UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


WASHINGTON,
D.C.  20549


FORM
10-Q





xQUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For
the quarterly period ended:  September 27, 2009


or





o    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 or organization)
            
            (I.R.S.
      Employer Identification No.)333 W. State Street, Milwaukee,
      Wisconsin
            
            53203(Address
      of principal executive offices)
            
            (Zip
      Code)800-388-2291Registrant'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
o





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
o  No
o





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 o
            Accelerated
      Filer x
            Non-accelerated
      Filer o
            Smaller
      reporting company o





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


Yes
o  No  x





Number of
shares outstanding of each of the issuer’s classes of common stock as of October
23, 2009 (excluding 8,676,705 shares of class B common stock held by our
subsidiary, The Journal Company):





Class
            Outstanding at October 23,
    2009Class
      A Common Stock
            41,640,929Class
      B Common Stock
            9,865,314Class
      C Common Stock
            3,264,000










JOURNALCOMMUNICATIONS, INC.





INDEX





Page No.Part
      I.
              Financial
      InformationItem
      1.
              Financial
      StatementsUnaudited Consolidated Condensed Balance Sheets as of September
      27, 2009 and December 28, 2008
              2Unaudited Consolidated Condensed Statements of Operations for
      the Third Quarter and Three Quarters Ended September 27, 2009 and
      September 28, 2008
              3Unaudited Consolidated Condensed Statement of Shareholders’
      Equity for the Three Quarters Ended September 27, 2009
              4Unaudited Consolidated Condensed Statements of Cash Flows for
      the Three Quarters Ended September 27, 2009 and September 28,
      2008
              5Notes to the Unaudited Consolidated Condensed Financial
      Statements as of September 27, 2009
              6Item
      2.
              Management's Discussion and Analysis of Financial Condition and
      Results of Operations
              21Item
      3.
              Quantitative and Qualitative Disclosure of Market
      Risk
              39Item
      4.
              Controls and Procedures
              40Part
      II.
              Other
      InformationItem
      1.
              Legal Proceedings
              40Item
      1A.
              Risk Factors
              40Item
      2.
              Unregistered Sales of Equity Securities and Use of
      Proceeds
              40Item
      3.
              Defaults Upon Senior Securities
              40Item
      4.
              Submission of Matters to a Vote of Security
      Holders
              40Item
      5.
              Other Information
              40Item
      6.
              Exhibits
              40


Index


PARTI.
            FINANCIAL
      INFORMATION





ITEM
      1.
            FINANCIAL
      STATEMENTS





JOURNAL
COMMUNICATIONS, INC.


Unaudited
Consolidated Condensed Balance Sheets


(in
thousands, except share and per share amounts)





September 27, 2009
            
            
            December 28, 2008AssetsCurrent
      assets:Cash
      and cash equivalents
            
            $
            3,425
            
            
            $
            4,040Receivables,
      less allowance for doubtful accounts of $4,952 and $4,734
            
            
            61,201
            
            
            
            79,418Inventories,
      net
            
            
            3,324
            
            
            
            5,935Prepaid
      expenses and other current assets
            
            
            12,081
            
            
            
            4,472Syndicated
      programs
            
            
            10,123
            
            
            
            11,088Deferred
      income taxes
            
            
            4,398
            
            
            
            4,869TotalCurrentAssets
            
            
            94,552
            
            
            
            109,822Property
      and equipment, at cost, less accumulated depreciation of $249,923 and
      $233,380
            
            
            206,788
            
            
            
            221,158Goodwill
            
            
            9,098
            
            
            
            4,285Broadcast
      licenses
            
            
            82,920
            
            
            
            101,120Other
      intangible assets, net
            
            
            25,470
            
            
            
            26,706Deferred
      income taxes
            
            
            64,346
            
            
            
            64,420Syndicated
      programs
            
            
            4,195
            
            
            
            3,091Other
      assets
            
            
            1,598
            
            
            
            11,997TotalAssets
            
            $
            488,967
            
            
            $
            542,599LiabilitiesAndShareholders’EquityCurrent
      liabilities:Accounts
      payable
            
            $
            23,735
            
            
            $
            23,582Accrued
      compensation
            
            
            11,417
            
            
            
            15,046Accrued
      employee benefits
            
            
            6,535
            
            
            
            7,214Deferred
      revenue
            
            
            16,218
            
            
            
            15,001Accrued
      income taxes
            
            
            134
            
            
            
            43Syndicated
      programs
            
            
            12,784
            
            
            
            12,348Other
      current liabilities
            
            
            7,930
            
            
            
            6,668Current
      portion of long-term liabilities
            
            
            575
            
            
            
            1,609TotalCurrentLiabilities
            
            
            79,328
            
            
            
            81,511Accrued
      employee benefits
            
            
            62,178
            
            
            
            64,620Syndicated
      programs
            
            
            7,415
            
            
            
            7,871Long-term
      notes payable to banks
            
            
            172,225
            
            
            
            215,090Other
      long-term liabilities
            
            
            2,485
            
            
            
            5,445Shareholders’
      equity:Preferred
      stock, $0.01 par – authorized 10,000,000 shares; no shares outstanding at
      September 27, 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 September 27, 2009 and December 28, 2008
            
            
            33
            
            
            
            33Class
      B – authorized 120,000,000 shares; issued and outstanding (excluding
      treasury stock):  9,903,559 shares at September 27, 2009 and
      9,938,816 shares at December 28, 2008
            
            
            176
            
            
            
            183Class
      A – authorized 170,000,000 shares; issued and outstanding: 41,598,934
      shares at September 27, 2009 and 40,553,107 shares at December 28,
      2008
            
            
            416
            
            
            
            406Additional
      paid-in capital
            
            
            258,068
            
            
            
            256,716Accumulated
      other comprehensive loss
            
            
            (33,152
            )
            
            
            (34,355
            )Retained
      earnings
            
            
            48,510
            
            
            
            53,794Treasury
      stock, at cost (8,676,705 class B shares)
            
            
            (108,715
            )
            
            
            (108,715
            )Total Shareholders’
      Equity
            
            
            165,336
            
            
            
            168,062TotalLiabilitiesAndShareholders’Equity
            
            $
            488,967
            
            
            $
            542,599





See
accompanying notes to unaudited consolidated condensed financial
statements.


2
 Index


JOURNALCOMMUNICATIONS, INC.


Unaudited
Consolidated Condensed Statements of Operations


(in
thousands, except per share amounts)





Third Quarter Ended
            
            
            Three Quarters EndedSeptember 27, 2009
            
            
            September 28, 2008
            
            
            September 27, 2009
            
            
            September 28, 2008Revenue:Publishing
            
            $
            46,479
            
            
            $
            59,452
            
            
            $
            144,036
            
            
            $
            181,997Broadcasting
            
            
            42,453
            
            
            
            53,994
            
            
            
            125,410
            
            
            
            156,790Printing
      services
            
            
            11,086
            
            
            
            16,099
            
            
            
            36,621
            
            
            
            49,395Other
            
            
            5,059
            
            
            
            6,725
            
            
            
            15,273
            
            
            
            22,443Total
      revenue
            
            
            105,077
            
            
            
            136,270
            
            
            
            321,340
            
            
            
            410,625Operating
      costs and expenses:Publishing
            
            
            27,316
            
            
            
            35,405
            
            
            
            86,387
            
            
            
            103,454Broadcasting
            
            
            24,098
            
            
            
            26,565
            
            
            
            67,333
            
            
            
            75,455Printing
      services
            
            
            9,957
            
            
            
            13,396
            
            
            
            32,216
            
            
            
            41,027Other
            
            
            4,485
            
            
            
            5,781
            
            
            
            13,488
            
            
            
            18,971Total
      operating costs and expenses
            
            
            65,856
            
            
            
            81,147
            
            
            
            199,424
            
            
            
            238,907Selling
      and administrative expenses
            
            
            35,542
            
            
            
            43,313
            
            
            
            109,879
            
            
            
            130,700Broadcast
      license impairment
            
            
            --
            
            
            
            38,762
            
            
            
            18,975
            
            
            
            38,762Total
      operating costs and expenses and selling and administrative
      expenses
            
            
            101,398
            
            
            
            163,222
            
            
            
            328,278
            
            
            
            408,369Operating
      earnings (loss)
            
            
            3,679
            
            
            
            (26,952
            )
            
            
            (6,938
            )
            
            
            2,256Other
      income and (expense):Interest
      income
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            2Interest
      expense
            
            
            (645
            )
            
            
            (1,940
            )
            
            
            (2,194
            )
            
            
            (6,103
            )Total
      other income and (expense)
            
            
            (645
            )
            
            
            (1,940
            )
            
            
            (2,194
            )
            
            
            (6,101
            )Earnings
      (loss) from continuing operations before income taxes
            
            
            3,034
            
            
            
            (28,892
            )
            
            
            (9,132
            )
            
            
            (3,845
            )Provision
      (benefit) for income taxes
            
            
            1,209
            
            
            
            (11,791
            )
            
            
            (6,246
            )
            
            
            (2,038
            )Earnings
      (loss) from continuing operations
            
            
            1,825
            
            
            
            (17,101
            )
            
            
            (2,886
            )
            
            
            (1,807
            )Gain
      from discontinued operations, net of $0 applicable income tax
      expense
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            400Net
      earnings (loss)
            
            $
            1,825
            
            
            $
            (17,101
            )
            
            $
            (2,886
            )
            
            $
            (1,407
            )Earnings
      (loss) per share:Basic
      – Class A and B common stock:Continuing
      operations
            
            $
            0.02
            
            
            $
            (0.35
            )
            
            $
            (0.08
            )
            
            $
            (0.06
            )Discontinued
      operations
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            0.01Net
      earnings (loss)
            
            $
            0.02
            
            
            $
            (0.35
            )
            
            $
            (0.08
            )
            
            $
            (0.05
            )Diluted
      – Class A and B common stock:Continuing
      operations
            
            $
            0.02
            
            
            $
            (0.35
            )
            
            $
            (0.08
            )
            
            $
            (0.06
            )Discontinued
      operations
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            0.01Net
      earnings (loss)
            
            $
            0.02
            
            
            $
            (0.35
            )
            
            $
            (0.08
            )
            
            $
            (0.05
            )Basic
      and diluted – Class C common stock:Continuing
      operations
            
            $
            0.17
            
            
            $
            0.14
            
            
            $
            0.43
            
            
            $
            0.42Discontinued
      operations
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            0.01Net
      earnings
            
            $
            0.17
            
            
            $
            0.14
            
            
            $
            0.43
            
            
            $
            0.43





See
accompanying notes to unaudited consolidated condensed financial
statements.


3
 Index


JournalCommunications, Inc.


Unaudited
Consolidated Statements of Shareholders' Equity


Three
Quarters Ended September 27, 2009


(in
thousands, except per share amounts)








AccumulatedAdditional
            
            
            Other
            
            
            
            
            
            TreasuryPreferred
            
            
            Common
      Stock
            
            
            Paid-in-
            
            
            Comprehensive
            
            
            Retained
            
            
            Stock,Stock
            
            
            Class
      C
            
            
            Class
      B
            
            
            Class
      A
            
            
            Capital
            
            
            Loss
            
            
            Earnings
            
            
            at
      cost
            
            
            TotalBalance
      at December 28, 2008
            
            $
            -
            
            
            $
            33
            
            
            $
            183
            
            
            $
            406
            
            
            $
            256,716
            
            
            $
            (34,355
            )
            
            $
            53,794
            
            
            $
            (108,715
            )
            
            $
            168,062Net
      earnings
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            121
            
            
            
            
            
            
            
            121Change
      in pension and postretirement (net of deferred tax expense of
      $962)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,438
            
            
            
            
            
            
            
            
            
            
            
            1,438Dividends
      declared:Class
      C ($0.142 per share)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (464
            )
            
            
            
            
            
            
            (464
            )Class
      B ($0.02 per share)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (200
            )
            
            
            
            
            
            
            (200
            )Class
      A ($0.02 per share)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (812
            )
            
            
            
            
            
            
            (812
            )Issuance
      of shares:Conversion
      of class B to class A
            
            
            
            
            
            
            
            
            
            
            (1
            )
            
            
            1
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Stock
      grants
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            10Employee
      stock purchase plan
            
            
            
            
            
            
            
            
            
            
            1
            
            
            
            
            
            
            
            209
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            210Shares
      withheld from employees for tax withholding
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (20
            )
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (20
            )Stock-based
      compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            325
            
            
            
            
            
            
            
            1
            
            
            
            
            
            
            
            326Balance
      at March 29, 2009
            
            
            -
            
            
            
            33
            
            
            
            183
            
            
            
            407
            
            
            
            257,240
            
            
            
            (32,917
            )
            
            
            52,440
            
            
            
            (108,715
            )
            
            
            168,671Net
      earnings
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (4,832
            )
            
            
            
            
            
            
            (4,832
            )Change
      in pension and postretirement (net of deferred tax benefit of
      $176)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (258
            )
            
            
            
            
            
            
            
            
            
            
            (258
            )Dividends
      declared:Class
      C ($0.142 per share)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (464
            )
            
            
            
            
            
            
            (464
            )Issuance
      of shares:Conversion
      of class B to class A
            
            
            
            
            
            
            
            
            
            
            (2
            )
            
            
            2
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Stock
      grants
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            73
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            73Stock-based
      compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            328
            
            
            
            
            
            
            
            5
            
            
            
            
            
            
            
            333Balance
      at June 28, 2009
            
            
            -
            
            
            
            33
            
            
            
            181
            
            
            
            409
            
            
            
            257,641
            
            
            
            (33,175
            )
            
            
            47,149
            
            
            
            (108,715
            )
            
            
            163,523Net
      earnings
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,825
            
            
            
            
            
            
            
            1,825Change
      in pension and postretirement (net of deferred tax expense of
      $16)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            23
            
            
            
            
            
            
            
            
            
            
            
            23Dividends
      declared:Class
      C ($0.142 per share)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (463
            )
            
            
            
            
            
            
            (463
            )Issuance
      of shares:Conversion
      of class B to class A
            
            
            
            
            
            
            
            
            
            
            (7
            )
            
            
            7
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            -Stock
      grants
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            21
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            21Employee
      stock purchase plan
            
            
            
            
            
            
            
            
            
            
            2
            
            
            
            
            
            
            
            158
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            160Stock-based
      compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            248
            
            
            
            
            
            
            
            (1
            )
            
            
            
            
            
            
            247Balance
      at September 27, 2009
            
            $
            -
            
            
            $
            33
            
            
            $
            176
            
            
            $
            416
            
            
            $
            258,068
            
            
            $
            (33,152
            )
            
            $
            48,510
            
            
            $
            (108,715
            )
            
            $
            165,336





See
accompanying notes to unaudited consolidated condensed financial
statements.


4
 Index


JOURNALCOMMUNICATIONS, INC.


Unaudited
Consolidated Condensed Statements of Cash Flows


(in
thousands)





Three Quarters EndedSeptember 27, 2009
            
            
            September 28, 2008Cash
      flow from operating activities:Net
      loss
            
            $
            (2,886
            )
            
            $
            (1,407
            )Less
      gain from discontinued operations
            
            
            --
            
            
            
            400Loss
      from continuing operations
            
            
            (2,886
            )
            
            
            (1,807
            )Adjustments
      for non-cash items:Depreciation
            
            
            19,891
            
            
            
            20,477Amortization
            
            
            1,481
            
            
            
            1,516Broadcast
      license impairment
            
            
            18,975
            
            
            
            38,762Provision
      for doubtful accounts
            
            
            2,162
            
            
            
            1,317Deferred
      income taxes
            
            
            (257
            )
            
            
            (4,470
            )Non-cash
      stock-based compensation
            
            
            1,005
            
            
            
            1,224Curtailment
      gains for pension plans
            
            
            (353
            )
            
            
            --(Gain)
      loss from disposal of assets
            
            
            (1,894
            )
            
            
            106Net
      changes in operating assets and liabilities, excluding effect of sales and
      acquisitions:Receivables
            
            
            16,055
            
            
            
            4,079Inventories
            
            
            2,611
            
            
            
            795Accounts
      payable
            
            
            153
            
            
            
            (5,509
            )Other
      assets and liabilities
            
            
            (2,967
            )
            
            
            (10,615
            )Net Cash Provided By Operating Activities
            
            
            53,976
            
            
            
            45,875Cash
      flow from investing activities:Capital
      expenditures for property and equipment
            
            
            (5,536
            )
            
            
            (15,139
            )Insurance
      proceeds and proceeds from sales of assets
            
            
            1,054
            
            
            
            49Sale
      of business
            
            
            492
            
            
            
            --Acquisition
      of businesses
            
            
            (6,593
            )
            
            
            (18,297
            )Net CashUsed For Investing
      Activities
            
            
            (10,583
            )
            
            
            (33,387
            )Cash
      flow from financing activities:Proceeds
      from long-term notes payable to banks
            
            
            105,365
            
            
            
            162,160Payments
      on long-term notes payable to banks
            
            
            (148,230
            )
            
            
            (117,895
            )Proceeds
      from issuance of common stock
            
            
            333
            
            
            
            527Redemption
      of common stock
            
            
            --
            
            
            
            (44,833
            )Cash
      dividends
            
            
            (1,476
            )
            
            
            (14,037
            )Net Cash Used For
      Financing Activties
            
            
            (44,008
            )
            
            
            (14,078
            )Net
      Decrease In Cash And Cash Equivalents
            
            
            (615
            )
            
            
            (1,590
            )Cash
      and cash equivalents:Beginning
      of year
            
            
            4,040
            
            
            
            6,256At
      September 27, 2009 and September 28, 2008
            
            $
            3,425
            
            
            $
            4,666





See
accompanying notes to unaudited consolidated condensed financial
statements.


5
 Index


JOURNALCOMMUNICATIONS, 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 three quarters of 2008.  The operating
results for the third quarter and three quarters ended September 27, 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.





We have
evaluated subsequent events through October 30, 2009, the date the accompanying
financial statements were filed with the SEC.  As of October 30, 2009,
there were no subsequent events which required recognition in our consolidated
financial statements.





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
December 2008, the Financial Accounting Standards Board (FASB) amended the
existing guidance on an employers’ disclosures about plan assets of a defined
benefit pension or other postretirement plan.  The guidance is
effective for fiscal years ending after December 15, 2009.  Upon
initial application, the guidance is not required for earlier periods that are
presented for comparative purposes.  Earlier application of the
guidance is permitted.  We do not believe the effect of adopting the
guidance on an employers’ disclosures will have a material impact on our
consolidated financial statements.





Current
Adoptions





In
August 2009, the FASB issued amended guidance for fair value measurements
and disclosures.  The guidance provides clarification for the
circumstances when a quoted price in an active market for the identical
liability is not available, a reporting entity is required to measure fair value
using a valuation technique that uses either the quoted price of the identical
liability when traded as an asset or quoted prices for similar liabilities or
similar liabilities when traded as assets. This guidance is effective upon
issuance. The adoption of this guidance did not have a material impact on our
consolidated financial statements.





In May
2009, the FASB issued guidance on the 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, this guidance
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.





This
guidance is effective for interim or annual financial periods ending after June
15, 2009, and shall be applied prospectively.  We adopted this
guidance in the second quarter of 2009.  The adoption of this guidance
did not have a material impact on our consolidated financial
statements.


6
 Index


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 amended guidance on the disclosures about fair value of
financial instruments in interim financial information. Under this amended
guidance, 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.
This amended guidance is effective for interim periods ending after June 15,
2009.  We adopted this amended guidance in the second quarter of
2009.  The adoption of this amended guidance did not have a material
impact on our consolidated financial statements.





In April
2009, the FASB issued guidance on how to determine the fair value of assets and
liabilities when the transaction volume and level of activity for the assets and
liabilities have significantly decreased and the transactions are not occurring
in an orderly fashion.  This guidance 1) 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; 2) 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; 3)
eliminates the proposed presumption that all transactions are not orderly unless
proven otherwise and instead requires an entity to base its conclusion about
whether a transaction was not orderly on the weight of the evidence; 4) requires
an entity to disclose a change in valuation technique (and the related inputs)
resulting from the application of this guidance and to quantify its effects, if
practicable; and 5) applies to all fair value measurements when
appropriate.  This guidance is effective for interim and annual
periods ending after June 15, 2009.  We adopted this guidance in the
second quarter of 2009.  The adoption of this guidance did not have a
material impact on our consolidated financial statements.





In April
2009, the FASB issued amended guidance for the accounting for assets acquired
and liabilities assumed in a business combination that arise from
contingencies.  This guidance requires 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.  This guidance eliminates 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 disclosures in the business combination footnote regarding the nature of
the contingency and give an estimate of the possible loss or range of loss or
state that such an estimate cannot be made.  This guidance also
requires 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.
This guidance 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 this guidance in the first quarter of
2009.  The adoption of this guidance did not have a material impact on
our consolidated financial statements.





In June
2008, the FASB issued guidance for the accounting by lessees for nonrefundable
maintenance deposits.  This guidance 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.  This guidance is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years.  We adopted this guidance
in the first quarter of 2009.  The adoption of this guidance did not
have a material impact on our consolidated financial statements.





In April
2008, the FASB issued guidance for determining the useful life of intangible
assets.  This guidance 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 and 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 this guidance in the
first quarter of 2009.  The adoption of this guidance did not have a
material impact on our consolidated financial statements.





In
February 2008, the FASB issued guidance which delays the effective date of the
guidance for fair value measurements 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 this guidance in the
first quarter of 2009.  The adoption of this guidance did not have a
material impact on our consolidated financial statements.


7
 Index


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 amended guidance for accounting for business
combinations.  This amended guidance 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.  This
guidance changed 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.  This guidance
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.  We adopted this guidance in the first quarter of
2009.  The adoption of this guidance 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 the FASB’s guidance for earnings per share, 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 (loss)”) 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 stock are not contractually obligated to
      share in the losses.





(d)
            The
      total earnings (loss) 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 (loss) are allocated to determine
      the earnings (loss) per share for that class of common
    stock.





(e)
            Basic
      earnings (loss) per share data are presented for class A and B common
      stock in the aggregate and for class C common stock.  The basic
      earnings (loss) 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 guidance in the first quarter of 2009 on how to determine whether
instruments granted in share-based payment transactions are participating
securities and should be included in the computation of earnings per share
pursuant to the two class method.  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 this guidance did not have a material effect
on our historically reported earnings per share.


8
 Index


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 (loss) per share
under the two-class method.





Third Quarter Ended
            
            
            Three Quarters EndedSeptember 27, 2009
            
            
            September 28, 2008
            
            
            September 27, 2009
            
            
            September 28, 2008Numerator
      for basic earnings from continuing operations for each class of common
      stock and non-vested restricted stock:Earnings
      (loss) from continuing operations
            
            $
            1,825
            
            
            $
            (17,101
            )
            
            $
            (2,886
            )
            
            $
            (1,807
            )Less
      dividends declared:Class
      A and B
            
            
            --
            
            
            
            4,045
            
            
            
            1,006
            
            
            
            12,639Class
      C
            
            
            463
            
            
            
            463
            
            
            
            1,391
            
            
            
            1,391Non-vested
      restricted stock
            
            
            1
            
            
            
            --
            
            
            
            2
            
            
            
            --Total
      undistributed earnings (loss) from continuing operations
            
            $
            1,361
            
            
            $
            (21,609
            )
            
            $
            (5,285
            )
            
            $
            (15,837
            )Class
      A and B undistributed earnings (loss) from continuing
      operations
            
            $
            1,256
            
            
            $
            (21,609
            )
            
            $
            (5,285
            )
            
            $
            (15,837
            )Class
      C undistributed earnings from continuing operations
            
            
            81
            
            
            
            --
            
            
            
            --
            
            
            
            --Non-vested
      restricted stock undistributed earnings from continuing
      operations
            
            
            24
            
            
            
            --
            
            
            
            --
            
            
            
            --Total
      undistributed earnings (loss) from continuing operations
            
            $
            1,361
            
            
            $
            (21,609
            )
            
            $
            (5,285
            )
            
            $
            (15,837
            )Numerator
      for basic earnings (loss) from continuing operations per class A and B
      common stock:Dividends
      on class A and B
            
            $
            --
            
            
            $
            4,045
            
            
            $
            1,006
            
            
            $
            12,639Class
      A and B undistributed earnings (loss)
            
            
            1,256
            
            
            
            (21,609
            )
            
            
            (5,285
            )
            
            
            (15,837
            )Numerator
      for basic earnings (loss) from continuing operations per
    classA
      and B common stock
            
            $
            1,256
            
            
            $
            (17,564
            )
            
            $
            (4,279
            )
            
            $
            (3,198
            )Numerator
      for basic earnings from continuing operations per class C common
      stock:Dividends
      on class C
            
            $
            463
            
            
            $
            463
            
            
            $
            1,391
            
            
            $
            1,391Class
      C undistributed earnings
            
            
            81
            
            
            
            --
            
            
            
            --
            
            
            
            --Numerator
      for basic earnings from continuing operations per class C common
      stock
            
            $
            544
            
            
            $
            463
            
            
            $
            1,391
            
            
            $
            1,391Denominator
      for basic earnings (loss) from continuing operations for each class of
      common stock:Weighted
      average shares outstanding -Class
      A and B
            
            
            50,500
            
            
            
            50,433
            
            
            
            50,363
            
            
            
            52,502Class
      C
            
            
            3,264
            
            
            
            3,264
            
            
            
            3,264
            
            
            
            3,264Basic
      earnings (loss) per share from continuing operationsClass
      A and B
            
            $
            0.02
            
            
            $
            (0.35
            )
            
            $
            (0.08
            )
            
            $
            (0.06
            )Class
      C
            
            $
            0.17
            
            
            $
            0.14
            
            
            $
            0.43
            
            
            $
            0.42


9
 Index


JOURNAL
COMMUNICATIONS, INC.


Notes to
Unaudited Consolidated Condensed Financial Statements


(in
thousands, except per share amounts)





4
            EARNINGS
      PER SHARE continued





Third Quarter Ended
            
            
            Three Quarters EndedSeptember 27,
              2009
            
            
            September 28,
              2008
            
            
            September 27,
              2009
            
            
            September 28,
              2008Numerator
      for basic earnings from discontinued operations for each class of common
      stock and non-vested restricted stock:Total
      undistributed earnings from from discontinued opertions
            
            $
            --
            
            
            $
            --
            
            
            $
            --
            
            
            $
            400Class
      A and B undistributed earnings from discontinued opertions
            
            $
            --
            
            
            $
            --
            
            
            $
            --
            
            
            $
            377Class
      C undistributed earnings from discontinued operations
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            23Non-vested
      restricted stock undistributed earnings from discontinued
      operations
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --Total
      undistributed earnings from discontinued operations
            
            $
            --
            
            
            $
            --
            
            
            $
            --
            
            
            $
            400Denominator
      for basic earnings from discontinued operations for each class of common
      stock:Weighted
      average shares outstanding -Class
      A and B
            
            
            50,500
            
            
            
            50,433
            
            
            
            50,363
            
            
            
            52,502Class
      C
            
            
            3,264
            
            
            
            3,264
            
            
            
            3,264
            
            
            
            3,264Basic
      earnings per share from discontinued operationsClass
      A and B
            
            $
            --
            
            
            $
            --
            
            
            $
            --
            
            
            $
            0.01Class
      C
            
            $
            --
            
            
            $
            --
            
            
            $
            --
            
            
            $
            0.01Numerator
      for basic net earnings (loss) for each class of common
    stock:Net
      earnings (loss)
            
            $
            1,825
            
            
            $
            (17,101
            )
            
            $
            (2,886
            )
            
            $
            (1,407
            )Less
      dividends declared:Class
      A and B
            
            
            --
            
            
            
            4,045
            
            
            
            1,006
            
            
            
            12,639Class
      C
            
            
            463
            
            
            
            463
            
            
            
            1,391
            
            
            
            1,391Non-vested
      restricted stock
            
            
            1
            
            
            
            --
            
            
            
            2
            
            
            
            --Total
      undistributed net earnings (loss)
            
            $
            1,361
            
            
            $
            (21,609
            )
            
            $
            (5,285
            )
            
            $
            (15,437
            )Class
      A and B undistributed net earnings (loss)
            
            $
            1,256
            
            
            $
            (21,609
            )
            
            $
            (5,285
            )
            
            $
            (15,460
            )Class
      C undistributed net earnings
            
            
            81
            
            
            
            --
            
            
            
            --
            
            
            
            23Non-vested
      undistributed net earnings
            
            
            24
            
            
            
            --
            
            
            
            --
            
            
            
            --Total
      undistributed net earnings (loss)
            
            $
            1,361
            
            
            $
            (21,609
            )
            
            $
            (5,285
            )
            
            $
            (15,437
            )Numerator
      for basic net earnings (loss) per class A and B common
    stock:Dividends
      declared on class A and B
            
            $
            --
            
            
            $
            4,045
            
            
            $
            1,006
            
            
            $
            12,639Class
      A and B undistributed net earnings (loss)
            
            
            1,256
            
            
            
            (21,609
            )
            
            
            (5,285
            )
            
            
            (15,460
            )Numerator
      for basic net earnings (loss) per class A and B common
    stock
            
            $
            1,256
            
            
            $
            (17,564
            )
            
            $
            (4,279
            )
            
            $
            (2,821
            )Numerator
      for basic net earnings per class C common stock:Dividends
      on class C
            
            $
            463
            
            
            $
            463
            
            
            $
            1,391
            
            
            $
            1,391Class
      C undistributed net earnings
            
            
            81
            
            
            
            --
            
            
            
            --
            
            
            
            23Numerator
      for basic net earnings per class C common stock
            
            $
            544
            
            
            $
            463
            
            
            $
            1,391
            
            
            $
            1,414


10
 Index


JOURNAL
COMMUNICATIONS, INC.


Notes to
Unaudited Consolidated Condensed Financial Statements


(in
thousands, except per share amounts)





4
            EARNINGS
      PER SHARE continued





Third Quarter Ended
            
            
            Three Quarters EndedSeptember 27, 2009
            
            
            September 28, 2008
            
            
            September 27, 2009
            
            
            September 28, 2008Denominator
      for basic net earnings (loss) for each class of common
    stock:Weighted
      average shares outstanding -Class
      A and B
            
            
            50,500
            
            
            
            50,433
            
            
            
            50,363
            
            
            
            52,502Class
      C
            
            
            3,264
            
            
            
            3,264
            
            
            
            3,264
            
            
            
            3,264Basic
      net earnings (loss) per shareClass
      A and B
            
            $
            0.02
            
            
            $
            (0.35
            )
            
            $
            (0.08
            )
            
            $
            (0.05
            )Class
      C
            
            $
            0.17
            
            
            $
            0.14
            
            
            $
            0.43
            
            
            $
            0.43





Diluted





Diluted
earnings per share for the third quarter and the three 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 third quarter and the
three 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
third quarter and three quarters of 2009, 552 and 412 non-vested restricted
class B common shares, respectively, are not deemed to be 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 (loss) per
share for class A and B common stock:





Third Quarter Ended
            
            
            Three Quarters EndedSeptember 27, 2009
            
            
            September 28, 2008
            
            
            September 27, 2009
            
            
            September 28, 2008Numerator
      for diluted net earnings (loss) per share:Dividends
      on class A and B common stock
            
            $
            --
            
            
            $
            4,045
            
            
            $
            1,006
            
            
            $
            12,639Total
      undistributed earnings from continuing operations
            
            
            1,256
            
            
            
            (21,609
            )
            
            
            (5,285
            )
            
            
            (15,837
            )Total
      undistributed earnings from discontinued operations
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            377Net
      earnings (loss)
            
            $
            1,256
            
            
            $
            (17,564
            )
            
            $
            (4,279
            )
            
            $
            (2,821
            )Denominator
      for diluted net earnings (loss) per share:Weighted
      average shares outstanding - class A and B
            
            
            50,500
            
            
            
            50,433
            
            
            
            50,363
            
            
            
            52,502Impact
      of non-vested restricted stock
            
            
            --
            
            
            
            14
            
            
            
            --
            
            
            
            17Adjusted
      weighted average shares outstanding
            
            
            50,500
            
            
            
            50,447
            
            
            
            50,363
            
            
            
            52,519Diluted
      earnings (loss) per share:Continuing
      operations
            
            $
            0.02
            
            
            $
            (0.35
            )
            
            $
            (0.08
            )
            
            $
            (0.06
            )Discontinued
      operations
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            0.01Net
      earnings
            
            $
            0.02
            
            
            $
            (0.35
            )
            
            $
            (0.08
            )
            
            $
            (0.05
            )





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).


11
 Index


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):





Third Quarter Ended
            
            
            Three Quarters EndedSeptember 27, 2009
            
            
            September 28, 2008
            
            
            September 27, 2009
            
            
            September 28, 2008Net
      earnings (loss)
            
            $
            1,825
            
            
            $
            (17,101
            )
            
            $
            (2,886
            )
            
            $
            (1,407
            )Change
      in pension and post-retirement (net of tax)
            
            
            23
            
            
            
            16
            
            
            
            1,203
            
            
            
            48Comprehensive
      income (loss)
            
            $
            1,848
            
            
            $
            (17,085
            )
            
            $
            (1,683
            )
            
            $
            (1,359
            )





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 2007 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 September 27, 2009, there are 3,156,833 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 third quarter and three quarters ended September 27, 2009, we recognized
$276 and $1,035, respectively, in stock-based compensation
expense.  Total income tax benefit recognized related to stock-based
compensation for the third quarter and three quarters ended September 27, 2009
was $110 and $708, 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 September 27,
2009, total unrecognized compensation cost related to stock-based compensation
awards was $1,455 net of estimated forfeitures, which we expect to recognize
over a weighted average period of 1.2 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.


12
 Index


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 three quarters of 2009 is:





Weighted
      Average
            
            
            Weighted
      Average ContractualExercise
            
            
            TermOptions
            
            
            Price
            
            
            (years)Outstanding
      at December 28, 2008
            
            
            47,500
            
            
            $
            18.14Expired
            
            
            (500
            )
            
            
            19.95Outstanding
      and exercisable at September 27, 2009
            
            
            47,000
            
            
            
            18.12
            
            
            
            1.4





The
aggregate intrinsic value of stock options outstanding and exercisable at the
end of the third quarter of 2009 is zero because the fair market value of our
class B common stock on September 27, 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 three quarters of 2009 is:





Weighted
      Average
            
            
            Weighted
      Average ContractualExercise
            
            
            TermSARs
            
            
            Price
            
            
            (years)Outstanding
      at December 28, 2008
            
            
            1,331,000
            
            
            $
            10.56Forfeited
            
            
            (140,692
            )
            
            
            10.04Outstanding
      at September 27, 2009
            
            
            1,190,308
            
            
            
            10.62
            
            
            
            7.9Exercisable
      at September 27, 2009
            
            
            590,409
            
            
            
            11.51
            
            
            
            7.8





The
aggregate intrinsic value of the SARs outstanding and exercisable at the end of
the third quarter of 2009 is zero because the fair market value of our class B
common stock on September 27, 2009 was lower than the weighted average exercise
price of the SARs.





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.


13
 Index


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 grant activity during the three quarters of 2009 is:





WeightedAverageShares
            
            
            Fair ValueNon-vested
      at December 28, 2008
            
            
            325,600
            
            
            $
            6.09Granted
            
            
            794,911
            
            
            
            0.96Vested
            
            
            (111,791
            )
            
            
            5.34Forfeited
            
            
            (10,920
            )
            
            
            10.48Non-vested
      at September 27, 2009
            
            
            997,800
            
            
            
            2.04





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 1.4 years.  The
total fair value of shares vesting during the three quarters of 2009 was
$597.  There was an aggregate of 101,246 unrestricted and non-vested
restricted stock grants issued to our directors and employees in the three
quarters of 2008 at a weighted average fair value of $6.64 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
238,339 class B common shares sold to employees under this plan in the three
quarters of 2009 at a weighted average fair value of $1.40.  As of
September 27, 2009, there are 2,404,650shares 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 2006 through 2008 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 2003
in the state of Wisconsin and we are currently under audit for our 2003 through
2007 tax returns.




As of
September 27, 2009, our liability for unrecognized tax benefits was $948, which,
if recognized, $834 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
September 27, 2009 we had $300 accrued for interest expense and
penalties.  During the three quarters of 2009, we recognized $134 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 three quarters of 2009, our liability for unrecognized tax benefits and
interest and penalties decreased by $1,530 and $924, respectively, due to a
reduction for a state audit settlement and the expiration of statutes of
limitations.  As of September 27, 2009, it is possible for $134 of
unrecognized tax benefits and related interest to be recognized within the next
12 months due to settlements with taxing authorities.





8
            INVENTORIES





Inventories
are stated at the lower of cost (first in, first out method) or
market.  Inventories at September 27, 2009 and December 28, 2008
consist of the following:





September 27, 2009
            
            
            December 28, 2008Paper
      and supplies
            
            $
            2,742
            
            
            $
            4,779Work
      in process
            
            
            390
            
            
            
            723Finished
      goods
            
            
            413
            
            
            
            632Less
      obsolescence reserve
            
            
            (221
            )
            
            
            (199
            )Inventories,
      net
            
            $
            3,324
            
            
            $
            5,935


14
 Index


JOURNAL
COMMUNICATIONS, INC.


Notes to
Unaudited Consolidated Condensed Financial Statements


(in
thousands, except per share amounts)





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 September 27, 2009 and
December 28, 2008, we had borrowings of $172,225 and $215,090, respectively,
under the facility at a weighted average rate of 0.93% and 2.10%,
respectively.  Cash provided by operating activities was used
primarily to decrease our borrowings during the three 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 September 27,
2009 and December 28, 2008 to be $162,110 and $195,375, respectively, based on
discounted cash flows using an interest rate of 4.38% and 6.00%,
respectively.





The
facility includes the following two financial covenants, which remain constant
over the term of the agreement:





·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 applying the FASB’s guidance for impairment
testing for goodwill and other intangible assets not subject to
amortization.  As of September 27, 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 applying the FASB’s guidance for impairment testing for goodwill and
other intangible assets not subject to amortization to our interest
expense.  As of September 27, 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
difficult economic environment, 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.





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
$1,259 as of September 27, 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.


15
 Index


JOURNAL
COMMUNICATIONS, INC.


Notes to
Unaudited Consolidated Condensed Financial Statements


(in
thousands, except per share amounts)





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 BenefitsThird Quarter Ended
            
            
            Three Quarters EndedSeptember 27, 2009
            
            
            September 28, 2008
            
            
            September 27, 2009
            
            
            September 28, 2008Service
      cost
            
            $
            --
            
            
            $
            567
            
            
            $
            1,088
            
            
            $
            1,703Interest
      cost
            
            
            2,258
            
            
            
            2,062
            
            
            
            6,744
            
            
            
            6,183Expected
      return on plan assets
            
            
            (2,625
            )
            
            
            (2,776
            )
            
            
            (7,974
            )
            
            
            (8,328
            )Amortization
      of:Unrecognized
      prior service cost
            
            
            (44
            )
            
            
            (55
            )
            
            
            (143
            )
            
            
            (164
            )Unrecognized
      net loss
            
            
            --
            
            
            
            --
            
            
            
            182
            
            
            
            --Curtailment
      gain
            
            
            --
            
            
            
            --
            
            
            
            (353
            )
            
            
            --Net
      periodic benefit (income) cost included in total operating costs and
      expenses, selling and and administrative expenses
            
            $
            (411
            )
            
            $
            (202
            )
            
            $
            (456
            )
            
            $
            (606
            )





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 plan participants 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.  Based on recent
estimates, we currently do not expect to contribute to our qualified defined
benefit pension plan in 2010.  We expect to contribute $289 and $394
to our unfunded non-qualified pension plan in 2009 and 2010,
respectively.





Other Postretirement
    BenefitsThird Quarter Ended
            
            
            Three Quarters EndedSeptember 27, 2009
            
            
            September 28, 2008
            
            
            September 27, 2009
            
            
            September 28, 2008Service
      cost
            
            $
            17
            
            
            $
            26
            
            
            $
            52
            
            
            $
            79Interest
      cost
            
            
            270
            
            
            
            315
            
            
            
            809
            
            
            
            945Amortization
      of:Unrecognized
      prior service cost
            
            
            (54
            )
            
            
            (54
            )
            
            
            (164
            )
            
            
            (164
            )Unrecognized
      net transition obligation
            
            
            137
            
            
            
            137
            
            
            
            411
            
            
            
            411Net
      periodic benefit cost included in total operating costs and expenses and
      selling and administrative expenses
            
            $
            370
            
            
            $
            424
            
            
            $
            1,108
            
            
            $
            1,271





12
            GOODWILL
      AND OTHER INTANGIBLE ASSETS





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 September 27, 2009.





Amortization
expense was $494 and $1,481 for the third quarter and three quarters ended
September 27, 2009, respectively, and $520 and $1,516 for the third quarter and
three quarters ended September, 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.


16
 Index


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 September 27, 2009 and
December 28, 2008 are as follows:





Gross
            
            
            
            
            
            NetCarrying
            
            
            Accumulated
            
            
            CarryingAmount
            
            
            Amortization
            
            
            AmountSeptember 27, 2009Network
      affiliation agreements
            
            $
            26,930
            
            
            $
            (5,729
            )
            
            $
            21,201Customer
      lists
            
            
            18,206
            
            
            
            (15,892
            )
            
            
            2,314Non-compete
      agreements
            
            
            15,351
            
            
            
            (15,282
            )
            
            
            69Other
            
            
            4,884
            
            
            
            (2,998
            )
            
            
            1,886Total
            
            $
            65,371
            
            
            $
            (39,901
            )
            
            $
            25,470December 28, 2008Network
      affiliation agreements
            
            $
            26,930
            
            
            $
            (4,929
            )
            
            $
            22,001Customer
      lists
            
            
            18,066
            
            
            
            (15,365
            )
            
            
            2,701Non-compete
      agreements
            
            
            15,351
            
            
            
            (15,266
            )
            
            
            85Other
            
            
            4,779
            
            
            
            (2,860
            )
            
            
            1,919Total
            
            $
            65,126
            
            
            $
            (38,420
            )
            
            $
            26,706





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 $82,920 and $101,120 as of
September 27, 2009 and December 28, 2008, respectively.  The decrease
in the net carrying amount of our broadcast licenses for the three quarters
ended September 27, 2009 represents the sale of KGEM-AM and KCID-AM in Boise,
Idaho of $428 and the non-cash 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 three quarters ended
September 27, 2009 is as follows:





Goodwill
      at
            
            
            
            
            
            Goodwill
      atDecember 28, 2008
            
            
            Adjustment
            
            
            September 27, 2009Reporting unitCommunity
      newspapers and shoppers
            
            $
            4,285
            
            
            $
            --
            
            
            $
            4,285Broadcasting
            
            
            --
            
            
            
            4,813
            
            
            
            4,813Total
            
            $
            4,285
            
            
            $
            4,813
            
            
            $
            9,098





The
adjustment in the carrying amount of goodwill for the three quarters ended
September 27, 2009 represents the acquisition of KNIN-TV in Boise, Idaho for
$4,824, partially offset by the sale of KGEM-AM and KCID-AM in Boise, Idaho for
$11.





13
            ACQUISITION
      & SALE





On
September 25, 2009, Journal Broadcast Group, Inc. and Journal Broadcast
Corporation, our broadcasting businesses, completed the sale of KGEM-AM and
KCID-AM in Boise, Idaho to Salt & Light Radio, Inc. for $950 and recorded a
$312 pre-tax gain on the sale.  The divestiture of KGEM-AM and KCID-AM
will allow us to focus on our four remaining radio stations and two television
stations in Boise, Idaho.





On April
23, 2009, Journal Broadcast Group, Inc. and Journal Broadcast Corporation
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. 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.




17
 Index


JOURNAL
COMMUNICATIONS, INC.


Notes to
Unaudited Consolidated Condensed Financial Statements


(in
thousands, except per share amounts)





13
            ACQUISITION
      & SALE continued





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.





The
recognized amounts of identifiable assets acquired and liabilities assumed for
KNIN-TV are as follows:





KNIN-TVBoise, IDSyndicated
      programs
            
            $
            533Property
      and equipment
            
            
            555Goodwill
            
            
            4,824Broadcast
      license
            
            
            1,203Customer
      list
            
            
            140Syndicated
      programs
            
            
            (656
            )Other
      current assets and liabilities
            
            
            (6
            )Total
      purchase price
            
            $
            6,593





We
determined the useful life of the acquired customer list to be 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 third quarter and three quarters ended September 27, 2009
was:





Third Quarter
      Ended
            
            
            Three Quarters
      EndedSeptember 27, 2009
            
            
            September 27, 2009Revenue
            
            $
            715
            
            
            $
            1,252Earnings
      before income taxes
            
            $
            372
            
            
            $
            558





The pro
forma revenue and earnings for the third quarter and three quarters of 2008 and
2009 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.





15
            FAIR
      VALUE





The
carrying amount of cash and cash equivalents, receivables, accounts payable and
accrued severance approximates fair value as of September 27, 2009 and December
28, 2008.





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 were impaired.  In accordance with the
FASB’s guidance for goodwill and intangible assets, 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 sale of radio stations KGEM-AM and KCID-AM in
Boise, Idaho in the third quarter of 2009 decreased the carrying value of our
broadcast licenses to $82,920 as of September 27, 2009.


18
 Index


JOURNAL
COMMUNICATIONS, INC.


Notes to
Unaudited Consolidated Condensed Financial Statements


(in
thousands, except per share amounts)





15
            FAIR
      VALUE continued





The
following table presents the fair value measurement of our broadcast licenses by
level of the fair value hierarchy.  In accordance with the FASB’s
guidance for 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
UsingAs
      of
              September
      27,
            
            
            Level
      1
            
            
            Level
      2
            
            
            Level
      3
            
            
            TotalDescription
            
            2009
            
            
            Inputs
            
            
            Inputs
            
            
            Inputs
            
            
            LossesBroadcast
      licenses
            
            $
            82,920
            
            
            $
            --
            
            
            $
            --
            
            
            $
            82,920
            
            
            $
            (18,975
            )





We used a
market approach to estimate fair value of our barter programming assets and
liabilities at our television and radio stations.  This approach uses
our most recent average unit rates and sellout percentages, which are applied to
the number of barter programming spots available in each contract.





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 or
operating cash flows could result in additional non-cash impairment charges on
our broadcast licenses and goodwill 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 will perform our required annual impairment
test in the fourth quarter of 2009.





16
            WORKFORCE
      REDUCTIONS





We
continue to align our costs with our declining revenues.  During the
three quarters of 2009, we recorded a pre-tax charge of $5,410 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 three quarters of 2009 was as
follows:





Balance
      at
            
            
            Charge
      for
            
            
            Payments
      for
            
            
            Balance
      atDecember 28,
            
            
            Separation
            
            
            Separation
            
            
            September 27,2008
            
            
            Benefits
            
            
            Benefits
            
            
            2009PublishingDaily
      newspaper
            
            $
            557
            
            
            $
            4,528
            
            
            $
            (3,633
            )
            
            $
            1,452Community
      newspapers and shoppers
            
            
            53
            
            
            
            121
            
            
            
            (163
            )
            
            
            11Total
      Publishing
            
            
            610
            
            
            
            4,649
            
            
            
            (3,796
            )
            
            
            1,463Broadcasting
            
            
            30
            
            
            
            104
            
            
            
            (134
            )
            
            
            --Printing
      services
            
            
            --
            
            
            
            541
            
            
            
            (387
            )
            
            
            154Direct
      marketing services
            
            
            177
            
            
            
            116
            
            
            
            (288
            )
            
            
            5Total
            
            $
            817
            
            
            $
            5,410
            
            
            $
            (4,605
            )
            
            $
            1,622


19
 Index


JOURNAL
COMMUNICATIONS, INC.


Notes to
Unaudited Consolidated Condensed Financial Statements


(in
thousands, except per share amounts)


17
            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
September 27, 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 33 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.





The
following tables summarize revenue, operating earnings (loss), non-cash
impairment charge, depreciation and amortization and capital expenditures for
the third quarter and three quarters ended September 27, 2009 and September 28,
2008 and identifiable total assets at September 27, 2009 and December 28,
2008:





Third Quarter Ended
            
            
            Three Quarters EndedSeptember 27, 2009
            
            
            September 28, 2008
            
            
            September 27, 2009
            
            
            September 28, 2008RevenuePublishing
            
            $
            46,479
            
            
            $
            59,452
            
            
            $
            144,036
            
            
            $
            181,997Broadcasting
            
            
            42,453
            
            
            
            53,994
            
            
            
            125,410
            
            
            
            156,790Printing
      services
            
            
            11,086
            
            
            
            16,099
            
            
            
            36,621
            
            
            
            49,395Other
            
            
            5,059
            
            
            
            6,725
            
            
            
            15,273
            
            
            
            22,443$
            105,077
            
            
            $
            136,270
            
            
            $
            321,340
            
            
            $
            410,625Operating earnings (loss)Publishing
            
            $
            680
            
            
            $
            1,139
            
            
            $
            2,378
            
            
            $
            11,132Broadcasting
            
            
            3,651
            
            
            
            (29,110
            )
            
            
            (8,190
            )
            
            
            (12,264
            )Printing
      services
            
            
            (750
            )
            
            
            814
            
            
            
            (1,157
            )
            
            
            2,392Other
            
            
            98
            
            
            
            205
            
            
            
            31
            
            
            
            996$
            3,679
            
            
            $
            (26,952
            )
            
            $
            (6,938
            )
            
            $
            2,256Non-cash impairment chargeBroadcasting
            
            $
            --
            
            
            $
            38,762
            
            
            $
            18,975
            
            
            $
            38,762$
            --
            
            
            $
            38,762
            
            
            $
            18,975
            
            
            $
            38,762Depreciation and
    amortizationPublishing
            
            $
            3,016
            
            
            $
            3,132
            
            
            $
            9,094
            
            
            $
            9,564Broadcasting
            
            
            3,253
            
            
            
            3,406
            
            
            
            9,955
            
            
            
            10,050Printing
      services
            
            
            531
            
            
            
            579
            
            
            
            1,581
            
            
            
            1,730Other
            
            
            241
            
            
            
            215
            
            
            
            742
            
            
            
            649$
            7,041
            
            
            $
            7,332
            
            
            $
            21,372
            
            
            $
            21,993Capital expendituresPublishing
            
            $
            111
            
            
            $
            1,205
            
            
            $
            1,205
            
            
            $
            4,547Broadcasting
            
            
            1,396
            
            
            
            5,281
            
            
            
            3,725
            
            
            
            9,433Printing
      services
            
            
            171
            
            
            
            132
            
            
            
            501
            
            
            
            845Other
            
            
            55
            
            
            
            46
            
            
            
            105
            
            
            
            314$
            1,733
            
            
            $
            6,664
            
            
            $
            5,536
            
            
            $
            15,139





September 27, 2009
            
            
            December 28, 2008Identifiable total assetsPublishing
            
            $
            141,420
            
            
            $
            157,440Broadcasting
            
            
            300,060
            
            
            
            330,355Printing
      service
            
            
            13,555
            
            
            
            19,375Other
            
            
            33,932
            
            
            
            35,429$
            488,967
            
            
            $
            542,599




20
 Index


ITEM2.
            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 third quarter and three quarters ended September 27, 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 financialmarketconditions 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 thetermsof 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 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.


21
 Index


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 33 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,
coupled with a weak economy, continued in the third quarter of
2009.





Our
publishing businesses continued to be challenged in the third quarter of 2009
due to the difficult economic environment and 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 third quarter of 2009 compared to the third quarter of
2008.  Retail advertising also decreased in the third quarter of 2009
compared to the third quarter of 2008 with weakness in a number of
consumer-driven categories, including the automotive, furniture and furnishings,
health services, finance/insurance, home improvement, dining and entertainment,
communications, food and department stores categories. Interactive revenue
decreased at our publishing businesses in the third quarter of 2009 compared to
the third quarter of 2008.  In addition to the impact of the difficult
economic environment, 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 remained profitable
in the third quarter of 2009 despite recording $3.7 million in workforce
reduction charges.  Notwithstanding these challenges, our publishing
businesses continue to reduce their expense platforms to better align with a
reduced revenue base.  Total expenses decreased $12.6 million, or
21.5%, in the third quarter of 2009 compared to the third quarter of 2008
primarily due to a decrease of $6.5 million in payroll-related costs and a
decrease of $3.5 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 audiences
have an increasing number of options to access news and other
programming.





Revenue
from broadcasting decreased in the third quarter of 2009 compared to the third
quarter of 2008 due to decreases in local, national, political and issue and
Olympic advertising revenue, partially offset by increases in retransmission and
developmental revenue and revenue from the television stations acquired in 2008
and 2009.  The difficult economic environment 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 operating earnings of $3.7 million in the third
quarter of 2009 compared to an operating loss of $29.1 million in the third
quarter of 2008, which included a $38.8 million non-cash broadcast license
impairment charge.  Total expenses decreased $44.4 million, or 53.3%,
in the third quarter of 2009 compared to the third quarter of 2008, primarily
due to the non-cash broadcast license impairment charge in the third quarter of
2008.  Our broadcasting business continues to reduce its expense
platforms to reflect a reduced revenue base.





Revenue
at our printing services business decreased in the third quarter of 2009
compared to the third quarter of 2008 primarily due to the effects of the
difficult economic environment 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.  Our printing services business
recorded an operating loss in the third quarter of 2009 compared to operating
earnings in the third quarter of 2008 primarily due to the impact from the
decrease in revenue and an increase in bad debt expense, partially offset by a
decrease in production and payroll-related costs.  Revenue at our
direct marketing services business decreased in the third quarter of 2009
compared to the third quarter of 2008 primarily due to a decrease in mailing
services and postage revenue.  Our direct marketing services business
posted operating losses in the third quarter of 2009 and the third 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.


22
 Index


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 fourth quarter of 2009, we expect our revenue will be down compared to
the fourth quarter of 2008.  We will continue to reduce costs and to
pay down our debt.





Results
of Operations





Third
Quarter Ended September 27, 2009 compared to the Third Quarter Ended September
28, 2008





Our
consolidated revenue in the third quarter of 2009 was $105.1 million, a decrease
of $31.2 million, or 22.9%, compared to $136.3 million in the third quarter of
2008. Our consolidated operating costs and expenses in the third quarter of 2009
were $65.9 million, a decrease of $15.3 million, or 18.8%, compared to $81.2
million in the third quarter of 2008. Our consolidated selling and
administrative expenses in the third quarter of 2009 were $35.5 million, a
decrease of $7.8 million, or 17.9%, compared to $43.3 million in the third
quarter of 2008.  Broadcast license impairment was $38.8 million in
the third quarter of 2008.





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 third
quarter of 2009 and the third quarter of 2008:





Percent
      of
            
            
            
            
            
            Percent
      ofTotal
            
            
            
            
            
            Total2009
            
            
            Revenue
            
            
            2008
            
            
            Revenue(dollars
      in millions)Revenue:Publishing
            
            $
            46.5
            
            
            
            44.2
            %
            
            $
            59.5
            
            
            
            43.6
            %Broadcasting
            
            
            42.4
            
            
            
            40.4
            
            
            
            54.0
            
            
            
            39.6Printing
      services
            
            
            11.1
            
            
            
            10.6
            
            
            
            16.1
            
            
            
            11.8Other
            
            
            5.1
            
            
            
            4.8
            
            
            
            6.7
            
            
            
            5.0Total
      revenue
            
            
            105.1
            
            
            
            100.0
            
            
            
            136.3
            
            
            
            100.0Total
      operating costs and expenses
            
            
            65.9
            
            
            
            62.7
            
            
            
            81.2
            
            
            
            59.6Selling
      and administrative expenses
            
            
            35.5
            
            
            
            33.8
            
            
            
            43.3
            
            
            
            31.8Broadcast
      license impairment
            
            
            --
            
            
            
            --
            
            
            
            38.8
            
            
            
            28.4Total
      operating costs and expenses and selling and administrative
      expenses
            
            
            101.4
            
            
            
            96.5
            
            
            
            163.3
            
            
            
            119.8Total
      operating earnings (loss)
            
            $
            3.7
            
            
            
            3.5
            %
            
            $
            (27.0
            )
            
            
            (19.8
            )%





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





In the
newspaper industry, classified advertising has historically been 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 44.0%
decrease in classified advertising revenue in the third quarter of 2009 compared
to the third quarter of 2008.  Retail advertising revenue decreased
21.1% in the third quarter of 2009 compared to the third 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 automotive,
furniture and furnishings, health services, finance/insurance, home improvement,
dining and entertainment, communications, food and department stores categories.
Because of secular changes and the difficult economic environment affecting the
newspaper industry, we are aligning our cost structure in the face of decreasing
revenues.





At our
broadcasting business, advertising revenue decreased in the third quarter across
most categories, the most significant being our largest revenue category ­—
automotive.  Automotive advertising revenue decreased $4.3 million, or
41.4%, in the third quarter of 2009 compared to the third quarter of 2008 as the
domestic automobile industry is experiencing an unprecedented decrease in
automotive sales.  2009 is generally considered to be a non-election
year and, while there will be some political and issue advertising revenue in
2009, we will experience a significant decrease in the political and issue
advertising revenue category throughout the year in our comparisons to
2008.  In the third quarter of 2009, political and issue advertising
revenue decreased $2.9 million compared to the third quarter of
2008.  This is part of the normal two-year advertising cycle which
affects our television stations in particular.   Olympic
advertising revenue decreased $2.3 million due to the broadcast of the 2008
Summer Olympics on our NBC affiliates in the third quarter of
2008.  Partially offsetting the decrease in advertising revenue,
retransmission revenue increased $0.8 million in the third quarter of 2009
compared to the third quarter of 2008.  These contracts will continue
to generate incremental revenue through the remainder of 2009 and into the next
several years.  Developmental revenue increased $0.6 million in the
third quarter of 2009 compared to the third quarter of 2008.


23
 Index


The
decrease in printing services revenue was primarily due to the effects of the
difficult economic environment.  Revenue from printing publications
and revenue from Dell and other computer-related customers decreased in the
third quarter of 2009 compared to the third quarter of 2008.  At our
direct marketing services business, revenue from mailing services and postage
decreased in the third quarter of 2009 compared to the third quarter 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
other production materials, and overall cost reduction initiatives. The decrease
in selling and administrative expenses is primarily due to decreases in
payroll-related costs reflecting the savings from workforce reduction
initiatives, a decrease in bad debt expense, a gain on the sale of radio
stations KGEM-AM and KCID-AM in Boise, Idaho and overall cost reduction
initiatives as our businesses continue to reduce expense platforms in response
to the decrease in revenue.  We recorded total workforce reduction
charges of $4.2 million the third quarter of 2009 compared to $3.9 million in
the third quarter of 2008.





Our
consolidated operating earnings in the third quarter of 2009 were $3.7 million
compared to an operating loss of $27.0 million in the third quarter of
2008.  The following table presents our operating earnings (loss) by
segment for the third quarter of 2009 and the third quarter 2008:





Percent
      of
            
            
            
            
            
            Percent
      ofTotal
            
            
            
            
            
            TotalOperating
            
            
            
            
            
            Operating2009
            
            
            Earnings
            
            
            2008
            
            
            Loss(dollars
      in millions)Publishing
            
            $
            0.7
            
            
            
            18.5
            %
            
            $
            1.1
            
            
            
            (4.2
            )%Broadcasting
            
            
            3.7
            
            
            
            99.2
            
            
            
            (29.1
            )
            
            
            108.0Printing
      services
            
            
            (0.8
            )
            
            
            (20.4
            )
            
            
            0.8
            
            
            
            (3.0
            )Other
            
            
            0.1
            
            
            
            2.7
            
            
            
            0.2
            
            
            
            (0.8
            )Total
      operating earnings (loss)
            
            $
            3.7
            
            
            
            100.0
            %
            
            $
            (27.0
            )
            
            
            100.0
            %





The
increase in total operating earnings was primarily due to the $38.8 million
non-cash broadcast license impairment charge in the third quarter of 2008 and
decreases in total operating costs and expenses and selling and administrative
expenses, partially offset by the decrease in revenue at our publishing,
broadcasting, printing services and direct marketing services
businesses.





Publishing





Revenue
from publishing in the third quarter of 2009 was $46.5 million, a decrease of
$13.0 million, or 21.8%, compared to $59.5 million in the third quarter of
2008.  Operating earnings from publishing in the third quarter of 2009
were $0.7 million, a decrease of $0.4 million, or 40.3%, compared to $1.1
million in the third quarter of 2008.


24
 Index


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





2009
            
            
            2008Community
            
            
            
            
            
            
            
            
            CommunityDaily
            
            
            Newspapers
            
            
            
            
            
            Daily
            
            
            Newspapers
            
            
            
            
            
            PercentNewspaper
            
            
            & Shoppers
            
            
            Total
            
            
            Newspaper
            
            
            & Shoppers
            
            
            Total
            
            
            Change(dollars
      in millions)Advertising
      revenue:Retail
            
            $
            15.6
            
            
            $
            5.5
            
            
            $
            21.1
            
            
            $
            20.2
            
            
            $
            6.6
            
            
            $
            26.8
            
            
            
            (21.1
            )Classified
            
            
            5.7
            
            
            
            1.4
            
            
            
            7.1
            
            
            
            11.1
            
            
            
            1.5
            
            
            
            12.6
            
            
            
            (44.0
            )National
            
            
            1.0
            
            
            
            --
            
            
            
            1.0
            
            
            
            1.7
            
            
            
            --
            
            
            
            1.7
            
            
            
            (43.1
            )Direct
      Marketing
            
            
            0.1
            
            
            
            --
            
            
            
            0.1
            
            
            
            0.7
            
            
            
            --
            
            
            
            0.7
            
            
            
            (88.2
            )Other
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            0.1
            
            
            
            0.1
            
            
            
            (58.0
            )Total
      advertising revenue
            
            
            22.4
            
            
            
            6.9
            
            
            
            29.3
            
            
            
            33.7
            
            
            
            8.2
            
            
            
            41.9
            
            
            
            (30.1
            )Circulation
      revenue
            
            
            12.9
            
            
            
            0.5
            
            
            
            13.4
            
            
            
            12.9
            
            
            
            0.3
            
            
            
            13.2
            
            
            
            1.8Other
      revenue
            
            
            3.1
            
            
            
            0.7
            
            
            
            3.8
            
            
            
            3.5
            
            
            
            0.9
            
            
            
            4.4
            
            
            
            (14.0
            )Total
      revenue
            
            $
            38.4
            
            
            $
            8.1
            
            
            $
            46.5
            
            
            $
            50.1
            
            
            $
            9.4
            
            
            $
            59.5
            
            
            
            (21.8
            )Operating
      earnings
            
            $
            0.1
            
            
            $
            0.6
            
            
            $
            0.7
            
            
            $
            0.9
            
            
            $
            0.2
            
            
            $
            1.1
            
            
            
            (40.3
            )





Advertising
revenue accounted for 63.0% of total publishing revenue in the third quarter of
2009 compared to 70.5% in the third quarter of 2008.  The difficult
economic environment 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 third quarter of 2009 was $21.1 million, a decrease
of $5.7 million, or 21.1%, compared to $26.8 million in the third quarter of
2008.  The $4.6 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 automotive, furniture and furnishings, health services, finance/insurance,
home improvement, dining and entertainment, communications, food and department
stores categories. The same trends persisted in our community newspapers and
shoppers business.  A $1.7 million decrease in revenue at our
community newspapers and shoppers, excluding revenue from acquisitions, was
primarily due to decreases in automotive, small-retailers and real estate
advertising, partially offset by $0.6 million in revenue from publications
acquired in Northern Wisconsin and Florida in late 2008.





Classified
advertising has historically been 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 difficult economic environment
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 third quarter of 2009 compared to the
third quarter of 2008.  Classified advertising revenue in the third
quarter of 2009 was $7.1 million, a decrease of $5.5 million, or 44.0%, compared
to $12.6 million in the third quarter of 2008.  At our daily
newspaper, print and online classified advertising revenue decreased by 48.7%
from the third quarter of 2008, which is a smaller decrease against the
comparable prior period than experienced in the first and second quarters of
2009.  Specifically, the employment category decreased $2.8 million,
or 65.0%; automotive decreased $1.3 million, or 53.9%; real estate decreased
$1.0 million, or 41.0% and other decreased $0.3 million, or
15.5%.  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 third quarter of 2009 was $1.8 million, or 53.2%, compared to the third
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 $2.5 million in the third quarter of
2009, a decrease of $1.4 million, or 35.7%, compared to $3.9 million in the
third quarter of 2008.  Interactive classified advertising revenue at
the daily newspaper was $1.1 million in the third quarter of 2009, a decrease of
$1.3 million, or 55.3%, compared to $2.4 million in the third quarter of
2008.  The $1.4 million decrease was primarily due to decreases in
automotive classified advertising of $0.8 million, or 80.2%, and employment
classified advertising of $0.6 million, or 48.5%. The difficult economic
environment has negatively impacted automotive and employment online advertising
revenue.  In the third quarter of 2009 compared to the third quarter
of 2008, revenue from automotive online classified advertising at our daily
newspaper was also negatively impacted by the transition to a new franchise
relationship with CarSoup.com.


25
 Index


National
advertising revenue in the third quarter of 2009 was $1.0 million, a decrease of
$0.7 million, or 43.1%, compared to $1.7 million in the third quarter of
2008.  The decrease was primarily due to a decrease in ROP and
preprint advertising in the business services, dining and entertainment, food
and airline and travel categories, which are predominantly
consumer-driven.  Partially offsetting these decreases were increases
in the finance/insurance and health services categories.





Direct
marketing revenue, consisting of revenue from the sale of direct mail products
of our daily newspaper, was $0.1 million in the third quarter of 2009, a
decrease of $0.6 million, or 88.2%, compared to $0.7 million in the third
quarter of 2008 due to the cessation of operations of our Milwaukee-area direct
marketing facility.  We are now focusing our direct marketing efforts
on our total market coverage (TMC) product, which is more cost effective for us
to produce.  We began our transition from a mail-delivered product to
a carrier-delivered product in the second quarter of 2009 and we completed the
transition by the end of the third quarter of 2009




Other
advertising revenue, consisting of revenue from company-sponsored event
advertising at our community newspapers and shoppers, decreased $0.1 million in
the third quarter of 2009 compared to the third quarter of 2008.





Circulation
revenue in the third quarter of 2009 accounted for 28.8% of total publishing
revenue compared to 22.1% in the third 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
$13.4 million in the third quarter of 2009 increased $0.2 million, or 1.8%,
compared to $13.2 million in the third quarter of 2008.  At our daily
newspaper, circulation revenue in the third quarter of 2009 was essentially even
compared to circulation revenue in the third quarter of 2008.  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, helped offset
decreases in daily and Sunday home delivery revenue. We believe this increase in
revenue demonstrates 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 and due to an increase in the rates
of certain Milwaukee-area community newspapers.





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 third quarter of 2009 compared to 7.4%
in the third 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 third quarter of 2009 was $3.8
million, a decrease of $0.6 million, or 14.0%, compared to $4.4 million in the
third quarter of 2008.  The $0.4 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 a decrease in newsprint prices, which is passed along to certain
customers.  This decrease was partially offset by an increase in
commercial delivery revenue from additional routes for USA Today.  The
$0.2 million decrease at our community newspapers and shoppers business was
primarily due to the loss of certain print customers.





In
September 2009, our daily newspaper signed a three-year commercial printing
contract to print all of the Pioneer Press Publications,
which consist of 39 weekly newspapers serving Northeastern Illinois
communities.  The Pioneer
Press Publications are owned by Sun Times Media Group, which expects to
print about 156,000 weekly copies at our production facility.  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 facility.  Our daily newspaper is printing
26,000 daily and 29,000 Sunday copies, plus weekly and community
products.





Publishing
operating earnings in the third quarter of 2009 were $0.7 million, a decrease of
$0.4 million, or 40.3%, compared to operating earnings of $1.1 million in the
third quarter of 2008. The decrease in operating earnings was primarily 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 $12.6 million, or 21.5%, in
the third quarter of 2009 compared to the third quarter of 2008 primarily due to
a decrease of $6.5 million in payroll-related costs.  The charges for
workforce reductions were $3.7 million in both the third quarter of 2009 and the
third quarter of 2008.  Since the end of 2007, our full-time employee
count for our publishing businesses has decreased by 30.1%.  Excluding
payroll-related costs, operating costs and expenses decreased $5.4 million in
the third quarter of 2009 compared to the third 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 third quarter of 2009 were $3.5 million, a decrease of $3.5
million, or 50.0%, compared to $7.0 million in the third quarter of 2008 due to
a 35.5% decrease in average newsprint pricing per metric ton and a 24.9%
decrease in newsprint consumption.  Consumption of metric tonnes of
newsprint in the third quarter of 2009 decreased primarily due to decreases in
average net paid circulation, ROP advertising and editorial pages and
waste.  Online fees at our daily newspaper decreased by $0.5 million
in the third quarter of 2009 compared to the third 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.  Bad
debt expense decreased by $0.5 million in the third quarter of 2009 compared to
the third quarter of 2008 primarily due to the reversal of a bankruptcy reserve
for a pre-petition receivable at the daily newspaper, which has been paid in
full after a customer’s emergence from bankruptcy.  Partially
offsetting the expense decreases were additional expenses from publications
acquired by our community newspapers and shoppers business in 2008 and a $0.8
million increase in its sales and use tax reserve at the daily newspaper in the
third quarter of 2009.


26
 Index


Broadcasting





Revenue
from broadcasting in the third quarter of 2009 was $42.4 million, a decrease of
$11.6 million, or 21.4%, compared to $54.0 million in the third quarter of
2008.  Operating earnings from broadcasting in the third quarter of
2009 were $3.7 million compared to an operating loss of $29.1 million in the
third quarter of 2008, which included a $38.8 million non-cash broadcast license
impairment charge.





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





2009
            
            
            2008
            
            
            PercentTelevision
            
            
            Radio
            
            
            Total
            
            
            Television
            
            
            Radio
            
            
            Total
            
            
            Change(dollars
      in millions)Revenue
            
            $
            24.5
            
            
            $
            17.9
            
            
            $
            42.4
            
            
            $
            32.3
            
            
            $
            21.7
            
            
            $
            54.0
            
            
            
            (21.4
            )Broadcast
      license impairment
            
            $
            --
            
            
            $
            --
            
            
            $
            --
            
            
            $
            21.1
            
            
            $
            17.7
            
            
            $
            38.8
            
            
            
            (100.0
            )Operating
      earnings (loss)
            
            $
            --
            
            
            $
            3.7
            
            
            $
            3.7
            
            
            $
            (17.0
            )
            
            $
            (12.1
            )
            
            $
            (29.1
            )
            
            NA





Revenue
from our television stations in the third quarter of 2009 was $24.5 million, a
decrease of $7.8 million, or 24.1%, compared to $32.3 million in the third
quarter of 2008.  The revenue decrease was experienced across all of
our television markets, partially offset by revenue of $0.7 million from the
acquisition of KNIN-TV in Boise, Idaho in the third quarter of
2009.  Compared to the third quarter of 2008, political and issue
advertising revenue decreased $2.6 million, or 83.7%; Olympic advertising
revenue decreased $2.3 million, or 100.0%, due to the broadcast of the 2008
Summer Olympics on our NBC affiliates in the third quarter of 2008; local
advertising revenue decreased $2.0 million, or 10.1%; and national advertising
revenue decreased $1.7 million, or 25.7%.  2009 is generally
considered to be a non-election year and, while there will be some political and
issue advertising revenue in 2009, 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.  We have television stations in a number of states with
competitive political races in 2010.




The
difficult economic environment has negatively impacted our advertising revenue
across most categories, the most significant being our largest revenue category
­— automotive, which represented 14.4% of television advertising revenue in
the third quarter of 2009 compared to 19.7% in the third quarter of
2008.  Automotive advertising revenue decreased $2.8 millionin the third quarter of
2009 compared to the third quarter of 2008 as the automobile industry is
experiencing an unprecedented decrease in automotive sales.  We
believe the “cash for clunkers” program provided a temporary boost in automotive
advertising revenue in the third quarter of 2009 and weekly automotive
advertising revenue increased towards the end of the third quarter of
2009.  In comparing revenue trends, automotive advertising revenue
increased 2.5% compared to the second quarter of 2009.  The lack of
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 third quarter of 2009.  The
other consumer-driven categories that felt the impact of the difficult economic
environment and caused revenue decreases included communications, furniture and
electronics, medical, restaurants, retail, travel, entertainment and home
improvement.  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.  Developmental revenue was
$3.5 million in the third quarter of 2009, an increase of $0.1 million, or 2.9%,
compared to  $3.4 million in the third quarter of 2008 and it
increased as a percentage of total revenue from our television stations to
14.3%, up from 10.5% in the third quarter of 2008.  Interactive
revenue was $0.3 million in the third quarter of 2009, a decrease of $0.2
million, or 32.5%, compared to $0.5 million in the third 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 local revenue in the financial,
media and professional services categories.  Retransmission revenue
increased $0.8 million in the third quarter of 2009 to $1.2 million, compared to
$0.4 million in the third quarter of 2008.  We finalized
retransmission contracts covering about 98% 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.





Operating
results from our television stations in the third quarter of 2009 were
essentially breakeven compared to an operating loss of $17.0 million in the
third quarter of 2008, which included a non-cash broadcast license impairment
charge of $21.1 million. The increase in operating earnings was primarily due to
the non-cash broadcast license impairment charge recorded in the third quarter
of 2008, partially offset by the impact of the decrease in advertising
revenue.  Total television expenses in the third quarter of 2009 were
$24.5 million, a decrease of $24.8 million compared to $49.3 million in the
third quarter of 2008.  The decrease in total television expenses was
primarily due to the $21.1 non-cash broadcast license impairment charge in the
third quarter of 2008, a decrease of $2.2 million in payroll-related costs, a
decrease in programming expenses, a decrease in agency commissions, a decrease
in bad debt expense and various other expense reductions.  Our
television stations continue to reduce their expense platform to align with a
reduced revenue base. Partially offsetting these expense decreases was $0.3
million in incremental expenses from television stations acquired in
2009.


27
 Index


Revenue
from our radio stations in the third quarter of 2009 was $17.9 million, a
decrease of $3.8 million, or 17.3%, compared to $21.7 million in the third
quarter of 2008.  The revenue decrease was experienced across all of
our radio markets.  Compared to the third quarter of 2008, local
advertising revenue decreased $3.1 million, or 16.3%; national advertising
revenue decreased $0.4 million or 23.9% and political and issue advertising
revenue decreased $0.3 million, or 81.2%.  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 difficult economic
environment has negatively impacted our advertising revenue across most
categories, the most significant being our largest revenue category ­—
automotive, which represented 14.2% of radio advertising revenue in the third
quarter of 2009 compared to 18.4% in the third quarter of
2008.  Automotive advertising revenue decreased $1.5 million in the
third quarter of 2009 compared to the third quarter of 2008 as the domestic
automobile industry is experiencing an unprecedented decrease in automotive
sales.  In comparing revenue trends, automotive advertising revenue
increased 14.5% compared to the second quarter of 2009.  The other
consumer-driven categories that felt the impact of the economic recession and
caused revenue decreases included medical, home improvement, entertainment,
communications and restaurants partially offset by increases in the beverages
and financial categories.  In an effort to overcome the decrease in
automotive and other consumer-driven advertising revenue, our radio stations are
focused on selling developmental revenue. Developmental revenue was $3.6 million
in the third quarter of 2009, an increase of $0.5 million, or 16.5%, compared to
$3.1 million in the third quarter of 2008 and it increased as a percentage of
total revenue from our radio stations to 19.8%, up from 14.0% in the third
quarter of 2008.  Interactive revenue was $0.4 million in the third
quarter of 2009, a decrease of $0.1 million, or 22.0%, compared to $0.5 million
in the third quarter of 2008.  Both interactive and developmental
revenue are reported in local advertising revenue.





Operating
earnings from our radio stations in the third quarter of 2009 were $3.7 million
compared to an operating loss of $12.1 million in the third quarter of 2008,
which included a $17.7 million non-cash broadcast license impairment charge. The
increase in operating earnings was primarily due to the non-cash broadcast
license impairment charge recorded in the third quarter of 2008, partially
offset by the impact of the decrease in advertising revenue and an increase in
sports rights fees.  Partially offsetting the decrease in operating
earnings was a decrease of $1.2 million in payroll-related costs, a $0.3 million
gain on the sale of the radio stations KGEM-AM and KCID-AM in Boise, Idaho and
various other expense reductions.  Our radio stations continue to
reduce their expense platform to align with a reduced revenue base.





Printing
Services





Revenue
from printing services in the third quarter of 2009 was $11.1 million, a
decrease of $5.0 million, or 31.1%, compared to $16.1 million in the third
quarter of 2008.  The operating loss from printing services in the
third quarter of 2009 was $0.8 million compared to operating earnings of $0.8
million in the third quarter of 2008.





The
decrease in printing services revenue was primarily due to the effects of the
difficult economic environment.  Revenue from printing publications
and revenue from Dell and other computer-related customers decreased in the
third quarter of 2009 compared to the third 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 $0.2 million in the
third quarter of 2009, will cease by the mid-2010.





The
decrease in printing services operating earnings was primarily due to the impact
from the decrease in revenue.  Total expenses decreased $3.4 million,
or 22.6%, in the third quarter of 2009 compared to the third quarter of
2008.  The decrease in total expenses was primarily due to a decrease
of $2.5 million in materials costs, a decrease of $1.2 million in
payroll-related costs, partially offset by a workforce reduction charge of $0.4
million and an increase of $0.4 million in bad debt expense.  Due to
the difficult economic environment, 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 third quarter of 2009 was $5.1 million, a decrease of $1.6
million, or 24.8%, compared to $6.7 million in the third quarter of
2008.  Other operating earnings in the third quarter of 2009 were $0.1
million, a decrease of $0.1 million, or 52.2%, compared to $0.2 million in the
third quarter of 2008.


28
 Index


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





2009
            
            
            2008Direct
            
            
            Corporate
            
            
            
            
            
            Direct
            
            
            CorporateMarketing
            
            
            and
            
            
            
            
            
            Marketing
            
            
            and
            
            
            
            
            
            PercentServices
            
            
            Eliminations
            
            
            Total
            
            
            Services
            
            
            Eliminations
            
            
            Total
            
            
            Change(dollars
      in millions)Revenue
            
            $
            5.2
            
            
            $
            (0.1
            )
            
            $
            5.1
            
            
            $
            6.8
            
            
            $
            (0.1
            )
            
            $
            6.7
            
            
            
            (24.8
            )Operating
      earnings (loss)
            
            $
            (0.4
            )
            
            $
            0.5
            
            
            $
            0.1
            
            
            $
            (0.3
            )
            
            $
            0.5
            
            
            $
            0.2
            
            
            
            (52.2
            )





The
decrease in direct marketing services revenue was primarily due to the effects
of the difficult economic environment. Revenue from mailing services and postage
decreased in the third quarter of 2009 compared to the third 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 $3.9
million of postage amounts billed to customers in the third quarter 2009 and the
third 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





Interest
expense was $0.6 million in the third quarter of 2009 compared to $1.9 million
in the third 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
third quarter of 2009 and the third quarter of 2008.





Our
effective tax provision rate was 39.8% in the third quarter of 2009 compared to
an effective tax benefit rate of 40.8% in the third quarter of
2008.





Discontinued
Operations





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





Net
Earnings (Loss)





Our net income in the third quarter of 2009 was $1.8
million compared to a net loss of $17.1 million in the third quarter of
2008.  The increase was due to the increase in operating earnings from
continuing operations for the reasons described above and the decrease in
interest expense.





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





In the
third quarter of 2009, basic and diluted net earnings per share of class A and B
common stock were $0.02 for both.  This compared to net loss per share
of $0.35 for both in the third quarter of 2008. Basic and diluted earnings per
share of class A and B common stock from continuing operations were $0.02 for
both in the third quarter of 2009 compared to a loss per share of $0.35 for both
in the third quarter of 2008.  There were no basic and diluted
earnings per share of class A and B common stock from discontinued operations in
the third quarter of 2009 and in the third quarter of 2008.





Three
Quarters Ended September 27, 2009 compared to the Three Quarters Ended September
28, 2008





Our
consolidated revenue in the three quarters of 2009 was $321.3 million, a
decrease of $89.3 million, or 21.7%, compared to $410.6 million in the three
quarters of 2008. Our consolidated operating costs and expenses in the three
quarters of 2009 were $199.4 million, a decrease of $39.4 million, or 16.5%,
compared to $238.8 million in the three quarters of 2008. Our consolidated
selling and administrative expenses in the three quarters of 2009 were $109.8
million, a decrease of $20.9 million, or 15.9%, compared to $130.7 million in
the three quarters of 2008. Broadcast license impairment was $19.0 million in
the three quarters of 2009 compared to $38.8 million in the three quarters of
2008.


29
 Index


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 three
quarters of 2009 and the three quarters of 2008:





Percent
      of
            
            
            
            
            
            Percent
      ofTotal
            
            
            
            
            
            Total2009
            
            
            Revenue
            
            
            2008
            
            
            Revenue(dollars
      in millions)Revenue:Publishing
            
            $
            144.0
            
            
            
            44.8
            %
            
            $
            182.0
            
            
            
            44.3
            %Broadcasting
            
            
            125.4
            
            
            
            39.0
            
            
            
            156.8
            
            
            
            38.2Printing
      services
            
            
            36.6
            
            
            
            11.4
            
            
            
            49.4
            
            
            
            12.0Other
            
            
            15.3
            
            
            
            4.8
            
            
            
            22.4
            
            
            
            5.5Total
      revenue
            
            
            321.3
            
            
            
            100.0
            
            
            
            410.6
            
            
            
            100.0Total
      operating costs and expenses
            
            
            199.4
            
            
            
            62.1
            
            
            
            238.8
            
            
            
            58.2Selling
      and administrative expenses
            
            
            109.8
            
            
            
            34.2
            
            
            
            130.7
            
            
            
            31.8Broadcast
      license impairment
            
            
            19.0
            
            
            
            5.9
            
            
            
            38.8
            
            
            
            9.5Total
      operating costs and expenses and selling and administrative
      expenses
            
            
            328.2
            
            
            
            102.2
            
            
            
            408.3
            
            
            
            99.5Total
      operating earnings (loss)
            
            $
            (6.9
            )
            
            
            (2.2
            )%
            
            $
            2.3
            
            
            
            0.5
            %





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





In the
newspaper industry, classified advertising has historically been 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 46.7% decrease
in classified advertising revenue in the three quarters of 2009 compared to the
three quarters of 2008.  Retail advertising revenue decreased 20.1% in
the three quarters of 2009 compared to the three 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, finance/insurance, dining and entertainment, home improvement,
automotive, health services, small-retailers, department stores, food, real
estate, business services, communications and airline and travel
categories.  Secular changes affecting the newspaper industry also are
resulting in pressure to reduce costs and align our cost structure in the face
of decreasing revenues.





At our
broadcasting business, advertising revenue decreased in the three quarters
across most categories, the most significant being our largest revenue category
­— automotive.  Automotive advertising revenue decreased $14.0
million, or 45.2%, in the three quarters of 2009 compared to the three quarters
of 2008 as the domestic automobile industry is experiencing an unprecedented
decrease in automotive sales. In the three quarters of 2009, political and issue
advertising revenue decreased $4.8 million compared to the three quarters of
2008.  This is part of the normal two-year advertising cycle which
affects our television stations in particular.  Olympic advertising
revenue decreased $2.3 million due to the broadcast of the 2008 Summer Olympics
on our NBC affiliates in the three quarters of 2008.  Partially
offsetting the decrease in advertising revenue, retransmission revenue increased
$2.5 million in the three quarters of 2009 compared to the three quarters of
2008.  These contracts will continue to generate incremental revenue
through the remainder of 2009 and into the next several years.





The
decrease in printing services revenue was primarily due to the effects of the
difficult economic environment.  Revenue from printing publications
and revenue from Dell and other computer-related customers decreased in the
three quarters of 2009 compared to the three quarters of 2008.  At our
direct marketing services business, revenue from mailing and list services,
postage and offset printing decreased in the three quarters of 2009 compared to
the three 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, a $1.7
million gain related to insurance proceeds from our tower replacement in
Wichita, Kansas and a decrease in programming expenses.  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 three quarters of 2009 compared to a $38.8 million
non-cash broadcast license in impairment charge in the three quarters of
2008.  We recorded total workforce reduction charges of $5.4 million
in the three quarters of 2009 compared to $4.0 million in the three quarters of
2008.


30
 Index


Our
consolidated operating loss in the three quarters of 2009 was $6.9 million
compared to operating earnings of $2.3 million in the three quarters of
2008.  The following table presents our operating earnings (loss) by
segment for the three quarters of 2009 and the three quarters 2008:





Percent
      of
            
            
            
            
            
            Percent
      ofTotal
            
            
            
            
            
            TotalOperating
            
            
            
            
            
            Operating2009
            
            
            Loss
            
            
            2008
            
            
            Earnings(dollars
      in millions)Publishing
            
            $
            2.4
            
            
            
            (34.3
            )%
            
            $
            11.1
            
            
            
            493.4
            %Broadcasting
            
            
            (8.2
            )
            
            
            118.0
            
            
            
            (12.2
            )
            
            
            (543.6
            )Printing
      services
            
            
            (1.2
            )
            
            
            16.7
            
            
            
            2.4
            
            
            
            106.0Other
            
            
            0.1
            
            
            
            (0.4
            )
            
            
            1.0
            
            
            
            44.2Total
      operating earnings (loss)
            
            $
            (6.9
            )
            
            
            100.0
            %
            
            $
            2.3
            
            
            
            100.0
            %





The
decrease in total operating earnings was primarily due to the decrease in
revenue at our publishing, broadcasting, printing services and direct marketing
services businesses.





Publishing





Revenue
from publishing in the three quarters of 2009 was $144.0 million, a decrease of
$38.0 million, or 20.9%, compared to $182.0 million in the three quarters of
2008.  Operating earnings from publishing in the three quarters of
2009 were $2.4 million, a decrease of $8.7 million, or 78.6%, compared to $11.1
million in the three quarters of 2008.





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





2009
            
            
            2008Community
            
            
            
            
            
            
            
            
            CommunityDaily
            
            
            Newspapers
            
            
            
            
            
            Daily
            
            
            Newspapers
            
            
            PercentNewspaper
            
            
            & Shoppers
            
            
            Total
            
            
            Newspaper
            
            
            & Shoppers
            
            
            Total
            
            
            Change(dollars
      in millions)Advertising
      revenue:Retail
            
            $
            47.6
            
            
            $
            18.0
            
            
            $
            65.6
            
            
            $
            61.3
            
            
            $
            20.7
            
            
            $
            82.0
            
            
            
            (20.1
            )Classified
            
            
            17.1
            
            
            
            4.1
            
            
            
            21.2
            
            
            
            35.5
            
            
            
            4.3
            
            
            
            39.8
            
            
            
            (46.7
            )National
            
            
            3.6
            
            
            
            --
            
            
            
            3.6
            
            
            
            5.3
            
            
            
            --
            
            
            
            5.3
            
            
            
            (31.8
            )Direct
      Marketing
            
            
            0.5
            
            
            
            --
            
            
            
            0.5
            
            
            
            2.3
            
            
            
            --
            
            
            
            2.3
            
            
            
            (76.7
            )Other
            
            
            --
            
            
            
            0.2
            
            
            
            0.2
            
            
            
            --
            
            
            
            0.3
            
            
            
            0.3
            
            
            
            (35.3
            )Total
      advertising revenue
            
            
            68.8
            
            
            
            22.3
            
            
            
            91.1
            
            
            
            104.4
            
            
            
            25.3
            
            
            
            129.7
            
            
            
            (29.8
            )Circulation
      revenue
            
            
            38.2
            
            
            
            1.5
            
            
            
            39.7
            
            
            
            37.7
            
            
            
            0.8
            
            
            
            38.5
            
            
            
            3.2Other
      revenue
            
            
            10.9
            
            
            
            2.3
            
            
            
            13.2
            
            
            
            11.3
            
            
            
            2.5
            
            
            
            13.8
            
            
            
            (4.3
            )Total
      revenue
            
            $
            117.9
            
            
            $
            26.1
            
            
            $
            144.0
            
            
            $
            153.4
            
            
            $
            28.6
            
            
            $
            182.0
            
            
            
            (20.9
            )Operating
      earnings
            
            $
            1.6
            
            
            $
            0.8
            
            
            $
            2.4
            
            
            $
            10.9
            
            
            $
            0.2
            
            
            $
            11.1
            
            
            
            (78.6
            )





Advertising
revenue accounted for 63.2% of total publishing revenue in the three quarters of
2009 compared to 71.2% in the three quarters of 2008.  The difficult
economic environment 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 three quarters of 2009 was $65.6 million, a decrease
of $16.4 million, or 20.1%, compared to $82.0 million in the three quarters of
2008.  The $13.7 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, home
improvement, automotive, health services, small-retailers, department stores,
food, real estate, business services, communications and airline and travel. The
same trends persisted in our community newspapers and shoppers
business.  A $4.5 million decrease in revenue at our community
newspapers and shoppers, excluding revenue from acquisitions, was primarily due
to decreases in automotive and real estate advertising, partially offset by $1.8
million in revenue from publications acquired in Northern Wisconsin and Florida
in late 2008.


31
 Index


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 difficult economic environment 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 three quarters of 2009 compared to the three quarters
of 2008.  Classified advertising revenue in the three quarters of 2009
was $21.2 million, a decrease of $18.6 million, or 46.7%, compared to $39.8
million in the three quarters of 2008.  At our daily newspaper, print
and online classified advertising revenue decreased by 51.8% from the three
quarters of 2008.  Specifically, the employment category decreased
$9.7 million, or 67.3%; automotive decreased $4.2 million, or 57.0%; real estate
decreased $3.7 million, or 46.3% and other decreased $0.8 million, or
13.7%.  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 three quarters of 2009 was $5.2 million, or 53.6%, compared to the three
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 $7.1 million in the three quarters of
2009, a decrease of $4.2 million, or 37.3%, compared to $11.3 million in the
three quarters of 2008.  Interactive classified advertising revenue at
the daily newspaper was $3.0 million in the three quarters of 2009, a decrease
of $3.9 million, or 56.6%, compared to $6.9 million in the three quarters of
2008.  The $3.9 million decrease was primarily due to decreases in
automotive classified advertising of $2.1 million, or 81.3%, and employment
classified advertising of $1.8 million, or 51.1%. The difficult economic
environment has negatively impacted automotive and employment online advertising
revenue.  In the three 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 three quarters of 2009 was $3.6 million, a decrease
of $1.7 million, or 31.8%, compared to $5.3 million in the three quarters of
2008.  The decrease was primarily due to a decrease in ROP and
preprint advertising in the business services, dining and entertainment, airline
and travel, small-retailers and food categories, which are predominantly
consumer-driven.  Partially offsetting these decreases was an increase
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 three quarters of 2009, a
decrease of $1.8 million, or 76.7%, compared to $2.3 million in the three
quarters of 2008.  This revenue category was also negatively impacted
by the difficult economic environment as the demand for direct marketing
advertising decreased.  In May 2009, we shut down 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 TMC product, which is
more cost effective for us to produce.




Other
advertising revenue, consisting of revenue from company-sponsored event
advertising at our community newspapers and shoppers, was $0.2 million in the
three quarters of 2009 compared to $0.3 million in the three quarters of
2008.





Circulation
revenue in the three quarters of 2009 accounted for 27.6% of total publishing
revenue compared to 21.2% in the three 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
$39.7 million in the three quarters of 2009 increased $1.2 million, or 3.2%,
compared to $38.5 million in the three 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 and a price increase in home delivery
rates in June 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. 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
9.2% of total publishing revenue in the three quarters of 2009 compared to 7.6%
in the three 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 $13.2 million in the three quarters
of 2009, a decrease of $0.6 million, or 4.3%, compared to $13.8 million in the
three quarters of 2008.  The $0.4 million decrease at our daily
newspaper was primarily due to a decrease in commercial and brokered printing
revenue due to volume declines as certain customers reduced page counts and
number of copies and the loss of certain customers partially offset by an
increase in commercial delivery revenue from additional routes for USA Today.  The
$0.2 million decrease at our community newspapers and shoppers was due to the
loss of certain customers.


32
 Index


In
September 2009, our daily newspaper signed a three-year commercial printing
contract to print all of the Pioneer Press Publications,
which consist of 39 weekly newspapers serving Northeastern Illinois
communities.  The Pioneer
Press Publications are owned by Sun Times Media Group, which expects to
print about 156,000 weekly copies.  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 is printing
26,000 daily and 29,000 Sunday copies, plus weekly and community
products.  Some capacity is available at our daily newspaper’s
production facility to allow for printing during certain shifts/days of the
week.





Publishing
operating earnings in the three quarters of 2009 were $2.4 million, a decrease
of $8.7 million, or 78.6%, compared to $11.1 million in the three 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 $29.3 million, or 17.1%, in the three
quarters of 2009 compared to the three quarters of 2008 primarily due to a
decrease of $15.9 million in payroll-related costs.  The charges for
workforce reductions were $4.6 million and $3.8 million in the three quarters of
2009 and 2008, respectively.  Since the end of 2007, our full-time
employee count for our publishing businesses has decreased by
30.1%.  Excluding payroll-related costs, operating costs and expenses
decreased $10.7 million in the three quarters of 2009 compared to the three
quarters of 2008, the most significant of which was newsprint and paper costs,
online fees and costs related to the total market coverage and direct mail
advertising products at our daily newspaper.  Total newsprint and
paper costs for our publishing businesses in the three quarters of 2009 were
$13.3 million, a decrease of $6.4 million, or 32.4%, compared to $19.7 million
in the three quarters of 2008 due to a 26.4% decrease in newsprint consumption a
8.8% decrease in average newsprint pricing per metric
ton.  Consumption of metric tonnes of newsprint in the three quarters
of 2009 decreased primarily due to decreases in ROP advertising and editorial
pages, average net paid circulation and waste.  Online fees at our
daily newspaper decreased by $1.6 million in the three quarters of 2009 compared
to the three 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 three quarters of 2009 compared to the three quarters of
2008 due to a $0.4 million contract termination charge in the three quarters of
2008.  Costs associated with our TMC product decreased by $0.5 million
in the three quarters of 2009 compared to the three quarters of 2008 due to
transitioning this product from mail delivery to carrier
delivery.  Partially offsetting the expense decreases, the daily
newspaper increased its sales and use tax reserve by $0.8 million in the third
quarter of 2009.





Broadcasting





Revenue
from broadcasting in the three quarters of 2009 was $125.4 million, a decrease
of $31.4 million, or 20.0%, compared to $156.8 million in the three quarters of
2008.  Operating loss from broadcasting in the three quarters of 2009
was $8.2 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 an operating
loss of $12.2 million in the three quarters of 2008 including a $38.8 million
non-cash broadcast license impairment charge.





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





2009
            
            
            2008
            
            
            PercentTelevision
            
            
            Radio
            
            
            Total
            
            
            Television
            
            
            Radio
            
            
            Total
            
            
            Change(dollars
      in millions)Revenue
            
            $
            77.1
            
            
            $
            48.3
            
            
            $
            125.4
            
            
            $
            97.2
            
            
            $
            59.6
            
            
            $
            156.8
            
            
            
            (20.0
            )Broadcast
      license impairment
            
            $
            14.9
            
            
            $
            4.1
            
            
            $
            19.0
            
            
            $
            21.1
            
            
            $
            17.7
            
            
            $
            38.8
            
            
            
            (51.0
            )Operating
      earnings (loss)
            
            $
            (13.3
            )
            
            $
            5.1
            
            
            $
            (8.2
            )
            
            $
            (8.8
            )
            
            $
            (3.4
            )
            
            $
            (12.2
            )
            
            
            33.2





Revenue
from our television stations in the three quarters of 2009 was $77.1 million, a
decrease of $20.1 million, or 20.7%, compared to $97.2 million in the three
quarters of 2008.  The revenue decrease was experienced across all of
our television markets, partially offset by incremental revenue of $3.8 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 three quarters of 2008, local
advertising revenue decreased $9.2 million, or 14.0%; national advertising
revenue decreased $6.5 million or 29.8%; political and issue advertising revenue
decreased $4.5 million, or 83.0%; and Olympic advertising revenue decreased $2.3
million, or 100.0% due to the broadcast of the 2008 Summer Olympics on our NBC
affiliates in the third quarter of 2008.  In the three quarters of
2009, we recorded higher than expected political and issue advertising revenue
due the current national debate on health care
reform.   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.  We have television stations in a number of states with
competitive political races in 2010.


33
 Index


The
difficult economic environment has negatively impacted our advertising revenue
across most categories, the most significant being our largest revenue category
­— automotive, which represented 13.7% of television advertising revenue in
the three quarters of 2009 compared to 21.7% in the three quarters of
2008.  Automotive advertising revenue decreased $10.5 millionin the three quarters of
2009 compared to the three quarters of 2008 as the 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 furniture and electronics, communications,
medical, restaurants, retail, professional services, home improvement,
entertainment, home products, travel, beverages and health and
leisure.  In an effort to overcome the decrease in automotive and
other consumer-driven advertising revenue, our television stations are selling
developmental revenue.  While developmental revenue decreased $0.3
million in the three quarters of 2009 compared to the three quarters of 2008, it
increased as a percentage of total revenue from our television stations to
14.2%, up from 11.5%.  Interactive revenue was $1.1 million in the
three quarters of 2009, a decrease of $0.3 million, or 22.9%, compared to $1.4
million in the three 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 local revenue in the media, financial and
supermarkets categories.  Retransmission revenue increased $2.5
million in the three quarters of 2009 to $3.6 million, compared to $1.1 million
in the three quarters of 2008.  We finalized retransmission contracts
covering about 98% 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.





Operating
loss from our television stations in the three quarters of 2009 was $13.3
million, a decrease of $4.5 million, or 51.1%,  compared to $8.8
million in the three quarters of 2008. The decrease in operating earnings was
primarily due to the impact of the decrease in advertising
revenue.  Total television expenses in the three quarters of 2009 were
$90.4 million, a decrease of $15.6 million, or 14.7%, compared to $106.0 million
in the three quarters of 2008.  The decrease in total television
expenses was primarily due to a decrease of $6.7 million in payroll-related
costs, a decrease of $6.2 million in non-cash broadcast license impairment
charges, a decrease in programming expenses, a decrease in advertising and
promotion expenses, a decrease in agency commissions, a decrease in syndicated
programming expenses and a decrease in bad debt expense.  Our
television stations continue to reduce their expense platforms to align with a
reduced revenue base.  Partially offsetting these expense decreases
was $2.5 million in incremental expenses from television stations acquired in
2008 and 2009 and an increase of $0.6 million in legal fees.





Revenue
from our radio stations in the three quarters of 2009 was $48.3 million, a
decrease of $11.3 million, or 18.9%, compared to $59.6 million in the three
quarters of 2008.  The revenue decrease was experienced across all of
our radio markets.  Compared to the three quarters of 2008, local
advertising revenue decreased $9.6 million, or 18.3%, national advertising
revenue decreased $1.4 million, or 27.8% and political and issued revenue
decreased $0.3 million, or 49.7%.  The difficult economic environment
has negatively impacted our advertising revenue across most categories, the most
significant being our largest revenue category ­— automotive, which
represented 13.3% of radio advertising revenue in the three quarters of 2009
compared to 16.8% in the three quarters of 2008.  Automotive
advertising revenue decreased $3.5 million in the three quarters of 2009
compared to the three 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, home improvement,
restaurants, media, retail, hotel and gambling, furniture and electronics and
education.  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 three quarters of 2009
compared to the three quarters of 2008, it actually increased as a percentage of
total revenue from our radio stations to 19.4%, up from
16.0%.  Interactive revenue was $1.3 million in the three quarters of
2009, a decrease of $0.1 million, or 7.7%, compared to $1.4 million in the three
quarters of 2008.  Both interactive and developmental revenue are
reported in local advertising revenue.





Operating
earnings from our radio stations in the three quarters of 2009 were $5.1 million
compared to an operating loss of $3.4 million in the three quarters of 2008. The
increase in operating earnings was due to a decrease of $13.6 million in
non-cash broadcast license impairment charges, a decrease of $3.5 million in
payroll-related costs, 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 in advertising and promotion expenses, a $0.3 million gain on the sale
of radio stations KGEM-AM and KCID-AM in Boise, Idaho and various other expense
reductions.  Our radio stations continue to reduce their expense
platforms to align them with a reduced revenue base.  Partially
offsetting these expense decreases was an increase in sports rights fees and an
increase in bad debt expense.





Printing
Services





Revenue
from printing services in the three quarters of 2009 was $36.6 million, a
decrease of $12.8 million, or 25.9%, compared to $49.4 million in the three
quarters of 2008.  Operating loss from printing services in the three
quarters of 2009 was $1.2 million compared to operating earnings of $2.4 million
in the three quarters of 2008.





The
decrease in printing services revenue was primarily due to the effects of the
difficult economic environment.  Revenue from printing publications
and revenue from Dell and other computer-related customers decreased in the
three quarters of 2009 compared to the three 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 $1.5 million in the
three quarters of 2009, will cease by mid-2010.





The
decrease in printing services operating earnings was primarily due to the impact
from the decrease in revenue.  Total expenses decreased $9.2 million,
or 19.6%, in the three quarters of 2009 compared to the three quarters of
2008.  The decrease in total expenses was primarily due to a decrease
of $5.6 million in materials costs, a decrease of $4.2 million in
payroll-related costs, partially offset by workforce reduction charges of $0.5
million, an increase in bad debt expense of $0.7 million and an increase of $0.6
million in postage and freight expense.  Due to the difficult economic
environment, our printing services business is encountering an increase in
slow-paying customers as well as customers who have filed
bankruptcy.


34
 Index


Other





Other
revenue in the three quarters of 2009 was $15.3 million, a decrease of $7.1
million, or 31.9%, compared to $22.4 million in the three quarters of
2008.  Other operating earnings in the three quarters of 2009 were
$0.1 million, a decrease of $0.9 million, or 96.9%, compared to $1.0 million in
the three quarters of 2008.





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





2009
            
            
            2008Direct
            
            
            Corporate
            
            
            
            
            
            Direct
            
            
            CorporateMarketing
            
            
            and
            
            
            
            
            
            Marketing
            
            
            and
            
            
            
            
            
            PercentServices
            
            
            Eliminations
            
            
            Total
            
            
            Services
            
            
            Eliminations
            
            
            Total
            
            
            Change(dollars
      in millions)Revenue
            
            $
            15.6
            
            
            $
            (0.3
            )
            
            $
            15.3
            
            
            $
            22.7
            
            
            $
            (0.3
            )
            
            $
            22.4
            
            
            
            (31.9
            )Operating
      earnings (loss)
            
            $
            (1.3
            )
            
            $
            1.4
            
            
            $
            0.1
            
            
            $
            (0.2
            )
            
            $
            1.2
            
            
            $
            1.0
            
            
            
            (96.9
            )





The
decrease in direct marketing services revenue was primarily due to the effects
of the difficult economic environment. Revenue from mailing and list services,
postage and offset printing decreased in the three quarters of 2009 compared to
the three 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 $8.7
million and $13.0 million of postage amounts billed to customers in the three
quarters of 2009 and the three 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 $2.2 million in the three quarters of 2009 compared to $6.1 million
in the three 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 $0.3 million in the
three quarters of 2009 and the three quarters of 2008.





Our
effective tax benefit rate was 68.4% in the three quarters of 2009 compared to
53.0% in the three 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 three quarters of 2009 from the deposit we made in
2007.





Discontinued
Operations





There
were no results from discontinued operations in the three quarters
2009.  In the three 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 three quarters of 2009 was $2.9
million compared to $1.4 million in the three 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 the decrease in interest expense
and the increase in the income tax benefit.





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





In the
three quarters of 2009, basic and diluted net loss per share of class A and B
common stock were $0.08 for both.  This compared to net loss per share
of $0.05 for both in the three quarters of 2008. Basic and diluted loss per
share of class A and B common stock from continuing operations were $0.08 for
both in the three quarters of 2009 compared to earnings per share of $0.06 for
both in the three quarters of 2008.  There were no basic and diluted
earnings per share of class A and B common stock from discontinued operations in
the three quarters of 2009 compared to $0.01 for both in the three quarters of
2008.


35
 Index


Liquidity and Capital
Resources





Cash
balances were $3.4 million at September 27, 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 September 27, 2009
and December 28, 2008, we had borrowings of $172.2 million and $215.1 million,
respectively, under the facility at a weighted average rate of 0.93% and 2.10%,
respectively.  Cash provided by operating activities was used
primarily to decrease our borrowings during the three 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,
which remain constant over the term of the agreement:





·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 applying the FASB’s guidance for impairment
testing for goodwill and other intangible assets not subject to
amortization.   As of September 27, 2009, our consolidated funded
debt ratio was 3.30-to-1, resulting in a current maximum borrowing capacity of
$209.0 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 applying the FASB’s guidance for impairment testing for goodwill and
other intangible assets not subject to amortization to our interest
expense.  As of September 27, 2009, our interest coverage ratio was
12.27–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 third quarter of 2009 was $10.7 million, a
decrease of $8.4 million, or 44.0%, compared to $19.1 million in the third
quarter of 2008.  Our consolidated adjusted EBITDA in the three
quarters of 2009 was $33.4 million, a decrease of $29.6 million, or 47.0%,
compared to $63.0 million in the three quarters of 2008.





The
following table presents a reconciliation of our consolidated net earnings to
consolidated adjusted EBITDA for the third quarter and three quarters of 2009
and the third quarter and three quarters of 2008:





Third Quarter Ended
            
            
            Three Quarters EndedSeptember 27, 2009
            
            
            September 28, 2008
            
            
            September 27, 2009
            
            
            September 28, 2008(dollars
      in millions)Net
      earnings (loss)
            
            $
            1.8
            
            
            $
            (17.1
            )
            
            $
            (2.9
            )
            
            $
            (1.4
            )Gain
      from discontinued operations, net
            
            
            --
            
            
            
            --
            
            
            
            --
            
            
            
            (0.4
            )Provision
      (benefit) for income taxes
            
            
            1.2
            
            
            
            (11.8
            )
            
            
            (6.3
            )
            
            
            (2.0
            )Total
      other expense, net
            
            
            0.6
            
            
            
            1.9
            
            
            
            2.2
            
            
            
            6.1Depreciation
            
            
            6.6
            
            
            
            6.8
            
            
            
            19.9
            
            
            
            20.4Amortization
            
            
            0.5
            
            
            
            0.5
            
            
            
            1.5
            
            
            
            1.5Broadcast
      license impairment
            
            
            --
            
            
            
            38.8
            
            
            
            19.0
            
            
            
            38.8Adjusted
      EBITDA
            
            $
            10.7
            
            
            $
            19.1
            
            
            $
            33.4
            
            
            $
            63.0


36
 Index


Adjusted
EBITDA for the four fiscal quarter period proceeding September 27, 2009 was
$52.2 million.  We expect to be able to continue to pay down debt over
the next 12 months and to stay within our debt covenants.





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.





Given the
difficult economic environment, 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, along with our workforce reduction initiatives, were taken in order to
offset decreases in revenue and to help maintain financial flexibility in this
difficult economic environment.  In the three quarters of 2009, we
have paid down our debt by $42.9 million.





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 payment of 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.  As of the end of the third quarter 2009, we have $0.9 million
accrued for class C dividends.  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 four
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
September 25, 2009, Journal Broadcast Group, Inc. and Journal Broadcast
Corporation, our broadcasting businesses, completed the asset sale of KGEM-AM
and KCID-AM in Boise, Idaho to Salt & Light Radio, Inc., an Idaho non-profit
corporation, for $1.0 million.  We recorded a $0.3 million gain on the
sale of these assets.





Cash
Flow





Continuing
Operations





Cash
provided by operating activities was $54.0 million in the three quarters of 2009
compared to $45.9 million in the three 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 due to a settlement
with the WDR.


37
 Index


Cash used
for investing activities was $10.6 million in the three quarters of 2009
compared to $33.4 million in the three quarters of 2008.  Capital
expenditures were $5.5 million in the three quarters of 2009 compared to $15.1
million in the three quarters of 2008.  Our capital expenditures at
our daily newspaper in the three quarters of 2009 related primarily to building
improvements and software upgrades for production equipment.  Our
capital expenditures in our broadcasting segment in the three 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.  During the three quarters of 2009, we acquired KNIN-TV in
Boise, Idaho for $6.6 million and we received $0.5 million for the sale of
KGEM-AM and KCID-AM.  During the three quarters of 2008, we acquired
two television stations for $16.7 million and three community newspapers and
three community shoppers for $1.6 million.  In the three 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 $1.0 million in insurance proceeds by the end of
2009.





Cash used
for financing activities was $44.0 million in the three quarters of 2009
compared to $14.1 million in the three quarters of 2008.  Borrowings
under our credit facility in the first quarter of 2009 were $105.3 million and
we made payments of $148.2 million, reflecting a $42.9 million decrease in our
debt outstanding compared to borrowings of $162.2 million and payments of $117.9
million in the three quarters of 2008.  The increase in borrowings in
the three quarters of 2008 was used to finance the repurchase our class A common
stock for $44.8 million.  We paid cash dividends of $1.5 million and
$14.0 million in the three quarters of 2009 and the three quarters of 2008,
respectively.




New
Accounting Standards





Future
Adoptions





In
December 2008, the Financial Accounting Standards Board (FASB) amended the
existing guidance on an employers’ disclosures about plan assets of a defined
benefit pension or other postretirement plan.  The guidance is
effective for fiscal years ending after December 15, 2009.  Upon
initial application, the guidance is not required for earlier periods that are
presented for comparative purposes.  Earlier application of the
guidance is permitted.  We do not believe the effect of adopting the
guidance on an employers’ disclosures will have a material impact on our
consolidated financial statements.





Current
Adoptions





In
August 2009, the FASB issued amended guidance for fair value measurements
and disclosures.  The guidance provides clarification for the
circumstances when a quoted price in an active market for the identical
liability is not available, a reporting entity is required to measure fair value
using a valuation technique that uses either the quoted price of the identical
liability when traded as an asset or quoted prices for similar liabilities or
similar liabilities when traded as assets. This guidance is effective upon
issuance. The adoption of this guidance did not have a material impact on our
consolidated financial statements.





In May
2009, the FASB issued guidance on the 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, this guidance
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.





This
guidance is effective for interim or annual financial periods ending after June
15, 2009, and shall be applied prospectively.  We adopted this
guidance in the second quarter of 2009.  The adoption of this guidance
did not have a material impact on our consolidated financial
statements.





In April
2009, the FASB issued amended guidance on the disclosures about fair value of
financial instruments in interim financial information. Under this amended
guidance, 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.
This amended guidance is effective for interim periods ending after June 15,
2009.  We adopted this amended guidance in the second quarter of
2009.  The adoption of this amended guidance did not have a material
impact on our consolidated financial statements.





In April
2009, the FASB issued guidance on how to determine the fair value of assets and
liabilities when the transaction volume and level of activity for the assets and
liabilities have significantly decreased and the transactions are not occurring
in an orderly fashion.  This guidance 1) 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; 2) 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; 3)
eliminates the proposed presumption that all transactions are not orderly unless
proven otherwise and instead requires an entity to base its conclusion about
whether a transaction was not orderly on the weight of the evidence; 4) requires
an entity to disclose a change in valuation technique (and the related inputs)
resulting from the application of this guidance and to quantify its effects, if
practicable; and 5) applies to all fair value measurements when
appropriate.  This guidance is effective for interim and annual
periods ending after June 15, 2009.  We adopted this guidance in the
second quarter of 2009.  The adoption of this guidance did not have a
material impact on our consolidated financial statements.


38
 Index


In April
2009, the FASB issued amended guidance for the accounting for assets acquired
and liabilities assumed in a business combination that arise from
contingencies.  This guidance requires 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.  This guidance eliminates 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 disclosures in the business combination footnote regarding the nature of
the contingency and give an estimate of the possible loss or range of loss or
state that such an estimate cannot be made.  This guidance also
requires 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.
This guidance 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 this guidance in the first quarter of
2009.  The adoption of this guidance did not have a material impact on
our consolidated financial statements.





In June
2008, the FASB issued guidance for the accounting by lessees for nonrefundable
maintenance deposits.  This guidance 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.  This guidance is effective for financial
statements issued for fiscal years beginning after December 15, 2008, and
interim periods within those fiscal years.  We adopted this guidance
in the first quarter of 2009.  The adoption of this guidance did not
have a material impact on our consolidated financial statements.





In April
2008, the FASB issued guidance for determining the useful life of intangible
assets.  This guidance 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 and 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 this guidance in the
first quarter of 2009.  The adoption of this guidance did not have a
material impact on our consolidated financial statements.





In
February 2008, the FASB issued guidance which delays the effective date of the
guidance for fair value measurements 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 this guidance in the
first quarter of 2009.  The adoption of this guidance did not have a
material impact on our consolidated financial statements.





In
December 2007, the FASB issued amended guidance for accounting for business
combinations.  This amended guidance 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.  This
guidance changed 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.  This guidance
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.  We adopted this guidance in the first quarter of
2009.  The adoption of this guidance 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.





ITEM3.
            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.


39
 Index


ITEM4.
            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.





PARTII. OTHER INFORMATION





ITEM 1.
            LEGAL
      PROCEEDINGS





None.





ITEM1A.
            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.





ITEM2.
            UNREGISTERED
      SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS





There
were no share repurchases during the third quarter ended September 27,
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.  On October 31, 2009, the
May 1, 2008 share repurchase programs will expire.





ITEM3.
            DEFAULTS
      UPON SENIOR SECURITIES





None.





ITEM4.
            SUBMISSION
      OF MATTERS TO A VOTE OF SECURITY
HOLDERS





None.





ITEM5.
            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.


40
 Index


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.RegistrantDate:  October
      30, 2009
            /s/ Steven J. SmithSteven
      J. Smith, Chairman and Chief Executive OfficerDate:  October
      30, 2009
            /s/ Andre J. FernandezAndre
      J. Fernandez, Executive Vice President, Finance &
    Strategyand
      Chief Financial Officer







41