##### Table of Contents

---

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

---

FORM 10-K



Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the fiscal year ended
December 31, 2006

Commission File Number: 1-31805

---

JOURNAL COMMUNICATIONS, INC.

(Exact
name of Registrant as specified in its charter)



|                                            |  |                                        
|------------------------------------------- |  | ---------------------------------------
|Wisconsin                                   |  | 20-0020198                             
|(State of incorporation)                    |  | (I.R.S. Employer identification number)
|                                            | 
|333 West State Street, Milwaukee, Wisconsin |  | 53203                                  
|(Address of principal executive offices)    |  | (Zip Code)                             



Registrants telephone number, including area code: (414) 224-2000



Securities registered pursuant to Section 12(b) of the Act:



|                                                |  |                                          
|----------------------------------------------- |  | -----------------------------------------
|Title of Class                                  |  | Name of Each Exchange on Which Registered
|Class A Common Stock, $0.01 par value per share |  | The New York Stock Exchange              



Securities registered pursuant to
Section 12(g) of the Act:



Class B Common Stock, $0.01
par value per share



---



Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities
Act.  Yes ̈No  x



Indicate by check mark whether the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Exchange Act.   Yes ̈No  x



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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of
this chapter) is not contained herein, and will not be contained, to the best of registrants knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K.  x



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



The aggregate market value of
the class A common stock held by non-affiliates of the registrant as of June 23, 2006 was approximately $500,948,388 (based on the closing price of such stock on the New York Stock Exchange, Inc. as of such date). Neither of the
registrants class B common stock or class C common stock is listed on a national securities exchange or traded in an organized over-the-counter market, but each share of the registrants class B common stock is convertible into one share
of the registrants class A common stock and each share of the registrants class C common stock is convertible into 1.363970 shares of the registrants class A common stock.



Number of shares outstanding of each of the issuers classes of common
stock as of February 28, 2007 (excluding 8,676,705 shares of class B common stock, held by our subsidiary, The Journal Company):



|                     |  |                                 
|-------------------- |  | --------------------------------
|Class                |  | Outstanding at February 28, 2007
|Class A Common Stock |  | 48,291,093                      
|Class B Common Stock |  | 17,098,735                      
|Class C Common Stock |  | 3,264,000                       



Documents
Incorporated by Reference



Portions of the Proxy Statement
for our May 3, 2007 Annual Meeting of Shareholders are incorporated by reference into Part III.



---



---

##### Table of Contents

JOURNAL COMMUNICATIONS, INC.



INDEX TO
FORM 10-K



|                           |  |                                                                                                              |  |         
|-------------------------- |  | ------------------------------------------------------------------------------------------------------------ |  | --------
|                           |  |                                                                                                              |  | Page No.
|Forward-Looking Statements |  | 1                                                                                                           
|                           |  |                                                                                                             
|Part I                     |  |                                                                                                              |  |         
|                           |  |                                                                                                             
|Item 1.                    |  | Business                                                                                                     |  | 2       
|Item 1A.                   |  | Risk Factors                                                                                                 |  | 17      
|Item 1B.                   |  | Unresolved Staff Comments                                                                                    |  | 26      
|Item 2.                    |  | Properties                                                                                                   |  | 26      
|Item 3.                    |  | Legal Proceedings                                                                                            |  | 28      
|Item 4.                    |  | Submission of Matters to a Vote of Security Holders                                                          |  | 28      
|                           |  |                                                                                                             
|Part II                    |  |                                                                                                              |  |         
|                           |  |                                                                                                             
|Item 5.                    |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 30      
|Item 6.                    |  | Selected Financial Data                                                                                      |  | 33      
|Item 7.                    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 35      
|Item 7A.                   |  | Quantitative and Qualitative Disclosures About Market Risk                                                   |  | 58      
|Item 8.                    |  | Financial Statements and Supplementary Data                                                                  |  | 60      
|Item 9.                    |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 92      
|Item 9A.                   |  | Controls and Procedures                                                                                      |  | 92      
|Item 9B.                   |  | Other Information                                                                                            |  | 92      
|                           |  |                                                                                                             
|Part III                   |  |                                                                                                              |  |         
|                           |  |                                                                                                             
|Item 10.                   |  | Directors, Executive Officers and Corporate Governance                                                       |  | 93      
|Item 11.                   |  | Executive Compensation                                                                                       |  | 93      
|Item 12.                   |  | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters               |  | 93      
|Item 13.                   |  | Certain Relationships and Related Transactions, and Director Independence                                    |  | 93      
|Item 14.                   |  | Principal Accounting Fees and Services                                                                       |  | 93      
|                           |  |                                                                                                             
|Part IV                    |  |                                                                                                              |  |         
|                           |  |                                                                                                             
|Item 15.                   |  | Exhibits, Financial Statement Schedules                                                                      |  | 94      
|                           | 
|Signatures                 |  | 96                                                                                                          
|                           | 
|Index to Exhibits          |  | 97                                                                                                          



---

##### Table of Contents

Forward-Looking Statements



We
make certain statements in this Annual Report on Form 10-K (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 Annual Report on Form 10-K to identify forward-looking statements. These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control. These
risks, uncertainties and other factors could cause actual results to differ materially from those expressed or implied by those forward-looking statements. Among such risks, uncertainties and other factors that may impact us are the following, as
well as those contained in Item 1A. Risk Factors of this Annual Report on Form 10-K:



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



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



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



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



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



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



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



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



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



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



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



| |  |  | energy costs;
| | - |  | -------------



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



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



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



1



---

##### Table of Contents

PART I



|ITEM 1. | BUSINESS
|------- | --------



Overview



Our business
segments are based on the organizational structure used by management for making operating and investment decisions and for assessing performance. Our reportable business segments are: (i) publishing; (ii) broadcasting; (iii) printing
services; and (iv) other. Our publishing segment consists of a daily newspaper, the Milwaukee Journal Sentinel, and 75 community newspapers and shoppers in eight states. Our broadcasting segment consists of 36 radio stations and nine
television stations in 12 states, as well as the operation of two additional television stations under local marketing agreements. Included in our publishing and broadcasting segments are more than 75 online enterprises. Our printing services
segment reflects the operations of our printing and assembly and fulfillment business. Our other segment consists of a direct marketing services business and corporate expenses and eliminations.



We were founded in 1882 as a newspaper publisher serving Milwaukee,
Wisconsin. Our media business mix was expanded in 1927 when we signed on WTMJ radio station, and again in 1947 when we put WTMJ-TV on the air. In 1937, Harry J. Grant founded our employee ownership plan, which contributed significantly to our
company's positive culture and growth through its termination in 2003, in conjunction with our initial public offering. We believe our current capital structure allows us to continue our longstanding tradition of employee ownership. We have been
able to attract and retain motivated people who have a passion for the business and a level of commitment and sense of accountability that is heightened due to their participation in ownership. Our culture is reinforced by our strong commitment to
high ethical standards.



In 2006, our total revenue was $671.9
million, 84.4% of which was generated from our publishing and broadcasting operations and 15.6% from printing services and other operations. The revenue generated by each operating segment, as a percentage of our consolidated revenue, for the last
three years is shown below:



|                  |  |       |   |  |       |   |  |       |  
|----------------- |  | ----- | - |  | ----- | - |  | ----- | -
|                  |  | 2006  |   |  | 2005  |   |  | 2004  |  
|Publishing        |  | 48.9  | % |  | 54.3  | % |  | 53.8  | %
|Broadcasting      |  | 35.5  |   |  | 27.0  |   |  | 27.3  |  
|Printing Services |  | 10.0  |   |  | 11.6  |   |  | 12.1  |  
|Other             |  | 5.6   |   |  | 7.1   |   |  | 6.8   |  
|                  |  |       |   |  |       |   |  |       |  
|Total             |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %
|                  |  |       |   |  |       |   |  |       |  



More information
regarding us is available at our website at www.journalcommunications.com. We are not including the information contained on our website as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. 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.



Publishing



Our publishing business is conducted through our wholly owned subsidiaries, Journal Sentinel, Inc., and Journal Community
Publishing Group, Inc., and consists of our daily newspaper, theMilwaukee Journal Sentinel, and our community newspapers and shoppers. Our publishing business accounted for 48.9% of our revenue and 35.1% of our operating earnings for the
year ended December 31, 2006. Within our publishing segment, our daily newspaper accounted for 72.1% of our publishing revenue and 81.3% of our publishing operating earnings in 2006. See Note 12 to our Consolidated Financial Statements for
additional financial information regarding our publishing business.



2



---

##### Table of Contents

Daily Newspaper



Published continuously from 1882, our daily newspaper has the largest circulation among all newspapers published in
Wisconsin, with a 6-month average net paid circulation reported to the Audit Bureau of Circulations in our Publishers Statement at September 30, 2006 of 401,379 on Sunday and 231,052 daily. TheMilwaukee Journal Sentinel serves as
the only major daily and Sunday newspaper for the Milwaukee metropolitan area. According to a 2006 readership survey conducted by Scarborough Research, the SundayMilwaukee Journal Sentinel ranks number one in readership among the 50 highest
populated markets in the United States with a 70% penetration rate and the daily newspaper ranks number two with a 46% penetration rate. These rankings are calculated by dividing the number of adults reading the newspaper in a newspapers
Metropolitan Statistical Area (MSA) by the number of persons over the age of 18 in the newspapers MSA. The Milwaukee Journal Sentinels MSA, which ranks among the top 50 in the United States, consists of Milwaukee, Waukesha,
Washington and Ozaukee counties.



The American Society of
Newspaper Editors recently awarded us with a 2007 Jesse Laventhol Award for deadline reporting by a newsroom team for coverage of a manufacturing plant explosion and a series entitled Abandoning our Mentally Ill was honored as a finalist
for the 2007 Seldon Ring Award for Investigative Reporting. In 2006, our national print awards for work published in 2005 included a Pulitzer Prize finalist for the account of a teenage girls recovery from rabies, the National Headliner award
for medical reporting, Society of American Business Editors and Writers for the best in business among business sections, Society for News Design for photographs, graphics and page designs and editing, the American Society of Newspapers Editors for
breaking news for coverage of multiple shootings at a Brookfield, WI church, Inland Press Association for a stem cell research series, the Nakkula Award for the reporting on a police brutality case and the National Association of Real Estate Editors
for Best Newspaper Real Estate Section.



In addition to our
traditional print media, we operate a number of websites that provide editorial and advertising content, including JSOnline.com, MKEOnline.com, MilwaukeeMarketplace.com, Milwaukeemoms.com and the MyCommunityNOW family of 25 community websites, which
we operate under the name of Journal Interactive. Also, we have developed an award-winning subscription-based website, PackerInsider.com, dedicated to coverage of the Green Bay Packers. In 2006, advertising revenue for Journal Interactive increased
34.3% over 2005.



TheMilwaukee Journal Sentinel is
distributed primarily by independent contract carriers throughout southeastern Wisconsin. Agents deliver theMilwaukee Journal Sentinel to single copy outlets throughout the rest of Wisconsin.



Although the penetration of theMilwaukee Journal Sentinel among
southeastern Wisconsin readers is generally high, the newspaper still has significant growth potential, especially in targeted ZIP codes in which the newspapers penetration level remains low.



The following table sets forth our average net paid circulation:



|                        |  |                               |  |                          |  |         |  |         |  |         |  |        
|----------------------- |  | ----------------------------- |  | ------------------------ |  | ------- |  | ------- |  | ------- |  | -------
|                        |  | Six-Months Ended September 30 |  | 12-Months Ended March 31
|                        |  | 2006                          |  | 2005                     |  | 2004    |  | 2006    |  | 2005    |  | 2004   
|Daily (Six day average) |  | 231,052                       |  | 236,219                  |  | 236,692 |  | 235,188 |  | 239,975 |  | 240,106
|Sunday                  |  | 401,379                       |  | 405,009                  |  | 424,208 |  | 405,175 |  | 423,677 |  | 422,069



Circulation revenue
accounted for 22.2% of our daily newspapers total revenue in 2006. TheMilwaukee Journal Sentinel single copy prices are $0.50 for daily and $1.75 for Sunday in our PMA.



Advertising revenue accounted for 72.9% of our daily newspapers total revenue in 2006. We have set forth in the table
below annual advertising volume for theMilwaukee Journal Sentinel (measured in column inches)



3



---

##### Table of Contents

and the number of preprints (which are individual customers advertisements that are provided by the customer) inserted into theMilwaukee Journal
Sentinels daily and Sunday editions and its total market coverage products, Weekend Plus and Marketplace, for the last three years. We believe the advertising volume decline during 2006 in full run (which refers to
advertisements that are published in all editions of the newspaper, as opposed to part run which refers to advertisements published in only certain editions of the newspaper) was a result of advertisers decreasing their ROP
(run-of-press) spending and certain advertisers switching to preprints. We believe some advertisers utilize preprints because preprints can offer opportunities for targeted advertising, higher print quality and, possibly, lower cost. Preprint pieces
increased in 2006 compared to 2005 due to an overall increase in the number of advertisers using preprints.



Other revenue, which consists of revenue from commercial printing, commercial delivery and promotional revenue, accounted for 4.9% of our daily
newspapers total revenue in 2006.



|                              |  |                           |  |         |  |        
|----------------------------- |  | ------------------------- |  | ------- |  | -------
|                              |  | Annual Advertising Linage
|                              |  | 2006                      |  | 2005    |  | 2004   
|                              |  | (inches in thousands)    
|Full run in column inches     |  | 1,383.4                   |  | 1,505.2 |  | 1,623.4
|Part run in column inches     |  | 111.4                     |  | 167.0   |  | 172.1  
|Preprint pieces (in millions) |  | 926.2                     |  | 895.6   |  | 800.7  



Community
Newspapers and Shoppers



We own and operate 75
community newspapers and shoppers and four printing plants through our subsidiary, Journal Community Publishing Group.



We publish 37 community newspapers, with a combined paid and free average weekly distribution of more than 285,000. Our community newspapers focus on
local news and events that are of interest to the local residents. In some markets, our community newspapers are the only source of local news. Our local newspapers serve communities in Wisconsin, Connecticut and Florida.



We publish 29 shoppers with a combined average weekly distribution of more
than 596,000. Shoppers are free-distribution publications, primarily carrier-delivered to each household in a geographic area, featuring advertisements primarily from local and regional businesses. A few of our shoppers also include local interest
stories and weekly columns, such as fishing/hunting reports, obituaries and television listings. Our shoppers are delivered to various communities in Wisconsin, Ohio, Louisiana, Vermont and Massachusetts.



We also publish nine niche publications that appeal to a very specific
advertiser and reader, with a combined paid and free average weekly distribution of more than 139,000. A few examples of the niche products are automotive- and boating- focused publications. We provide niche publications in Wisconsin, Louisiana,
Florida and New York.



Advertising revenue and circulation
revenue accounted for 70.2% and 3.1%, respectively, of our community newspapers and shoppers total revenue in 2006. In addition to our publishing operations, we also provide commercial printing services, including cold-web printing,
sheet-fed printing, electronic prepress, mailing services, bindery and inserting, mostly for other weekly and monthly publications. Revenue from commercial printing accounted for 26.6% of our community newspapers and shoppers total
revenue in 2006.



In 2006, Community Newspapers (CN), a
division of Journal Community Publishing Group, discontinued 10 shopper publications. In addition, our daily newspaper launched a new shared mail product for the full Milwaukee market called Marketplace which enables it and CN to provide unrivaled
neighborhood coverage in the greater Milwaukee area.



4



---

##### Table of Contents

In late January 2007, CN revamped its weekly
community newspapers while still maintaining the same market coverage. These newspapers will change their names to adopt the NOW moniker after a given communitys name, which change follows the 2006 launch of 25
CommunityNOWTM websites which include local news from both the Journal Sentinel and CN as well as
local bloggers and other features. These weeklies are now being distributed free of charge with the daily newspaper, which should double their distribution in the communities they target.



Our community newspapers, shoppers and niche publication groups are as follows:



|                       |  |                         |            |           |          |    |                   |  
|---------------------- |  | ----------------------- | ---------- | --------- | -------- | -- | ----------------- | -
|                       |  | 2006AverageDistribution |            | Number of
|                       |  |                         | Newspapers |           | Shoppers |    | NichePublications
|Northern Wisconsin     |  | 327,000                 |            | 4         |          | 11 |                   | 3
|Southeastern Wisconsin |  | 155,000                 |            | 17        |          | 4  |                   | 
|Ohio                   |  | 184,000                 |            |          |          | 8  |                   | 
|New York/Connecticut   |  | 131,000                 |            | 12        |          |   |                   | 1
|Florida                |  | 80,000                  |            | 4         |          |   |                   | 2
|Louisiana              |  | 76,000                  |            |          |          | 2  |                   | 3
|Vermont/Massachusetts  |  | 67,000                  |            |          |          | 4  |                   | 



Newsprint



The basic raw material of newspapers is newsprint. We
currently purchase the majority of our estimated newsprint requirements from two suppliers according to the terms of our purchase contracts. We purchase a majority of our remaining estimated newsprint requirements in the spot market from other
suppliers.



We believe we will continue to receive an adequate
supply of newsprint for our needs. Newsprint prices fluctuate based upon market factors, which include newsprint production capacity, currency exchange rates, manufacturers cost drivers, inventory levels, demand and consumption. Price
fluctuations for newsprint can have a significant effect on our results of operations. The average net price per ton was $668 in 2006 compared to an average net price per ton of $608 in 2005. Our consumption of newsprint decreased to 56,260 metric
tons in 2006 from 65,058 metric tons in 2005, and our total cost of newsprint increased $2.0 million in 2006. Based on the consumption of newsprint in 2006, a $10 per ton increase or decrease in the price of newsprint would increase or decrease our
total cost of newsprint by $0.6 million.



The decrease in
consumption in 2006 is due to decreases in ROP advertising, editorial content, average net paid circulation and production waste at our daily newspaper and the shutdown of our printing plant in New Orleans in late 2005 partially offset by an
increase in consumption due to the extra week in fiscal 2006.



Industry and Competition



Newspaper
publishing is the oldest segment of the media industry. Metropolitan and community newspapers often represent the primary medium for local advertising due to their importance to the communities they serve. We believe newspapers continue to be one of
the most effective mediums for retail and classified advertising because they allow advertisers to promote the price and selection of goods and to maximize household reach. Notwithstanding the advertising advantages newspapers offer, newspapers have
many competitors for advertising dollars and paid circulation. These competitors include local, regional and national newspapers, shoppers, magazines, broadcast and cable television, radio, direct mail, Yellow Pages, the Internet and other media.
Competition for newspaper advertising revenue is based largely upon advertiser results, advertising rates, readership, demographics and circulation levels, while competition for circulation is based largely upon the content of the newspaper, its
price, editorial quality, and customer service. On occasion, our businesses compete with each other for regional and local advertising, particularly in the Milwaukee market.



5



---

##### Table of Contents

Advertising revenue is the largest component of a newspapers total revenue. Advertising rates at
newspapers, free circulars and publications are usually based on market size, circulation, penetration, demographics and alternative advertising media available in the marketplace. Newspaper advertising revenue is seasonal. Our publishing business
tends to see increased revenue due to increased advertising activity during certain holidays, in time for summer shopping and just prior to students returning to school in the fall. Advertising revenue is also generally affected by cyclical changes
in national and regional economic conditions. Classified advertising is generally the most sensitive to economic cycles because it is driven primarily by the demand for employment, real estate transactions and automotive sales.



Although there are several major national newspaper companies, we believe
that the newspaper publishing industry in the United States remains fragmented. Many smaller publications are owned and operated by individuals whose newspaper holdings and financial resources are generally limited. Further, we believe that
relatively few daily newspapers have been established in recent years due to the high cost of starting a daily newspaper operation and building a franchise identity. Moreover, most markets cannot sustain more than one daily newspaper.



Broadcasting



Our broadcasting business is conducted through our wholly owned subsidiary, Journal Broadcast Corporation, and its
subsidiaries, which together operate nine television stations and 36 radio stations in 12 states, as well as operate two additional television stations under local marketing agreements. Our broadcasting business accounted for 35.5% of our revenue
and 61.1% of our operating earnings for the year ended December 31, 2006. See Note 12 to our Consolidated Financial Statements for additional financial information regarding our broadcasting business.



Our radio and television stations focus on providing targeted and relevant
local programming that is responsive to the interests of the communities in which they compete. We promote a local focus that allows our stations and clusters to serve listeners, viewers and advertisers more effectively, strengthens each
stations brand identity and allows our stations to provide effective marketing solutions for local advertisers by reaching their targeted audiences.



In an effort to maximize our operating margins, we have implemented a centralized management approach to certain functions such as engineering, IT,
finance and human resources to generate economies of scale and incorporate best practices. We intend to continue to explore cost reduction and efficiency measures across our businesses and pursue market share and ratings growth which we believe will
generate increased operating efficiency and revenue, and continue to drive operating margin improvement.



In three of our marketsMilwaukee, Wisconsin, Boise, Idaho and Tucson, Arizonawe own and operate both television and radio stations. We also
own and operate six radio stations and operate a television station under a local marketing agreement in our Omaha, Nebraska market. Assuming television stations will be available at attractive prices, we may consider pursuing additional
acquisitions, particularly of stations in mid-sized growth markets with potential for operating improvement. As an example of our acquisition strategy, on December 5, 2005, we acquired the business and certain assets of ABC affiliate KGUN-TV in
Tucson, Arizona and FOX affiliate WFTX-TV in Naples/Fort Myers, Florida. In addition, we acquired certain assets of CBS affiliate KMTV-TV in Omaha, Nebraska and operate this station under a local marketing agreement effective December 5, 2005.
KMTV-TV and KGUN-TV operate in markets in which we also currently own and operate existing radio stations. We may seek to add second stations in our existing markets and exploit other potential clustering or cross-ownership opportunities as they
arise.



Radio Broadcasting



Based on the Fall 2006 Arbitron ratings book, we have the number one station
in terms of station audience rank in three of the eight markets in which our radio stations operate, including in Milwaukee where WTMJ-AM



6



---

##### Table of Contents

has been the top rated radio station for 42 consecutive Arbitron rating periods. We have grown our radio operations primarily through acquisitions of
stations in mid-sized growth markets. We have acquired 17 of our 36 radio stations since 1999. In 2006, revenue from radio operations accounted for 36.7% percent of our broadcasting revenue.



Our radio stations are:



|                   |  |                               |  |              |  |                            |  |                        |   |  |                          |  |                   
|------------------ |  | ----------------------------- |  | ------------ |  | -------------------------- |  | ---------------------- | - |  | ------------------------ |  | ------------------
|Market and Station |  | City of License               |  | YearAcquired |  | Format                     |  | StationAudienceRank(1) |   |  | TotalStationsinMarket(2) |  | FCCLicenseClass(3)
|Milwaukee, WI      |  |                               |  |              |  |                            |  |                        |   |  |                          |  |                   
|WTMJ-AM            |  | Milwaukee, WI                 |  | 1927         |  | News/Talk/Sports           |  | 1                      |   |  | 29                       |  | B                 
|WKTI-FM            |  | Milwaukee, WI                 |  | 1959         |  | Adult Contemporary         |  | 11                     | + |  | 29                       |  | B                 
|                   |  |                               |  |              |  |                           
|Omaha, NE          |  |                               |  |              |  |                            |  |                        |   |  |                          |  |                   
|KOMJ-AM(5)         |  | Omaha, NE                     |  | 1995         |  | Adult Standards            |  | 18                     | + |  | 23                       |  | C                 
|KEZO-FM            |  | Omaha, NE                     |  | 1995         |  | Rock                       |  | 3                      |   |  | 23                       |  | C                 
|KKCD-FM            |  | Omaha, NE                     |  | 1995         |  | Classic Hits               |  | 9                      | + |  | 23                       |  | C2                
|KSRZ-FM            |  | Omaha, NE                     |  | 1998         |  | Hot Adult Contemporary     |  | 8                      |   |  | 23                       |  | C                 
|KXSP-AM            |  | Omaha, NE                     |  | 1999         |  | Sports                     |  | 16                     | + |  | 23                       |  | B                 
|KQCH-FM            |  | Omaha, NE                     |  | 1999         |  | Contemporary Hits          |  | 4                      |   |  | 23                       |  | C                 
|                   |  |                               |  |              |  |                           
|Tucson, AZ         |  |                               |  |              |  |                            |  |                        |   |  |                          |  |                   
|KFFN-AM            |  | Tucson, AZ                    |  | 1996         |  | Sports                     |  | 16                     |   |  | 26                       |  | C                 
|KMXZ-FM            |  | Tucson, AZ                    |  | 1996         |  | Adult Contemporary         |  | 2                      |   |  | 26                       |  | C                 
|KZPT-FM            |  | Tucson, AZ                    |  | 1996         |  | Hot Adult Contemporary     |  | 13                     |   |  | 26                       |  | A                 
|KGMG-FM            |  | Oracle, AZ                    |  | 1998         |  | Rhythmic Oldies            |  | 11                     | + |  | 26                       |  | C2                
|                   |  |                               |  |              |  |                           
|Knoxville, TN      |  |                               |  |              |  |                            |  |                        |   |  |                          |  |                   
|WQBB-AM            |  | Powell, TN                    |  | 1998         |  | Adult Standards            |  | 16                     | + |  | 20                       |  | D                 
|WMYU-FM            |  | Karns, TN                     |  | 1997         |  | Hot Adult Contemporary     |  | 10                     |   |  | 20                       |  | A                 
|WWST-FM            |  | Sevierville, TN               |  | 1997         |  | Contemporary Hits          |  | 3                      |   |  | 20                       |  | C1                
|WKHT-FM            |  | Knoxville, TN                 |  | 1998         |  | Rhythmic Contemporary Hits |  | 6                      |   |  | 20                       |  | A                 
|                   |  |                               |  |              |  |                           
|Boise, ID          |  |                               |  |              |  |                            |  |                        |   |  |                          |  |                   
|KGEM-AM            |  | Boise, ID                     |  | 1998         |  | Oldies                     |  | 16                     | + |  | 22                       |  | B                 
|KJOT-FM            |  | Boise, ID                     |  | 1998         |  | Rock                       |  | 7                      |   |  | 22                       |  | C                 
|KQXR-FM            |  | Boise, ID                     |  | 1998         |  | Alternative Rock           |  | 9                      |   |  | 22                       |  | C1                
|KTHI-FM            |  | Caldwell, ID                  |  | 1998         |  | Classic Hits               |  | 2                      |   |  | 22                       |  | C                 
|KRVB-FM            |  | Nampa, ID                     |  | 2000         |  | Adult Alternative          |  | 12                     | + |  | 22                       |  | C                 
|KCID-AM(4)         |  | Caldwell, ID                  |  | 1998         |  | Adult Standards            |  | N/A                    |   |  | 22                       |  | C                 
|                   |  |                               |  |              |  |                           
|Wichita, KS        |  |                               |  |              |  |                            |  |                        |   |  |                          |  |                   
|KFTI-AM            |  | Wichita, KS                   |  | 1999         |  | Classic Country            |  | 12                     | + |  | 21                       |  | B                 
|KFDI-FM            |  | Wichita, KS                   |  | 1999         |  | Country                    |  | 1                      |   |  | 21                       |  | C                 
|KICT-FM            |  | Wichita, KS                   |  | 1999         |  | Rock                       |  | 4                      |   |  | 21                       |  | C1                
|KFXJ-FM            |  | Augusta, KS                   |  | 1999         |  | Classic Hits               |  | 8                      |   |  | 21                       |  | C2                
|KYQQ-FM            |  | Arkansas City, KS             |  | 1999         |  | Regional Mexican           |  | 16                     |   |  | 21                       |  | C                 
|KMXW-FM            |  | Newton, KS                    |  | 2000         |  | Hot Adult Contemporary     |  | 19                     |   |  | 21                       |  | C1                
|                   |  |                               |  |              |  |                           
|Springfield, MO    |  |                               |  |              |  |                            |  |                        |   |  |                          |  |                   
|KSGF-AM/FM         |  | Springfield, MO/Ash Grove, MO |  | 1999/2003    |  | News/Talk (Simulcast)      |  | 4                      |   |  | 20                       |  | B/C3              
|KTTS-FM            |  | Springfield, MO               |  | 1999         |  | Country                    |  | 1                      |   |  | 20                       |  | C                 
|KSPW-FM            |  | Sparta, MO                    |  | 1999         |  | Rhythmic Contemporary Hits |  | 3                      |   |  | 20                       |  | C2                
|KZRQ-FM            |  | Mt. Vernon, MO                |  | 2003         |  | Active Rock                |  | 10                     | + |  | 20                       |  | C3                
|                   |  |                               |  |              |  |                           
|Tulsa, OK          |  |                               |  |              |  |                            |  |                        |   |  |                          |  |                   
|KFAQ-AM            |  | Tulsa, OK                     |  | 1999         |  | Talk                       |  | 11                     | + |  | 23                       |  | A                 
|KVOO-FM            |  | Tulsa, OK                     |  | 1999         |  | Country                    |  | 3                      |   |  | 23                       |  | C                 
|KXBL-FM            |  | Henryetta, OK                 |  | 1999         |  | Classic Country            |  | 6                      | + |  | 23                       |  | C1                



7



---

##### Table of Contents

---

|(1) | Station audience rank equals the ranking of each station, in its market, according to the Fall 2006 Arbitron ratings book. The ranking is determined based on the estimated share of
persons 12 years and older listening during an average 15-minute increment (also known as average quarterly hour, or AQH, share) occurring Monday-Friday between 6:00 a.m. and midnight. A +indicates a tie with
another station in the market.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes stations qualified to be reported in the Fall 2006 Arbitron ratings book. In order to be qualified to be reported, a station must have received five or more minutes of
listening in at least 10 diaries in the market from midnight to midnight, Monday through Sunday, during the survey period.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The FCC license class is a designation for the type of license based upon the radio broadcast service area according to radio broadcast rules compiled in the Code of Federal
Regulations.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | KCID-AM did not qualify to be reported in the Fall 2006 Arbitron ratings book.
|--- | ------------------------------------------------------------------------------



|(5) | On January 23, 2007, Journal Broadcast Group announced it had signed an agreement to sell KOMJ-AM to Cochise Broadcasting LLC.
|--- | ------------------------------------------------------------------------------------------------------------------------------



We employ a variety of sales-related and programming strategies. Our
sales-related strategy includes maximizing our share of the local advertisers advertising spending. We believe that developing local station clusters allows us to maximize market share because it allows us to offer a variety of
format alternatives to appeal to a broader range of local advertisers. Our programming strategy includes developing and retaining local on-air talent to drive ratings. We have long-term contracts with many of our on-air personalities. In addition,
our Milwaukee radio station, WTMJ-AM, currently maintains exclusive radio broadcast rights for the Green Bay Packers, Milwaukee Bucks and Milwaukee Brewers, and arranges a statewide radio network for these organizations.



Most of our radio broadcasting revenue is generated from the sale of local
advertising, with the balance generated from the sale of national advertising, political and issue advertising and other sources. We base our advertising rates primarily on each stations ability to attract audiences having certain demographic
characteristics in the market areas that advertisers want to reach, as well as the number of stations competing in the market. Advertising rates generally are the highest during morning and evening drive-time hours. We have predetermined the number
of commercials that are broadcast each hour, depending on the format of a particular station. We attempt to determine the number of commercials broadcast hourly that can maximize available revenue dollars without diminishing listening levels.
Although the number of advertisements broadcast during a given time period may vary, the total number of advertisements broadcast on a particular station generally does not vary significantly from year to year, unless there has been a format change.



We have aligned our radio stations in clusters within a
market, in many cases building out the cluster around a lead station. We seek to build a unique and differentiated brand position at each station within a cluster so that we can offer distinct solutions for a variety of advertisers in any given
market. This clustering strategy has allowed us to target our stations formats and sales efforts to better serve advertisers and listeners as well as leverage operating expenses to maximize the performance of each station and the cluster.
Assuming radio stations will be available at attractive prices, we currently intend to continue our acquisition program following our cluster strategy in certain existing and new mid-sized growth markets. We have converted 10 of our radio stations
to digital transmission and plan to convert seven additional radio stations to digital by mid-2007.



Television Broadcasting



Based on the November 2006 Nielsen ratings book, we are ranked among the top three stations in terms of station audience rating in eight of the ten
markets in which our television stations operate. As of November 2006, WTMJ-TV, our Milwaukee television station, had the top-rated late night local newscast (Monday-Friday) in its Designated Market Area in 64 of the previous 65 ratings periods
(based on the percentage of the total potential household audience). In 2006, revenue from television operations accounted for 63.3% of our broadcasting revenue.



8



---

##### Table of Contents

Our television stations are:



|           |  |                       |  |              |  |                    |  |                      |   |  |                         |  |                          
|---------- |  | --------------------- |  | ------------ |  | ------------------ |  | -------------------- | - |  | ----------------------- |  | -------------------------
|Station    |  | Market                |  | YearAcquired |  | NetworkAffiliation |  | StationMarketRank(1) |   |  | StationAudienceShare(1) |  | TotalStationsin Market(2)
|WTMJ-TV    |  | Milwaukee, WI         |  | 1947         |  | NBC                |  | 1                    | + |  | 12                      |  | 13                       
|KTNV-TV    |  | Las Vegas, NV         |  | 1979         |  | ABC                |  | 3                    |   |  | 7                       |  | 12                       
|WSYM-TV    |  | Lansing, MI           |  | 1984         |  | FOX                |  | 4                    | + |  | 6                       |  | 7                        
|KMIR-TV    |  | Palm Springs, CA      |  | 1999         |  | NBC                |  | 2                    | + |  | 8                       |  | 10                       
|KIVI-TV    |  | Boise, ID             |  | 2001         |  | ABC                |  | 3                    |   |  | 9                       |  | 6                        
|KSAW-TV(3) |  | Twin Falls, ID        |  | 2001         |  | ABC                |  | 3                    | + |  | 6                       |  | 6                        
|WGBA-TV    |  | Green Bay, WI(6)      |  | 2004         |  | NBC                |  | 4                    |   |  | 10                      |  | 7                        
|WACY-TV(4) |  | Appleton, WI(6)       |  | 2004         |  | UPN                |  | N/A                  |   |  | N/A                     |  | 7                        
|KGUN-TV    |  | Tucson, AZ            |  | 2005         |  | ABC                |  | 2                    | + |  | 13                      |  | 10                       
|WFTX-TV    |  | Naples/Fort Myers, FL |  | 2005         |  | FOX                |  | 3                    |   |  | 5                       |  | 8                        
|KMTV-TV(5) |  | Omaha, NE             |  | 2005         |  | CBS                |  | 3                    |   |  | 11                      |  | 8                        

---

|(1) | Station market rank is based upon station audience ratings, which equal the percentage of the total potential household audience in the Designated Market Area. Station audience
share equals the percentages of the audience in the Designated Market Area actually watching our television station. The percentages are based on surveys conducted 5:00 a.m. to 2:00 a.m., seven days a week, as published in the November 2006 Nielsen
ratings book. A + indicates a tie with another station in the market.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes all television stations whose city of origin is within the Designated Market Area (DMA) that meet the minimum reporting standards.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Low-power television station.
|--- | -----------------------------



|(4) | We acquired certain assets of WACY-TV and assumed an existing local marketing agreement between WGBA-TV and WACY-TV effective October 2005. WACY-TV did not qualify to be reported in
the November 2006 Nielsen ratings book.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(5) | We acquired certain assets of KMTV-TV and operate this station under a local marketing agreement effective December 5, 2005. We applied for the transfer of this FCC license to
us from Emmis Communications Corporation on January 23, 2007.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(6) | Green Bay, WI and Appleton, WI are considered one Designated Market Area.
|--- | -------------------------------------------------------------------------



The affiliation by a station with one of the four major networks (NBC, ABC, CBS and FOX) has a significant impact on the composition of the stations
programming, revenue, expenses and operations. Lower ratings of NBC network programming has continued to have an adverse affect on revenue in our Milwaukee, Green Bay, and Palm Springs markets. However, recent improvement in ratings has given our
Las Vegas and Boise ABC stations new revenue opportunities. We believe all of our television stations are strong affiliates with good relationships with the respective networks. We believe that Las Vegas, Boise, Palm Springs, Tucson and Fort
Myers/Naples are markets with attractive demographic and growth profiles and that as a result, there is significant opportunity for growth and operating improvement at these stations.



In all of our markets and regardless of network affiliation, we focus on delivering leading local news programming and
contracting for popular syndicated programming with the objective of maximizing our ratings and in turn our share of advertising spending in a given market. Based on the Five-day Average DMA Household Rating in the November 2006 Nielsen ratings
book, we had the number one local late evening news program in two of our ten marketsKMIR-TV in Palm Springs and WTMJ-TV in Milwaukee.



We derive the vast majority of our television broadcasting revenue from advertising. Our television advertising revenue and rates in even-numbered years
benefit from political, issue, and Olympics-related advertising. Absent political and issue advertising, there is less pressure on inventory, which drives rates downward. For example, television political and issue advertising revenue was $14.6
million in 2006 compared



9



---

##### Table of Contents

to $0.6 million in 2005. In addition, NBC has purchased the right to broadcast the Olympics through 2012, and we expect higher revenue in these years because
the expected increased ratings during the Olympic time period for our three NBC affiliates will allow them to sell advertising at premium rates.



We have also made substantial investments in digital transmission equipment at our stations and are fully compliant with FCC mandates on digital
transmission. We anticipate investing in digital infrastructure in several of our television markets as we make the continuing transition to HDTV. In some cases, this investment replaces aging analog equipment. Also, we expect these investments to
create additional operating efficiencies and improve the transfer of program content to our interactive websites.



Industry and Competition



We compete with other radio and television stations, newspapers, cable television, satellite television, direct mail services, billboards, the Internet
and, in the future, may also compete with the emerging satellite radio technology for advertising dollars. We believe some of the factors an advertiser considers when choosing an advertising medium include its overall marketing strategy and reaching
its targeted audience in the most cost-effective manner. In both radio and television broadcasting, revenue is derived primarily from advertising. Ratings, which estimate the number of viewers or listeners tuning in to a given station, highly
influence competition in broadcasting because they affect the advertising rates the broadcaster can chargehigher ratings generally mean the broadcaster can charge higher rates for advertising. Advertising rates for both the radio and
television broadcast industries are also based upon a variety of other factors, including a programs popularity among the advertisers target audience, the number of advertisers competing for the available time, the size and demographic
makeup of the market served and the availability of alternative advertising in the market. By having a cluster of several stations within one market, we can offer advertisers the opportunity to purchase air time on more than one of our stations in
order to reach a broader audience.



Radio stations generate the
majority of their revenue from the sale of advertising time to local and national spot advertisers. Changes in market demographics, the entry of competitive stations, the adoption of competitive formats by existing stations and the inability to
retain popular on-air talent could result in lower ratings, which could in turn reduce advertising revenue. Technology can play an important role in competition as the ratings each station receives also depend upon the strength of the stations
signal in each market and, therefore, the number of listeners who have access to the signal. We continue to invest in the technology needed to maintain, and, where possible, strengthen our signals.



Commercial television stations generally fall into one of three categories.
The first category of stations includes those affiliated with one of the four major national networks (NBC, ABC, CBS and FOX). The second category comprises stations affiliated with more recently developed national networks, such as CW (formerly UPN
and WB) and MyNetwork TV. The third category includes independent stations that are not affiliated with any network and rely principally on local and syndicated programming. Affiliation with a television network can have a significant influence on
the revenue of a television station because the audience ratings generated by a networks programming can affect the rates at which a station can sell advertising time. Generally, each station determines rates and receives all of the revenue,
net of agency commissions, for national and local spot advertising sold by us. Rates are influenced by the demand for advertising time, the popularity of the stations programming and market size.



Seasonal revenue fluctuations are common in the broadcasting industry and are
primarily due to fluctuations in advertising expenditures by retailers and automobile manufacturers. Broadcast advertising is typically strongest in the second and fourth quarters of the year, which coincides with increased advertising around
certain holidays. Historically, the second quarter tends to show an increase in automotive advertising as well as increases in tourism and travel advertising before the summer months. In even numbered years, the Olympics, which typically occur
during the first quarter or third quarter, and political advertising, which typically is strongest in the third and fourth quarters, tend to cause increases in advertising revenue. Because television and radio



10



---

##### Table of Contents

broadcasters rely upon advertising revenue, they are subject to cyclical changes in the economy. The size of advertisers budgets, which are affected by
broad economic trends, affects the broadcast industry in general and the revenue of individual television and radio stations.



Printing Services



Our printing services business is conducted through our wholly owned subsidiary IPC Print Services, Inc. (IPC). Our printing services business accounted
for 10.0% of our revenue and 2.4% of our operating earnings for the year ended December 31, 2006. See Note 12 to our Consolidated Financial Statements for additional financial information regarding our printing services business.



IPC, which was founded in 1949 and acquired by us in 1992, provides a wide
range of printing services including complete production of magazines, professional journals and documentation material, as well as mailing solutions and fulfillment. The foundation of our printing business includes printing scientific, medical and
technical journals and magazines. We generally utilize conventional and electronic pre-press processes, web- and sheet-fed printing and complete bindery and finishing in our production processes. All of these markets are served through our direct
national sales force or by the use of print brokers.



The
printing services industry is highly competitive and generally characterized by lower operating margins. As a result, we maintain control over our costs and ensure we align our cost base to changes in our revenue streams. We consistently seek
opportunities to grow revenue through existing or new business. For example, there are opportunities for growth in providing printing products and services to OEMs (original equipment manufacturers) and to magazine publishers.



Dell Computer Corporation accounted for 7.5% and 19.0% of our printing
services revenue in 2006 and 2005, respectively. In early 2006, we ceased supplying software-related products to Dell, which was consistent with our strategy to focus on our core publication printing business. Although we continue to supply Dell
with printed documentation, the projected revenue from Dell for the full 2007 fiscal year should represent a small portion of IPCs total revenue.



Industry and Competition



The printing services industry continues to experience consolidation. This trend has resulted in fewer private, independent competitors, creating several
competitors that are larger than us in size with broader product offerings. The major competitive factors that impact our printing services business are price and schedule flexibility, paper prices, United States Postal Service (USPS) rates,
customer service and finished products quality, time to market and distribution capabilities.



We compete with a large number of companies, some of which have greater resources and capacity. In recent years, there has been excess capacity in the printing industry and consolidation within the industry that has
increased competition. Rapid technological changes as well as a more global marketplace, both in terms of supply and demand, have also brought new competitors to the marketplace. To lessen exposure to larger competitors with greater resources, we
focus generally on specialized markets with small- to medium-sized print run requirements where we can achieve market differentiation and gain competitive advantages through knowledge of the market and the ability to offer high quality solutions to
customers.



Other



Our other business consists of our direct marketing services business
conducted through our wholly owned subsidiary, PrimeNet, and corporate intercompany eliminations and corporate expenses, and accounted for 5.6% of our revenue and 1.4% of our operating earnings for the year ended December 31, 2006. See Note 12
to our Consolidated Financial Statements for additional financial information regarding our direct marketing services business and corporate expenses and eliminations.



11



---

##### Table of Contents

Our direct marketing business provides direct marketing support services to major brands and marketers of
automotive, retail, publishing, financial and other services in the United States and Canada. Our direct marketing business is committed to providing innovative data, print and mail solutions that are on time and right.



Compliance with Environmental Laws



As the owner, lessee or operator of various real properties and facilities,
we are subject to various federal, state, and local environmental laws and regulations. Historically, compliance with these laws and regulations has not had a material adverse effect on our business. Compliance with existing or new environmental
laws and regulations may require us to make future expenditures.



Regulation



Our businesses are subject to regulation by governmental
authorities in the United States and in the various states in which we operate.



Television and Radio Regulation



Introduction



Our
television and radio broadcasting operations are subject to regulation by the Federal Communications Commission (FCC) under the Communications Act of 1934, as amended (which we refer to as the Communications Act). Under authority of the
Communications Act, the FCC, among other things, assigns frequency bands for broadcast and other uses; determines the location and power of stations and establishes areas to be served; grants permits and licenses to construct and operate television
and radio stations on particular frequencies; issues, revokes, modifies and renews radio and television broadcast station licenses; regulates equipment used by stations; determines whether to approve changes in ownership or control of station
licenses; regulates the content of some forms of programming; adopts and implements regulations and policies which directly or indirectly affect the ownership, operations and profitability of broadcasting stations; and has the power to impose
penalties for violations of its rules.



Licensed broadcast
stations must pay FCC regulatory and application fees and follow various rules promulgated under the Communications Act that regulate, among other things, political advertising, sponsorship identification, closed captioning of certain television
programming, obscene, indecent and profane broadcasts, and technical operations, including limits on radio frequency radiation. Additionally, the FCCs rules require licensees to create equal employment opportunity outreach programs and
maintain records and make filings with the FCC evidencing such efforts. Television stations are also required to broadcast a minimum of three hours per week of core childrens educational programming, which must be identified as
educational and informational at the time it is broadcast and described in quarterly childrens programming reports required to be placed in the stations public inspection files and filed with the FCC. The amount of core
childrens programming broadcast by a digital television station (see Digital Television, below) is required to increase proportionally with the number of free video programming streams broadcast simultaneously (multicast) by
that station.



The following is a brief summary of certain
provisions of the Communications Act and specific FCC rules and policies. Failure to observe the provisions of the Communications Act and the FCCs rules and policies can result in the imposition of various sanctions, including monetary
forfeitures, the grant of short-term (less than the maximum term) license renewal or, for particularly egregious violations, the denial of a license renewal application, the revocation of a license or the withholding of approval for
acquisition of additional broadcast properties.



Broadcast
Licenses/Renewals



The Communications Act permits the
operation of a broadcast station only in accordance with a license issued by the FCC upon a finding that the grant of a license would serve the public interest, convenience and



12



---

##### Table of Contents

necessity. The FCC grants broadcast licenses for specified periods of time and, upon application, may renew the licenses for additional terms (ordinarily for
the maximum eight years). Generally, the FCC renews a broadcast license upon a finding that (i) the broadcast station has served the public interest, convenience and necessity; (ii) there have been no serious violations by the licensee of
the Communications Act or the FCCs rules; and (iii) there have been no other violations by the licensee of the Communications Act or other FCC rules which, taken together, indicate a pattern of abuse. After considering these factors, the
FCC may renew a broadcast stations license, either with conditions or without, or it may designate the renewal application for hearing. Although there can be no assurance that our licenses will be renewed, we have not to date had a violation
of the FCCs regulations that jeopardized the renewal of our licenses, and we are not currently aware of any facts that would prevent their renewal. On November 1, 2005, the Milwaukee Public Interest Media Coalition (MPIMC)
filed a petition at the FCC asking it to deny the pending license renewal applications of all eleven commercial television stations in the Milwaukee Designated Market Area (DMA), including our station, WTMJ-TV, on the grounds that the stations
failed to provide adequate coverage of state and local issues during the 2004 election campaign. We filed an opposition to the petition at the FCC on December 15, 2005, and MPIMC filed a reply to our opposition on January 18, 2006. The
pleading cycle is now closed and the matter is under review by the staff of the FCC. It is impossible to predict when the FCC will rule on this matter. We believe the petition is without merit and will continue to defend the allegations against us
vigorously in any continuing proceedings before the FCC.



Ownership Restrictions



The Communications Act
and FCC rules and policies include a number of limitations regarding the number and reach of broadcast stations that any person or entity may own, directly or by attribution. FCC approval is also required for transfers of control and assignments of
station licenses.



The FCC is required to review quadrennially
the following media ownership rules and to modify, repeal or retain any rules as it determines to be in the public interest: the Daily Newspaper Cross-Ownership Rule; the Local Radio Ownership Rule; the Radio-Television Cross-Ownership Rule; the
Dual Network Rule; and the Local Television Multiple Ownership Rule. In a decision adopted June 2, 2003, the FCC relaxed several of these rules. The FCCs new rules were to have become effective on September 4, 2003. However, a number
of parties sought reconsideration of the new rules and others filed judicial appeals. The U.S. Court of Appeals for the Third Circuit issued a stay of the new rules on September 3, 2003. Then, in an opinion issued on June 24, 2004, the
court remanded the new rules to the FCC with instructions to undertake additional analysis and to justify what the court characterized as several irrational assumptions and inconsistencies in the FCCs June 2, 2003 decision. In
an order issued on September 3, 2004 in response to a request by the FCC, the Third Circuit court lifted its stay insofar as it applied to the modified Local Radio Ownership Rule. In all other respects the rules that were in effect prior to
June 2, 2003 will remain in effect until the appeals are resolved or the stay is lifted. On June 13, 2005, the United States Supreme Court declined to review the June 24, 2004 ruling by the Third Circuit Court of Appeals. In response
to the remand order and in order to satisfy its statutory obligation to conduct a quadrennial review of its media ownership rules, on July 24, 2006, the FCC released a Further Notice of Proposed Rulemaking soliciting additional public comments
on the rules. We cannot predict the outcome of the FCC proceeding or of any subsequent review of the proceeding by the Third Circuit Court of Appeals, which has retained jurisdiction over the case.



Under the currently effective Daily Newspaper Cross-Ownership Rule, unless
grandfathered or subject to waiver, no party can have an attributable interest in both a daily English-language newspaper and either a television station or a radio station in the same market if specified signal contours of the television station or
the radio station encompass the entire community in which the newspaper is published. Our media operations in Milwaukee are grandfathered under this rule. Under the new rule that has been stayed, in television markets with between four and eight
television stations, a party may have an attributable interest in a daily newspaper, a television station, and radio stations up to one half of the local radio station limit (see below). In markets with nine or more television stations, there are no
longer any broadcast-newspaper cross-ownership restrictions under the new rule that has been stayed.



13



---

##### Table of Contents

The September 3, 2004 order of the Court of Appeals for the Third Circuit partially lifting its stay
of the FCCs June 2, 2003 decision permitted the new Local Radio Ownership Rule to take effect. Under the rule, the number of radio stations an entity may own in a given market is dependent upon the size of that radio market. Specifically,
in a radio market with 45 or more commercial and noncommercial radio stations, a party may own, operate, or control up to eight commercial radio stations, not more than five of which are in the same service (AM or FM). In a radio market with between
30 and 44 radio stations, a party may own, operate, or control up to seven commercial radio stations, not more than four of which are in the same service. In a radio market with between 15 and 29 radio stations, a party may own, operate, or control
up to six commercial radio stations, not more than four of which are in the same service. In a radio market with 14 or fewer radio stations, a party may own, operate, or control up to five commercial radio stations, not more than three of which are
in the same service, except that a party may not own, operate, or control more than 50% of the stations in the market, except for combinations of one AM and one FM station, which are permitted in any size market. For stations located in a market in
which the Arbitron ratings service provides ratings, the definition of radio market is based on the radio market to which BIA Financial Network assigns the affected radio stations. For stations that are not in an Arbitron market, the
market definition is based on technical service areas, pending a further FCC rulemaking. Also under the rule, a radio station that brokers more than 15% of another in-market stations weekly programming or advertising time will be deemed to
have an attributable interest in the brokered station counting toward the applicable local numerical ownership limitation.



The currently effective Radio-Television Cross-Ownership Rule generally allows common ownership of one or two television stations and up to six radio
stations, or, in certain circumstances, one television station and seven radio stations, in any market where at least 20 independent voices would remain after the combination; two television stations and up to four radio stations in a market where
at least 10 independent voices would remain after the combination; and one television and one radio station notwithstanding the number of independent voices in the market. A voice generally includes independently owned, same-market,
commercial and noncommercial broadcast television and radio stations, newspapers of certain minimum circulation, and one cable system per market. Under the new, stayed rule, subject to the applicable limitations of the Local Radio Ownership Rule and
the Local Television Multiple Ownership Rule, cross-ownership of television stations and radio stations is not limited in television markets with four or more television stations so long as there is no common daily newspaper ownership.



Under the currently effective Local Television Multiple Ownership Rule,
absent a waiver, an individual (or entity) cannot have an attributable interest in more than one television station in a market, unless (i) the market would have at least eight independent television voices after the combination and at least
one of the stations is not one of the top-four-rated stations in the television market, or (ii) the stations Grade B contours do not overlap. Under the new, stayed rule, common ownership of up to three television stations is permitted in
markets with 18 or more television stations. Common ownership of up to two television stations is permitted in television markets with between five and 17 television stations. Ownership of one television station is permitted in television markets
with fewer than five television stations. The new rules do not permit combinations of two or more of the top-four-rated television stations in any market. In its June 2, 2003 order, the FCC also relaxed the standards for obtaining a waiver of
the Local Television Multiple Ownership Rule for failed (i.e., bankrupt) or failing stations (i.e., stations with negative cash flow and less than a four-share all-day audience rating). The FCC also stated that
it would consider waivers of the top-four ranked restriction in markets with 11 or fewer television stations.



The Dual Network Rule permits a television broadcast station to affiliate with one of the four major networksABC, CBS, FOX and NBC, that owns,
operates, maintains or controls one of the emerging broadcast networks. The four major networks are prohibited from merging with each other. This rule was retained by the FCC in its June 2, 2003 decision.



Although the new rules adopted by the FCC on June 2, 2003 provided for
increasing the National Television Ownership Rule cap on aggregate television audience reach to 45% of all television households, the 2004



14



---

##### Table of Contents

Consolidated Appropriations Act included a provision instructing the FCC to set the cap at 39%. Under the rule, a person or entity is prohibited from having
an attributable interest in television stations whose aggregate audience reach exceeds 39% of the television households in the United States. Under the FCCs rules, the number of households served by UHF stations is discounted by 50% for the
purposes of this calculation. The FCC has solicited comments on the effect, if any, of the 2004 Consolidated Appropriations Act on the FCCs decision in June 2003 to retain the 50% UHF discount applicable to the National Television Ownership
Rule and on pending petitions for reconsideration asking the FCC to eliminate the UHF discount.



Alien Ownership



The Communications Act restricts the ability of foreign entities or individuals to own or hold interests in U.S. broadcast licenses. Foreign governments,
representatives of foreign governments, non-U.S. citizens, representatives of non-U.S. citizens, and corporations or partnerships organized under the laws of a foreign country (collectively, aliens) are prohibited from holding broadcast
licenses. Aliens may directly or indirectly own or vote, in the aggregate, up to 20% of the capital stock of a licensee. In addition, a broadcast license may not be granted to or held by any corporation that is controlled, directly or indirectly, by
any other corporation more than 25% of whose capital stock is owned or voted by aliens if the FCC finds that the public interest will be served by the refusal or revocation of such license. The FCC has interpreted this provision to require an
affirmative finding that foreign ownership in excess of 25% would serve the public interest and, in the broadcast context, has made such a finding only in highly limited circumstances.



Obscenity, Indecency and Profanity



The FCCs rules prohibit the broadcast of obscene material at any time and indecent or profane material between the
hours of 6:00 a.m. and 10:00 p.m. Recently, the FCC has begun more vigorous enforcement of its indecency rules and has found on a number of occasions that broadcasts have contained indecent or profane material. The FCC has issued fines to licensees
found to have violated the indecency rules. Several appeals of certain of the FCCs recent enforcement actions and of the FCCs underlying indecency standards are pending in the federal courts.



Formerly, the maximum permitted fines for adjudicated violations of the
FCCs indecency rules were $32,500 per incident and $300,000 for each continuing violation. In June 2006, Congress increased the maximum permitted fines to $325,000 per incident and $3,000,000 for a continuing violation.



Because the FCC may investigate indecency complaints on an ex parte
basis, a licensee may not have knowledge of an indecency complaint unless and until the complaint results in the issuance of a formal FCC letter of inquiry or notice of apparent liability for monetary forfeiture. Three of our radio stations are
subject to pending letters of inquiry and one of our television stations is subject to a proposed fine as a result of their alleged broadcast of indecent material. The broadcasts at issue in each case occurred prior to the statutory increase in
indecency forfeitures. We believe the broadcasts identified in the complaints do not violate the indecency standards and will continue to defend them vigorously before the FCC.



Sponsorship Identification



Both the Communications Act and the FCC rules generally require that, when payment or other consideration has been received or promised to a broadcast
licensee for the airing of program material, at the time of the airing, the station must disclose that fact and identify who paid or promised to provide the consideration. In response to a complaint by a public interest organization, the FCC
recently issued letters of inquiry to several dozen television stations seeking to determine whether their broadcast of video news releases (VNRs) violated the sponsorship identification rules by failing to disclose the source and
sponsorship of the VNR materials. VNRs are news stories and feature materials produced by government agencies and commercial entities, among others, for use by broadcasters. Two of our television stations received and have responded to the VNR
letter of inquiry. We cannot predict the outcome of the FCCs investigation.



15



---

##### Table of Contents

Digital Television



The FCC has approved technical standards and channel assignments for digital television (DTV) service. The transition from
analog to digital format will (i) enable stations to transmit high-definition television or several streams of standard definition television and data simultaneously, and (ii) reduce the amount of spectrum needed for broadcast television
to the spectrum located between what are now television channels 2 through 51 (called the core spectrum). During the digital television transition period, all established television stations have been allocated a separate 6-megahertz
channel on which to conduct digital operations.



To the extent
a station has excess digital capacity (i.e., digital capacity not used to transmit a single free, over-the-air video program), it may elect to use that capacity in any manner consistent with FCC technical requirements, including for
additional free program streams, data transmission, interactive or subscription video services, or paging and information services. If a station uses its digital capacity to provide any such ancillary or supplementary services on a
subscription or otherwise feeable basis, it must pay the FCC an annual fee equal to 5% of the gross revenues realized from such services.



Congress has directed that the transition to DTV be completed by February 17, 2009, after which broadcasters will be required to return one of their
two assigned channels to the FCC and broadcast exclusively in digital format. In an order issued on September 7, 2004, the FCC established DTV construction milestones generally requiring affiliates of the top-four networks in television markets
1-100 to substantially complete construction of their full, authorized DTV facilities by July 1, 2005, and all other stations to substantially complete DTV construction by July 1, 2006. The FCC also established procedures for stations to
elect which of their two currently-assigned 6-megahertz channels they will retain for their permanent digital operations at the conclusion of the digital television transition period.



The effect digital broadcasting will have on us remains to be seen. Like other television broadcasters, we have made
substantial capital investments in digital transmission equipment in order to meet the FCCs mandates. We are broadcasting programs on a secondary digital channel in our Milwaukee and Las Vegas markets and we are continuing to explore the
opportunities provided by digital broadcasting, which remain in their formative stage.



Relationship With Cable/Satellite



A number of provisions of the Communications Act and FCC rules govern aspects of the relationship between broadcast television and subscriber services such as cable and satellite. The rules generally provide certain
protections for broadcast stations, for which cable and satellite services are both an important means of distribution and a provider of competing program channels.



To ensure that every local television station can be received in its local market without requiring a cable subscriber to
switch between cable and off-air signals, the FCC allows every full-power television broadcast station to require that all local cable systems transmit that stations analog programming (or digital programming, if the station has ceased analog
operations) to their subscribers within the stations market (the so-called must-carry rule). Alternatively, a station can elect to forego its must-carry rights and seek a negotiated agreement to establish the terms of its carriage
by a local cable systemreferred to as retransmission consent. A station electing retransmission consent assumes the risk that it will not be able to strike a deal with the cable operator and will not be carried. A station has the
opportunity to elect must-carry or retransmission consent every three years. A station that fails to notify a cable system of its election is presumed to have elected must-carry.



The FCC has declined to impose a dual carriage must-carry requirement on cable operators, which would have
required them to simultaneously carry broadcasters analog and digital signals for the balance of the digital transition period. The FCC also has declined to modify the must-carry rule to require cable operators to carry more than a single
digital programming stream from any particular television station following the transition to all-digital broadcasting. Consequently, if we engage in multicasting, as we have begun to do on some of our



16



---

##### Table of Contents

television stations, only one of each stations digital program streams will be entitled to mandatory carriage pursuant to the digital must-carry rule
after the end of the digital transition period. However, because the FCCs action does not affect digital retransmission consent agreements, we are free to negotiate with cable operators for the carriage of additional programming streams under
mutually agreed terms and conditions.



A similar must-carry and
retransmission consent regime governs carriage of local broadcast channels by direct-to-home satellite television operators. A satellite provider is not required to transmit the signal of any television station to its subscribers in that
stations market. However, if a satellite provider chooses to provide one local station to its subscribers in a market, the provider also must transmit locally every other station in that market that elects must-carry status. (As with cable,
stations may opt to pursue retransmission consent agreements.) A local television station that fails to make any election is deemed to have elected retransmission consent and is not guaranteed carriage. Satellite must-carry election periods occur
every three years, consistent with cable must-carry periods.



Employees



As of December 31, 2006, we and our subsidiaries,
including approximately 340 full-time and 10 part-time employees of our former telecommunications business, Norlight, which was sold on February 26, 2007, had approximately 3,800 full-time and 1,600 part-time employees compared to approximately
3,800 full-time and 1,700 part-time employees at December 25, 2005. Currently, there are 11 bargaining units representing approximately 800 (or approximately 15%) of our total number of employees. We have various collective bargaining
agreements with these bargaining units. Seven of these agreements will expire within the next two years, of which one agreement covering 14 employees of our daily newspaper expired in 2006. A majority of the full-time employees covered by a
collective bargaining agreement work at the daily newspaper.



|ITEM 1A.  RISK | FACTORS
|-------------- | -------



You should carefully consider the following risk factors and warnings before making an investment decision. If any of the risks below actually occur, our
business, financial condition, results of operations or prospects could be materially adversely affected. In that case, the price of our securities could decline and you could lose all or part of your investment. You should also refer to the other
information set forth or incorporated by reference in this document.



Risks
Relating to Our Diversified Media Business



Decreases in advertising
spending, resulting from economic downturn, war, terrorism or other factors, could adversely affect our financial condition and results of operations.



Approximately 71% of our revenue in 2006 was generated from the sale of local, regional and national advertising appearing in our newspapers and
shoppers and for broadcast on our radio and television stations. Advertisers generally reduce their advertising spending during economic downturns; a recession or economic downturn could have an adverse effect on our financial condition and results
of operations. Also, our advertising revenue tends to decline in times of national or local crisis because our radio and television stations broadcast more news coverage and sell less advertising time. For example, the threatened outbreak of
hostilities in Iraq in March 2003 and the war itself had a negative impact on our broadcast results due to reduced spending levels by some advertisers, cancellations by some advertisers for the duration of war coverage and elimination of advertising
inventory available from our television networks during their continuous coverage of the war. As a result, the war in Iraq, additional terrorist attacks or other wars involving the United States or any other local or national crisis could adversely
affect our financial condition and results of operations.



Additionally, some of our printed publications and our radio and television stations generate a large percentage of their advertising revenue from a limited number of sources, including the automotive industry, political advertising and
professional sports contracts. As a result, even in the absence of a recession or economic



17



---

##### Table of Contents

downturn, adverse changes specifically affecting these advertising sources could significantly reduce advertising revenue and have a material adverse affect
on our financial condition and results of operations.



In
addition, our advertising revenue and circulation revenue depend upon a variety of other factors specific to the communities that we serve. Changes in those factors could negatively affect those revenues. These factors include, among others, the
size and demographic characteristics of the local population, the concentration of retail stores and local economic conditions in general. If the population demographics, prevailing retail environment or local economic conditions of a community
served by us were to change adversely, revenue could decline and our financial condition and results of operations could be adversely affected. This is especially true with respect to the metropolitan Milwaukee market, which is served by our daily
newspaper, theMilwaukee Journal Sentinel, one of our television stations, two of our radio stations, a number of our community newspapers and shoppers and 30 websites, and from which we derived approximately 46% of our revenue in 2006.



Our diversified media businesses operate in highly competitive markets,
and during a time of rapid competitive changes, we may lose market share and advertising revenue to competing newspapers, radio and television station or other types of media competitors, as well as through consolidation of media competitors or
changes in advertisers media buying strategies.



Our diversified media businesses operate in highly competitive markets. Our newspapers, shoppers, radio stations, television stations and Internet sites compete for audiences and advertising revenue with other newspapers, shoppers, radio
stations, television stations and Internet sites as well as with other media such as magazines, cable television, satellite television, satellite radio, outdoor advertising, the Internet and direct mail. Some of our current and potential competitors
have greater financial, marketing, programming and broadcasting resources than we do and may respond faster or more aggressively to changing competitive dynamics.



In newspapers and shoppers, our revenue primarily consists of advertising and paid circulation. Competition for advertising
expenditures and paid circulation comes from local, regional and national newspapers, shoppers, magazines, broadcast and cable television, radio, direct mail, yellow pages, the Internet and other media. Competition for newspaper advertising revenue
is based largely upon advertiser results, advertising rates, readership, demographics and circulation levels, while competition for circulation is based largely upon the content of the newspaper, its price, editorial quality and customer service. On
occasion, our businesses compete with each other for regional and local advertising, particularly in the Milwaukee market. Our local and regional competitors in community newspapers and shoppers are typically unique to each market, but we have many
competitors for advertising revenue that are larger and have greater financial and distribution resources than us. Circulation revenue and our ability to achieve price increases for our print products are affected by competition from other
publications and other forms of media available in our various markets, declining consumer spending on discretionary items like newspapers, decreasing amounts of free time, and declining frequency of regular newspaper buying among young people. We
may incur increasing costs competing for advertising expenditures and paid circulation. If we are not able to compete effectively for advertising expenditures and paid circulation, our revenue may decline and our financial condition and results of
operations may be adversely affected.



Our radio and television
broadcasting businesses compete for audiences and advertising revenue primarily on the basis of programming content and advertising rates. Advertising rates are set based upon a variety of factors, including a programs popularity among the
advertisers target audience, the number of advertisers competing for the available time, the size and demographic make-up of the market served and the availability of alternative advertising in the market. Our ability to maintain market share
and competitive advertising rates depends in part on audience acceptance of our network, syndicated and local programming. Changes in market demographics, the entry of competitive stations to our markets, the introduction of competitive local news
or other programming by cable, satellite or other news providers, or the adoption of competitive formats by existing radio stations could result in lower ratings and have a material adverse effect on our financial condition and results of
operations. Changes in ratings technology or metrics used by advertisers or other changes in advertisers media buying strategies also could have a material adverse effect on our financial condition and results of operations.



18



---

##### Table of Contents

Further, our operations may be adversely affected by consolidation in the broadcast industry, especially
if competing stations in our markets are acquired by competitors who have a greater national scope, can offer a greater variety of national and syndicated programming for listeners and viewers and have enhanced opportunities for advertisers to reach
broader markets. On June 2, 2003, the FCC voted to relax rules that currently restrict media ownership; the modified rules, which were to have become effective on September 4, 2003, would likely result in additional industry consolidation.
However, the U.S. Court of Appeals for the Third Circuit issued a stay of the new rules on September 3, 2003 and, in an opinion issued on June 24, 2004, remanded the case to the FCC for further proceedings. The court retained jurisdiction
over the case pending its future review of the FCCs action on remand. In an order issued on September 3, 2004, in response to a request by the FCC, the court lifted its stay insofar as it applied to the FCCs proposed modification of
the local market definition used for purposes of applying the limitation on local radio station ownership, which has taken effect. In all other respects, the rules that were in effect prior to June 2, 2003 will remain in effect until
proceedings related to the rules are resolved or the stay is lifted. On June 13, 2005, the United States Supreme Court declined to review the June 24, 2004 ruling by the Third Circuit Court of Appeals. In response to the remand order and
in order to satisfy its statutory obligation to conduct a quadrennial review of its media ownership rules, on July 24, 2006, the FCC released a Further Notice of Proposed Rulemaking soliciting additional public comment on the rules. We cannot
predict the outcome of any further administrative or judicial proceedings related to the rules.



Seasonal and cyclical changes in advertising volume affect our quarterly revenue and results of operations and may cause our stock price to be volatile.



Our quarterly revenue and results of operations are subject to seasonal and
cyclical fluctuations that we expect to continue to affect our results of operations in future periods. Our first quarter of the year tends to be our weakest quarter because advertising volume is typically at its lowest levels following the holiday
season. Our fourth quarter tends to be our strongest quarter primarily because of revenue from holiday season advertising. Our quarterly revenue also varies based on the dynamics of the television broadcast industry. In particular, we experience
fluctuations, primarily during our third and fourth quarters, during political voting periods as advertising dramatically increases. Also, since NBC has exclusive rights to broadcast the Olympics through 2012, our NBC affiliated stations experience
increased viewership and revenue during Olympic broadcasts in the first or third quarters. Other factors that affect our quarterly revenue and results of operations may be beyond our control, including changes in the pricing policies of our
competitors, the hiring and retention of key personnel, wage and cost pressures, changes in newsprint prices and general economic factors. These quarterly fluctuations in revenue and results of operations may cause our stock price to be volatile.



We may not be able to acquire radio stations, television stations,
newspapers or assets related to our Internet-based growth strategy, successfully manage acquired properties, or increase our profits from these operations.



Our diversified media business has in the past expanded through acquisitions of radio and television stations and community
newspapers and shoppers in selected markets. We intend to pursue continued growth through selected acquisitions, including acquisitions and investments related to our Internet-based growth strategy, if we are able to identify strategic acquisition
candidates, negotiate definitive agreements on acceptable terms and, as necessary, secure additional financing.



Our acquisition strategy includes certain risks. For example:



| |  |  | we may not be able to identify suitable acquisition candidates or, if identified, negotiate successfully their acquisition;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------



| |  |  | we may not be able to secure additional financing necessary to complete acquisitions;
| | - |  | -------------------------------------------------------------------------------------



| |  |  | we may encounter unforeseen expenses, difficulties, complications or delays in connection with the integration of acquired entities and the expansion of operations;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | we may fail to achieve anticipated financial benefits from acquisitions;
| | - |  | ------------------------------------------------------------------------



19



---

##### Table of Contents

| |  |  | we may encounter regulatory delays or other impediments in connection with proposed transactions;
| | - |  | -------------------------------------------------------------------------------------------------



| |  |  | our acquisition strategy may divert managements attention from the day-to-day operation of our businesses;
| | - |  | -----------------------------------------------------------------------------------------------------------



| |  |  | key personnel at acquired companies may leave employment; or
| | - |  | ------------------------------------------------------------



| |  |  | we may be required to focus resources on integration of operations rather than more profitable areas.
| | - |  | -----------------------------------------------------------------------------------------------------



In addition, we may compete for certain acquisition targets with companies
having greater financial resources. We cannot assure you that we will be able to successfully make future acquisitions or what effects those acquisitions may have on our financial condition and results of operations.



We have in the past and may in the future cluster multiple radio
and television stations in markets that we believe have demographic characteristics and growth potential suitable to further our business objectives. Multiple stations in the same geographic market area could make our results of operations more
vulnerable to adverse local economic or demographic changes than they would otherwise be if our stations were located in geographically diverse areas.



We anticipate that we would finance potential acquisitions through cash provided by operating activities and/or borrowings, which would reduce our cash
available for other purposes. We cannot assure you, however, that we would be able to obtain needed financing in the event strategic acquisition opportunities are identified. We may also consider financing acquisitions by issuing additional shares
of class A common stock, which would dilute current shareholders ownership. Another potential source of financing for future acquisitions is to incur more debt, which would lead to increased leverage and debt service requirements. Inherent in
any future acquisitions is the risk of transitioning company cultures and facilities, which could have a material adverse effect on our financial condition and results of operations, particularly during the period immediately following any
acquisitions.



Our publishing business may suffer if there is a
significant increase in the cost of newsprint or a reduction in the availability of newsprint.



The basic raw material for newspapers and shoppers is newsprint. Our newsprint consumption related to our publications totaled $37.6 million in 2006,
which was 11.4% of our total publishing revenue. We currently purchase approximately 88% of our newsprint from two suppliers. Recently, once of our suppliers, Bowater Incorporated, announced a definitive agreement to merge with another company. We
cannot predict the effect this potential merger may have on the cost or availability of newsprint to us. Our inability to obtain an adequate supply of newsprint in the future or significant increases in newsprint costs could have a material
adverse effect on our financial condition and results of operations.



Changes relating to information collection and use could adversely affect our ability to collect and use data, which could harm our business.



Recent public concern over methods of information-gathering has led to the enactment of legislation in certain jurisdictions
that restricts the collection and use of information. Our publishing business relies in part on telemarketing sales, which are affected by recent do not call legislation at both the federal and state levels. We also engage in e-mail
marketing in connection with our publishing and broadcasting businesses. Further legislation, industry regulations, the issuance of judicial interpretations or a change in customs relating to the collection, management, aggregation and use of
consumer information could materially increase the cost of collecting that data, or limit our ability to provide that information to our customers or otherwise utilize telemarketing or e-mail marketing, and could adversely affect our results of
operations.



20



---

##### Table of Contents

If we are unable to respond to changes in technology and evolving industry standards, our radio stations may not be
able to effectively compete.



The broadcast media
industry is subject to the emergence of new media technologies and evolving industry standards. Several new technologies are being developed that may compete with our radio stations, including:



| |  |  | audio programming by cable television systems, direct broadcast satellite systems, personal communications systems, Internet content providers and other digital
audio broadcast formats;
| | - |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | satellite digital audio radio service, with sound quality comparable to that of compact discs, which has resulted in the introduction of two satellite radio
services that provide numerous niche formats, whose potential merger was recently announced;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | in-band on-channel digital radio, which could improve the quality of existing AM and FM stations, including stations owned by us;
| | - |  | ---------------------------------------------------------------------------------------------------------------------------------



| |  |  | expanded approval of low-power FM radio, which could result in additional FM radio broadcast outlets designed to serve small, localized areas; and
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | enhanced capabilities of cell phones, MP3 players, and other mobile devices.
| | - |  | ----------------------------------------------------------------------------



These new technologies have the potential to introduce new market competitors or change the means by which radio advertisers
can most efficiently and effectively reach their target audiences. We may not have the resources to acquire new technologies or to introduce new services that could compete with these new technologies.



If we are unable to respond to changes in technology and evolving industry standards,
our television stations may not be able to effectively compete.



New technologies could also adversely affect our television stations. Programming alternatives such as cable, direct satellite-to-home services, pay-per-view, the Internet and home video and entertainment systems have
fractionalized television viewing audiences. Over the past decade, cable television programming services have captured an increasing market share, while the aggregate viewership of the major television networks has declined. In addition, the
expansion of cable television and other technological changes, including the recent entry by certain of the regional Bell operating companies into the video services delivery market, has increased, and may continue to increase, competitive demand
for programming. Such increased demand, together with rising production costs may, in the future, increase our programming costs or impair our ability to acquire programming. The enhanced video and audio capabilities of cell phones, MP3 players and
other mobile devices also has the potential to affect television viewership.



In addition, video compression techniques now in use with direct broadcast satellites and, increasingly, by cable and wireless cable, are expected to permit greater numbers of channels to be carried within existing
bandwidth. These compression techniques, as well as other technological developments, are applicable to all video delivery systems, including over-the-air broadcasting, and have the potential to provide vastly expanded programming to highly targeted
audiences. Reduction in the cost of creating additional channel capacity could lower entry barriers for new channels and encourage the development of increasingly specialized niche programming. This ability to reach very narrowly defined audiences
may alter the competitive dynamics for advertising expenditures. We are unable to predict the effect that these technological changes will have on the television industry or the future results of our television broadcast business.



If the network programming we broadcast pursuant to network affiliation agreements does
not maintain satisfactory viewership levels or if the networks we are affiliated with terminate or do not renew our agreements our advertising revenues, financial condition and results of operations may be adversely affected.



The television viewership levels, and ultimately advertising revenue, for
each of our stations are materially dependent upon network programming, which is provided pursuant to network affiliation agreements. We cannot



21



---

##### Table of Contents

assure you that network programming will achieve or maintain satisfactory viewership levels. In particular, because four of our stations (including our
low-power station) are parties to affiliation agreements with ABC, three with NBC, two with FOX and one with CBS, failures of ABC, NBC, FOX or CBS network programming to attract viewers or generate satisfactory ratings may have an adverse effect on
our financial condition and results of operations. In addition, we cannot assure you that we will be able to renew our network affiliation agreements on as favorable terms or at all. The termination or non-renewal, or renewal on less favorable
terms, of the affiliation agreements could have an adverse effect on us.



Changes in the relationship of television networks with their affiliates and other content providers and distribution channels also could affect our success. For example, networks and other content providers recently
have begun to sell programming content through new distribution channels and offer viewers the ability to watch programs on-demand, rather than on an established live television broadcast schedule.



The costs of television programming may increase, which could adversely affect our
results of operations.



Television programming is a
significant operating cost component in our broadcasting operations. We cannot assure you that we will not be exposed in the future to increased programming costs. Should such an increase occur, it could have an adverse effect on our results of
operations. Television networks have been seeking arrangements from their affiliates to share the networks programming costs. We cannot predict the nature or scope of any such potential compensation arrangements or the effect, if any, on our
operations. In addition, acquisitions of program rights for syndicated programming are usually made two or three years in advance and may require multi-year commitments, making it difficult to predict accurately how a program will perform. In some
instances, programs must be replaced before their costs have been fully amortized, resulting in write-offs that increase station operating costs and decrease station earnings.



If our key on-air talent does not remain with us or loses popularity, our advertising revenue and results of operations may be
adversely affected.



We employ or independently
contract with a number of on-air personalities and hosts of television and radio programs whose ratings success depends in part on audience loyalty in their respective markets. Although we have entered into long-term agreements with some of our key
on-air talent and program hosts to protect our interests in those relationships, we cannot assure you that all or any of these key employees will remain with us over the long term. Furthermore, the popularity and audience loyalty to our key on-air
talent and program hosts is highly sensitive to rapidly changing public tastes. A loss of such popularity or audience loyalty could reduce ratings and may impact our ability to generate advertising revenue.



In addition, our key local management employees are extremely important to
our business since we believe that our growth and future success depends on retaining local management with knowledge of the community, its audience and its advertisers. Our inability to attract or retain these skilled personnel could have a
material adverse impact on our financial condition and results of operations.



Changes in the professional sports industry or changes in our contractual relationships with local professional sports teams could result in decreased ratings for our Milwaukee radio station and adversely affect our results of
operations and financial condition.



Our Milwaukee
radio station, WTMJ-AM, currently maintains exclusive radio broadcast rights for the Green Bay Packers, Milwaukee Bucks and Milwaukee Brewers, and arranges a statewide radio network for these organizations. Our advertising revenue could be adversely
affected by changes in the professional sports industry, such as a relocation of one of the local professional sports teams from the Wisconsin market or the potential loss of exclusivity due to league or team initiatives such as pay-per-listen,
satellite radio or Internet broadcast of games. In addition, we could lose our exclusive broadcast rights during periodic competitive bidding, or suffer damage to the marketplace value of sports advertising due to factors such as a players
strike, negative publicity or downturn in on-field performance of a team.



22



---

##### Table of Contents

If cable systems do not carry our new digital channels, our revenue and results of operations may be adversely
affected.



Since our television stations are highly
dependent on carriage by cable systems in many of the areas they service, any rules of the FCC that ultimately impose no or limited obligations on cable systems to carry digital television signals in their local markets could result in some of our
television stations or channels not being carried on cable systems, which could adversely affect our revenue and results of operations.



If we cannot renew our FCC broadcast licenses, our business will be impaired.



Our business depends upon maintaining our broadcast licenses, which are issued by the FCC for a term of eight years and are
renewable. Pursuant to FCC rules, certain of our broadcast licenses that expired in 2006 and 2005 remain in effect pending processing by the FCC of their timely filed renewal applications. Interested parties may challenge a renewal application. The
FCC has the authority to revoke licenses, not renew them, or renew them with conditions, including renewals for less than a full term. We cannot assure you that our future renewal applications will be approved, or that the renewals, even if granted,
will not include conditions or qualifications that could adversely affect our operations. If we fail to renew any of our licenses, or renew them with substantial conditions or modifications (including renewing one or more of our licenses for a term
of fewer than eight years), it could prevent us from operating the affected station and generating revenue from it.



The FCC may impose sanctions or penalties for violations of rules or regulations.



If we or any of our officers, directors or significant shareholders materially violate the FCCs rules and regulations
or are convicted of a felony or are found to have engaged in unlawful anticompetitive conduct or fraud upon another government agency, the FCC may, in response to a petition by a third party or on its own initiative, in its discretion, commence a
proceeding to impose sanctions upon us that could involve the imposition of monetary penalties, the denial of a license renewal application, revocation of a broadcast license or other sanctions. If the FCC were to issue an order denying a license
renewal application or revoking a license, we would be required to cease operating the broadcast station only after we had exhausted all administrative and judicial review without success. In addition, the FCC has recently emphasized more vigorous
enforcement of indecency standards and the prohibition on payola, which could result in increased costs associated with the adoption and implementation of stricter compliance procedures at our broadcast facilities or FCC fines.



We could experience delays in expanding our business due to antitrust
laws.



The Federal Trade Commission, the United States
Department of Justice and the FCC carefully review our proposed business acquisitions and dispositions under their respective regulatory authority, focusing on the effects on competition, the number and types of stations owned in a market and the
effects on concentration of market revenue share. The Department of Justice has challenged proposed acquisitions of radio stations, particularly in instances where an existing licensee seeks to acquire additional radio stations in the same market.
Some of these challenges ultimately resulted in consent decrees requiring, among other things, divestitures of certain stations. In general, the Department of Justice has more closely scrutinized radio station acquisitions that result in local
market shares in excess of 40% of radio advertising revenue. Any delay, prohibition or modification required by regulatory authorities could adversely affect the terms of a proposed transaction or could require us to modify or abandon an otherwise
attractive acquisition opportunity. The filing of petitions or complaints against us or any FCC licensee from which we acquire a station could result in the FCC delaying the grant of, refusing to grant or imposing conditions on its consent to the
assignment or transfer of control of licenses.



Regulatory changes may
result in increased competition in our radio and television broadcasting business.



The radio and television broadcasting industry is subject to extensive and changing federal regulation. Among other things, the Communications Act of 1934, as amended, and FCC rules and policies require FCC



23



---

##### Table of Contents

approval for transfers of control and assignments of licenses, and limit the number and types of broadcast properties in a market in which any person or
entity may have an attributable interest. Media ownership restrictions include a variety of limits on local ownership, such as a limit of one television station in medium and smaller markets and two stations in larger markets as long as one station
is not a top-four rated station (known as the duopoly rule), a prohibition on ownership of a daily English-language newspaper and a broadcast station in the same market, and limits both on the ownership of radio stations, and on common ownership of
radio stations and television stations, in the same local market. Under rules adopted by the FCC on June 2, 2003, a party would be permitted to own up to three television stations in the very largest markets, up to two television stations in
medium-size markets and one television station in smaller markets. The FCCs new rules also would relax restrictions on common ownership of broadcast stations and newspapers, and on common ownership of radio stations and television stations
within the same area. The rules also proposed a new local market definition for purposes of applying the limitation on local radio station ownership. The new FCC media ownership rules were to have become effective on September 4, 2003. However,
the U.S. Court of Appeals for the Third Circuit issued a stay of the new rules on September 3, 2003, and, in an opinion issued on June 24, 2004, remanded the case to the FCC for further proceedings. The court retained jurisdiction over the
case pending its future review of the FCCs actions on remand. In an order issued on September 3, 2004, in response to a request by the FCC, the court lifted its stay insofar as it applied to the modified local radio ownership rule, which
has taken effect. In all other respects the rules that were in effect prior to June 2, 2003 will remain in effect until proceedings related to the rules are resolved or the stay is lifted. On June 13, 2005, the United States Supreme Court
declined to review the June 24, 2004 ruling by the Third Circuit Court of Appeals. In response to the remand order and in order to satisfy its statutory obligation to conduct a quadrennial review of its media ownership rules, on July 24,
2006, the FCC released a Further Notice of Proposed Rulemaking soliciting additional public comment on the rules.



In addition, the 2004 Consolidated Appropriations Act prohibits any person or entity from having an attributable interest in broadcast television stations
with an aggregate audience reach exceeding 39% of television households nationally. The increase in the national television viewership cap gave the largest television operators the ability to continue to hold or to acquire additional stations, which
may give them a competitive advantage over us, since they have much greater financial and other resources than we have. In addition, the networks ability to acquire additional stations could give them leverage over their affiliates
on issues such as compensation and program clearance, in part because of the risk that a network facing an uncooperative affiliate could acquire a station in the market and terminate its agreement with that affiliate. The relaxation of the national
and local media ownership restrictions may cause us to face increasing competition with larger and more diversified entities for advertising revenue.



Risks Relating to Our Printing Services Business and Other Segment



Postal rate increases and disruptions in postal services could lead to reduced volumes of business.



Our printing services business, as well as our direct marketing business,
have been negatively impacted from time to time during the past years by postal rate increases. Rate increases may result in customers mailing fewer pieces with reduced page counts. The USPS has announced another rate increase effective May 2007.
Additionally, the amount of mailings could be reduced in response to disruptions in and concerns over the security of the U.S. mail system. Such responses by customers could negatively impact us by decreasing the amount of printing and direct
marketing services or other services that our customers purchase from us, which could result in decreased revenue.



Revenue from our direct marketing business may decline if our data and laser print personalization products do not maintain technological competitiveness.



Our direct marketing service business is affected by
the complexity and uncertainty of new technologies. If we are not able to maintain technological competitiveness in our data and laser print personalization products, processing functionality or software systems and services, we may not be able to
provide effective or efficient service to our customers, and our revenue may decline.



24



---

##### Table of Contents

Other Business Risks



We depend on key personnel, and we may not be able to operate and grow our business effectively if we lose the services of any of our senior executive officers or
are unable to attract qualified personnel in the future.



We are dependent upon the efforts of our senior executive officers. The success of our business is heavily dependent on our ability to retain our current management and to attract and retain qualified personnel in the future. Competition
for senior management personnel is intense, and we may not be able to retain our personnel. We have not entered into employment agreements with our key personnel, other than with our Chairman and Chief Executive Officer, and these individuals may
not continue in their present capacity with us for any particular period of time. We have, however, entered into change in control agreements with certain of our senior executives which provide, within two years after a change in control, severance
payments and benefits to the executive if his or her employment is terminated without cause or the executive resigns for good reason. We do not have key man insurance for any of our executive officers or key personnel. The loss of any senior
executive officer could require the remaining executive officers to divert immediate and substantial attention to seeking a replacement. Our inability to find a replacement for any departing executive officer on a timely basis could adversely affect
our ability to operate and grow our business.



Our business may be
negatively affected by work stoppages, slowdowns or strikes by our employees.



Currently, there are 11 bargaining units representing approximately 800 (or approximately 15%) of our total number of employees. We have entered into various collective bargaining agreements with these bargaining
units. Seven of these agreements will expire within the next two years, of which one agreement covering 14 employees of our daily newspaper expired in 2006. A majority of the employees covered by a collective bargaining agreement work at the daily
newspaper. We cannot assure you of the results of negotiations of future collective bargaining agreements, whether future collective bargaining agreements will be negotiated without interruptions in our businesses, or the possible impact of future
collective bargaining agreements on our financial condition and results of operations. We also cannot assure you that strikes will not occur in the future in connection with labor negotiations or otherwise. Any prolonged strike or work stoppage
could have a material adverse effect on our financial condition and results of operations.



25



---

##### Table of Contents

|ITEM 1B. | UNRESOLVED STAFF COMMENTS
|-------- | -------------------------



None.



|ITEM 2. | PROPERTIES
|------- | ----------



Our corporate headquarters are located in Milwaukee, Wisconsin. We believe all of our properties are well maintained, are in good condition, and suitable
for present operations. There are no material encumbrances on any of our owned properties or equipment. The following are the principal properties operated by us and our subsidiaries and the approximate square footage, as of December 31, 2006:



|                                                                                                                                                                                                                  |  |         |  |       
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------- |  | ------
|                                                                                                                                                                                                                  |  | Owned   |  | Leased
|Publishing                                                                                                                                                                                                        |  |         |  |       
|Printing plants, newsrooms, offices and warehouses located in:                                                                                                                                                    |  |         |  |       
|Milwaukee, WI(1)                                                                                                                                                                                                  |  | 538,000 |  | 33,000
|West Milwaukee, WI(2)                                                                                                                                                                                             |  | 479,000 |  |      
|Cedarburg, WI                                                                                                                                                                                                     |  | 17,000  |  |      
|Waukesha, WI                                                                                                                                                                                                      |  |        |  | 23,000
|Wauwatosa, WI                                                                                                                                                                                                     |  | 18,000  |  |      
|Sturtevant, WI                                                                                                                                                                                                    |  |        |  | 10,000
|New Berlin, WI                                                                                                                                                                                                    |  | 14,000  |  | 21,000
|Madison, WI                                                                                                                                                                                                       |  |        |  | 8,000 
|Menomonee Falls, WI                                                                                                                                                                                               |  | 12,000  |  |      
|Waupaca, WI                                                                                                                                                                                                       |  | 58,000  |  |      
|Hartland, WI                                                                                                                                                                                                      |  | 58,000  |  |      
|Mukwonago, WI                                                                                                                                                                                                     |  |        |  | 6,000 
|Elkhorn, WI                                                                                                                                                                                                       |  |        |  | 5,000 
|Waterford, WI                                                                                                                                                                                                     |  |        |  | 5,000 
|Oconomowoc, WI                                                                                                                                                                                                    |  |        |  | 8,000 
|West Bend, WI                                                                                                                                                                                                     |  | 7,000   |  |      
|Hartford, WI                                                                                                                                                                                                      |  | 7,000   |  |      
|New London, WI                                                                                                                                                                                                    |  | 6,000   |  |      
|Rhinelander, WI                                                                                                                                                                                                   |  | 7,000   |  |      
|Fond du Lac, Sheboygan, Beaver Dam, Johnson Creek, Germantown, Muskego, Port Washington, Jefferson, Marshfield, Menasha, Merrill, Oshkosh,
Ripon, Seymour, Stevens Point, Wausau, Antigo and Wisconsin Rapids, WI |  | 8,000   |  | 51,000
|Shelton, CT                                                                                                                                                                                                       |  |        |  | 8,000 
|Trumbull, CT                                                                                                                                                                                                      |  | 57,000  |  |      
|Venice, Orange Park, Sarasota and Ponte Vedra, FL                                                                                                                                                                 |  |        |  | 12,000
|Baton Rouge and Kenner, LA                                                                                                                                                                                        |  |        |  | 16,000
|Dalton and Lee, MA                                                                                                                                                                                                |  |        |  | 3,000 
|Carroll, Cambridge, Chillicothe, Circleville, Coshocton, Logan, New Lexington, Newark, and Zanesville, OH                                                                                                         |  | 43,000  |  | 13,000
|Bennington and Manchester Village, VT                                                                                                                                                                             |  |        |  | 10,000
|Pound Ridge, NY                                                                                                                                                                                                   |  |        |  | 1,000 
|                                                                                                                                                                                                                  |  |        
|Broadcasting                                                                                                                                                                                                      |  |         |  |       
|Offices, studios and transmitter and tower sites located in:                                                                                                                                                      |  |         |  |       
|Milwaukee, WI(3)                                                                                                                                                                                                  |  | 109,000 |  |      
|Green Bay, WI                                                                                                                                                                                                     |  | 22,000  |  | 2,000 
|Las Vegas, NV                                                                                                                                                                                                     |  | 22,000  |  |      
|Lansing, MI                                                                                                                                                                                                       |  | 2,000   |  | 13,000
|Palm Springs, CA                                                                                                                                                                                                  |  | 19,000  |  | 1,000 



26



---

##### Table of Contents

|                                                                 |  |        |  |        
|---------------------------------------------------------------- |  | ------ |  | -------
|                                                                 |  | Owned  |  | Leased 
|Broadcasting, continued                                          |  |        |  |        
|Omaha, NE                                                        |  | 62,000 |  |       
|Tucson, AZ                                                       |  | 29,000 |  | 9,000  
|Knoxville, TN (4)                                                |  | 26,000 |  |       
|Boise, ID                                                        |  | 49,000 |  | 13,000 
|Wichita, KS (5)                                                  |  | 23,000 |  | 6,000  
|Springfield, MO                                                  |  | 2,000  |  | 9,000  
|Tulsa, OK                                                        |  | 22,000 |  | 1,000  
|Fort Myers, FL                                                   |  | 25,000 |  |       
|Mount Bigelow, AZ                                                |  | 2,000  |  |       
|                                                                 |  |       
|Printing services                                                |  |        |  |        
|Offices, printing plants and warehouses located in:              |  |        |  |        
|St. Joseph, MI(3)                                                |  |       |  | 218,000
|                                                                 |  |       
|Direct marketing services                                        |  |        |  |        
|Offices, plants and warehouses located in:                       |  |        |  |        
|St. Paul, MN(3)                                                  |  |       |  | 87,000 
|Clearwater, FL                                                   |  |       |  | 45,000 
|Milwaukee, WI                                                    |  |       |  | 23,000 
|                                                                 |  |       
|Discontinued operations                                          |  |        |  |        
|Printing plant located in:                                       |  |        |  |        
|Green Bay, WI(6)                                                 |  | 40,000 |  |       
|                                                                 |  |       
|Telecommunications offices and satellite antennae located in(7): |  |        |  |        
|Brookfield, WI(3)                                                |  |       |  | 75,000 
|Green Bay, WI                                                    |  |       |  | 6,000  
|Madison, WI                                                      |  |       |  | 4,000  
|Afton, WI                                                        |  | 4,000  |  |       
|Skokie, IL                                                       |  |       |  | 6,000  
|Chicago, IL                                                      |  |       |  | 6,000  
|Buffalo Grove, IL                                                |  |       |  | 1,000  
|Grand Rapids, MI                                                 |  |       |  | 11,000 
|Lansing, MI                                                      |  |       |  | 2,000  
|Plymouth, MI                                                     |  |       |  | 2,000  
|St. Paul, MN                                                     |  |       |  | 3,000  

---

|(1) | Includes our corporate headquarters and the Milwaukee Journal Sentinels business and editorial offices.
|--- | --------------------------------------------------------------------------------------------------------



|(2) | Production facility housing printing, packaging, inserting, recycling, distribution, and transportation operations of the Milwaukee Journal Sentinel.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Includes our business operations headquarters.
|--- | -----------------------------------------------



|(4) | Includes 5,000 square feet leased to third party pursuant to lease expiring in September 2012 and 9,000 square feet not in use.
|--- | -------------------------------------------------------------------------------------------------------------------------------



|(5) | Includes 4,700 square feet not in use.
|--- | --------------------------------------



|(6) | Property to be sold to Multi-Color Corporation, in connection with the sale of the assets of NorthStar Print Group, Inc., upon the achievement of certain environmental standards.
The property is currently being leased to Multi-Color.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(7) | Properties sold or leases assumed by Q-Comm upon the February 26, 2007 sale of Norlight.
|--- | ----------------------------------------------------------------------------------------



27



---

##### Table of Contents

|ITEM 3. | LEGAL PROCEEDINGS
|------- | -----------------



See Note 9 in our Notes to Consolidated Financial Statements, which is incorporated herein by reference.



|ITEM 4. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
|------- | ---------------------------------------------------



No matters were submitted to a vote of security holders during the fourth quarter of 2006.



Executive Officers of Registrant



The following table sets forth the names, ages and positions of our executive officers as of February 28, 2007.



|                     |  |                                                                     |  |    
|-------------------- |  | ------------------------------------------------------------------- |  | ---
|Name                 |  | Title                                                               |  | Age
|Steven J. Smith      |  | Chairman of the Board, Chief Executive Officer and Director         |  | 56 
|Douglas G. Kiel      |  | President                                                           |  | 58 
|Elizabeth Brenner    |  | Executive Vice President                                            |  | 52 
|Paul M. Bonaiuto     |  | Executive Vice President and Chief Financial Officer                |  | 56 
|Mary Hill Leahy      |  | Senior Vice President, General Counsel and Chief Compliance Officer |  | 52 
|Anne M. Bauer        |  | Vice President and Controller                                       |  | 42 
|Carl D. Gardner      |  | Vice President, Digital Media                                       |  | 50 
|Mark J. Keefe        |  | Vice President                                                      |  | 47 
|Kenneth L. Kozminski |  | Vice President                                                      |  | 41 
|Paul E. Kritzer      |  | Vice President, Secretary and General Counsel-Media                 |  | 64 
|James P. Prather     |  | Vice President                                                      |  | 49 
|Karen O. Trickle     |  | Vice President and Treasurer                                        |  | 50 



Steven J. Smith is
Chairman of the Board and Chief Executive Officer. Mr. Smith was elected Chief Executive Officer in March 1998 and Chairman in December 1998. Mr. Smith was President from September 1992 to December 1998. Mr. Smith has been a director
since May 2003. Mr. Smith was a director of our predecessor company since 1987.



Douglas G. Kiel is President. Mr. Kiel was elected President in December 1998. In addition, Mr. Kiel has been the Vice Chairman and Chief Executive Officer of Journal Broadcast Group since December 2001. He
was Executive Vice President between June 1997 and December 1998 and President of Journal Broadcast Group from June 1992 to December 1998.



Elizabeth Brenner is Executive Vice President. Ms. Brenner was elected Vice President in December 2004. In addition, Ms. Brenner is Chief
Operating Officer of our publishing businesses and has been President of Journal Sentinel Inc. and Publisher of the Milwaukee Journal Sentinelsince January 2005. Ms. Brenner was Publisher of The News Tribune, a Tacoma, Washington
publication of the McClatchy Company, from 1998 to December 2004.



Paul M. Bonaiuto is Executive Vice President and Chief Financial Officer. Mr. Bonaiuto was elected Executive Vice President in June 1997 and Chief Financial Officer in January 1996. Mr. Bonaiuto was Senior Vice President between
March 1996 and June 1997. He was President of NorthStar Print Group from June 1994 to December 1995.



Mary Hill Leahy is Senior Vice President, General Counsel and Chief Compliance Officer. She was elected Senior Vice President and General Counsel in May
2003 and Chief Compliance Officer in April 2005. Prior thereto, she served as Vice President and General Counsel-Business Services since July 2001. Ms. Leahy was General Counsel Americas, GE Medical Systems, a developer and manufacturer of
medical diagnostic equipment, from January 1999 to July 2001.



28



---

##### Table of Contents

Anne M. Bauer is a Vice President and Controller. Ms. Bauer was elected Vice President and
Controller in June 2000. She was Controller from January 1999 to June 2000 and Assistant Controller from January 1995 to January 1999.



Carl D. Gardner is a Vice President, Digital Media. Mr. Gardner was elected Vice President in June 1999 and named Vice President, Digital Media in
February 2007. In addition, Mr. Gardner has been the Executive Vice President, Television and Radio Operations and Digital Interactive Media of Journal Broadcast Group since April 2005. He was President-Radio, Journal Broadcast Group from
December 1998 to April 2005.



Mark J. Keefe is a Vice
President. Mr. Keefe was elected Vice President in March 1996. Mr. Keefe has also been President of PrimeNet since October 1995.



Kenneth L. Kozminski is a Vice President. Mr. Kozminski was elected Vice President in December 1999. In addition, Mr. Kozminski has been
President of IPC Print Services since July 1999. He was Vice President and General Manager of Eastern Region-IPC Print Services from July 1998 to July 1999.



Paul E. Kritzer is Vice President, Secretary and General Counsel-Media. Mr. Kritzer was elected Vice President and General Counsel-Media in July 2001
and Secretary in September 1992. In addition, Mr. Kritzer was Vice President-Legal from June 1990 to July 2001.



James P. Prather is a Vice President. Mr. Prather was elected Vice President in March 1999. In addition, Mr. Prather has been Executive Vice
President, Television and Radio Operations of Journal Broadcast Group since April 2005 and President of News and Vice President and General Manager of KTNV-TV since August 2003. He was Senior Vice President and President of News, Journal Broadcast
Group from August 2003 to April 2005. Mr. Prather was President-Television, Journal Broadcast Group from December 1998 to August 2003 and General Manager of WTMJ-TV from 1995 to August 2003.



Karen O. Trickle is Vice President and Treasurer. Ms. Trickle was
elected Treasurer in December 1996 and Vice President in March 1999.



There are no family relationships between any of the executive officers. All of the officers are elected annually at the first meeting of the board of directors held after each Annual Meeting of Shareholders and hold office until their
successors are elected and qualified. There is no arrangement or understanding between any executive officer and any other person pursuant to which he or she was elected as an officer.



29



---

##### Table of Contents

PART II



|ITEM 5. | MARKET FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
|------- | ------------------------------------------------------------------------------------------------------------



We are authorized to issue 170 million shares of class A common stock;
120 million shares of class B common stock; 10 million shares of class C common stock; and 10 million shares of preferred stock.



Class C shares are held by Matex Inc., the Abert Family Journal Stock Trust, and members of the family of our former chairman Harry J. Grant (which we
collectively refer to as the Grant family shareholders) and are entitled to two votes per share. These shares are convertible into either (i) 1.363970 shares of class A common stock or (ii) a combination of 0.248243 shares of
class A common stock and 1.115727 shares of class B common stock at any time at the option of the holder. There is no public trading market for the class C shares.



Class B shares are primarily held by our current and former employees and Grant family shareholders. These shares are
entitled to ten votes per share. Each class B share is convertible into one class A share at any time, but first must be offered for sale to other eligible purchasers through the offer procedures set forth in our articles of incorporation. As of
February 28, 2007, there were 8,676,705 class B shares held by our subsidiary, The Journal Company. There is no public trading market for the class B shares, although shares can be offered for sale to eligible purchasers under our amended and
restated articles of incorporation.



Class A shares are
listed for trading on the New York Stock Exchange under the symbol JRN. Class A shareholders are entitled to one vote per share. All shares of class A common stock purchased by us during Period 1 to Period 5 2006 and 502,175 shares
of class A common stock purchased by us during Period 6 2006 were purchased pursuant to a repurchase program publicly announced on February 10, 2005, pursuant to which our board of directors authorized the repurchase of up to 5 million
shares. We completed our repurchases under this program in June 2006. 1,260,100 shares of class A common stock purchased by us during Period 6 to Period 12 2006 were purchased pursuant to a repurchase program publicly announced on April 25,
2006, pursuant to which our board of directors authorized the repurchase of up to 5 million shares. The repurchase program will expire in October 2007. Repurchases, by fiscal period, for 2006 were as follows:



|                                        |  |                   |  |              |       |                                       |           |                                   |          
|--------------------------------------- |  | ----------------- |  | ------------ | ----- | ------------------------------------- | --------- | --------------------------------- | ---------
|                                        |  | SharesRepurchased |  | AveragePrice |       | Cumulative Numberof SharesRepurchased |           | Shares That May Yet beRepurchased
|Period 1 (4 weeks ended Jan. 22, 2006)  |  | 375,000           |  | $            | 13.67 |                                       | 3,809,995 |                                   | 1,190,005
|Period 2 (4 weeks ended Feb. 19, 2006)  |  | 461,730           |  |              | 12.54 |                                       | 4,271,725 |                                   | 728,275  
|Period 3 (5 weeks ended March 26, 2006) |  |                  |  |              |      |                                       |          |                                   | 728,275  
|Period 4 (4 weeks ended April 23, 2006) |  |                  |  |              |      |                                       |          |                                   | 728,275  
|Period 5 (4 weeks ended May 21, 2006)   |  | 226,100           |  |              | 11.56 |                                       | 4,497,825 |                                   | 5,502,175
|Period 6 (5 weeks ended June 25, 2006)  |  | 745,875           |  |              | 11.45 |                                       | 5,243,700 |                                   | 4,756,300
|Period 7 (4 weeks ended July 23, 2006)  |  | 239,800           |  |              | 11.21 |                                       | 5,483,500 |                                   | 4,516,500
|Period 8 (4 weeks ended Aug. 20, 2006)  |  |                  |  |              |      |                                       |          |                                   | 4,516,500
|Period 9 (5 weeks ended Sept. 24, 2006) |  |                  |  |              |      |                                       |          |                                   | 4,516,500
|Period 10 (4 weeks ended Oct. 22, 2006) |  |                  |  |              |      |                                       |          |                                   | 4,516,500
|Period 11 (4 weeks ended Nov. 19, 2006) |  |                  |  |              |      |                                       |          |                                   | 4,516,500
|Period 12 (6 weeks ended Dec. 31, 2006) |  | 776,600           |  |              | 12.20 |                                       | 6,260,100 |                                   | 3,739,900



As of
February 28, 2007, there were 2,138 record holders of class B common stock, 158 record holders of class A common stock and four record holders of class C common stock. We have no outstanding shares of preferred stock.



30



---

##### Table of Contents

The high and low sales prices of our class A common shares for the four quarters of 2006 and 2005 as
reported on the New York Stock Exchange and the dividends declared per class A and class B common share for the four quarters of 2006 and 2005 were as follows:



|               |  |      |       |      |   |              |  |      |       |     |   |              |  |   |       |  |   |      
|-------------- |  | ---- | ----- | ---- | - | ------------ |  | ---- | ----- | --- | - | ------------ |  | - | ----- |  | - | -----
|               |  | 2006 |       | 2005
|               |  | High |       | Low  |   | CashDividend |  | High |       | Low |   | CashDividend
|First Quarter  |  | $    | 14.19 |      | $ | 11.81        |  | $    | 0.065 |     | $ | 18.22        |  | $ | 15.96 |  | $ | 0.065
|Second Quarter |  |      | 12.47 |      |   | 10.85        |  |      | 0.065 |     |   | 17.14        |  |   | 15.05 |  |   | 0.065
|Third Quarter  |  |      | 11.59 |      |   | 10.05        |  |      | 0.065 |     |   | 16.89        |  |   | 14.41 |  |   | 0.065
|Fourth Quarter |  |      | 12.72 |      |   | 10.75        |  |      | 0.065 |     |   | 15.00        |  |   | 13.02 |  |   | 0.065



Dividends



The declaration of future dividends is subject to the
discretion of our board of directors in light of all relevant factors, including earnings, general business conditions, working capital requirements, capital spending needs, debt levels and contractual restrictions. Pursuant to our amended and
restated articles of incorporation, each class of common stock has equal rights with respect to cash dividends, except that dividends on class C shares are cumulative and will not be less than approximately $0.57 per year. Our board of directors
currently anticipates declaring annual dividends of $0.30 per class B and class A share and approximately $0.57 per class C share. Of the anticipated annual dividend, the board of directors has already declared the first quarter 2007 dividend of
$0.075 per class B and class A and approximately $0.14 per class C share.



The terms of our credit facility provide that we cannot make distributions or dividends (other than distributions or dividends payable solely in stock) if an event of default under our credit facility then exists or
would result therefrom.



31



---

##### Table of Contents

Stock Performance Information



The following information in this Item 5 of this Annual Report on Form
10-K is not deemed to be "soliciting material" or to be filed with the SEC or subject to Regulation 14A or 14C under the Securities Exchange Act of 1934 or to the liabilities of Section 18 of the Securities Exchange Act of 1934, and
will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent we specifically incorporate it by reference into such a filing.



The following graph compares, on a cumulative basis, changes in (i) the
total return on our class A common stock since the close of trading on September 24, 2003 (the date on which our Class A common stock was first publicly traded) with (ii) the total return since the close of trading on August 31,
2003 on the Standard & Poors 500 Stock Index, when the most applicable monthly index was calculated, and (iii) the total return since the close of trading on September 24, 2003 on a peer group comprised of eight corporations
that concentrate on newspapers and broadcast operations. Our peer group is comprised of A.H. Belo Corporation, Gannett, Inc., Lee Enterprises, Inc., McClatchy Newspapers, Inc., The New York Times Company, The E.W. Scripps Company, The Tribune
Company and The Washington Post Company. Pulitzer Publishing Company and Knight Ridder, Inc., which were previously included in our peer group, no longer have a class of stock that is traded publicly because the companies were acquired in 2005 and
2006, respectively.



COMPARISON OF 39-MONTH CUMULATIVE TOTAL
RETURN*

Among Journal Communications, Inc., The S & P 500 Index

And A Peer Group



LOGO



|* | $100 invested on 9/24/03 in stock or on 8/31/03 in index-including reinvestment of dividends. Fiscal year ending December 31.
|- | -----------------------------------------------------------------------------------------------------------------------------



|                             |  |        |  |        |  |        |  |        |  |       
|---------------------------- |  | ------ |  | ------ |  | ------ |  | ------ |  | ------
|                             |  | 9/03   |  | 12/03  |  | 12/04  |  | 12/05  |  | 12/06 
|Journal Communications, Inc. |  | 100.00 |  | 114.47 |  | 113.05 |  | 88.52  |  | 82.16 
|S & P 500                    |  | 100.00 |  | 110.99 |  | 123.06 |  | 129.11 |  | 149.50
|Peer Group                   |  | 100.00 |  | 113.60 |  | 105.68 |  | 82.85  |  | 81.13 



32



---

##### Table of Contents

|ITEM 6. | SELECTED FINANCIAL DATA
|------- | -----------------------



The following table presents our selected financial data. The selected financial data for the years ended December 26, 2004, December 25,
2005 and December 31, 2006 and as of December 25, 2005 and December 31, 2006 have been derived from our audited consolidated financial statements, including the notes thereto, appearing elsewhere in this Annual Report on Form 10-K.
The selected financial data for the years ended December 31, 2002 and 2003 and as of December 31, 2002, 2003 and December 26, 2004 have been derived from our audited consolidated financial statements, including the notes thereto, not
included in this Annual Report on Form 10-K. This table should be read together with our other financial information, including Managements Discussion and Analysis of Financial Condition and Results of Operations and the
consolidated financial statements, including the notes thereto, appearing elsewhere in this Annual Report on Form 10-K. Norlight Telecommunications, Inc., NorthStar Print Group, Inc., FOX Cities Newspapers and IPC Communication Services, S.A. have
been reflected as discontinued operations in all years presented.



|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|----------------------------------------------------------------------------- |  | ----------------------------------------------------------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                                                              |  | 2006                                                        |         |   | 2005(1) |   |         | 2004(2) |  |   | 2003    |   |  | 2002 |        
|                                                                              |  | (dollars and shares in thousands, except per share amounts) |        
|Statement of Earnings Data                                                    |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Revenue                                                                       |  | $                                                           | 671,853 |   |         | $ | 624,013 |         |  | $ | 630,139 |   |  | $    | 603,700 |   |  | $ | 608,387 |  
|Operating costs and expenses                                                  |  |                                                             | 563,990 |   |         |   | 545,927 |         |  |   | 543,451 |   |  |      | 535,452 |   |  |   | 541,072 |  
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Operating earnings                                                            |  |                                                             | 107,863 |   |         |   | 78,086  |         |  |   | 86,688  |   |  |      | 68,248  |   |  |   | 67,315  |  
|Total other income and (expense)(4)                                           |  |                                                             | (15,570 | ) |         |   | (3,798  | )       |  |   | (2,057  | ) |  |      | (1,503  | ) |  |   | 269     |  
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Earnings from continuing operations before income taxes and accounting change |  |                                                             | 92,293  |   |         |   | 74,288  |         |  |   | 84,631  |   |  |      | 66,745  |   |  |   | 67,584  |  
|Provision for income taxes(4)                                                 |  |                                                             | 36,556  |   |         |   | 29,528  |         |  |   | 33,872  |   |  |      | 26,866  |   |  |   | 30,753  |  
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Earnings from continuing operations before accounting change                  |  |                                                             | 55,737  |   |         |   | 44,760  |         |  |   | 50,759  |   |  |      | 39,879  |   |  |   | 36,831  |  
|Gain from discontinued operations, net of taxes(4)                            |  |                                                             | 8,636   |   |         |   | 21,483  |         |  |   | 27,721  |   |  |      | 26,914  |   |  |   | 27,598  |  
|Cumulative effect of accounting change, net of taxes(3)(4)                    |  |                                                             |        |   |         |   |        |         |  |   |        |   |  |      |        |   |  |   | (6,509  | )
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Net earnings(4)                                                               |  | $                                                           | 64,373  |   |         | $ | 66,243  |         |  | $ | 78,480  |   |  | $    | 66,793  |   |  | $ | 57,920  |  
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Basic weighted average shares outstanding                                     |  |                                                             | 67,476  |   |         |   | 70,945  |         |  |   | 72,931  |   |  |      | 78,645  |   |  |   | 79,291  |  
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Basic Earnings Per Share Amounts                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Continuing operations before accounting change                                |  | $                                                           | 0.80    |   |         | $ | 0.60    |         |  | $ | 0.67    |   |  | $    | 0.50    |   |  | $ | 0.46    |  
|Discontinued operations                                                       |  |                                                             | 0.13    |   |         |   | 0.31    |         |  |   | 0.38    |   |  |      | 0.34    |   |  |   | 0.35    |  
|Cumulative effect of accounting change                                        |  |                                                             |        |   |         |   |        |         |  |   |        |   |  |      |        |   |  |   | (0.08   | )
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Net earnings(4)                                                               |  | $                                                           | 0.93    |   |         | $ | 0.91    |         |  | $ | 1.05    |   |  | $    | 0.84    |   |  | $ | 0.73    |  
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Diluted weighted average shares outstanding                                   |  |                                                             | 71,985  |   |         |   | 75,415  |         |  |   | 77,387  |   |  |      | 83,097  |   |  |   | 79,291  |  
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Diluted Earnings Per Share Amounts                                            |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Continuing operations before accounting change                                |  | $                                                           | 0.77    |   |         | $ | 0.59    |         |  | $ | 0.65    |   |  | $    | 0.48    |   |  | $ | 0.46    |  
|Discontinued operations                                                       |  |                                                             | 0.12    |   |         |   | 0.29    |         |  |   | 0.36    |   |  |      | 0.32    |   |  |   | 0.35    |  
|Cumulative effect of accounting change                                        |  |                                                             |        |   |         |   |        |         |  |   |        |   |  |      |        |   |  |   | (0.08   | )
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Net earnings(4)                                                               |  | $                                                           | 0.89    |   |         | $ | 0.88    |         |  | $ | 1.01    |   |  | $    | 0.80    |   |  | $ | 0.73    |  
|                                                                              |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Cash dividends                                                                |  |                                                             |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|Common                                                                        |  | $                                                           |        |   |         | $ |        |         |  | $ |        |   |  | $    | 0.500   |   |  | $ | 0.40    |  
|Class C                                                                       |  | $                                                           | 0.57    |   |         | $ | 0.57    |         |  | $ | 0.57    |   |  | $    | 0.142   |   |  | $ |        |  
|Class B                                                                       |  | $                                                           | 0.26    |   |         | $ | 0.26    |         |  | $ | 0.26    |   |  | $    | 0.065   |   |  | $ |        |  
|Class A                                                                       |  | $                                                           | 0.26    |   |         | $ | 0.26    |         |  | $ | 0.26    |   |  | $    | 0.065   |   |  | $ |        |  



33



---

##### Table of Contents

|                                 |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|-------------------------------- |  | ---------------------- | ------- | - | ------- | - | -------- | ------- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                 |  | 2006                   |         |   | 2005(1) |   |          | 2004(2) |  |   | 2003    |   |  | 2002 |        
|                                 |  | (dollars in thousands) |        
|Segment Data                     |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Revenue:                         |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Publishing                       |  | $                      | 328,630 |   |         | $ | 339,002  |         |  | $ | 338,896 |   |  | $    | 328,303 |   |  | $ | 322,364 |  
|Broadcasting                     |  |                        | 238,536 |   |         |   | 168,316  |         |  |   | 172,073 |   |  |      | 150,744 |   |  |   | 152,749 |  
|Printing services                |  |                        | 66,956  |   |         |   | 72,463   |         |  |   | 76,308  |   |  |      | 85,958  |   |  |   | 97,841  |  
|Other                            |  |                        | 37,731  |   |         |   | 44,232   |         |  |   | 42,862  |   |  |      | 38,695  |   |  |   | 35,433  |  
|                                 |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Total revenue                    |  | $                      | 671,853 |   |         | $ | 624,013  |         |  | $ | 630,139 |   |  | $    | 603,700 |   |  | $ | 608,387 |  
|                                 |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Operating earnings (loss):       |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Publishing                       |  | $                      | 37,814  |   |         | $ | 41,677   |         |  | $ | 43,708  |   |  | $    | 33,199  |   |  | $ | 30,315  |  
|Broadcasting                     |  |                        | 65,887  |   |         |   | 35,094   |         |  |   | 44,404  |   |  |      | 29,879  |   |  |   | 33,384  |  
|Printing services                |  |                        | 2,600   |   |         |   | 2,324    |         |  |   | (367    | ) |  |      | 3,760   |   |  |   | 2,131   |  
|Other                            |  |                        | 1,562   |   |         |   | (1,009   | )       |  |   | (1,057  | ) |  |      | 1,410   |   |  |   | 1,485   |  
|                                 |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Total operating earnings         |  | $                      | 107,863 |   |         | $ | 78,086   |         |  | $ | 86,688  |   |  | $    | 68,248  |   |  | $ | 67,315  |  
|                                 |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Other Financial Data             |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Depreciation(4)                  |  | $                      | 27,897  |   |         | $ | 25,078   |         |  | $ | 26,129  |   |  | $    | 26,919  |   |  | $ | 25,709  |  
|Amortization(4)                  |  | $                      | 2,060   |   |         | $ | 1,006    |         |  | $ | 1,372   |   |  | $    | 2,241   |   |  | $ | 1,909   |  
|EBITDA(4)                        |  | $                      | 137,820 |   |         | $ | 104,170  |         |  | $ | 114,189 |   |  | $    | 97,408  |   |  | $ | 94,933  |  
|Capital expenditures             |  | $                      | 22,223  |   |         | $ | 19,530   |         |  | $ | 22,199  |   |  | $    | 29,130  |   |  | $ | 42,293  |  
|Cash dividends                   |  | $                      | 19,433  |   |         | $ | 20,289   |         |  | $ | 20,792  |   |  | $    | 44,080  |   |  | $ | 31,597  |  
|Cash Flow Data                   |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Net cash provided by (used for): |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Operating activities             |  | $                      | 119,999 |   |         | $ | 106,430  |         |  | $ | 133,966 |   |  | $    | 128,523 |   |  | $ | 82,185  |  
|Investing activities             |  | $                      | (27,047 | ) |         | $ | (236,755 | )       |  | $ | (69,269 | ) |  | $    | (40,216 | ) |  | $ | (50,924 | )
|Financing activities             |  | $                      | (91,893 | ) |         | $ | 130,815  |         |  | $ | (66,763 | ) |  | $    | (88,321 | ) |  | $ | (31,714 | )
|Balance Sheet Data               |  |                        |         |   |         |   |          |         |  |   |         |   |  |      |         |   |  |   |         |  
|Property and equipment, net      |  | $                      | 223,844 |   |         | $ | 232,270  |         |  | $ | 209,560 |   |  | $    | 207,806 |   |  | $ | 208,001 |  
|Intangible assets, net           |  | $                      | 469,279 |   |         | $ | 491,233  |         |  | $ | 289,083 |   |  | $    | 251,181 |   |  | $ | 247,055 |  
|Total assets                     |  | $                      | 955,258 |   |         | $ | 984,666  |         |  | $ | 774,519 |   |  | $    | 747,175 |   |  | $ | 744,967 |  
|Total debt                       |  | $                      | 235,000 |   |         | $ | 274,545  |         |  | $ | 70,310  |   |  | $    | 84,000  |   |  | $ | 90,775  |  
|Shareholders equity             |  | $                      | 480,892 |   |         | $ | 484,068  |         |  | $ | 489,495 |   |  | $    | 463,750 |   |  | $ | 476,544 |  

---

|(1) | Includes Fort Myers, Florida television station WFTX-TV and Tucson, Arizona television station KGUN-TV, and a local marketing agreement for Omaha, Nebraska television station,
KMTV-TV, from December 5, 2005.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(2) | Includes Green Bay, Wisconsin television station WGBA-TV and a local marketing agreement between WGBA-TV and WACY-TV from October 6, 2004.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------



|(3) | Effective January 1, 2002, we adopted Statement No. 142, Goodwill and Other Intangible Assets. Under Statement No. 142, goodwill and broadcast licenses
are no longer amortized but are reviewed for impairment and written down and charged to net earnings when their carrying amounts exceed their estimated fair values. In connection with the adoption of Statement No. 142, we recorded a
transitional goodwill and broadcast license impairment charge of $6.5 million, which is reported as a cumulative effect of accounting change.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(4) | We define EBITDA as net earnings excluding gain/loss from discontinued operations, net, cumulative effect of accounting change, net, provision for income taxes, total other expense
(which is entirely comprised of interest income and expense), depreciation and amortization. Our management uses EBITDA, among other things, to evaluate our operating performance, to value prospective acquisitions and as a component of incentive
compensation targets for certain management personnel. 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



34



---

##### Table of Contents

The following table presents a reconciliation of our consolidated net earnings to consolidated EBITDA:



|                                               |  |                        |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|---------------------------------------------- |  | ---------------------- | ------- | - | ------- | - | ------- | ------- |  | - | ------- | - |  | ---- | ------- | - |  | - | ------- | -
|                                               |  | 2006                   |         |   | 2005(1) |   |         | 2004(2) |  |   | 2003    |   |  | 2002 |        
|                                               |  | (dollars in thousands) |        
|Net earnings                                   |  | $                      | 64,373  |   |         | $ | 66,243  |         |  | $ | 78,480  |   |  | $    | 66,793  |   |  | $ | 57,920  |  
|Gain from discontinued operations, net         |  |                        | (8,636  | ) |         |   | (21,483 | )       |  |   | (27,721 | ) |  |      | (26,914 | ) |  |   | (27,598 | )
|Cumulative effect of accounting change, net(3) |  |                        |        |   |         |   |        |         |  |   |        |   |  |      |        |   |  |   | 6,509   |  
|Provision for income taxes                     |  |                        | 36,556  |   |         |   | 29,528  |         |  |   | 33,872  |   |  |      | 26,866  |   |  |   | 30,753  |  
|Total other (income) and expense               |  |                        | 15,570  |   |         |   | 3,798   |         |  |   | 2,057   |   |  |      | 1,503   |   |  |   | (269    | )
|Depreciation                                   |  |                        | 27,897  |   |         |   | 25,078  |         |  |   | 26,129  |   |  |      | 26,919  |   |  |   | 25,709  |  
|Amortization                                   |  |                        | 2,060   |   |         |   | 1,006   |         |  |   | 1,372   |   |  |      | 2,241   |   |  |   | 1,909   |  
|                                               |  |                        |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  
|EBITDA                                         |  | $                      | 137,820 |   |         | $ | 104,170 |         |  | $ | 114,189 |   |  | $    | 97,408  |   |  | $ | 94,933  |  
|                                               |  |                        |         |   |         |   |         |         |  |   |         |   |  |      |         |   |  |   |         |  



|ITEM 7. | 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 audited
consolidated financial statements for the three years ended December 31, 2006, including the notes thereto, appearing elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements. See Forward-Looking
Statements for a discussion of uncertainties, risks and assumptions associated with these statements.



Overview



Our business
segments are based on the organizational structure used by management for making operating and investment decisions and for assessing performance. Our reportable business segments are: (i) publishing; (ii) broadcasting; (iii) printing
services; and (iv) other. Our publishing segment consists of a daily newspaper, the Milwaukee Journal Sentinel, and 75 community newspapers and shoppers in eight states. Our broadcasting segment consists of 36 radio stations and nine
television stations in 12 states, as well as the operation of two additional television stations under local marketing agreements. Included in our publishing and broadcasting segments are more than 75 online enterprises. Our printing services
segment reflects the operations of our printing and assembly and fulfillment business. Our other segment consists of a direct marketing services business and corporate expenses and eliminations. On February 26, 2007, Q-Comm Corporation (Q-Comm)
acquired 100% of the stock of our subsidiary, Norlight Telecommunications, Inc. (Norlight), our former telecommunications business. Norlight is reported as a discontinued operation.



In 2006, we executed a number of key strategies that sharpened our focus on our core media businesses and position us for
the future expansion of our traditional and new revenue platforms and online initiatives. We announced an agreement to sell Norlight and executed a very successful integration of three television stations whose assets we acquired in December 2005.
The achievements of these stations in their first full year with us exceeded our expectations, reflecting our strong integration efforts and a focus on driving operational results.



Overall, our broadcasting business delivered a strong financial performance, with every television and radio market posting
increases in both operating earnings and margin. Although our publishing business experienced an unprecedented decline in automobile advertising revenue and a revenue reduction for litigation settlement credits to be issued toward 2007 advertising,
it successfully introduced numerous Web-based initiatives and grew its distribution and commercial print businesses in 2006. Additionally, at the daily newspaper, Journal Interactive revenue increased 34.3% to $9.6 million. Interactive now accounts
for approximately 6.0% of the advertising revenue at our daily newspaper. Operating earnings increased at our community newspapers and shoppers due to the absence of $3.7 million in hurricane-related costs recorded in 2005 and overall expense
reductions while revenue decreased due to the closure of our Louisiana printing facility in New Orleans in late 2005 and weakness



35



---

##### Table of Contents

in automotive and real estate retail advertising. As expected, revenue decreased at our printing services business due to the decrease in revenue from Dell
Computer Corporation. At our direct marketing services business we also experienced a revenue decrease due to the loss of a large customer. Throughout the year, we maintained strict cost control across all of our businesses.



Acquisition



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. We also acquired certain assets of CBS-affiliate KMTV-TV, in Omaha, Nebraska and have begun programming KMTV-TV under a local marketing agreement. The total purchase price for the three stations was $235.0
million subject to certain adjustments. We paid $228.8 million, including $3.8 million for expenses associated with the transaction, in 2005. The remaining $10.0 million will be paid upon the earlier of the transfer of the broadcast license
associated with KMTV-TV, which was applied for on January 23, 2007, or a $5.0 million payment no later than October 15, 2007 and another $5.0 million payment no later than October 15, 2008.



Sale



On September 25, 2006, Journal Broadcast Group, our broadcasting business, sold KBBX-FM in Omaha, Nebraska for net
proceeds of $7.3 million. The divestiture of KBBX-FM is part of Journal Broadcast Groups compliance with the FCCs cross-ownership rules as a result of our December 2005 agreement to acquire the broadcast license of KMTV-TV in Omaha,
Nebraska from Emmis Communications Corporation. The net book value of assets sold was $4.7 million and the after-tax gain on the sale was $1.5 million.



Subsequent Events



On February 26, 2007, Q-Comm acquired 100% of the stock of our subsidiary, Norlight, for $185 million in cash, subject to certain working capital and
long-term liability adjustments. Net proceeds, after taxes and transaction expenses, are expected to be approximately $125.0$130.0 million. The after-tax gain on the sale, which will be recorded in the first quarter of 2007, is expected to
approximate $60.0 million.



On January 23, 2007, Journal
Broadcast Group announced it had signed an agreement to sell KOMJ-AM in Omaha, Nebraska to Cochise Broadcasting LLC (Cochise). The divestiture of KOMJ-AM is part of Journal Broadcast Groups compliance with the FCCs cross-ownership rules
as a result of our December 2005 agreement to acquire KMTV-TV, Omaha from Emmis Communications Corporation. Under the terms of the agreement with Cochise, the KMTV-TV FCC assignment application shall have been granted and shall be in full force and
effect and the closing of Journal Broadcast Groups acquisition of KMTV-TV shall be scheduled to occur contemporaneously with the closing of KOMJ-AM, provided that both Cochise and Journal Broadcast Group acknowledge that the closing of KOMJ-AM
must occur prior to the acquisition of KMTV-TV. The net book value of assets of KOMJ-AM held for sale will approximate the sales price. The sale of KOMJ-AM and the purchase of KMTV-TV are subject to FCC approval.



Results of Operations



2006 (53 weeks) compared to 2005 (52 weeks)



Consolidated Continuing Operations



Our consolidated operating revenue in 2006 was $671.9 million, an increase of $47.9 million, or 7.7%, compared to $624.0
million in 2005. Our consolidated operating costs and expenses in 2006 were $361.5 million, an increase of $12.2 million, or 3.5%, compared to $349.3 million in 2005. Our consolidated selling and administrative expenses in 2006 were $202.5 million,
an increase of $5.9 million, or 3.0%, compared to $196.6 million in 2005.



36



---

##### Table of Contents

The 2006 results include the operations of three television stations whose assets were acquired on
December 5, 2005. Also, 2006 contained 53 weeks compared to 52 weeks in 2005. Although it is difficult to precisely quantify the impact of the additional week, we estimate the revenue impact to be $11.1 million and the operating earnings impact
to be $1.4 million.



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 2006 and 2005:



|                                                                           |  |                       |       |                         |       |   |      |   |                         |  |       |  
|-------------------------------------------------------------------------- |  | --------------------- | ----- | ----------------------- | ----- | - | ---- | - | ----------------------- |  | ----- | -
|                                                                           |  | 2006                  |       | Percent ofTotal Revenue |       |   | 2005 |   | Percent ofTotal Revenue | 
|                                                                           |  | (dollars in millions) |      
|Continuing operations:                                                     |  |                       |       |                         |       |   |      |   |                         |  |       |  
|Revenue:                                                                   |  |                       |       |                         |       |   |      |   |                         |  |       |  
|Publishing                                                                 |  | $                     | 328.6 |                         | 48.9  | % |      | $ | 339.0                   |  | 54.3  | %
|Broadcasting                                                               |  |                       | 238.6 |                         | 35.5  |   |      |   | 168.3                   |  | 27.0  |  
|Printing services                                                          |  |                       | 67.0  |                         | 10.0  |   |      |   | 72.5                    |  | 11.6  |  
|Other                                                                      |  |                       | 37.7  |                         | 5.6   |   |      |   | 44.2                    |  | 7.1   |  
|                                                                           |  |                       |       |                         |       |   |      |   |                         |  |       |  
|Total revenue                                                              |  |                       | 671.9 |                         | 100.0 |   |      |   | 624.0                   |  | 100.0 |  
|Total operating costs and expenses                                         |  |                       | 361.5 |                         | 53.8  |   |      |   | 349.3                   |  | 56.0  |  
|Selling and administrative expenses                                        |  |                       | 202.5 |                         | 30.1  |   |      |   | 196.6                   |  | 31.5  |  
|                                                                           |  |                       |       |                         |       |   |      |   |                         |  |       |  
|Total operating costs and expenses and selling and administrative expenses |  |                       | 564.0 |                         | 83.9  |   |      |   | 545.9                   |  | 87.5  |  
|                                                                           |  |                       |       |                         |       |   |      |   |                         |  |       |  
|Total operating earnings                                                   |  | $                     | 107.9 |                         | 16.1  | % |      | $ | 78.1                    |  | 12.5  | %
|                                                                           |  |                       |       |                         |       |   |      |   |                         |  |       |  



The increase in total
revenue was due to the impact of the extra week, contribution from the television operations we acquired in December 2005, an increase in political and issue advertising revenue, Olympic advertising revenue at our NBC affiliates and local
advertising revenue at our television stations, an increase in political and issue advertising revenue and local advertising revenue at our radio stations. We also experienced an increase in Journal Interactive and commercial printing revenue at our
daily newspaper. These revenue increases were partially offset by a planned decrease in revenue from several computer-related customers in our printing services business, a decrease in retail and classified automotive advertising revenue at our
publishing businesses, a decrease in postage revenue at our direct marketing services business due to the loss of a customer and the reduction in revenue at our daily newspaper for credits to be issued toward 2007 advertising in the Milwaukee
Journal Sentinel under a litigation settlement agreement with classified advertisers as well as a voluntary offer made to preprint advertisers.



The increase in total operating costs and expenses was due to the television operations we acquired in December 2005, the impact of the extra week, and an
increase in commercial printing, Journal Interactive and commercial delivery costs at our daily newspaper. These increases were partially offset by a decrease in total operating costs and expenses at our printing services business due to the
decrease in revenue, a decrease in postage and freight expense at our direct marketing services business and a decrease in production costs at our community newspapers and shoppers due to the closure of our Louisiana printing facility in New Orleans
in late 2005.



The increase in selling and administrative
expenses is primarily due to the television operations we acquired in December 2005, the impact of the extra week, an increase in sales commissions and incentive compensation expense at our television and radio stations and litigation costs for the
settlement at our daily newspaper. These increases were partially offset by the hurricane-related costs in 2005, a pension plan curtailment gain at our publishing and broadcasting businesses, a decrease in payroll and benefits at our community
newspapers and shoppers, a gain on the sale of a garage property at our daily newspaper and other segment, the gain on the sale of KBBX-FM in Omaha, Nebraska, insurance proceeds received from a business interruption claim from the impact of
Hurricane Katrina at our community newspapers and shoppers business, a postretirement benefits curtailment gain at our other segment and a decrease in payroll and bad debt expense at our printing services business.



37



---

##### Table of Contents

Our consolidated operating earnings in 2006 were $107.9 million, an increase of $29.8 million, or 38.1%,
compared to $78.1 million in 2005. The following table presents our operating earnings by segment for 2006 and 2005:



|                         |  |                       |       |                                   |       |   |      |   |      |                                   |  |       |  
|------------------------ |  | --------------------- | ----- | --------------------------------- | ----- | - | ---- | - | ---- | --------------------------------- |  | ----- | -
|                         |  | 2006                  |       | Percent ofTotal OperatingEarnings |       |   | 2005 |   |      | Percent ofTotal OperatingEarnings | 
|                         |  | (dollars in millions) |      
|Publishing               |  | $                     | 37.8  |                                   | 35.1  | % |      | $ | 41.7 |                                   |  | 53.4  | %
|Broadcasting             |  |                       | 65.9  |                                   | 61.1  |   |      |   | 35.1 |                                   |  | 44.9  |  
|Printing services        |  |                       | 2.6   |                                   | 2.4   |   |      |   | 2.3  |                                   |  | 3.0   |  
|Other                    |  |                       | 1.6   |                                   | 1.4   |   |      |   | (1.0 | )                                 |  | (1.3  | )
|                         |  |                       |       |                                   |       |   |      |   |      |                                   |  |       |  
|Total operating earnings |  | $                     | 107.9 |                                   | 100.0 | % |      | $ | 78.1 |                                   |  | 100.0 | %
|                         |  |                       |       |                                   |       |   |      |   |      |                                   |  |       |  



The increase in total
operating earnings was primarily due to the contribution from the television operations we acquired in December 2005, the increase in revenue at our television and radio stations, the hurricane-related costs recorded in 2005, pension plan and
postretirement healthcare curtailment gains at our publishing, broadcasting and other segments, a gain on the sale of a garage property jointly owned by our daily newspaper and other segment, the gain on the sale of KBBX-FM in Omaha, Nebraska,
insurance proceeds received from a business interruption claim from the impact of Hurricane Katrina at our community newspapers and shoppers business. Partially offsetting these operating earnings increases were the decreases in operating earnings
due to the impact of the decrease in revenue at our daily newspaper and direct marketing services business and the litigation costs for the settlement at our daily newspaper.



Our consolidated EBITDA in 2006 was $137.8 million, an increase of $33.6 million, or 32.3%, compared to $104.2 million in
2005. We define EBITDA as net earnings excluding gain/loss from discontinued operations, net, provision for income taxes, total other expense (which is entirely comprised of interest income and expense), depreciation and amortization. Our management
uses EBITDA, among other things, to evaluate our operating performance, to value prospective acquisitions and as a component of incentive compensation targets for certain management personnel. EBITDA is not a measure of performance calculated in
accordance with accounting principles generally accepted in the United States. EBITDA should not be considered in isolation of, or as a substitute for, net earnings as an indicator of operating performance or cash flows from operating activities as
a measure of liquidity. EBITDA, as we calculate it, may not be comparable to EBITDA measures reported by other companies.



The following table presents a reconciliation of our consolidated net earnings to consolidated EBITDA for 2006 and 2005:



|                                       |  |                       |       |   |      |   |       |  
|-------------------------------------- |  | --------------------- | ----- | - | ---- | - | ----- | -
|                                       |  | 2006                  |       |   | 2005 |  
|                                       |  | (dollars in millions) |      
|Net earnings                           |  | $                     | 64.4  |   |      | $ | 66.3  |  
|Gain from discontinued operations, net |  |                       | (8.6  | ) |      |   | (21.5 | )
|Provision for income taxes             |  |                       | 36.5  |   |      |   | 29.5  |  
|Total other expense                    |  |                       | 15.5  |   |      |   | 3.8   |  
|Depreciation                           |  |                       | 27.9  |   |      |   | 25.1  |  
|Amortization                           |  |                       | 2.1   |   |      |   | 1.0   |  
|                                       |  |                       |       |   |      |   |       |  
|EBITDA                                 |  | $                     | 137.8 |   |      | $ | 104.2 |  
|                                       |  |                       |       |   |      |   |       |  



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 publishing segment in 2006 for the reasons described above.



38



---

##### Table of Contents

Publishing



Revenue from publishing in 2006 was $328.6 million, a decrease of $10.4 million, or 3.1%, compared to $339.0 million in
2005. Operating earnings from publishing were $37.8 million, a decrease of $3.9 million, or 9.3%, compared to $41.7 million in 2005. We estimate the impact of the additional week on revenue from publishing to be $5.6 million and the impact on
operating earnings from publishing to be $1.1 million. Excluding the additional week and litigation settlement, revenue decreased 3.5% and operating earnings increased 1.9%.



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



|                          |  |                       |       |                               |   |               |  |                |       |                               |   |       |  |   |      |  |   |       |  |       |  
|------------------------- |  | --------------------- | ----- | ----------------------------- | - | ------------- |  | -------------- | ----- | ----------------------------- | - | ----- |  | - | ---- |  | - | ----- |  | ----- | -
|                          |  | 2006                  |       | 2005                          |   | PercentChange | 
|                          |  | DailyNewspaper        |       | CommunityNewspapers& Shoppers |   | Total         |  | DailyNewspaper |       | CommunityNewspapers& Shoppers |   | Total | 
|                          |  | (dollars in millions) |      
|Advertising revenue:      |  |                       |       |                               |   |               |  |                |       |                               |   |       |  |   |      |  |   |       |  |       |  
|Retail                    |  | $                     | 91.0  |                               | $ | 52.8          |  | $              | 143.8 |                               | $ | 93.8  |  | $ | 54.9 |  | $ | 148.7 |  | (3.3  | )
|Classified                |  |                       | 64.7  |                               |   | 10.8          |  |                | 75.5  |                               |   | 70.0  |  |   | 10.6 |  |   | 80.6  |  | (6.5  | )
|National                  |  |                       | 11.0  |                               |   |              |  |                | 11.0  |                               |   | 10.2  |  |   |     |  |   | 10.2  |  | 8.1   |  
|Direct Marketing          |  |                       | 5.9   |                               |   |              |  |                | 5.9   |                               |   | 7.6   |  |   |     |  |   | 7.6   |  | (22.3 | )
|Other                     |  |                       |      |                               |   | 0.9           |  |                | 0.9   |                               |   |      |  |   | 0.9  |  |   | 0.9   |  | (2.0  | )
|                          |  |                       |       |                               |   |               |  |                |       |                               |   |       |  |   |      |  |   |       |  |       |  
|Total advertising revenue |  |                       | 172.6 |                               |   | 64.5          |  |                | 237.1 |                               |   | 181.6 |  |   | 66.4 |  |   | 248.0 |  | (4.4  | )
|Circulation revenue       |  |                       | 52.6  |                               |   | 2.9           |  |                | 55.5  |                               |   | 52.9  |  |   | 2.9  |  |   | 55.8  |  | (0.6  | )
|Other revenue             |  |                       | 11.6  |                               |   | 24.4          |  |                | 36.0  |                               |   | 7.5   |  |   | 27.7 |  |   | 35.2  |  | 2.6   |  
|                          |  |                       |       |                               |   |               |  |                |       |                               |   |       |  |   |      |  |   |       |  |       |  
|Total revenue             |  | $                     | 236.8 |                               | $ | 91.8          |  | $              | 328.6 |                               | $ | 242.0 |  | $ | 97.0 |  | $ | 339.0 |  | (3.1  | )
|                          |  |                       |       |                               |   |               |  |                |       |                               |   |       |  |   |      |  |   |       |  |       |  
|Operating earnings        |  | $                     | 30.7  |                               | $ | 7.1           |  | $              | 37.8  |                               | $ | 39.5  |  | $ | 2.2  |  | $ | 41.7  |  | (9.3  | )
|                          |  |                       |       |                               |   |               |  |                |       |                               |   |       |  |   |      |  |   |       |  |       |  



Advertising revenue in
2006 accounted for 72.1% of total publishing revenue compared to 73.1% in 2005.



Retail advertising revenue in 2006 was $143.8 million, a decrease of $4.9 million, or 3.3%, compared to $148.7 million in 2005. The $2.8 million decrease at our daily newspaper was primarily due to a $4.0 million
reduction in revenue for credits to be issued toward 2007 advertising in the Milwaukee Journal Sentinel under a settlement agreement with classified advertisers as well as a voluntary offer made to preprint advertisers related to changes made
in 2003 and 2004 reported net paid circulation numbers, partially offset by an increase in retail Interactive revenue and the extra week. The $2.1 million decrease at our community newspapers and shoppers was primarily due to a decrease in
automotive and retail advertising, shoppers that were discontinued and replaced with a shared mail product of our daily newspaper and a reduction in business at our Louisiana publications partially offset by additional revenue from the extra week.



Classified advertising revenue in 2006 was $75.5 million, a
decrease of $5.1 million, or 6.5%, compared to $80.6 million in 2005. The $5.3 million decrease at our daily newspaper was primarily due to decreases in automotive advertising of $4.3 million, employment advertising of $0.5 million, real estate
advertising of $0.3 million and other advertising of $0.2 million. Employment advertising accounted for 42.4% of classified advertising at the daily newspaper in 2006. The $0.2 million increase at our community newspapers and shoppers is primarily
due to a cross-sell program established with the daily newspaper.



The total decrease in retail and classified automotive advertising at our daily newspaper in 2006 was $6.1 million, or 28.7%, compared to 2005. The decrease is consistent with the national trend, though we believe the impact has been
greater in the Milwaukee-area market.



Total retail and
classified Interactive revenue at our daily newspaper was $9.6 million in 2006, an increase of $2.5 million, or 34.3%, compared to $7.1 million in 2005. During 2006, we continued investing in online products by launching 26 new web sites and
purchasing the Milwaukeemoms.com website for $0.2 million.



39



---

##### Table of Contents

National advertising revenue in 2006 was $11.0 million, an increase of $0.8 million, or 8.1%, compared to
$10.2 million in 2005. The increase was primarily due to increases in the finance, health and business services and communications categories partially offset by decreases in the entertainment and manufacturers categories.



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



|                               |  |           |  |           |  |               |  
|------------------------------ |  | --------- |  | --------- |  | ------------- | -
|                               |  | 2006      |  | 2005      |  | PercentChange |  
|Advertising linage (inches):   |  |           |  |           |  |               |  
|Full run                       |  |           |  |           |  |               |  
|Retail                         |  | 670,719   |  | 687,132   |  | (2.4          | )
|Classified                     |  | 653,601   |  | 773,032   |  | (15.4         | )
|National                       |  | 59,049    |  | 45,074    |  | 31.0          |  
|                               |  |           |  |           |  |               |  
|Total full run                 |  | 1,383,369 |  | 1,505,238 |  | (8.1          | )
|Part run                       |  | 111,420   |  | 167,047   |  | (33.3         | )
|                               |  |           |  |           |  |               |  
|Total advertising linage       |  | 1,494,789 |  | 1,672,285 |  | (10.6         | )
|                               |  |           |  |           |  |               |  
|Preprint pieces (in thousands) |  | 926,175   |  | 895,598   |  | 3.4           |  
|                               |  |           |  |           |  |               |  



Total advertising
linage in 2006 decreased 10.6% compared to 2005. Full run advertising linage in 2006 decreased 8.1% compared to 2005 due to a reduction in classified and retail advertising linage partially offset by an increase in national advertising lineage. The
decrease in classified and retail ROP advertising linage is primarily due to a decrease in the automotive category. National advertising linage primarily increased in the finance, health and business services categories. Part run advertising linage
decreased 33.3% in 2006 due to a decrease in daily zoned classifieds. Preprint advertising pieces increased 3.4% in 2006 due to increases in department stores and furniture and furnishings preprints.



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



|                                |  |      |         |      |   |               |  |      |  
|------------------------------- |  | ---- | ------- | ---- | - | ------------- |  | ---- | -
|                                |  | 2006 |         | 2005 |   | PercentChange | 
|Full pages of advertising:      |  |      |         |      |   |               |  |      |  
|Community newspapers            |  |      | 82,903  |      |   | 91,659        |  | (9.6 | )
|Shoppers and specialty products |  |      | 104,641 |      |   | 107,847       |  | (3.0 | )
|                                |  |      |         |      |   |               |  |      |  
|Total full pages of advertising |  |      | 187,544 |      |   | 199,506       |  | (6.0 | )
|                                |  |      |         |      |   |               |  |      |  
|Revenue per page                |  | $    | 309.10  |      | $ | 300.75        |  | 2.8  |  
|                                |  |      |         |      |   |               |  |      |  



Total full pages of
advertising for our community newspapers and shoppers business in 2006 decreased 6.0% compared to 2005. The decrease was due to a decline in retail and classified ROP advertising, the discontinuation of 10 shopper publications, reformatting certain
papers to more efficiently use the amount of available space on each page and a special automotive supplement that was produced in 2005 and not continued in 2006. Revenue per page increased 2.8% 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 $5.9 million in 2006, a decrease of $1.7 million, or 22.3%, compared to $7.6 million in 2005. The decrease was due to The Bon-Ton Stores, Inc.s
consolidation of all Boston Store mail programs and a decrease in postage revenue billed to our solo mail customers.



Other advertising revenue, consisting of revenue from company-sponsored event advertising at our community newspapers and shoppers, was $0.9 million in
2006 and 2005.



40



---

##### Table of Contents

Circulation revenue in 2006 accounted for 16.9% of total publishing revenue compared to 16.5% in 2005.
Circulation revenue of $55.5 million in 2006 decreased $0.3 million, or 0.6%, compared to $55.8 million in 2005 primarily due to decreases in daily and Sunday average net paid circulation and a decrease in the daily average rate per copy partially
offset by an increase in the Sunday average rate per copy. Circulation revenue was $2.9 million in 2006 and 2005 at our community newspapers and shoppers.



Other revenue, which consists of revenue from commercial printing at the printing plants for our community newspapers and shoppers and promotional,
distribution and commercial printing revenue at our daily newspaper, accounted for 11.0% of total publishing revenue in 2006 compared to 10.4% in 2005. Other revenue in 2006 was $36.0 million, an increase of $0.8 million, or 2.6%, compared to $35.2
million in 2005. A $4.1 million increase in commercial printing, commercial delivery and other revenue at the daily newspaper was partially offset by $3.3 million decrease at our community newspapers and shoppers due to the closure of our Louisiana
printing facility in New Orleans in late 2005.



In September
2006, our daily newspaper signed a five-year agreement to print the national edition of USA TODAY for distribution in the northern and western suburbs of Chicago, Illinois and the eastern half of Wisconsin. Printing commenced in late October
2006.



Also in September 2006, we announced the closure of our
Hartland, Wisconsin commercial printing plant. Our community newspapers and shoppers Wisconsin-based printing will be consolidated at our printing operations in Waupaca, Wisconsin to enhance capacity utilization and streamline printing
operations. We incurred $0.7 million in expenses related to the move, including employee-related charges. We expect future annualized savings to be between $0.6 million and $0.8 million.



Publishing operating earnings in 2006 were $37.8 million, a decrease of $3.9 million, or 9.3%, compared to $41.7 million in
2005. Operating earnings decreased $8.8 million at the daily newspaper primarily due to the operating earnings impact from the decrease in revenue, including $4.0 million for credits to be issued towards 2007 advertising, and increases in direct
expenses, legal and professional fees, commercial printing costs, paper costs and recruitment and relocation expenses. These expenses were partially offset by decreases in benefit expenses, including a $0.8 million pension plan curtailment gain and
a decrease in workers compensation costs. Operating earnings increased $4.9 million in 2006 at our community newspapers and shoppers primarily due to $3.7 million of hurricane-related costs in 2005, $1.1 million in insurance proceeds received
from a business interruption claim from the impact of Hurricane Katrina, a $0.3 million pension plan curtailment gain and reductions in bad debt and depreciation expenses. These savings were partially offset by a $0.9 million increase in paper
costs, $0.7 million in one-time costs related to consolidating the Wisconsin printing operations and increased workers compensation costs. Total newsprint and paper costs for our publishing businesses in 2006 were $44.0 million, a decrease of
$0.3 million, or 0.6%, compared to $44.3 million in 2005 primarily due to a decrease in newsprint consumption. Partially offsetting this savings was a 9.8% increase in average newsprint pricing per metric ton at our daily newspaper and community
newspapers and shoppers. Consumption of metric tonnes of newsprint in 2006 decreased 13.5% compared to 2005 due to decreases in ROP advertising, editorial content, average net paid circulation and production waste at our daily newspaper and the
shutdown of our printing plant in New Orleans in late 2005 partially offset by an increase in consumption due to the extra week in fiscal 2006.



Broadcasting



Revenue from broadcasting in 2006 was $238.6 million, an increase of $70.3 million, or 41.7%, compared to $168.3 million in 2005. Operating earnings from
broadcasting in 2006 were $65.9 million, an increase of $30.8 million, or 87.7%, compared to $35.1 million in 2005. We estimate the impact of the additional week on revenue from broadcasting to be $3.6 million and the impact on operating earnings
from broadcasting to be $0.3 million. Excluding the additional week, revenue increased 39.6% and operating earnings increased 86.9%.



41



---

##### Table of Contents

The following table presents our broadcasting revenue and operating earnings for 2006 and 2005:



|                   |  |                       |      |            |   |               |  |       |       |            |   |       |  |   |      |  |   |       |  |     
|------------------ |  | --------------------- | ---- | ---------- | - | ------------- |  | ----- | ----- | ---------- | - | ----- |  | - | ---- |  | - | ----- |  | ----
|                   |  | 2006                  |      | 2005       |   | PercentChange
|                   |  | Radio                 |      | Television |   | Total         |  | Radio |       | Television |   | Total | 
|                   |  | (dollars in millions)
|Revenue            |  | $                     | 87.5 |            | $ | 151.1         |  | $     | 238.6 |            | $ | 84.3  |  | $ | 84.0 |  | $ | 168.3 |  | 41.7
|                   |  |                       |      |            |   |               |  |       |       |            |   |       |  |   |      |  |   |       |  |     
|Operating earnings |  | $                     | 27.1 |            | $ | 38.8          |  | $     | 65.9  |            | $ | 22.9  |  | $ | 12.2 |  | $ | 35.1  |  | 87.7
|                   |  |                       |      |            |   |               |  |       |       |            |   |       |  |   |      |  |   |       |  |     



Revenue from our radio
stations in 2006 was $87.5 million, an increase of $3.2 million, or 3.8%, compared to $84.3 million in 2005. The increase was primarily attributed to a $1.6 million increase in political and issue advertising revenue, a $0.8 million increase in
local advertising revenue, a $0.6 million increase in national advertising revenue and a $0.2 million increase in other revenue.



Operating earnings from our radio stations in 2006 were $27.1 million, an increase of $4.2 million, or 18.3%, compared to $22.9 million in 2005. The
increase was primarily attributed a $2.5 million gain on the sale of KBBX-FM in Omaha, Nebraska, the increase in revenue and a decrease in technology expenses, a $0.3 million pension plan curtailment gain, and a decrease in promotion expenses. These
operating earnings increases were partially offset by an increase in programming and incentive compensation expenses.



Revenue from our television stations in 2006 was $151.1 million, an increase of $67.1 million, or 79.9%, compared to $84.0 million in 2005. The increase
was primarily due to a $51.9 million increase in revenue from the television operations we acquired in December 2005 and, on a same station basis, a $10.1 million increase in political and issue advertising, a $3.5 million increase in local
advertising revenue and a $3.3 million increase in Olympic advertising revenue, partially offset by a $1.6 million decrease in national advertising revenue and a $0.1 million decrease in other revenue.



Operating earnings from our television stations in 2006 were $38.8 million,
an increase of $26.6 million, or 218.0%, compared to $12.2 million in 2005. The increase in operating earnings was primarily due to a $17.4 million increase in operating earnings from the television operations we acquired in December 2005 and the
increase in revenue on a same station basis. An increase in technology and news expenses and sales commission was partially offset by a decrease in syndicated programming expenses, a $0.2 million pension plan curtailment gain and a decrease in
promotional expenses.



Printing Services



Revenue from printing services in 2006 was $67.0
million, a decrease of $5.5 million, or 7.6%, compared to $72.5 million in 2005. Operating earnings from printing services in 2006 were $2.6 million, an increase of $0.3 million, or 11.9%, compared to $2.3 million in 2005. We estimate the impact of
the additional week on revenue from printing services to be $1.4 million and the impact on operating earnings from printing services to be $0.2 million. Excluding the additional week, revenue decreased 9.5% and operating earnings increased 3.3%.



The decrease in printing services revenue was primarily due to
an $8.7 million decrease in revenue from our largest customer, Dell Computer Corporation, and a $1.5 million decrease in revenue from other computer-related customers. These decreases were partially offset by a $4.7 million increase in revenue from
the printing of publications and product manuals. Dell accounted for 7.5% and 19.0% of our printing services revenue in 2006 and 2005, respectively. As previously disclosed, we have fully exited the Dell software business in 2006.



The increase in printing services operating earnings was primarily due to
improved profitability from a change in our customer mix and decreases in overall expenses partially offset by reductions in sales volume to computer-related customers.



42



---

##### Table of Contents

Other



Other revenue in 2006 was $37.7 million, a decrease of $6.5 million, or 14.7%, compared to $44.2 million in 2005. Other
operating earnings in 2006 were $1.6 million, an increase of $2.6 million compared to a loss of $1.0 million in 2005. We estimate the impact of the additional week on other revenue to be $0.5 million and the impact on other operating earnings to be
a loss of $0.2 million. Excluding the additional week, revenue decreased 15.9% and operating earnings increased $2.8 million.



The following table presents our other revenue and operating earnings for 2006 and 2005:



|                   |  |                         |      |      |                          |   |               |       |  |                         |      |  |                          |      |   |       |   |      |   |  |   |      |   |  |       |  
|------------------ |  | ----------------------- | ---- | ---- | ------------------------ | - | ------------- | ----- |  | ----------------------- | ---- |  | ------------------------ | ---- | - | ----- | - | ---- | - |  | - | ---- | - |  | ----- | -
|                   |  | 2006                    |      | 2005 |                          |   | PercentChange |      
|                   |  | DirectMarketingServices |      |      | CorporateandEliminations |   |               | Total |  | DirectMarketingServices |      |  | CorporateandEliminations |      |   | Total |   |     
|                   |  | (dollars in millions)   |     
|Revenue            |  | $                       | 41.5 |      |                          | $ | (3.8          | )     |  | $                       | 37.7 |  | $                        | 48.1 |   |       | $ | (3.9 | ) |  | $ | 44.2 |   |  | (14.7 | )
|                   |  |                         |      |      |                          |   |               |       |  |                         |      |  |                          |      |   |       |   |      |   |  |   |      |   |  |       |  
|Operating earnings |  | $                       | (0.9 | )    |                          | $ | 2.5           |       |  | $                       | 1.6  |  | $                        | (0.1 | ) |       | $ | (0.9 | ) |  | $ | (1.0 | ) |  | NA    |  
|                   |  |                         |      |      |                          |   |               |       |  |                         |      |  |                          |      |   |       |   |      |   |  |   |      |   |  |       |  



The decrease in other
revenue in 2006 compared to 2005 was primarily due to a decrease in postage amounts and mailing services at our direct marketing services business. Included in revenue and operating costs and expenses from our direct marketing services business is
$22.2 million and $27.6 million of postage amounts billed to customers in 2006 and 2005, respectively.



The increase in other operating earnings was primarily from a gain on the sale of a garage property and a postretirement benefits curtailment gain
recorded at corporate partially offset by the decrease in revenue at our direct marketing business.



Other Income and Expense and Taxes



Interest income was insignificant in 2006 and $0.1 million in 2005. Interest expense was $15.6 million in 2006 compared to $3.9 million in 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 $0.4 million
and $0.8 million in 2006 and 2005, respectively. In 2005, we expensed $0.4 million in unamortized deferred financing fees attributed to the original credit facility at the time we amended our revolving credit facility.



The effective tax rate for continuing operations was 39.6% in 2006 and 39.7%
in 2005.



Discontinued Operations



Gain from discontinued operations, net of income taxes, was $8.6 million in
2006 compared to $21.5 million in 2005. Income tax expense was $5.8 million in 2006 compared to $14.0 million in 2005.



Norlight



On February 26, 2007, Q-Comm acquired 100% of the stock of our subsidiary, Norlight, for $185 million in cash, subject to certain working capital and
long-term liability adjustments. The operations of Norlight have been reflected as discontinued operations in our consolidated financial statements for all periods presented.



Revenue from Norlight in 2006 was $127.8 million, a decrease of $12.6 million, or 9.0%, compared to $140.4 million in 2005.
Gain from the operations of Norlight was $9.7 million in 2006 compared to $16.4 million in 2005. We estimate the impact of the additional week on revenue from Norlight to be $2.3 million and the impact on the gain from the operations of Norlight to
be $0.3 million. Excluding the additional week, revenue decreased 10.6% and gain from discontinued operations from telecommunications decreased 42.7%.



43



---

##### Table of Contents

Wholesale telecommunication services provide high-capacity network services for other service providers
and government/education customers by offering bulk transmission capacity. Revenue from wholesale services in 2006 was $68.9 million, a decrease of $7.6 million, or 9.9%, compared to $76.5 million in 2005. The decrease was primarily due to service
disconnections and lower pricing on customer contract renewals. Monthly recurring revenue from wholesale services at the end of 2006 was $4.8 million compared to $5.8 million at the beginning of 2006 and $6.4 million at the beginning of 2005. During
2006, new circuit connections of $1.4 million in monthly recurring revenue were more than offset by service disconnections and repricings.



Norlight has substantial business relationships with a few large customers, including major long distance carriers. Nrolights top 10 customers
accounted for 38.2% and 40.8% of our telecommunications revenue in 2006 and 2005, respectively. The service specifications of the new Verizon Business contract were completed during the first quarter of 2006 and the effects were fully reflected in
revenue and earnings during the second quarter of 2006.



Commercial telecommunication services provide network and IP&E services to small and medium-sized businesses in the Upper Midwest, principally in Wisconsin, Michigan, Indiana, Minnesota and Illinois. Revenue from commercial services in
2006 was $58.9 million, a decrease of $5.0 million, or 7.8%, compared to $63.9 million in 2005. The decrease was primarily due to a reduction in long-distance revenue, a reduction in premise based equipment sales, the loss of several significant
customers and aggressive competition in the market partially offset by new customer sales. Monthly recurring revenue from commercial advanced data services at the end of 2006 was $3.2 million compared to $3.4 million at the beginning of 2006 and
$3.5 million at the beginning of 2005.



The decrease in the
gain from the operations of Norlight was primarily due to the decrease in wholesale and commercial revenue, reduced margins due to competitive pricing in the commercial services business, approximately $2.3 million in spin-off and sale related
expenses and $1.3 million in start-up costs related to the IP Live initiative, an integrated voice and data solution for small and medium businesses. Partially offsetting these decreases was the discontinuation of depreciation expense as
of the date of the announced sale and reductions in marketing, advertising and incentive compensation expenses.



Net assets of Norlight operations were $71.4 million at December 31, 2006 compared to $75.5 million at December 25, 2005.



NorthStar Print Group, Inc. (NorthStar)



In January 2005, we signed 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, our former label printing business. The sale price, excluding certain real estate holdings that we
retained, was $26.1 million in cash. The operations of NorthStar have been reflected as discontinued operations in our consolidated financial statements for all periods presented.



The loss from NorthStars operations, net of tax, was $1.1 million in 2006 compared to a gain on operations of $5.1
million in 2005. In 2006, we recorded a pre-tax purchase price adjustment of $1.7 million related to the January 2005 sale of NorthStar and in 2005 we recorded a $8.4 million pre-tax gain on the sale of NorthStar. Revenue from NorthStar was $4.1
million in 2005. Net assets of NorthStar were $0.2 million at December 31, 2006 and $0.1 million December 25, 2005. Real estate holdings in Green Bay, Wisconsin are to be sold to Multi-Color Corporation upon the achievement of certain
environmental standards.



Net Earnings



Our net earnings in 2006 were $64.4 million, a
decrease of $1.9 million, or 2.8%, compared to $66.3 million in 2005. The decrease was primarily due to the increase in interest expense in 2006 for the reasons described above and the decrease in the gain on discontinued operations in 2005
partially offset by the increase in operating earnings.



44



---

##### Table of Contents

Earnings per Share



Our basic and diluted earnings per share from continuing operations were $0.80 and $0.77, respectively, in 2006, compared to
basic and diluted earnings per share from continuing operations of $0.60 and $0.59, respectively, in 2005. Our basic and diluted earnings per share from discontinued operations were $0.13 and $0.12, respectively, in 2006, compared to basic and
diluted earnings per share from discontinued operations of $0.31 and $0.29, respectively, in 2005.



2005 compared to 2004



Consolidated Continuing Operations



Our consolidated operating revenue in 2005 was $624.0 million, a decrease of $6.1 million, or 1.0%, compared to $630.1 million in 2004. Our consolidated operating costs and expenses in 2005 were $349.3 million, an
increase of $5.1 million, or 1.5%, compared to $344.2 million in 2004. Our consolidated selling and administrative expenses in 2005 were $196.6 million, a decrease of $2.6 million, or 1.3%, compared to $199.2 million in 2004.



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 2005 and 2004:



|                                                                           |  |                       |       |                        |       |   |      |   |                        |  |       |  
|-------------------------------------------------------------------------- |  | --------------------- | ----- | ---------------------- | ----- | - | ---- | - | ---------------------- |  | ----- | -
|                                                                           |  | 2005                  |       | Percent ofTotalRevenue |       |   | 2004 |   | Percent ofTotalRevenue | 
|                                                                           |  | (dollars in millions) |      
|Continuing operations:                                                     |  |                       |       |                        |       |   |      |   |                        |  |       |  
|Revenue:                                                                   |  |                       |       |                        |       |   |      |   |                        |  |       |  
|Publishing                                                                 |  | $                     | 339.0 |                        | 54.3  | % |      | $ | 338.9                  |  | 53.8  | %
|Broadcasting                                                               |  |                       | 168.3 |                        | 27.0  |   |      |   | 172.1                  |  | 27.3  |  
|Printing services                                                          |  |                       | 72.5  |                        | 11.6  |   |      |   | 76.3                   |  | 12.1  |  
|Other                                                                      |  |                       | 44.2  |                        | 7.1   |   |      |   | 42.8                   |  | 6.8   |  
|                                                                           |  |                       |       |                        |       |   |      |   |                        |  |       |  
|Total revenue                                                              |  |                       | 624.0 |                        | 100.0 |   |      |   | 630.1                  |  | 100.0 |  
|Total operating costs and expenses                                         |  |                       | 349.3 |                        | 56.0  |   |      |   | 344.2                  |  | 54.6  |  
|Selling and administrative expenses                                        |  |                       | 196.6 |                        | 31.5  |   |      |   | 199.2                  |  | 31.6  |  
|                                                                           |  |                       |       |                        |       |   |      |   |                        |  |       |  
|Total operating costs and expenses and selling and administrative expenses |  |                       | 545.9 |                        | 87.5  |   |      |   | 543.4                  |  | 86.2  |  
|                                                                           |  |                       |       |                        |       |   |      |   |                        |  |       |  
|Total operating earnings                                                   |  | $                     | 78.1  |                        | 12.5  | % |      | $ | 86.7                   |  | 13.8  | %
|                                                                           |  |                       |       |                        |       |   |      |   |                        |  |       |  



The decrease in total
revenue was due to a decrease in political and issue and Olympics advertising revenue and the reduction in ratings of NBC at our television stations, a decrease in revenue from several computer-related customers in our printing services business and
a decrease in other and retail revenue at our community newspapers and shoppers due to the impact from Hurricane Katrina and the closure of our Dixie Web printing facility in New Orleans. These decreases were partially offset by increases in revenue
from our 2005 and 2004 television acquisitions, classified advertising revenue at our publishing businesses, local advertising revenue at our radio stations, other revenue at our daily newspaper and postage amounts billed to customers at our direct
marketing business.



The increase in total operating costs and
expenses was due to the addition of the Green Bay, Wisconsin, Omaha, Nebraska, Tucson, Arizona and Naples/Fort Myers, Florida television operations, an increase in newsprint and other paper expense at our publishing businesses and an increase in
postage and freight expense associated with mailing services revenue at our direct marketing business. These increases were partially offset by decreases in operating costs and expenses at our printing services business due to improved production
efficiencies and in syndicated and network programming costs at our television stations.



45



---

##### Table of Contents

The decrease in selling and administrative expenses was primarily due cost saving initiatives at our
printing services business, a decrease in payroll-related termination benefits and incentive compensation expense at our daily newspaper, decrease in incentive compensation and bonuses, decrease in overall cost reduction initiatives at our
publishing businesses, and reductions in a reserve for bad debts at our television operations. These decreases were partially offset by the addition of the Green Bay, Wisconsin, Omaha, Nebraska, Tucson, Arizona and Naples/Fort Myers, Florida
television operations, Hurricane Katrina and printing facility closure costs at our community newspapers and shoppers business.



Our consolidated operating earnings in 2005 were $78.1 million, a decrease of $8.6 million, or 9.9%, compared to $86.7 million in 2004. The following
table presents our operating earnings by segment for 2005 and 2004:



|                         |  |                       |      |   |                                  |       |   |      |   |      |                                  |  |       |  
|------------------------ |  | --------------------- | ---- | - | -------------------------------- | ----- | - | ---- | - | ---- | -------------------------------- |  | ----- | -
|                         |  | 2005                  |      |   | Percent ofTotalOperatingEarnings |       |   | 2004 |   |      | Percent ofTotalOperatingEarnings | 
|                         |  | (dollars in millions) |     
|Publishing               |  | $                     | 41.7 |   |                                  | 53.4  | % |      | $ | 43.7 |                                  |  | 50.4  | %
|Broadcasting             |  |                       | 35.1 |   |                                  | 44.9  |   |      |   | 44.4 |                                  |  | 51.2  |  
|Printing services        |  |                       | 2.3  |   |                                  | 3.0   |   |      |   | (0.4 | )                                |  | (0.4  | )
|Other                    |  |                       | (1.0 | ) |                                  | (1.3  | ) |      |   | (1.0 | )                                |  | (1.2  | )
|                         |  |                       |      |   |                                  |       |   |      |   |      |                                  |  |       |  
|Total operating earnings |  | $                     | 78.1 |   |                                  | 100.0 | % |      | $ | 86.7 |                                  |  | 100.0 | %
|                         |  |                       |      |   |                                  |       |   |      |   |      |                                  |  |       |  



The decrease in total
operating earnings was primarily due to the decrease in political and issue and Olympic advertising revenue and the reduction in ratings of NBC at our television stations, costs related to the impact of Hurricane Katrina and printing facility
closure costs at our community newspapers and shoppers. These decreases were partially offset by improved production efficiencies at our printing services business, an increase in revenue at our radio stations and a gain on the sale of radio station
KHLP-AM in Omaha.



Our consolidated EBITDA in 2005 was $104.2
million, a decrease of $10.0 million, or 8.8%, compared to $114.2 million in 2004. The following table presents a reconciliation of our consolidated net earnings to consolidated EBITDA for 2005 and 2004:



|                                       |  |                       |       |   |      |   |       |  
|-------------------------------------- |  | --------------------- | ----- | - | ---- | - | ----- | -
|                                       |  | 2005                  |       |   | 2004 |  
|                                       |  | (dollars in millions) |      
|Net earnings                           |  | $                     | 66.3  |   |      | $ | 78.5  |  
|Gain from discontinued operations, net |  |                       | (21.5 | ) |      |   | (27.7 | )
|Provision for income taxes             |  |                       | 29.5  |   |      |   | 33.9  |  
|Total other expense                    |  |                       | 3.8   |   |      |   | 2.0   |  
|Depreciation                           |  |                       | 25.1  |   |      |   | 26.1  |  
|Amortization                           |  |                       | 1.0   |   |      |   | 1.4   |  
|                                       |  |                       |       |   |      |   |       |  
|EBITDA                                 |  | $                     | 104.2 |   |      | $ | 114.2 |  
|                                       |  |                       |       |   |      |   |       |  



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



Publishing



Revenue from publishing in 2005 was $339.0 million, an increase of $0.1
million, compared to $338.9 million in 2004. Operating earnings from publishing were $41.7 million, a decrease of $2.0 million, or 4.6%, compared to $43.7 million in 2004.



46



---

##### Table of Contents

The following table presents our publishing revenue by category and operating earnings for 2005 and 2004:



|                          |  |                       |       |                               |   |       |  |                |       |                              |   |       |  |               |      |  |   |       |  |       |  
|------------------------- |  | --------------------- | ----- | ----------------------------- | - | ----- |  | -------------- | ----- | ---------------------------- | - | ----- |  | ------------- | ---- |  | - | ----- |  | ----- | -
|                          |  | 2005                  |       | 2004                          |   |       | 
|                          |  | DailyNewspaper        |       | CommunityNewspapers& Shoppers |   | Total |  | DailyNewspaper |       | CommunityNewspaper& Shoppers |   | Total |  | PercentChange |     
|                          |  | (dollars in millions) |      
|Advertising revenue:      |  |                       |       |                               |   |       |  |                |       |                              |   |       |  |               |      |  |   |       |  |       |  
|Retail                    |  | $                     | 93.8  |                               | $ | 54.9  |  | $              | 148.7 |                              | $ | 93.6  |  | $             | 55.7 |  | $ | 149.3 |  | (0.4  | )
|Classified                |  |                       | 70.0  |                               |   | 10.6  |  |                | 80.6  |                              |   | 67.3  |  |               | 9.7  |  |   | 77.0  |  | 4.7   |  
|National                  |  |                       | 10.2  |                               |   |      |  |                | 10.2  |                              |   | 11.5  |  |               |     |  |   | 11.5  |  | (11.6 | )
|Direct Marketing          |  |                       | 7.6   |                               |   |      |  |                | 7.6   |                              |   | 7.9   |  |               |     |  |   | 7.9   |  | (3.9  | )
|Other                     |  |                       |      |                               |   | 0.9   |  |                | 0.9   |                              |   |      |  |               | 1.1  |  |   | 1.1   |  | (14.3 | )
|                          |  |                       |       |                               |   |       |  |                |       |                              |   |       |  |               |      |  |   |       |  |       |  
|Total advertising revenue |  |                       | 181.6 |                               |   | 66.4  |  |                | 248.0 |                              |   | 180.3 |  |               | 66.5 |  |   | 246.8 |  | 0.5   |  
|Circulation revenue       |  |                       | 52.9  |                               |   | 2.9   |  |                | 55.8  |                              |   | 54.4  |  |               | 2.9  |  |   | 57.3  |  | (2.5  | )
|Other revenue             |  |                       | 7.5   |                               |   | 27.7  |  |                | 35.2  |                              |   | 5.6   |  |               | 29.2 |  |   | 34.8  |  | 1.1   |  
|                          |  |                       |       |                               |   |       |  |                |       |                              |   |       |  |               |      |  |   |       |  |       |  
|Total revenue             |  | $                     | 242.0 |                               | $ | 97.0  |  | $              | 339.0 |                              | $ | 240.3 |  | $             | 98.6 |  | $ | 338.9 |  |      |  
|                          |  |                       |       |                               |   |       |  |                |       |                              |   |       |  |               |      |  |   |       |  |       |  
|Operating earnings        |  | $                     | 39.5  |                               | $ | 2.2   |  | $              | 41.7  |                              | $ | 38.4  |  | $             | 5.3  |  | $ | 43.7  |  | (4.6  | )
|                          |  |                       |       |                               |   |       |  |                |       |                              |   |       |  |               |      |  |   |       |  |       |  



Advertising revenue in
2005 accounted for 73.2% of total publishing revenue compared to 72.9% in 2004.



Retail advertising revenue in 2005 was $148.7 million, a decrease of $0.6 million, or 0.4%, compared to $149.3 million in 2004. A $0.8 million decrease in community newspapers and shoppers retail advertising was
partially offset by the $0.2 million increase in daily newspaper retail advertising. The $0.2 million increase at the daily newspaper was primarily due to increases in retail preprints, advertising in our weekly tabloid-style publication,
mke, shared mail and JSOnline, partially offset by a decrease in retail ROP advertising. The decrease in retail ROP advertising is attributed to decreases in automotive, telecommunications, and department and furniture stores, partially
offset by increases in health services and insurance and financial services. The $0.8 million decrease at our community newspapers and shoppers was primarily due to the reduction in business at our Louisiana publications from the impact of Hurricane
Katrina.



Classified advertising revenue in 2005 was $80.6
million, an increase of $3.6 million, or 4.7%, compared to $77.0 million in 2004. Increases in employment advertising of $2.7 million, real estate advertising of $1.6 million and other advertising of $0.4 million at our daily newspaper, and an
increase in other advertising $0.9 million at our community newspapers and shoppers were partially offset by a decrease in automotive classified advertising at our daily newspaper of $2.0 million. Employment advertising, which accounted for 39.9% of
classified advertising at the daily newspaper in 2005, increased 10.7% compared to 2004. We believe the increase in employment advertising is due to job growth in the Milwaukee, Wisconsin area. The decrease in automotive classified advertising
combined with the decrease in retail advertising was $3.3 million or 13.3%. This decrease is consistent with the national trend.



National advertising revenue in 2005 was $10.2 million, a decrease of $1.3 million, or 11.6%, compared to $11.5 million in 2004. The decrease was due to
reductions in telecommunications, movies, finance/insurance and transportation advertising, partially offset by an increase in preprints from national advertisers.



47



---

##### Table of Contents

The following table presents our daily newspapers core newspaper advertising linage by category and
core newspaper and shared mail preprint pieces for 2005 and 2004:



|                               |  |           |  |           |  |               |  
|------------------------------ |  | --------- |  | --------- |  | ------------- | -
|                               |  | 2005      |  | 2004      |  | PercentChange |  
|Advertising linage (inches):   |  |           |  |           |  |               |  
|Full run                       |  |           |  |           |  |               |  
|Retail                         |  | 687,132   |  | 724,220   |  | (5.1          | )
|Classified                     |  | 773,032   |  | 845,014   |  | (8.5          | )
|National                       |  | 45,074    |  | 54,213    |  | (16.9         | )
|                               |  |           |  |           |  |               |  
|Total full run                 |  | 1,505,238 |  | 1,623,447 |  | (7.3          | )
|Part run                       |  | 167,047   |  | 172,125   |  | (3.0          | )
|                               |  |           |  |           |  |               |  
|Total advertising linage       |  | 1,672,285 |  | 1,795,572 |  | (6.9          | )
|                               |  |           |  |           |  |               |  
|Preprint pieces (in thousands) |  | 895,598   |  | 800,700   |  | 11.9          |  
|                               |  |           |  |           |  |               |  



Total advertising
linage in 2005 decreased 6.9% compared to 2004. Full run advertising linage in 2005 decreased 7.3% compared to 2004 due to a reduction in all advertising linage categories. Retail ROP advertising linage decreased in the automotive, communication and
department store categories. In many of these categories, there was also a shift to preprint advertising. The decrease in classified advertising linage is due to a decrease in automotive advertising, partially offset by an increase in employment and
real estate advertising. The decrease in national advertising linage is consistent with the decreases in national ROP advertising revenue. Part run advertising linage decreased in 2005 due to an decrease in automotive zoned classified and overall
reductions in the zoned product. Preprint advertising pieces increased 11.9% due to the continued switch of advertising from ROP to preprints and preprint pieces used in our shared mail products.



The following table presents the full pages of advertising and revenue per
page for our community newspapers and shoppers and specialty products for 2005 and 2004:



|                                |  |      |         |      |   |               |  |      |  
|------------------------------- |  | ---- | ------- | ---- | - | ------------- |  | ---- | -
|                                |  | 2005 |         | 2004 |   | PercentChange | 
|Full pages of advertising:      |  |      |         |      |   |               |  |      |  
|Community newspapers            |  |      | 91,659  |      |   | 100,156       |  | (8.5 | )
|Shoppers and specialty products |  |      | 107,847 |      |   | 108,979       |  | (1.0 | )
|                                |  |      |         |      |   |               |  |      |  
|Total full pages of advertising |  |      | 199,506 |      |   | 209,135       |  | (4.6 | )
|                                |  |      |         |      |   |               |  |      |  
|Revenue per page                |  | $    | 300.75  |      | $ | 285.47        |  | 5.4  |  
|                                |  |      |         |      |   |               |  |      |  



Total full pages of
advertising for our community newspapers and shoppers business in 2005 decreased 4.6% compared to 2004. The decrease was due to the reduction in advertising in our Louisiana publications due to the impact of Hurricane Katrina and reformatting
certain papers to more efficiently use the amount of available space on each page. This was partially offset by an increase in advertising in specialty products. Revenue per page increased 5.4% primarily due to the decrease in total full pages of
advertising while increasing advertising rates.



Direct
marketing revenue, consisting of revenue from direct mail efforts for our daily newspaper was $7.6 million in 2005, a decrease of $0.3 million, or 3.9%, compared to $7.9 million in 2004. The decrease was due to a decrease in our solo mail
initiatives. Other advertising revenue, consisting of revenue from company-sponsored event advertising at our community newspapers and shoppers, in 2005 was $0.9 million, a decrease of $0.2 million, or 14.3%, compared to $1.1 million in 2004.



Circulation revenue in 2005 accounted for 16.5% of total
publishing revenue compared to 16.9% in 2004. Circulation revenue in 2005 was $55.8 million, a decrease of $1.5 million, or 2.5%, compared to $57.3 million in



48



---

##### Table of Contents

2004. The decrease is primarily due to lower daily and Sunday average net paid circulation. Revenue and average paid circulation was essentially 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, distribution and commercial printing revenue at our daily newspaper, accounted for 10.3% of total publishing revenue in
2005 compared to 10.2% in 2004. Other revenue in 2005 was $35.2 million, an increase of $0.4 million, or 1.1%, compared to $34.8 million in 2004. The increase was due to a $2.0 million increase in printing revenue, distribution revenue and
commercial printing revenue at the daily newspaper, partially offset by a $1.5 million decrease at our community newspapers and shoppers primarily due to the closure of our New Orleans printing facility.



Publishing operating earnings in 2005 were $41.7 million, a decrease of $2.0
million, or 4.6%, compared to $43.7 million in 2004. The decrease was primarily due to $3.7 million in costs related to the impact of Hurricane Katrina and printing facility closure costs at the community newspapers and shoppers and a $1.3 million
increase in the cost of paper at our publishing companies. These operating earnings decreases were partially offset by $0.9 million in savings from cost reduction initiatives at our community newspapers and shoppers and a $1.3 million reduction in
payroll-related termination benefits and incentive compensation expense at our daily newspaper. Total newsprint and paper cost in 2005 was $44.3 million, an increase of $1.2 million, or 2.9%, compared to $43.1 million in 2004. Average newsprint
pricing per metric ton was up 14.6% and consumption of newsprint tonnage was down by 10.3%. In the second quarter 2005, the daily newspaper switched to lighter basis-weight newsprint.



Broadcasting



Revenue from broadcasting in 2005 was $168.3 million, a decrease of $3.8 million, or 2.2%, compared to $172.1 million in 2004. Operating earnings from
broadcasting in 2005 were $35.1 million, a decrease of $9.3 million, or 21.0%, compared to $44.4 million in 2004.



The following table presents our broadcasting revenue and operating earnings for 2005 and 2004:



|                   |  |                       |      |            |   |                |  |       |       |            |   |       |  |   |      |  |   |       |  |       |  
|------------------ |  | --------------------- | ---- | ---------- | - | -------------- |  | ----- | ----- | ---------- | - | ----- |  | - | ---- |  | - | ----- |  | ----- | -
|                   |  | 2005                  |      | 2004       |   | Percent Change | 
|                   |  | Radio                 |      | Television |   | Total          |  | Radio |       | Television |   | Total | 
|                   |  | (dollars in millions) |     
|Revenue            |  | $                     | 84.3 |            | $ | 84.0           |  | $     | 168.3 |            | $ | 82.3  |  | $ | 89.8 |  | $ | 172.1 |  | (2.2  | )
|                   |  |                       |      |            |   |                |  |       |       |            |   |       |  |   |      |  |   |       |  |       |  
|Operating earnings |  | $                     | 22.9 |            | $ | 12.2           |  | $     | 35.1  |            | $ | 19.8  |  | $ | 24.6 |  | $ | 44.4  |  | (21.0 | )
|                   |  |                       |      |            |   |                |  |       |       |            |   |       |  |   |      |  |   |       |  |       |  



Revenue from our radio
stations in 2005 was $84.3 million, an increase of $2.0 million, or 2.5%, compared to $82.3 million in 2004. The increase was primarily attributed to a $2.6 million increase in local advertising revenue and a $0.4 million increase in other revenue,
partially offset by a $1.0 million decrease in political and issue advertising.



Operating earnings from our radio stations in 2005 were $22.9 million, an increase of $3.1 million, or 15.7%, compared to $19.8 million in 2004. The increase was primarily attributed to the increase in revenue and
decreases in promotion and amortization expense, partially offset by increases in technology and programming expenses and increased sales commissions.



Revenue from our television stations in 2005 was $84.0 million, a decrease of $5.8 million, or 6.5%, compared to $89.8 million in 2004. The decrease was
primarily attributed to a $12.0 million decrease in political and issue advertising revenue, a $2.5 million decrease in Olympics advertising revenue and a $0.8 million decrease in other revenue, partially offset by a $5.8 million increase in local
advertising and a $3.7 million increase in national advertising revenue. Revenue from our 2005 and 2004 television station acquisitions was $12.0 million in 2005 and $2.7 million in 2004.



49



---

##### Table of Contents

Operating earnings from our television stations in 2005 were $12.2 million, a decrease of $12.4 million,
or 50.5%, compared to $24.6 million in 2004. The ratings decline at NBC, coupled with lower advertising demand compared to last year, adversely affected our average unit rates for advertising and the lack of political and issue advertising demand
negatively impacted our results. Overall, operating expenses in our television stations have decreased, excluding the operating expenses from our recent acquisitions. Decreases in syndicated and network programming expense, incentive compensation
and bonuses and a reduction in a reserve for bad debts were partially offset by increases in news and certain payroll and training expenses.



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. We also acquired certain assets of CBS-affiliate KMTV-TV, in Omaha, Nebraska, and have begun programming KMTV-TV under a local marketing agreement. This acquisition contributed $2.9 million in revenue and $0.8 million in operating
earnings in 2005.



On October 6, 2004, we acquired the
business and certain assets of NBC-affiliate WGBA-TV, in Green Bay, Wisconsin and certain assets of UPN affiliate WACY-TV, which is licensed to serve Appleton, Wisconsin. We also assumed an existing local marketing agreement between WGBA-TV and
WACY-TV. This acquisition contributed $9.0 million and $2.8 million in revenue and a $0.1 million operating loss and $0.7 million in operating earnings in 2005 and 2004, respectively.



Printing Services



Revenue from printing services in 2005 was $72.5 million, a decrease of $3.8 million, or 5.0%, compared to $76.3 million in 2004. Operating earnings from
printing services in 2005 were $2.3 million, an increase of $2.7 million, compared to an operating loss of $0.4 million in 2004.



The decrease in printing services revenue was due primarily to a $4.8 million decrease in revenue from our largest customer, Dell Computer Corporation,
and a $1.1 million decrease in revenue from other computer-related customers. These decreases were partially offset by a $2.1 million increase in revenue from printing of publications. Dell accounted for 19.0% and 24.4% of our printing services
revenue in 2005 and 2004, respectively.



The increase in
printing services operating earnings was primarily attributed to production efficiencies and cost reduction initiatives, partially offset by reduction in sales volume and prices to computer-related customers.



Other



Other revenue in 2005 was $44.2 million, an increase of $1.4 million, or
3.2%, compared to $42.8 million in 2004. The other operating loss in 2005 was essentially even compared to 2004.



The following table presents our other revenue and operating earnings for 2005 and 2004:



|                   |  |                         |      |   |                          |   |      |               |  |   |                         |   |                          |   |      |       |   |      |   |  |   |      |   |  |     |  
|------------------ |  | ----------------------- | ---- | - | ------------------------ | - | ---- | ------------- |  | - | ----------------------- | - | ------------------------ | - | ---- | ----- | - | ---- | - |  | - | ---- | - |  | --- | -
|                   |  | 2005                    |      |   | 2004                     |   |      | PercentChange | 
|                   |  | DirectMarketingServices |      |   | CorporateandEliminations |   |      | Total         |  |   | DirectMarketingServices |   | CorporateandEliminations |   |      | Total |   |     
|                   |  | (dollars in millions)   |      |   |                          |  
|Revenue            |  | $                       | 48.1 |   |                          | $ | (3.9 | )             |  | $ | 44.2                    |   |                          | $ | 46.9 |       | $ | (4.1 | ) |  | $ | 42.8 |   |  | 3.2 | %
|                   |  |                         |      |   |                          |   |      |               |  |   |                         |   |                          |   |      |       |   |      |   |  |   |      |   |  |     |  
|Operating earnings |  | $                       | (0.1 | ) |                          | $ | (0.9 | )             |  | $ | (1.0                    | ) |                          | $ | 0.4  |       | $ | (1.4 | ) |  | $ | (1.0 | ) |  | NA  |  
|                   |  |                         |      |   |                          |   |      |               |  |   |                         |   |                          |   |      |       |   |      |   |  |   |      |   |  |     |  



The increase in other
revenue in 2005 compared to 2004 was primarily attributed to an increase in postage amounts and mailing services at our direct marketing services business. Included in revenue and operating costs and expenses from our direct marketing services
business is $27.6 million and $26.4 million of postage amounts billed to customers in 2005 and 2004, respectively.



50



---

##### Table of Contents

Other Income and Expense and Taxes



Interest income and dividends were $0.1 million in 2005 compared to $0.2
million in 2004. Interest expense in 2005 was $3.9 million, an increase of $1.6 million, or 73.5%, compared to $2.3 million in 2004. Gross interest expense from borrowings under our credit agreement was $3.1 million in 2005 and $1.8 million in 2004.
Amortization of deferred financing fees was $0.4 million in both 2005 and 2004. In 2005, we expensed $0.4 million in unamortized deferred financing fees attributed to the original credit facility at the time we amended our revolving credit facility.



The effective tax rate from continuing operations was 39.7% in
2005 and 40.0% in 2004.



Discontinued Operations



Gain from discontinued operations, net of income
taxes, was $21.5 million in 2005 compared to $27.7 million in 2004. Income tax expense was $14.0 million in 2005 compared to $18.5 million in 2004.



Norlight



Revenue from Norlight in 2005 was $140.4 million, a decrease of $2.8 million, or 1.9%, compared to $143.2 million in 2004. The gain from Norlight was
$16.4 million in 2005 compared to $22.6 million in 2004.



Wholesale telecommunication services provide high-capacity network services for other service providers and government/education customers by offering bulk transmission capacity. Revenue from wholesale services in 2005 was $76.5 million, a
decrease of $5.6 million, or 6.8%, compared to $82.1 million in 2004. The decrease was primarily due to service disconnections and lower pricing on customer contract renewals. Monthly recurring revenue from wholesale services at the end of 2005 was
$5.8 million compared to $6.4 million at the beginning of 2005 and $7.0 million at the beginning of 2004. During 2005, new circuit connections of $1.1 million in monthly recurring revenue were more than offset by service disconnections and
repricings.



Norlight has substantial business relationships
with a few large customers, including major long distance carriers. Norlights top 10 customers accounted for 40.8% and 37.2% of our telecommunications revenue in 2005 and 2004, respectively. In February 2005, Norlight signed a new five-year
contract extension with Verizon Business whereby they remain a significant customer. The new contract includes reduced prices for current services being provided to Verizon Business and provision for higher capacity circuits to replace specific
existing circuits being disconnected. The service specifications of the new Verizon Business contract were completed during the first quarter of 2006.



Commercial telecommunication services provide network and IP&E services to small and medium-sized businesses in the Upper Midwest, principally in
Wisconsin, Michigan, Indiana, Minnesota and Illinois. Revenue from commercial services in 2005 was $63.9 million, an increase of $2.8 million, or 4.6%, compared to $61.1 million in 2004. The increase was primarily attributed to our newly acquired
infrastructure business and was partially offset by a decrease in long distance revenue. Monthly recurring revenue from commercial advanced data services at the end of 2005 was $3.4 million compared to $3.5 million at the beginning of 2005 and $3.3
million at the beginning of 2004.



In December 2004, Norlight
acquired the customer base and certain assets of Executone of Western Michigan, Inc. (d/b/a Netcom Group), a provider of networking, business telephone system and carrier services solutions in Grand Rapids, Michigan. The cash purchase price was $1.1
million.



The decrease in the gain from Norlight was primarily
due to the decrease in wholesale revenue, the increasing mix of lower margin enterprise and telephone system business and reduced margins due to competitive pricing in the enterprise business.



51



---

##### Table of Contents

NorthStar



Revenue from NorthStar in 2005 was $4.1 million, a decrease of $54.5 million, compared to $58.6 million in 2004. Net assets
of NorthStar at December 25, 2005 were $0.1 million. Real estate holdings in Green Bay, WI are to be sold to Multi-Color Corporation upon the achievement of certain environmental standards. Gain from NorthStar was $5.1 million in both 2005 and
2004. Applicable income tax expense was $3.1 million in 2005 and $3.3 million in 2004.



Net Earnings



Our net earnings in 2005 were $66.3 million, a decrease of $12.2 million, or 15.6%, compared to $78.5 million in 2004. The decrease was primarily due to the decrease in operating earnings for the reasons described above and an increase in
interest expense partially offset by the gain on discontinued operations.



Earnings per Share



Our basic and diluted earnings per share from continuing operations were $0.60 and $0.59, respectively, in 2005, compared to basic and diluted earnings per share from continuing operations of $0.67 and $0.65, respectively, in 2004. Our
basic and diluted earnings per share from discontinued operations were $0.31 and $0.29, respectively, in 2005, compared to basic and diluted earnings per share from discontinued operations of $0.38 and $0.36, respectively, in 2004.



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 December 31, 2006, we had borrowings of $235.0 million under the facility at a weighted average rate of 5.95%. 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 December 31, 2006, we are in compliance with both of these
material covenants.



Cash balances were $7.9 million at
December 31, 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.



On February 26, 2007, Q-Comm acquired 100% of the stock of our subsidiary, Norlight, for $185 million in cash, subject
to certain working capital and long-term liability adjustments. Net proceeds, after taxes and transaction expenses, are expected to be approximately $125.0$130.0 million. In the short-term, we will use the proceeds to reduce our obligations
under our unsecured revolving credit facility. The after-tax gain on the sale, which will be recorded in the first quarter of 2007, is expected to approximate $60.0 million. The operations of Norlight have been reflected as discontinued operations
in our consolidated financial statements for all periods presented.



In January 2007, Journal Broadcast Group, announced it had signed an agreement to sell KOMJ-AM in Omaha, Nebraska to Cochise Broadcasting LLC (Cochise). The divestiture of KOMJ-AM is part of Journal



52



---

##### Table of Contents

Broadcast Groups compliance with the FCCs cross-ownership rules as a result of our December 2005 agreement to acquire KMTV-TV, Omaha from Emmis
Communications Corporation. Under the terms of the agreement with Cochise, the KMTV-TV FCC license application shall have been granted and shall be in full force and effect and the closing of Journal Broadcast Groups acquisition of the
broadcast license of KMTV-TV shall be scheduled to occur contemporaneously with the closing of KOMJ-AM, provided that both Cochise and Journal Broadcast Group acknowledge that the closing of KOMJ-AM must occur prior to the acquisition of the
broadcast license of KMTV-TV. Journal Broadcast Group will pay Emmis $10.0 million upon the transfer of the license.



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 following 18
months. Under the program, share purchases may be made at our discretion, from time to time, in the open market and/or in private transactions. Our share purchases will depend on market conditions, share price, trading volume and other factors. The
action supplements the five million share repurchase authorization approved in February 2005 and completed in June 2006. In 2006, we repurchased 2.8 million of our class A shares under our February 2005 and April 2006 buy-back programs.



Cash Flow



Cash provided by operating activities was $120.0 million in 2006 compared to
$106.4 million in 2005. The increase was primarily due to an increase in earnings from continuing operations due to increases in revenue at our broadcasting business partially offset by the increase in interest expense. We expect that cash provided
by operating activities in 2007 will be negatively impacted by the litigation settlement and voluntary preprint advertiser program where $4.0 million in credits will be used towards payment for 2007 advertising in the Milwaukee Journal
Sentinel.



Cash used for investing activities was $27.0
million in 2006 compared to $236.8 million in 2005. Capital expenditures for property and equipment were $22.2 million in 2006 compared to $19.5 million in 2005. Our capital expenditures in our publishing segment are primarily targeted towards
equipment and building improvements and our capital expenditures in our broadcasting segment are targeted towards technology upgrades, including investments in digital radio and for our television stations acquired in 2005. We believe these
expenditures will optimize our results and position us well for the future. The cash used for investing activities of discontinued operations in 2006 includes $13.3 million in capital expenditures for Norlight and a $1.7 million purchase price
adjustment for the sale of NorthStar compared to $14.8 million in capital expenditures for Norlight and $26.1 million proceeds received from the sale of NorthStar in 2005. In 2005, we paid $228.8 million for the business and assets of FOX-affiliate
WFTX-TV, in Fort Myers/Naples, Florida and ABC-affiliate, KGUN-TV, in Tucson, Arizona. We also acquired certain assets of CBS-affiliate KMTV-TV, in Omaha, Nebraska.



Cash used for financing activities was $91.9 million in 2006 compared to cash received from financing activities of $130.8
million in 2005. Borrowings under our credit facility in 2006 were $224.1 million and we made payments of $263.6 million compared to borrowings of $431.3 million and payments of $227.0 million in 2005. In 2006 and 2005, we received $1.3 million and
$1.2 million, respectively, in proceeds from the issuance of our class B common stock to our employees under our Employee Stock Purchase Plan. In 2006 and 2005, we paid $34.2 million and $53.3 million, respectively, to purchase our class A common
stock. We paid cash dividends of $19.4 million and $20.3 million in 2006 and 2005, respectively.



53



---

##### Table of Contents

Contractual Obligations



Our contractual obligations as of December 31, 2006 are summarized below.



|                                    |  |                        |       |                 |   |          |  |          |      |                  |   |       |  |   |    
|----------------------------------- |  | ---------------------- | ----- | --------------- | - | -------- |  | -------- | ---- | ---------------- | - | ----- |  | - | ---
|                                    |  | Payments Due by Period
|Contractual obligations             |  | Total                  |       | Less than1 year |   | 1-3years |  | 3-5years |      | More than5 years
|                                    |  |                        |       |                 |   |          |  |          |      |                  |   |       |  |   |    
|Long-term notes payable to banks(1) |  | $                      | 296.3 |                 | $ | 14.0     |  | $        | 27.7 |                  | $ | 254.6 |  | $ |   
|Operating leases                    |  |                        | 20.1  |                 |   | 6.4      |  |          | 7.4  |                  |   | 3.9   |  |   | 2.4
|Purchase commitments                |  |                        | 68.3  |                 |   | 39.8     |  |          | 27.1 |                  |   | 1.4   |  |   |   
|Other long-term liabilities         |  |                        | 21.5  |                 |   | 4.8      |  |          | 8.3  |                  |   | 6.6   |  |   | 1.8
|                                    |  |                        |       |                 |   |          |  |          |      |                  |   |       |  |   |    
|Total                               |  | $                      | 406.2 |                 | $ | 65.0     |  | $        | 70.5 |                  | $ | 266.5 |  | $ | 4.2
|                                    |  |                        |       |                 |   |          |  |          |      |                  |   |       |  |   |    

---

|(1) | Includes the associated interest calculated on our borrowings of $235.0 million outstanding as of December 31, 2006 at a weighted average rate of 5.95%.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------



Our amended $475 million unsecured revolving
facility expires on June 2, 2011. As of December 31, 2006, we had borrowings outstanding of $235.0 million under the facility. Other long-term liabilities consist primarily of obligations for syndicated contracts, a national advertising
representative litigation settlement, a capital lease, deferred income, deferred compensation arrangements and deposits received from subleases of building operating leases. We lease office space, certain broadcasting facilities, distribution
centers, buildings used for printing plants and equipment under both short-term and long-term leases accounted for as operating leases. Some of the lease agreements contain renewal options and rental escalation clauses, as well as provisions for the
payment of utilities, maintenance and taxes by us. Purchase commitments for newsprint for our publishing businesses from two newsprint suppliers, which run through 2007 and 2008 were $53.8 million as of December 31, 2006. The commitment is
based on market prices for quantities we determine will meet our newsprint requirements over the term of the contract, but we have no obligation to purchase any particular quantities. In the unlikely event that newsprint is no longer required in our
business, our commitment would expire without obligation. A purchase commitment relating to printing equipment was approximately $0.2 million as of December 31, 2006. Purchase commitments related to broadcasting equipment and systems were
approximately $1.2 million as of December 31, 2006. In addition, we have the right to broadcast certain television programs during the years 2007-2010 under contracts aggregating $13.1 million. We have $1.7 million of standby letters of credit
for business insurance purposes.



Off-Balance Sheet
Arrangements



We do not engage in off-balance sheet
transactions, arrangements, obligations (including contingent obligations), and other relationships with unconsolidated entities or other persons that may have a material current or future effect on our financial condition, results of operations,
liquidity, capital expenditures, capital resources, or significant components of revenues or expenses. We do not rely on off-balance sheet arrangements for liquidity, capital resources, market risk support, credit risk support or other
benefits.



Critical Accounting Policies



Our managements discussion and analysis of financial condition and
results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related footnote disclosures. On an on-going basis, we evaluate our estimates, including those related to doubtful accounts, property and
equipment, intangible assets, income taxes, litigation, and pension and other postretirement benefits. We base our estimates on historical experience and on various other assumptions that are



54



---

##### Table of Contents

believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. We do not believe our past results have differed materially from these estimates, however, we cannot predict how actual results may differ from these estimates in the future.



We believe the following critical accounting policies affect our more
significant judgments and estimates used in the preparation of our consolidated financial statements.



Allowance for doubtful accounts



We evaluate the collectibility of our accounts receivable based on a combination of factors. We specifically review historical write-off activity by
market, large customer concentrations, customer creditworthiness and changes in our customer payment terms when evaluating the adequacy of the allowance for doubtful accounts. In circumstances where we are aware of a specific customer's inability to
meet its financial obligations to us (such as bankruptcy filings, credit history, etc.), we record a specific reserve for bad debts against amounts due us to reduce the net recognized receivable to the amount we reasonably believe will be collected.
For all other customers, we recognize reserves for bad debts based on past loss history, the length of time the receivables are past due and the current business environment. If our evaluations of the collectibility of our accounts receivable differ
from actual results, increases or decreases in bad debt expense and allowances may be required.



Property and equipment and definite-lived intangibles



We assign useful lives for our property and equipment and definite-lived intangibles based on our estimate of the amount of time that we will use those
assets and we have selected the straight-line method to depreciate our property and equipment and definite-lived intangibles. A change in the estimated useful lives or the depreciation or amortization method used could have a material impact upon
our results of operations.



We evaluate our property and
equipment and definite-lived intangibles for impairment whenever indicators of impairment exist. Accounting standards require that, if the sum of the future cash flows expected to result from an asset or group of assets, undiscounted and without
interest charges, is less than the carrying amount of the asset or group of assets, an asset impairment must be recognized in the financial statements. The estimated future cash flows related to an asset or group of assets is highly susceptible to
change because we must make assumptions about future revenue and the related cost of sales. Changes in our assumptions could require us to recognize a loss for asset impairment.



Impairment of goodwill and indefinite-lived intangibles



Goodwill and broadcast licenses account for 46.3% and 45.8% of total assets
in 2006 and 2005, respectively. The annual impairment tests for goodwill and broadcast licenses under Statement No. 142 require us to make certain assumptions in determining fair value, including assumptions about cash flow growth rates of our
businesses. Additionally, the fair values are significantly impacted by factors including competitive industry valuations and long-term interest rates that exist at the time the annual impairment tests are performed. Accordingly, we may incur
additional impairment charges in future periods under Statement No. 142 to the extent we do not achieve our expected cash flow growth rates, and to the extent that market values and long-term interest rates in general decrease and increase,
respectively.



Accrued income taxes



The Internal Revenue Service (IRS) and various state Departments of Revenue
routinely examine our federal and state tax returns. From time to time, the IRS and the state Departments of Revenue may challenge certain of our tax positions. We believe our tax positions comply with applicable tax law, and we would vigorously
defend these positions if challenged. The final disposition of any positions challenged by the IRS or



55



---

##### Table of Contents

state Departments of Revenue could require us to make additional tax payments or have an impact on our effective tax rate. Nonetheless, we believe that we
have adequately reserved for any foreseeable payments related to such matters and consequently do not anticipate any material earnings impact from the ultimate resolution of such matters. As of December 31, 2006 and December 25, 2005, we
recorded liabilities to cover additional tax exposure items of $5.1 million and $4.5 million, respectively.



Accrued litigation



We are subject to various legal actions, administrative proceedings and claims. When necessary, we may need to record a liability for an estimate of the
probable costs for the resolution of such claims. The estimate would be developed in consultation with counsel and would be based upon an analysis of potential results, assuming a combination of litigation and settlement strategies. We believe that
such unresolved legal actions and claims would not materially affect our results of operations, financial position or cash flows.



Employee benefits



We are self-insured for a majority of our employee related health and disability benefits and workers compensation claims. Third party administrators are
used to process all claims. Liabilities for unpaid claims are based on our historical claims experience. Liabilities for workers compensation claims are developed from actuarial valuations. Actual amounts could vary significantly from such estimates
which would require us to record additional expense in the future.



We rely upon actuarial valuations to determine pension costs and funding. There are certain assumptions that have a significant effect on our obligations, such as:



| |  |  | the discount rateused to arrive at the net present value of the obligations and expense;
| | - |  | -----------------------------------------------------------------------------------------



| |  |  | the return on assetsused to estimate the growth in invested asset value available to satisfy certain obligations;
| | - |  | ------------------------------------------------------------------------------------------------------------------



| |  |  | the salary increasesused to calculate the impact future pay increases will have on pension obligations; and
| | - |  | ------------------------------------------------------------------------------------------------------------



| |  |  | the employee turnover statisticsused to estimate the number of employees to be paid pension benefits.
| | - |  | ------------------------------------------------------------------------------------------------------



The assumptions used in accounting for pension benefits and other
postretirement benefits for 2006 and 2005 are:



|                                               |  |                  |   |  |                              |   |  |      |   |  |      |  
|---------------------------------------------- |  | ---------------- | - |  | ---------------------------- | - |  | ---- | - |  | ---- | -
|                                               |  | Pension Benefits |   |  | OtherPostretirement Benefits |  
|                                               |  | 2006             |   |  | 2005                         |   |  | 2006 |   |  | 2005 |  
|Discount rate for expense                      |  | 5.95             | % |  | 5.75                         | % |  | 5.50 | % |  | 6.00 | %
|Discount rate for obligations                  |  | 5.90             |   |  | 5.95                         |   |  | 5.75 |   |  | 5.50 |  
|Rate of compensation increases for expense     |  | 4.00             |   |  | 4.50                         |   |  |     |   |  |     |  
|Rate of compensation increases for obligations |  | 4.00             |   |  | 4.00                         |   |  |     |   |  |     |  
|Expected return on plan assets                 |  | 8.50             |   |  | 8.50                         |   |  |     |   |  |     |  



For our pension plans,
a one percent increase or decrease in the discount rate would have lowered by $2.1 million or raised by $2.6 million, respectively, the plans 2006 expense and would have lowered the plans projected benefit obligations by $18.0 million or
raised by $22.4 million, respectively, as of December 31, 2006.



To determine the discount rate assumptions for the pension and the postretirement benefit plans, we commissioned our actuarial firms to study our plans specific discount rate by matching our projected benefit payments to a yield curve
developed from high grade corporate bonds. The results of those studies were used as the benchmark to determine the discount rate assumptions. In addition, we used the Moodys Aa Corporate bonds, as of the measurement dates, as another
reference point to support our decision.



56



---

##### Table of Contents

To determine the long-term rate of return assumption for pension plan assets, we study historical markets
and preserve the long-term historical relationships between equities and fixed-income securities consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. We evaluate
current market factors such as inflation and interest rates before we determine long-term capital market assumptions. We review peer data and historical returns to check for reasonability and appropriateness.



We make other assumptions that affect the accounting for pension benefits,
such as the rate of compensation increase. Changes in these assumptions affect the benefit obligations and the service and interest cost components of the pension plan and the other postretirement plan and the required funding of the pension plan.
We review these assumptions on an annual basis.



We also rely
upon actuarial valuations to determine postretirement benefit costs other than pension. We provide our actuarial firm with the assumption of the discount rate and medical cost inflation. These assumptions could have a significant effect on our
obligation. The discount rate is used to arrive at the net present value of the obligation. The health care cost trend rate is used to calculate the impact future medical costs would have on postretirement obligations.



New Accounting Standards



In September 2006, the FASB issued Statement No. 158,
Employers Accounting for Defined Benefit Pension and Other Postretirement PlansAn Amendment of FASB Statements No. 87, 88, 106, and 132(R), which requires an employer to: (a) recognize in its statement of financial
position an asset for a plans overfunded status or a liability for a plans underfunded status; (b) measure a plans assets and its obligations that determine its funded status as of the end of the employers fiscal year
(with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. These changes are reported in comprehensive income. In accordance with the new standard,
we adopted Statement No. 158 on December 31, 2006.



In September 2006, the FASB issued Statement No. 157, Fair Value Measurements, which provides guidance for using fair value to measure assets and liabilities. Statement No. 157 applies whenever other standards
require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. Under Statement No. 157, fair value refers to the price that would be received to sell an asset or paid
to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. In this standard, the FASB clarifies the principle that fair value should be based on the assumptions market
participants would use when pricing the asset or liability. In support of this principle, Statement No. 157 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value hierarchy gives
the highest priority to quoted prices in active markets and the lowest priority to unobservable data, for example, the reporting entitys own data. Under the standard, fair value measurements would be separately disclosed by level within the
fair value hierarchy. In accordance with the new rule, we will adopt Statement No. 157 in the first quarter of 2008. We do not believe the effect of adopting Statement No. 157 will have a material impact on our consolidated financial
statements.



In September 2006, the SEC issued Staff Accounting
Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB No. 108). SAB No. 108 requires analysis of misstatements using both an income
statement (rollover) approach and a balance sheet (iron curtain) approach in assessing materiality and provides for a one-time cumulative effect transition adjustment. SAB No. 108 is effective as of the beginning of fiscal years ending
subsequent to November 15, 2006. The adoption of SAB No. 108 did not have a material impact on our consolidated financial statements.



In July 2006, the FASB issued 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



57



---

##### Table of Contents

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 adoption FIN 48 will have a material impact on our consolidated financial statements.



Effect of Inflation



Our results of operations and financial condition have not been significantly affected by general inflation. We have reduced the effects of rising costs
through improvements in productivity, cost containment programs and, where the competitive environment permits, increased selling prices. However, changes in newsprint prices could have an impact on costs, which we may not be able to offset fully in
our pricing or cost containment programs.



|ITEM 7A. | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
|-------- | ----------------------------------------------------------



We are exposed to market risk stemming from changes in interest rates on our long-term notes payable to banks, which are borrowings under our $475
million unsecured revolving credit facility, and in prices for newsprint. Changes in these factors could cause fluctuations in our net earnings and cash flows.



Interest rates on our long-term notes payable to banks are variable. The interest rate on our current unsecured revolving credit facility is either at
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. Average
interest rates on borrowings under our credit facility were 5.95% in 2006. If interest rates had been 100 basis points higher, our annual interest expense would have increased $2.2 million, assuming comparable borrowing levels. We have not entered
into derivative instruments to manage our exposure to interest rate risk.



We currently purchase approximately 88% of our estimated newsprint requirements from two suppliers. We pay market prices for quantities we determine will meet our requirements. The remaining 12% of our newsprint could
come from these suppliers or from other suppliers in the spot market. Price fluctuations for newsprint can have a significant effect on our results of operations. The average net price per ton was $668 in 2006. Based on the average net price per ton
in 2006 and consumption of newsprint in 2006, a $10 per ton increase or decrease in the price of newsprint would increase or decrease our total cost of newsprint by $0.6 million. We have not entered into derivative instruments to manage our exposure
to newsprint price risk.



58



---

##### Table of Contents





[THIS PAGE INTENTIONALLY LEFT BLANK]







59



---

##### Table of Contents

|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
|------- | -------------------------------------------



CONSOLIDATED BALANCE SHEETS

December 31 and December 25

(in thousands, except per share amounts)



|                                                                                                                                                   |  |      |          |   |      |   |          |  
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                                                                                                                                   |  | 2006 |          |   | 2005 |  
|ASSETS                                                                                                                                             |  |      |          |   |      |   |          |  
|Current assets:                                                                                                                                    |  |      |          |   |      |   |          |  
|Cash and cash equivalents                                                                                                                          |  | $    | 7,923    |   |      | $ | 6,864    |  
|Receivables, net                                                                                                                                   |  |      | 92,248   |   |      |   | 86,027   |  
|Inventories, net                                                                                                                                   |  |      | 7,890    |   |      |   | 8,752    |  
|Prepaid expenses and other current asset                                                                                                           |  |      | 11,757   |   |      |   | 12,794   |  
|Deferred income taxes                                                                                                                              |  |      | 11,017   |   |      |   | 9,968    |  
|Assets of discontinued operations                                                                                                                  |  |      | 91,932   |   |      |   | 93,795   |  
|                                                                                                                                                   |  |      |          |   |      |   |          |  
|Total Current Assets                                                                                                                               |  |      | 222,767  |   |      |   | 218,200  |  
|Property and equipment:                                                                                                                            |  |      |          |   |      |   |          |  
|Land and land improvements                                                                                                                         |  |      | 33,914   |   |      |   | 28,507   |  
|Buildings and building improvements                                                                                                                |  |      | 125,253  |   |      |   | 130,193  |  
|Equipment                                                                                                                                          |  |      | 277,482  |   |      |   | 273,911  |  
|Construction in progress                                                                                                                           |  |      | 6,070    |   |      |   | 3,775    |  
|                                                                                                                                                   |  |      |          |   |      |   |          |  
|                                                                                                                                                   |  |      | 442,719  |   |      |   | 436,386  |  
|Less accumulated depreciation                                                                                                                      |  |      | 218,875  |   |      |   | 204,116  |  
|                                                                                                                                                   |  |      |          |   |      |   |          |  
|Net property and equipment                                                                                                                         |  |      | 223,844  |   |      |   | 232,270  |  
|Goodwill                                                                                                                                           |  |      | 245,552  |   |      |   | 276,151  |  
|Broadcast licenses                                                                                                                                 |  |      | 196,659  |   |      |   | 174,835  |  
|Other intangible assets, net                                                                                                                       |  |      | 27,068   |   |      |   | 40,247   |  
|Prepaid pension costs                                                                                                                              |  |      |         |   |      |   | 18,603   |  
|Other assets                                                                                                                                       |  |      | 39,090   |   |      |   | 24,053   |  
|Non-current assets of discontinued operations                                                                                                      |  |      | 278      |   |      |   | 307      |  
|                                                                                                                                                   |  |      |          |   |      |   |          |  
|Total Assets                                                                                                                                       |  | $    | 955,258  |   |      | $ | 984,666  |  
|                                                                                                                                                   |  |      |          |   |      |   |          |  
|LIABILITIES AND SHAREHOLDERS EQUITY                                                                                                               |  |      |          |   |      |   |          |  
|Current liabilities:                                                                                                                               |  |      |          |   |      |   |          |  
|Accounts payable                                                                                                                                   |  | $    | 31,025   |   |      | $ | 36,990   |  
|Accrued compensation                                                                                                                               |  |      | 18,730   |   |      |   | 16,039   |  
|Accrued employee benefits                                                                                                                          |  |      | 10,456   |   |      |   | 9,722    |  
|Deferred revenue                                                                                                                                   |  |      | 18,687   |   |      |   | 14,590   |  
|Other current liabilities                                                                                                                          |  |      | 22,526   |   |      |   | 9,527    |  
|Liabilities of discontinued operations                                                                                                             |  |      | 20,647   |   |      |   | 18,479   |  
|Current portion of long-term liabilities                                                                                                           |  |      | 4,770    |   |      |   | 5,053    |  
|                                                                                                                                                   |  |      |          |   |      |   |          |  
|Total Current Liabilities                                                                                                                          |  |      | 126,841  |   |      |   | 110,400  |  
|Accrued employee benefits                                                                                                                          |  |      | 33,749   |   |      |   | 20,138   |  
|Long-term notes payable to banks                                                                                                                   |  |      | 235,000  |   |      |   | 274,545  |  
|Deferred income taxes                                                                                                                              |  |      | 62,089   |   |      |   | 65,630   |  
|Other long-term liabilities                                                                                                                        |  |      | 16,687   |   |      |   | 29,885   |  
|Shareholders equity:                                                                                                                              |  |      |          |   |      |   |          |  
|Preferred stock, $0.01 par  authorized 10,000,000 shares; no shares outstanding at December 31, 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 December 31, 2006 and December 25,
2005                        |  |      | 33       |   |      |   | 33       |  
|Class B  authorized 120,000,000 shares; issued: 18,231,716 shares at December 31, 2006 and 26,762,782 shares at December 25,
2005                 |  |      | 268      |   |      |   | 354      |  
|Class A  authorized 170,000,000 shares; issued and outstanding: 48,140,935 shares at December 31, 2006 and 42,188,974 shares
at December 25, 2005 |  |      | 481      |   |      |   | 422      |  
|Additional paid-in capital                                                                                                                         |  |      | 334,948  |   |      |   | 353,567  |  
|Unearned compensation                                                                                                                              |  |      |         |   |      |   | (679     | )
|Accumulated other comprehensive loss                                                                                                               |  |      | (17,114  | ) |      |   |         |  
|Retained earnings                                                                                                                                  |  |      | 270,991  |   |      |   | 239,086  |  
|Treasury stock, at cost (8,676,705 class B shares)                                                                                                 |  |      | (108,715 | ) |      |   | (108,715 | )
|                                                                                                                                                   |  |      |          |   |      |   |          |  
|Total Shareholders Equity                                                                                                                         |  |      | 480,892  |   |      |   | 484,068  |  
|                                                                                                                                                   |  |      |          |   |      |   |          |  
|Total Liabilities And Shareholders Equity                                                                                                         |  | $    | 955,258  |   |      | $ | 984,666  |  
|                                                                                                                                                   |  |      |          |   |      |   |          |  



See accompanying
notes.



60



---

##### Table of Contents

CONSOLIDATED STATEMENTS OF EARNINGS

Years Ended December 31, 2006, December 25, 2005 and
December 26, 2004

(in thousands, except per share amounts)



|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|-------------------------------------------------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                                                                     |  | 2006 |         |   | 2005 |   |         | 2004 | 
|Continuing operations:                                                                                               |  |      |         |   |      |   |         |      |  |   |         |  
|Revenue:                                                                                                             |  |      |         |   |      |   |         |      |  |   |         |  
|Publishing                                                                                                           |  | $    | 328,630 |   |      | $ | 339,002 |      |  | $ | 338,896 |  
|Broadcasting                                                                                                         |  |      | 238,536 |   |      |   | 168,316 |      |  |   | 172,073 |  
|Printing services                                                                                                    |  |      | 66,956  |   |      |   | 72,463  |      |  |   | 76,308  |  
|Other                                                                                                                |  |      | 37,731  |   |      |   | 44,232  |      |  |   | 42,862  |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Total revenue                                                                                                        |  |      | 671,853 |   |      |   | 624,013 |      |  |   | 630,139 |  
|Operating costs and expenses:                                                                                        |  |      |         |   |      |   |         |      |  |   |         |  
|Publishing                                                                                                           |  |      | 177,579 |   |      |   | 176,316 |      |  |   | 173,155 |  
|Broadcasting                                                                                                         |  |      | 95,745  |   |      |   | 73,722  |      |  |   | 68,832  |  
|Printing services                                                                                                    |  |      | 56,129  |   |      |   | 61,291  |      |  |   | 66,519  |  
|Other                                                                                                                |  |      | 32,083  |   |      |   | 37,955  |      |  |   | 35,712  |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Total operating costs and expenses                                                                                   |  |      | 361,536 |   |      |   | 349,284 |      |  |   | 344,218 |  
|Selling and administrative expenses                                                                                  |  |      | 202,454 |   |      |   | 196,643 |      |  |   | 199,233 |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Total operating costs and expenses and selling and administrative expenses                                           |  |      | 563,990 |   |      |   | 545,927 |      |  |   | 543,451 |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Operating earnings                                                                                                   |  |      | 107,863 |   |      |   | 78,086  |      |  |   | 86,688  |  
|Other income and expense:                                                                                            |  |      |         |   |      |   |         |      |  |   |         |  
|Interest income and dividends                                                                                        |  |      | 37      |   |      |   | 143     |      |  |   | 215     |  
|Interest expense                                                                                                     |  |      | (15,607 | ) |      |   | (3,941  | )    |  |   | (2,272  | )
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Total other income and expense                                                                                       |  |      | (15,570 | ) |      |   | (3,798  | )    |  |   | (2,057  | )
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Earnings from continuing operations before income taxes                                                              |  |      | 92,293  |   |      |   | 74,288  |      |  |   | 84,631  |  
|Provision for income taxes                                                                                           |  |      | 36,556  |   |      |   | 29,528  |      |  |   | 33,872  |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Earnings from continuing operations                                                                                  |  |      | 55,737  |   |      |   | 44,760  |      |  |   | 50,759  |  
|Gain from discontinued operations, net of applicable income tax expense of $5,823, $13,964 and $18,464, respectively |  |      | 8,636   |   |      |   | 21,483  |      |  |   | 27,721  |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Net earnings                                                                                                         |  | $    | 64,373  |   |      | $ | 66,243  |      |  | $ | 78,480  |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Earnings available to class A and B common shareholders                                                              |  | $    | 62,519  |   |      | $ | 64,389  |      |  | $ | 76,626  |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Earnings per share:                                                                                                  |  |      |         |   |      |   |         |      |  |   |         |  
|Basic:                                                                                                               |  |      |         |   |      |   |         |      |  |   |         |  
|Continuing operations                                                                                                |  | $    | 0.80    |   |      | $ | 0.60    |      |  | $ | 0.67    |  
|Discontinued operations                                                                                              |  |      | 0.13    |   |      |   | 0.31    |      |  |   | 0.38    |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Net earnings                                                                                                         |  | $    | 0.93    |   |      | $ | 0.91    |      |  | $ | 1.05    |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Diluted:                                                                                                             |  |      |         |   |      |   |         |      |  |   |         |  
|Continuing operations                                                                                                |  | $    | 0.77    |   |      | $ | 0.59    |      |  | $ | 0.65    |  
|Discontinued operations                                                                                              |  |      | 0.12    |   |      |   | 0.29    |      |  |   | 0.36    |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  
|Net earnings                                                                                                         |  | $    | 0.89    |   |      | $ | 0.88    |      |  | $ | 1.01    |  
|                                                                                                                     |  |      |         |   |      |   |         |      |  |   |         |  



See accompanying
notes.



61



---

##### Table of Contents

JOURNAL COMMUNICATIONS, INC.



CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY

Years Ended December 31, 2006, December 25, 2005 and December 26, 2004

(in
thousands, except per share data)



|                                                                                          |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|----------------------------------------------------------------------------------------- |  | -------------- | - | ----------- | - | ------------ |  | - | ------------------------- |  | - | ---- | - |  | - | --- | - |  | - | ------- | -
|                                                                                          |  | PreferredStock |   | CommonStock |   | Common Stock |  |   | AdditionalPaid-in-Capital | 
|                                                                                          |  |                |   | Class C     |   | Class B      |  |   | Class A                   |  |  
|Balance at December 31, 2003                                                              |  | $              |  |             | $ |             |  | $ | 33                        |  | $ | 620  |   |  | $ | 201 |   |  | $ | 268,907 |  
|Net earnings and other comprehensive income                                               |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|                                                                                          |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|                                                                                          |  |                |   |             |   |             
|Dividends declared:                                                                       |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Class C ($0.57 per share)                                                                 |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Class B ($0.26 per share)                                                                 |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Class A ($0.26 per share)                                                                 |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Issuance of shares:                                                                       |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Follow-on equity offering                                                                 |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   | 67  |   |  |   | 115,876 |  
|Conversion of class B to class A                                                          |  |                |   |             |   |              |  |   |                           |  |   | (6   | ) |  |   | 6   |   |  |   |         |  
|Stock grants                                                                              |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   | 189     |  
|Restricted stock grants                                                                   |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   | 26      |  
|Employee stock purchase plan                                                              |  |                |   |             |   |              |  |   |                           |  |   | 1    |   |  |   |     |   |  |   | 524     |  
|Amortization of unearned compensation                                                     |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Shares purchased and retired in tender offer                                              |  |                |   |             |   |              |  |   |                           |  |   | (80  | ) |  |   |     |   |  |   | (303    | )
|                                                                                          |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Balance at December 26, 2004                                                              |  |                |  |             |   |             |  |   | 33                        |  |   | 535  |   |  |   | 274 |   |  |   | 385,219 |  
|Net earnings and other comprehensive income                                               |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|                                                                                          |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|                                                                                          |  |                |   |             |   |             
|Dividends declared:                                                                       |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Class C ($0.57 per share)                                                                 |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Class B ($0.26 per share)                                                                 |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Class A ($0.26 per share)                                                                 |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Issuance of shares:                                                                       |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Conversion of class B to class A                                                          |  |                |   |             |   |              |  |   |                           |  |   | (183 | ) |  |   | 183 |   |  |   |         |  
|Stock grants                                                                              |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   | 417     |  
|Restricted stock grants                                                                   |  |                |   |             |   |              |  |   |                           |  |   | 1    |   |  |   |     |   |  |   | 990     |  
|Cancellation of restricted stock grants                                                   |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   | (83     | )
|Employee stock purchase plan                                                              |  |                |   |             |   |              |  |   |                           |  |   | 1    |   |  |   |     |   |  |   | 1,181   |  
|Shares purchased and retired                                                              |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   | (35 | ) |  |   | (34,157 | )
|Amortization of unearned compensation                                                     |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|                                                                                          |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Balance at December 25, 2005                                                              |  |                |  |             |   |             |  |   | 33                        |  |   | 354  |   |  |   | 422 |   |  |   | 353,567 |  
|Net earnings and other comprehensive income                                               |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|                                                                                          |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Recording of underfunded pension and post- retirement liabilities (net of tax of $11,457) |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|                                                                                          |  |                |   |             |   |             
|Dividends declared:                                                                       |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Class C ($0.57 per share)                                                                 |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Class B ($0.26 per share)                                                                 |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Class A ($0.26 per share)                                                                 |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Issuance of shares:                                                                       |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Conversion of class B to class A                                                          |  |                |   |             |   |              |  |   |                           |  |   | (87  | ) |  |   | 87  |   |  |   |         |  
|Stock grants                                                                              |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   | 710     |  
|Employee stock purchase plan                                                              |  |                |   |             |   |              |  |   |                           |  |   | 1    |   |  |   |     |   |  |   | 1,321   |  
|Shares purchased and retired                                                              |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   | (28 | ) |  |   | (21,172 | )
|Stock-based compensation                                                                  |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   | 522     |  
|                                                                                          |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  
|Balance at December 31, 2006                                                              |  | $              |  |             | $ |             |  | $ | 33                        |  | $ | 268  |   |  | $ | 481 |   |  | $ | 334,948 |  
|                                                                                          |  |                |   |             |   |              |  |   |                           |  |   |      |   |  |   |     |   |  |   |         |  



62



---

##### Table of Contents



| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  | - | -------------------- | - |  | - | --------------------------------- | - |  | - | ---------------- | - |  | - | --------------------- | - |  | - | -------- | - |  | - | ------------------- |  | 
| |  |   | UnearnedCompensation |   |  |   | AccumulatedOtherComprehensiveLoss |   |  |   | RetainedEarnings |   |  |   | TreasuryStock, atcost |   |  |   | Total    |   |  |   | ComprehensiveIncome |  | 
| |  |   |                      |   |  |  
| |  | $ | (129                 | ) |  | $ |                                  |   |  | $ | 302,833          |   |  | $ | (108,715              | ) |  | $ | 463,750  |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | 78,480           |   |  |   |                       |   |  |   | 78,480   |   |  | $ | 78,480              |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                  
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (1,854           | ) |  |   |                       |   |  |   | (1,854   | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (12,796          | ) |  |   |                       |   |  |   | (12,796  | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (6,142           | ) |  |   |                       |   |  |   | (6,142   | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   | 115,943  |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |         |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   | 189      |   |  |   |                     |  | 
| |  |   | (26                  | ) |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |         |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   | 525      |   |  |   |                     |  | 
| |  |   | 51                   |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   | 51       |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (148,268         | ) |  |   |                       |   |  |   | (148,651 | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   | (104                 | ) |  |   |                                  |   |  |   | 212,253          |   |  |   | (108,715              | ) |  |   | 489,495  |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | 66,243           |   |  |   |                       |   |  |   | 66,243   |   |  | $ | 66,243              |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                  
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (1,854           | ) |  |   |                       |   |  |   | (1,854   | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (9,245           | ) |  |   |                       |   |  |   | (9,245   | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (9,190           | ) |  |   |                       |   |  |   | (9,190   | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |         |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   | 417      |   |  |   |                     |  | 
| |  |   | (991                 | ) |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |         |   |  |   |                     |  | 
| |  |   | 83                   |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |         |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   | 1,182    |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (19,121          | ) |  |   |                       |   |  |   | (53,313  | ) |  |   |                     |  | 
| |  |   | 333                  |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   | 333      |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   | (679                 | ) |  |   |                                  |   |  |   | 239,086          |   |  |   | (108,715              | ) |  |   | 484,068  |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | 64,373           |   |  |   |                       |   |  |   | 64,373   |   |  | $ | 64,373              |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   |                      |   |  |   | (17,114                           | ) |  |   |                  |   |  |   |                       |   |  |   | (17,114  | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                  
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (1,854           | ) |  |   |                       |   |  |   | (1,854   | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (6,816           | ) |  |   |                       |   |  |   | (6,816   | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (10,763          | ) |  |   |                       |   |  |   | (10,763  | ) |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |         |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   | 710      |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   | 1,322    |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   | (13,037          | ) |  |   |                       |   |  |   | (34,237  | ) |  |   |                     |  | 
| |  |   | 679                  |   |  |   |                                   |   |  |   | 2                |   |  |   |                       |   |  |   | 1,203    |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 
| |  | $ |                     |   |  | $ | (17,114                           | ) |  | $ | 270,991          |   |  | $ | (108,715              | ) |  | $ | 480,892  |   |  |   |                     |  | 
| |  |   |                      |   |  |   |                                   |   |  |   |                  |   |  |   |                       |   |  |   |          |   |  |   |                     |  | 



63



---

##### Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2006, December 25, 2005 and
December 26, 2004

(in thousands)



|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|-------------------------------------------------------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                             |  | 2006 |          |   | 2005 |   |          | 2004 | 
|Cash flow from operating activities:                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Net earnings                                                                                 |  | $    | 64,373   |   |      | $ | 66,243   |      |  | $ | 78,480   |  
|Less gain from discontinued operations                                                       |  |      | 8,636    |   |      |   | 21,483   |      |  |   | 27,721   |  
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|Earnings from continuing operations                                                          |  |      | 55,737   |   |      |   | 44,760   |      |  |   | 50,759   |  
|Adjustments for non-cash items:                                                              |  |      |          |   |      |   |          |      |  |   |          |  
|Depreciation                                                                                 |  |      | 27,897   |   |      |   | 25,078   |      |  |   | 26,129   |  
|Amortization                                                                                 |  |      | 2,060    |   |      |   | 1,006    |      |  |   | 1,372    |  
|Write-off of financing costs                                                                 |  |      |         |   |      |   | 361      |      |  |   |         |  
|Provision for doubtful accounts                                                              |  |      | 1,491    |   |      |   | 2,533    |      |  |   | 3,442    |  
|Deferred income taxes                                                                        |  |      | 6,867    |   |      |   | 74       |      |  |   | 9,246    |  
|Non-cash compensation                                                                        |  |      | 1,373    |   |      |   | 713      |      |  |   | 240      |  
|Curtailment gains for defined benefit pension and other postretirement benefit plans         |  |      | (2,402   | ) |      |   |         |      |  |   |         |  
|Net loss (gain) from disposal of business and assets                                         |  |      | (3,443   | ) |      |   | (25      | )    |  |   | 398      |  
|Net operating activities of discontinued operations                                          |  |      | 27,329   |   |      |   | 25,746   |      |  |   | 40,200   |  
|Net changes in operating assets and liabilities, excluding effect of sales and acquisitions: |  |      |          |   |      |   |          |      |  |   |          |  
|Receivables                                                                                  |  |      | (7,608   | ) |      |   | (2,022   | )    |  |   | (6,529   | )
|Inventories                                                                                  |  |      | 862      |   |      |   | 860      |      |  |   | (1,869   | )
|Accounts payable                                                                             |  |      | (6,156   | ) |      |   | (1,066   | )    |  |   | 3,777    |  
|Other assets and liabilities                                                                 |  |      | 15,992   |   |      |   | 8,412    |      |  |   | 6,801    |  
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|Net Cash Provided By Operating Activities                                                    |  |      | 119,999  |   |      |   | 106,430  |      |  |   | 133,966  |  
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|Cash flow from investing activities:                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Capital expenditures for property and equipment                                              |  |      | (22,223  | ) |      |   | (19,530  | )    |  |   | (22,199  | )
|Proceeds from sales of assets                                                                |  |      | 2,871    |   |      |   | 1,590    |      |  |   | 607      |  
|Acquisition of businesses                                                                    |  |      |         |   |      |   | (228,779 | )    |  |   | (43,421  | )
|Proceeds from sale of business                                                               |  |      | 7,252    |   |      |   |         |      |  |   |         |  
|Net investing activities of discontinued operations                                          |  |      | (14,947  | ) |      |   | 9,964    |      |  |   | (4,256   | )
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|Net Cash Used For Investing Activities                                                       |  |      | (27,047  | ) |      |   | (236,755 | )    |  |   | (69,269  | )
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|Cash flow from financing activities:                                                         |  |      |          |   |      |   |          |      |  |   |          |  
|Financing costs on long-term notes payable to banks                                          |  |      |         |   |      |   | (1,000   | )    |  |   | (98      | )
|Proceeds from long-term notes payable to banks                                               |  |      | 224,052  |   |      |   | 431,265  |      |  |   | 276,432  |  
|Payments of long-term notes payable to banks                                                 |  |      | (263,597 | ) |      |   | (227,030 | )    |  |   | (290,122 | )
|Proceeds from issuance of common stock, net                                                  |  |      | 1,322    |   |      |   | 1,182    |      |  |   | 116,468  |  
|Redemption of common stock, net                                                              |  |      | (34,237  | ) |      |   | (53,313  | )    |  |   | (148,651 | )
|Cash dividends                                                                               |  |      | (19,433  | ) |      |   | (20,289  | )    |  |   | (20,792  | )
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|Net Cash (Used For) Provided By Financing Activities                                         |  |      | (91,893  | ) |      |   | 130,815  |      |  |   | (66,763  | )
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|Net Increase (Decrease) in Cash and Cash Equivalents                                         |  |      | 1,059    |   |      |   | 490      |      |  |   | (2,066   | )
|Cash and cash equivalents                                                                    |  |      |          |   |      |   |          |      |  |   |          |  
|Beginning of year                                                                            |  |      | 6,864    |   |      |   | 6,374    |      |  |   | 8,440    |  
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|End of year                                                                                  |  | $    | 7,923    |   |      | $ | 6,864    |      |  | $ | 6,374    |  
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|Supplemental Cash Flow Information                                                           |  |      |          |   |      |   |          |      |  |   |          |  
|Cash paid for income taxes                                                                   |  | $    | 32,936   |   |      | $ | 44,464   |      |  | $ | 41,192   |  
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  
|Cash paid for interest                                                                       |  | $    | 14,674   |   |      | $ | 1,857    |      |  | $ | 1,466    |  
|                                                                                             |  |      |          |   |      |   |          |      |  |   |          |  



See accompanying
notes.



64



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

December 31, 2006 (in thousands, except per share amounts)



|1 | SIGNIFICANT ACCOUNTING POLICIES
|- | -------------------------------



Basis of presentation and consolidationWe report on a 52-53 week fiscal year ending on the last Sunday of December in each year. In
addition, we have four quarterly reporting periods, each consisting of thirteen weeks and ending on a Sunday, provided that once every six years, starting in 2006, the fourth quarterly reporting period will be fourteen weeks. The 2006 fiscal year
ending December 31 is a 53-week year with a 14-week fourth quarter.



The consolidated financial statements include the accounts of Journal Communications, Inc. and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.



Revenue recognitionPublishing revenue is generated
primarily from the sale of newspaper and internet advertising space and newspaper sales. Broadcasting revenue is generated primarily from the sale of television and radio advertising time. Advertising revenue is recognized in the publishing and
broadcasting industries when the advertisement is published or aired, including advertising aired online on web sites. Circulation revenue is recognized when the newspaper is delivered to the customer. Printing services revenue is recorded at the
time of shipment when title passes to the customer. Other revenue that consists of direct marketing services is recognized at the time the service is performed.



Amounts we receive from customers in advance of revenue recognition are deferred as liabilities. Deferred revenue to be earned more than one year from
the balance sheet date is included in other long-term liabilities in the consolidated balance sheets.



Shipping and handling costsShipping and handling costs, including postage, billed to customers are included in revenue and the related
costs are included in operating costs and expenses.



Advertising expenseWe expense our advertising costs as incurred. Advertising expense totaled $4,413, $6,707 and $7,520 in 2006, 2005 and 2004, respectively.



Interest expenseAll interest incurred during 2006, 2005 and 2004 was expensed.



Income taxesWe account for income taxes in accordance
with Statement No. 109, Accounting for Income Taxes. In accordance with Statement No. 109, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts for income tax purposes. Valuation allowances are established where management determines that it is more likely than not that some portion or all of a deferred tax asset will not be realized.



Earnings per shareBasic earnings per share is computed
by dividing net earnings available to class A and B common shareholders by the weighted average number of class A and B shares outstanding during the period and excludes non-vested restricted stock. Diluted earnings per share is computed based upon
the assumption that the class C shares outstanding were converted into class A and B shares, common shares are issued upon exercise of 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.



65



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Basic and diluted earnings per share are computed as follows:



|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|Years ended December 31, December 25 and December 26    |  | 2006 |        |   | 2005 |   |        | 2004 | 
|Basic earnings:                                         |  |      |        |   |      |   |        |      |  |   |        |  
|Earnings from continuing operations                     |  | $    | 55,737 |   |      | $ | 44,760 |      |  | $ | 50,759 |  
|Discontinued operations                                 |  |      | 8,636  |   |      |   | 21,483 |      |  |   | 27,721 |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Net earnings                                            |  |      | 64,373 |   |      |   | 66,243 |      |  |   | 78,480 |  
|Less dividends on class C common stock                  |  |      | (1,854 | ) |      |   | (1,854 | )    |  |   | (1,854 | )
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Earnings available to class A and B common shareholders |  | $    | 62,519 |   |      | $ | 64,389 |      |  | $ | 76,626 |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Weighted average class A and B shares outstanding       |  |      | 67,476 |   |      |   | 70,945 |      |  |   | 72,931 |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Basic earnings per share:                               |  |      |        |   |      |   |        |      |  |   |        |  
|Continuing operations                                   |  | $    | 0.80   |   |      | $ | 0.60   |      |  | $ | 0.67   |  
|Discontinued operations                                 |  |      | 0.13   |   |      |   | 0.31   |      |  |   | 0.38   |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Net earnings                                            |  | $    | 0.93   |   |      | $ | 0.91   |      |  | $ | 1.05   |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Diluted earnings:                                       |  |      |        |   |      |   |        |      |  |   |        |  
|Earnings available to class A and B common shareholders |  | $    | 62,519 |   |      | $ | 64,389 |      |  | $ | 76,626 |  
|Plus dividends on class C common stock                  |  |      | 1,854  |   |      |   | 1,854  |      |  |   | 1,854  |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Net earnings                                            |  | $    | 64,373 |   |      | $ | 66,243 |      |  | $ | 78,480 |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Weighted average class A and B shares outstanding       |  |      | 67,476 |   |      |   | 70,945 |      |  |   | 72,931 |  
|Assumed exercise of stock options                       |  |      |       |   |      |   |       |      |  |   | 1      |  
|Impact of non-vested restricted stock                   |  |      | 57     |   |      |   | 18     |      |  |   | 3      |  
|Conversion of class C shares                            |  |      | 4,452  |   |      |   | 4,452  |      |  |   | 4,452  |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Adjusted weighted average shares outstanding            |  |      | 71,985 |   |      |   | 75,415 |      |  |   | 77,387 |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Diluted earnings per share:                             |  |      |        |   |      |   |        |      |  |   |        |  
|Continuing operations                                   |  | $    | 0.77   |   |      | $ | 0.59   |      |  | $ | 0.65   |  
|Discontinued operations                                 |  |      | 0.12   |   |      |   | 0.29   |      |  |   | 0.36   |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  
|Net earnings                                            |  | $    | 0.89   |   |      | $ | 0.88   |      |  | $ | 1.01   |  
|                                                        |  |      |        |   |      |   |        |      |  |   |        |  



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).



Fair valuesThe carrying amount of cash and cash equivalents, receivables, accounts payable and long-term notes payable to banks approximates fair value as of December 31, 2006 and December 25, 2005.



Cash equivalentsCash equivalents are highly liquid
investments with maturities of three months or less when purchased. Cash equivalents are stated at cost, which approximates market value.



Receivables, netWe evaluate the collectibility of our accounts receivable based on a combination of factors. In circumstances where we
are aware of a specific customers inability to meet its financial obligations, we record a specific reserve to reduce the amounts recorded to what we believe will be collected. For all other customers, we recognize allowances for bad debts
based on historical experience of bad debts as a percent of accounts receivable for each business unit. We write off uncollectible accounts against the allowance for doubtful accounts after collection efforts have been exhausted. The allowance for
doubtful accounts at December 31, 2006 and December 25, 2005 was $4,075 and $3,080, respectively.



66



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



InventoriesInventories are stated at the lower of cost (first in, first out
method) or market. A summary of inventories follows:



|                            |  |      |       |   |      |   |       |  
|--------------------------- |  | ---- | ----- | - | ---- | - | ----- | -
|December 31 and December 25 |  | 2006 |       |   | 2005 |  
|Paper and supplies          |  | $    | 6,577 |   |      | $ | 6,803 |  
|Work in process             |  |      | 722   |   |      |   | 873   |  
|Finished goods              |  |      | 784   |   |      |   | 1,272 |  
|Less obsolescence reserve   |  |      | (193  | ) |      |   | (196  | )
|                            |  |      |       |   |      |   |       |  
|Inventories, net            |  | $    | 7,890 |   |      | $ | 8,752 |  
|                            |  |      |       |   |      |   |       |  



Television
programmingWe have agreements with distributors for the rights to television programming over contract periods, which generally run for one to five years. Each contract is recorded as an asset and a liability at an amount equal to
its gross contractual commitment when the license period begins and the program is available for its first showing. The portion of program contracts that become payable within one year is reflected as a current liability in the accompanying
consolidated balance sheets. The rights to program materials are carried at the lower of unamortized cost or estimated net realizable value or in the case of programming obtained by an acquisition are carried at estimated fair market value.



Property and equipmentProperty and
equipment are recorded at cost. Depreciation of property and equipment is provided, using the straight-line method, over the estimated useful lives, which are as follows:



|                               |  |      
|------------------------------ |  | -----
|                               |  | Years
|Building and land improvements |  | 1020
|Buildings                      |  | 30   
|Newspaper printing presses     |  | 25   
|Broadcasting equipment         |  | 1520
|Other printing presses         |  | 10   
|Other                          |  | 310 



Intangible
assetsGoodwill and intangible assets deemed to have indefinite lives, including broadcast licenses, are no longer amortized but instead are reviewed at least annually for impairment. We continue to amortize definite-lived intangible
assets on a straight-line basis over periods of five to 40 years.



Impairment of long-lived assetsProperty and equipment and other definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. If an asset is considered impaired, a loss is recognized for the difference between the fair value and carrying value of the asset or group of assets. Such analyses necessarily involve significant judgment.



Concentration of credit riskGenerally, credit is extended
based upon an evaluation of the customers financial position, and advance payment is not required. Credit losses are provided for in the financial statements and have been within managements expectations.



Use of estimatesThe preparation of financial statements
in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ
from those estimates.



ReclassificationsCertain prior year amounts have been reclassified to conform to the 2006 presentation. The reclassifications were primarily associated with the sale of Norlight Telecommunications Inc. (Norlight), our
former telecommunications business to Q-Comm Corporation (Q-Comm). See Note 11 for additional information regarding our former telecommunications business.



67



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



New accounting standardsIn September 2006, the FASB issued Statement
No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement PlansAn Amendment of FASB Statements No. 87, 88, 106, and 132(R), which requires an employer to: (a) recognize in its statement
of financial position an asset for a plans overfunded status or a liability for a plans underfunded status; (b) measure a plans assets and its obligations that determine its funded status as of the end of the employers
fiscal year (with limited exceptions); and (c) recognize changes in the funded status of a defined benefit postretirement plan in the year in which the changes occur. These changes are reported in comprehensive income. In accordance with the
new standard, we adopted Statement No. 158 on December 31, 2006.



In September 2006, the FASB issued Statement No. 157, Fair Value Measurements, which provides guidance for using fair value to measure assets and liabilities. Statement No. 157 applies
whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. Under Statement No. 157, fair value refers to the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the market in which the reporting entity transacts. In this standard, the FASB clarifies the principle that fair value should be based on the
assumptions market participants would use when pricing the asset or liability. In support of this principle, Statement No. 157 establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. The fair value
hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data, for example, the reporting entitys own data. Under the standard, fair value measurements would be separately disclosed by
level within the fair value hierarchy. In accordance with the new rule, we will adopt Statement No. 157 in the first quarter of 2008. We do not believe the effect of adopting Statement No. 157 will have a material impact on our
consolidated financial statements.



In September 2006, the SEC
issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB No. 108). SAB No. 108 requires analysis of
misstatements using both an income statement (rollover) approach and a balance sheet (iron curtain) approach in assessing materiality and provides for a one-time cumulative effect transition adjustment. SAB No. 108 is effective as of the
beginning of fiscal years ending subsequent to November 15, 2006. The adoption of SAB No. 108 did not have a material impact on our consolidated financial statements.



In July 2006, the FASB issued 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 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 adoption FIN 48 will have a material impact on our consolidated financial statements.



|2 | NOTES PAYABLE TO BANKS
|- | ----------------------



We have a $475 million unsecured revolving facility that expires on June 2, 2011. The interest rate on borrowings are 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 December 31, 2006 and
December 25, 2005, we had borrowings of $235,000 and $274,545, respectively, under the facility at a weighted average rate of 5.95% and 5.04%, respectively. Fees in connection with the amended facility of $1,717 are being amortized over the
term of the facility using the straight-line method which approximates the effective-interest method.



68



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|3 | EMPLOYEE BENEFIT PLANS
|- | ----------------------



We have a defined benefit pension plan covering the majority of our employees. The plan provides benefits based on years of service and the average
compensation for the employees last five years of employment. Plan assets consist primarily of listed stocks and government and other bonds. The Pension Protection Act of 2006 was signed into law on August 17, 2006. The law primarily
changed employer funding rules of defined benefit pension plans and insurance premiums payable to the Pension Benefit Guarantee Corporation (PBGC). The changes in the laws do not require a significant change in funding to our plans. We expect our
PBGC insurance premiums to increase in future years.



In
addition, we provide health benefits to certain retirees and their eligible spouses. Our postretirement health plan qualifies for the federal subsidy under the Medicare Prescription Drug, Improvement and Modernization Act of 2003 because the
prescription drug benefits provided under our postretirement health care plan generally require lower premiums from covered retirees and have lower deductibles than the benefits provided in Medicare Part D and accordingly, are actuarially equivalent
to or better than, the benefits provided under the Act.



We
also sponsor an unfunded non-qualified pension plan for certain employees whose benefits under the pension plan and the Investment Savings Plan may be restricted due to limitations imposed by the Internal Revenue Service. The disclosure for the
unfunded non-qualified pension plan for all years presented is combined with the defined benefit pension plan.



|                                               |  |                  |         |   |                              |   |         |      |  |   |         |   |  |   |        |  
|---------------------------------------------- |  | ---------------- | ------- | - | ---------------------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------ | -
|                                               |  | Pension Benefits |         |   | OtherPostretirement Benefits |  
|Years ended December 31 and December 25        |  | 2006             |         |   | 2005                         |   |         | 2006 |  |   | 2005    |  
|Change in benefit obligations                  |  |                  |         |   |                              |   |         |      |  |   |         |   |  |   |        |  
|Benefit obligation at beginning of year        |  | $                | 148,435 |   |                              | $ | 148,845 |      |  | $ | 33,693  |   |  | $ | 32,662 |  
|Service cost                                   |  |                  | 4,497   |   |                              |   | 5,445   |      |  |   | 643     |   |  |   | 475    |  
|Change in plan provisions                      |  |                  |        |   |                              |   |        |      |  |   | (975    | ) |  |   | (995   | )
|Interest cost                                  |  |                  | 8,701   |   |                              |   | 8,347   |      |  |   | 1,774   |   |  |   | 1,998  |  
|Actuarial (gain) loss                          |  |                  | (4,256  | ) |                              |   | (6,399  | )    |  |   | (317    | ) |  |   | 2,075  |  
|Curtailment                                    |  |                  |        |   |                              |   |        |      |  |   | (11,098 | ) |  |   |       |  
|Benefits paid                                  |  |                  | (7,810  | ) |                              |   | (7,803  | )    |  |   | (1,814  | ) |  |   | (2,522 | )
|                                               |  |                  |         |   |                              |   |         |      |  |   |         |   |  |   |        |  
|Benefit obligation at end of year              |  | $                | 149,567 |   |                              | $ | 148,435 |      |  | $ | 21,906  |   |  | $ | 33,693 |  
|                                               |  |                  |         |   |                              |   |         |      |  |   |         |   |  |   |        |  
|Change in plan assets                          |  |                  |         |   |                              |   |         |      |  |   |         |   |  |   |        |  
|Fair value of plan assets at beginning of year |  | $                | 129,226 |   |                              | $ | 124,330 |      |  | $ |        |   |  | $ |       |  
|Actual gain on plan assets                     |  |                  | 14,336  |   |                              |   | 12,443  |      |  |   |        |   |  |   |       |  
|Company contributions                          |  |                  | 256     |   |                              |   | 256     |      |  |   | 1,814   |   |  |   | 2,522  |  
|Benefits paid                                  |  |                  | (7,810  | ) |                              |   | (7,803  | )    |  |   | (1,814  | ) |  |   | (2,522 | )
|                                               |  |                  |         |   |                              |   |         |      |  |   |         |   |  |   |        |  
|Fair value of plan assets at end of year       |  | $                | 136,008 |   |                              | $ | 129,226 |      |  | $ |        |   |  | $ |       |  
|                                               |  |                  |         |   |                              |   |         |      |  |   |         |   |  |   |        |  



69



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                                                       |  |                                   |         |   |                                               |   |         |  
|---------------------------------------------------------------------- |  | --------------------------------- | ------- | - | --------------------------------------------- | - | ------- | -
|                                                                       |  | Pension BenefitsDecember 31, 2006 |         |   | OtherPostretirement BenefitsDecember 31, 2006 |  
|Benefit obligation in excess of plan assets                            |  | $                                 | (13,559 | ) |                                               | $ | (21,906 | )
|Amounts recognized in statement of financial position                  |  |                                   |         |   |                                               |   |         |  
|Current liabilities                                                    |  | $                                 | (256    | ) |                                               | $ | (2,743  | )
|Noncurrent liabilities                                                 |  |                                   | (13,303 | ) |                                               |   | (19,163 | )
|                                                                       |  |                                   |         |   |                                               |   |         |  
|Accrued benefit cost included in accrued employee benefits             |  | $                                 | (13,559 | ) |                                               | $ | (21,906 | )
|                                                                       |  |                                   |         |   |                                               |   |         |  
|Amounts recognized in accumulated other comprehensive loss, net of tax |  |                                   |         |   |                                               |   |         |  
|Actuarial loss, net                                                    |  | $                                 | 26,987  |   |                                               | $ | 3,523   |  
|Prior service cost                                                     |  |                                   | (3,132  | ) |                                               |   | (2,097  | )
|Transition obligation                                                  |  |                                   |        |   |                                               |   | 3,291   |  
|                                                                       |  |                                   |         |   |                                               |   |         |  
|Total                                                                  |  | $                                 | 23,855  |   |                                               | $ | 4,717   |  
|                                                                       |  |                                   |         |   |                                               |   |         |  
|                                                                       |  |                                  
|                                                                       |  | Pension BenefitsDecember 25, 2005 |         |   | OtherPostretirement BenefitsDecember 25, 2005 |  
|Benefit obligation in excess of plan assets                            |  |                                   |         |   |                                               |   |         |  
|Underfunded status of the plan                                         |  | $                                 | (19,209 | ) |                                               | $ | (33,693 | )
|Unrecognized net actuarial loss                                        |  |                                   | 36,940  |   |                                               |   | 14,991  |  
|Unrecognized prior service cost                                        |  |                                   | (5,183  | ) |                                               |   | (1,228  | )
|Unrecognized transition obligation                                     |  |                                   |        |   |                                               |   | 3,840   |  
|                                                                       |  |                                   |         |   |                                               |   |         |  
|Prepaid (accrued) net benefit cost                                     |  | $                                 | 12,548  |   |                                               | $ | (16,090 | )
|                                                                       |  |                                   |         |   |                                               |   |         |  
|                                                                       |  |                                  
|                                                                       |  | Pension BenefitsDecember 25, 2005 |         |   | OtherPostretirement BenefitsDecember 25, 2005 |  
|Prepaid (accrued) net benefit cost included in:                        |  |                                   |         |   |                                               |   |         |  
|Prepaid pension costs                                                  |  | $                                 | 18,603  |   |                                               | $ |        |  
|Accrued employee benefits                                              |  |                                   | (6,055  | ) |                                               |   | (16,090 | )
|                                                                       |  |                                   |         |   |                                               |   |         |  
|                                                                       |  | $                                 | 12,548  |   |                                               | $ | (16,090 | )
|                                                                       |  |                                   |         |   |                                               |   |         |  



The accumulated
benefit obligation for the pension plans was $129,438 and $125,736 at December 31, 2006 and December 25, 2005, respectively.



|                                                                         |  |                  |         |   |      |   |         |      |  |   |         |  
|------------------------------------------------------------------------ |  | ---------------- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                         |  | Pension Benefits |        
|Years ended December 31, December 25 and December 26                     |  | 2006             |         |   | 2005 |   |         | 2004 | 
|Components of net periodic benefit cost                                  |  |                  |         |   |      |   |         |      |  |   |         |  
|Service cost                                                             |  | $                | 4,497   |   |      | $ | 5,445   |      |  | $ | 4,976   |  
|Interest cost                                                            |  |                  | 8,701   |   |      |   | 8,347   |      |  |   | 8,297   |  
|Expected return on plan assets                                           |  |                  | (10,206 | ) |      |   | (10,174 | )    |  |   | (10,338 | )
|Curtailment gain                                                         |  |                  | (1,682  | ) |      |   |        |      |  |   |        |  
|Amortization of:                                                         |  |                  |         |   |      |   |         |      |  |   |         |  
|Unrecognized prior service cost                                          |  |                  | (369    | ) |      |   | (474    | )    |  |   | 257     |  
|Unrecognized net transition obligation                                   |  |                  |        |   |      |   |        |      |  |   | 104     |  
|Unrecognized net loss                                                    |  |                  | 1,567   |   |      |   | 2,890   |      |  |   | 1,666   |  
|                                                                         |  |                  |         |   |      |   |         |      |  |   |         |  
|Net periodic benefit cost included in selling and administrative expense |  | $                | 2,508   |   |      | $ | 6,034   |      |  | $ | 4,962   |  
|                                                                         |  |                  |         |   |      |   |         |      |  |   |         |  



70



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The pension plan curtailment gain is the result of a plan amendment adopted on April 27, 2006.
The amendment eliminated participation in the plan for new employees as of April 30, 2006. In addition, employees eligible to participate in our pension plan have made a one-time irrevocable election to either (i) continue participation in
the pension plan or (ii) freeze the accrual of benefits under the pension plan as of December 31, 2006 and receive an annual 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.



|                                                                         |  |                               |       |   |      |   |       |  |   |      
|------------------------------------------------------------------------ |  | ----------------------------- | ----- | - | ---- | - | ----- |  | - | -----
|                                                                         |  | Other Postretirement Benefits
|Years ended December 31, December 25 and December 26                     |  | 2006                          |       |   | 2005 |   | 2004 
|Components of net periodic benefit cost                                  |  |                               |       |   |      |   |       |  |   |      
|Service cost                                                             |  | $                             | 643   |   |      | $ | 475   |  | $ | 371  
|Interest cost                                                            |  |                               | 1,774 |   |      |   | 1,998 |  |   | 1,697
|Curtailment gain                                                         |  |                               | (720  | ) |      |   |      |  |   |     
|Amortization of:                                                         |  |                               |       |   |      |   |       |  |   |      
|Unrecognized prior service cost                                          |  |                               | (106  | ) |      |   | 233   |  |   |     
|Unrecognized net transition obligation                                   |  |                               | 549   |   |      |   | 549   |  |   | 549  
|Unrecognized net loss                                                    |  |                               | 773   |   |      |   | 655   |  |   | 393  
|                                                                         |  |                               |       |   |      |   |       |  |   |      
|Net periodic benefit cost included in selling and administrative expense |  | $                             | 2,913 |   |      | $ | 3,910 |  | $ | 3,010
|                                                                         |  |                               |       |   |      |   |       |  |   |      



The other
postretirement benefits curtailment gain is the result of an amendment adopted on October 31, 2006. The amendment eliminated all postretirement health benefits for full-time active employees who have not attained age 50 by December 31,
2006. In addition, effective for full-time active employees who retire on or after April 1, 2007, the amendment eliminated the employer contribution for medical benefits after such persons attain age 65.



The estimated net loss and prior service cost for the defined benefit plan
that will be amortized from accumulated other comprehensive income into net periodic benefit cost over the next fiscal year is $1,712 and ($317), respectively. The estimated net loss, prior service obligation and transition obligation for the other
postretirement plan that will be amortized from other accumulated comprehensive income into net periodic benefit cost over the next fiscal year is $155, ($219) and $549, respectively.



The incremental effect of applying Statement No. 158 on individual line items in the Consolidated Balance Sheet as of
December 31, 2006 is as follows:



|                                                 |  |                                       |         |             |   |         |                                      |  |   |         |  
|------------------------------------------------ |  | ------------------------------------- | ------- | ----------- | - | ------- | ------------------------------------ |  | - | ------- | -
|                                                 |  | BeforeApplication ofStatement No. 158 |         | Adjustments |   |         | AfterApplication ofStatement No. 158 | 
|Prepaid pension costs                            |  | $                                     | 16,884  |             | $ | (16,884 | )                                    |  | $ |        |  
|Total assets                                     |  | $                                     | 972,142 |             | $ | (16,884 | )                                    |  | $ | 955,258 |  
|Accrued employee benefits                        |  | $                                     | 23,777  |             | $ | 11,688  |                                      |  | $ | 35,465  |  
|Deferred income tax                              |  | $                                     |        |             | $ | (11,457 | )                                    |  | $ | (11,457 | )
|Total liabilities                                |  | $                                     | 474,135 |             | $ | 231     |                                      |  | $ | 474,366 |  
|Accumulated other comprehensive loss, net of tax |  | $                                     |        |             | $ | (17,114 | )                                    |  | $ | (17,114 | )
|Total shareholders equity                       |  | $                                     | 498,006 |             | $ | (17,114 | )                                    |  | $ | 480,892 |  



71



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The costs for our pension benefits and other postretirement benefits are actuarially determined. Key
assumptions utilized at the measurement dates of December 31, 2006 and December 25, 2005 for pension benefits and December 31, 2006 and September 30, 2005 for other postretirement benefits include the following:



Weighted-average assumptions used to determine benefit obligations



|                                                                         |  |                  |   |  |                              |   |  |      |   |  |      |  
|------------------------------------------------------------------------ |  | ---------------- | - |  | ---------------------------- | - |  | ---- | - |  | ---- | -
|                                                                         |  | Pension Benefits |   |  | OtherPostretirement Benefits |  
|                                                                         |  | 2006             |   |  | 2005                         |   |  | 2006 |   |  | 2005 |  
|Discount rate                                                            |  | 5.90             | % |  | 5.95                         | % |  | 5.75 | % |  | 5.50 | %
|Rate of compensation increases                                           |  | 4.00             |   |  | 4.00                         |   |  |     |   |  |     |  
|                                                                         |  |                  |  
|Weighted-average assumptions used to determine net periodic benefit cost |  |                  |   |  |                              |   |  |      |   | 
|                                                                         |  |                  |   | 
|Discount rate                                                            |  | 5.95             | % |  | 5.75                         | % |  | 5.50 | % |  | 6.00 | %
|Expected return on plan assets                                           |  | 8.50             |   |  | 8.50                         |   |  |     |   |  |     |  
|Rate of compensation increases                                           |  | 4.00             |   |  | 4.50                         |   |  |     |   |  |     |  



Due to the pension
plan amendment adopted on April 27, 2006, the measurement of the net periodic benefit cost for the pension plan from May 1, 2006 to December 31, 2006 was based on a 6.5% discount rate, the yield curve developed at the time of the plan
amendment.



To determine the discount rate assumptions for the
pension and the postretirement benefit plans, we studied our plans specific discount rate by matching our projected benefit payments to a yield curve developed from high grade corporate bonds. The results of those studies were used as the benchmark
to determine the discount rate assumptions. In addition, we used the Moodys Aa Corporate bonds, as of the measurement dates, as another reference point to support our decision.



To determine the long-term rate of return assumption for plan assets, we study historical markets and preserve the long-term
historical relationships between equities and fixed-income securities consistent with the widely accepted capital market principle that assets with higher volatility generate a greater return over the long run. We evaluate current market factors
such as inflation and interest rates before we determine long-term capital market assumptions. We review peer data and historical returns to check for reasonableness and appropriateness.



The assumed health care cost trend rate used in measuring the postretirement benefit obligation for retirees for 2007 is
9.0%, grading down to 5.0% in the year 2011 and thereafter. The assumed health care cost trend rates have a significant effect on the amounts reported for other postretirement benefits. A 1% change in the assumed health care cost trend rate would
have the following effects:



|                                                                    |  |            |     |            |   |      |  
|------------------------------------------------------------------- |  | ---------- | --- | ---------- | - | ---- | -
|                                                                    |  | 1%Increase |     | 1%Decrease |  
|Effect on total of service and interest cost components in 2006     |  | $          | 92  |            | $ | (88  | )
|Effect on postretirement benefit obligation as of December 31, 2006 |  | $          | 358 |            | $ | (405 | )



Plan Assets



Our pension plan weighted average asset allocations at December 31,
2006 and December 25, 2005, by asset category are as follows:



|                        |  |             |   |  |       |  
|----------------------- |  | ----------- | - |  | ----- | -
|                        |  | Plan Assets |  
|                        |  | 2006        |   |  | 2005  |  
|Equity securities       |  | 72.4        | % |  | 71.3  | %
|Fixed-income securities |  | 27.3        |   |  | 28.1  |  
|Other                   |  | 0.3         |   |  | 0.6   |  
|                        |  |             |   |  |       |  
|Total                   |  | 100.0       | % |  | 100.0 | %
|                        |  |             |   |  |       |  



72



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



We employ a total return investment approach whereby a mix of equity and fixed-income investment
funds are used to maximize the long-term return of plan assets for a prudent level of risk. We establish our risk tolerance through careful consideration of plan liabilities, plan funded status, and our financial condition. The investment portfolio
contains a diversified blend of equity and debt investments. The equity component is diversified across U.S. and non-U. S. stocks, as well as growth, value and small and large capitalization stocks. The fixed-income component is diversified across
the maturity, quality and sector spectrum. The portfolio may also hold cash equivalents. Fund managers may use derivatives only if the vehicle is deemed by the manager to be more attractive than a similar direct investment in the underlying cash
market, or if the vehicle is being used to manage risk of the portfolio. Derivatives, however, may not be used in a speculative manner or to leverage the portfolio. We measure and monitor investment risk on an ongoing basis through quarterly
investment portfolio reviews, annual liability measurements, and periodic asset/liability allocation studies. The asset mix guidelines for the plan are as follows:



|                                 |  |                            |   |  |        |   |  |         |  
|-------------------------------- |  | -------------------------- | - |  | ------ | - |  | ------- | -
|                                 |  | Percent of Total Portfolio |  
|                                 |  | Minimum                    |   |  | Target |   |  | Maximum |  
|Large capitalization U.S. stocks |  | 30.0                       | % |  | 35.0   | % |  | 40.0    | %
|Small capitalization U.S. stocks |  | 15.0                       |   |  | 20.0   |   |  | 25.0    |  
|International stocks             |  | 10.0                       |   |  | 15.0   |   |  | 20.0    |  
|Fixed-income securities          |  | 20.0                       |   |  | 25.0   |   |  | 35.0    |  
|Cash equivalents                 |  |                           |   |  | 5.0    |   |  | 5.0     |  



Contributions



We do not expect to contribute to our qualified defined
benefit pension plan in 2007. We expect to contribute $256 to our unfunded non-qualified pension plan.



Benefit Payments



The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid with future contributions to the plan or
directly from plan assets, as follows:



|          |  |                 |        |                               |   |                            |  |             |     |  |   |      
|--------- |  | --------------- | ------ | ----------------------------- | - | -------------------------- |  | ----------- | --- |  | - | -----
|          |  | PensionBenefits |        | Other Postretirement Benefits
|          |  | Payments        |        | GrossPayments                 |   | Less MedicarePart DSubsidy |  | NetPayments
|2007      |  | $               | 7,873  |                               | $ | 2,908                      |  | $           | 165 |  | $ | 2,743
|2008      |  |                 | 7,829  |                               |   | 2,791                      |  |             | 172 |  |   | 2,619
|2009      |  |                 | 7,871  |                               |   | 2,641                      |  |             | 175 |  |   | 2,466
|2010      |  |                 | 8,120  |                               |   | 2,544                      |  |             | 177 |  |   | 2,367
|2011      |  |                 | 8,339  |                               |   | 2,383                      |  |             | 177 |  |   | 2,206
|20122016 |  |                 | 48,122 |                               |   | 10,776                     |  |             | 822 |  |   | 9,954



The ISP is a defined
contribution benefit plan covering substantially all employees. The plan allows employees to defer up to 50% of their eligible wages, up to the IRS limit, on a pre-tax basis. In addition, employees can contribute up to 50% of their eligible wages
after taxes. The maximum combined total contribution may not exceed 50% of their eligible wages. Each employee who elects to participate is eligible to receive company matching contributions. We may contribute $0.50 for each dollar contributed by
the participant, up to 5% of eligible wages as defined by the ISP. The matching contributions, recorded as an operating expense, were $2,672, $2,390 and $2,603 in 2006, 2005 and 2004, respectively. We made additional contributions into the ISP on
behalf of certain employees not covered by the defined benefit pension plan of $1,028, $633 and $927 in



73



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



2006, 2005 and 2004, respectively. We expect to contribute $987 on behalf of these employees in 2007. Included in the 2006, 2005 and 2004 matching
contributions are contributions to the employees of Norlight of $305, $258 and $290, respectively. Included in the matching and additional contributions in 2004 are contributions to the employees of NorthStar Print Group of $401. Both NorthStar
Print Group and Norlight are reported as discontinued operations. Employees who have elected to freeze their defined benefit pension benefits will receive a contribution of 3% of eligible wages into the ISP. We expect to contribute $1,225 on behalf
of these employees in 2007.



|4 | INCOME TAXES
|- | ------------



The components of the provision for income taxes consist of the following:



|                                                     |  |      |        |      |   |        |  |   |       
|---------------------------------------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|Years ended December 31, December 25 and December 26 |  | 2006 |        | 2005 |   | 2004  
|Current:                                             |  |      |        |      |   |        |  |   |       
|Federal                                              |  | $    | 24,144 |      | $ | 22,102 |  | $ | 19,803
|State                                                |  |      | 5,426  |      |   | 4,061  |  |   | 5,376 
|                                                     |  |      |        |      |   |        |  |   |       
|Total current                                        |  |      | 29,570 |      |   | 26,163 |  |   | 25,179
|Deferred:                                            |  |      |        |      |   |        |  |   |       
|Federal                                              |  |      | 6,677  |      |   | 3,217  |  |   | 7,810 
|State                                                |  |      | 309    |      |   | 148    |  |   | 883   
|                                                     |  |      |        |      |   |        |  |   |       
|Total deferred                                       |  |      | 6,986  |      |   | 3,365  |  |   | 8,693 
|                                                     |  |      |        |      |   |        |  |   |       
|Total provision for income taxes                     |  | $    | 36,556 |      | $ | 29,528 |  | $ | 33,872
|                                                     |  |      |        |      |   |        |  |   |       



The significant
differences between the statutory federal income tax rates and the effective income tax rates are as follows:



|                                                     |  |      |   |  |      |   |  |      |  
|---------------------------------------------------- |  | ---- | - |  | ---- | - |  | ---- | -
|Years ended December 31, December 25 and December 26 |  | 2006 |   |  | 2005 |   |  | 2004 |  
|Statutory federal income tax rate                    |  | 35.0 | % |  | 35.0 | % |  | 35.0 | %
|State income taxes, net of federal tax benefit       |  | 4.6  |   |  | 4.4  |   |  | 4.6  |  
|Other                                                |  |     |   |  | 0.3  |   |  | 0.4  |  
|                                                     |  |      |   |  |      |   |  |      |  
|Effective income tax rate                            |  | 39.6 | % |  | 39.7 | % |  | 40.0 | %
|                                                     |  |      |   |  |      |   |  |      |  



74



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Temporary differences that give rise to the deferred tax assets and liabilities at December 31,
2006 and December 25, 2005 are as follows:



|                                                                              |  |      |         |   |      |   |         |  
|----------------------------------------------------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|Current assets                                                                |  | 2006 |         |   | 2005 |  
|Receivables                                                                   |  | $    | 3,219   |   |      | $ | 3,525   |  
|Inventories                                                                   |  |      | 107     |   |      |   | 158     |  
|Other assets                                                                  |  |      | 3,767   |   |      |   | 2,270   |  
|Accrued compensation                                                          |  |      | 2,521   |   |      |   | 2,826   |  
|Accrued employee benefits                                                     |  |      | 1,403   |   |      |   | 1,189   |  
|                                                                              |  |      |         |   |      |   |         |  
|Total current deferred tax assets                                             |  | $    | 11,017  |   |      | $ | 9,968   |  
|                                                                              |  |      |         |   |      |   |         |  
|Non-current assets                                                            |  |      |         |   |      |   |         |  
|Accrued employee benefits                                                     |  | $    | 12,892  |   |      | $ | 6,379   |  
|State net operating loss and tax credit carryforwards                         |  |      | 1,924   |   |      |   | 2,659   |  
|Other assets                                                                  |  |      | 161     |   |      |   | 220     |  
|Valuation allowances on state net operating loss and tax credit carryforwards |  |      | (1,202  | ) |      |   | (2,051  | )
|                                                                              |  |      |         |   |      |   |         |  
|Total non-current deferred tax assets                                         |  |      | 13,775  |   |      |   | 7,207   |  
|                                                                              |  |      |         |   |      |   |         |  
|Non-current liabilities                                                       |  |      |         |   |      |   |         |  
|Property and equipment                                                        |  | $    | (25,037 | ) |      | $ | (24,204 | )
|Intangible assets                                                             |  |      | (46,877 | ) |      |   | (39,187 | )
|Accrued employee benefits                                                     |  |      |        |   |      |   | (4,460  | )
|Other liabilities                                                             |  |      | (3,950  | ) |      |   | (4,986  | )
|                                                                              |  |      |         |   |      |   |         |  
|Total non-current deferred tax liabilities                                    |  |      | (75,864 | ) |      |   | (72,837 | )
|                                                                              |  |      |         |   |      |   |         |  
|Total net non-current deferred tax liabilities                                |  | $    | (62,089 | ) |      | $ | (65,630 | )
|                                                                              |  |      |         |   |      |   |         |  



We recognize a
deferred tax liability for the difference between financial reporting and tax amortization on our broadcast licenses and tax-deductible goodwill. The deferred tax liability that relates to the difference between financial reporting and tax basis on
broadcast licenses and goodwill will not reverse over time unless future impairment charges are recognized on the broadcast licenses or goodwill for financial reporting purposes or they are sold.



We also maintain a liability to cover the cost of additional tax exposure
items on the filing of the federal and state income tax returns. As of December 31, 2006 and December 25, 2005, this liability amounted to $5,061 and $4,459, respectively.



At December 31, 2006, we have $1,487 of tax-effected state net operating loss carryforwards available to offset against
future taxable income over the next 20 years. The net operating losses begin expiring in 2007. To the extent we believe it is more likely than not that certain of the net operating loss carryforwards will expire unused, we have recorded $765 in
valuation allowances.



At December 31, 2006, we have $437
of state income tax credit carryforwards available to offset against future state income tax liabilities in certain states over the next 12 years. The tax credits begin expiring in 2007. To the extent we believe it is more likely than not that
certain of the state tax credit carryforwards will expire unused, we have recorded $437 in valuation allowances.



75



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|5 | COMMITMENTS
|- | -----------



We lease office space, certain broadcasting facilities, distribution centers, buildings used for printing plants and equipment under both short-term and
long-term leases accounted for as operating leases. Some of the lease agreements contain renewal options and rental escalation clauses, as well as provisions for the payment of utilities, maintenance and taxes. As of December 31, 2006, our
future minimum rental payments due under noncancellable operating lease agreements consist of the following:



|           |  |   |       
|---------- |  | - | ------
|2007       |  | $ | 6,418 
|2008       |  |   | 4,175 
|2009       |  |   | 3,221 
|2010       |  |   | 2,449 
|2011       |  |   | 1,509 
|Thereafter |  |   | 2,371 
|           |  |   |       
|           |  | $ | 20,143
|           |  |   |       



Excluded from this
table are $13,752 in future minimum rental payments due under noncancellable operating lease payments for Norlight, our former telecommunications business, which is classified as a discontinued operation. All lease agreements were assigned to the
buyer, Q-Comm, at the time the sale closed on February 26, 2007.



Rent expense charged to operations for 2006, 2005 and 2004 was $9,108, $12,281 and $13,358, respectively. Rental income from subleases included in operations for 2006, 2005 and 2004 was $618, $3,213 and $3,885, respectively. There were no
noncancellable subleases as of December 31, 2006.



Norlight has entered into agreements (collocation agreements) that allow them to locate equipment in facilities owned by communication providers. The use of this space enables them to extend the effective capability of the physical
infrastructure comprising our network. Typically these agreements involve locating multiplexing/muxing equipment (a rack) in local exchange carrier (LEC) central offices. These agreements have specified beginning and ending dates. However, absent
the required notification from either party of the intent to end the agreement, the term automatically converts to a month-to-month arrangement with no specified ending date. Absent a regulatory change eliminating the LECs responsibility to
open their facilities to competing carriers, these agreements have been assumed to exist in near perpetuity and are considered to have put in place permanent components of our network. The agreements require rental payments for the use of the space.
Should Norlight elect to exit such an agreement, the terms of the agreements provide that they are responsible for both the removal of our equipment and fiber as well as the cost of returning the space to its original condition, if any physical
alterations had taken place. According to Statement No. 143, Accounting for Asset Retirement Obligations, and FASB Interpretation No. 47, Accounting for Conditional Asset Retirement Obligations, the fair value of an asset
retirement obligation (ARO) liability should be recognized in the period in which (1) a legal obligation to retire a long-lived asset exists and (2) the fair value of the obligation based on retirement cost and settlement date is
reasonably estimable. Upon initial recognition of the ARO liability, the related asset retirement cost is capitalized, therefore increasing the carrying amount of the related long-lived asset. Norlight believes that it has legal obligations under
its collocation agreements to remove the equipment and restore the facilities to their original condition upon terminating the agreements. However, Norlight does not have a reasonable basis by which to assign probabilities to the timing of the
potential settlement dates and accordingly, it cannot reasonable estimate the fair value of the asset retirement obligation. To illustrate the range of potential obligation outcomes, consider that Norlight has entered into approximately
30 collocation agreements since the inception of their deployment in 1999 whose projected restoration cost ranges from an estimate of $50 to $200 per site. The range in time over which these agreements could be settled is between 10 years
to longer than 30 years. The



76



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



corresponding range of fair value of the ARO liability when determined at Norlights estimated credit adjusted risk free interest rate is approximately
$250 to $1,150. These obligations were transferred to Q-Comm upon the February 26, 2007 sale of Norlight.



Purchase commitments from two suppliers for newsprint for our publishing businesses run through 2007 and 2008 and total $53,711 as of December 31,
2006. The commitments are based on market prices for quantities we determine will meet our newsprint requirements over the term of the contract. In the unlikely event that newsprint is no longer required in our business, our commitments would expire
without obligation. A purchase commitment relating to printing equipment was approximately $219 as of December 31, 2006. Purchase commitments related to broadcasting equipment and systems were approximately $1,167 as of December 31, 2006.
We have $1,702 of standby letters of credit for business insurance purposes.



Over the next five years, we are committed to purchase $13,137 of television program rights that currently are not available for broadcast, including programs not yet produced. If such programs are not produced, our
corresponding commitment would expire without obligation.



|6 | SHAREHOLDERS EQUITY
|- | --------------------



Common stock



We have three classes of common stock. Class C shares are held by the family members of our former chairman, Harry J. Grant, and are entitled to two votes
per share. These shares are convertible into class A shares or a combination of class A and class B shares at any time at the option of the holder. Dividends on class C shares are cumulative and equal to the dividends declared on the class A and
class B shares, provided that the dividend will not be less than $0.57 per year. Cash dividends may be declared and paid with respect to class C common stock without concurrent cash dividends on the class A and class B shares. Class B shares are
held by our current and former employees and Grant family shareholders. These shares are entitled to ten votes per share, and are convertible to class A shares at the option of the holder after first offering to sell them to other eligible
purchasers through the offer procedures set forth in our articles of incorporation. Dividends on Class B shares are equal to those declared on the class A shares. As of December 31, 2006 and December 25, 2005, there are 8,676,705 class B
shares included in treasury stock. Class A shares are publicly traded on the New York Stock Exchange under the symbol JRN.



The changes in the number of shares of our common stock during 2006 and 2005 are as follows (in thousands):



|                                                                       |  |              |  |         |                |  |         |   |  |      
|---------------------------------------------------------------------- |  | ------------ |  | ------- | -------------- |  | ------- | - |  | -----
|                                                                       |  | Common Stock |  |         | Treasury stock
|                                                                       |  | Class C      |  | Class B |                |  | Class A |   | 
|Balance as December 26, 2004                                           |  | 3,264        |  | 44,811  |                |  | 27,417  |   |  | 8,677
|Conversion of class B shares to class A shares                         |  |             |  | (18,207 | )              |  | 18,207  |   |  |     
|Shares repurchased                                                     |  |             |  |        |                |  | (3,435  | ) |  |     
|Shares issued under equity incentive and employee stock purchase plans |  |             |  | 159     |                |  |        |   |  |     
|                                                                       |  |              |  |         |                |  |         |   |  |      
|Balance at December 25, 2005                                           |  | 3,264        |  | 26,763  |                |  | 42,189  |   |  | 8,677
|Conversion of class B shares to class A shares                         |  |             |  | (8,777  | )              |  | 8,777   |   |  |     
|Shares repurchased                                                     |  |             |  |        |                |  | (2,825  | ) |  |     
|Shares issued under equity incentive and employee stock purchase plans |  |             |  | 246     |                |  |        |   |  |     
|                                                                       |  |              |  |         |                |  |         |   |  |      
|Balance at December 31, 2006                                           |  | 3,264        |  | 18,232  |                |  | 48,141  |   |  | 8,677
|                                                                       |  |              |  |         |                |  |         |   |  |      



77



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|7 | STOCK-BASED COMPENSATION
|- | ------------------------



Effective December 26, 2005, we adopted Statement of Financial Accounting Standards Statement No. 123(R), Share-Based Payment, using
the modified prospective application transition method. Under the modified prospective application transition method, the fair value and recognition provisions of Statement 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 Statement No. 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 year ended December 31, 2006, we recognized $1,489 in
stock-based compensation expense, including $102 recorded in gain from discontinued operations. Total income tax benefit recognized related to stock-based compensation for the year ended December 31, 2006 was $590. We recognize compensation
expense on a straight-line basis over the service period based upon the fair value of the award on the grant date. There was no impact on cash flows from operating or financing activities associated with stock-based compensation during 2006. As of
December 31, 2006, total unrecognized compensation cost related to stock-based compensation awards was $844, net of estimated forfeitures, which we expect to recognize over a weighted average period of approximately 1.6 years. Stock-based
compensation expense is included in selling and administrative expenses in our consolidated statement of earnings. As a result of adopting Statement No. 123(R), our earnings from continuing operations, earnings before income taxes and net
earnings for 2006 are $105, $138 and $83 lower, respectively, than if we had continued to account for share-based compensation under APB No. 25. There was no impact on our basic or diluted earnings per share from adopting Statement
No. 123(R).



Our 2003 Equity Incentive Plan (Plan) rewards
key employees for achieving designated corporate and individual performance goals and allows for issuances 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, not to
exceed ten years from the grant date. It is our policy to issue new class B common stock upon the exercise of non-statutory stock options. As of December 31, 2006, there are 5,683,232 shares available for issuance in the form of non-statutory
stock options under the Plan.



In 2004, our directors and
certain of our employees were granted options to purchase class B common stock. These options become exercisable three years from the grant date and will remain exercisable for a period of up to seven years. There were no options granted in 2006 or
2005.



Fair value for non-statutory stock options granted in
2004 was calculated using the Black-Scholes option pricing model, with the following weighted-average assumptions:



|                                               |  |      |       |  
|---------------------------------------------- |  | ---- | ----- | -
|                                               |  | 2004 |      
|Dividend yield                                 |  |      | 1.43  | %
|Expected volatility                            |  |      | 28.95 | %
|Risk-free rate of return                       |  |      | 3.90  | %
|Expected life of options (in years)            |  |      | 7     |  
|Weighted average fair value of options granted |  | $    | 5.94  |  



78



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The expected life was based on the projected exercise period of unexercised stock options. The risk
free rate was based on the United States Treasury yield curve in effect on the date of grant for the respective life of the option. The expected dividend yield was based on the expected annual dividends divided by the grant date market value of our
common stock. The expected volatility was based on the historical volatility of our peers common stock as our common stock had been publicly trading for less than six months.



A summary of non-statutory stock option activity during 2006 is:



|                                 |  |         |   |  |                               |       |                                       |    
|-------------------------------- |  | ------- | - |  | ----------------------------- | ----- | ------------------------------------- | ---
|                                 |  | Options |   |  | WeightedAverageExercise Price |       | WeightedAverageContractualTerm(years)
|Outstanding at December 26, 2005 |  | 65,750  |   |  | $                             | 18.24 |                                       |    
|Forfeited                        |  | (1,500  | ) |  |                               | 19.95 |                                       |    
|Expired                          |  | (10,000 | ) |  |                               | 17.92 |                                       |    
|                                 |  |         |   |  |                               |       |                                       |    
|Outstanding at December 31, 2006 |  | 54,250  |   |  |                               | 18.25 |                                       | 4.1
|                                 |  |         |   |  |                               |       |                                       |    
|Exercisable at December 31, 2006 |  | 43,750  |   |  |                               | 17.98 |                                       | 3.9
|                                 |  |         |   |  |                               |       |                                       |    



The aggregate
intrinsic value of stock options outstanding and exercisable at December 31, 2006 is zero because the fair market value of our class B common stock on December 31, 2006 was lower than the weighted average exercise price of the options.



In 2006, 2,750 non-statutory stock options granted to three
employees of Norlight became exercisable as a result of the acceleration by the compensation committee of our board of directors of the vesting period of these options in contemplation of the proposed spin-off of Norlight. There was no incremental
compensation expense resulting from this modification. We expect these options to expire in the first quarter of 2007.



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
nonvested restricted stock grants at the closing market price of our class A common stock on the grant date. As of December 31, 2006, there are 2,747,482 shares available for issuance in the form of stock grants under the Plan.



A summary of stock grant activity during 2006 is:



|                                  |  |         |   |  |                           |      
|--------------------------------- |  | ------- | - |  | ------------------------- | -----
|                                  |  | Shares  |   |  | WeightedAverageFair Value
|Outstanding at December 26, 2005  |  | 63,250  |   |  | $                         | 16.46
|Granted                           |  | 140,131 |   |  |                           | 12.34
|Vested                            |  | (65,636 | ) |  |                           | 12.51
|Forfeited                         |  | (11,140 | ) |  |                           | 14.23
|                                  |  |         |   |  |                           |      
|Outstanding at December 31, 2006  |  | 126,605 |   |  |                           | 14.15
|                                  |  |         |   |  |                           |      
|Fully vested at December 31, 2006 |  | 105,639 |   |  |                           | 13.80
|                                  |  |         |   |  |                           |      



Our nonvested
restricted stock grants vest either three or five years from the grant date. We expect our nonvested restricted stock grants to fully vest over the weighted average remaining service period of 1.8 years.



79



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



During 2005, 88,404 vested and nonvested restricted stock grants were issued to our directors and employees at a weighted-average fair value of $15.93, of
which 27,679 shares vested with a total fair value of $422. During 2004, 12,424 vested and nonvested restricted stock grants were issued to our directors at a weighted-average fair value of $17.31, of which 10,924 shares vested with a total fair
value of $189.



In 2006, the compensation committee of our
board of directors accelerated the vesting of 13,950 nonvested restricted stock grants granted to 45 employees of Norlight. The nonvested restricted stock grants vested immediately prior to the effective time of the February 26, 2007 sale of
Norlight. There was no overall incremental compensation expense resulting from this modification.



Performance unit grantsEach performance unit grant will be accompanied by restrictions as may be determined in the discretion of the
compensation 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. There were no performance units granted in 2006. 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 was performed at the end of the performance period, December 31, 2006 for the current performance cycle, which
determined each performance unit was worthless. At December 31, 2006, there were no performance units outstanding.



The fair value of each performance unit 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              |  | 3.33 | %
|Expected dividend yield                      |  | 1.40 | %
|Expected volatility (Journal Communications) |  | 0.22 |  
|Expected volatility (S&P 500 index)          |  | 0.14 |  



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 class A common stock as of the grant date.
We determined the expected volatility based on historical volatility over two years using daily stock prices.



In 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. In 2006, we recognized $54 in compensation expense for the stock portion of the performance unit awards in accordance with Statement No. 123(R). As of December 31, 2006, $491 is recorded in additional paid-in-capital in our
consolidated balance sheet for the stock portion of the performance unit awards.



Employee stock purchase planThe 2003 Employee Stock Purchase Plan permits eligible employees to purchase our class B common stock at 90% of the fair market value measured as the closing market price of
our class A common stock on the day of purchase. We recognize compensation expense equal to the 10% discount of the fair market value. Subject to certain adjustments, 3,000,000 shares of our class B common stock are authorized for sale under this
plan. During 2006 and 2005, 117,009 and 75,384 of our class B common shares, respectively, were sold to employees under this plan at a weighted average fair value of $11.30 and $15.67, respectively. As of December 31, 2006, there are 2,761,630
shares available for sale under the plan.



80



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Prior year pro forma expenseThe following table illustrates the effect on net earnings
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):



|                                                                                                                                                              |  |                             |        |   |                             |   |        |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------- | ------ | - | --------------------------- | - | ------ | -
|                                                                                                                                                              |  | Year EndedDecember 25, 2005 |        |   | Year EndedDecember 26, 2004 |  
|Net earnings as reported                                                                                                                                      |  | $                           | 66,243 |   |                             | $ | 78,480 |  
|Add compensation cost of restricted stock, net of income tax benefit of $133 and $20, respectively, included in the determination of net
earnings as reported |  |                             | 201    |   |                             |   | 30     |  
|Deduct stock based compensation determined under fair value-based method, net of related tax effects:                                                         |  |                             |        |   |                             |   |        |  
|Stock options                                                                                                                                                 |  |                             | (82    | ) |                             |   | (11    | )
|Employee stock purchase plan                                                                                                                                  |  |                             | (79    | ) |                             |   | (35    | )
|Nonvested restricted stock                                                                                                                                    |  |                             | (201   | ) |                             |   | (30    | )
|                                                                                                                                                              |  |                             |        |   |                             |   |        |  
|Pro forma net earnings including the effect of stock compensation expense                                                                                     |  | $                           | 66,082 |   |                             | $ | 78,334 |  
|                                                                                                                                                              |  |                             |        |   |                             |   |        |  
|Net earnings per share of common stock:                                                                                                                       |  |                             |        |   |                             |   |        |  
|Basic earnings per share:                                                                                                                                     |  |                             |        |   |                             |   |        |  
|As reported                                                                                                                                                   |  | $                           | 0.91   |   |                             | $ | 1.05   |  
|                                                                                                                                                              |  |                             |        |   |                             |   |        |  
|Pro forma including the effect of stock compensation expense                                                                                                  |  | $                           | 0.91   |   |                             | $ | 1.05   |  
|                                                                                                                                                              |  |                             |        |   |                             |   |        |  
|Diluted earnings per share:                                                                                                                                   |  |                             |        |   |                             |   |        |  
|As reported                                                                                                                                                   |  | $                           | 0.88   |   |                             | $ | 1.01   |  
|                                                                                                                                                              |  |                             |        |   |                             |   |        |  
|Pro forma including the effect of stock compensation expense                                                                                                  |  | $                           | 0.88   |   |                             | $ | 1.01   |  
|                                                                                                                                                              |  |                             |        |   |                             |   |        |  



|8 | GOODWILL, BROADCAST LICENSES 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 based on our good relationships with the networks, our long history of renewing these agreements and because 25 years is deemed to be the length of time before a material modification of the
underlying contract would occur. We amortize the customer lists over a period of five to 40 years and the non-compete agreements over the terms of the contracts.



Amortization expense was $2,060 for the year ended December 31, 2006. Estimated amortization expense is $1,948 for
2007, $1,867 for 2008, $1,615 for 2009, $1,562 for 2010 and $1,204 for 2011.



The gross carrying amount, accumulated amortization and net carrying amount of the major classes of definite-lived intangible assets as of December 31, 2006 and December 25, 2005 is as follows:



|                                  |  |                     |        |                         |   |         |                   |  |   |       
|--------------------------------- |  | ------------------- | ------ | ----------------------- | - | ------- | ----------------- |  | - | ------
|December 31, 2006                 |  | GrossCarryingAmount |        | AccumulatedAmortization |   |         | NetCarryingAmount
|Definite-lived intangible assets: |  |                     |        |                         |   |         |                   |  |   |       
|Network affiliation agreements    |  | $                   | 26,930 |                         | $ | (2,796  | )                 |  | $ | 24,134
|Customer lists                    |  |                     | 19,651 |                         |   | (17,256 | )                 |  |   | 2,395 
|Non-compete agreements            |  |                     | 19,450 |                         |   | (19,447 | )                 |  |   | 3     
|Other                             |  |                     | 3,449  |                         |   | (2,913  | )                 |  |   | 536   
|                                  |  |                     |        |                         |   |         |                   |  |   |       
|Total                             |  | $                   | 69,480 |                         | $ | (42,412 | )                 |  | $ | 27,068
|                                  |  |                     |        |                         |   |         |                   |  |   |       



81



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|                                  |  |                     |        |                         |   |         |                   |  |   |       
|--------------------------------- |  | ------------------- | ------ | ----------------------- | - | ------- | ----------------- |  | - | ------
|December 25, 2005                 |  | GrossCarryingAmount |        | AccumulatedAmortization |   |         | NetCarryingAmount
|Definite-lived intangible assets: |  |                     |        |                         |   |         |                   |  |   |       
|Network affiliation agreements    |  | $                   | 40,506 |                         | $ | (1,738  | )                 |  | $ | 38,768
|Customer lists                    |  |                     | 17,900 |                         |   | (16,448 | )                 |  |   | 1,452 
|Non-compete agreements            |  |                     | 19,840 |                         |   | (19,813 | )                 |  |   | 27    
|Other                             |  |                     | 2,773  |                         |   | (2,773  | )                 |  |   |      
|                                  |  |                     |        |                         |   |         |                   |  |   |       
|Total                             |  | $                   | 81,019 |                         | $ | (40,772 | )                 |  | $ | 40,247
|                                  |  |                     |        |                         |   |         |                   |  |   |       



|                                      |  |      
|------------------------------------- |  | -----
|Weighted-average amortization period: |  | Years
|Network affiliation agreements        |  | 25   
|Customer lists                        |  | 13   
|Non-compete agreements                |  | 5    
|Other                                 |  | 6    
|Total                                 |  | 15   



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 in the future. Accordingly, we expect the cash flows from our broadcast licenses to continue indefinitely. We perform impairment tests each year on
indefinite-lived intangible assets. With the assistance of independent, professional appraisers, we performed the 2006 and 2005 annual impairment tests as of the beginning of the fourth quarter. We recorded a $30 impairment on our KOMJ-AM broadcast
license, as a result of our annual impairment test. No impairment resulted from our annual impairment test in 2005.



Goodwill



The change in the carrying amount of goodwill during the year ended December 31, 2006 is as follows:



|                                  |  |                             |         |                                                  |   |         |                                |  |   |                             |   |  |   |        
|--------------------------------- |  | --------------------------- | ------- | ------------------------------------------------ | - | ------- | ------------------------------ |  | - | --------------------------- | - |  | - | -------
|Reporting unit                    |  | Goodwill atDecember 25,2005 |         | Adjustment toPreliminaryPurchase PriceAllocation |   |         | Goodwillrelated todivestitures |  |   | Goodwill atDecember 31,2006
|Daily newspaper                   |  | $                           | 2,084   |                                                  | $ |        |                                |  |   |                             |   |  | $ | 2,084  
|Community newspapers and shoppers |  |                             | 26,095  |                                                  |   |        |                                |  |   |                            |   |  |   | 26,095 
|Broadcasting                      |  |                             | 247,562 |                                                  |   | (29,260 | )                              |  |   | (1,339                      | ) |  |   | 216,963
|Direct marketing services         |  |                             | 410     |                                                  |   |        |                                |  |   |                            |   |  |   | 410    
|                                  |  |                             |         |                                                  |   |         |                                |  |   |                             |   |  |   |        
|Total                             |  | $                           | 276,151 |                                                  | $ | (29,260 | )                              |  | $ | (1,339                      | ) |  | $ | 245,552
|                                  |  |                             |         |                                                  |   |         |                                |  |   |                             |   |  |   |        



The change to the
carrying amount of network affiliation agreements, customer lists, other intangibles, broadcast licenses and goodwill during 2006 represents finalization of the purchase price allocation related to 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.



82



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The changes in the carrying amount of goodwill for the year ended December 25, 2005 are as
follows:



|                                  |  |                              |         |                                |   |                                |  |   |                              |   |  |   |        
|--------------------------------- |  | ---------------------------- | ------- | ------------------------------ | - | ------------------------------ |  | - | ---------------------------- | - |  | - | -------
|Reporting Unit                    |  | Goodwill atDecember 26, 2004 |         | Goodwillrelated toacquisitions |   | Goodwillrelated todivestitures |  |   | Goodwill atDecember 25, 2005
|Daily newspaper                   |  | $                            | 2,084   |                                | $ |                               |  | $ |                             |   |  | $ | 2,084  
|Community newspapers and shoppers |  |                              | 26,535  |                                |   |                               |  |   | (440                         | ) |  |   | 26,095 
|Broadcasting                      |  |                              | 107,069 |                                |   | 140,601                        |  |   | (108                         | ) |  |   | 247,562
|Direct marketing services         |  |                              | 410     |                                |   |                               |  |   |                             |   |  |   | 410    
|                                  |  |                              |         |                                |   |                                |  |   |                              |   |  |   |        
|Total                             |  | $                            | 136,098 |                                | $ | 140,601                        |  | $ | (548                         | ) |  | $ | 276,151
|                                  |  |                              |         |                                |   |                                |  |   |                              |   |  |   |        



With the assistance of
independent, professional appraisers, we perform goodwill impairment tests each year as of the beginning of the fourth quarter, or more frequently if indicators of impairment are present. No impairment resulted from our annual goodwill impairment
tests in 2006 or 2005. We cannot be certain that future goodwill impairment tests will not result in a charge to earnings.



|9 | LITIGATION
|- | ----------



We are subject to various legal actions, administrative proceedings and claims arising out of the ordinary course of business. We believe that such
unresolved legal actions and claims will not materially adversely affect our consolidated results of operations, financial condition or cash flows.



Shorewest Realtors Litigation.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 avoided 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 approval from the court on September 29, 2006. Members of the class will be eligible 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 Sentinelunder the settlement as well as for a voluntary offer made by Journal Sentinel to preprint advertisers
related to changes made in 2003 and 2004 in Audit Bureau of Circulations reported net paid circulation numbers. During the fourth quarter of 2006, Journal Sentinel adjusted its reduction in revenue by $1.1 million based upon the actual claims for
credits received by advertisers. Journal Sentinel recorded $2.2 million for litigation related expenses, of which $1.8 million was recorded in 2006 and $0.4 million in 2005. Our insurance carrier has accepted this claim under a reservation of rights
and the amount that will be paid by the carrier, if any, is uncertain at this point in time.



Russ Darrow Group, Inc. Litigation.On December 27, 2006, a lawsuit was filed against Journal Sentinel, Inc., a subsidiary of Journal Communications, Inc., in Milwaukee County
Circuit Court. The plaintiff chose to opt-out of the class action settlement in the Shorewest v. Journal Sentinel, Inc. matter described above and filed this separate lawsuit against Journal Sentinel Inc. repeating in large part the
allegations related to overstated circulation in the class-action case. The claims include: violation of the Wisconsin Deceptive Trade Practices



83



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



Act; breach of contract and implied duty of good faith and fair dealing; strict misrepresentation; intentional misrepresentation; negligent
misrepresentation; negligence; unjust enrichment; equitable recession; and punitive damages. On February 26, 2007, Journal Sentinel, Inc. filed its answer and a Motion to Dismiss all of plaintiffs tort claims. We believe the lawsuit
is without merit and intend to defend the action vigorously. Our insurance carrier has accepted this claim under a reservation of rights and the amount that will be paid by the carrier, if any, is uncertain at this point in time.



|10 | ACQUISITION AND SALE
|-- | --------------------



All acquisitions are accounted for using the purchase method. Accordingly, the results of operations and cash flows since the respective dates of
acquisition are included in the consolidated financial statements.



Acquisition of Three Television Stations



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 is $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 is recorded in other current liabilities in our 2006 consolidated balance sheet and will be paid upon the earlier of the transfer of the broadcast license associated with
KMTV-TV, which was applied for on January 23, 2007, or a $5,000 payment no later than October 15, 2007 and another $5,000 payment no later than 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 some of the factors that contributed to a purchase price which resulted in recognizing goodwill.



The final purchase price allocation for this acquisition is as follows:



|                               |  |                           |         |   |                          |   |         |                     |  |   |         |  
|------------------------------ |  | ------------------------- | ------- | - | ------------------------ | - | ------- | ------------------- |  | - | ------- | -
|                               |  | PreliminaryPurchase Price |         |   | First QuarterAdjustments |   |         | FinalPurchase Price | 
|Receivables                    |  | $                         | 69      |   |                          | $ | 104     |                     |  | $ | 173     |  
|Prepaid expenses               |  |                           | 3,069   |   |                          |   | (186    | )                   |  |   | 2,883   |  
|Property and equipment         |  |                           | 29,119  |   |                          |   | (1,224  | )                   |  |   | 27,895  |  
|Customer list                  |  |                           |        |   |                          |   | 1,750   |                     |  |   | 1,750   |  
|Other intangibles              |  |                           |        |   |                          |   | 676     |                     |  |   | 676     |  
|Other assets                   |  |                           | 13,791  |   |                          |   | 17,051  |                     |  |   | 30,842  |  
|Goodwill                       |  |                           | 140,786 |   |                          |   | (29,260 | )                   |  |   | 111,526 |  
|Broadcast licenses             |  |                           | 34,900  |   |                          |   | 24,835  |                     |  |   | 59,735  |  
|Network affiliation agreements |  |                           | 28,364  |   |                          |   | (13,576 | )                   |  |   | 14,788  |  
|Accounts payable               |  |                           | (2,103  | ) |                          |   | (191    | )                   |  |   | (2,294  | )
|Other current liabilities      |  |                           | (3,075  | ) |                          |   | 154     |                     |  |   | (2,921  | )
|Other long-term liabilities    |  |                           | (6,141  | ) |                          |   | (133    | )                   |  |   | (6,274  | )
|                               |  |                           |         |   |                          |   |         |                     |  |   |         |  
|Total purchase price           |  | $                         | 238,779 |   |                          | $ |        |                     |  | $ | 238,779 |  
|                               |  |                           |         |   |                          |   |         |                     |  |   |         |  



Due to the length of
time to complete the purchase price allocation for an acquisition of this size and complexity, as of year end 2005, we recorded a preliminary purchase price allocation based upon a preliminary valuation provided by an independent, professional
appraiser of all components of the acquisition. A final



84



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



purchase price allocation was recorded in the first quarter of 2006 based upon the detailed valuation of all components of the acquisition completed by the
same independent, professional appraiser. The final purchase price allocation does not reflect the purchase of the broadcast license for KMTV-TV in Omaha, the sale of which is subject to certain Federal Communications Commission (FCC) regulations.
The goodwill and the broadcast licenses, which we acquired, are not subject to amortization for financial reporting purposes. These intangible assets are, however, deductible for income tax purposes.



Sale of KBBX-FM



On September 25, 2006, Journal Broadcast Group, our broadcasting business, sold KBBX-FM in Omaha, Nebraska for net
proceeds of $7,252. The divestiture of KBBX-FM is part of Journal Broadcast Groups compliance with the FCCs cross-ownership rules as a result of our December 2005 agreement to acquire the broadcast license of KMTV-TV in Omaha, Nebraska
from Emmis Communications Corporation. The net book value of assets sold was $4,717 and the after-tax gain on the sale was $1,498.



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



Norlight



On February 26, 2007, Q-Comm acquired 100% of the stock of our subsidiary, Norlight, for $185 million in cash, subject to certain working capital and
long-term liability adjustments. The operations of Norlight have been reflected as discontinued operations in our consolidated financial statements for all periods presented.



The following table summarizes Norlights results of operations which are included in the gain from discontinued
operations in the consolidated statement of earnings for 2006, 2005 and 2004:



|                                                     |  |      |         |      |   |         |  |   |        
|---------------------------------------------------- |  | ---- | ------- | ---- | - | ------- |  | - | -------
|Years ended December 31, December 25 and December 26 |  | 2006 |         | 2005 |   | 2004   
|Revenue                                              |  | $    | 127,768 |      | $ | 140,448 |  | $ | 143,233
|Earnings before income taxes                         |  | $    | 16,209  |      | $ | 27,230  |  | $ | 37,768 



Norlights
current assets and current liabilities reported as discontinued operations in the consolidated balance sheets at December 31, 2006 and December 25, 2005 consisted of the following:



|                                         |  |                   |        |                   |   |       
|---------------------------------------- |  | ----------------- | ------ | ----------------- | - | ------
|                                         |  | December 31, 2006 |        | December 25, 2005
|Receivables                              |  | $                 | 2,614  |                   | $ | 4,119 
|Inventories, net                         |  |                   | 934    |                   |   | 895   
|Prepaid expenses                         |  |                   | 2,248  |                   |   | 1,485 
|Property and equipment, net              |  |                   | 83,616 |                   |   | 84,641
|Goodwill                                 |  |                   | 188    |                   |   | 188   
|Other intangible assets, net             |  |                   | 1,099  |                   |   | 1,416 
|Other assets                             |  |                   | 1,228  |                   |   | 1,051 
|                                         |  |                   |        |                   |   |       
|Total assets                             |  | $                 | 91,927 |                   | $ | 93,795
|                                         |  |                   |        |                   |   |       
|Accounts payable                         |  | $                 | 3,292  |                   | $ | 3,681 
|Accrued compensation                     |  |                   | 2,651  |                   |   | 2,493 
|Current portion of long-term liabilities |  |                   | 241    |                   |   |      
|Accrued employee benefits                |  |                   | 168    |                   |   | 142   
|Other liabilities                        |  |                   | 14,212 |                   |   | 11,958
|                                         |  |                   |        |                   |   |       
|Total liabilities                        |  | $                 | 20,564 |                   | $ | 18,274
|                                         |  |                   |        |                   |   |       



Norlights
long-term assets and long-term liabilities as of December 31, 2006 are classified as current because it is probable that the sale will occur and proceeds will be collected within one year. The long-term



85



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



assets and long-term liabilities as of December 25, 2005 conform to the 2006 presentation. Norlights property and equipment and other intangible
assets are classified as held-for-sale and, accordingly, have not been depreciated or amortized since November 13, 2006.



NorthStar Print Group, Inc.



On January 25, 2005, we signed 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., our label printing business. The sale 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. In 2006, we recorded a loss on discontinued operations of $1,666 from a purchase price adjustment.



The following table summarizes NorthStar Print Group Inc.s (NorthStar) results of operations which are included in the gain from discontinued
operations in the consolidated statement of earnings for 2006, 2005 and 2004:



|                                                     |  |      |     |   |      |   |       |      |  |   |       
|---------------------------------------------------- |  | ---- | --- | - | ---- | - | ----- | ---- |  | - | ------
|Years ended December 31, December 25 and December 26 |  | 2006 |     |   | 2005 |   |       | 2004
|Revenue                                              |  | $    |    |   |      | $ | 4,112 |      |  | $ | 58,598
|Earnings (loss) before income taxes                  |  | $    | (84 | ) |      | $ | (165  | )    |  | $ | 8,417 



NorthStars
current and non-current assets and current liabilities reported as discontinued operations in the consolidated balance sheets at December 31, 2006 and December 25, 2005 consisted of the following:



|                            |  |                   |     |                   |   |    
|--------------------------- |  | ----------------- | --- | ----------------- | - | ---
|                            |  | December 31, 2006 |     | December 25, 2005
|Receivables                 |  | $                 | 5   |                   | $ |   
|                            |  |                   |     |                   |   |    
|Total current assets        |  | $                 | 5   |                   | $ |   
|                            |  |                   |     |                   |   |    
|Property and equipment, net |  | $                 | 278 |                   | $ | 307
|                            |  |                   |     |                   |   |    
|Total non-current assets    |  | $                 | 278 |                   | $ | 307
|                            |  |                   |     |                   |   |    
|Accounts payable            |  | $                 | 83  |                   | $ | 114
|Accrued employee benefits   |  |                   |    |                   |   | 15 
|Other current liabilities   |  |                   |    |                   |   | 76 
|                            |  |                   |     |                   |   |    
|Total current liabilities   |  | $                 | 83  |                   | $ | 205
|                            |  |                   |     |                   |   |    



|12 | SEGMENT ANALYSIS
|-- | ----------------



We conduct our operations through three reportable segments: publishing, broadcasting and printing services. In addition, our direct marketing services
business and certain administrative activities are aggregated and reported as other. All businesses conduct their operations in the United States. We publish a daily newspaper, the Milwaukee Journal Sentinel, and 75 community
newspapers and shoppers in eight states. Our broadcasting segment consists of 36 radio stations and nine television stations in 12 states, as well as the operation of two additional television stations under local marketing agreements. Included in
our publishing and broadcasting segments are more than 75 online enterprises. Our printing services segment includes the operations of our printing and assembly and fulfillment business.



The accounting basis for transactions between reportable segments is the same as that described in the Significant
Accounting Policies outlined in Note 1.



86



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



The following tables summarize revenue, operating earnings (loss), depreciation and amortization and
capital expenditures from continuing operations for the years ended December 31, 2006, December 25, 2005 and December 26, 2004 and identifiable total assets at December 31, 2006 and December 25, 2005:



|                                  |  |      |         |      |   |         |      |  |   |         |  
|--------------------------------- |  | ---- | ------- | ---- | - | ------- | ---- |  | - | ------- | -
|                                  |  | 2006 |         | 2005 |   |         | 2004 | 
|Revenue                           |  |      |         |      |   |         |      |  |   |         |  
|Publishing                        |  | $    | 328,630 |      | $ | 339,002 |      |  | $ | 338,896 |  
|Broadcasting                      |  |      | 238,536 |      |   | 168,316 |      |  |   | 172,073 |  
|Printing services                 |  |      | 66,956  |      |   | 72,463  |      |  |   | 76,308  |  
|Other                             |  |      | 37,731  |      |   | 44,232  |      |  |   | 42,862  |  
|                                  |  |      |         |      |   |         |      |  |   |         |  
|                                  |  | $    | 671,853 |      | $ | 624,013 |      |  | $ | 630,139 |  
|                                  |  |      |         |      |   |         |      |  |   |         |  
|Operating earnings (loss)         |  |      |         |      |   |         |      |  |   |         |  
|Publishing                        |  | $    | 37,814  |      | $ | 41,677  |      |  | $ | 43,708  |  
|Broadcasting                      |  |      | 65,887  |      |   | 35,094  |      |  |   | 44,404  |  
|Printing services                 |  |      | 2,600   |      |   | 2,324   |      |  |   | (367    | )
|Other                             |  |      | 1,562   |      |   | (1,009  | )    |  |   | (1,057  | )
|                                  |  |      |         |      |   |         |      |  |   |         |  
|                                  |  | $    | 107,863 |      | $ | 78,086  |      |  | $ | 86,688  |  
|                                  |  |      |         |      |   |         |      |  |   |         |  
|Depreciation and amortization     |  |      |         |      |   |         |      |  |   |         |  
|Publishing                        |  | $    | 14,137  |      | $ | 14,319  |      |  | $ | 15,855  |  
|Broadcasting                      |  |      | 12,970  |      |   | 8,910   |      |  |   | 8,516   |  
|Printing services                 |  |      | 1,985   |      |   | 2,085   |      |  |   | 2,381   |  
|Other                             |  |      | 865     |      |   | 770     |      |  |   | 749     |  
|                                  |  |      |         |      |   |         |      |  |   |         |  
|                                  |  | $    | 29,957  |      | $ | 26,084  |      |  | $ | 27,501  |  
|                                  |  |      |         |      |   |         |      |  |   |         |  
|Capital expenditures              |  |      |         |      |   |         |      |  |   |         |  
|Publishing                        |  | $    | 9,763   |      | $ | 10,765  |      |  | $ | 9,221   |  
|Broadcasting                      |  |      | 9,171   |      |   | 7,030   |      |  |   | 7,711   |  
|Printing services                 |  |      | 1,857   |      |   | 840     |      |  |   | 3,807   |  
|Other                             |  |      | 1,432   |      |   | 895     |      |  |   | 1,460   |  
|                                  |  |      |         |      |   |         |      |  |   |         |  
|                                  |  | $    | 22,223  |      | $ | 19,530  |      |  | $ | 22,199  |  
|                                  |  |      |         |      |   |         |      |  |   |         |  
|Identifiable total assets         |  |      |         |      |   |         |      |  |   |         |  
|Publishing                        |  | $    | 207,849 |      | $ | 212,058 |      |  |   |         |  
|Broadcasting                      |  |      | 607,089 |      |   | 611,418 |      |  |   |         |  
|Printing services                 |  |      | 21,998  |      |   | 24,620  |      |  |   |         |  
|Other and discontinued operations |  |      | 118,322 |      |   | 136,570 |      |  |   |         |  
|                                  |  |      |         |      |   |         |      |  |   |         |  
|                                  |  | $    | 955,258 |      | $ | 984,666 |      |  |   |         |  
|                                  |  |      |         |      |   |         |      |  |   |         |  



87



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|13 | QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
|-- | -------------------------------------------



|                    |  |               |         |        |   |         |  |        |         |       |   |         |  |   |        
|------------------- |  | ------------- | ------- | ------ | - | ------- |  | ------ | ------- | ----- | - | ------- |  | - | -------
|                    |  | 2006 Quarters
|                    |  | First         |         | Second |   | Third   |  | Fourth |         | Total
|Revenue             |  | $             | 156,376 |        | $ | 165,327 |  | $      | 163,568 |       | $ | 186,582 |  | $ | 671,853
|Gross profit        |  |               | 70,226  |        |   | 76,339  |  |        | 75,331  |       |   | 88,421  |  |   | 310,317
|Net earnings        |  |               | 12,273  |        |   | 15,241  |  |        | 13,501  |       |   | 23,358  |  |   | 64,373 
|Earnings per share: |  |               |         |        |   |         |  |        |         |       |   |         |  |   |        
|Basic               |  |               | 0.17    |        |   | 0.22    |  |        | 0.19    |       |   | 0.34    |  |   | 0.93   
|Diluted             |  |               | 0.17    |        |   | 0.21    |  |        | 0.19    |       |   | 0.33    |  |   | 0.89   
|                    | 
|                    |  | 2005 Quarters
|                    |  | First         |         | Second |   | Third   |  | Fourth |         | Total
|Revenue             |  | $             | 146,956 |        | $ | 161,574 |  | $      | 153,723 |       | $ | 161,760 |  | $ | 624,013
|Gross profit        |  |               | 61,357  |        |   | 73,226  |  |        | 67,000  |       |   | 73,146  |  |   | 274,729
|Net earnings        |  |               | 17,411  |        |   | 18,135  |  |        | 13,996  |       |   | 16,701  |  |   | 66,243 
|Earnings per share: |  |               |         |        |   |         |  |        |         |       |   |         |  |   |        
|Basic               |  |               | 0.24    |        |   | 0.25    |  |        | 0.19    |       |   | 0.23    |  |   | 0.91   
|Diluted             |  |               | 0.23    |        |   | 0.24    |  |        | 0.19    |       |   | 0.23    |  |   | 0.88   



The results for 2006
include revenue of $54,813 and gross profit of $33,583 from the three television stations acquired on December 5, 2005. The second quarter of 2006 includes a $5,058 reduction in revenue for credits to be issued by our daily newspaper toward
2007 advertising in the Milwaukee Journal Sentinel under a settlement agreement in the Shorewest Realtors Litigation as well as a voluntary offer to preprint advertisers. The second quarter of 2006 also includes a $1,682 pre-tax
curtailment gain as the result of a pension plan amendment. The fourth quarter of 2006 includes a $2,477 pre-tax gain on the sale of radio station KBBX-FM, Omaha, Nebraska; a $1,093 increase in revenue at our daily newspaper for an adjustment to the
reduction of revenue based upon actual claims for credits received by advertisers for the settlement of the Shorewest Realtors Litigation; a $1,462 pre-tax gain on the sale of property by our daily newspaper and our corporate operations; and
a $720 pre-tax curtailment gain as the result of a plan amendment to our other postretirement benefit plan.



The results for the third and fourth quarter of 2005 include $1,562 and $2,177, respectively, in pre-tax expenses and operating losses related to the
impact of Hurricane Katrina and the closure of the printing facility in New Orleans. The fourth quarter of 2005 includes revenue of $2,916 and gross profit of $1,667 from the three television stations acquired on December 5, 2005 and a $585
pre-tax gain on the sale of radio station KHLP-AM, Omaha, Nebraska.



The first, second and third quarters of 2006 and 2005 each contained 91 days. The fourth quarter of 2006 contained 98 days, while the fourth quarter of 2005 contained 91 days.



88



---

##### Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS(Continued)



|14 | SUBSEQUENT EVENTS (UNAUDITED)
|-- | -----------------------------



On February 26, 2007, Q-Comm acquired 100% of the stock of our subsidiary, Norlight, for $185 million in cash, subject to certain working capital and
long-term liability adjustments. Net proceeds, after taxes and transaction expenses, are expected to be approximately $125.0 million to $130.0 million. In the short-term, we will use the proceeds to reduce our obligation under our unsecured
revolving credit facility. The after-tax gain on the sale, which will be recorded in the first quarter of 2007, is expected to approximate $60.0 million.



On January 23, 2007, Journal Broadcast Group announced it had signed an agreement to sell KOMJ-AM in Omaha, Nebraska to Cochise Broadcasting LLC
(Cochise). The divestiture of KOMJ-AM is part of Journal Broadcast Groups compliance with the FCCs cross-ownership rules as a result of our December 2005 agreement to acquire KMTV-TV, Omaha from Emmis Communications Corporation. Under
the terms of the agreement with Cochise, the KMTV-TV FCC license application shall have been granted and shall be in full force and effect and the closing of Journal Broadcast Groups acquisition of KMTV-TV shall be scheduled to occur
contemporaneously with the closing of KOMJ-AM, provided that both Cochise and Journal Broadcast Group acknowledge that the closing of KOMJ-AM must occur prior to the acquisition of KMTV-TV. The net book value of assets of KOMJ-AM held for sale will
approximate the sales price. The sale of KOMJ-AM and the purchase of KMTV-TV are subject to FCC approval.



89



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Shareholders

Journal Communications, Inc.



We have audited the accompanying consolidated balance sheets of Journal Communications, Inc. as of December 31, 2006 and December 25, 2005, and the related consolidated statements of earnings, shareholders' equity, and cash flows
for each of the three years in the period ended December 31, 2006. Our audits also included the financial statement schedule listed in the Index to Exhibits at Item 15(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we
plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for
our opinion.



In our opinion, the financial statements referred
to above present fairly, in all material respects, the consolidated financial position of Journal Communications, Inc. at December 31, 2006 and December 25, 2005, and the consolidated results of its operations and its cash flows for each
of the three years in the period ended December 31, 2006, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic
financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.



As discussed in Notes 7 and 3 to the consolidated financial statements, the Company changed its method of accounting for stock-based compensation
effective December 26, 2005, and its method of accounting for pension and postretirement benefits effective December 31, 2006, respectively.



We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Journal
Communication Inc.s internal control over financial reporting as of December 31, 2006, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission and our report dated February 8, 2007, expressed an unqualified opinion thereon.



Ernst & Young LLP




Milwaukee, Wisconsin

February 8, 2007

except for Note 14, as to which is the date is

February 26, 2007



90



---

##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



The Board of Directors and Shareholders

Journal Communications, Inc.



We have audited managements assessment, included in the accompanying Managements Report on Internal Control Over Financial Reporting, that
Journal Communications, Inc. maintained effective internal control over financial reporting as of December 31, 2006, based on criteria established in Internal ControlIntegrated Framework issued by the Committee of Sponsoring Organizations
of the Treadway Commission (the COSO criteria). Journal Communication Inc.s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over
financial reporting. Our responsibility is to express an opinion on managements assessment and an opinion on the effectiveness of the companys internal control over financial reporting based on our audit.



We conducted our audit in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our
audit included obtaining an understanding of internal control over financial reporting, evaluating managements assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures
as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.



A companys internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial
reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A companys internal control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors
of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the companys assets that could have a material effect on the financial statements.



Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.



In
our opinion, managements assessment that Journal Communications, Inc. maintained effective internal control over financial reporting as of December 31, 2006, is fairly stated, in all material respects, based on the COSO criteria. Also, in
our opinion, Journal Communications, Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2006, based on the COSO criteria.



We also have audited, in accordance with the standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheets of Journal Communications, Inc. as of December 31, 2006 and December 25, 2005, and the related consolidated statements of earnings, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 2006 and our report dated February 8, 2007 except for Note 14, as to which the date was February 26, 2007, expressed an unqualified opinion thereon.



Ernst & Young LLP




Milwaukee, Wisconsin

February 8, 2007



91



---

##### Table of Contents

|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
|------- | ------------------------------------------------------------------------------------



None.



|ITEM 9A. | CONTROLS AND PROCEDURES
|-------- | -----------------------



Conclusion Regarding the Effectiveness of Disclosure 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
Annual Report on Form 10-K. 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.



Managements Report on Internal Control Over Financial Reporting



We are responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally accepted accounting principles. Under the supervision and with the participation of our management, including our Chief Executive Officer and our Chief Financial Officer, we
conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Based on our evaluation under this framework, our management concluded that our internal control over financial reporting was effective as of December 31, 2006.



Our assessment of the effectiveness of our internal control over financial reporting as of December 31, 2006 has been
audited by Ernst & Young LLP, an independent registered public accounting firm, as stated in their report which is included in Item 8 hereto.



|ITEM 9B. | OTHER INFORMATION
|-------- | -----------------



None.



92



---

##### Table of Contents

PART III



|ITEM 10. | DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
|-------- | ------------------------------------------------------



The information contained under the headings Election of Directors and Other Matters-Section 16(a) Beneficial Ownership Reporting
Compliance in the Proxy Statement for our May 3, 2007 Annual Meeting of Shareholders is incorporated by reference herein. Reference is also made to the information under the heading Executive Officers of the Registrant
included under Part I of this Annual Report on Form 10-K.



We
have adopted a Code of Ethics for Financial Executives that applies to our Chief Executive Officer and senior financial and accounting officers and employees. We have also adopted a Code of Ethics, applicable to all employees, and a Code of
Conduct and Ethics for Members of the Board of Directors, applicable to all directors, which together satisfy the requirements of the New York Stock Exchange regarding a code of business conduct. Finally, we have adopted Corporate
Governance Guidelines addressing the subjects required by the New York Stock Exchange. We make copies of the foregoing, as well as the charters of our Board committees, available free of charge on our website at
www.journalcommunications.com, and this information is available in print to any shareholder who requests it by writing to Paul E. Kritzer, Vice President and Secretary, Journal Communications, Inc., P.O. Box 661, Milwaukee, Wisconsin
53201-0661. We intend to satisfy the disclosure requirements under Item 5.05 of Form 8-K regarding amendments to, or waivers from, our Code of Ethics for Financial Executives by posting such information on our web site at the address stated
above. We are not including the information contained on our website as part of, or incorporating it by reference into, this Annual Report on Form 10-K.



|ITEM 11. | EXECUTIVE COMPENSATION
|-------- | ----------------------



The information contained under the headings Compensation Discussion and Analysis, Election of Officers, Compensation
Committee Report, Executive Compensation and Director Compensation, in the Proxy Statement for our May 3, 2007 Annual Meeting of Shareholders is incorporated by reference herein.



|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
|-------- | ----------------------------------------------------------------------------------------------



The information contained under the headings Stock Ownership of Management and Others and Proposal to
Approve the 2007 Omnibus Incentive Plan-Equity Compensation Plan Information in the Proxy Statement for our May 3, 2007 Annual Meeting of Shareholders is incorporated by reference herein.



|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
|-------- | -------------------------------------------------------------------------



The information contained under the headings Election of Directors and Certain Transactions in the
Proxy Statement for our May 3, 2007 Annual Meeting of Shareholders is incorporated by reference herein.



|ITEM 14. | PRINCIPAL ACCOUNTING FEES AND SERVICES
|-------- | --------------------------------------



The information contained under the heading Ernst & Young LLP Disclosure in the Proxy Statement for our May 3, 2007 Annual
Meeting of Shareholders is incorporated by reference herein.



93



---

##### Table of Contents

PART IV



|ITEM 15. | EXHIBITS, FINANCIAL STATEMENT SCHEDULES
|-------- | ---------------------------------------



Financial Statements, Financial Statement Schedule and Exhibits



|                                                                                                                  |  |                 
|----------------------------------------------------------------------------------------------------------------- |  | ----------------
|                                                                                                                  |  | Form 10-KPage(s)
|(1) Financial Statements                                                                                          |  |                 
|                                                                                                                  | 
|Consolidated Balance Sheets at December 31, 2006 and December 25, 2005                                            |  | 60              
|                                                                                                                  | 
|Consolidated Statements of Earnings for each of the three years in the period ended December 31, 2006             |  | 61              
|                                                                                                                  | 
|Consolidated Statements of Shareholders Equity for each of the three years in the period ended December 31, 2006 |  | 62 and 63       
|                                                                                                                  | 
|Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 2006           |  | 64              
|                                                                                                                  | 
|Notes to Consolidated Financial Statements                                                                        |  | 65              
|                                                                                                                  | 
|Reports of Independent Registered Public Accounting Firm                                                          |  | 90 and 91       
|                                                                                                                  | 
|(2) Financial Statement Schedule for the years ended December 31, 2006, December 25,   2005 and December 26,
2004 |  |                 
|                                                                                                                  | 
|IIConsolidated Valuation and Qualifying Accounts                                                                 |  | 95              



All other schedules
are omitted since the required information is not present, or is not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements and notes thereto.



(3) Exhibits



The exhibits listed on the accompanying Index to
Exhibits (on pages 97-99) are filed, or incorporated by reference, as part of this Annual Report on Form 10-K.



94



---

##### Table of Contents

JOURNAL COMMUNICATIONS, INC.



SCHEDULE IICONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS

Years ended December 31,
2006, December 25, 2005 and December 26, 2004

(dollars in thousands)



|                                                                               |  |                           |       |                            |   |                            |  |   |            |   |                      |   |       |  |   |      
|------------------------------------------------------------------------------ |  | ------------------------- | ----- | -------------------------- | - | -------------------------- |  | - | ---------- | - | -------------------- | - | ----- |  | - | -----
|Description                                                                    |  | BalanceatBeginningof Year |       | AdditionsChargedtoEarnings |   | OtherAdditions(Deductions) |  |   | Deductions |   | Balanceat Endof Year
|Allowance for doubtful accounts:                                               |  |                           |       |                            |   |                            |  |   |            |   |                      |   |       |  |   |      
|2006(1)                                                                        |  | $                         | 3,080 |                            | $ | 1,574                      |  | $ |           |   |                      | $ | 579   |  | $ | 4,075
|2005(1)(3)                                                                     |  | $                         | 5,162 |                            | $ | 1,179                      |  | $ | (1,000     | ) |                      | $ | 2,261 |  | $ | 3,080
|2004(1)(2)                                                                     |  | $                         | 3,046 |                            | $ | 3,813                      |  | $ | 1,500      |   |                      | $ | 3,197 |  | $ | 5,162
|Reserve for litigation:                                                        |  |                           |       |                            |   |                            |  |   |            |   |                      |   |       |  |   |      
|2006                                                                           |  | $                         |      |                            | $ |                           |  | $ |           |   |                      | $ |      |  | $ |     
|2005                                                                           |  | $                         |      |                            | $ |                           |  | $ |           |   |                      | $ |      |  | $ |     
|2004(2)                                                                        |  | $                         | 1,487 |                            | $ |                           |  | $ |           |   |                      | $ | 1,487 |  | $ |     
|Deferred income taxes                                                          |  |                           |       |                            |   |                            |  |   |            |   |                      |   |       |  |   |      
|Valuation allowances on state net operating loss and tax credit carryforwards: |  |                           |       |                            |   |                            |  |   |            |   |                      |   |       |  |   |      
|2006(4)                                                                        |  | $                         | 2,051 |                            | $ |                           |  | $ |           |   |                      | $ | 849   |  | $ | 1,202
|2005(4)                                                                        |  | $                         | 2,541 |                            | $ | 7                          |  | $ |           |   |                      | $ | 497   |  | $ | 2,051
|2004(4)                                                                        |  | $                         | 3,555 |                            | $ | 87                         |  | $ |           |   |                      | $ | 1,101 |  | $ | 2,541

---

|(1) | Deductions from the allowance for doubtful accounts equal accounts receivable written off, less recoveries, against the allowance.
|--- | ----------------------------------------------------------------------------------------------------------------------------------



|(2) | The TeleRep, Inc. reserve for litigation was reclassified as an allowance for doubtful accounts against the receivable recorded in other assets due to us from Journal Broadcast
Groups new national representative.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|(3) | The remaining reserve for the TeleRep, Inc. receivable was reduced by $1,000.
|--- | -----------------------------------------------------------------------------



|(4) | Deductions from the valuation allowances on state net operating loss and tax credit carryforwards equal expired, utilized or re-valued state net operating loss and tax credit
carryforwards.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



95



---

##### Table of Contents

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this annual report to be signed on its behalf by the undersigned, hereunto duly authorized on
March 6, 2007.



JOURNAL COMMUNICATIONS, INC.By:

/s/    Steven J. SmithSteven J. SmithChairman and Chief Executive Officer




Pursuant to
the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on March 6, 2007:



|                         |  |  |  |                                                                                 
|------------------------ |  |  |  | --------------------------------------------------------------------------------
|                         |  | 
|/s/    Steven J. Smith   |  |  |  | Chairman of the Board & Chief Executive Officer (Principal Executive Officer)   
|Steven J. Smith          |  |  | 
|                         |  | 
|/s/    Douglas G. Kiel   |  |  |  | President                                                                       
|Douglas G. Kiel          |  |  |  |                                                                                 
|                         |  | 
|/s/    Paul M. Bonaiuto  |  |  |  | Executive Vice President & Chief Financial Officer (Principal Financial Officer)
|Paul M. Bonaiuto         |  |  | 
|                         |  | 
|/s/    Anne M. Bauer     |  |  |  | Vice President & Controller (Principal Accounting Officer)                      
|Anne M. Bauer            |  |  | 
|                         |  | 
|/s/    Don H. Davis, Jr. |  |  |  | Director                                                                        
|Don H. Davis, Jr.        |  |  |  |                                                                                 
|                         |  | 
|/s/    David J. Drury    |  |  |  | Director                                                                        
|David J. Drury           |  |  |  |                                                                                 
|                         |  | 
|/s/    David G. Meissner |  |  |  | Director                                                                        
|David G. Meissner        |  |  |  |                                                                                 
|                         |  | 
|/s/    Jonathan Newcomb  |  |  |  | Director                                                                        
|Jonathan Newcomb         |  |  |  |                                                                                 
|                         |  | 
|/s/    Roger D. Peirce   |  |  |  | Director                                                                        
|Roger D. Peirce          |  |  |  |                                                                                 
|                         |  | 
|/s/    Mary Ellen Stanek |  |  |  | Director                                                                        
|Mary Ellen Stanek        |  |  |  |                                                                                 
|                         |  | 
|/s/    Jeanette Tully    |  |  |  | Director                                                                        
|Jeanette Tully           |  |  |  |                                                                                 



96



---

##### Table of Contents

JOURNAL COMMUNICATIONS, INC.



INDEX TO EXHIBITS



|              |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|------------- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
|              | 
|(2.1)         |  | Asset Purchase Agreement, dated January 25, 2005, between Multi-Color Corporation and Journal Communications, Inc. (incorporated by reference to Exhibit 10.15 to Journal Communications,
Inc.s Annual Report on Form 10-K for the period ended December 26, 2004 [Commission File No. 1-31805]).                                                                                                                                                                                                                                                                            
|              | 
|(2.2)         |  | Stock Purchase Agreement, dated as of November 13, 2006, among Journal Communications, Inc., Norlight Telecommunications, Inc. and Q-Comm Corporation.                                                                                                                                                                                                                                                                                                                                                                                                                        
|              | 
|(3.1)         |  | Amended and Restated Articles of Incorporation of Journal Communications, Inc., as amended through June 30, 2006 (incorporated by reference to Exhibit 3.2 to Journal Communications,
Inc.s Current Report on Form 8-K dated June 30, 2006 [Commission File No. 1-31805]).                                                                                                                                                                                                                                                                                                   
|              | 
|(3.2)         |  | Bylaws of Journal Communications, Inc., as amended (incorporated by reference to Exhibit 3.1 to Journal Communications Current Report on Form 8-K dated February 15, 2007
[Commission File No. 1-31805]).                                                                                                                                                                                                                                                                                                                                                                    
|              | 
|(4.1)         |  | Amended and Restated Credit Agreement, dated December 2, 2005, among Journal Communications, Inc., certain subsidiaries thereof from time to time party thereto, the financial
institutions party thereto, Suntrust Bank, as syndication agent, Bank of America, N.A., as co-documentation agent, Wachovia Bank, National Association, as co- documentation agent, and U.S. Bank, N.A., as administrative agent (incorporated by
reference to Exhibit 4.1 to Journal Communications, Inc.s Current Report on Form 8-K dated December 2, 2005 [Commission File No. 1- 31805]).
|              | 
|(10.1)        |  | Journal Communications, Inc. Executive Management Incentive Plan (f/k/a the Management Long Term Incentive Plan) (incorporated by reference to Exhibit 10.2 to Journal Communications,
Inc.s (now known as The Journal Company) Annual Report on Form 10-K for the period ended December 31, 2002 [Commission File No. 0-7831]).*                                                                                                                                                                                                                                            
|              | 
|(10.2)        |  | Journal Communications, Inc. Annual Management Incentive Plan (f/k/a the Management Annual Incentive Plan) (incorporated by reference to Exhibit 10.3 to Journal Communications, Inc.s
(now known as the Journal Company) Annual Report on Form 10-K for the period ended December 31, 2002 [Commission File No. 0-7831]).*                                                                                                                                                                                                                                                  
|              | 
|(10.3)        |  | Journal Communications, Inc. Non-Qualified Deferred Compensation Plan (incorporated by reference to Exhibit 10.4 to Journal Communications, Inc.s (now known as The Journal Company)
Annual Report on Form 10-K for the period ended December 31, 2002 [Commission File No. 0-7831]).*                                                                                                                                                                                                                                                                                       
|              | 
|(10.4)        |  | Journal Communications, Inc. Supplemental Benefit Plan (incorporated by reference to Exhibit 10.5 to Journal Communications, Inc.s (now known as The Journal Company) Annual Report on
Form 10-K for the period ended December 31, 2002 [Commission File No. 0-7831]).*                                                                                                                                                                                                                                                                                                      
|              | 
|(10.5)        |  | Journal Communications, Inc. 2003 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.5 to Journal Communications, Inc.s Annual Report on Form 10-K for the period
ended December 26, 2004 [Commission File No. 1-31805]).*                                                                                                                                                                                                                                                                                                                           
|              | 
|(10.6)        |  | Journal Communications, Inc. (f/k/a The Journal Company) 2003 Employee Stock Purchase Plan incorporated by reference to Exhibit 10.6 to The Journal Companys (now known as Journal
Communications, Inc.) Registration Statement on Form S-1 [Registration File No. 333-105210]).                                                                                                                                                                                                                                                                                             



97



---

##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                      
|------------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                          
|              | 
|(10.7)        |  | Journal Communications, Inc. Executive Management Incentive Plan (incorporated by reference to Exhibit 10.7 to Journal Communications, Inc.s Annual Report on Form 10-K for the period
ended December 26, 2004 [Commission File No. 1-31805]).*                                                                     
|              | 
|(10.8)        |  | Form of Journal Communications, Inc. 2003 Equity Incentive Plan Stock Option Award Agreement (Non-Statutory Stock Option Grant) for Directors (incorporated by reference to Exhibit 10.1 to
Journal Communications Current Report on Form 8-K dated February 3, 2005 [Commission File No. 1-31805]).*               
|              | 
|(10.9)        |  | Form of Journal Communications, Inc. 2003 Equity Incentive Plan Stock Option Award Agreement (Non-Statutory Stock Option Grant) for Officers and Employees (incorporated by reference to
Exhibit 10.2 to Journal Communications Current Report on Form 8-K dated February 3, 2005 [Commission File No. 1-31805]).*  
|              | 
|(10.10)       |  | Form of Journal Communications, Inc. 2003 Equity Incentive Plan Stock Grant Award Agreement (incorporated by reference to Exhibit 10.3 to Journal Communications Current Report on Form
8-K dated February 3, 2005 [Commission File No. 1-31805]).*                                                                 
|              | 
|(10.11)       |  | Form of Journal Communications, Inc. 2003 Equity Incentive Plan Restricted Stock Award Agreement for Directors (incorporated by reference to Exhibit 10.4 to Journal Communications
Current Report on Form 8-K dated February 3, 2005 [Commission File No. 1-31805]).*                                              
|              | 
|(10.12)       |  | Form of Journal Communications, Inc. 2003 Equity Incentive Plan Restricted Stock Award Agreement for Officers and Employees (incorporated by reference to Exhibit 10.5 to Journal
Communications Current Report on Form 8-K dated February 3, 2005 [Commission File No. 1-31805]).*                                 
|              | 
|(10.13)       |  | Employment Agreement, dated February 8, 2005, between Steven J. Smith and Journal Communications, Inc. (incorporated by reference to Exhibit 10.13 to Journal Communications, Inc.s
Annual Report on Form 10-K for the period ended December 26, 2004 [Commission File No. 1-31805]).*                              
|              | 
|(10.14)       |  | Amendment, effective as of January 29, 2007, to Employment Agreement between Journal Communications, Inc. and Steven J. Smith, dated February 8, 2005 (incorporated by reference to Exhibit
10.1 to Journal Communications, Inc.s Current Report on Form 8-K dated January 29, 2007 [Commission File No. 1-31805]).*
|              | 
|(10.15)       |  | Change in Control Agreement, effective as of January 29, 2007, between Journal Communications, Inc. and Douglas G. Kiel (incorporated by reference to Exhibit 10.2 to Journal Communications,
Inc.s Current Report on Form 8-K dated January 29, 2007 [Commission File No. 1-31805]).*                              
|              | 
|(10.16)       |  | Change in Control Agreement, effective as of January 29, 2007, between Journal Communications, Inc. and Elizabeth Brenner (incorporated by reference to Exhibit 10.3 to Journal Communications,
Inc.s Current Report on Form 8-K dated January 29, 2007 [Commission File No. 1-31805]).*                            
|              | 
|(10.17)       |  | Change in Control Agreement, effective as of January 29, 2007, between Journal Communications, Inc. and Paul M. Bonaiuto (incorporated by reference to Exhibit 10.4 to Journal Communications,
Inc.s Current Report on Form 8-K dated January 29, 2007 [Commission File No. 1-31805]).*                             
|              | 
|(10.18)       |  | Change in Control Agreement, effective as of January 29, 2007, between Journal Communications, Inc. and Mary Hill Leahy (incorporated by reference to Exhibit 10.5 to Journal Communications,
Inc.s Current Report on Form 8-K dated January 29, 2007 [Commission File No. 1-31805]).*                              
|              | 
|(10.19)       |  | Retention Agreement between Norlight Telecommunications, Inc. and James J. Ditter dated July 31, 2006 (incorporated by reference to Exhibit 10 to Journal Communications Inc.s Current
Report on Form 8-K dated July 31, 2006 [Commission File No. 1-31805]).*                                                      



98



---

##### Table of Contents

|              |  |                                                                                                                                                                                                                                                                                                                                                                 
|------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|ExhibitNumber |  | Description                                                                                                                                                                                                                                                                                                                                                     
|              | 
|(10.20)       |  | Amendment, effective as of December 10, 2006, to Retention Agreement between Norlight Telecommunications, Inc. and James J. Ditter dated July 31, 2006 (incorporated by reference to
Exhibit 10 to Journal Communications Inc.s Current Report on Form 8-K dated December 10, 2006 [Commission File No. 1-31805]).*                                            
|              | 
|(10.21)       |  | Amendment to the Journal Communications, Inc. 2003 Equity Incentive Plan, as amended (incorporated by reference to Exhibit 10.1 to Journal Communications, Inc.s Current Report on Form
8-K dated February 13, 2007 [Commission File No. 1-31805]).*                                                                                                           
|              | 
|(10.22)       |  | Form of Stock Appreciation Rights Agreement for Fixed Price Stock Appreciation Rights under the Journal Communications, Inc. 2003 Equity Incentive Plan (incorporated by reference to Exhibit
10.2 to Journal Communications, Inc.s Current Report on Form 8-K dated February 13, 2007 [Commission File No. 1-31805]).*                                        
|              | 
|(10.23)       |  | Form of Stock Appreciation Rights Agreement for Escalating Price Stock Appreciation Rights under the Journal Communications, Inc. 2003 Equity Incentive Plan (incorporated by reference to
Exhibit 10.3 to Journal Communications, Inc.s Current Report on Form 8-K dated February 13, 2007 [Commission File No. 1-31805]).*                                   
|              | 
|(10.24)       |  | Form of Restricted Stock Award Agreement under the Journal Communications, Inc. 2003 Equity Incentive Plan (incorporated by reference to Exhibit 10.4 to Journal Communications, Inc.s
Current Report on Form 8-K dated February 13, 2007 [Commission File No. 1-31805]).*                                                                                     
|              | 
|(10.25)       |  | Form of Non-Statutory Stock Option Agreement under the Journal Communications, Inc. 2003 Equity Incentive Plan (incorporated by reference to Exhibit 10.5 to Journal Communications,
Inc.s Current Report on Form 8-K dated February 13, 2007 [Commission File No. 1-31805]).*                                                                                 
|              | 
|(10.26)       |  | Summary of Non-Employee Director Compensation, effective December 12, 2006. *                                                                                                                                                                                                                                                                                   
|              | 
|(21)          |  | Subsidiaries of the Registrant.                                                                                                                                                                                                                                                                                                                                 
|              | 
|(23)          |  | Consent of Independent Registered Public Accounting Firm.                                                                                                                                                                                                                                                                                                       
|              | 
|(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.                                                                    
|              | 
|(99.1)        |  | Proxy Statement for the May 3, 2007 Annual Meeting of Shareholders of Journal Communications, Inc. (Except to the extent specifically incorporated by reference, the Proxy Statement for the
May 3, 2007 Annual Meeting of Shareholders shall not be deemed to be filed with the Securities and Exchange Commission as part of this Annual Report of Form 10-K.)

---

|* | Denotes a management or compensatory plan or arrangement.
|- | ---------------------------------------------------------



99