# 

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

# FORM 10-Q

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

| | For
the quarterly period ended: June 27, 2004
| | ---------------------------------------------

or

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

| | For
the transition period from _____________________ to _____________________
| | -----------------------------------------------------------------------------

Commission File Number:  1-31805

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

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

|414-224-2616                                        
|----------------------------------------------------
|(Registrant's telephone number, including area code)

Indicate by check mark whether the
 registrant  (1) has filed all reports  required to be filed by Section 13 or 15 (d) of
the  Securities  Exchange Act of 1934 during the  preceding  12 months (or for such
shorter  period that the registrant was required to file such reports),  and (2) has been
subject to such filing  requirements  for the past 90 days.     Yes  X
     No

Indicate by check mark whether the
registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act)     Yes  
     No  X

Number of shares  outstanding  of
each of the  issuer's  classes  of common  stock as of July 23,  2004  (excluding
4,338,352  and  4,338,353  shares of class B-1 and B-2 common  stock,  respectively,
 held by our  subsidiary,  The Journal Company):

|Class                  | Outstanding at July 23, 2004
|---------------------- | ----------------------------
|Class A Common Stock   | 26,926,496                  
|Class B-1 Common Stock | 9,741,509                   
|Class B-2 Common Stock | 35,549,109                  
|Class C Common Stock   | 3,264,000                   

---

# JOURNAL
COMMUNICATIONS, INC.

# INDEX

|        |                       | PageNo.                                                       
|------- | --------------------- | --------------------------------------------------------------
|        |                       |                                                               
|Part I  | Financial Information |                                                               
|        |                       |                                                               
|        | Item 1.               | Financial Statements                                          
|        |                       |                                                               
|        |                       | Consolidated Condensed Balance Sheets as of                   
|        |                       | June 27, 2004 (Unaudited) and December 31, 2003               
|        |                       |                                                               
|        |                       | Unaudited Consolidated Condensed Statements of Earnings       
|        |                       | for the Second Quarter and Two Quarters Ended                 
|        |                       | June 27, 2004 and June 29, 2003                               
|        |                       |                                                               
|        |                       | Unaudited Consolidated Condensed Statement of                 
|        |                       | Shareholders' Equity for the Two Quarters Ended               
|        |                       | June 27, 2004                                                 
|        |                       |                                                               
|        |                       | Unaudited Consolidated Condensed Statements of                
|        |                       | Cash Flows for the Two Quarters Ended June 27, 2004           
|        |                       | and June 29, 2003                                             
|        |                       |                                                               
|        |                       | Notes to Unaudited Consolidated Condensed                     
|        |                       | Financial Statements as of June 27, 2004                      
|        |                       |                                                               
|        | Item 2.               | Management's Discussion and Analysis of Financial Condition   
|        |                       | and Results of Operations                                     
|        |                       |                                                               
|        | Item 3.               | Quantitative and Qualitative Disclosure of Market Risk        
|        |                       |                                                               
|        | Item 4.               | Controls and Procedures                                       
|        |                       |                                                               
|        |                       |                                                               
|Part II | Other Information     |                                                               
|        |                       |                                                               
|        | Item 1.               | Legal Proceedings                                             
|        |                       |                                                               
|        | Item 2.               | Changes in Securities, Use of Proceeds and Issuer Purchases of
|        |                       | Equity Securities                                             
|        |                       |                                                               
|        | Item 3.               | Defaults Upon Senior Securities                               
|        |                       |                                                               
|        | Item 4.               | Submission of Matters to a Vote of Security Holders           
|        |                       |                                                               
|        | Item 5.               | Other Information                                             
|        |                       |                                                               
|        | Item 6.               | Exhibits and Reports on Form 8-K                              

1

---

# PART I.  FINANCIAL
INFORMATION

# ITEM 1.  FINANCIAL
STATEMENTS

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

|                                                                  | June 27, 2004 | December 31, 2003
|----------------------------------------------------------------- | ------------- | -----------------
|ASSETS                                                            |               |                  
|Current assets:                                                   |               |                  
|Cash and cash equivalents                                         |               |                  
|Receivables, less allowance for doubtful                          |               |                  
|accounts of $7,726 and $6,836                                     |               |                  
|Inventories                                                       |               |                  
|Prepaid expenses                                                  |               |                  
|Deferred income taxes                                             |               |                  
|                                                                  |               |                  
|TOTAL CURRENT ASSETS                                              |               |                  
|Property and equipment, at cost, less accumulated                 |               |                  
|depreciation of $352,718 and $331,658                             |               |                  
|Goodwill                                                          |               |                  
|Broadcast licenses                                                |               |                  
|Other intangible assets, net                                      |               |                  
|Prepaid pension costs                                             |               |                  
|Other assets, net                                                 |               |                  
|                                                                  |               |                  
|TOTAL ASSETS                                                      |               |                  
|                                                                  |               |                  
|LIABILITIES AND SHAREHOLDERS' EQUITY                              |               |                  
|Current liabilities:                                              |               |                  
|Accounts payable                                                  |               |                  
|Accrued compensation                                              |               |                  
|Deferred revenue                                                  |               |                  
|Accrued employee benefits                                         |               |                  
|Other current liabilities                                         |               |                  
|Current portion of long-term liabilities                          |               |                  
|                                                                  |               |                  
|TOTAL CURRENT LIABILITIES                                         |               |                  
|Accrued employee benefits                                         |               |                  
|Long-term notes payable to banks                                  |               |                  
|Deferred income taxes                                             |               |                  
|Other long-term liabilities                                       |               |                  
|Shareholders' equity:                                             |               |                  
|Preferred stock, $0.01 par - authorized 10,000,000 shares; no     |               |                  
|shares outstanding at June 27, 2004 and at December 31, 2003      |               |                  
|Common stock, $0.01 par:                                          |               |                  
|Class C - authorized 10,000,000 shares; issued and outstanding:   |               |                  
|3,264,000 shares at June 27, 2004 and December 31, 2003           |               |                  
|Class B-2 - authorized 60,000,000 shares; issued and outstanding: |               |                  
|35,518,175 shares at June 27, 2004 and 38,301,224 shares          |               |                  
|at December 31, 2003                                              |               |                  
|Class B-1 - authorized 60,000,000 shares; issued and outstanding: |               |                  
|9,741,509 shares at June 27, 2004 and 14,972,117 shares           |               |                  
|at December 31, 2003                                              |               |                  
|Class A - authorized 170,000,000 shares; issued and outstanding:  |               |                  
|26,926,496 shares at June 27, 2004 and 20,191,542 shares          |               |                  
|at December 31, 2003                                              |               |                  
|Additional paid-in capital                                        |               |                  
|Unearned compensation                                             |               |                  
|Retained earnings                                                 |               |                  
|Treasury stock, at cost                                           |               |                  
|                                                                  |               |                  
|TOTAL SHAREHOLDERS' EQUITY                                        |               |                  
|                                                                  |               |                  
|TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY                        |               |                  
|                                                                  |               |                  

| | Note:  The balance sheet at December 31, 2003 has been derived from the audited financial
statements at that date, but does not include all the information and footnotes required
by generally accepted accounting principles in the United States for complete financial
statements.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

See accompanying notes
to unaudited consolidated condensed financial statements.

2

---

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

|                                       | Second Quarter Ended |  | Two Quarters Ended |        
|-------------------------------------- | -------------------- |  | ------------------ | -------
|
|Operating revenue:                     |                      |  |                    |        
|Publishing                             |                      |  | $                  | 83,599 
|Broadcasting                           |                      |  |                    | 42,254 
|Telecommunications                     |                      |  |                    | 36,804 
|Printing services                      |                      |  |                    | 17,427 
|Other                                  |                      |  |                    | 27,938 
|                                       |                      |  |                    |        
|Total operating revenue                |                      |  |                    | 208,022
|Operating costs and expenses:          |                      | 
|Publishing                             |                      |  |                    | 39,674 
|Broadcasting                           |                      |  |                    | 16,384 
|Telecommunications                     |                      |  |                    | 20,898 
|Printing services                      |                      |  |                    | 15,459 
|Other                                  |                      |  |                    | 22,842 
|                                       |                      |  |                    |        
|Total operating costs and expenses     |                      |  |                    | 115,257
|Selling and administrative expenses    |                      |  |                    | 57,726 
|                                       |                      |  |                    |        
|Total operating costs and expenses and |                      | 
|selling and administrative expenses    |                      |  |                    | 172,983
|                                       |                      |  |                    |        
|Operating earnings                     |                      |  |                    | 35,039 
|Other income and expense:              |                      | 
|Interest income and dividends          |                      |  |                    | 70     
|Interest expense, net                  |                      |  |                    | (390   
|                                       |                      |  |                    |        
|Total other income and expense         |                      |  |                    | (320   
|                                       |                      |  |                    |        
|Earnings before income taxes           |                      |  |                    | 34,719 
|Provision for income taxes             |                      |  |                    | 13,888 
|                                       |                      |  |                    |        
|Net earnings                           |                      |  | $                  | 20,831 
|                                       |                      |  |                    |        
|Net earnings available to class A      |                      | 
|and B common shareholders              |                      |  | $                  | 20,367 
|                                       |                      |  |                    |        
|Earnings per share:                    |                      | 
|Basic                                  |                      |  | $                  | 0.28   
|                                       |                      |  |                    |        
|Diluted                                |                      |  | $                  | 0.27   
|                                       |                      |  |                    |        

See accompanying notes
to unaudited consolidated condensed financial statements.

3

---

Journal Communications,
Inc. Unaudited Consolidated
Condensed Statement of Shareholders' Equity For the Two Quarters ended June 27,
2004 (dollars in thousands, except per-share amounts)

|                                                | Pre- |  | Common Stock |    | Additional |   | Unearned |  |   |     | Treasury |   |     |   | Compre-hensive |    
|----------------------------------------------- | ---- |  | ------------ | -- | ---------- | - | -------- |  | - | --- | -------- | - | --- | - | -------------- | ---
|
|Balance at   December 31, 2003                  |      |  | $            | -- |            | $ | 33       |  | $ | 427 |          | $ | 193 |   | $              | 201
|                                                |      |  |              |    |            |   |          |  |   |     |         
|Net earnings and   other comprehensive   income |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|                                                |      |  |              |    |            |   |          |  |   |     |          |  
|Dividends declared:                             |      | 
|Class C ($0.142       per share)                |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|Class B ($0.065       per share)                |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|Class A ($0.065       per share)                |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|Issuance of shares:                             |      | 
|Conversion of       class B to class A          |      |  |              |    |            |   |          |  |   | (1  | )        |   |     |   |                | 1  
|Amortization of   unearned compensation         |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|                                                |      |  |              |    |            |   |          |  |   |     |         
|Balance at   March 28, 2004                     |      |  | $            | -- |            | $ | 33       |  | $ | 426 |          | $ | 193 |   | $              | 202
|                                                |      |  |              |    |            |   |          |  |   |     |         
|Net earnings and other   comprehensive income   |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|                                                |      |  |              |    |            |   |          |  |   |     |          |  
|Dividends declared:                             |      | 
|Class C ($0.142       per share)                |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|Class B ($0.065       per share)                |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|Class A ($0.065       per share)                |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|Issuance of shares:                             |      | 
|Follow-on equity       offering                 |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                | 67 
|Nonvested restricted       stock                |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|Amortization of   unearned compensation         |      |  |              |    |            |   |          |  |   |     |          |   |     |   |                |    
|Shares purchased and   redeemed in tender offer |      |  |              |    |            |   |          |  |   | (28 | )        |   | (52 | ) |                |    
|                                                |      |  |              |    |            |   |          |  |   |     |         
|Balance at   June 27, 2004                      |      |  | $            | -- |            | $ | 33       |  | $ | 398 |          | $ | 141 |   | $              | 269
|                                                |      |  |              |    |            |   |          |  |   |     |         

4

---

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

|                                                 | Two Quarters Ended | 
|------------------------------------------------ | ------------------ | 
|
|Cash flow from operating activities:             |                    | 
|Net earnings                                     |                    | 
|Adjustments for non-cash items:                  |                    | 
|Depreciation                                     |                    | 
|Amortization                                     |                    | 
|Provision for doubtful accounts                  |                    | 
|Deferred income taxes                            |                    | 
|Net loss from disposal of assets                 |                    | 
|Net changes in operating assets and liabilities: |                    | 
|Receivables                                      |                    | 
|Inventories                                      |                    | 
|Accounts payable                                 |                    | 
|Other assets and liabilities                     |                    | 
|                                                 |                    | 
|NET CASH PROVIDED BY OPERATING ACTIVITIES        |                    | 
|Cash flow from investing activities:             |                    | 
|Capital expenditures for property and equipment  |                    | 
|Proceeds from sales of assets                    |                    | 
|Acquisition of business                          |                    | 
|Other, net                                       |                    | 
|                                                 |                    | 
|NET CASH USED FOR INVESTING ACTIVITIES           |                    | 
|Cash flow from financing activities:             |                    | 
|Net decrease in notes payable to banks           |                    | 
|Proceeds from long-term notes payable to banks   |                    | 
|Payments on long-term notes payable to banks     |                    | 
|Proceeds from issuance of common stock, net      |                    | 
|Purchase and redemption of common stock, net     |                    | 
|Cash dividends                                   |                    | 
|                                                 |                    | 
|NET CASH USED FOR FINANCING ACTIVITIES           |                    | 
|                                                 |                    | 
|NET DECREASE IN CASH AND CASH EQUIVALENTS        |                    | 
|Cash and cash equivalents:                       |                    | 
|Beginning of year                                |                    | 
|                                                 |                    | 
|At June 27, 2004 and June 29, 2003               |                    | 
|                                                 |                    | 

See accompanying notes
to unaudited consolidated condensed financial statements.

5

---

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

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

| | The
accompanying unaudited consolidated condensed financial statements have been prepared by
Journal Communications, Inc. and its wholly owned subsidiaries in accordance with
accounting principles generally accepted in the United States for interim financial
information and pursuant to the rules and regulations of the Securities and Exchange
Commission and reflect normal and recurring adjustments, which we believe to be necessary
for a fair presentation. As permitted by these regulations, these statements do not
include all of the information and footnotes required by accounting principles generally
accepted in the United States for annual financial statements. However, we believe that
the disclosures are adequate to make the information presented not misleading. The
operating results for the second quarter and two quarters ended June 27, 2004 are not
necessarily indicative of the results that may be expected for the fiscal year ending
December 26, 2004. You should read these unaudited consolidated condensed financial
statements in conjunction with the consolidated financial statements and the notes
thereto included in our Annual Report on Form 10-K for the year ended December 31, 2003.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | As
of January 1, 2004, we adopted a 52-53 week fiscal 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,
starting in 2006, the fourth quarterly reporting period will be 14 weeks.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Prior
to fiscal 2004, we divided our calendar year into 13 four-week accounting periods, except
that the second and thirteenth periods were longer or shorter to the extent necessary to
make each accounting year end on December 31 and we followed a practice of reporting our
quarterly financial statements at the end of the third accounting period (the first
quarter), at the end of the sixth accounting period (the second quarter), and at the end
of the tenth accounting period (the third quarter). The results of the second quarter and
two quarters of 2003 have been presented on a basis which conforms to the quarterly
reporting of operating results adopted effective January 1, 2004.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3 | EARNINGS
PER SHARE
|- | ------------------

| | Basic
earnings per share are computed by dividing net earnings available to class A and B
common shareholders by the weighted average number of class A and B shares outstanding
during the period. Diluted earnings per share are computed based upon the assumption that
the class C shares outstanding were converted into class A and B shares and the assumed
common shares purchased upon exercise of certain of our non-statutory stock options. In
the second quarter and two quarters of 2003, basic and diluted earnings were the same
because there were no dilutive securities.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

6

---

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

|3 | EARNINGS
PER SHARE, continued
|- | -----------------------------

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

| |                                              | Second Quarter Ended |  | Two Quarters Ended |       
| | -------------------------------------------- | -------------------- |  | ------------------ | ------
|
| | Basic earnings:                              |                      |  |                    |       
| | Net earnings                                 |                      |  | $                  | 20,831
| | Less dividends on class C common stock       |                      |  |                    | (464  
| |                                              |                      |  |                    |       
| | Net earnings available to class A and B      |                      | 
| | common shareholders                          |                      |  | $                  | 20,367
| |                                              |                      |  |                    |       
| | Weighted average class A and B               |                      | 
| | shares outstanding                           |                      |  |                    | 73,866
| | Basic earnings per share                     |                      |  | $                  | 0.28  
| |                                              |                      |  |                    |       
| | Diluted earnings:                            |                      | 
| | Net earnings available to class A and B      |                      | 
| | common shareholders                          |                      |  | $                  | 20,367
| | Plus dividends on class C common stock       |                      |  |                    | 464   
| |                                              |                      |  |                    |       
| | Net earnings                                 |                      |  | $                  | 20,831
| |                                              |                      |  |                    |       
| | Weighted average shares outstanding          |                      |  |                    | 73,866
| | Assumed exercise of stock options, net of    |                      | 
| | common shares assumed repurchased            |                      | 
| | with the proceeds                            |                      |  |                    | 1     
| | Incremental class A and B shares for assumed |                      | 
| | conversion of class C shares                 |                      |  |                    | 4,452 
| |                                              |                      |  |                    |       
| | Adjusted weighted average shares outstanding |                      |  |                    | 78,319
| |                                              |                      |  |                    |       
| | Diluted earnings per share                   |                      |  | $                  | 0.27  
| |                                              |                      |  |                    |       

| | Each
of the 3,264 class C shares outstanding, which are held by the Grant family shareholders,
is convertible at any time at the option of the holder into either (i) 1.363970 class A
shares (or a total of 4,452 class A shares) or (ii) 0.248243 class A shares (or a total
of 810 class A shares) and 1.115727 class B shares (or a total of 3,642 class B shares).
Pursuant to our articles of incorporation, each class of common stock has equal rights
with respect to cash dividends, except that dividends on class C shares are cumulative
and will not be less than $0.57 per year or $0.142 per quarter.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4 | STOCK-BASED
COMPENSATION
|- | ------------------------

| | We
account for stock-based compensation by using the intrinsic value-based method in
accordance with Accounting Principles Board Opinion (APB) No. 25, Accounting for
Stock Issued to Employees. Under APB No. 25, we do not recognize compensation
expense for our stock options because the exercise price equals the market price of the
underlying stock on the grant date. We recognize compensation expense related to
restricted stock grants over the vesting period. As permitted, we have elected to adopt
the disclosure only provisions of Statement No. 123, Accounting for Stock-Based
Compensation, and Statement No. 148, Accounting for Stock-Based Compensation
 Transition and Disclosure  an Amendment of FASB Statement No. 123.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Statement
No. 123, as amended by Statement No. 148, establishes a fair value-based method of
accounting for employee stock-based compensation plans and encourages companies to adopt
that method. However, it also allows companies to continue to apply the intrinsic
value-based method currently prescribed under APB No. 25. We have chosen to continue to
report stock-based compensation in accordance with APB No. 25, and provide the following
pro forma disclosure of the effects of applying the fair value method to all applicable
awards granted. The following table illustrates the effect on net earnings and net
earnings per share if we had applied the fair value recognition provisions of Statement
No. 123:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

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

|4 | STOCK-BASED
COMPENSATION, continued
|- | -----------------------------------

| |                                                 | Second Quarter Ended |  | Two Quarters Ended |       
| | ----------------------------------------------- | -------------------- |  | ------------------ | ------
|
| | Net earnings as reported                        |                      |  | $                  | 20,831
| | Add compensation cost of restricted stock       |                      | 
| | grants, net of related tax effects, included in |                      | 
| | the determination of net earnings as reported   |                      |  |                    | 8     
| | Deduct stock based compensation determined      |                      | 
| | under fair value-based method, net of related   |                      | 
| | tax effects:                                    |                      | 
| | Stock options                                   |                      |  |                    | (17   
| | Restricted stock grants                         |                      |  |                    | (8    
| |                                                 |                      |  |                    |       
| | Pro forma net earnings                          |                      |  | $                  | 20,814
| |                                                 |                      |  |                    |       
| |                                                 |                      |  |                    |       
| | Net earnings per share of common stock:         |                      | 
| | Basic earnings per share:                       |                      | 
| | As reported                                     |                      |  | $                  | 0.28  
| |                                                 |                      |  |                    |       
| | Pro forma                                       |                      |  | $                  | 0.28  
| |                                                 |                      |  |                    |       
| |                                                 |                      |  |                    |       
| | Diluted earnings per share:                     |                      | 
| | As reported                                     |                      |  | $                  | 0.27  
| |                                                 |                      |  |                    |       
| | Pro forma                                       |                      |  | $                  | 0.27  
| |                                                 |                      |  |                    |       
| |                                                 |                      |  |                    |       

|5 | INVENTORIES
|- | -----------

| | Inventories
are stated at the lower of cost (first in, first out method) or market. Inventories at
June 27, 2004 and December 31, 2003 consisted of the following:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                          | June 27, 2004 |  | December 31, 2003
|------------------------- | ------------- |  | -----------------
|Paper and supplies        |               |  | $                
|Work in process           |               |  |                  
|Finished goods            |               |  |                  
|Less obsolescence reserve |               |  |                  
|                          |               |  |                  
|Inventories               |               |  | $                
|                          |               |  |                  

|6 | LONG-TERM
NOTES PAYABLE TO BANKS
|- | --------------------------------

| | We
have a $350 million unsecured revolving credit facility expiring on September 4, 2008.
The interest rate on borrowings are either LIBOR plus a margin that ranges from 87.5
basis points to 150 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
one percent per annum. As of June 27, 2004 we had borrowings of $76,735 under the
facility at the weighted average interest rate of 2.1%. Fees of $1,959 in connection with
the facility are being amortized over the term of the facility using the straight-line
method which approximates the effective-interest method.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7 | EMPLOYEE
BENEFIT PLANS
|- | ----------------------

| | FASB
Staff Position 106-2, Accounting and Disclosure Requirements Related to the
Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the FSP)
was issued on May 19, 2004 and is effective as of the first interim or annual period
beginning after June 15, 2004. The FSP provides guidance on accounting for the effects of
the new Medicare prescription drug legislation and also contains guidance on transition.
Our postretirement health benefit plan provides for a prescription drug benefit. The
disclosed measures of the net periodic benefit cost of our other postretirement benefits
currently do not reflect any amount associated with the subsidy because we have not yet
concluded whether the benefits provided by the plan are actuarially equivalent to the
Medicare Part D benefit under the Act. Actuarially equivalent benefits to the Medicare
Part D benefit could reduce our postretirement benefit obligation by approximately
$5,100.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

8

---

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

|7 | EMPLOYEE
BENEFIT PLANS, continued
|- | ---------------------------------

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

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

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

|8 | GOODWILL
AND OTHER INTANGIBLE ASSETS
|- | ------------------------------------

| | Definite-lived
IntangiblesOur
definite-lived intangible assets consist primarily of network affiliation agreements,
customer lists and non-compete agreements. We amortize the network affiliation agreements
over a period of 25 years, the customer lists over a period of 5 to 40 years and the
non-compete agreements over the terms of the contracts.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Amortization
expense was $421 for the second quarter ended June 27, 2004 and $912 for the two quarters
ended June 27, 2004. Estimated amortization expense for our next five fiscal years is
$1,336 for 2004, $763 for 2005, $748 for 2006, $710 for 2007 and $662 for 2008.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

9

---

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

|8 | GOODWILL
AND OTHER INTANGIBLE ASSETS, continued
|- | -----------------------------------------------

| | The
gross carrying amount, accumulated amortization and net carrying amount of the major
classes of definite-lived intangible assets as of June 27, 2004 and December 31, 2003 is
as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               | Gross Carrying Amount |  | Accumulated Amortization |        | Net Carrying Amount |  
|------------------------------ | --------------------- |  | ------------------------ | ------ | ------------------- | -
|As of June 27, 2004            |                       |  |                          |        |                     |  
|Network affiliation agreements |                       |  | $                        | 7,759  |                     | $
|Customer lists                 |                       |  |                          | 18,011 |                     |  
|Non-compete agreements         |                       |  |                          | 24,818 |                     |  
|Other                          |                       |  |                          | 3,377  |                     |  
|                               |                       |  |                          |        |                     |  
|Total                          |                       |  | $                        | 53,965 |                     | $
|                               |                       |  |                          |        |                     |  
|December 31, 2003              |                       | 
|Network affiliation agreements |                       |  | $                        | 7,759  |                     | $
|Customer lists                 |                       |  |                          | 17,771 |                     |  
|Non-compete agreements         |                       |  |                          | 24,838 |                     |  
|Other                          |                       |  |                          | 3,080  |                     |  
|                               |                       |  |                          |        |                     |  
|Total                          |                       |  | $                        | 53,448 |                     | $
|                               |                       |  |                          |        |                     |  

| | Indefinite-lived
IntangiblesBroadcast
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. There were no changes to the carrying amount of broadcast licenses in the
two quarters ended June 27, 2004.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | GoodwillThere
were no changes in the carrying amount of goodwill in the two quarters ended June 27,
2004.
| | ---------------------------------------------------------------------------------------------------------

|9 | WORKFORCE
REDUCTION AND BUSINESS IMPROVEMENT INITIATIVES
|- | --------------------------------------------------------

| | Activity
associated with our daily newspapers and printing services workforce
reduction and business improvement initiatives during the two quarters ended June 27,
2004 is as follows:
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                | Balance at December 31, 2003 | Additions |   | Payments |  | Balance at June 27, 2004
|------------------------------- | ---------------------------- | --------- | - | -------- |  | ------------------------
|Employee severance and benefits |                              |           | $ | 347      |  | $                       
|Facility costs                  |                              |           |   | 131      |  |                         
|                                |                              |           |   |          |  |                         
|                                |                              |           | $ | 478      |  | $                       
|                                |                              |           |   |          |  |                         

| | The
obligations for our workforce reduction and business improvement initiatives are included
in other current liabilities in the consolidated balance sheets. The remaining costs
associated with these actions are expected to be paid in 2004, except for portions of the
$86 liability representing the remaining operating lease obligation for the closed CD-ROM
mastering and replication facility, expiring in June 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|10 | SEGMENT
INFORMATION
|-- | -------------------

| | We
conduct our operations through four reportable segments: publishing, broadcasting,
telecommunications and printing services. In addition, our label printing business, our
direct marketing services business and certain administrative activities are aggregated
and reported as other. All operations primarily conduct their business in the
United States. We publish the Milwaukee Journal Sentinel and more than 90 weekly
shopper and community newspapers in eight states. Our broadcasting segment consists of 38
radio stations and six television stations in 11 states and we have signed an agreement
to purchase WGBA-TV and to assume an existing local marketing agreement for WACY-TV both
located in the Green Bay-Appleton (Wisconsin) market. Our telecommunications segment
consists of wholesale and business-to-business telecommunications services provided
through a high speed fiber optic telecommunications network that covers more than 4,400
route miles in seven states, of which we operate about 3,800 route miles. Our printing
services segment reflects the operations of our printing and assembly and fulfillment
business.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

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

|10 | SEGMENT
INFORMATION, continued
|-- | ------------------------------

| | The
following tables summarize operating revenue, operating earnings, depreciation and
amortization and capital expenditures for the second quarter and two quarters ended June
27, 2004 and June 29, 2003 and identifiable total assets at June 27, 2004 and December
31, 2003:
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                              | Second Quarter Ended |  | Two Quarters Ended |        
|----------------------------- | -------------------- |  | ------------------ | -------
|
|Operating revenue             |                      |  |                    |        
|Publishing                    |                      |  | $                  | 83,599 
|Broadcasting                  |                      |  |                    | 42,254 
|Telecommunications            |                      |  |                    | 36,804 
|Printing services             |                      |  |                    | 17,427 
|Other                         |                      |  |                    | 27,938 
|                              |                      |  |                    |        
|                              |                      |  | $                  | 208,022
|                              |                      |  |                    |        
|Operating earnings            |                      | 
|Publishing                    |                      |  | $                  | 12,643 
|Broadcasting                  |                      |  |                    | 11,072 
|Telecommunications            |                      |  |                    | 9,103  
|Printing services             |                      |  |                    | (597   
|Other                         |                      |  |                    | 2,818  
|                              |                      |  |                    |        
|                              |                      |  | $                  | 35,039 
|                              |                      |  |                    |        
|Depreciation and amortization |                      | 
|Publishing                    |                      |  | $                  | 3,917  
|Broadcasting                  |                      |  |                    | 2,159  
|Telecommunications            |                      |  |                    | 4,381  
|Printing services             |                      |  |                    | 597    
|Other                         |                      |  |                    | 638    
|                              |                      |  |                    |        
|                              |                      |  | $                  | 11,692 
|                              |                      |  |                    |        
|Capital expenditures          |                      | 
|Publishing                    |                      |  | $                  | 2,718  
|Broadcasting                  |                      |  |                    | 2,493  
|Telecommunications            |                      |  |                    | 1,430  
|Printing services             |                      |  |                    | 2,269  
|Other                         |                      |  |                    | 332    
|                              |                      |  |                    |        
|                              |                      |  | $                  | 9,242  
|                              |                      |  |                    |        

| |                           | June 27, 2004 |  | December 31, 2003
Audited
| | ------------------------- | ------------- |  | -------------------------
| | Identifiable total assets |               |  |                          
| | Publishing                |               |  | $                        
| | Broadcasting              |               |  |                          
| | Telecommunications        |               |  |                          
| | Printing services         |               |  |                          
| | Other                     |               |  |                          
| |                           |               |  |                          
| |                           |               |  | $                        
| |                           |               |  |                          

11

---

# JOURNAL
COMMUNICATIONS, INC.

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

The following discussion of our
financial condition and results of operations should be read together with our unaudited
consolidated condensed financial statements for the second quarter and two quarters ended
June 27, 2004, including the notes thereto. The results of the second quarter and two
quarters of 2003 have been presented on a basis which conforms to the quarterly reporting
of operating results adopted effective January 1, 2004.

More information regarding us is
available at our website at www.jc.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 that are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995. We intend these
forward-looking statements to be covered by the safe harbor provisions for forward-looking
statements contained in that Act, and we are including this statement for purposes of
those safe harbor provisions. These forward-looking statements generally include all
statements other than statements of historical fact, including statements regarding our
future financial position, business strategy, budgets, projected revenues and expenses,
expected regulatory actions and plans and objectives of management for future operations.
We use words such as may, will, intend,
anticipate, believe, or should and similar expressions
in this Quarterly Report on Form 10-Q to identify forward-looking statements.

These forward-looking statements are
not guarantees of future performance and are subject to risks, uncertainties and other
factors, some of which are beyond our control. These risks, uncertainties and other
factors could cause actual results to differ materially from those expressed or implied by
those forward-looking statements. Among such risks, uncertainties and other factors that
may impact us are the following:

| | changes
in advertising demand;
|- | ------------------------------

| | 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 available to our customers;
|- | -----------------------------------------------------------------------------------------

| | 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, telecommunications, and
printing industries, including general business issues, competitive issues and the
introduction of new technologies;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | effects
of bankruptcies and government  investigations on customers for our  telecommunications
 wholesale services;
|- | --------------------------------------------------------------------------------------------------------------------

| | the
 ability  of  regional   telecommunications   companies  to  expand   service   offerings
 to  include      intra-exchange services;
|- | ----------------------------------------------------------------------------------------------------------------------------------------

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

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

| | energy
costs;
|- | -------------

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

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

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

12

---

# 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) telecommunications; (iv) printing services; and (v)
other. Our publishing segment consists of a daily newspaper, the Milwaukee Journal
Sentinel, and more than 90 community newspapers and shoppers in eight states. Our
broadcasting segment consists of 38 radio stations and six television stations in 11
states and we have signed an agreement to purchase WGBA-TV and to assume an existing local
marketing agreement for WACY-TV  both located in the Green Bay-Appleton (Wisconsin)
market. Our telecommunications segment consists of wholesale and business-to-business
telecommunications services provided through a high speed fiber optic telecommunications
network that covers more than 4,400 route miles in seven states, of which we operate about
3,800 route miles. Our printing services segment reflects the operations of our printing
and assembly and fulfillment business. Our other segment consists of a label printing
business and a direct marketing services business. Also included in other are corporate
expenses and eliminations.

We finished the first half of 2004
with another strong performance, driven in large part by the same benefits that we have
been reporting for the past three quarters. Among them were continued gains in
productivity benefits from our new newspaper production facility, broad-based advertising
revenue expansion at our publishing businesses and our television and radio stations and
cost controls throughout the organization. Our operating earnings this quarter were again
driven by solid contributions from the publishing and broadcast groups, up 41.0% and
45.7%, respectively. For the fourth consecutive quarter we benefited from efficiencies
generated by our new production facility. Going forward, we will have tougher
year-over-year comparisons in terms of productivity gains, as we have now completed a full
cycle of improving operations at the new production facility. At the daily newspaper, we
recorded gains in retail, general and classified advertising revenue as well as in our
online product and shared mail. We also recorded low double-digit growth in classified
advertising at the community newspapers and shoppers for the quarter. These gains at the
publishing group were accomplished while concurrently lowering costs across numerous
expense categories. Our television stations recorded another solid quarter, as local
advertising and political and issue advertising were both significant contributors. On the
radio side, we were pleased with solid earnings gains at the majority of our developmental
markets. While the wholesale side of our telecommunications business experienced
continuing pricing pressure and service disconnections in the second quarter of 2004, we
were encouraged by yet another quarter of nearly 11.0% revenue growth on the commercial
side. In the second quarter, we recorded an operating loss at our printing services
company due primarily to reduced sales volume from several computer-related customers as
well as production inefficiencies on print work. As we move into the second half of the
year, we expect that our publishing and broadcasting businesses will continue to provide
earnings growth with the help of a recovering economy, new revenue initiatives, and strong
political and Olympic advertising.

# Results of Operations

| | Second
Quarter Ended June 27, 2004 compared to Second Quarter Ended June 29, 2003
| | ---------------------------------------------------------------------------------

| | Consolidated
| | ------------

Our consolidated operating revenue in
the second quarter of 2004 was $208.0 million, an increase of $8.6 million, or 4.3%,
compared to $199.4 million in the second quarter of 2003. Our consolidated operating costs
and expenses in the second quarter of 2004 were $115.3 million, an increase of $2.4
million, or 2.1%, compared to $112.9 million in the second quarter of 2003. Our
consolidated selling and administrative expenses in the second quarter of 2004 were $57.7
million, a decrease of $2.3 million, or 3.8%, compared to $60.0 million in the second
quarter of 2003.

The following table presents our
total operating revenue by segment, total operating costs and expenses, selling and
administrative expenses and total operating earnings as a percent of total operating
revenue for the second quarter of 2004 and 2003:

|                                               | 2004 |  | Percent of
   Total
 Operating
  Revenue |       | 2003 |  | Percent of
   Total
 Operating
  Revenue |  
|---------------------------------------------- | ---- |  | ---------------------------------------- | ----- | ---- |  | ---------------------------------------- | -
|                                               |      |  | (dollars in millions)                   
|Operating revenue:                             |      |  |                                          |       |      |  |                                          |  
|Publishing                                     |      |  | $                                        | 83.6  |      |  | 40.2                                     | %
|Broadcasting                                   |      |  |                                          | 42.3  |      |  | 20.3                                     |  
|Telecommunications                             |      |  |                                          | 36.8  |      |  | 17.7                                     |  
|Printing services                              |      |  |                                          | 17.4  |      |  | 8.4                                      |  
|Other                                          |      |  |                                          | 27.9  |      |  | 13.4                                     |  
|                                               |      |  |                                          |       |      |  |                                          |  
|Total operating revenue                        |      |  |                                          | 208.0 |      |  | 100.0                                    |  
|Total operating costs and expenses             |      |  |                                          | 115.3 |      |  | 55.4                                     |  
|Selling and administrative expenses            |      |  |                                          | 57.7  |      |  | 27.8                                     |  
|                                               |      |  |                                          |       |      |  |                                          |  
|Total operating costs and expenses and selling |      | 
|and administrative expenses                    |      |  |                                          | 173.0 |      |  | 83.2                                     |  
|                                               |      |  |                                          |       |      |  |                                          |  
|Total operating earnings                       |      |  | $                                        | 35.0  |      |  | 16.8                                     | %
|                                               |      |  |                                          |       |      |  |                                          |  

13

---

The increase in total operating
revenue was due to the revenue increases at our television stations, increases in
classified and retail advertising revenue at our daily newspaper, increases in gravure
label printing revenue, an increase in commercial services revenue at our
telecommunications business, increases in local advertising revenue at our radio stations
and an increase in mailing services revenue at our direct marketing services business.
These increases were partially offset by a decrease in revenue from several
computer-related customers in our printing services business and a decrease in wholesale
telecommunications revenue due to customer disconnections.

The increase in total operating costs
and expenses was primarily due to an increase in postage and freight expenses associated
with the increase in mailing services revenue at our direct marketing services business,
an increase in newsprint costs at our publishing business, and an increase in technology,
news and programming costs at our television stations offset by the decrease in revenue at
our printing services business and increased operating efficiencies and productivity
benefits at our daily newspapers new production facility.

The decrease in selling and
administrative expenses was primarily due to a $2.1 million liability for
employment-related taxes recorded in the second quarter of 2003.

Our consolidated operating earnings
in the second quarter of 2004 were $35.0 million, an increase of $8.5 million, or 32.3%,
compared to $26.5 million in the second quarter of 2003. The following table presents our
operating earnings by segment for the second quarter of 2004 and 2003:

|                         | 2004 |  | Percent of
   Total
 Operating
  Earnings |      | 2003 |  | Percent of
   Total
 Operating
  Earnings |  
|------------------------ | ---- |  | ----------------------------------------- | ---- | ---- |  | ----------------------------------------- | -
|                         |      |  | (dollars in millions)                    
|Publishing               |      |  | $                                         | 12.6 |      |  | 36.1                                      | %
|Broadcasting             |      |  |                                           | 11.1 |      |  | 31.6                                      |  
|Telecommunications       |      |  |                                           | 9.1  |      |  | 26.0                                      |  
|Printing services        |      |  |                                           | (0.6 | )    |  | (1.7                                      | )
|Other                    |      |  |                                           | 2.8  |      |  | 8.0                                       |  
|                         |      |  |                                           |      |      |  |                                           |  
|Total operating earnings |      |  | $                                         | 35.0 |      |  | 100.0                                     | %
|                         |      |  |                                           |      |      |  |                                           |  

The increase in total operating
earnings was primarily due to recording an employment-related tax liability in the second
quarter of 2003, increased productivity benefits from the daily newspapers new
production facility, the revenue increases at our television stations, cost reduction
initiatives at our community newspapers and shoppers, an increase in operating revenue in
our publishing businesses, and an increase in local advertising at our radio stations.
These increases were offset by a decrease in sales volume and production inefficiencies at
our printing services business and wholesale telecommunications service disconnections.

Our consolidated EBITDA in the second
quarter of 2004 was $46.7 million, an increase of $8.2 million, or 21.4%, compared to
$38.5 million in the second quarter of 2003. We define EBITDA as net earnings plus
provision for income taxes, total other income and expense, depreciation and amortization.
We believe the presentation of EBITDA is relevant and useful because it helps improve our
investors ability to understand our operating performance and makes it easier to
compare our results with other companies that have different financing and capital
structures or tax rates. Our management uses EBITDA, among other things, to evaluate our
operating performance, to value prospective acquisitions and as a component of incentive
compensation targets for certain management personnel. In addition, our lenders use EBITDA
as one of the measures of our ability to service our debt. EBITDA is not a measure of
performance calculated in accordance with accounting principles generally accepted in the
United States. EBITDA should not be considered in isolation of, or as a substitute for,
net earnings as an indicator of operating performance or cash flows from operating
activities as a measure of liquidity. EBITDA, as we calculate it, may not be comparable to
EBITDA measures reported by other companies. In addition, EBITDA does not represent funds
available for discretionary use.

The following table presents a
reconciliation of our consolidated net earnings to consolidated EBITDA for the second
quarter of 2004 and 2003:

|                               | 2004 |  | 2003                  |     
|------------------------------ | ---- |  | --------------------- | ----
|                               |      |  | (dollars in millions)
|Net earnings                   |      |  | $                     | 20.8
|Provision for income taxes     |      |  |                       | 13.9
|Total other income and expense |      |  |                       | 0.3 
|Depreciation                   |      |  |                       | 11.3
|Amortization                   |      |  |                       | 0.4 
|                               |      |  |                       |     
|EBITDA                         |      |  | $                     | 46.7
|                               |      |  |                       |     

14

---

The increase in total EBITDA is
consistent with increases in operating earnings in our publishing, broadcasting and other
segments offset by a decrease in operating earnings at our printing services and
telecommunications segments.

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

Operating revenue from publishing in
the second quarter of 2004 was $83.6 million, an increase of $3.7 million, or 4.6%,
compared to $79.9 million in the second quarter of 2003. Operating earnings from
publishing were $12.6 million, an increase of $3.6 million, or 41.0%, compared to $9.0
million in the second quarter of 2003.

The following table presents our
publishing operating revenue and operating earnings for the second quarter of 2004 and
2003:

|                   | 2004 |  | 2003                  |      |  |  
|------------------ | ---- |  | --------------------- | ---- |  | -
|
|                   |      |  | (dollars in millions)
|Operating revenue  |      |  | $                     | 57.4 |  | $
|                   |      |  |                       |      |  |  
|Operating earnings |      |  | $                     | 10.2 |  | $
|                   |      |  |                       |      |  |  
|                   |      |  |                       |      |  |  

The following table presents our
publishing operating revenue by category for the second quarter of 2004 and 2003:

|                          | 2004 |  | 2003                  |      |  |  
|------------------------- | ---- |  | --------------------- | ---- |  | -
|
|                          |      |  | (dollars in millions)
|Advertising revenue:      |      |  |                       |      |  |  
|Retail                    |      |  | $                     | 21.0 |  | $
|Classified                |      |  |                       | 16.6 |  |  
|General                   |      |  |                       | 2.7  |  |  
|Other                     |      |  |                       | 5.3  |  |  
|                          |      |  |                       |      |  |  
|Total advertising revenue |      |  |                       | 45.6 |  |  
|Circulation revenue       |      |  |                       | 10.9 |  |  
|Other revenue             |      |  |                       | 0.9  |  |  
|                          |      |  |                       |      |  |  
|Total operating revenue   |      |  | $                     | 57.4 |  | $
|                          |      |  |                       |      |  |  
|                          |      |  |                       |      |  |  

Advertising revenue in the second
quarter of 2004 accounted for 75.8% of total publishing revenue compared to 76.2% in the
second quarter of 2003.

Retail advertising revenue in the
second quarter of 2004 was $35.8 million, an increase of $0.6 million, or 1.7%, compared
to $35.2 million in the second quarter of 2003. A $0.7 million increase in daily newspaper
retail advertising was offset by a $0.1 million decrease in community newspaper and
shopper retail advertising. The $0.7 million increase at the daily newspaper was primarily
due to an increase in automotive, healthcare, a department store and telecommunications
advertising. The $0.1 million decrease at our community newspapers and shoppers was
primarily due to a reduction in automotive advertising. Preprint advertising for the
second quarter of 2004 for both our daily newspaper and our community newspapers and
shoppers was essentially even compared to the second quarter of 2003.

Classified advertising revenue in the
second quarter of 2004 was $19.2 million, an increase of $1.4 million, or 7.8%, compared
to $17.8 million in the second quarter of 2003. Increases in employment advertising of
$0.8 million, real estate advertising of $0.2 million and general/other advertising of
$0.2 million at our daily newspaper and $0.3 million increase at our community newspapers
and shoppers were partially offset by a decrease in automotive advertising of $0.1 million
at our daily newspaper. The increase in employment advertising, which accounted for 35.8%
of total classified advertising in the second quarter of 2004, represented a 15.3%
increase from the second quarter of 2003. We believe the increase in employment
advertising is due to an improving economy. The decrease in automotive advertising is due
to certain advertisers switching their ad placement from the classified section to retail
sections of the paper and taking advantage of the enhanced color capabilities of our new
presses. The increase in classified advertising at our community newspapers and shoppers
is primarily due to decentralizing the classified sales operations.

General advertising revenue in the
second quarter of 2004 was $2.7 million, an increase of $0.2 million, or 6.5%, compared to
$2.5 million in the second quarter of 2003. The increase was due to an increase in
airline/travel industry ROP (run-of-press) advertising and an increase in preprints from
national advertisers.

15

---

The following table presents our
daily newspapers core newspaper advertising linage by category for the second
quarter of 2004 and 2003:

|                               | 2004 |  | 2003 |         | Percent Change | 
|------------------------------ | ---- |  | ---- | ------- | -------------- | 
|Advertising linage (inches):   |      |  |      |         |                | 
|Full run                       |      | 
|Retail                         |      |  |      | 188,916 |                | 
|Classified                     |      |  |      | 224,308 |                | 
|General                        |      |  |      | 12,438  |                | 
|                               |      |  |      |         |                | 
|Total full run                 |      |  |      | 425,662 |                | 
|Part run                       |      |  |      | 45,328  |                | 
|                               |      |  |      |         |                | 
|Total advertising linage       |      |  |      | 470,990 |                | 
|                               |      |  |      |         |                | 
|Preprint pieces (in thousands) |      |  |      | 187,974 |                | 
|                               |      |  |      |         |                | 

Total advertising linage in the
second quarter of 2004 increased 3.7% compared to the second quarter of 2003. The increase
was largely due to a 46.5% increase in part run advertising linage. Part run advertising
linage increased in the second quarter of 2004 due to an increase in zoned classified
advertising. Full run advertising linage in the second quarter of 2004 increased 0.6%
compared to the second quarter of 2003 due to a 3.1% increase in retail ROP advertising
linage and a 2.9% increase in general ROP advertising linage offset by a 1.6% decrease in
classified advertising linage. These increases in retail and general advertising linage
are consistent with the increases in retail and general advertising revenue. The decrease
in classified advertising linage is due to a mix change of an increase in employment
advertising and a decrease in automotive advertising. Preprint advertising pieces
decreased 9.8% due to lower average net paid circulation, the in-house printing of a local
advertisers insert which was previously measured as a preprint piece and the
elimination of Kmart preprints in the daily newspaper due to the closing of several area
stores.

The following table presents the full
pages of advertising and revenue per page of our community newspapers and shoppers for the
second quarter of 2004 and 2003:

|                                | 2004 |  | 2003 |        | Percent Change |  
|------------------------------- | ---- |  | ---- | ------ | -------------- | -
|Full pages of advertising:      |      |  |      |        |                |  
|Community newspapers            |      |  |      | 26,750 |                |  
|Shoppers                        |      |  |      | 23,445 |                |  
|                                |      |  |      |        |                |  
|Total full pages of advertising |      |  |      | 50,195 |                |  
|                                |      |  |      |        |                |  
|Revenue per page                |      |  | $    | 316.73 |                | $
|                                |      |  |      |        |                |  
|                                |      |  |     

Total full pages of advertising for
our community newspapers and shoppers in the second quarter of 2004 decreased 8.5%
compared to the second quarter of 2003. The decrease was due to reformatting certain
papers to more efficiently use the amount of available space on each page. Revenue per
page increased 10.2% primarily due to the decrease in total pages of full advertising
while increasing or maintaining the same advertising rates.

Other advertising revenue in the
second quarter of 2004, consisting of revenue from direct marketing and event marketing
efforts, and JSOnline for our daily newspaper and company-sponsored event advertising for
our community newspapers and shoppers, was $5.7 million, an increase of $0.3 million, or
6.6%, compared to $5.4 million in the second quarter of 2003. A $0.5 million increase in
JSOnline advertising and direct marketing advertising at our daily newspaper was partially
offset by a $0.2 million decrease in company-sponsored event advertising revenue at our
community newspapers and shoppers.

Circulation revenue in the second
quarter of 2004 accounted for 13.9% of total publishing revenue compared to 14.3% in the
second quarter of 2003. Circulation revenue in the second quarter of 2004 was $11.6
million, an increase of $0.2 million, or 1.5%, compared to $11.4 million in the second
quarter of 2003. The increase is primarily due to a cover price increase on home delivery
and single copy sales outside our PMA and wholesale rate increases to dealers at our daily
newspaper. Average net paid circulation for the Milwaukee Journal Sentinelsweekday edition decreased 2.5% in the second quarter of 2004 compared to the second
quarter of 2003. The decrease in daily average net paid circulation is due to lower home
delivery and single copy sales. Average net paid circulation for the Milwaukee Journal
Sentinels Sunday edition in the second quarter of 2004 was essentially even
compared to the second quarter of 2003. Average paid circulation for our community
newspapers decreased 3.8% in the second quarter of 2004 compared to the second quarter of
2003 primarily due to less discounting and promotions on home delivery.

Other revenue, which consists of
revenue from commercial printing opportunities at the printing plants for our community
newspapers and shoppers and promotional, distribution and commercial printing revenue at
our daily newspaper, in the second quarter of 2004 accounted for 10.3% of total publishing
revenue compared to 9.5% in the second quarter of 2003. Other revenue in the second
quarter of 2004 was $8.6 million, an increase of $1.0 million, or 13.4%, compared to $7.6
million in the second quarter of 2003. The increase was due to an $0.8 million increase in
printing revenue at our community newspapers and shoppers and a $0.2 million increase in
commercial printing revenue at the daily newspaper.

16

---

Publishing operating earnings in the
second quarter of 2004 were $12.6 million, an increase of $3.6 million, or 41.0%, compared
to $9.0 million in the second quarter of 2003. The increase was primarily due to $1.5
million in productivity benefits related to the daily newspapers new production
facility, $0.8 million in savings from cost reduction initiatives at our community
newspapers and shoppers business and the increase in revenue at our daily newspaper and
our community newspapers and shoppers. Included in the second quarter of 2003 was a $0.7
million loss on the disposal of the daily newspapers old production facility assets.
These operating earnings increases were partially offset by an increase in newsprint
costs. Newsprint costs were $10.8 million in the second quarter of 2004, an increase of
$1.0 million, or 10.2%, compared to $9.8 million in the second quarter of 2003. The
increase in the cost of newsprint was primarily attributed to price increases totaling
$1.2 million, or a 12.2% price increase per average ton.

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

Operating revenue from broadcasting
in the second quarter of 2004 was $42.3 million, an increase of $4.6 million, or 12.2%,
compared to $37.7 million in the second quarter of 2003. Operating earnings from
broadcasting in the second quarter of 2004 were $11.1 million, an increase of $3.5
million, or 45.7%, compared to $7.6 million in the second quarter of 2003.

The following table presents our
broadcasting operating revenue and operating earnings for the second quarter of 2004 and
2003:

|                   | 2004 |  | 2003                  |      |  |  
|------------------ | ---- |  | --------------------- | ---- |  | -
|
|                   |      |  | (dollars in millions)
|Operating revenue  |      |  | $                     | 20.5 |  | $
|                   |      |  |                       |      |  |  
|Operating earnings |      |  | $                     | 5.0  |  | $
|                   |      |  |                       |      |  |  
|                   |      |  |                       |      |  |  

Operating revenue from our radio
stations in the second quarter of 2004 was $20.5 million, an increase of $1.1 million, or
5.7%, compared to $19.4 million in the second quarter of 2003. The increase was primarily
attributed to a $1.3 million increase in local advertising revenue offset by a $0.2
million decrease in national advertising.

Operating earnings from our radio
stations in the second quarter of 2004 were $5.0 million, an increase of $0.8 million, or
19.0%, compared to $4.2 million in the second quarter of 2003. The increase was primarily
attributed to the increase in revenue, a decrease in programming expenses, reduced
national sales commissions and decreases in sales and promotional expenses offset by an
increase in incentive compensation expense and depreciation expense.

We recently agreed to a contract
extension the Milwaukee Brewers through the 2008 major league baseball season.

Operating revenue from our television
stations in the second quarter of 2004 was $21.8 million, an increase of $3.5 million, or
19.1%, compared to $18.3 million in the second quarter of 2003. The increase was
attributed to a $1.7 million increase in local advertising revenue, a $1.3 million
increase in political and issue advertising revenue and a $0.5 million increase in
national advertising revenue.

Operating earnings from our
television stations in the second quarter of 2004 were $6.1 million, an increase of $2.7
million, or 79.4%, compared to $3.4 million in the second quarter of 2003. The increase
was primarily attributed to the increase in revenue and a $0.5 million net adjustment to
our litigation reserve due to the settlement of our national advertising representative
litigation offset by increases in incentive compensation and payroll expense and news and
technology expenses.

| | Telecommunications
| | ------------------

Operating revenue from
telecommunications in the second quarter of 2004 was $36.8 million, a decrease of $0.7
million, or 1.8%, compared to $37.5 million in the second quarter of 2003. Operating
earnings from telecommunications in the second quarter of 2004 were $9.1 million, a
decrease of $0.4 million, or 4.6%, compared to $9.5 million in the second quarter of 2003.

Wholesale telecommunication services
provide network transmission solutions for other service providers by offering bulk
transmission capacity. Operating revenue from wholesale services in the second quarter of
2004 was $21.1 million, a decrease of $2.2 million, or 9.4%, compared to $23.3 million in
the second quarter of 2003. The decrease was primarily due to significant customer service
disconnections and terminations. While we are not always able to determine the specific
reason a customer may disconnect service, we believe the trend of customers focusing on
reducing their network costs by consolidating traffic on least cost routes will continue.
Monthly recurring revenue from wholesale services at the end of the second quarter of 2004
was $6.6 million compared to $6.8 million at the beginning of the second quarter 2004 and
$7.4 million at the end of the second quarter of 2003. During the second quarter of 2004,
new circuit connections of $0.2 million in monthly recurring revenue were more than offset
by service disconnections.

17

---

Commercial telecommunication services
provide advanced data communications and long distance service to small and medium-sized
businesses in the Upper Midwest, principally in Wisconsin, Michigan, Indiana, Minnesota
and Illinois. Operating revenue from commercial services in the second quarter of 2004 was
$15.7 million, an increase of $1.5 million, or 10.6%, compared to $14.2 million in the
second quarter of 2003. The increase was primarily attributed to an increase in the
services utilized by our existing customers. Monthly recurring revenue from commercial
advanced data services at the end of the second quarter of 2004 was $3.5 million compared
to $3.4 million at the beginning of the second quarter of 2004 and $3.2 million at the end
of the second quarter of 2003. In the third quarter of 2003, regulators approved SBC
Communications Inc.s application to offer long distance service in Wisconsin,
Indiana, Illinois and Michigan. We believe this increased competition for commercial
telecommunication services could adversely impact us through the loss of existing
customers or by reducing the success rate of securing new customers. We have been
proactively working with our customers by leveraging our customer service abilities and
adding new bundled services as we extend contracts at reduced prices.

The decrease in operating earnings
from telecommunications was primarily attributed to wholesale service disconnections and
higher operating costs and expenses associated with the higher mix of commercial revenue.
Offsetting these earnings decreases were decreases in selling and promotional expenses and
a decrease in bad debt expense.

MCI and Global Crossing together
accounted for 15.9% and 15.6% of our telecommunications revenue in the second quarter of
2004 and 2003, respectively. We recently signed a three-year master capacity agreement
with Global Crossing to provide carrier services throughout the Great Lakes Region,
although it has not yet been determined which circuits Global Crossing intends to renew
and how much revenue the Global Crossing business will generate. MCI filed for Chapter 11
bankruptcy protection in July 2002 and emerged in April 2004. We continue to provide
services to MCI and receive advance or timely payment for those services. We are in the
process of negotiating contract extensions with MCI for our current contracts and we
believe they will remain a significant customer. These new contracts will likely result in
a re-pricing of services and could result in providing them additional capacity. We expect
these contract changes to result in a significant decrease in our telecommunications
operating earnings. The loss of the ongoing business from either of these two customers
would have a significant adverse effect on our results of operations.

We do not believe we have a material
bad debt exposure because we bill all data services for both wholesale and commercial
customers in advance of providing services. Most customers are required to pay their bill
before services are provided.

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

Operating revenue from printing
services in the second quarter of 2004 was $17.4 million, a decrease of $3.3 million, or
15.9%, compared to $20.7 million in the second quarter of 2003. Our operating loss from
printing services in the second quarter of 2004 was $0.6 million, a decrease of $1.2
million compared to operating earnings of $0.6 million in the second quarter of 2003.

The decrease in printing services
operating revenue was primarily attributed to the decreases in revenue from our largest
customer, Dell Computer Corporation, and from other computer-related customers. These
decreases were partially offset by an increase in publication printing revenue primarily
from newly acquired business.

The decrease in printing services
operating earnings was primarily attributed to the decrease in sales volume as well as
production inefficiencies on print work. These decreases were partially offset by lower
production costs and cost reduction initiatives. In early July, because of continuing
margin loss and lower volumes in assembly, kitting and fulfillment, we executed a
transition plan to reduce costs through a 12% reduction in our full-time workforce and to
focus on our core printing business. We expect these transition costs, which will be
recognized in the second half of 2004, will be $0.3 million.

Dell Computer Corporation accounted
for 20.5% and 28.1% of our printing services revenue in the second quarter of 2004 and
2003, respectively. We recently learned that Dell has decided to eliminate supplying its
customers with certain items that we produce and that we face the loss of more Dell
business. While we expect the transition period to be a few months in duration as we wind
down the process of supplying Dell with these products, we anticipate this will result in
an additional annualized decline in revenues from Dell.  Overall, we anticipate Dell revenues
will decline approximately 35-40%, or $9.0 million - $10.0 million, this year. This changing relationship
with Dell represents an important step in our long-term strategy to minimize our reliance
on a single customer in our printing services segment and to return to our core printing
business. This decrease in revenue from Dell is being accompanied by significant cost
reduction initiatives in order to mitigate the material adverse effect on our results of
operations.

| | Other
| | -----

Other operating revenue in the second
quarter of 2004 was $27.9 million, an increase of $4.3 million, or 18.1%, compared to
$23.6 million in the second quarter of 2003. Other operating earnings in the second
quarter of 2004 were $2.8 million, an increase of $3.0 million compared to an operating
loss of $0.2 million in the second quarter of 2003.

The following table presents our
other operating revenue and operating earnings for the second quarter of 2004 and 2003:

|                   | 2004 |  | 2003                  |      |  |  
|------------------ | ---- |  | --------------------- | ---- |  | -
|
|                   |      |  | (dollars in millions)
|Operating revenue  |      |  | $                     | 15.9 |  | $
|                   |      |  |                       |      |  |  
|Operating earnings |      |  | $                     | 1.4  |  | $
|                   |      |  |                       |      |  |  
|                   |      |  |                       |      |  |  

18

---

The increase in other operating
revenue was primarily attributed to an increase in postage amounts billed to customers and
mailing services at our direct marketing services business and an increase in gravure
label sales, including sales to our largest customer, SAB/Miller Brewing Company, at our
label printing business. Included in operating revenue and operating costsand
expenses from our direct marketing services business is $7.4 million and $5.4 million of
postage amounts billed to customers in the second quarter of 2004 and 2003, respectively.

The increase in other operating
earnings was primarily attributed to recording a $2.1 million liability for
employment-related taxes in the second quarter of 2003.

SAB/Miller Brewing Company accounted
for 50.1% and 47.9% of our label printing business revenue in the second quarter of
2004 and 2003, respectively. We recently signed a three-year contract extension with
SAB/Miller Brewing Company which expires on December 31, 2008. We agreed to certain price
reductions as a result of this new contract and SAB/Miller Brewing Company has the right
to re-bid the work covered by the contract each year beginning in 2006, subject to similar
quality standards. The loss of this customer could have a material adverse effect on our
results of operations.

| | Non-Operating
Income and Taxes from Continuing Operations
| | ---------------------------------------------------------

Interest income and dividends was
$0.1 million in the second quarter of 2004 and 2003. Interest expense in the second
quarter of 2004 was $0.4 million, a decrease of $0.6 million, or 60.0%, compared to $1.0
million in the second quarter of 2003. Gross interest expense from borrowings under our
credit agreement was $0.4 million in the second quarter of 2004 and $0.6 million in the
second quarter of 2003.

The effective tax rate on continuing
operations was 40.0% in the second quarter of 2004 and 40.5% in the second quarter of
2003.

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

Our basic and diluted earnings per
share in the second quarter of 2004 were $0.28 and $0.27, respectively, an increase of
$0.08 and $0.07, respectively, compared to basic and diluted earnings per share of $0.20
in the second quarter of 2003. Earnings per share amounts are presented on a generally
accepted accounting principles basis (discussed in Note 3 in our Notes to Unaudited
Condensed Consolidated Financial Statements) and reflects our new capital structure as of
September 2003 and our follow-on equity offering and tender offer completed in June 2004.

| | Two
Quarters Ended June 27, 2004 compared to Two Quarters Ended June 29, 2003
| | -----------------------------------------------------------------------------

| | Consolidated
| | ------------

Our consolidated operating revenue in
the two quarters of 2004 was $400.7 million, an increase of $11.4 million, or 2.9%,
compared to $389.3 million in the two quarters of 2003. Our consolidated operating costs
and expenses in the two quarters of 2004 were $227.0 million, an increase of $2.2 million,
or 0.9%, compared to $224.8 million in the two quarters of 2003. Our consolidated selling
and administrative expenses in the two quarters of 2004 were $112.0 million, a decrease of
$4.8 million, or 4.1%, compared to $116.8 million in the two quarters of 2003.

The following table presents our
total operating revenue by segment, total operating costs and expenses, selling and
administrative expenses and total operating earnings as a percent of total operating
revenue for the two quarters of 2004 and 2003:

|                                               | 2004 |  | Percent of
   Total
 Operating
  Revenue |       | 2003 |  | Percent of
   Total
 Operating
  Revenue |  
|---------------------------------------------- | ---- |  | ---------------------------------------- | ----- | ---- |  | ---------------------------------------- | -
|                                               |      |  | (dollars in millions)                   
|Operating revenue:                             |      |  |                                          |       |      |  |                                          |  
|Publishing                                     |      |  | $                                        | 160.3 |      |  | 40.0                                     | %
|Broadcasting                                   |      |  |                                          | 76.9  |      |  | 19.2                                     |  
|Telecommunications                             |      |  |                                          | 72.3  |      |  | 18.0                                     |  
|Printing services                              |      |  |                                          | 39.2  |      |  | 9.8                                      |  
|Other                                          |      |  |                                          | 52.0  |      |  | 13.0                                     |  
|                                               |      |  |                                          |       |      |  |                                          |  
|Total operating revenue                        |      |  |                                          | 400.7 |      |  | 100.0                                    |  
|Total operating costs and expenses             |      |  |                                          | 227.0 |      |  | 56.6                                     |  
|Selling and administrative expenses            |      |  |                                          | 112.0 |      |  | 28.0                                     |  
|                                               |      |  |                                          |       |      |  |                                          |  
|Total operating costs and expenses and selling |      | 
|and administrative expenses                    |      |  |                                          | 339.0 |      |  | 84.6                                     |  
|                                               |      |  |                                          |       |      |  |                                          |  
|Total operating earnings                       |      |  | $                                        | 61.7  |      |  | 15.4                                     | %
|                                               |      |  |                                          |       |      |  |                                          |  

19

---

The increase in total operating
revenue was due to the revenue increases at our television stations, an increase in
commercial services revenue at our telecommunications business, increases in classified
and retail advertising revenue at our daily newspaper, increases in local advertising
revenue at our radio stations, an increase in mailing services revenue at our direct
marketing services business and an increase in commercial printing revenue at our
community newspapers and shoppers business. These increases were partially offset by a
decrease in wholesale telecommunications revenue due to customer disconnections and a
decrease in revenue from several computer-related customers at our printing services
business.

The increase in total operating costs
and expenses was primarily due to an increase in postage and freight expenses associated
with the increase in mailing services revenue at our direct marketing services business,
an increase in newsprint costs at our publishing businesses, an increase in news and
technology costs at our television stations and higher operating costs and expenses
associated with the higher mix of commercial revenue at our telecommunications business
offset by productivity benefits at our daily newspapers new production facility and
the decrease in revenue at our printing services business.

The decrease in selling and
administrative expenses was primarily due to a $2.1 million liability for
employment-related taxes recorded in the two quarters of 2003.

Our consolidated operating earnings
in the two quarters of 2004 were $61.7 million, an increase of $14.0 million, or 29.5%,
compared to $47.7 million in the two quarters of 2003. The following table presents our
operating earnings by segment for the two quarters of 2004 and 2003:

|                         | 2004 |  | Percent of
   Total
 Operating
  Earnings |      | 2003 |  | Percent of
   Total
 Operating
  Earnings |  
|------------------------ | ---- |  | ----------------------------------------- | ---- | ---- |  | ----------------------------------------- | -
|                         |      |  | (dollars in millions)                    
|Publishing               |      |  | $                                         | 21.6 |      |  | 35.1                                      | %
|Broadcasting             |      |  |                                           | 17.6 |      |  | 28.4                                      |  
|Telecommunications       |      |  |                                           | 17.8 |      |  | 28.9                                      |  
|Printing services        |      |  |                                           | 0.3  |      |  | 0.5                                       |  
|Other                    |      |  |                                           | 4.4  |      |  | 7.1                                       |  
|                         |      |  |                                           |      |      |  |                                           |  
|Total operating earnings |      |  | $                                         | 61.7 |      |  | 100.0                                     | %
|                         |      |  |                                           |      |      |  |                                           |  

The increase in total operating
earnings was primarily due to productivity benefits from the daily newspapers new
production facility, an employment-related tax liability recorded in the two quarters of
2003, cost reduction initiatives at our community newspapers and shoppers, operating
revenue increases at our television stations, an increase in operating revenue in our
publishing businesses, and an increase in local advertising revenue at our radio stations.
These increases were offset by a decrease in wholesale telecommunications revenue due to
service disconnections and a decrease in sales volume and production inefficiencies at our
printing services business.

Our consolidated EBITDA in the two
quarters of 2004 was $85.0 million, an increase of $13.5 million, or 18.9%, compared to
$71.5 million in the two quarters of 2003. We define EBITDA as net earnings plus provision
for income taxes, total other income and expense, depreciation and amortization. We
believe the presentation of EBITDA is relevant and useful because it helps improve our
investors ability to understand our operating performance and makes it easier to
compare our results with other companies that have different financing and capital
structures or tax rates. Our management uses EBITDA, among other things, to evaluate our
operating performance, to value prospective acquisitions and as a component of incentive
compensation targets for certain management personnel. In addition, our lenders use EBITDA
as one of the measures of our ability to service our debt. EBITDA is not a measure of
performance calculated in accordance with accounting principles generally accepted in the
United States. EBITDA should not be considered in isolation of, or as a substitute for,
net earnings as an indicator of operating performance or cash flows from operating
activities as a measure of liquidity. EBITDA, as we calculate it, may not be comparable to
EBITDA measures reported by other companies. In addition, EBITDA does not represent funds
available for discretionary use.

The following table presents a
reconciliation of our consolidated net earnings to consolidated EBITDA for the two
quarters of 2004 and 2003:

|                               | 2004 |  | 2003                  |     
|------------------------------ | ---- |  | --------------------- | ----
|                               |      |  | (dollars in millions)
|Net earnings                   |      |  | $                     | 36.5
|Provision for income taxes     |      |  |                       | 24.3
|Total other income and expense |      |  |                       | 0.9 
|Depreciation                   |      |  |                       | 22.4
|Amortization                   |      |  |                       | 0.9 
|                               |      |  |                       |     
|EBITDA                         |      |  | $                     | 85.0
|                               |      |  |                       |     

20

---

The increase in total EBITDA is
consistent with increases in operating earnings in our publishing, broadcasting and other
segments offset by a decrease in operating earnings at our telecommunications and printing
services segments.

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

Operating revenue from publishing in
the two quarters of 2004 was $160.3 million, an increase of $5.8 million, or 3.8%,
compared to $154.5 million in the two quarters of 2003. Operating earnings from publishing
were $21.6 million, an increase of $8.6 million, or 66.1%, compared to $13.0 million in
the two quarters of 2003.

The following table presents our
publishing operating revenue and operating earnings for the two quarters of 2004 and 2003:

|                   | 2004 |  | 2003                  |       |  |  
|------------------ | ---- |  | --------------------- | ----- |  | -
|
|                   |      |  | (dollars in millions)
|Operating revenue  |      |  | $                     | 111.3 |  | $
|                   |      |  |                       |       |  |  
|Operating earnings |      |  | $                     | 18.8  |  | $
|                   |      |  |                       |       |  |  
|                   |      |  |                       |       |  |  

The following table presents our publishing
operating revenue by category for the two quarters of 2004 and 2003:

|                          | 2004 |  | 2003                  |       |  |  
|------------------------- | ---- |  | --------------------- | ----- |  | -
|
|                          |      |  | (dollars in millions)
|Advertising revenue:      |      |  |                       |       |  |  
|Retail                    |      |  | $                     | 39.3  |  | $
|Classified                |      |  |                       | 31.7  |  |  
|General                   |      |  |                       | 6.0   |  |  
|Other                     |      |  |                       | 9.5   |  |  
|                          |      |  |                       |       |  |  
|Total advertising revenue |      |  |                       | 86.5  |  |  
|Circulation revenue       |      |  |                       | 21.5  |  |  
|Other revenue             |      |  |                       | 3.3   |  |  
|                          |      |  |                       |       |  |  
|Total operating revenue   |      |  | $                     | 111.3 |  | $
|                          |      |  |                       |       |  |  
|                          |      |  |                       |       |  |  

Advertising revenue in the two
quarters of 2004 accounted for 74.6% of total publishing revenue compared to 74.9% in the
two quarters of 2003.

Retail advertising revenue in the two
quarters of 2004 was $66.9 million, an increase of $0.7 million, or 1.0%, compared to
$66.2 million in the two quarters of 2003. A $1.0 million increase in daily newspaper
retail advertising was offset by a $0.3 million decrease in community newspaper and
shopper retail advertising. The $1.0 million increase at the daily newspaper was primarily
due to advertising from a new furniture retailer in the marketplace and increases in
telecommunications and automotive advertising. The $0.3 million decrease at our community
newspapers and shoppers was primarily due to a reduction in automotive advertising.
Preprint advertising for the two quarters of 2004 decreased $0.1 million, collectively, at
our daily newspaper and our community newspapers and shoppers compared to the two quarters
of 2003.

Classified advertising revenue in the
two quarters of 2004 was $36.2 million, an increase of $1.8 million, or 5.4%, compared to
$34.4 million in the two quarters of 2003. Increases of $0.6 million each in general/other
advertising and employment advertising, an increase of $0.5 million in real estate
advertising at our daily newspaper and a $0.4 million increase at our community newspapers
and shoppers were partially offset by a decrease in automotive advertising of $0.3 million
at our daily newspaper. The increase in employment advertising, which accounted for 36.8%
of total classified advertising in the two quarters of 2004, represented a 5.3% increase
from the two quarters of 2003. We believe the increase in employment advertising is due to
an improving economy. The decrease in automotive advertising is due to certain advertisers
switching their ad placement from the classified section to retail sections of the paper
and taking advantage of the enhanced color capabilities of our new presses. The increase
in classified advertising at our community newspapers and shoppers is primarily due to
decentralizing the classified sales operations.

General advertising revenue in the
two quarters of 2004 was $6.0 million, an increase of $0.6 million, or 11.1%, compared to
$5.4 million in the two quarters of 2003. The increase was due to an increase in
airline/travel industry ROP (run-of-press) advertising and an increase in preprints from
national advertisers.

21

---

The following table presents our
daily newspapers core newspaper advertising linage by category for the two quarters
of 2004 and 2003:

|                               | 2004 |  | 2003 |         | Percent Change | 
|------------------------------ | ---- |  | ---- | ------- | -------------- | 
|Full pages of advertising:     |      |  |      |         |                | 
|Full run                       |      | 
|Retail                         |      |  |      | 346,430 |                | 
|Classified                     |      |  |      | 424,895 |                | 
|General                        |      |  |      | 28,348  |                | 
|                               |      |  |      |         |                | 
|Total full run                 |      |  |      | 799,673 |                | 
|Part run                       |      |  |      | 70,542  |                | 
|                               |      |  |      |         |                | 
|Total advertising linage       |      |  |      | 870,215 |                | 
|                               |      |  |      |         |                | 
|Preprint pieces (in thousands) |      |  |      | 373,748 |                | 
|                               |      |  |      |         |                | 

Total advertising linage in the two
quarters of 2004 increased 2.7% compared to the two quarters of 2003. The increase was
largely due to a 40.7% increase in part run advertising linage. Part run advertising
linage increased in the two quarters of 2004 due to an increase in zoned classified
advertising. Full run advertising linage in the two quarters of 2004 increased 0.3%
compared to the two quarters of 2003 due to an 18.1% increase in general ROP advertising
linage and a 1.2% increase in retail advertising linage. These increases in retail and
general advertising linage are consistent with the increases in retail and general
advertising revenue. The decrease in classified advertising linage is due to a mix change
of an increase in employment advertising and a decrease in automotive advertising.
Preprint advertising pieces decreased 8.4% due to lower average net paid circulation, the
in-house printing of a local advertisers insert which was previously measured as a
preprint piece and the elimination of Kmart preprints in the daily newspaper due to the
closing of several area stores.

The following table presents the full
pages of advertising and revenue per page of our community newspapers and shoppers for the
two quarters of 2004 and 2003:

|                                | 2004 |  | 2003 |        | Percent Change |  
|------------------------------- | ---- |  | ---- | ------ | -------------- | -
|Full pages of advertising:      |      |  |      |        |                |  
|Community newspapers            |      |  |      | 49,370 |                |  
|Shoppers                        |      |  |      | 43,975 |                |  
|                                |      |  |      |        |                |  
|Total full pages of advertising |      |  |      | 93,345 |                |  
|                                |      |  |      |        |                |  
|Revenue per page                |      |  | $    | 314.25 |                | $
|                                |      |  |      |        |                |  
|                                |      |  |     

Total full pages of advertising for
our community newspapers and shoppers in the two quarters of 2004 decreased 9.1% compared
to the two quarters of 2003. The decrease was due to reformatting certain papers to more
efficiently use the amount of available space on each page. Revenue per page increased
10.6% primarily due to the decrease in total pages of full advertising while increasing or
maintaining the same advertising rates.

Other advertising revenue in the two
quarters of 2004, consisting of revenue from direct marketing and event marketing efforts,
and JSOnline for our daily newspaper and company-sponsored event advertising for our
community newspapers and shoppers, was $10.5 million, an increase of $0.8 million, or
8.2%, compared to $9.7 million in the two quarters of 2003. The increase was due to a $0.6
million increase in JSOnline advertising and a $0.3 million increase in direct mail
advertising at our daily newspaper offset by a decrease of $0.1 million in
company-sponsored event advertising revenue at our community newspapers and shoppers.

Circulation revenue in the two
quarters of 2004 accounted for 14.3% of total publishing revenue compared to 14.7% in the
two quarters of 2003. Circulation revenue in the two quarters of 2004 was $22.9 million,
an increase of $0.2 million, or 0.7%, compared to $22.7 million in the two quarters of
2003. The increase is primarily due to a cover price increase on home delivery and single
copy sales outside our PMA and wholesale rate increases to dealers at our daily newspaper.
Average net paid circulation for the Milwaukee Journal Sentinels weekday
edition decreased 3.1% in the two quarters of 2004 compared to the two quarters of 2003.
The decrease in daily average net paid circulation is due to lower home delivery and
single copy sales. Average net paid circulation for the Milwaukee Journal
Sentinels Sunday edition in the two quarters of 2004 decreased 0.4% compared to
the second quarter of 2003. Average paid circulation for our community newspapers
decreased 2.7% in the two quarters of 2004 compared to the two quarters of 2003 primarily
due to less discounting and promotions on home delivery.

Other revenue, which consists of
revenue from commercial printing opportunities at the printing plants for our community
newspapers and shoppers and promotional, distribution and commercial printing revenue at
our daily newspaper, in the two quarters of 2004 accounted for 11.1% of total publishing
revenue compared to 10.4% in the two quarters of 2003. Other revenue in the two quarters
of 2004 was $17.8 million, an increase of $1.7 million, or 10.7%, compared to $16.1
million in the two quarters of 2003. The increase was attributed to a $1.2 million
increase in printing revenue at our community newspapers and shoppers primarily due to
sales volume increases and a $0.5 million increase in commercial printing revenue at our
daily newspaper.

22

---

Publishing operating earnings in the
two quarters of 2004 were $21.6 million, an increase of $8.6 million, or 66.1%, compared
to $13.0 million in the two quarters of 2003. The increase was primarily due to $4.2
million in productivity benefits from the daily newspapers new production facility,
$1.5 million in savings from the structural reorganization and other cost reduction
initiatives of our community newspapers and shoppers business, a $0.7 million loss on the
disposal of the daily newspapers old production facility assets in the two quarters
of 2003, a $0.6 million reduction of the vacation liability at the daily newspaper
resulting from a policy change, and the increase in revenue at our daily newspaper. These
operating earnings increases were partially offset by an increase in the cost of
newsprint, the recording of $0.3 million for additional bad debt expense, an increase in
operating costs due to the increase of commercial printing revenue and the increase in
direct mail advertising revenue at our daily newspaper. Newsprint costs were $20.5 million
in the two quarters of 2004, an increase of $1.4 million, or 7.3%, compared to $19.1
million in the two quarters of 2003. The increase in the cost of newsprint was primarily
attributed to price increases totaling $2.0 million, or a 12.3% price increase per average
ton, partially offset by $0.8 million in savings at the daily newspaper from utilizing a
smaller page size. The additional bad debt expense in the two quarters of 2004 was accrued
for the prospect that our publishing businesses will be required to refund critical vendor
payments received from Kmart Corporation during their bankruptcy proceedings. A recent
ruling by the United States Court of Appeals for the 7th Circuit affirmed an
earlier United States District Court decision that certain critical vendor payments made
by Kmart Corporation during its bankruptcy proceedings in 2002 were without legal
authority and are subject to recovery from recipients.

As of March 31, 2003, all production
and distribution of the daily newspaper was transitioned to the new production facility.
Production and distribution of the newspaper was performed at both the old and new
production facilities from October 2002 until March 2003.

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

Operating revenue from broadcasting
in the two quarters of 2004 was $76.9 million, an increase of $7.0 million, or 10.0%,
compared to $69.9 million in the two quarters of 2003. Operating earnings from
broadcasting in the two quarters of 2004 were $17.6 million, an increase of $6.2 million,
or 53.9%, compared to $11.4 million in the two quarters of 2003.

The following table presents our
broadcasting operating revenue and operating earnings for the two quarters of 2004 and
2003:

|                   | 2004 |  | 2003                  |      |  |  
|------------------ | ---- |  | --------------------- | ---- |  | -
|
|                   |      |  | (dollars in millions)
|Operating revenue  |      |  | $                     | 37.2 |  | $
|                   |      |  |                       |      |  |  
|Operating earnings |      |  | $                     | 8.1  |  | $
|                   |      |  |                       |      |  |  
|                   |      |  |                       |      |  |  

Operating revenue from our radio
stations in the two quarters of 2004 was $37.2 million, an increase of $2.0 million, or
5.7%, compared to $35.2 million in the two quarters of 2003. The increase was primarily
attributed to a $2.4 million increase in local advertising revenue and a $0.1 million
increase in political and issue advertising revenue offset by a $0.5 million decrease in
national advertising.

Operating earnings from our radio
stations in the two quarters of 2004 were $8.1 million, an increase of $2.1 million, or
35.0%, compared to $6.0 million in the two quarters of 2003. The increase was primarily
attributed to the increase in revenue, a decrease in programming expenses, reduced
national sales commission and decreases in sales and promotional expenses due to cost
reduction initiatives offset by an increase in technology expenses. We recently agreed to
a contract extension the Milwaukee Brewers through the 2008 major league baseball season.

Operating revenue from our television
stations in the two quarters of 2004 was $39.7 million, an increase of $5.0 million, or
14.4%, compared to $34.7 million in the two quarters of 2003. The increase was primarily
attributed to a $2.5 million increase in political and issue advertising revenue, a $2.3
million increase in local advertising revenue and a $0.2 million increase in national
advertising.

Operating earnings from our
television stations in the two quarters of 2004 were $9.5 million, an increase of $4.1
million, or 75.9%, compared to $5.4 million in the two quarters of 2003. The increase was
primarily attributed to the increase in revenue and the higher margins associated with the
increased demand created by political and issue advertising and a $0.5 million net
adjustment to our litigation reserve due to the settlement of our national advertising
representative litigation offset by increases in news, technology, legal, payroll and
amortization expenses.

| | Telecommunications
| | ------------------

Operating revenue from
telecommunications in the two quarters of 2004 was $72.3 million, a decrease of $1.8
million, or 2.4%, compared to $74.1 million in the two quarters of 2003. Operating
earnings from telecommunications in the two quarters of 2004 were $17.8 million, a
decrease of $1.8 million, or 8.8%, compared to $19.6 million in the two quarters of 2003.

23

---

Wholesale telecommunication services
provide network transmission solutions for other service providers by offering bulk
transmission capacity. Operating revenue from wholesale services in the two quarters of
2004 was $41.6 million, a decrease of $4.9 million, or 10.5%, compared to $46.5 million in
the two quarters of 2003. The decrease was primarily due to significant customer service
disconnections and terminations. While we are not always able to determine the specific
reason a customer may disconnect service, we believe the trend of customers focusing on
reducing their network costs by consolidating traffic on least cost routes will continue.
Monthly recurring revenue from wholesale services at the end of the two quarters of 2004
was $6.6 million compared to $6.9 million at the beginning of 2004 and $7.4 million at the
end of the two quarters of 2003. During the two quarters of 2004, new circuit connections
of $0.2 million in monthly recurring revenue were more than offset by service
disconnections.

Commercial telecommunication services
provide advanced data communications and long distance service to small and medium-sized
businesses in the Upper Midwest, principally in Wisconsin, Michigan, Indiana, Minnesota
and Illinois. Operating revenue from commercial services in the two quarters of 2004 was
$30.7 million, an increase of $3.1 million, or 11.2%, compared to $27.6 million in the two
quarters of 2003. The increase was primarily attributed to an increase in the services
utilized by our exisitng customers. Monthly recurring revenue from commercial advanced
data services at the end of the two quarters of 2004 was $3.5 million compared to $3.3
million at the beginning of 2004 and $3.2 million at the end of the two quarters of 2003.
In the third quarter of 2003, regulators approved SBC Communications Inc.s
application to offer long distance service in Wisconsin, Indiana, Illinois and Michigan.
We believe this increased competition for commercial telecommunication services could
adversely impact us through the loss of existing customers or by reducing the success rate
of securing new customers. We have been proactively working with our customers by
leveraging our customer service abilities and adding new bundled services as we extend
contracts at reduced prices.

The decrease in operating earnings
from telecommunications was primarily attributed to wholesale service disconnections and
higher operating costs and expenses associated with the higher mix of commercial revenue.
Offsetting these earnings decreases were decreases in selling and promotional expenses and
a decrease in bad debt expense.

MCI and Global Crossing together
accounted for 16.3% and 17.3% of our telecommunications revenue in the two quarters of
2004 and 2003, respectively. We recently signed a three-year master capacity agreement
with Global Crossing to provide carrier services throughout the Great Lakes Region,
although it has not yet been determined which circuits Global Crossing intends to renew
and how much revenue the Global Crossing business will generate. MCI filed for Chapter 11
bankruptcy protection in July 2002 and emerged in April 2004. We continue to provide
services to MCI and receive advance or timely payment for those services. We are in the
process of negotiating contract extensions with MCI for our current contracts and we
believe they will remain a significant customer. These new contracts will likely result in
a re-pricing of services and could result in providing them additional capacity. We expect
these contract changes to result in a significant decrease in our telecommunications
operating earnings. The loss of the ongoing business from either of these two customers
would have a significant adverse effect on our results of operations.

We do not believe we have a material
bad debt exposure because we bill all data services for both wholesale and commercial
customers in advance of providing services. Most customers are required to pay their bill
before services are provided.

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

Operating revenue from printing
services in the two quarters of 2004 was $39.2 million, a decrease of $4.2 million, or
9.7%, compared to $43.4 million in the two quarters of 2003. Operating earnings from
printing services in the two quarters of 2004 were $0.3 million, a decrease of $1.5
million, or 82.3%, compared to $1.8 million in the two quarters of 2003.

The decrease in printing services
operating revenue was primarily attributed to the decreases in revenue from our largest
customer, Dell Computer Corporation, and from other computer-related customers. These
decreases were partially offset by an increase in publication printing revenue primarily
from newly acquired business.

The decrease in printing services
operating earnings was primarily attributed to the decrease in sales volume as well as
production inefficiencies on print work. These decreases were partially offset by lower
production costs and cost reduction initiatives. In early July, because of continuing
margin loss and lower volumes in assembly, kitting and fulfillment, we executed a
transition plan to reduce costs through a 12% reduction in our full-time workforce and to
focus on our core printing business. We expect these transition costs, which will be
recognized in the second half of 2004, will be $0.3 million.

Dell Computer Corporation accounted
for 24.2% and 28.3% of our printing services revenue in the two quarters of 2004 and 2003,
respectively. We recently learned that Dell has decided to eliminate supplying its
customers with certain items that we produce and that we face the loss of more Dell
business. While we expect the transition period to be a few months in duration as we wind
down the process of supplying Dell with these products, we anticipate this will result in
an additional annualized decline in revenues from Dell.  Overall, we anticipate Dell revenues will decline approximately 35-45%,
or $9.0 million - $10.0 million, this year. This changing relationship
with Dell represents an important step in our long-term strategy to minimize our reliance
on a single customer in our printing services segment and to return to our core printing
business. This decrease in revenue from Dell is being accompanied by significant cost
reduction initiatives in order to mitigate the material adverse effect on our results of
operations.

24

---

| | Other
| | -----

Other operating revenue in the two
quarters of 2004 was $52.0 million, an increase of $4.6 million, or 9.8%, compared to
$47.4 million in the two quarters of 2003. Other operating earnings in the two quarters of
2004 were $4.4 million, an increase of $2.5 million, or 131.2%, compared to $1.9 million
in the two quarters of 2003.

The following table presents our
other operating revenue and operating earnings for the two quarters of 2004 and 2003:

|                   | 2004 |  | 2003                  |      |  |  
|------------------ | ---- |  | --------------------- | ---- |  | -
|
|                   |      |  | (dollars in millions)
|Operating revenue  |      |  | $                     | 29.5 |  | $
|                   |      |  |                       |      |  |  
|Operating earnings |      |  | $                     | 2.0  |  | $
|                   |      |  |                       |      |  |  
|                   |      |  |                       |      |  |  

The increase in other operating
revenue was primarily attributed to an increase in postage amounts billed to customers and
mailing services at our direct marketing services business and an increase in gravure
label sales, including sales to our largest customer, SAB/Miller Brewing Company, at our
label printing business. Included in operating revenue and operating costs and expenses
from our direct marketing services business is $13.7 million and $10.4 million of postage
amounts billed to customers in the two quarters of 2004 and 2003, respectively.

The increase in other operating
earnings was primarily attributed to recording a $2.1 million liability for
employment-related taxes in the two quarters of 2003.

SAB/Miller Brewing Company accounted
for 47.4% and 47.5% of our label printing business revenue in the two quarters of
2004 and 2003, respectively. We recently signed a three-year contract extension with
SAB/Miller Brewing Company which expires on December 31, 2008. We agreed to certain price
reductions as a result of this new contract and SAB/Miller Brewing Company has the right
to re-bid the work covered by the contract each year beginning in 2006, subject to similar
quality standards. The loss of this customer could have a material adverse effect on our
results of operations.

| | Non-Operating
Income and Taxes from Continuing Operations
| | ---------------------------------------------------------

Interest income and dividends was
$0.1 million in the two quarters of 2004 and 2003. Interest expense in the two quarters of
2004 was $1.0 million, a decrease of $0.4 million, or 40.0%, compared to $1.4 million in
the two quarters of 2003. Gross interest expense from borrowings under our credit
agreement was $1.0 million in the two quarters of 2004 and $1.1 million in the two
quarters of 2003.

The effective tax rate on continuing
operations was 40.0% in the two quarters of 2004 and 40.3% in the two quarters of 2003.

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

Our basic and diluted earnings per
share in the two quarters of 2004 were $0.48 and $0.47, respectively, an increase of $0.12
and $0.11, respectively, compared to basic and diluted earnings per share of $0.36 in the
two quarters of 2003. Earnings per share amounts are presented on a generally accepted
accounting principles basis (discussed in Note 3 in our Notes to Unaudited Condensed
Consolidated Financial Statements) and reflects our new capital structure as of September
2003 and our follow-on equity offering and tender offer completed in June 2004.

# Follow-On Public Equity
Offering and Tender Offer

In June 2004, we completed a public
offering of 6,725,000 shares of our class A common stock at $18.25 per share, including
the underwriters over-allotments. The net proceeds from the offering of $116.0
million were used to repay outstanding indebtedness under our unsecured revolving credit
facility, to fund a portion of the tender offer, will be used to fund the Green Bay
(Wisconsin) television acquisition and for general corporate purposes, including potential
future acquisitions.

On June 15, 2004, we completed a
tender offer for our class B common stock at $18.55 per share, in which we purchased
8,005,203 shares, or $148.5 million worth of our class B common stock. A clerical error by
our transfer agent resulted in the purchase of 15,264 fewer class B shares than the
8,020,467 shares that had originally been reported. We used additional borrowings under
our $350 million debt facility and a portion of the net proceeds of the follow-on equity
offering to fund the tender offer.

25

---

# Liquidity and Capital
Resources

We have a $350 million unsecured
revolving credit facility expiring on September 4, 2008. The interest rate on borrowings
are either LIBOR plus a margin that ranges from 87.5 basis points to 150 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 one percent per annum. As
of June 27, 2004 we had borrowings of $76.7 million under the facility at the weighted
average interest rate of 2.1%. Fees of $2.0 million in connection with the facility are
being amortized over the term of the facility using the straight-line method which
approximates the effective-interest method. The material covenants of this agreement
include the following:

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

| | A
fixed charge coverage ratio as determined for the four fiscal quarter period preceding
the date of determination.
|- | -------------------------------------------------------------------------------------------------------------------

| | A
consolidated tangible net worth as of the end of any quarter.
|- | ---------------------------------------------------------------

| | Consolidated
capital expenditures during any fiscal year.
|- | ---------------------------------------------------------

| | A
consolidated rent expense during any fiscal year.
|- | ---------------------------------------------------

As of June 27, 2004, we are in
compliance with all of our material covenants.

Cash balances were $6.1 million at
June 27, 2004. We believe our expected cash flows from operations and borrowings available
under our credit facility will adequately meet our needs for the foreseeable future.

# Cash Flow

Cash provided by operating activities
was $63.3 million in the two quarters of 2004 compared to $54.0 million in the two
quarters of 2003. The increase is primarily due to the increase in net income.

Cash used for investing activities
was $15.2 million in the two quarters of 2004 compared to $26.3 million in the two
quarters of 2003. Capital expenditures for property and equipment were $14.7 million in
the two quarters of 2004 and $27.9 million in the two quarters of 2003. In the two
quarters of 2003, we were making the final payments for our daily newspapers new
production facility.

Cash used for financing activities
was $50.4 million in the two quarters of 2004 compared to $30.7 million in the two
quarters of 2003. Borrowings under our new credit facility during the two quarters of 2004
were $157.6 million and we made payments of $164.9 million. We decreased our borrowing
under our old credit agreement by $15.1 million in the two quarters of 2003. In the two
quarters of 2004, we received $116.0 million net proceeds from the issuance of our class A
common stock and we paid $148.7 million to purchase and redeem our class B common stock.
We paid cash dividends of $10.5 million and $15.5 million in the two quarters of 2004 and
2003, respectively.

# Critical Accounting
Policies

There are no material changes to the disclosures
regarding critical accounting policies made in our Annual Report on Form 10-K for the year
ended December 31, 2003.

# ITEM 3.  QUANTITATIVE AND
QUALITATIVE DISCLOSURE OF MARKET RISK

There are no material changes to the
disclosures regarding interest rate risk and foreign currency exchange risk made in our
Annual Report on Form 10-K for the year ended December 31, 2003.

# ITEM 4.  CONTROLS AND
PROCEDURES

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

26

---

# PART II. OTHER
INFORMATION

# ITEM 1.  LEGAL PROCEEDINGS

National Advertising
Representative Litigation.In September 2003, we hired a new national television
advertising representative due to our assessment of the performance of the prior
representative. On September 11, 2003, the prior representative, TeleRep, Inc. and
Harrington, Righter & Parsons, Inc. (which are affiliated entities), filed suits
against our subsidiary, Journal Broadcast Group, Inc., in the Supreme Court of the State
of New York, County of New York, demanding a lump sum payment under certain contractual
provisions in the aggregate amount of approximately $9.0 million. On May 12, 2004, the
parties reached an out-of-court settlement. We must pay the remaining amount of $7.9
million to the prior representative over a period of time. A receivable of $7.9 million is
due to us from the new national representative over the same period of time under our
contract with the new national representative. The liability to our prior national
representative is included in the consolidated condensed balance sheet in other current
liabilities and other long-term liabilities and the receivable from the new national
representative is included in the consolidated condensed balance sheet in receivables and
other assets, net of applicable reserves.

# ITEM 2.  CHANGES IN
SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY SECURITES

In connection with our follow-on
offering of class A common stock, we filed a registration statement on Form S-1 (Reg. No.
333-114974) with the Securities and Exchange Commission registering a total of 6,900,000
shares. The registration statement was declared effective under the Securities Act of 1933
on June 9, 2004. Pursuant to the registration statement, we sold 6,725,000 shares of our
class A common stock, including 725,000 shares subject to the underwriters
over-allotment option, at $18.25 per share. The offering has since terminated. The
aggregate public offering price for the shares registered for sale by us was approximately
$125.9 million. The underwriting syndicate for the offering was managed by Morgan Stanley
& Co. Incorporated, Robert W. Baird & Co. Incorporated, Credit Suisse First Boston
LLC, Goldman, Sachs & Co, and Merrill Lynch, Pierce, Fenner & Smith Incorporated.

We received gross proceeds of
approximately $122.7 million for the sale of shares in the offering, approximately $6.1
million of which were applied to underwriting discounts and commissions, and approximately
$0.6 million of which were applied to legal, accounting and other costs. After deducting
the expenses described above, the net proceeds to us from our sale of class A shares in
the offering was approximately $116.0 million. The net proceeds were used to repay
outstanding indebtedness under our unsecured revolving credit facility, to fund a portion
of the tender offer, will be used to fund the Green Bay (Wisconsin) television acquisition
and for general corporate purposes, including potential future acquisitions.

On June 15, 2004, we completed a
tender offer for our class B common stock at $18.55 per share, in which we purchased
8,005,203 shares, or $148.5 million worth, plus related expenses, of our class B common
stock.

# Issuer Purchases of
Equity Securities

|                           | (a)                                      | (b)    | (c)                                      | (d)
|-------------------------- | ---------------------------------------- | ------ | ---------------------------------------- | ---
|
|March 29 to April 28, 2004 | 0                                        | n/a    | n/a                                      | n/a
|April 29 to May 28, 2004   | 0                                        | n/a    | n/a                                      | n/a
|May 29 to June 27, 2004    | 8,005,203 shares of class B common stock | $18.55 | 8,005,203 shares of class B common stock | 0  

|
|

|(1)  All shares of class B common  stock  purchased by us were purchased
 pursuant to a tender offer publicly  announced on April 29, 2004 and  commenced  on May
17, 2004,  pursuant to which our board of directors authorized the
repurchase of up to 8,020,467  shares.  The tender offer expired on June
15, 2004.
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ITEM 3.  DEFAULTS UPON
SENIOR SECURITIES

None.

27

---

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

On April 29, 2004, we held our annual
meeting of shareholders for the purpose of voting on the following three items:

| | The
election of two Class I directors, Don. H. Davis, Jr. and David G. Meissner.
|- | --------------------------------------------------------------------------------

| | An
amendment to our articles of  incorporation  to allow transfers of our class B common
stock directly to          certain charities; and
|- | ------------------------------------------------------------------------------------------------------------------------------------------

| | An
amendment to our articles of incorporation to provide that class B common stock held by
certain charities will automatically convert into class A common stock upon expiration of
the applicable public sale restriction period and that, with respect to transfers to such
charities that occur after expiration of the applicable public sale restriction period,
each share of class B common stock will automatically convert into one share of class A
common stock immediately prior to such transfer.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Steven J. Smith and Douglas G. Kiel,
as the designated proxies, voted the shares of Journal Communications, Inc. common stock
as they were instructed by the shareholders of Journal Communications, Inc. Approximately
79% of all shares of common stock eligible to vote were represented at the meeting in
person or by proxy. The votes were:

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

|               
|---------------
|Votes For      
|Votes Against  
|Votes Abstained
|               
|Total Votes    
|               

|                     
|---------------------
|Term Expiring in 2005
|                     
|                     
|                     

# ITEM 5.  OTHER INFORMATION

A shareholder who intends to present
a proposal at, and have the proposal included in our proxy statement for, an annual
meeting of shareholders must comply with the requirements of Rule 14a-8 under the
Securities Exchange Act of 1934, as amended. In order to comply with such rule, proposals
submitted for the 2005 annual meeting must be received by us by no later than November 19,
2004 (assuming a meeting date in late April 2005). A shareholder who intends to present a
proposal at an annual meeting (including nominating persons for election as directors) but
does not intend to have the proposal included in our proxy statement for such meeting must
comply with the requirements set forth in our bylaws and discussed above under
Proposal One: Election of DirectorsBoard Meetings and
CommitteesNominating and Corporate Governance Committee. Under our bylaws, if
we do not receive such notice prior to December 31, 2004 (assuming a meeting date before
May 1, 2005), then the notice will be considered untimely and we will not be required to
present such proposal at the 2005 annual meeting. If our Board chooses to present such
proposal at the 2005 annual meeting, then the persons named in proxies solicited by the
board of directors for the 2005 annual meeting may exercise discretionary voting power
with respect to such proposal.

28

---

# ITEM 6.  EXHIBITS AND
REPORTS ON FORM 8-K

|(a) | Exhibits
|--- | --------

| | ExhibitNo. | Description
| | ---------- | -----------

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

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

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

|(b) | Reports
on Form 8-K
|--- | -------------------

| | Filing | Date           | Items Reported                                        | Financial Statements Filed
| | ------ | -------------- | ----------------------------------------------------- | --------------------------
| |        |                |                                                       |                           
| | 8-K    | April 20, 2004 | Item 7 Financial Statements and Exhibits              | None                      
| |        |                | Item 12 Results of Operations and Financial Condition | None                      
| |        |                |                                                       |                           
| | 8-K    | May 28, 2004   | Item 5 Other Events and Regulation FD Disclosure      | None                      
| |        |                | Item 7 Financial Statements and Exhibits              | None                      
| |        |                |                                                       |                           
| | 8-K    | June 10, 2004  | Item 5 Other Events and Regulation FD Disclosure      | None                      

29

---

SIGNATURES

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

|                      | JOURNAL COMMUNICATIONS, INC.Registrant
|--------------------- | --------------------------------------
|Date:  August 4, 2004 | By:                                   
|                      |                                       

|                      |    
|--------------------- | ---
|Date:  August 4, 2004 | By:
|                      |    

30