combination that arise from contingencies be recognized
at fair value if fair value can be reasonably estimated. If fair value of such an asset or
liability cannot be reasonably estimated, the asset or liability would generally be
recognized in accordance with FASB Statement No. 5, Accounting for
Contingencies, and FASB Interpretation (FIN) No. 14, Reasonable
Estimation of the Amount of a Loss. Further, the FASB decided to remove the
subsequent accounting guidance for assets and liabilities arising from contingencies from
Statement No. 141R, and carry forward without significant revision the guidance in FASB
Statement No. 141, Business Combinations.

    Eliminate the requirement to
disclose an estimate of the range of outcomes of recognized contingencies at the
acquisition date. For unrecognized contingencies, the FASB decided to require that
entities include only the disclosures required by Statement No. 5 and that those
disclosures be included in the business combination footnote.

    Require that contingent
consideration arrangements of an acquiree assumed by the acquirer in a business
combination be treated as contingent consideration of the acquirer and should be initially
and subsequently measured at fair value in accordance with Statement No. 141R.

41

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This FSP is effective for assets or
liabilities arising from contingencies in business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning on or
after December 15, 2008. We adopted FSP FAS 141(R)-1 in the first quarter of 2009. The
adoption of FSP FAS 141(R)-1 did not have a material impact on our consolidated financial
statements.

In June 2008, the FASB issued EITF
08-3, Accounting by Lessees for Nonrefundable Maintenance Deposits. EITF 08-3
requires that all nonrefundable maintenance deposits should be accounted for as a deposit.
When the underlying maintenance is performed, the deposit is expensed or capitalized in
accordance with the lessees maintenance accounting policy. Once it is determined
that an amount on deposit is not probable of being used to fund future maintenance
expense, it is recognized as additional expense at the time such determination is made.
EITF 08-3 is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those fiscal years. Earlier application is
not permitted. We adopted EITF 08-3 in the first quarter of 2009. The adoption of EITF
08-3 did not have a material impact on our consolidated financial statements.

In April 2008, the FASB issued FSP
FAS 142-3, Determination of the Useful Life of Intangible Assets. FSP FAS
142-3 requires that in developing assumptions about renewal or extension used to
determine the useful life of a recognized intangible asset, an entity shall consider its
own historical experience in renewing or extending similar arrangements; however, these
assumptions should be adjusted for entity-specific factors. In the absence of that
experience, an entity shall consider the assumptions that market participants would use
about renewal or extension (consistent with the highest and best use of the asset by
market participants), adjusted for the entity-specific factors. For a recognized
intangible asset, an entity shall disclose information that enables users of financial
statements to assess the extent to which the expected future cash flows associated with
the asset are affected by the entitys intent and/or ability to renew or extend the
arrangement. This guidance is effective for financial statements issued for fiscal years
beginning after December 15, 2008, and interim periods within those fiscal years. Early
adoption is prohibited. The guidance for determining the useful life of a recognized
intangible asset shall be applied prospectively to intangible assets acquired after the
effective date. The disclosure requirements shall be applied prospectively to all
intangible assets recognized as of, and subsequent to, the effective date. We adopted FSP
FAS 142-3 in the first quarter of 2009. The adoption of FSP FAS 142-3 did not have a
material impact on our consolidated financial statements.

In February 2008, the FASB issued FSP
FAS 157-2, Effective Date of FASB Statement No. 157, which delays the
effective date of Statement No. 157 for all nonfinancial assets and liabilities, except
those that are recognized or disclosed at fair value in the financial statements on a
recurring basis (at least annually) to fiscal years beginning after November 15, 2008. We
adopted FSP FAS 157-2 in the first quarter of 2009. The adoption of FSP FAS 157-2 did not
have a material impact on our consolidated financial statements.

In December 2007, the FASB issued
FASB Statement No. 141 (Revised 2007), Business Combinations. Statement No.
141R requires that an acquiring entity recognize all the assets acquired and liabilities
assumed in a transaction at the acquisition date fair value with limited exceptions.
Statement No. 141R will change the accounting treatment for acquisition costs,
non-controlling interests, contingent liabilities, in-process research and development,
restructuring costs, and income taxes. In addition, it also requires a substantial number
of new disclosure requirements. Statement No. 141R applies prospectively to business
combinations for which the acquisition date is on or after the beginning of the first
annual reporting period beginning on or after December 15, 2008. Earlier adoption is
prohibited. We adopted Statement No. 141R in the first quarter of 2009. The adoption of
Statement No. 141R did not have a material impact on our consolidated 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 28, 2008.

# 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 28, 2008.

# 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 Securities
Exchange Act of 1934, as amended, Rule 13a-15(e)) 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 Securitites 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.

42

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# PART II. OTHER
INFORMATION

# ITEM 1.     LEGAL PROCEEDINGS

None.

# ITEM 1A.     RISK FACTORS

There are no material changes to the
disclosures regarding risk factors made in Part I, Item 1A. of our Annual Report on Form
10-K for the year ended December 28, 2008.

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

There were no share repurchases
during the second quarter ended June 28, 2009.

We publicly announced a share
repurchase program on May 1, 2008, and commenced our repurchases on May 12, 2008, pursuant
to which our board of directors authorized the repurchase of up to 5,000,000 class A
shares over the following 18 months. After repurchasing 2,629,500 class A shares pursuant
to the authorization, we suspended our share repurchase program in October 2008 given the
current difficult economic environment.

# ITEM 3.     DEFAULTS UPON
SENIOR SECURITIES

None.

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

On April 30, 2009, we held our annual
meeting of shareholders for the purpose of voting on the following items:

| |  | The
election of three Class III directors: David J. Drury, Jonathan Newcomb and Roger D.
Peirce, and
| | - | ----------------------------------------------------------------------------------------------------

| |  | A
proposal that the shareholders ratify the appointment of PricewaterhouseCoopers LLP by
the Audit Committee as our independent registered public accounting firm for 2009.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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
82% of all votes were represented at the meeting in person or by proxy. The votes were:

|              
|--------------
|David J. Drury
|Votes For     
|Votes Withheld
|              
|Total Votes   
|              

|                     
|---------------------
|Term Expiring in 2010
|                     
|                     
|                     
|                     

The ratification of appointment of
PricewaterhouseCoopers LLP as our independent registered public accounting firm for 2009
was approved with the following voting results: 97,741,513 votes FOR the proposal,
2,662,289 votes AGAINST the proposal and 4,122,764 votes ABSTAINING.

43

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# 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 Andre J. Fernandez, Executive Vice President, Finance &          Strategy 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           Andre J.
Fernandez, Executive Vice President, Finance & Strategy 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.
|---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

44

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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:  July 30, 2009 | /s/ Steven J. Smith                                             
|                     | Steven J. Smith, Chairman and Chief Executive Officer           
|Date:  July 30, 2009 | /s/ Andre J. Fernandez                                          
|                     | Andre J. Fernandez, Executive Vice President, Finance & Strategy
|                     | and Chief Financial Officer                                     

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