# 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 25, 2006

or

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

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

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

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

|414-224-2616                                      
|--------------------------------------------------
|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 a large accelerated filer, an accelerated filer, or a non-accelerated filer.
See definition of accelerated filer and large accelerated filer in Rule 12b-2
of the Exchange Act.

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

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

# Yes [   ] No [ X ]

Number of shares outstanding of each
of the issuers classes of common stock as of July 20, 2006 (excluding 8,676,705
shares of class B common stock, respectively, held by our subsidiary, The Journal
Company):

|Class                | Outstanding at July 20, 2006
|-------------------- | ----------------------------
|Class A Common Stock | 46,110,769                  
|Class B Common Stock | 20,980,418                  
|Class C Common Stock | 3,264,000                   

---

# JOURNAL
COMMUNICATIONS, INC.

# INDEX

|         |                       |                                                            
|-------- | --------------------- | -----------------------------------------------------------
|         |                       |                                                            
|Part I.  | Financial Information |                                                            
|         | Item 1.               | Financial Statements                                       
|         |                       | Consolidated Condensed Balance Sheets as of                
|         |                       | June 25, 2006 (Unaudited) and December 25, 2005            
|         |                       | Unaudited Consolidated Condensed Statements of Earnings    
|         |                       | for the Second Quarter and Two Quarters Ended              
|         |                       | June 25, 2006 and June 26, 2005                            
|         |                       | Unaudited Consolidated Condensed Statement of              
|         |                       | Shareholders Equity for the Two Quarters Ended            
|         |                       | June 25, 2006                                              
|         |                       | Unaudited Consolidated Condensed Statements of             
|         |                       | Cash Flows for the Two Quarters Ended June 25, 2006        
|         |                       | and June 26, 2005                                          
|         |                       | Notes to Unaudited Consolidated Condensed                  
|         |                       | Financial Statements as of June 25, 2006                   
|         | Item 2.               | Managements Discussion and Analysis of Financial Condition
|         |                       | and Results of Operations                                  
|         | Item 3.               | Quantitative and Qualitative Disclosure of Market Risk     
|         | Item 4.               | Controls and Procedures                                    
|Part II. | Other Information    
|         | Item 1.               | Legal Proceedings                                          
|         | Item 1A.              | Risk Factors                                               
|         | Item 2.               | Unregistered Sales of Equity Securities and Use of Proceeds
|         | Item 3.               | Defaults Upon Senior Securities                            
|         | Item 4.               | Submission of Matters to a Vote of Security Holders        
|         | Item 5.               | Other Information                                          
|         | Item 6.               | Exhibits                                                   

1

---

# PART I. FINANCIAL
INFORMATION

# ITEM 1. FINANCIAL
STATEMENTS

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

|                                                                     | June 25, 2006 | December 25, 2005
|-------------------------------------------------------------------- | ------------- | -----------------
|(unaudited)                                                         
|Current assets:                                                      |               |                  
|Cash and cash equivalents                                            |               |                  
|Receivables, less allowance for doubtful accounts                    |               |                  
|of $4,281 and $4,581                                                 |               |                  
|Inventories                                                          |               |                  
|Prepaid expenses                                                     |               |                  
|Deferred income taxes                                                |               |                  
|                                                                     |               |                  
|TOTAL CURRENT ASSETS                                                 |               |                  
|Property and equipment, at cost, less accumulated depreciation       |               |                  
|of $365,921 and $345,838                                             |               |                  
|Goodwill                                                             |               |                  
|Broadcast licenses                                                   |               |                  
|Other intangible assets, net                                         |               |                  
|Prepaid pension costs                                                |               |                  
|Other assets, net                                                    |               |                  
|Non-current assets of discontinued operations                        |               |                  
|                                                                     |               |                  
|TOTAL ASSETS                                                         |               |                  
|                                                                     |               |                  
|LIABILITIES AND SHAREHOLDERS EQUITY                                 |               |                  
|Current liabilities:                                                 |               |                  
|Accounts payable                                                     |               |                  
|Accrued compensation                                                 |               |                  
|Accrued employee benefits                                            |               |                  
|Deferred revenue                                                     |               |                  
|Other current liabilities                                            |               |                  
|Current liabilities of discontinued operations                       |               |                  
|Current portion of long-term liabilities                             |               |                  
|                                                                     |               |                  
|TOTAL CURRENT LIABILITIES                                            |               |                  
|Accrued employee benefits                                            |               |                  
|Long-term notes payable to banks                                     |               |                  
|Deferred income taxes                                                |               |                  
|Other long-term liabilities                                          |               |                  
|Shareholders equity:                                                |               |                  
|Preferred stock, $0.01 par - authorized 10,000,000 shares; no shares |               |                  
|outstanding at June 25, 2006 and December 25, 2005                   |               |                  
|Common stock, $0.01 par:                                             |               |                  
|Class C - authorized 10,000,000 shares; issued and outstanding:      |               |                  
|3,264,000 shares at June 25, 2006 and December 25, 2005              |               |                  
|Class B - authorized 120,000,000 shares; issued and outstanding:     |               |                  
|21,884,929 shares at June 25, 2006 and 26,762,782 shares             |               |                  
|at December 25, 2005                                                 |               |                  
|Class A - authorized 170,000,000 shares; issued and outstanding:     |               |                  
|45,400,573 shares at June 25, 2006 and 42,188,974 shares             |               |                  
|at December 25, 2005                                                 |               |                  
|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
25, 2005 has been derived from the audited financial statements at that date, but does not
include all the information and footnotes required by generally accepted accounting
principles in the United States for complete financial statements.

See accompanying notes
to unaudited consolidated condensed financial statements.

2

---

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

|                                               | Second Quarter Ended | Two Quarters Ended
|---------------------------------------------- | -------------------- | ------------------
|
|Continuing operations:                         |                      |                   
|Revenue:                                       |                      |                   
|Publishing                                     |                      |                   
|Broadcasting                                   |                      |                   
|Telecommunications                             |                      |                   
|Printing services                              |                      |                   
|Other                                          |                      |                   
|                                               |                      |                   
|Total revenue                                  |                      |                   
|Operating costs and expenses:                  |                      |                   
|Publishing                                     |                      |                   
|Broadcasting                                   |                      |                   
|Telecommunications                             |                      |                   
|Printing services                              |                      |                   
|Other                                          |                      |                   
|                                               |                      |                   
|Total operating costs and expenses             |                      |                   
|Selling and administrative expenses            |                      |                   
|                                               |                      |                   
|Total operating costs and expenses and selling |                      |                   
|and administrative expenses                    |                      |                   
|                                               |                      |                   
|Operating earnings                             |                      |                   
|Other income and expense:                      |                      |                   
|Interest income and dividends                  |                      |                   
|Interest expense                               |                      |                   
|                                               |                      |                   
|Total other income and expense                 |                      |                   
|                                               |                      |                   
|Earnings from continuing operations before     |                      |                   
|income taxes                                   |                      |                   
|Provision for income taxes                     |                      |                   
|                                               |                      |                   
|Earnings from continuing operations            |                      |                   
|Gain from discontinued operations, net of      |                      |                   
|tax benefit of $0 and $12, and tax expense     |                      |                   
|of $0 and $3,061, respectively                 |                      |                   
|                                               |                      |                   
|Net earnings                                   |                      |                   
|                                               |                      |                   
|Earnings available to class A and B            |                      |                   
|common shareholders                            |                      |                   
|                                               |                      |                   
|Earnings per share:                            |                      |                   
|Basic:                                         |                      |                   
|Continuing operations                          |                      |                   
|Discontinued operations                        |                      |                   
|                                               |                      |                   
|Net earnings                                   |                      |                   
|                                               |                      |                   
|Diluted:                                       |                      |                   
|Continuing operations                          |                      |                   
|Discontinued operations                        |                      |                   
|                                               |                      |                   
|Net earnings                                   |                      |                   
|                                               |                      |                   

See accompanying notes
to unaudited consolidated condensed financial statements.

3

---

Journal Communications,
Inc.                             Unaudited Consolidated Condensed Statement of
Shareholders' Equity       For the Two Quarters Ended June 25, 2006         (dollars in
thousands, except per-share amounts)

|                                            | Preferred | Common Stock | Additional | Unearned | Retained | Treasury Stock, | Comprehensive
|------------------------------------------- | --------- | ------------ | ---------- | -------- | -------- | --------------- | -------------
|
|Balance at December 25, 2005                |           |              | $          | -        |          | $               | 33           
|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            |           |              |            |          |          |                 |              
|Stock grants                                |           |              |            |          |          |                 |              
|Employee stock purchase plan                |           |              |            |          |          |                 |              
|Shares purchased and retired                |           |              |            |          |          |                 |              
|Adoption of SFAS 123 (R)                    |           |              |            |          |          |                 |              
|Stock -based compensation                   |           |              |            |          |          |                 |              
|                                            |           |              |            |          |          |                 |              
|Balance at March 26, 2006                   |           |              |            | --       |          |                 | 33           
|                                            |           |              |            |          |          |                 |              
|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            |           |              |            |          |          |                 |              
|Stock grants                                |           |              |            |          |          |                 |              
|Shares purchased and retired                |           |              |            |          |          |                 |              
|Stock -based compensation                   |           |              |            |          |          |                 |              
|                                            |           |              |            |          |          |                 |              
|Balance at June 25, 2006                    |           |              | $          | --       |          | $               | 33           
|                                            |           |              |            |          |          |                 |              

See accompanying notes to unaudited
consolidated condensed financial statements.

4

---

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

|                                                     | Two Quarters Ended
|---------------------------------------------------- | ------------------
|
|Cash flow from operating activities:                 |                   
|Net earnings                                         |                   
|Less gain from discontinued operations               |                   
|                                                     |                   
|Earnings from continuing operations                  |                   
|Adjustments for non-cash items:                      |                   
|Depreciation                                         |                   
|Amortization                                         |                   
|Provision for doubtful accounts                      |                   
|Deferred income taxes                                |                   
|Net loss (gain) from disposal of assets              |                   
|Net operating activities of discontinued operations  |                   
|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                        |                   
|Purchase price adjustment                            |                   
|Net investing activities of discontinued operations  |                   
|                                                     |                   
|NET CASH (USED FOR) PROVIDED BY                      |                   
|INVESTING ACTIVITIES                                 |                   
|Cash flow from financing activities:                 |                   
|Proceeds from long-term notes payable to banks       |                   
|Payments on long-term notes payable to banks         |                   
|Proceeds from issuance of common stock               |                   
|Redemption of common stock, net                      |                   
|Cash dividends                                       |                   
|                                                     |                   
|NET CASH USED FOR FINANCING ACTIVITIES               |                   
|NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS |                   
|Cash and cash equivalents:                           |                   
|Beginning of year                                    |                   
|                                                     |                   
|At June 25, 2006 and June 26, 2005                   |                   
|                                                     |                   

See accompanying notes
to unaudited consolidated condensed financial statements.

5

---

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

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

| | The
accompanying unaudited consolidated condensed financial statements have been prepared by
Journal Communications, Inc. and its wholly owned subsidiaries in accordance with U.S.
generally accepted accounting principles for interim financial information and pursuant
to the rules and regulations of the Securities and Exchange Commission and reflect normal
and recurring adjustments, which we believe to be necessary for a fair presentation. As
permitted by these regulations, these statements do not include all of the information
and footnotes required by U.S. generally accepted accounting principles for annual
financial statements. However, we believe that the disclosures are adequate to make the
information presented not misleading. The operating results for the second quarter and
two quarters ended June 25, 2006 are not necessarily indicative of the results that may
be expected for the fiscal year ending December 31, 2006. 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 25, 2005.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Our
fiscal year is a 52-53 week year ending on the last Sunday of December in each year. In
addition, we have four quarterly reporting periods, each consisting of 13 weeks and
ending on a Sunday, provided that once every six years, the fourth quarterly reporting
period will be 14 weeks. The 2006 fiscal year ends on December 31st and is a 53-week year
with a 14-week fourth quarter.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Basic
earnings per share is computed by dividing net earnings available to class A and B common
shareholders by the weighted average number of class A and B shares outstanding during
the period and excludes non-vested restricted stock. Diluted earnings per share is
computed based upon the assumptions that the class C shares outstanding were converted
into class A and B shares, common shares are purchased upon exercise of certain of our
non-statutory stock options, and common shares will be outstanding upon expiration of the
vesting periods for our non-vested restricted stock.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

6

---

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

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

|                                             | Second Quarter Ended | Two Quarters Ended
|-------------------------------------------- | -------------------- | ------------------
|
|Weighted average shares outstanding          |                      |                   
|Impact of restricted stock                   |                      |                   
|Conversion of class C shares                 |                      |                   
|                                             |                      |                   
|Adjusted weighted average shares outstanding |                      |                   
|                                             |                      |                   
|Diluted earnings per share:                  |                      |                   
|Continuing operations                        |                      |                   
|Discontinued operations                      |                      |                   
|                                             |                      |                   
|Net earnings                                 |                      |                   
|                                             |                      |                   

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

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

| | Effective
December 26, 2005, we adopted Statement of Financial Accounting Standards Statement No.
123(R), Share-Based Payment (SFAS No. 123(R)), using the modified prospective
application transition method. Under the modified prospective application transition
method, the fair value and recognition provisions of SFAS No. 123(R) are applied to
stock-based awards granted or modified subsequent to the date of adoption and prior
periods are not restated. Before we adopted SFAS 123(R), we accounted 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. Stock-based
compensation cost for restricted stock and performance units was reflected in net
earnings prior to December 26, 2005.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | During
the second quarter and two quarters ended June 25, 2006, we recognized $61 and $306,
respectively, in stock-based compensation expense. Total income tax benefit recognized
related to stock-based compensation for the second quarter and two quarters ended June
25, 2006 was $24 and $122, respectively. We recognize compensation expense based upon the
fair value of the award on the grant date on a straight-line basis over the service
period. As of June 25, 2006, total unrecognized compensation cost related to stock-based
compensation awards was approximately $1,753, net of estimated forfeitures, which we
expect to recognize over a weighted average period of approximately 2.2 years.
Stock-based compensation expense is included in selling and administrative expenses in
our consolidated condensed statement of earnings. There was no impact on basic or diluted
earnings per share from adopting SFAS No. 123(R).
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Our
2003 Equity Incentive Plan (Plan) allows for equity-based compensation to be granted to
employees for achieving designated corporate and individual performance goals and to
outside directors as part of their board compensation package. Awards to outside
directors may be granted in any one or a combination of stock grants, non-statutory stock
options, performance unit grants and stock unit grants. Incentive stock options may be
included in the combination granted to employees. Subject to certain adjustments,
6,000,000 shares of our class B common stock are authorized to be issued under the plan.
Not more than 3,000,000 shares of our class B common stock may be issued under the plan
in the form of stock grants, performance unit grants or stock unit grants.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | The
compensation committee of our board of directors may grant non-statutory stock options to
employees and directors at a purchase price equal to at least the fair market value of
our class B common stock on the grant date for an exercise term determined by the
committee, but not more than ten years from the grant date. As of June 25, 2006, there
are 5,739,744 shares available for issuance in the form of non-statutory stock options
under the Plan.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Fair
value was calculated using the Black-Scholes option pricing model for options granted in
2004 and 2003. There were no options granted in 2005 or in the two quarters of 2006.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

7

---

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

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

| | A
summary of non-statutory stock option activity during the two quarters of 2006 is:
| | ------------------------------------------------------------------------------------

|                                
|--------------------------------
|Outstanding at December 26, 2005
|Forfeited                       
|                                
|Outstanding at June 25, 2006    
|                                
|Exercisable at June 25, 2006    
|                                

| | The
aggregate intrinsic value of stock options outstanding and exercisable at the end of the
two quarters of 2006 is zero because the fair market value of our class B common stock on
June 25, 2006 was lower than the weighted average exercise price of the options.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | Each
stock grant may be accompanied by restrictions, or may be made without any restrictions,
as the compensation committee of the board of directors determines. Such restrictions may
include requirements that the participant remain in our continuous employment for a
specified period of time, or that we or the participant meet designated performance
goals. We value restricted stock grants at the closing market price of our class A common
stock on the grant date. As of June 25, 2006, there are 2,794,994 shares available for
issuance in the form of stock grants under the Plan.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | A
summary of stock grant activity during the two quarters of 2006 is:
| | ---------------------------------------------------------------------

|                                 | 
|-------------------------------- | 
|Outstanding at December 26, 2005 | 
|Granted                          | 
|Exercised                        | 
|Forfeited                        | 
|                                 | 
|Outstanding at June 25, 2006     | 
|                                 | 

| | Performance
unit grants or stock unit grants
| | --------------------------------------------

| | Each
stock unit entitles the participant to a cash payment equal to the fair market value of
one share of our class B common stock and will have a value established by the
compensation committee of our board of directors. Each performance unit grant and stock
unit grant will be accompanied by restrictions as may be determined in the discretion of
the committee. Such restrictions may include, without limitation, requirements that the
participant remain in our continuous employment for a specified period of time or meet
designated performance goals. There were 21,513 performance units granted in 2005. The
number of performance units granted is determined by multiplying the participants
base salary by his or her target percentage of salary, which target ranges by participant
from 100% to 50%, then dividing by the initial performance unit value of $100 per unit. A
Total Shareholder Return calculation is performed at the end of the performance period,
which will be December 31, 2006 for the current performance cycle in place, to determine
the value of each performance unit. Each participant will receive an amount payable that
ranges between $0 and $150 per performance unit payable 50% in cash and 50% in our class
B common stock. At June 25, 2006, there are 20,274 performance units outstanding and no
stock units outstanding.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
per share fair value of performance units granted on February 8, 2005 was $48.47 which we
determined using a Monte Carlo simulation and the following assumptions:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                             |  | 
|-------------------------------------------- |  | 
|Average risk-free interest rate              |  | 
|Expected dividend yield                      |  | 
|Expected volatility (Journal Communications) |  | 
|Expected volatility (S&P 500 index)          |  | 

8

---

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

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

| | The
average risk-free interest rate is based on the two-year U.S. treasury bond rate in
effect as of the grant date. The expected dividend yield is based on the expected annual
dividend as a percentage of the market value of our common stock as of the grant date. We
determined the expected volatility based on historical volatility over two years using
daily stock price observation.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | In
the second quarter of 2006, the cash liability portion of the performance unit grants of
$774 was reversed into income because payment of the award is no longer expected to
occur. As of June 25, 2006, $341 is accrued for the stock portion of the performance unit
awards in accordance with SFAS 123R.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | The
2003 Employee Stock Purchase Plan permits eligible employees to purchase shares of our
class B common stock at 90% of the fair market value of the stock on the day of purchase.
 We recognize compensation expense equal to the 10% discount of the fair market value.
 Subject to certain adjustments, 3,000,000 shares of our class B common stock are
authorized for sale under this plan.  During the two quarters of 2006, 40,698 of our
class B common shares were sold to employees under this plan at a weighted average fair
value of $12.56.  As of June 25, 2006, there are 2,837,941 shares available for sale
under the plan.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | Prior
year pro forma expense
| | ----------------------------

| | The
following table illustrates the effect on net income and earnings per share as if the
fair value-based method provided by SFAS No. 123, Accounting for Stock-Based
Compensation, had been applied for all outstanding and unvested awards for periods
prior to the adoption of SFAS 123(R):
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                     | Second Quarter Ended | Two QuartersEnded
|---------------------------------------------------- | -------------------- | -----------------
|
|Net earnings as reported                             |                      |                  
|Add compensation cost of restricted stock,           |                      |                  
|net of related tax effects, included in              |                      |                  
|the determination of net earnings as reported        |                      |                  
|Deduct stock based compensation determined           |                      |                  
|under fair value-based method, net of related        |                      |                  
|tax effects:                                         |                      |                  
|Stock options                                        |                      |                  
|Employee stock purchase plan                         |                      |                  
|Restricted stock                                     |                      |                  
|                                                     |                      |                  
|Pro forma net earnings including the effect of stock |                      |                  
|compensation expense                                 |                      |                  
|                                                     |                      |                  
|Net earnings per share of common stock:              |                      |                  
|Basic earnings per share:                            |                      |                  
|As reported                                          |                      |                  
|                                                     |                      |                  
|Pro forma including the effect of stock compensation |                      |                  
|expense                                              |                      |                  
|                                                     |                      |                  
|Diluted earnings per share:                          |                      |                  
|As reported                                          |                      |                  
|                                                     |                      |                  
|Pro forma including the effect of stock compensation |                      |                  
|expense                                              |                      |                  
|                                                     |                      |                  

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

| | Inventories
are stated at the lower of cost (first in, first out method) or market. Inventories at
June 25, 2006 and December 25, 2005 consisted of the following:
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                          | June 25, 2006 | December 25, 2005
|------------------------- | ------------- | -----------------
|Paper and supplies        |               |                  
|Work in process           |               |                  
|Finished goods            |               |                  
|Less obsolescence reserve |               |                  
|                          |               |                  
|Inventories, net          |               |                  
|                          |               |                  

9

---

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

|6 | NOTES
PAYABLE TO BANKS
|- | ----------------------

| | We
have a $475 million unsecured revolving credit facility that expires on June 2, 2011. The
interest rate on borrowings is either LIBOR plus a margin that ranges from 37.5 basis
points to 87.5 basis points, depending on our leverage, or the base rate, which equals
the higher of the prime rate set by U.S. Bank, N.A. or the Federal Funds Rate plus 100
basis points. As of June 25, 2006, we had borrowings of $274,660 under the facility at a
weighted average rate of 5.70%. Fees in connection with the facility of $1,717 are being
amortized over the term of the facility using the straight-line method which approximates
the effective-interest method.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

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

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

| | The
curtailment credit is the result of a pension plan amendment adopted on April 27, 2006.
The amendment froze participation in the plan for new employees as of April 30, 2006. In
addition, most employees eligible to participate in our pension plan will make a one-time
irrevocable election to either continue participation in the pension plan or cease the
accrual of benefits under the pension plan as of December 31, 2006 and receive a
contribution of 3% of eligible wages into the Investment Savings Plan (ISP) beginning in
2007. Future pension benefit accruals will be reduced for participants electing to
receive the contribution into their ISP account.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | Our
definite-lived intangible assets consist primarily of network affiliation agreements,
customer lists and non-compete agreements. We amortize the network affiliation agreements
over a period of 25 years, 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 $587 for the second quarter ended June 25, 2006 and $1,165 for the two
quarters ended June 25, 2006. Estimated amortization expense for our next five fiscal
years is $2,347 for 2006, $2,317 for 2007, $2,257 for 2008, $1,978 for 2009 and $1,607
for 2010.
| | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

10

---

JOURNAL COMMUNICATIONS,
INC.  Notes to Unaudited Consolidated Condensed Financial Statements(in thousands, except
share and 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 25, 2006 and December 25, 2005 is
as follows:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                               | Gross
Carrying
Amount | Accumulated
Amortization | Net
Carrying
Amount
|------------------------------ | --------------------- | ------------------------ | -------------------
|June 25, 2006                  |                       |                          |                    
|Network affiliation agreements |                       |                          | $                  
|Customer lists                 |                       |                          |                    
|Non-compete agreements         |                       |                          |                    
|Other                          |                       |                          |                    
|                               |                       |                          |                    
|Total                          |                       |                          | $                  
|                               |                       |                          |                    
|December 25, 2005              |                       |                         
|Network affiliation agreements |                       |                          | $                  
|Customer lists                 |                       |                          |                    
|Non-compete agreements         |                       |                          |                    
|Other                          |                       |                          |                    
|                               |                       |                          |                    
|Total                          |                       |                          | $                  
|                               |                       |                          |                    

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

| | Broadcast
licenses are deemed to have indefinite useful lives because we have renewed these
agreements without issue in the past and we intend to renew them indefinitely in the
future. Accordingly, we expect the cash flows from our broadcast licenses to continue
indefinitely. There were no changes to the carrying amount of broadcast licenses in the
two quarters ended June 25, 2006.
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | The
change in the carrying amount of goodwill in the two quarters ended June 26, 2005 is as
follows:
| | ----------------------------------------------------------------------------------------------------

|Reporting unit                    | Goodwill at
December 25, 2005 | Adjustment to
Preliminary
Purchase Price
Allocation | Goodwill at
June 25, 2006
|--------------------------------- | ----------------------------- | --------------------------------------------------- | -------------------------
|Daily newspaper                   |                               |                                                     | $                        
|Community newspapers and shoppers |                               |                                                     |                          
|Broadcasting                      |                               |                                                     |                          
|Telecommunications                |                               |                                                     |                          
|Direct marketing services         |                               |                                                     |                          
|                                  |                               |                                                     |                          
|Total                             |                               |                                                     | $                        
|                                  |                               |                                                     |                          

| | The
change to the carrying amount of network affiliation agreements, customer lists, other
intangibles, broadcast licenses and goodwill during 2006 represents a revised purchase
price allocation for our purchase of FOX-affiliate WFTX-TV, in Fort Myers/Naples,
Florida, ABC-affiliate, KGUN-TV, in Tucson, Arizona and certain assets of CBS-affiliate
KMTV-TV, in Omaha, Nebraska, from subsidiaries of Emmis Communications Corporation on
December 5, 2005.
| | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|9 | ACQUISITIONS
|- | ------------

| | All
acquisitions are accounted for using the purchase method. Accordingly, the results of
operations and cash flows since the respective date of acquisition are included in the
consolidated condensed financial statements. On December 5, 2005, we acquired the
business and assets of FOX-affiliate WFTX-TV, in Fort Myers/Naples, Florida and
ABC-affiliate, KGUN-TV, in Tucson, Arizona from subsidiaries of Emmis Communications
Corporation. We also acquired certain assets of CBS-affiliate KMTV-TV, in Omaha,
Nebraska, and have begun programming KMTV under a local marketing agreement. The total
purchase price for the three stations was $235,000, subject to certain adjustments. We
paid $228,779, including $3,848 for expenses associated with the transaction, in 2005.
The remaining $10,000 will be paid upon the earlier of the transfer to us of the
broadcast license associated with KMTV-TV, or a $5,000 payment no later than October 15,
2007 and another $5,000 payment no later than
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

11

---

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

|9 | ACQUISITIONS
continued
|- | ----------------------

| | October
15, 2008. The acquisition allows us to operate television stations in two growth markets
where we already own radio stations and to leverage our market resources to be more
effective in serving the communities and advertisers of Tucson and Omaha. The acquisition
also adds a new mid-size growth market (Fort Myers/Naples) to our broadcast operations.
These are among the factors that contributed to the recognized goodwill.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
unaudited pro forma consolidated condensed statement of earnings information for the
second quarter and two quarters of 2005, set forth below, presents the results of
operations as if the acquisition of the three television stations had occurred at the
beginning of 2005 and is not necessarily indicative of future results or actual results
that would have been achieved had the acquisition occurred as of the beginning of such
year.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                                                      | Second Quarter Ended | Two Quarters Ended
|----------------------------------------------------- | -------------------- | ------------------
|
|Revenue                                               |                      |                   
|Earnings from continuing operations                   |                      |                   
|Earnings per common share from continuing operations: |                      |                   
|Basic                                                 |                      |                   
|Diluted                                               |                      |                   

|10 | DISCONTINUED
OPERATIONS
|-- | -----------------------

| | On
January 25, 2005, we entered into a definitive asset sale agreement with Multi-Color
Corporation pursuant to which Multi-Color Corporation acquired substantially all of the
assets and certain liabilities of NorthStar Print Group, Inc. (NorthStar), our label
printing business. The purchase price, excluding certain real estate holdings that we
retained, was $26,144 in cash and resulted in a gain on discontinued operations before
income taxes of $8,382, of which $7,916 was recognized in the first quarter of 2005. The
revenue of NorthStar for the period December 27, 2004 through the date of sale totaled
$4,112.
| | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | The
current and non-current assets and liabilities of discontinued operations in the
consolidated condensed balance sheets at June 25, 2006 and December 25, 2005 consisted of
the following:
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|                          | June 25, 2006 | December 25, 2005
|------------------------- | ------------- | -----------------
|Property and equipment    |               |                  
|                          |               |                  
|Total non-current assets  |               |                  
|                          |               |                  
|Accounts payable          |               |                  
|Accrued employee benefits |               |                  
|Other current liabilities |               |                  
|                          |               |                  
|Total current liabilities |               |                  
|                          |               |                  

|11 | SEGMENT
INFORMATION
|-- | -------------------

| | We
conduct our operations through four reportable segments: publishing, broadcasting,
telecommunications and printing services. In addition, our direct marketing services
business and certain administrative activities are aggregated and reported as other. All
operations conduct their business in the United States. We publish a daily newspaper, the
Milwaukee JournalSentinel, and more than 90 weekly shoppers and community
newspapers in eight states. Our broadcasting segment consists of 37 radio stations and
nine television stations in 12 states, as well as the operation of two additional
television stations under local marketing agreements. Our telecommunications segment
consists of wholesale and commercial (previously referred to as business-to-business or
enterprise) telecommunications services provided through a high speed fiber optic
telecommunications network that covers about 4,600 route miles in seven states, of which
we operate about 4,240 route miles. Our printing services segment includes the operations
of our printing and assembly and fulfillment business.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

12

---

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

|11 | SEGMENT
INFORMATION continued
|-- | -----------------------------

| | The
following tables summarize revenue, operating earnings, depreciation and amortization and
capital expenditures for the second quarter and two quarters ended June 25, 2006 and June
26, 2005 and identifiable total assets at June 25, 2006 and December 25, 2005:
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

|                                  | June 25, 2006 | December 25, 2005
|--------------------------------- | ------------- | -----------------
|Audited                          
|Identifiable total assets         |               |                  
|Publishing                        |               |                  
|Broadcasting                      |               |                  
|Telecommunications                |               |                  
|Printing services                 |               |                  
|Other and discontinued operations |               |                  
|                                  |               |                  
|                                  |               |                  
|                                  |               |                  

13

---

# 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 25, 2006, including the notes thereto.

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

# Forward-Looking
Statements

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

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

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

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

| | changes
in legislation or customs relating to the collection, management and aggregation and use
of consumer information through telemarketing and electronic communication efforts;
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | the
availability of quality broadcast programming at competitive prices;
|- | ------------------------------------------------------------------------

| | changes
in network affiliation agreements;
|- | ------------------------------------------

| | quality
and rating of network over-the-air broadcast programs, including programs changing
networks and changing competitive dynamics regarding how and when programs are made
available to our viewers;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

| | effects
of the rapidly changing nature of the publishing, broadcasting, telecommunications and
printing industries, including general business issues, competitive issues and the
introduction of new technologies;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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

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

| | effects
of potential acquisitions of or mergers of telecommunications companies or advertisers;
|- | -----------------------------------------------------------------------------------------------

| | the
proposed spin-off of the common stock of Norlight Telecommunications, Inc. to our
shareholders;
|- | ---------------------------------------------------------------------------------------------------

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

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

| | energy
costs;
|- | -------------

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

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

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

# Overview

Our business segments are based on
the organizational structure used by management for making operating and investment
decisions and for assessing performance. Our reportable business segments are: (i)
publishing; (ii) broadcasting; (iii) telecommunications; (iv) printing services; and (v)
other. Our publishing segment consists of a daily newspaper, the Milwaukee Journal
Sentinel, and about 90 community newspapers and shoppers in eight states. Our
broadcasting segment consists of 37 radio stations and nine television stations in 12
states, as well as the operation of two additional television stations under local
marketing agreements. Our telecommunications segment consists of wholesale and commercial
(previously referred to as business-to-business or enterprise) telecommunications services
provided through a high speed fiber optic telecommunications network that covers about
4,600 route miles in seven states. Our printing services segment reflects the operations
of our printing and kit assembly and fulfillment business. Our other segment consists of a
direct marketing services business and corporate expenses and eliminations.

14

---

In the second quarter of 2006, there
were a number of unusual items reported that had a cumulative net negative impact of $3.0
million on operating earnings, $1.8 million on net earnings and $0.02 on diluted earnings
per share. These items were (i) a $5.1 million reduction of revenue for credits to be
issued toward 2007 advertising in the Milwaukee Journal Sentinelfrom a proposed
settlement in the Shorewest class action litigation and a voluntary offer made to preprint
advertisers related to changes reported in 2003 and 2004 net paid circulation, and (ii) a
reserve of $0.7 million for litigation related expenses which were partially offset by a
one-time curtailment credit of $1.7 million related to a pension plan amendment and $1.1
million in insurance proceeds received from a business interruption claim from the impact
of Hurricane Katrina.

Our broadcasting business again
delivered a solid performance while weakness persisted in our publishing business. Our
television stations performance was strong, led by our Las Vegas market, with
significant contributions from our three new stations as well as improvement in all but
one of our other TV markets. Additionally, radio revenue rebounded in the last two months
of the quarter and our radio stations continued to improve margins by containing their
costs. The daily newspaper continues to be challenged by a decline in classified
advertising, particularly in the automotive category. Interactive revenue, however, was up
nearly 29% to $2.3 million in the quarter. Our daily newspapers continued focus on
expense control resulted in total operating expenses increasing less than 1%. Our
telecommunications business continues to be impacted by the anticipated lower contract
pricing in the wholesale business and significant competitive pricing pressure in the
commercial business, which has resulted in decreased revenues and operating earnings.
Operating earnings increased at our community newspapers and shoppers due to proceeds from
a business interruption claim and overall expense reductions while revenue decreased due
to the closure of our Dixie Web printing facility in New Orleans in late 2005 and the
reduction in publication revenue in New Orleans due to the impact of Hurricane Katrina.
Our printing services business experienced operating earnings improvement despite the
expected lower revenue.

On April 25, 2006, we announced a
plan to spin-off our telecommunications business, Norlight Telecommunications, Inc., as an
independent public company, which will allow us to concentrate greater managerial and
financial resources on our diversified local media businesses and enable Norlight to
concentrate on the growth of its communications business. We believe Norlight will benefit
from greater operational and financial flexibility to take advantage of growth
opportunities in its industry. Completion of the spin-off is subject to the effectiveness
of the Norlight registration statement and receipt of an opinion from counsel as to the
tax-free nature of the transaction. We are currently on track for completion of the
spin-off, which is expected to take up to six months from the April filing of the
registration statement. We will continue to support our telecommunications business,
attempt to optimize its results and position it well for its future.

# Results of Operations

| | Second
Quarter Ended June 25, 2006 compared to Second Quarter Ended June 26, 2005
| | ---------------------------------------------------------------------------------

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

Our consolidated revenue from
continuing operations in the second quarter of 2006 was $197.2 million, a decrease of $0.3
million, or 0.2%, compared to $197.5 million in the second quarter of 2005. Our
consolidated operating costs and expenses from continuing operations in the second quarter
of 2006 and 2005 were $110.7 million. Our consolidated selling and administrative expenses
from continuing operations in the second quarter of 2006 were $57.2 million, an increase
of $0.9 million, or 1.5%, compared to $56.3 million in the second quarter of 2005.

15

---

The following table presents our
total revenue by segment, total operating costs and expenses, selling and administrative
expenses and total operating earnings as a percent of total revenue for the second quarter
of 2006 and 2005:

|                                              
|----------------------------------------------
|(dollars in millions)                         
|Revenue from continuing operations:           
|Publishing                                    
|Broadcasting                                  
|Telecommunications                            
|Printing services                             
|Other                                         
|                                              
|Total revenue                                 
|Total operating costs and expenses            
|Selling and administrative expenses           
|                                              
|Total operating costs and expenses and selling
|and administrative expenses                   
|                                              
|Total operating earnings                      
|                                              

The decrease in total revenue from
continuing operations was due to the reduction in revenue at our daily newspaper for
credits to be issued toward 2007 advertising in the Milwaukee Journal Sentinel
under a proposed settlement agreement with a classified advertiser as well as a voluntary
offer made to preprint advertisers, a decrease in wholesale revenue at our
telecommunications business due to service disconnections and repricings, a decrease in
commercial services revenue at our telecommunications business due to a reduction in
long-distance services and aggressive competition, a decrease in automotive advertising at
our daily newspaper, a decrease in revenue from several computer-related customers in our
printing services business, a decrease in postage revenue at our direct marketing services
business and a decrease in other revenue at our community newspapers and shoppers due to
the closure of our Louisiana printing facility in New Orleans in late 2005. These revenue
decreases were partially offset by the contribution from the television operations we
acquired in December 2005, an increase in local advertising at our television stations and
political and issue advertising at our television and radio stations.

Total operating costs and expenses
from continuing operations in the second quarter of 2006 were essentially even compared to
the second quarter of 2005.

The increase in selling and
administrative expenses from continuing operations is primarily due to the television
operations acquired in December 2005, spin-off related expenses at our telecommunications
business and litigation related expenses at our daily newspaper partially offset by a
pension plan curtailment credit at our publishing and broadcasting businesses and by
insurance proceeds received from a business interruption claim from the impact of
Hurricane Katrina at our community newspapers and shoppers business.

Our consolidated operating earnings
from continuing operations in the second quarter of 2006 were $29.3 million, a decrease of
$1.2 million, or 4.0%, compared to $30.5 million in the second quarter of 2005. The
following table presents our operating earnings by segment for the second quarter of 2006
and 2005:

|                        
|------------------------
|(dollars in millions)   
|Continuing operations:  
|Publishing              
|Broadcasting            
|Telecommunications      
|Printing services       
|Other                   
|                        
|Total operating earnings
|                        

The decrease in total operating
earnings from continuing operations was primarily due to the operating earnings impact
from a reduction in revenue for credits to be issued toward 2007 advertising in the
Milwaukee Journal Sentinel under a proposed settlement agreement as well as a
voluntary offer made to preprint advertisers and settlement-related litigation expenses at
our daily newspaper and the decrease in revenue and spin-off related expenses at our
telecommunications business. Partially offsetting these operating earnings decreases were
the contribution from the television operations we acquired in December 2005, a pension
plan curtailment credit, insurance proceeds received from a business interruption claim at
our community newspapers and shoppers business and a reversal of previously recognized
incentive compensation expense.

16

---

Our consolidated EBITDA in the second
quarter of 2006 was $41.2 million, a decrease of $0.3 million, or 0.7%, compared to $41.5
million in the second quarter of 2005. We define EBITDA as net earnings excluding
gain/loss from discontinued operations, net, provision for income taxes, total other
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 2006 and 2005:

|                          
|--------------------------
|(dollars in millions)     
|Net earnings              
|Provision for income taxes
|Total other expense       
|Depreciation              
|Amortization              
|                          
|EBITDA                    
|                          

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

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

Revenue from publishing in the second
quarter of 2006 was $79.4 million, a decrease of $8.8 million, or 10.0%, compared to $88.2
million in the second quarter of 2005. Operating earnings from publishing were $8.5
million, a decrease of $5.8 million, or 41.0%, compared to $14.3 million in the second
quarter of 2005.

The following table presents our
publishing revenue by category and operating earnings for the second quarter of 2006 and
2005:

|                            |                                
|--------------------------- | -------------------------------
|Daily
Newspaper             | Community
Newspapers
& Shoppers
|(dollars in millions)      
|Advertising revenue:        |                                
|Retail                      |                                
|Classified                  |                                
|National                    |                                
|Direct Marketing            |                                
|Other                       |                                
|                            |                                
|Total advertising revenue . |                                
|Circulation revenue         |                                
|Other revenue               |                                
|                            |                                
|Total revenue               |                                
|                            |                                
|Operating earnings          |                                
|                            |                                

Advertising revenue in the second
quarter of 2006 accounted for 71.9% of total publishing revenue compared to 73.9% in the
second quarter of 2005.

17

---

Retail advertising revenue in the
second quarter of 2006 was $32.8 million, a decrease of $6.1 million, or 15.5%, compared
to $38.9 million in the second quarter of 2005. The $5.5 million decrease at our daily
newspaper was primarily due to a $5.1 million reduction in revenue for credits to be
issued toward 2007 advertising in the Milwaukee Journal Sentinel under a proposed
settlement agreement with a classified advertiser as well as a voluntary offer made to
preprint advertisers related to changes made in 2003 and 2004 reported net paid
circulation numbers. Excluding this reduction in revenue, retail advertising revenue
decreased $0.4 million due to decreases in ROP (run-of-press) and shared mail, partially
offset by increases in preprints and online advertising. The decrease in retail ROP
advertising is attributed to decreases in the automotive, health services, communications
and entertainment categories partially offset by increases in the building/hardware/lawn
and garden and food categories. The $0.6 million decrease at our community newspapers and
shoppers was primarily due to a decrease in automotive advertising and the reduction in
business at our Louisiana publications.

Classified advertising revenue in the
second quarter of 2006 was $19.9 million, a decrease of $1.8 million, or 8.1%, compared to
$21.7 million in the second quarter of 2005. The $2.0 million decrease at our daily
newspaper was primarily due to decreases in automotive advertising of $1.5 million,
employment advertising of $0.4 million and other advertising of $0.1 million. Employment
advertising accounted for 41.3% of classified advertising at the daily newspaper in the
second quarter of 2006. The combined decrease in automotive classified and retail
advertising in the second quarter of 2006 was $2.0 million, or 33.8%, compared to the
second quarter of 2005. This decrease is consistent with the national trend. The $0.2
million increase at our community newspapers and shoppers is primarily due to the
cross-sell program established with the daily newspaper.

National advertising revenue in the
second quarter of 2006 of $2.7 million was essentially even compared to the second quarter
of 2005.

The following table presents our
daily newspapers core newspaper advertising linage by category and core newspaper
and shared mail preprint pieces for the second quarter of 2006 and 2005:

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

Total advertising linage in the
second quarter of 2006 decreased 12.6% compared to the second quarter of 2005. Full run
advertising linage in the second quarter of 2006 decreased 10.4% compared to the second
quarter of 2005 due to a reduction in classified and retail advertising linage partially
offset by an increase in national advertising lineage. The decrease in classified
advertising linage is primarily due to a decrease in the automotive category. Retail ROP
advertising linage primarily decreased in the automotive, health services and
communication categories. National advertising linage primarily increased in the business
services category. Part run advertising linage decreased 32.1% in the second quarter of
2006 due to a decrease in automotive zoned classifieds. Preprint advertising pieces
decreased 0.6% in the second quarter of 2006 compared to the second quarter of 2005.

The following table presents the full
pages of advertising and revenue per page of our community newspapers and shoppers and
specialty products for the second quarter of 2006 and 2005:

|                               
|-------------------------------
|Full pages of advertising:     
|Community newspapers           
|Shoppers and specialty products
|                               
|Total full pages of advertising
|                               
|Revenue per page               
|                               

Total full pages of advertising for
our community newspapers and shoppers business in the second quarter of 2006 decreased
3.3% compared to the second quarter of 2005. The decrease was due to the reduction in
advertising in our Louisiana publications due to the impact of Hurricane Katrina,
reformatting certain papers to more efficiently use the amount of available space on each
page and the change from offering two shoppers in one of our markets to offering one new
shopper in that market. This was partially offset by an increase in advertising in
specialty products. Revenue per page increased 0.4% primarily due to the decrease in total
full pages of advertising and the increase in advertising rates.

Direct marketing revenue, consisting
of revenue from direct mail efforts for our daily newspaper was $1.5 million, a decrease
of $0.2 million, or 13.5%, compared to $1.7 million in the second quarter of 2005. The
decrease was due to a reduction in our solo mail initiatives.

18

---

Other advertising revenue, consisting
of revenue from company-sponsored event advertising at our community newspapers and
shoppers, was $0.2 million in the second quarter of 2006 and 2005.

Total retail and classified Journal
Interactive revenue at our daily newspaper was $2.3 million in the second quarter of 2006,
an increase of $0.5 million, or 29.4%, compared to $1.8 million in the second quarter of
2005. During the second quarter of 2006, our daily newspaper continued investing in online
products by launching eight new web sites.

Circulation revenue in the second
quarter of 2006 accounted for 17.0% of total publishing revenue compared to 15.9% in the
second quarter of 2005. Circulation revenue of $13.5 million in the second quarter of 2006
decreased $0.5 million, or 3.4%, compared to $14.0 million in the second quarter of 2005
primarily due to a lower daily average rate per copy and a decrease in Sunday average net
paid circulation at our daily newspaper. Circulation revenue was flat at our community
newspapers and shoppers.

Other revenue, which consists of
revenue from commercial printing at the printing plants for our community newspapers and
shoppers and promotional, commercial delivery, events and commercial printing revenue at
our daily newspaper, accounted for 11.1% of total publishing revenue in the second quarter
of 2006 compared to 10.2% in the second quarter of 2005. Other revenue of $8.8 million in
the second quarter of 2006 decreased $0.2 million, or 2.9%, compared to $9.0 million in
the second quarter of 2005. A $1.6 million decrease at our community newspapers and
shoppers due to the closure of our Louisiana printing facility in late 2005 was partially
offset by a $1.0 million increase in commercial printing, commercial delivery and other
revenue at the daily newspaper and $0.4 million in new commercial printing revenue at our
community newspapers and shoppers business.

Publishing operating earnings in the
second quarter of 2006 were $8.5 million, a decrease of $5.8 million, or 41.0%, compared
to $14.3 million in the second quarter of 2005. Operating earnings decreased $7.5 million
at the daily newspaper primarily due to a $5.1 million reduction in revenue for credits to
be issued toward 2007 advertising in the Milwaukee Journal Sentinel under a
proposed settlement agreement and a voluntary offer made to preprint advertisers, a $0.8
million increase in direct expenses, $0.7 million increase in litigation related expenses
related to the settlement and an increase in workers compensation costs. These
expenses were partially offset by a decrease in benefit expenses, including a $0.7 million
pension plan curtailment credit, and a decrease in payroll expenses reflecting a decline
in full-time employees. Operating earnings increased $1.7 million in the second quarter of
2006 at our community newspapers and shoppers due to $1.1 million in insurance proceeds
received from a business interruption claim from the impact of Hurricane Katrina, a $0.4
million pension plan curtailment credit and reductions in bad debt and depreciation
expenses partially offset by an increase in benefit expenses. Total newsprint and paper
costs for our publishing businesses in the second quarter of 2006 was $11.4 million, a
decrease of $0.2 million, or 1.9%, compared to $11.6 million in the second quarter of 2005
primarily due to the closure of our Louisiana printing facility in New Orleans in late
2005. Partially offsetting this savings was an 11.3% increase in average newsprint pricing
per metric ton at our daily newspaper and community newspapers and shoppers. Consumption
of metric tonnes of newsprint in the second quarter of 2006 decreased 11.6% compared to
the second quarter of 2005 due to the closure of our Louisiana printing facility and the
switch to a lighter basis-weight newsprint by the daily newspaper.

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

Revenue from broadcasting in the
second quarter of 2006 was $58.4 million, an increase of $15.5 million, or 36.2%, compared
to $42.9 million in the second quarter of 2005. Operating earnings from broadcasting in
the second quarter of 2006 were $16.1 million, an increase of $7.2 million, or 81.2%,
compared to $8.9 million in the second quarter of 2005.

The following table presents our
broadcasting revenue and operating earnings for the second quarter of 2006 and 2005:

|                     
|---------------------
|Radio                
|(dollars in millions)
|Revenue              
|                     
|Operating earnings   
|                     

Revenue from our radio stations in
the second quarter of 2006 was $22.1 million, an increase of $0.7 million, or 3.3%,
compared to $21.4 million in the second quarter of 2005. The increase was attributed to a
$0.2 million increase in political and issue advertising revenue, a $0.2 million increase
in other revenue, a $0.2 million increase in national advertising revenue and a $0.1
million increase in local advertising revenue.

Operating earnings from our radio
stations in the second quarter of 2006 were $6.8 million, an increase of $1.4 million, or
25.9%, compared to $5.4 million in the second quarter of 2005. The increase in operating
earnings was primarily due to the increase in revenue, a decrease in technology expenses,
a $0.2 million pension plan curtailment credit and a decrease in promotional expenses
partially offset by an increase in sales and programming expenses.

Revenue from our television stations
in the second quarter of 2006 was $36.3 million, an increase of $14.8 million, or 68.8%,
compared to $21.5 million in the second quarter of 2005. The increase was primarily due to
a $14.2 million contribution from the television operations we acquired in December 2005
and on a same station basis, a $1.1 million increase in local advertising revenue and a
$0.5 million increase in political and issue advertising partially offset by a $0.9
million decrease in national advertising revenue and a $0.1 million decrease in other
revenue.

19

---

Operating earnings from our
television stations in the second quarter of 2006 were $9.3 million, an increase of $5.8
million, or 165.7%, compared to $3.5 million in the second quarter of 2005. The increase
in operating earnings was primarily due to a $5.2 million contribution from the television
operations we acquired in December 2005, a decrease in syndicated programming expenses, a
$0.3 million pension plan curtailment credit and a decrease in news expenses partially
offset by an increase in sales, incentive compensation and technology expenses.

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

Revenue from telecommunications in
the second quarter of 2006 was $32.1 million, a decrease of $4.0 million, or 11.2%,
compared to $36.1 million in the second quarter of 2005. Operating earnings from
telecommunications in the second quarter of 2006 were $2.7 million, a decrease of $4.0
million, or 59.9%, compared to $6.7 million in the second quarter of 2005.

Wholesale telecommunication services
provide network transmission solutions for other service providers by offering bulk
transmission capacity. Revenue from wholesale services in the second quarter of 2006 was
$17.1 million, a decrease of $2.4 million, or 12.3%, compared to $19.5 million in the
second quarter of 2005. The decrease was primarily due to anticipated service
disconnections and lower prices on customer contract renewals. Monthly recurring revenue
from wholesale services was $5.3 million at the end and beginning of the second quarter of
2006 and $6.1 million at the end of the second quarter of 2005. During the second quarter
of 2006, new circuit connections of $0.3 million in monthly recurring revenue were offset
by service disconnections and repricings.

We have substantial business
relationships with a few large customers, including major long distance carriers. Our top
10 customers accounted for 36.9% and 37.5% of our telecommunications revenue in the second
quarter of 2006 and 2005, respectively. As expected, the terms of the new Verizon Business
contract were fully implemented in mid-March 2006, further reducing monthly recurring
revenue as part of a new long-term agreement.

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. Revenue from commercial services in the second quarter of 2006 was $15.0
million, a decrease of $1.6 million, or 10.1%, compared to $16.6 million in the second
quarter of 2005. The decrease was primarily due to a reduction in long-distance revenue,
the loss of several significant customers and aggressive competition from the Regional
Bell Operating Companies. Monthly recurring revenue from commercial advanced data services
was $3.3 million at the end and beginning of the second quarter of 2006 and $3.4 million
at the end of the second quarter of 2005.

The decrease in operating earnings
from telecommunications was primarily due to the decrease in wholesale and commercial
revenue, reduced margins due to competitive pricing in the commercial business and
approximately $1.0 million in spin-off related expenses. Partially offsetting these
operating earnings decreases were reductions in marketing and advertising expenses.

On April 25, 2006, we announced a
plan to spin-off our telecommunications business, Norlight Telecommunications, Inc., as an
independent public company, which will allow us to concentrate greater managerial and
financial resources on our diversified local media businesses and enable Norlight to
concentrate on the growth of its communications business.

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

Revenue from printing services in the
second quarter of 2006 was $16.7 million, a decrease of $1.4 million, or 7.7%, compared to
$18.1 million in the second quarter of 2005. Operating earnings from printing services in
the second quarter of 2006 were $0.5 million, an increase of $0.1 million, or 36.2%,
compared to $0.4 million in the second quarter of 2005.

The decrease in printing services
revenue was primarily due to a $2.2 million decrease in revenue from our largest customer,
Dell Computer Corporation, and a $1.0 million decrease in revenue from other
computer-related customers. These decreases were partially offset by a $1.8 million
increase in revenue from the printing of publications. Dell accounted for 6.8% and 18.2%
of our printing services revenue in the second quarter of 2006 and 2005, respectively. As
previously discussed, we have fully exited the Dell software business, which will continue
to result in revenue decreases in 2006 compared to 2005. We do not expect this reduction
in revenue to have an adverse impact on our results of operations.

The increase in printing services
operating earnings was primarily attributed to a decrease in payroll, benefits, and
depreciation expenses partially offset by reductions in sales volume to computer-related
customers.

| | Other
| | -----

Other revenue in the second quarter
of 2006 was $10.6 million, a decrease of $1.6 million, or 12.9%, compared to $12.2 million
in the second quarter of 2005. Other operating earnings in the second quarter of 2006 were
$1.5 million, an increase of $1.3 million compared to operating earnings of $0.2 million
in the second quarter of 2005.

20

---

The following table presents our
other revenue and operating earnings for the second quarter of 2006 and 2005:

|                         
|-------------------------
|Direct
Marketing
Services
|(dollars in millions)    
|Revenue                  
|                         
|Operating earnings       
|                         

The decrease in other revenue in the
second quarter of 2006 compared to the second quarter of 2005 was primarily attributed to
a decrease in postage amounts billed to customers at our direct marketing services
business due to the loss of a customer. Included in revenue and operating costs and
expenses from our direct marketing services business is $6.4 million and $8.0 million of
postage amounts billed to customers in the second quarter of 2006 and 2005, respectively.

The increase in other operating
earnings was primarily due to a reversal of previously recognized incentive compensation
expense and a decrease in corporate welfare benefit expenses partially offset by the
decrease in revenue and an increase in payroll, bad debt and commission expenses at our
direct marketing services business.

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

Interest income and dividends were
insignificant in the second quarter of 2006 compared to $0.2 million in the second quarter
of 2005. Interest expense, representing gross interest expense from borrowings under our
credit agreement, was $3.8 million in the second quarter of 2006 compared to $0.4 million
in the second quarter of 2005. The increase is primarily due to an increase in debt
outstanding related to the television operations we acquired in December 2005, share
repurchase activity and higher short-term interest rates. Amortization of deferred
financing costs was $0.1 million in the second quarter of 2006 and 2005.

The effective tax rate for continuing
operations was 40.2% in the second quarter of 2006 and 39.9% in the second quarter of
2005.

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

Our net earnings in the second
quarter of 2006 were $15.2 million, a decrease of $2.9 million, or 16.0% compared to $18.1
million in the second quarter of 2005. The decrease was primarily attributable to the
decline in operating earnings and the increase in interest expense for the reasons
described above.

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

Our basic and diluted earnings per
share from continuing operations were $0.22 and $0.21, respectively, for the second
quarter of 2006 compared to basic and diluted earnings per share from continuing
operations of $0.25 and $0.24, respectively, for the second quarter of 2005.

| | Two
Quarters Ended June 25, 2006 compared to Two Quarters Ended June 26, 2005
| | -----------------------------------------------------------------------------

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

Our consolidated revenue from
continuing operations in the two quarters of 2006 was $386.3 million, an increase of $4.6
million, or 1.2%, compared to $381.7 million in the two quarters of 2005. Our consolidated
operating costs and expenses from continuing operations in the two quarters of 2006 of
$218.9 million were essentially even compared to $219.0 million in the two quarters of
2005. Our consolidated selling and administrative expenses from continuing operations in
the two quarters of 2006 were $114.0 million, an increase of $3.1 million, or 2.8%,
compared to $110.9 million in the two quarters of 2005.

21

---

The following table presents our
total revenue by segment, total operating costs and expenses, selling and administrative
expenses and total operating earnings as a percent of total revenue for the two quarters
of 2006 and 2005:

|                                              
|----------------------------------------------
|(dollars in millions)                         
|Revenue from continuing operations:           
|Publishing                                    
|Broadcasting                                  
|Telecommunications                            
|Printing services                             
|Other                                         
|                                              
|Total revenue                                 
|Total operating costs and expenses            
|Selling and administrative expenses           
|                                              
|Total operating costs and expenses and selling
|and administrative expenses                   
|                                              
|Total operating earnings                      
|                                              

The increase in total revenue from
continuing operations was due to the contribution from the television operations we
acquired in December 2005, Olympic advertising revenue at our NBC affiliates and an
increase in local advertising at our television stations. These revenue increases were
partially offset by the reduction in revenue at our daily newspaper for credits to be
issued toward 2007 advertising in the Milwaukee Journal Sentinel under a proposed
settlement agreement with a classified advertiser as well as a voluntary offer made to
preprint advertisers, a decrease in wholesale revenue at our telecommunications business
due to service disconnections and repricings, a decrease in revenue from several
computer-related customers in our printing services business, a decrease in automotive
advertising at our daily newspaper, a decrease in postage revenue at our direct marketing
services business, a decrease in commercial services revenue at our telecommunications
business due to a reduction in long-distance services and aggressive competition and
decreases in other and retail advertising revenue at our community newspapers and shoppers
due to the reduction in business and closure of our Louisiana printing facility in New
Orleans in late 2005.

Total operating costs and expenses
from continuing operations in the two quarters of 2006 were essentially even compared to
the second quarter of 2005. A decrease in postage and freight expense at our direct
marketing services business, a decrease in total operating costs and expenses at our
printing services business due to the decrease in revenue, a decrease in production costs
at our community newspapers and shoppers due to the closure of our Louisiana printing
facility in New Orleans, a decrease in operating costs and expenses in commercial services
at our telecommunications business due to the decrease in revenue and a decrease in
syndicated programming expenses at our television stations was offset by an increase in
total operating costs and expenses at the television operations acquired in December 2005.

The increase in selling and
administrative expenses from continuing operations is primarily due to the television
operations acquired in December 2005 partially offset by a pension plan curtailment credit
at our publishing and broadcasting businesses, insurance proceeds received from a business
interruption claim from the impact of Hurricane Katrina at our community newspapers and
shoppers business and a decrease in incentive compensation expense and corporate welfare
benefit expenses.

Our consolidated operating earnings
from continuing operations in the two quarters of 2006 were $53.4 million, an increase of
$1.6 million, or 2.9%, compared to $51.8 million in the two quarters of 2005.

The following table presents our
operating earnings by segment for the two quarters of 2006 and 2005:

|                         | 2006 | Percent of
Total
Operating
Earnings | 2005 | Percent of
Total
Operating
Earnings
|------------------------ | ---- | ----------------------------------- | ---- | -----------------------------------
|(dollars in millions)   
|Continuing operations:   |      |                                     |      |                                    
|Publishing               |      |                                     | $    | 16.1                               
|Broadcasting             |      |                                     |      | 27.8                               
|Telecommunications       |      |                                     |      | 6.9                                
|Printing services        |      |                                     |      | 1.0                                
|Other                    |      |                                     |      | 1.6                                
|                         |      |                                     |      |                                    
|Total operating earnings |      |                                     | $    | 53.4                               
|                         |      |                                     |      |                                    

22

---

The increase in total operating
earnings from continuing operations was primarily due to the contribution from the
television operations we acquired in December 2005,a pension plan curtailment
credit, cost control initiatives at our radio and television stations, insurance proceeds
received from a business interruption claim at our community newspapers and shoppers
business and a reversal of previously recognized incentive compensation expense. Partially
offsetting these operating earnings increases were a decrease in revenue and operating
earnings at our telecommunications business, a reduction in revenue for credits to be
issued toward 2007 advertising in the Milwaukee Journal Sentinel under a proposed
settlement agreement and litigation related expenses at our daily newspaper and spin-off
related expenses at our telecommunications business.

Our consolidated EBITDA in the two
quarters of 2006 was $76.9 million, an increase of $2.7 million, or 3.6%, compared to
$74.2 million in the two quarters of 2005. The following table presents a reconciliation
of our consolidated net earnings to consolidated EBITDA for the two quarters of 2006 and
2005:

|                                      
|--------------------------------------
|(dollars in millions)                 
|Net earnings                          
|Gain from discontinued operations, net
|Provision for income taxes            
|Total other expense                   
|Depreciation                          
|Amortization                          
|                                      
|EBITDA                                
|                                      

The increase in EBITDA is consistent
with increases in operating earnings in our broadcasting, other and printing services
segments partially offset by a decrease in operating earnings at our telecommunications
and publishing segments for the two quarters of 2006 for the reasons described above.

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

Revenue from publishing in the two
quarters of 2006 was $158.9 million, a decrease of $10.0 million, or 5.9%, compared to
$168.9 million in the two quarters of 2005. Operating earnings from publishing were $16.1
million, a decrease of $5.7 million, or 26.1%, compared to $21.8 million in the two
quarters of 2005.

The following table presents our
publishing revenue by category and operating earnings for the two quarters of 2005 and
2006:

|                            |                                
|--------------------------- | -------------------------------
|Daily
Newspaper             | Community
Newspapers
& Shoppers
|(dollars in millions)      
|Advertising revenue:        |                                
|Retail                      |                                
|Classified                  |                                
|National                    |                                
|Direct Marketing            |                                
|Other                       |                                
|                            |                                
|Total advertising revenue . |                                
|Circulation revenue         |                                
|Other revenue               |                                
|                            |                                
|Total revenue               |                                
|                            |                                
|Operating earnings          |                                
|                            |                                

Advertising revenue in the two
quarters of 2006 accounted for 71.6% of total publishing revenue compared to 72.5% in the
two quarters of 2005.

Retail advertising revenue in the two
quarters of 2006 was $66.5 million, a decrease of $6.2 million, or 8.5%, compared to $72.7
million in the two quarters of 2005. The $5.1 million decrease at our daily newspaper was
due to a $5.1 million reduction in revenue for credits to be issued toward 2007
advertising in the Milwaukee Journal Sentinel under a proposed settlement agreement
with a classified advertiser as well as a voluntary offer made to preprint advertisers
related to changes made in 2003 and 2004 reported net paid circulation numbers. The $1.1
million decrease at our community newspapers and shoppers was primarily due to the
reduction in business at our Louisiana publications and a decrease in automotive
advertising.

23

---

Classified advertising revenue in the
two quarters of 2006 was $38.7 million, a decrease of $1.8 million, or 4.3%, compared to
$40.5 million in the two quarters of 2005. The $2.3 million decrease at our daily
newspaper was primarily due to a $2.5 million decrease in automotive advertising and a
decrease in employment advertising partially offset by a $0.5 million increase in real
estate advertising. Employment advertising, which accounted for 43.1% of classified
advertising at the daily newspaper in the two quarters of 2006, decreased $0.3 million
compared to the two quarters of 2005. The combined decrease in automotive classified and
retail advertising in the two quarters of 2006 was $3.7 million, or 31.8%, compared to the
two quarters of 2005. This decrease is consistent with the national trend. The $0.5
million increase at our community newspapers and shoppers is primarily due to the
cross-sell program established with the daily newspaper.

National advertising revenue in the
two quarters of 2006 was $5.1 million, a decrease of $0.5 million, or 8.4%, compared to
$5.6 million for the two quarters of 2005. The decrease was primarily due to decreases in
the entertainment, transportation, and other categories partially offset by an increase in
the business services and communications categories.

The following table presents our
daily newspapers core newspaper advertising linage by category and core newspaper
and shared mail pieces for the two quarters of 2006 and 2005:

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

Total advertising linage in the two
quarters of 2006 decreased 11.2% compared to the two quarters of 2005. Full run
advertising linage in the two quarters of 2006 decreased 9.4% compared to the two quarters
of 2005 due to a reduction in classified and retail advertising linage partially offset by
an increase in national advertising lineage. The decrease in classified advertising linage
is primarily due to a decrease in the automotive category. Retail ROP advertising linage
primarily decreased in the automotive, health services and communication categories.
National advertising linage primarily increased in the business services category. Part
run advertising linage decreased 29.2% in the two quarters of 2006 due to a decrease in
automotive zoned classifieds. Preprint advertising pieces increased 0.5% in the two
quarters of 2006 compared to the two quarters of 2005.

The following table presents the full
pages of advertising and revenue per page of our community newspapers and shoppers and
speicalty products for the two quarters of 2006 and 2005:

|                               
|-------------------------------
|Full pages of advertising:     
|Community newspapers           
|Shoppers and specialty products
|                               
|Total full pages of advertising
|                               
|Revenue per page               
|                               

Total full pages of advertising for
our community newspapers and shoppers business in the two quarters of 2006 decreased 3.2%
compared to the two quarters of 2005. The decrease was due to the reduction in advertising
in our Louisiana publications due to the impact of Hurricane Katrina, reformatting certain
papers to more efficiently use the amount of available space on each page and the merger
of two shoppers into one new shopper. This was partially offset by an increase in
advertising in specialty products. Revenue per page increased 0.8% primarily due to the
decrease in total full pages of advertising and the increase in advertising rates.

Direct marketing revenue, consisting
of revenue from direct mail efforts for our daily newspaper was $2.9 million, a decrease
of $0.1 million, or 5.3%, compared to $3.0 million in the two quarters of 2005. The
decrease was due to a reduction in our solo mail initiatives.

Other advertising revenue, consisting
of revenue from company-sponsored event advertising at our community newspapers and
shoppers, was $0.6 million in the two quarters of 2006 and 2005.

Total retail and classified Journal
Interactive revenue at our daily newspaper was $4.3 million in the two quarters of 2006,
an increase of $1.0 million, or 28.8%, compared to $3.4 million in the two quarters of
2005. During the two quarters of 2006, our daily newspaper continued investing in online
products by launching eight new web sites.

24

---

Circulation revenue in the two
quarters of 2006 accounted for 17.1% of total publishing revenue compared to 16.5% in the
two quarters of 2005. Circulation revenue of $27.2 million in the two quarters of 2006
decreased $0.7 million, or 2.5%, compared to $27.9 million in the two quarters of 2005
primarily due to decreases in daily and Sunday average net paid circulation. Circulation
revenue in the two quarters of 2006 increased $0.1 million at our community newspapers and
shoppers.

Other revenue, which consists of
revenue from commercial printing at the printing plants for our community newspapers and
shoppers and promotional, commercial delivery, events and commercial printing revenue at
our daily newspaper, accounted for 11.3% of total publishing revenue in the two quarters
of 2006 compared to 11.0% in the two quarters of 2005. Other revenue of $17.9 million in
the two quarters of 2006 decreased $0.7 million, or 4.2%, compared to $18.6 million in the
two quarters of 2005. A $3.1 million decrease at our community newspapers and shoppers due
to the closure of our Louisiana printing facility in late 2005 was partially offset by a
$1.8 million increase in commercial printing, commercial delivery and other revenue at the
daily newspaper and $0.6 million in new commercial printing revenue at our community
newspapers and shoppers business.

Publishing operating earnings in the
two quarters of 2006 were $16.1 million, an decrease of $5.7 million, or 26.1%, compared
to $21.8 million in the two quarters of 2005. Operating earnings decreased $8.1 million at
the daily newspaper primarily due to the operating earnings impact on a $5.1 million
reduction in revenue for credits to be issued toward 2007 advertising in the Milwaukee
Journal Sentinel under a proposed settlement agreement and a voluntary offer made to
preprint advertisers, increases in direct expenses, litigation, relocation and recruitment
and commercial printing expenses related to the increase in revenue and increased paper
costs. These expenses were partially offset by a decrease in benefit expenses, including a
$0.7 million pension plan curtailment credit and a decrease in payroll expenses reflecting
a decline in full-time employees. Operating earnings increased $2.4 million in the two
quarters of 2006 at our community newspapers and shoppers due to $1.1 million in insurance
proceeds received from a business interruption claim from the impact of Hurricane Katrina,
a decrease in paper costs, a $0.4 million pension plan curtailment credit and reductions
in bad debt and depreciation expenses partially offset by an increase in benefit expenses.
Total newsprint and paper costs for our publishing businesses in the two quarters of 2006
were $21.6 million, a decrease of $0.3 million, or 1.5%, compared to $21.9 million in the
two quarters of 2005 primarily due to the closure of our Louisiana printing facility in
New Orleans. Partially offsetting this savings was a 14.1% increase in average newsprint
pricing per metric ton at our daily newspaper and community newspapers and shoppers.
Consumption of metric tones of newsprint in the two quarters of 2006 decreased 16.4%
compared to the two quarters of 2005 due to the closure of our Louisiana printing facility
and the switch to a lighter basis-weight newsprint by the daily newspaper.

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

Revenue from broadcasting in the two
quarters of 2006 was $110.1 million, an increase of $30.0 million, or 37.4%, compared to
$80.1 million in the two quarters of 2005. Operating earnings from broadcasting in the two
quarters of 2006 were $27.8 million, an increase of $13.5 million, or 94.0%, compared to
$14.3 million in the two quarters of 2005.

The following table presents our
broadcasting revenue and operating earnings for the two quarters of 2006 and 2005:

|                     
|---------------------
|Radio                
|(dollars in millions)
|Revenue              
|                     
|Operating earnings   
|                     

Revenue from our radio stations in
the two quarters of 2006 was $39.7 million, an increase of $0.1 million, or 0.2%, compared
to $39.6 million in the two quarters of 2005. The increase was attributed to a $0.4
million increase in political and issue advertising revenue and a $0.2 million increase in
other revenue partially offset by a $0.5 million decrease in local advertising revenue.

Operating earnings from our radio
stations in the two quarters of 2006 were $10.6 million, an increase of $1.4 million, or
15.1%, compared to $9.2 million in the two quarters of 2005. The increase in operating
earnings was primarily due to decreases in technology, sales and promotional expenses and
a $0.2 million pension plan curtailment credit.

Revenue from our television stations
in the two quarters of 2006 was $70.4 million, an increase of $29.9 million, or 73.8%,
compared to $40.5 million in the two quarters of 2005. The increase was primarily
attributed to a $26.9 million contribution from the television operations we acquired in
December 2005 and on a same station basis, a $3.3 million increase in Olympic advertising,
a $1.1 million increase in local advertising revenue and a $0.6 million increase in
political and issue advertising partially offset by a $1.9 million decrease in national
advertising revenue and a $0.1 million decrease in other revenue.

Operating earnings from our
television stations in the two quarters of 2006 were $17.2 million, an increase of $12.1
million, or 237.3%, compared to $5.1 million in the two quarters of 2005. The increase in
operating earnings was primarily due to a $9.4 million contribution from the television
operations we acquired in December 2005, a decrease in syndicated programming expenses, a
$0.3 million pension plan curtailment credit and a decrease in promotional expenses
partially offset by increases in sales commissions and incentive compensation and
technology expenses.

25

---

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

Revenue from telecommunications in
the two quarters of 2006 was $64.9 million, a decrease of $8.7 million, or 11.8%, compared
to $73.6 million in the two quarters of 2005. Operating earnings from telecommunications
in the two quarters of 2006 were $6.9 million, a decrease of $7.5 million, or 52.3%,
compared to $14.4 million in the two quarters of 2005.

Wholesale telecommunication services
provide network transmission solutions for other service providers by offering bulk
transmission capacity. Revenue from wholesale services in the two quarters of 2006 was
$34.8 million, a decrease of $5.0 million, or 12.6%, compared to $39.8 million in the two
quarters of 2005. The decrease was primarily due to anticipated service disconnections and
lower prices on customer contract renewals. Monthly recurring revenue from wholesale data
services at the end of the two quarters of 2006 was $5.3 million compared to $5.8 million
at the beginning of 2006 and $6.1 million at the end of the two quarters of 2005. During
the two quarters of 2006, new circuit connections of $0.9 million in monthly recurring
revenue were more than offset by service disconnections and re-pricings.

We have substantial business
relationships with a few large customers, including major long distance carriers. Our top
10 customers accounted for 38.3% and 37.0% of our telecommunications revenue in the two
quarters of 2006 and 2005, respectively. As expected, the terms of the new Verizon
Business contract were fully implemented in mid-March 2006, further reducing monthly
recurring revenue as part of a new long-term agreement.

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. Revenue from commercial services in the two quarters of 2006 was $30.1
million, a decrease of $3.7 million, or 10.8%, compared to $33.8 million in 2005. The
decrease was primarily due to a reduction in long-distance revenue, the loss of several
significant customers and aggressive competition from the Regional Bell Operating
Companies. Monthly recurring revenue from commercial advanced data services at the end of
the two quarters of 2006 was $3.3 million compared to $3.4 million at the beginning of
2006 and $3.4 million at the end of the two quarters of 2005.

The decrease in operating earnings
from telecommunications was primarily due to the decrease in wholesale and commercial
revenue, reduced margins due to competitive pricing in the commercial business and
approximately $1.1 million in spin-off related expenses. Partially offsetting these
operating earnings decreases were reductions in marketing, advertising, payroll and
incentive compensation expenses.

On April 25, 2006, we announced a
plan to spin-off our telecommunications business, Norlight Telecommunications, Inc., as an
independent public company, which will allow us to concentrate greater managerial and
financial resources on our diversified local media businesses and enable Norlight to
concentrate on the growth of its communications business.

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

Revenue from printing services in the
two quarters of 2006 was $33.0 million, a decrease of $3.4 million, or 9.3%, compared to
$36.4 million in the two quarters of 2005. Operating earnings from printing services in
the two quarters of 2006 were $1.0 million, an increase of $0.2 million, or 31.0%,
compared to $0.8 million in the two quarters of 2005.

The decrease in printing services
revenue was primarily due to a $4.1 million decrease in revenue from our largest customer,
Dell Computer Corporation, and a $1.4 million decrease in revenue from other
computer-related customers. These decreases were partially offset by a $2.1 million
increase in revenue from the printing of publications and product manuals. Dell accounted
for 9.2% and 19.5% of our printing services revenue in the two quarters of 2006 and 2005,
respectively. As previously discussed, we have fully exited the Dell software business,
which will continue to result in revenue decreases in 2006 compared to 2005. We do not
expect this reduction in revenue to have an adverse impact on our results of operations.

The increase in printing services
operating earnings was primarily attributed to a decrease in payroll, benefits, and
depreciation expenses partially offset by reductions in sales volume to computer-related
customers.

| | Other
| | -----

Other revenue in the two quarters of
2006 was $19.4 million, a decrease of $3.3 million, or 14.5%, compared to $22.7 million in
the two quarters of 2005. Other operating earnings in the two quarters of 2006 were $1.6
million, an increase of $1.1 million compared to operating earnings of $0.5 million in the
two quarters of 2005.

26

---

The following table presents our
other revenue and operating earnings for the two quarters of 2006 and 2005:

|                          |                           
|------------------------- | --------------------------
|Direct
Marketing
Services | Corporate
and
Eliminations
|(dollars in millions)    
|Revenue                   |                           
|                          |                           
|Operating earnings        |                           
|                          |                           

The decrease in other revenue in the
two quarters of 2006 compared to the two quarters of 2005 was primarily attributed to a
decrease in postage amounts billed to customers at our direct marketing services business
due to the loss of a customer. Included in revenue and operating costs and expenses from
our direct marketing services business is $11.3 million and $14.8 million of postage
amounts billed to customers in the two quarters of 2006 and 2005, respectively.

The increase in other operating
earnings was primarily from a reduction of incentive compensation expense and corporate
benefit expenses partially offset by the decrease in revenue and an increase in payroll,
benefits, bad debt and commission expenses at our direct marketing services business.

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

Interest income and dividends were
insignificant in the two quarters of 2006 compared to $0.3 million in the two quarters of
2005. Interest expense, representing gross interest expense from borrowings under our
credit agreement, was $7.3 million in the two quarters of 2006 compared to $0.9 million in
the two quarters of 2005. The increase is primarily due to an increase in debt outstanding
related to the 2005 television station acquisitions, share repurchase activity and higher
short-term interest rates. Amortization of deferred financing costs was $0.2 million in
the two quarters of 2006 and 2005.

The effective tax rate for continuing
operations was 40.0% in the two quarters of 2006 and 39.8% in the two quarters of 2005.

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

Revenue from discontinued operations
in the two quarters of 2005 was $4.1 million. Gain from discontinued operations, net of
income taxes, was $4.8 million in the two quarters of 2005. Applicable income tax expense
was $3.1 million in the two quarters of 2005. Net assets of discontinued operations at
June 25, 2006 were $0.3 million. Real estate holdings in Green Bay, WI, classified as
discontinued operations, are to be sold to Multi-Color Corporation upon the achievement of
certain environmental standards.

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

Our net earnings in the two quarters
of 2006 were $27.5 million, a decrease of $8.0 million, or 22.6% compared to $35.5 million
in the two quarters of 2005. The decrease was primarily attributable to the decline in
operating earnings, gain on discontinued operations in 2005 and the increase in interest
expense for the reasons described above.

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

Our basic and diluted earnings per
share from continuing operations were $0.39 and $0.38, respectively, for the two quarters
of 2006, compared to basic and diluted earnings per share from continuing operations of
$0.41 and $0.40, respectively, for the two quarters of 2005. Our basic and diluted
earnings per share from discontinued operations were each $0.07 for the two quarters of
2005.

# Liquidity and Capital
Resources

We have a $475 million unsecured
revolving credit facility that expires on June 2, 2011. The interest rate on borrowings is
either LIBOR plus a margin that ranges from 37.5 basis points to 87.5 basis points,
depending on our leverage, or the base rate, which equals the higher of the prime rate set
by U.S. Bank, N.A. or the Federal Funds Rate plus 100 basis points. As of June 25, 2006,
we had borrowings of $274.7 million under the facility at a weighted average rate of
5.70%. Fees in connection with the facility of $1.7 million are being amortized over the
term of the facility using the straight-line method which approximates the
effective-interest method. The material covenants of this agreement include the following:

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

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

As of June 25, 2006, we are in
compliance with all of our material covenants.

27

---

Cash balances were $6.6 million at
June 25, 2006. We believe our expected cash flows from operations and borrowings available
under our credit facility will adequately meet our needs for the foreseeable future. In
April 2006, our Board of Directors authorized the repurchase of up to five million
additional shares of our class A common stock over the next 18 months. Under the program,
share purchases may be made at our discretion, from time to time, in the open market
and/or in private transactions. Our share purchases will depend on market conditions,
share price, trading volume and other factors. The action supplements the five million
share repurchase authorization approved in February 2005 and completed in June 2006.

# Cash Flow

Cash provided by operating activities
was $48.3 million in the two quarters of 2006 compared to $53.0 million in the two
quarters of 2005. The decrease was primarily due to a decrease in earnings from continuing
operations due to decreases in revenue at our telecommunications and printing services
business, settlement-related litigation expenses at our daily newspaper, spin-off related
expenses at our telecommunications business and the increase in interest expense.

Cash used for investing activities
was $17.4 million in the two quarters of 2006 compared to cash provided by investing
activities of $11.7 million in the two quarters of 2005. Capital expenditures for property
and equipment were $17.5 million in the two quarters of 2006 compared to $13.4 million in
the two quarters of 2005. Our capital expenditures in our telecommunications business are
primarily targeted towards increased network capacity and investments for growth and
customer specific service offerings. We believe these expenditures will optimize its
results and position it well for its future as an independent public company. In our
broadcasting business, our capital expenditures are targeted towards technology upgrades,
including investments in digital radio and for our television stations acquired in 2005.
The cash provided by investing activities in the two quarters of 2005 includes the $26.1
million proceeds received from the sale of NorthStar Print Group in January 2005.

Cash used for financing activities
was $31.2 million in the two quarters of 2006 compared to $64.1 million in the two
quarters of 2005. Borrowings under our credit facility during the two quarters of 2006
were $115.9 million and we made payments of $115.8 million compared to borrowings of $97.9
million and payments of $127.8 million in the two quarters of 2005. The increase in
borrowings was primarily due to the repurchase of our class A common stock under our stock
repurchase program. In the two quarters of 2006 and 2005, we received $0.6 million in
proceeds from the issuance of our class B common stock to our employees under our Employee
Stock Purchase Plan. In the two quarters of 2006 and 2005 we paid $22.1 million and $24.6
million, respectively, to purchase our class A common stock. We paid cash dividends of
$9.8 million and $10.3 million in the two quarters of 2006 and 2005, respectively.

# New Accounting Standards

Effective December 26, 2005, we
adopted Statement of Financial Accounting Standards Statement No. 123(R),
Share-Based Payment (SFAS No. 123(R)), using the modified prospective
application transition method. Under the modified prospective application transition
method, the fair value and recognition provisions of SFAS No. 123(R) are applied to
stock-based awards granted or modified subsequent to the date of adoption and prior
periods are not restated. Before we adopted SFAS No. 123(R), we accounted for stock-based
compensation by using the intrinsic value-based method in accordance with Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to Employees.
Stock-based compensation cost for restircted stock and performance units was included in
net earnings prior to December 26, 2005.

During the second quarter and two
quarters ended June 25, 2006, we recognized $0.1 million and $0.3 million, respectively,
in stock-based compensation expense. Total income tax benefit recognized related to
stock-based compensation for the second quarter of 2006 was insignificant and was
approximately $0.1 million at the end of the two quarters of 2006. We recognize
compensation expense on a straight-line basis over the service period. As of June 25,
2006, total unrecognized compensation cost related to stock-based compensation awards was
approximately $1.8 million, net of estimated forfeitures, which we expect to recognize
over a weighted average period of approximately 2.2 years. Stock-based compensation
expense is included in selling and administrative expenses in our consolidated condensed
statement of earnings. There was no impact on basic or diluted earnings per share from
adopting SFAS No. 123(R).

In July 2006, the Financial
Accounting Standards Board issued FASB Interpretation (FIN) No. 48, Accounting for
Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109 (FIN
48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an
enterprises financial statements in accordance with FASB Statement No. 109,
Accounting for Income Taxes. FIN 48 also prescribes a recognition threshold
and measurement attribute for the financial statement recognition and measurement of a tax
position taken or expected to be taken in a tax return. FIN 48 also provides guidance on
derecognition, classification, interest and penalties, accounting in interim periods,
disclosure, and transition. The provisions of FIN 48 are effective for fiscal years
beginning after December 15, 2006. We will adopt FIN 48 in the first quarter of 2007. We
do not believe the effect of adopting FIN 48 will have a material impact on our
consolidated financial statements.

# Critical Accounting
Policies

28

---

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 25, 2005.

# 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 25, 2005.

# 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.

# PART II. OTHER
INFORMATION

# ITEM 1. LEGAL PROCEEDINGS

On April 25, 2005, a lawsuit was
filed against Journal Sentinel, Inc., a subsidiary of Journal Communications, Inc., in
Milwaukee County Circuit Court.  The plaintiff, Shorewest Realtors, sought to bring a
class action lawsuit on behalf ofMilwaukee Journal Sentinel advertisers, alleging
that the newspaper improperly inflated its circulation numbers from 1996 on. Shorewest
sought disgorgement or restitution by Journal Sentinel of alleged improperly collected
charges (with interest), plus an unspecified amount of damages. Journal Sentinel, Inc.
filed a Motion to Dismiss the plaintiffs claims on July 20, 2005 and
Shorewests contract-base cause of action was subsequently dismissed by the court. On
May 30, 2006, the parties filed a proposed settlement agreement with the court. Although
Journal Sentinel and its counsel continue to believe the claims lack merit, and Shorewest
and its counsel continue to believe the claims have merit, by agreeing to a settlement,
the parties avoid the costs and risks of additional litigation on terms that are mutually
agreeable. The settlement is on behalf of a proposed class of advertisers similar to
Shorewest who placed ads in the Milwaukee Journal Sentinel between January 1, 1999
and December 31, 2005. The proposed settlement received preliminary approval from the
court on June 16, 2006. If the settlement is given final approval by the Court after a
public hearing, members of the proposed class will be eligible under the settlement to
receive a credit to be used toward future advertising in the Milwaukee Journal
Sentinel. In the second quarter of 2006, Journal Sentinel recorded a $5.1 million
reduction in revenue for credits to be issued toward 2007 advertising in the Milwaukee
Journal Sentinel under the settlement as well as for a voluntary offer made by Journal
Sentinel to preprint advertisers related to changes made in 2003 and 2004 reported net
paid circulation numbers. Journal Sentinel expects to record $2.2 million for litigation
related expenses, of which $1.5 million has been recorded. We expect to record the
remainder of the expenses in the second half of 2006.

# ITEM 1A. RISK FACTORS

There are no material changes to the
disclosures regarding risk factors made in our Annual Report on Form 10-K for the year
ended December 25, 2005. Additionally, as announced on April 25, 2006, we intend to
spin-off Norlight, our telecommunications business, to our shareholders. In connection
with the spin-off, Norlight filed a Registration Statement on Form 10 (Registration
Statement) with the Securities and Exchange Commission on April 25, 2006. Norlight filed
Amendment No. 1 to the Registration Statement on July 14, 2006. We refer you to the
section entitled Risk Factors in the Information Statement (which is
preliminary and subject to completion) that is included as Exhibit 99 to the Registration
Statement for additional risk factors relating to our telecommunications business.

29

---

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

The following table provides
information about our repurchases of our class A common stock in the second quarter ended
June 25, 2006:

# Issuer Purchases of
Equity Securities

|                          
|--------------------------
|Period                    
|March 27 to April 23, 2006
|April 24 to May 21, 2006  
|May 22 to June 25, 2006   

|(1) | All
shares of class A common stock purchased by us during the period April 24 to
                    May 21, 2006 and 502,175 shares of class A common stock purchased by
us during                     the period May 22 to June 25, 2006 were purchased pursuant
to a repurchase                     program publicly announced on February 10, 2005 and
commenced on March 14, 2005,                     pursuant to which our board of directors
authorized the repurchase of up to                     5,000,000 shares. These shares
will remain authorized but unissued. We completed                     our repurchases
under this program in June 2006.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | 243,700
shares of class A common stock purchased by us during the period May 22
                    to June 25, 2006 were purchased pursuant to a repurchase program
publicly                     announced on April 25, 2006 and commenced on June 15, 2006,
pursuant to which                     our board of directors authorized the repurchase of
up to 5,000,000 shares.                     These shares will remain authorized but
unissued. The repurchase program will                     expire in October 2007.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

# ITEM 3. DEFAULTS UPON
SENIOR SECURITIES

None.

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

On April 27, 2006, we held our annual
meeting of shareholders for the purpose of voting on the following items:

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

| |  | A
proposed amendment that would eliminate the current three trading days sales/waiting
period in the B market under our amended and restated articles of
incorporation.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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
59% of all shares of common stock eligible to vote were represented at the meeting in
person or by proxy. The votes were:

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

|                     
|---------------------
|Term Expiring in 2007
|                     
|                     
|                     

30

---

The proposed amendment to eliminate
the current three trading days sales/waiting period in the B
market under our amended and restated articles of incorporation passed with
166,977,207 shares voting FOR the amendment, 6,246,358 shares voting AGAINST the amendment
and 1,391,374 shares ABSTAINING.

# ITEM 5. OTHER INFORMATION

None.

# ITEM 6. EXHIBITS

(a) Exhibits

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

| | (3.1) | Amendments
to the Amended and Restated Articles of Incorporation of Journal
               Communications, Inc. (incorporated by reference to Exhibit 3.1 to the
               Companys Current Report on Form 8-K dated June 30, 2006).
| | ----- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (3.2) | Amended
and Restated Articles of Incorporation of Journal Communications, Inc.,                as
amended, through June 30, 2006 (incorporated by reference to the                Companys
Current Report on Form 8-K dated June 30, 2006).
| | ----- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | (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.
| | ---- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

31

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SIGNATURES

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

|                    | JOURNAL COMMUNICATIONS, INC.                                          
|------------------- | ----------------------------------------------------------------------
|                    | Registrant                                                            
|Date: July 28, 2006 | /s/ Steven J. Smith                                                   
|                    | Steven J. Smith, Chairman and Chief Executive Officer                 
|Date: July 28, 2006 | /s/ Paul M. Bonaiuto                                                  
|                    | Paul M. Bonaiuto, Executive Vice President and Chief Financial Officer

32