Journal Communications (JRN) 10-Q 2010 Q2 Quarterly report

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C.  20549

FORM 10-Q

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

For the quarterly period ended:  June 27, 2010

or

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

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

JOURNAL COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Wisconsin	20-0020198
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

333 W. State Street, Milwaukee, Wisconsin	53203
(Address of principal executive offices)	(Zip Code)

(414) 224-2000

Registrant's telephone number, including area code

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  xNo  ¨

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

Yes  ¨No  ¨

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

Large Accelerated Filer  ¨  Accelerated Filer  ¨  Non-accelerated Filer  x  Smaller reporting company  ¨

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

Yes  ¨No  x

Number of shares outstanding of each of the issuer’s classes of common stock as of August 4, 2010 (excluding 8,676,705 shares of class B common stock held by our subsidiary, The Journal Company):

Class	Outstanding at August 4, 2010
Class A Common Stock	42,891,678
Class B Common Stock	8,880,097.684
Class C Common Stock	3,264,000

JOURNAL COMMUNICATIONS, INC.

INDEX

			Page No.
Part I.	Financial Information
	Item 1.	Financial Statements
		Unaudited Consolidated Condensed Balance Sheets as of June 27, 2010 and December 27, 2009	2
		Unaudited Consolidated Condensed Statements of Operations for the Two Quarters Ended June 27, 2010 and June 28, 2009	3
		Unaudited Consolidated Condensed Statement of Equity for the Two Quarters Ended June 27, 2010	4
		Unaudited Consolidated Condensed Statement of Equity for the Two Quarters Ended June 28, 2009	5
		Unaudited Consolidated Condensed Statements of Cash Flows for the Two Quarters Ended June 27, 2010 and June 28, 2009	6
		Notes to the Unaudited Consolidated Condensed Financial Statements as of June 27, 2010	7
	Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	21
	Item 3.	Quantitative and Qualitative Disclosure of Market Risk	36
	Item 4.	Controls and Procedures	36
Part II.	Other Information
	Item 1.	Legal Proceedings	37
	Item 1A.	Risk Factors	37
	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	37
	Item 3.	Defaults Upon Senior Securities	37
	Item 4.	Reserved	37
	Item 5.	Other Information	37
	Item 6.	Exhibits	37

PART I. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

JOURNAL COMMUNICATIONS, INC.

Unaudited Consolidated Condensed Balance Sheets

(in thousands, except share and per share amounts)

	June 27, 2010			December 27, 2009
Assets
Current assets:
Cash and cash equivalents	$	2,684		$	3,369
Investments of variable interest entity		500			--
Receivables, less allowance for doubtful accounts of $3,600 and $4,198		57,035			62,543
Inventories, net		2,667			3,070
Prepaid expenses		4,842			3,497
Syndicated programs		3,907			7,983
Deferred income taxes		4,166			4,899
Assets of discontinued operations		--			2,393
Total Current Assets		75,801			87,754
Property and equipment, at cost, less accumulated depreciation of $243,683 and $247,745		194,492			201,541
Syndicated programs		2,273			3,285
Goodwill		9,098			9,098
Broadcast licenses		82,426			81,762
Other intangible assets, net		23,997			24,976
Deferred income taxes		58,384			63,368
Other assets		1,680			1,403
Total Assets	$	448,151		$	473,187
Liabilities And Equity
Current liabilities:
Accounts payable	$	23,898		$	23,963
Accrued compensation		13,474			13,564
Notes payable to banks		117,815			--
Accrued employee benefits		6,238			5,642
Deferred revenue		15,202			15,353
Syndicated programs		5,215			9,944
Other current liabilities		8,087			7,437
Current portion of long-term liabilities		552			440
Current liabilities of discontinued operations		--			1,296
Total Current Liabilities		190,481			77,639
Accrued employee benefits		61,695			63,268
Syndicated programs		4,584			6,250
Long-term notes payable to banks		--			151,375
Other long-term liabilities		4,682			3,580
Equity:
Preferred stock, $0.01 par – authorized 10,000,000 shares; no shares outstanding at June 27, 2010 and December 27, 2009		--			--
Common stock, $0.01 par:
Class C – authorized 10,000,000 shares; issued and outstanding: 3,264,000 shares at June 27, 2010 and December 27, 2009		33			33
Class B – authorized 120,000,000 shares; issued and outstanding (excluding treasury stock): 8,874,950.684 shares at June 27, 2010 and 9,642,293 shares at December 27, 2009		166			174
Class A – authorized 170,000,000 shares; issued and outstanding: 42,862,890  shares at June 27, 2010 and 41,783,044 shares at December 27, 2009		429			418
Additional paid-in capital		259,522			258,413
Accumulated other comprehensive loss		(33,604	)		(34,487	)
Retained earnings		67,714			55,239
Treasury stock, at cost (8,676,705 class B shares)		(108,715	)		(108,715	)
Total Journal Communications, Inc. shareholders’ equity		185,545			171,075
Noncontrolling interest		1,164			--
Total Equity		186,709			171,075
Total Liabilities And Equity	$	448,151		$	473,187

See accompanying notes to unaudited consolidated condensed financial statements.

2

JOURNAL COMMUNICATIONS, INC.

Unaudited Consolidated Condensed Statements of Operations

 (in thousands, except per share amounts)

	Second Quarter Ended						Two Quarters Ended
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
Revenue:
Publishing	$	47,386		$	49,433		$	91,938		$	97,557
Broadcasting		47,012			43,742			89,617			82,957
Printing services		10,112			11,240			21,747			25,535
Corporate eliminations		(124	)		(156	)		(391	)		(268	)
Total revenue		104,386			104,259			202,911			205,781
Operating costs and expenses:
Publishing		28,552			32,060			57,499			66,876
Broadcasting		22,300			21,911			43,896			45,412
Printing services		8,196			9,832			17,800			22,259
Corporate eliminations		(124	)		(168	)		(391	)		(282	)
Total operating costs and expenses		58,924			63,635			118,804			134,265
Selling and administrative expenses		31,047			31,105			59,606			62,403
Broadcast license impairment		--			18,975			--			18,975
Total operating costs and expenses and selling and administrative expenses		89,971			113,715			178,410			215,643
Operating earnings (loss)		14,415			(9,456	)		24,501			(9,862	)
Other income and (expense):
Interest income		25			--			33			--
Interest expense		(543	)		(737	)		(1,106	)		(1,549	)
Total other income and (expense)		(518	)		(737	)		(1,073	)		(1,549	)
Earnings (loss) from continuing operations before income taxes		13,897			(10,193	)		23,428			(11,411	)
Provision (benefit) for income taxes		5,578			(5,665	)		9,401			(7,144	)
Earnings (loss) from continuing operations		8,319			(4,528	)		14,027			(4,267	)
Loss from discontinued operations, net of $154, $213, $436 and $311 applicable income tax benefit, respectively		(219	)		(304	)		(624	)		(444	)
Net earnings (loss)	$	8,100		$	(4,832	)	$	13,403		$	(4,711	)
Earnings (loss) per share:
Basic – Class A and B common stock:
Continuing operations	$	0.14		$	(0.10	)	$	0.24		$	(0.10	)
Discontinued operations		--			(0.01	)		(0.01	)		(0.01	)
Net earnings (loss)	$	0.14		$	(0.11	)	$	0.23		$	(0.11	)
Diluted – Class A and B common stock:
Continuing operations	$	0.14		$	(0.10	)	$	0.24		$	(0.10	)
Discontinued operations		--			(0.01	)		(0.01	)		(0.01	)
Net earnings (loss)	$	0.14		$	(0.11	)	$	0.23		$	(0.11	)
Basic and diluted – Class C common stock:
Continuing operations	$	0.28		$	0.14		$	0.52		$	0.28
Discontinued operations		--			--			(0.01	)		--
Net earnings	$	0.28		$	0.14		$	0.51		$	0.28

See accompanying notes to unaudited consolidated condensed financial statements.

3

Journal Communications, Inc.

Unaudited Consolidated Statements of Equity

Two Quarters Ended June 27, 2010

(in thousands, except per share amounts)

	Preferred Stock									Additional Paid-in-Capital			Accumulated Other Comprehensive Loss			Retained Earnings			Noncontrolling Interests		Treasury Stock, at cost
			Common Stock
			Class C		Class B			Class A																Total
Balance at December 27, 2009	$	-	$	33	$	174		$	418	$	258,413		$	(34,487	)	$	55,239		$	-	$	(108,715	)	$	171,075
Net earnings																	5,303								5,303
Change in pension and postretirement (net of deferred tax of $280)														441											441
Class C dividends declared ($0.142 per share)																	(464	)							(464	)
Issuance of shares:
Conversion of class B to class A						(4	)		4																-
Stock grants						2					30														32
Employee stock purchase plan						1					162														163
Shares withheld from employees for tax withholding						(1	)				(267	)													(268	)
Stock-based compensation											294														294
Consolidation of variable interest entity																				1,164					1,164
Income tax benefits from vesting of non-vested restricted stock											95														95
Balance at March 28, 2010		-		33		172			422		258,727			(34,046	)		60,078			1,164		(108,715	)		177,835
Net earnings																	8,100								8,100
Change in pension and postretirement (net of deferred tax of $278)														442											442
Class C dividends declared ($0.142 per share)																	(464	)							(464	)
Issuance of shares:
Conversion of class B to class A						(7	)		7																-
Stock grants						1					493														494
Stock-based compensation											302														302
Balance at June 27, 2010	$	-	$	33	$	166		$	429	$	259,522		$	(33,604	)	$	67,714		$	1,164	$	(108,715	)	$	186,709

See accompanying notes to unaudited consolidated condensed financial statements.

4

Journal Communications, Inc.

Unaudited Consolidated Statements of Equity

Two Quarters Ended June 28, 2009

(in thousands, except per share amounts)

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

See accompanying notes to unaudited consolidated condensed financial statements.

5

JOURNAL COMMUNICATIONS, INC.

Unaudited Consolidated Condensed Statements of Cash Flows

(in thousands)

	Two Quarters Ended
	June 27, 2010			June 28, 2009
Cash flow from operating activities:
Net earnings	$	13,403		$	(4,711	)
Less loss from discontinued operations		(624	)		(444	)
Earnings from continuing operations		14,027			(4,267	)
Adjustments for non-cash items:
Depreciation		12,498			13,112
Amortization		979			987
Broadcast license impairment		--			18,975
Provision for doubtful accounts		313			1,920
Deferred income taxes		5,254			(2,478	)
Non-cash stock-based compensation		1,104			736
Curtailment gains for defined benefit pension and other postretirement benefit plans		--			(353	)
Net (gain) loss from disposal of assets		109			(1,630	)
Net changes in operating assets and liabilities, excluding effect of sales and acquisitions:
Receivables		5,425			16,597
Inventories		403			2,083
Accounts payable		(131	)		2,909
Other assets and liabilities		(2,090	)		(1,614	)
Net Cash Provided By Operating Activities		37,891			46,977
Cash flow from investing activities:
Capital expenditures for property and equipment		(5,822	)		(3,757	)
Insurance proceeds and proceeds from sales of assets		731			1,042
Acquisition of business		--			(6,593	)
Proceeds from sale of business		17			--
Net Cash Used For Investing Activities		(5,074	)		(9,308	)
Cash flow from financing activities:
Proceeds from long-term notes payable to banks		43,645			69,615
Payments on long-term notes payable to banks		(77,205	)		(106,420	)
Proceeds from issuance of common stock		146			189
Income tax benefits from vesting of non-vested restricted stock		95			--
Cash dividends		--			(1,476	)
Net Cash Used For Financing Activties		(33,319	)		(38,092	)
Cash from discontinued operations:
Net operating activities of discontinued operations		(298	)		(147	)
Net investing activities of discontinued operations		115			(42	)
Net Cash used for Discontinued Operations		(183	)		(189	)
Net Decrease In Cash And Cash Equivalents		(685	)		(612	)
Cash and cash equivalents:
Beginning of year		3,369			4,040
At June 27, 2010 and June 28, 2009	$	2,684		$	3,428

See accompanying notes to unaudited consolidated condensed financial statements.

6

JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

1 BASIS OF PRESENTATION

The accompanying unaudited consolidated condensed financial statements have been prepared by Journal Communications, Inc. and its wholly owned subsidiaries and a variable interest entity (VIE) for which we are the primary beneficiary in accordance with U.S. generally accepted accounting principles and pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and reflect normal and recurring adjustments, which we believe to be necessary for a fair presentation.  As permitted by these regulations, these statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles for annual financial statements.  However, we believe that the disclosures are adequate to make the information presented not misleading.  The operations of Pri meNet Marketing Services (PrimeNet), our former direct marketing services business, have been reflected as discontinued operations in our consolidated condensed financial statements.  The balance sheet at December 27, 2009 has been derived from the audited financial statements at that date, but does not include all the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements.  The operating results for the second quarter and two quarters ended June 27, 2010 are not necessarily indicative of the operating results that may be expected for the fiscal year ending December 26, 2010.  You should read these unaudited consolidated condensed financial statements in conjunction with the consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 27, 2009.

2 ACCOUNTING PERIODS

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

3 NEW ACCOUNTING STANDARD

In January 2010, the FASB issued amended guidance for fair value measurements and disclosures.  The guidance requires new disclosures about the transfers between Levels 1 and 2 and clarifies existing disclosures about the different classes of assets and liabilities measured at fair value and the valuation techniques and inputs used for fair value measurements which fall in either Level 2 or 3.  This guidance is effective for interim and annual periods beginning after December 15, 2009.  We adopted this guidance in the first quarter of 2010 and the adoption did not have a material impact on our consolidated financial statements.  The guidance also requires new disclosures about purchases, sales, issuances, and settlements in the roll forward of activity for Level 3 fair value measurements. & #160;Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years.

4 EARNINGS PER SHARE

Basic

We apply the two-class method for calculating and presenting our basic earnings per share.  As noted in the FASB’s guidance for earnings per share, the two-class method is an earnings allocation formula that determines earnings per share for each class of common stock according to dividends declared (or accumulated) and participation rights in undistributed earnings.  Under that method:

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

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

(c) The remaining losses (“undistributed losses”) are allocated to the class A and B common stock.  Undistributed losses are not allocated to the class C common stock and non-vested restricted stock because the class C common stock and the non-vested restricted stock are not contractually obligated to share in the losses.  Losses from discontinued operations are allocated to class A and B shares and may be allocated to class C shares and non-vested restricted stock if there is undistributed earnings after deducting earnings distributed to class C shares from income after income from continuing operations.

7

JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

4 EARNINGS PER SHARE continued

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

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

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

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

	Second Quarter Ended					Two Quarters Ended
	June 27, 2010		June 28, 2009			June 27, 2010		June 28, 2009
Numerator for basic earnings (loss) from continuing operations for each class of common stock and non-vested restricted stock:
Earnings (loss) from continuing operations	$	8,319	$	(4,528	)	$	14,027	$	(4,267	)
Less dividends declared or accrued:
Class A and B		--		--			--		1,006
Class C		464		464			928		928
Non-vested restricted stock		--		(5	)		--		1
Total undistributed earnings (loss) from continuing operations	$	7,855	$	(4,987	)	$	13,099	$	(6,202	)
Class A and B undistributed earnings (loss) from continuing operations	$	7,257	$	(4,987	)	$	12,099	$	(6,202	)
Class C undistributed earnings from continuing operations		466		--			778		--
Non-vested restricted stock undistributed earnings from continuing operations		132		--			222		--
Total undistributed earnings (loss) from continuing operations	$	7,855	$	(4,987	)	$	13,099	$	(6,202	)
Numerator for basic earnings (loss) from continuing operations per class A and B common stock:
Dividends on class A and B	$	--	$	--		$	--	$	1,006
Class A and B undistributed earnings (loss)		7,257		(4,987	)		12,099		(6,202	)
Numerator for basic earnings (loss) from continuing operations per class A and B common stock	$	7,257	$	(4,987	)	$	12,099	$	(5,196	)
Numerator for basic earnings from continuing operations per class C common stock:
Dividends paid or accrued on class C	$	464	$	464		$	928	$	928
Class C undistributed earnings		466		--			778		--
Numerator for basic earnings from continuing operations per class C common stock	$	930	$	464		$	1,706	$	928

8

JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

4 EARNINGS PER SHARE continued

	Second Quarter Ended						Two Quarters Ended
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
Denominator for basic earnings (loss) from continuing operations for each class of common stock:
Weighted average shares outstanding –
Class A and B		50,784			50,317			50,700			50,294
Class C		3,264			3,264			3,264			3,264
Basic earnings (loss) per share from continuing operations
Class A and B	$	0.14		$	(0.10	)	$	0.24		$	(0.10	)
Class C	$	0.28		$	0.14		$	0.52		$	0.28
Numerator for basic loss from discontinued operations for each class of common stock and non-vested restricted stock:
Total undistributed loss from discontinued operations	$	(219	)	$	(304	)	$	(624	)	$	(444	)
Undistributed loss from discontinued operations:
Class A and B	$	(203	)	$	(304	)	$	(576	)	$	(444	)
Class C		(13	)		--			(37	)		--
Non-vested restricted stock		(3	)		--			(11	)		--
Total undistributed loss from discontinued operations	$	(219	)	$	(304	)	$	(624	)	$	(444	)
Denominator for basic loss from discontinued operations for each class of common stock:
Weighted average shares outstanding –
Class A and B		50,784			50,317			50,700			50,294
Class C		3,264			3,264			3,264			3,264
Basic loss per share from discontinued operations
Class A and B	$	--		$	(0.01	)	$	(0.01	)	$	(0.01	)
Class C	$	--		$	--		$	(0.01	)	$	--
Numerator for basic net earnings (loss) for each class of common stock:
Net earnings	$	8,100		$	(4,832	)	$	13,403		$	(4,711	)
Less dividends declared or accrued:
Class A and B		--			--			--			1,006
Class C		464			464			928			928
Non-vested restricted stock		--			(5	)		--			1
Total undistributed net earnings (loss)	$	7,636		$	(5,291	)	$	12,475		$	(6,646	)
Undistributed net earnings (loss):
Class A and B	$	7,054		$	(5,291	)	$	11,523		$	(6,646	)
Class C		453			--			741			--
Non-vested restricted stock		129			--			211			--
Total undistributed net earnings (loss)	$	7,636		$	(5,291	)	$	12,475		$	(6,646	)

9

JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

4 EARNINGS PER SHARE continued

	Second Quarter Ended					Two Quarters Ended
	June 27, 2010		June 28, 2009			June 27, 2010		June 28, 2009
Numerator for basic net earnings (loss) per class A and B common stock:
Dividends declared on class A and B	$	--	$	--		$	--	$	1,006
Class A and B undistributed net earnings (loss)		7,054		(5,291	)		11,523		(6,646	)
Numerator for basic net earnings (loss) per class A and B common stock	$	7,054	$	(5,291	)	$	11,523	$	(5,640	)
Numerator for basic net earnings per class C common stock:
Dividends paid or accrued on class C	$	464	$	464		$	928	$	928
Class C undistributed net earnings		453		--			741		--
Numerator for basic net earnings per class C common stock	$	917	$	464		$	1,669	$	928
Denominator for basic net earnings (loss) for each class of common stock:
Weighted average shares outstanding –
Class A and B		50,784		50,317			50,700		50,294
Class C		3,264		3,264			3,264		3,264
Basic net earnings (loss) per share:
Class A and B	$	0.14	$	(0.11	)	$	0.23	$	(0.11	)
Class C	$	0.28	$	0.14		$	0.51	$	0.28

Diluted

Diluted earnings per share is computed based upon the assumption that common shares are issued upon exercise of our non-statutory stock options or stock appreciation rights when the exercise price is less than the average market price of our common shares and common shares will be outstanding upon expiration of the vesting periods for our non-vested restricted stock.  For the second quarter and two quarters of 2010, 454 and 434 non-vested restricted class B common shares, respectively, are not deemed to be outstanding upon expiration of the vesting periods because they are anti-dilutive.  The class C shares are not converted into class A and B shares because they are anti-dilutive for all periods presented.

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

	Second Quarter Ended						Two Quarters Ended
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
Numerator for diluted net earnings (loss) per share:
Dividends on class A and B common stock	$	--		$	--		$	--		$	1,006
Total undistributed earnings from continuing operations		7,257			(4,987	)		12,099			(6,202	)
Total undistributed (loss)from discontinued operations		(203	)		(304	)		(576	)		(444	)
Net earnings (loss)	$	7,054		$	(5,291	)	$	11,523		$	(5,640	)

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JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except share per share amounts)

4 EARNINGS PER SHARE continued

	Second Quarter Ended					Two Quarters Ended
	June 27, 2010		June 28, 2009			June 27, 2010			June 28, 2009
Denominator for diluted net earnings (loss) per share:
Weighted average shares outstanding – class A and B		50,784		50,317			50,700			50,294
Diluted earnings (loss) per share:
Continuing operations	$	0.14	$	(0.10	)	$	0.24		$	(0.10	)
Discontinued operations		--		(0.01	)		(0.01	)		(0.01	)
Net earnings	$	0.14	$	(0.11	)	$	0.23		$	(0.11	)

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

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

5 COMPREHENSIVE INCOME

The following table sets forth our comprehensive income:

	Second Quarter Ended					Two Quarters Ended
	June 27, 2010		June 28, 2009			June 27, 2010		June 28, 2009
Net earnings	$	8,100	$	(4,832	)	$	13,403	$	(4,711	)
Change in pension and post-retirement (net of tax)		442		(258	)		883		1,180
Comprehensive income (loss)	$	8,542	$	(5,090	)	$	14,286	$	(3,531	)

6 STOCK-BASED COMPENSATION

2007 Journal Communications, Inc. Omnibus Incentive Plan

The purpose of the 2007 Journal Communications, Inc. Omnibus Incentive Plan (2007 Plan) is to promote our success by linking personal interests of our employees, officers and non-employee directors to those of our shareholders, and by providing participants with an incentive for outstanding performance.  The 2007 Plan is also intended to enhance our ability to attract, motivate and retain the services of employees, officers, and directors upon whose judgment, interest, and special effort the successful conduct of our operation is largely dependent.

Subject to adjustment as provided in the 2007 Plan, the aggregate number of shares of class A common stock or class B common stock reserved and available for issuance pursuant to awards granted under the 2007 Plan is 4,800,000 shares which may be awarded in the form of nonstatutory or incentive stock options, stock appreciation rights, restricted stock, restricted or deferred stock units, performance awards, dividend equivalents or other stock-based awards.  The 2007 Plan also provides for the issuance of cash-based awards.  The 2007 Plan replaced the 2003 Equity Incentive Plan (2003 Plan) and, as of May 3, 2007, all equity grants are made from the 2007 Plan.  We will not grant any additional awards under the 2003 Plan.  As of June 27, 2010, there are 2,933,357 shares available for issuance unde r the 2007 Plan.

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JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

6 STOCK-BASED COMPENSATION continued

During the second quarter and two quarters ended June 27, 2010, we recognized $806 and $1,141, respectively, in stock-based compensation expense, including $0 and $19, respectively, recorded in loss from discontinued operations.  Total income tax benefit recognized related to stock-based compensation for the second quarter and two quarters ended June 27, 2010 was $324 and $458, respectively.  We recognize stock-based compensation expense on a straight-line basis over the service period based upon the fair value of the award on the grant date.  As of June 27, 2010, total unrecognized compensation cost related to stock-based compensation awards was $1,588 net of estimated forfeitures, which we expect to recognize over a weighted average period of 1.1 years.  Stock-based compensation expense is rep orted in selling and administrative expenses and loss from discontinued operations in our consolidated statements of operations.

Nonstatutory stock options

The compensation committee of our board of directors has granted nonstatutory stock options to employees and non-employee directors at a purchase price equal to at least the fair market value of our class B common stock on the grant date for an exercise term determined by the committee, not to exceed 10 years from the grant date.  It is our policy to issue new class B common stock upon the exercise of nonstatutory stock options.

In 2003 and 2004, our non-employee directors and certain of our employees were granted options to purchase class B common stock.  These options are exercisable and will remain exercisable for a period of up to seven years from the grant date.  There have been no options granted since 2004.

A summary of stock option activity during the two quarters of 2010 is:

	Options		Weighted Average Exercise Price		Weighted Average Contractual Term (years)
Outstanding and exercisable at June 27, 2010 and December 27, 2009		41,500	$	18.18		0.6

The aggregate intrinsic value of stock options outstanding and exercisable at the end of the second quarter of 2010 is zero because the fair market value of our class B common stock on June 27, 2010 was lower than the weighted average exercise price of the options.

Stock appreciation rights

A stock appreciation right, or SAR, represents the right to receive an amount equal to the excess of the fair value of a share of our class B common stock on the exercise date over the base value of the SAR, which shall not be less than the fair value of a share of our class B common stock on the grant date.  Each SAR is settled only in shares of our class B common stock.  The term during which any SAR may be exercised is 10 years from the grant date, or such shorter period as determined by the compensation committee of our board of directors.

Our SARs vest over a three year graded vesting schedule and it is our policy to recognize compensation cost for awards with graded vesting on a straight-line basis over the vesting period for the entire award.  We ensure the compensation cost recognized at any date is at least equal to the portion of the grant-date value of the award that is vested at that date.  The fixed price SARs have a fixed base value equal to the closing price of our class A common stock on the date of grant. The escalating price SARs have an escalating base value that starts with the closing price of our class A common stock on the date of  grant and increases by six percent per year for each year that the SARs remain outstanding, starting on the first anniversary of the grant date.

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JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

6 STOCK-BASED COMPENSATION continued

A summary of SAR activity during the two quarters of 2010 is:

	SARs		Weighted Average Exercise Price		Weighted Average Contractual Term (years)
Outstanding at June 27, 2010 and December 27, 2009		1,083,207	$	10.71		7.1
Exercisable at June 27, 2010		909,527	$	11.21		7.0

The aggregate intrinsic value of the SARs outstanding and exercisable at the end of the second quarter of 2010 is zero because the fair market value of our class B common stock on June 27, 2010 was lower than the weighted average exercise price of the SARs.

Stock grants

The compensation committee of our board of directors has granted class B common stock to employees and non-employee directors under our 2003 Plan and our 2007 Plan.  Each stock grant may have been accompanied by restrictions, or may have been made without any restrictions, as the compensation committee of our board of directors determined.  Such restrictions could have included requirements that the participant remain in our continuous employment for a specified period of time, or that we or the participant meet designated performance goals.  We value non-vested restricted stock grants at the closing market prices of our class A common stock on the grant date.

A summary of stock grant activity during the two quarters of 2010 is:

	Shares			Weighted Average Fair Value
Non-vested at December 27, 2009		912,550		$	2.20
Granted		344,853			4.24
Vested		(328,195	)		3.58
Forfeited		(3,320	)		6.48
Non-vested at June 27, 2010		925,888			2.46

Our non-vested restricted stock grants vest from one to five years from the grant date.  We expect our non-vested restricted stock grants to fully vest over the weighted average remaining service period of 1.2 years.  The total fair value of shares vesting during the two quarters of 2010 was $1,173.  There was an aggregate of 695,466 unrestricted and non-vested restricted stock grants issued to our non-employee directors (53,466 shares) and employees (642,000 shares) in the two quarters of 2009 at a weighted average fair value of $0.78 per share, of which 179,835 of the non-vested restricted shares have since vested.

Employee stock purchase plan

The 2003 Employee Stock Purchase Plan permits eligible employees to purchase our class B common stock at 90% of the fair market value measured as of the closing market price of our class A common stock on the day of purchase.  We recognize compensation expense equal to the 10% discount of the fair market value.  Subject to certain adjustments, 3,000,000 shares of our class B common stock are authorized for sale under this plan.  There were 41,606 class B common shares sold to employees under this plan in the two quarters of 2010 at a weighted average fair value of $3.50.  As of June 27, 2010, there are 2,363,044 shares available for sale under the plan.

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JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

7 INCOME TAXES

We file tax returns in the United States federal jurisdiction, as well as approximately 15 state and local jurisdictions.  The statute of limitations for assessing additional taxes is three years for federal purposes and typically between three and four years for state and local purposes.  Accordingly, our 2006 through 2009 tax returns are open for federal purposes, and our 2005 through 2009 tax returns remain open for state tax purposes, unless the statute of limitations has been previously extended.  Currently, we are under audit in Wisconsin for our 2003 through 2007 tax returns and Illinois for our 2006 and 2007 tax returns.

As of June 27, 2010, our liability for unrecognized tax benefits was $1,075, which, if recognized, $961 would have an impact on our effective tax rate.  We recognize interest income/expense and penalties related to unrecognized tax benefits in our provision for income taxes.  As of June 27, 2010 we had $415 accrued for interest expense and penalties.  During the two quarters of 2010, we recognized $41 in interest expense.

As of June 27, 2010, it is possible for $593 of unrecognized tax benefits and related interest to be recognized within the next 12 months due to settlements with taxing authorities.

8 INVENTORIES

Inventories are stated at the lower of cost (first in, first out method) or market.  Inventories at June 27, 2010 and December 27, 2009 consist of the following:

	June 27, 2010			December 27, 2009
Paper and supplies	$	2,132		$	2,405
Work in process		469			600
Finished goods		275			273
Less obsolescence reserve		(209	)		(208	)
Inventories, net	$	2,667		$	3,070

9 NOTES PAYABLE TO BANKS

We have an unsecured revolving credit facility that expires on June 2, 2011. The interest rate on borrowings is either LIBOR plus a margin that ranges from 37.5 basis points to 87.5 basis points, depending on our leverage, or the base rate, which equals the higher of the prime rate set by U.S. Bank, N.A. or the Federal Funds Rate plus 100 basis points.  As of June 27, 2010 and December 27, 2009, we had borrowings of $117,815 and $151,375, respectively, under the facility at a weighted average rate of 0.89% and 1.00%, respectively.  Cash provided by operating activities was used primarily to decrease our borrowings during the two quarters of 2010.  Fees in connection with the facility of $1,717 are being amortized over the term of the facility using the straight-line method.

We estimate the fair value of our unsecured revolving facility at June 27, 2010 and December 27, 2009 to be $114,011 and $143,657, respectively, based on discounted cash flows using an interest rate of 4.12% and 4.47%, respectively.  This fair value measurement falls within Level 3 of the fair value hierarchy.

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

● A consolidated funded debt ratio of not greater than 4-to-1, as determined for the four fiscal quarter period preceding the date of determination.  This ratio compares, for any period, our funded debt to our earnings before interest, taxes, depreciation and amortization, as adjusted for non-operational impairment charges recorded as a result of applying the FASB’s guidance for impairment testing for goodwill and other intangible assets not subject to amortization.  As of June 27, 2010, we were in compliance with this financial covenant.

● An interest coverage ratio of not less than 3-to-1, as determined for the four fiscal quarter period preceding the date of determination.  This ratio compares, for any period, our earnings before interest, taxes, depreciation and amortization, as adjusted for non-operational impairment charges recorded as a result of applying the FASB’s guidance for impairment testing for goodwill and other intangible assets not subject to amortization to our interest expense.  As of June 27, 2010, we were in compliance with this financial covenant.

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JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

9 NOTES PAYABLE TO BANKS continued

While we have classified our unsecured revolving credit facility as a current liability in our consolidated condensed balance sheet at June 27, 2010, we are in the process of extending our existing credit facility on a long-term basis and expect to finalize the agreement in the near future.  If we are unable to extend our existing credit facility before the agreement expires on June 2, 2011, we may have to replace our credit facility with one or more capital sources that might contain more restrictive financial and operating terms.  If we are unable to obtain alternative sources of capital, it may be necessary to significantly restructure our business.

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

10 GUARANTEES

We provided a guarantee to the landlord of our former New England community newspapers and shopper business, which was sold in 2007, with respect to tenant liabilities and obligations associated with a lease which expires in December 2016.  Our maximum potential obligation pursuant to the guarantee is $1,137 as of June 27, 2010.  As part of the sales transaction, we received a guarantee from the buyer of our New England business that they will satisfy all the liabilities and obligations of the assigned lease.  In the event that they fail to satisfy their liabilities and obligations and the landlord invokes our guarantee, we have a right to indemnification from the buyer.

We provided a guarantee to the landlord of our former Clearwater, Florida-based operations of PrimeNet, which was sold in February 2010, with respect to tenant liabilities and obligations associated with a lease which expires in May 2011.  In addition, the buyer has assumed certain leases for equipment and we have provided a guarantee for the remaining lease obligations.  The equipment leases expire in November 2010 and March 2012.  Our maximum potential obligations pursuant to the guarantee and the assumed leases are $770 as of June 27, 2010.

11 EMPLOYEE BENEFIT PLANS

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

	Pension Benefits
	Second Quarter Ended						Two Quarters Ended
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
Service cost	$	--		$	544		$	--		$	1,088
Interest cost		2,085			2,258			4,170			4,486
Expected return on plan assets		(2,571	)		(2,625	)		(5,142	)		(5,349	)
Amortization of:
Unrecognized prior service cost		(41	)		(44	)		(82	)		(99	)
Unrecognized net loss		680			--			1,360			182
Curtailment gain		--			--			--			(353	)
Net periodic benefit (income) cost included in total operating costs and expenses and selling and administrative expenses	$	153		$	133		$	306		$	(45	)

We fund our defined benefit pension plan at the minimum amount required by the Pension Protection Act of 2006.  Based on recent estimates, we currently do not expect to contribute to our qualified defined benefit pension plan in 2010.  We do expect to contribute $317 and $418 to our unfunded non-qualified pension plan in 2010 and 2011, respectively.

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JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

11 EMPLOYEE BENEFIT PLANS continued

	Other Postretirement Benefits
	Second Quarter Ended						Two Quarters Ended
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
Service cost	$	21		$	18		$	42		$	35
Interest cost		238			269			476			539
Amortization of:
Unrecognized prior service cost		(55	)		(55	)		(110	)		(110	)
Unrecognized net transition obligation		137			137			274			274
Net periodic benefit cost included in total operating costs and expenses and selling and administrative expenses	$	341		$	369		$	682		$	738

12 VARIABLE INTEREST ENTITY

In 2009, the FASB issued amended guidance for consolidating variable interest entities (VIEs).  The guidance amends the evaluation criteria to identify the primary beneficiary of a variable interest entity and requires ongoing reassessment of whether an enterprise is the primary beneficiary of the variable interest entity.  The guidance also replaces the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a VIE with an approach focused on identifying which reporting entity has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. The amended guidance also requires a dditional disclosures about a reporting entity’s involvement in VIEs.  We adopted this guidance in the first quarter of 2010.

The impact of this guidance has resulted in the consolidation of an unrelated party, ACE TV, Inc.  The guidance was applied retrospectively with a cumulative-effect adjustment to noncontrolling interest as of the beginning of our fiscal year 2010.  We have an affiliation agreement with ACE TV, Inc. for the rights under a local marketing agreement for WACY-TV in Appleton, Wisconsin and to acquire certain assets of ACE TV, Inc. including the broadcast license of WACY-TV, pending FCC rule changes and approval.  Under the affiliation agreement, ACE TV, Inc. provides the programming for WACY-TV and we sell advertising time, provide all other television operating activities and own the non-broadcast license assets used by WACY-TV.  Based on our power to direct certain activities and our right to ultim ately acquire the broadcast license, we have determined that ACE TV, Inc. is a VIE and that we are the primary beneficiary of the variable interests of WACY-TV.  As a result, we have consolidated the net assets of ACE TV, Inc., aggregating $1,164 which consists primarily of a broadcast license and investments.  The investments of ACE TV Inc. can be used only to settle obligations of ACE TV, Inc.  Creditors of ACE TV, Inc. have no recourse to our general credit.

13 GOODWILL AND OTHER INTANGIBLE ASSETS

Definite-lived Intangibles

Our definite-lived intangible assets consist primarily of network affiliation agreements, customer lists, non-compete agreements and trade names.  We amortize the network affiliation agreements over a period of 25 years based on our good relationships with the networks, our long history of renewing these agreements and because 25 years is deemed to be the length of time before a material modification of the underlying contract would occur.  We amortize the customer lists over a period of five to 15 years, the non-compete agreements and franchise agreement fees over the terms of the contracts and the tradenames over a period of 25 years.  Management determined there were no significant adverse changes in the value of these assets as of June 27, 2010.

Amortization expense was $487 and $979 for the second quarter and two quarters ended June 27, 2010, respectively and $496 and $987 for the second quarter and two quarters ended June 28, 2009.  Estimated amortization expense for our next five fiscal years is $1,937 for 2010, $1,579 for 2011, $1,496 for 2012, $1,377 for 2013 and $1,278 for 2014.

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JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

13 GOODWILL AND OTHER INTANGIBLE ASSETS continued

The gross carrying amount, accumulated amortization and net carrying amount of the major classes of definite-lived intangible assets as of June 27, 2010 and December 27, 2009 are as follows:

	Gross Carrying Amount		Accumulated Amortization			Net Carrying Amount
June 27, 2010
Network affiliation agreements	$	26,930	$	(6,529	)	$	20,401
Customer lists		18,108		(16,328	)		1,780
Non-compete agreements		13,445		(13,390	)		55
Other		4,670		(2,909	)		1,761
Total	$	63,153	$	(39,156	)	$	23,997
December 27, 2009
Network affiliation agreements	$	26,930	$	(5,996	)	$	20,934
Customer lists		18,206		(16,076	)		2,130
Non-compete agreements		15,351		(15,286	)		65
Other		4,884		(3,037	)		1,847
Total	$	65,371	$	(40,395	)	$	24,976

Indefinite-lived Intangibles

Broadcast licenses are deemed to have indefinite useful lives because we have renewed these agreements without issue in the past and we intend to renew them indefinitely in the future.  Accordingly, we expect the cash flows from our broadcast licenses to continue indefinitely.  The net carrying amount of our broadcast licenses was $82,426 and $81,762 as of June 27, 2010 and December 27, 2009, respectively.  The $664 increase in the net carrying amount of our broadcast licenses for the two quarters ended June 27, 2010 reflects the consolidation of a VIE where we have an agreement that is considered to create variable interest in the entity that holds the broadcast license.

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

Goodwill

There were no changes in the carrying amount of goodwill for the two quarters ended June 27, 2010.  We currently have $4,285 of goodwill recorded at our community newspapers and shoppers reporting unit and $4,813 of goodwill recorded at our broadcasting reporting unit.  We do not believe either of these reporting units is at risk for failing the step one impairment test in accordance with the FASB’s guidance for accounting for goodwill and intangible assets.

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JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

14 DISCONTINUED OPERATIONS

During the first quarter of 2010, we sold substantially all of the operating assets of our PrimeNet direct marketing services business located in St. Paul, Minnesota and Clearwater, Florida in two separate transactions with unrelated parties.  On February 3, 2010, certain direct mail and mail services operating assets located in St. Paul, Minnesota were sold for $123.  The remaining Minnesota-based assets were shutdown in April, and accordingly, we recorded $373 for shutdown related costs in the second quarter of 2010.  In a separate transaction, on February 8, 2010, we sold the Clearwater, Florida-based operations of PrimeNet for a $700 note repayable over four years and a $147 working capital note repayable over three years.  We recorded receivables of $587 and $129, respectively, representing the fair value of the notes discounted at a market rate of interest.  The consideration received in each transaction approximates the net book value of the assets sold.

The following table summarizes PrimeNet’s results of operations, which are included in the loss from discontinued operations, net in the consolidated condensed statement of operations for the second quarter and two quarters ended June 27, 2010 and June 28, 2009:

	Second Quarter Ended						Two Quarters Ended
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
Revenue	$	--		$	5,192		$	2,144		$	10,506
Earnings before income taxes	$	(373	)	$	(517	)	$	(1,060	)	$	(755	)

There were no assets or liabilities reported as discontinued operations at June 27, 2010.  PrimeNet’s current assets and current liabilities reported as discontinued operations in the consolidated balance sheet at December 27, 2009 consisted of the following:

	December 27, 2009
Receivables	$	919
Inventories, net		386
Prepaid expenses		176
Property and equipment, net		912
Total assets	$	2,393
Accounts payable	$	318
Accrued compensation		399
Accrued employee benefits		44
Other liabilities		535
Total liabilities	$	1,296

15 WORKFORCE REDUCTIONS AND BUSINESS IMPROVEMENTS

During the two quarters of 2010, we recorded a pre-tax charge of $821 for workforce separation benefits.  These charges are recorded in operating costs and expenses and selling and administrative expenses in the consolidated statement of operations.  We recorded $132 in workforce separation benefits at our former direct marketing services business, which are reported in loss from discontinued operations, net in the consolidated statement of operations.  Activity associated with the workforce reduction and business initiatives during the two quarters of 2010 was as follows:

	Balance at December 27, 2009		Charge for Separation Benefits		Payments for Separation Benefits			Balance at June 27, 2010
Publishing
Daily newspaper	$	1,490	$	350	$	(1,174	)	$	666
Community newspapers and shoppers		26		17		(34	)		9
Total publishing		1,516		367		(1,208	)		675
Broadcasting		149		374		(381	)		142
Printing services		24		80		(47	)		57
Total	$	1,689	$	821	$	(1,636	)	$	874

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JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

16 SEGMENT REPORTING

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) corporate.  Our publishing segment consists of the Milwaukee Journal Sentinel, which serves as the only major daily newspaper for the Milwaukee metropolitan area, and several community newspapers and shoppers in Wisconsin and Florida.  Our broadcasting segment consists of 33 radio stations and 13 television stations in 12 states and the operation of a television station under a local marketing agreement.  We also provide a wide range of commercial printing services, including printing of publications, professional journals and documentation material, through our printing services segment.  Our corporate segment consists of unallocated corporate expenses and revenue eliminations.

With the reporting of PrimeNet as a discontinued operation, the previously reported “Other” segment has been changed to “Corporate” and now reflects unallocated costs primarily related to corporate executive management and corporate governance. The prior year period has been revised to conform to this change.

The following tables summarize revenue, operating earnings (loss), depreciation and amortization and capital expenditures for the second quarter and two quarters ended June 27, 2010 and June 28, 2009 and identifiable total assets at June 27, 2010 and December 27, 2009:

	Second Quarter Ended						Two Quarters Ended
	June 27, 2010			June 28, 2009			June 27, 2010			June 28, 2009
Revenue
Publishing	$	47,386		$	49,433		$	91,938		$	97,557
Broadcasting		47,012			43,742			89,617			82,957
Printing services		10,112			11,240			21,747			25,535
Corporate eliminations		(124	)		(156	)		(391	)		(268	)
	$	104,386		$	104,259		$	202,911		$	205,781
Operating earnings (loss)
Publishing	$	6,623		$	4,367		$	10,012		$	3,755
Broadcasting		9,675			(11,793	)		17,394			(10,072	)
Printing services		510			(183	)		1,108			78
Corporate		(2,393	)		(1,847	)		(4,013	)		(3,623	)
	$	14,415		$	(9,456	)	$	24,501		$	(9,862	)
Non−cash impairment charge
Broadcasting	$	--		$	18,975		$	--		$	18,975
	$	--		$	18,975		$	--		$	18,975
Depreciation and amortization
Publishing	$	2,902		$	3,026		$	5,800		$	6,078
Broadcasting		3,200			3,347			6,404			6,702
Printing services		490			522			1,029			1,050
Corporate		122			134			244			269
	$	6,714		$	7,029		$	13,477		$	14,099
Capital expenditures
Publishing	$	457		$	525		$	869		$	1,094
Broadcasting		3,172			859			4,543			2,329
Printing services		236			204			403			330
Corporate		--			1			7			4
	$	3,865		$	1,589		$	5,822		$	3,757

19

JOURNAL COMMUNICATIONS, INC.

Notes to Unaudited Consolidated Condensed Financial Statements

(in thousands, except per share amounts)

16 SEGMENT REPORTING continued

	June 27, 2010		December 27, 2009
Identifiable total assets
Publishing	$	131,741	$	140,810
Broadcasting		280,987		290,021
Printing service		11,177		13,371
Corporate & discontinued operations		24,246		28,985
	$	448,151	$	473,187

20

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion of our financial condition and results of operations should be read together with our unaudited consolidated condensed financial statements for the second quarter and two quarters ended June 27, 2010, including the notes thereto.

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

Forward-Looking Statements

We make certain statements in this Quarterly Report on Form 10-Q (including the information that we incorporate by reference herein) that are "forward-looking statements" within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended.  We intend these forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in that Act, and we are including this statement for purposes of those safe harbor provisions.  These forward-looking statements generally include all statements other than statements of historical fact, including statements regarding our future financial position, business strategy, budgets, projected revenues and expenses, expected regulatory actions and plans and objectives of management for future operations.  We often use words such as "may," "will," "intend," "anticipate," "believe," or "should" and similar expressions in this Quarterly Report on Form 10-Q to identify forward-looking statements.  These forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control.  These risks, uncertainties and other factors could cause actual results to differ materially from those expressed or implied by those forward-looking statements.  Among such risks, uncertainties and other factors that may impact us are the following as well as those contained in Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 27, 2009 as updated in Item 1A, “Risk Factors” of our Quarterly Report on Form 10-Q for the first quarter ended March 28, 2010:

· changes in advertising demand or the buying strategies of advertisers or the migration of advertising to the internet;

· changes in newsprint prices and other costs of materials;

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

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

· the availability of quality broadcast programming at competitive prices;

· changes in network affiliation agreements;

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

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

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

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

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

· our ability to remain in compliance with the terms of our credit agreement;

· changes in interest rates;

· the outcome of pending or future litigation;

· energy costs;

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

· changes in general economic conditions.

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

21

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) corporate.  Our publishing segment consists of the Milwaukee Journal Sentinel, which serves as the only major daily newspaper for the Milwaukee metropolitan area, and several community newspapers and shoppers in Wisconsin and Florida.  Our broadcasting segment consists of 33 radio stations and 13 television stations in 12 states and the operation of a television station under a local marketing agreement.  Our interactive media assets build on our strong publishing and broadcast ing brands.  We also provide a wide range of commercial printing services, including printing of publications, professional journals and documentation material, through our printing services segment.  Our corporate segment consists of unallocated corporate expenses and revenue eliminations.

Over the past few years, fundamentals in the newspaper industry have deteriorated significantly.  Retail and classified run-of-press (ROP) advertising has decreased from historic levels due in part to department store consolidation, weakened employment, automotive and real estate economics and a migration of advertising to the internet and other advertising forms.  Circulation declines and online competition have also negatively impacted newspaper industry revenues.  Additionally, the continued housing market downturn has adversely impacted the newspaper industry, including real estate classified advertising as well as the home improvement, furniture and financial services advertising categories.  However, we believe the rate of deterioration of these fundamentals has moderated based on our resul ts for the two quarters of 2010.

In the second quarter of 2010, our publishing businesses continued to be impacted by the uneven economic recovery and the secular and cyclical influences affecting the newspaper industry.  We have seen advertisers reduce their advertising spending in virtually all advertising categories.  In addition, due to the changing mix of revenue categories, frequency and placement of advertising in the newspaper and customer choices to reduce ad size, we have seen a decrease in the average rate per inch of advertising.  Classified advertising revenue, specifically for real estate and automotive, decreased in the second quarter of 2010 compared to the second quarter of 2009.  Retail advertising also decreased in the second quarter of 2010 compared to the second quarter of 2009 primarily due to a decrease in preprint advertising in the food, finance and insurance, small retailers and home improvement categories.  Retail and classified automotive ROP and online advertising revenue decreased $0.1 million in the second quarter of 2010 compared to the second quarter of 2009.  Interactive revenue increased $0.3 million at our publishing businesses in the second quarter of 2010 compared to the second quarter of 2009.  Operating earnings at our publishing businesses increased $2.2 million in the second quarter of 2010 compared to the second quarter of 2009, primarily due to the reduction in the expense platform to better align with a reduced revenue base.  Total expenses decreased $4.2 million, or 9.5%, in the second quarter of 2010 compared to the second quarter of 2009 primarily due to a decrease of $3.3 million in payroll-related costs and overall expense reduction initiatives.

Revenues in the broadcast industry are derived primarily from the sale of advertising time to local, national and political and issue advertisers and, to a lesser extent, from barter, digital revenues, retransmission fees, network compensation and other revenues.  Because television and radio broadcasters rely upon advertising revenue, they are subject to cyclical changes in the economy.  The size of advertisers’ budgets, which are affected by broad economic trends, affects the radio industry in general and the revenue of individual television stations, in particular.  The broadcast industry continues to experience softness in television and radio advertising, other than the political and issue and automotive segments, resulting from general economic pressures primarily in the housing and retail segm ents.  Our broadcasting business also is affected by audience fragmentation as audiences have an increasing number of options to access news and other programming.  Television advertising revenue and rates in even-numbered years  typically benefit from political and issue advertising because there tends to be more pressure on available inventory as the demand for advertising increases and we have the opportunity to increase average unit rates we charge our customers.  However, in the current economic environment, we cannot predict that our rates will increase in the event that the demand for our available inventory increases.

Revenue from our broadcasting business increased $3.2 million in the second quarter of 2010 compared to the second quarter of 2009 primarily due to a $1.3 million increase in political and issue advertising revenue, a $1.0 million increase in national advertising revenue, a $0.6 million increase in retransmission revenue and a $0.4 million increase in local advertising revenue.  We experienced an increase of $1.8 million in automotive advertising, which is included in the local and national advertising categories, in the second quarter of 2010 compared to the second quarter of 2009.  Operating earnings from our broadcasting business were $9.7 million in the second quarter of 2010 compared to a loss of $11.8 million in the second quarter of 2009, primarily due to the $19.0 million non-cash impairment charge recorded in the second quarter of 2009, the increase in revenue and the reduction in expenses.  Total expenses decreased $18.3 million, or 32.8%, in the second quarter of 2010 compared to the second quarter of 2009 primarily due to the non-cash impairment charges recorded in the second quarter of 2009 which did not repeat in the second quarter of 2010, a decrease of $0.7 million in payroll-related costs and overall expense reduction initiatives, partially offset by a decrease in the gain related to insurance proceeds from our tower replacement in Wichita, Kansas.

Revenue at our printing services business decreased $1.1 million in the second quarter of 2010 compared to the second quarter of 2009 primarily due to the effects of the current economic environment on the printing industry and the previously  planned reduction in revenue from certain printing customers.  Customers are reducing their print volumes, ceasing to print and/or are taking their printing needs out for bid in order to achieve lower pricing.  Operating earnings from our printing services business increased $0.7 million in the second quarter of 2010 compared to the second quarter of 2009 due to decreases in production and payroll-related costs.

Advertising revenue at our publishing and broadcasting businesses reflects continued cautious behavior of both our customers and consumers.  While we are seeing some improvement, persistent high unemployment, lack of strong economic growth and continued economic uncertainty temper our optimism with respect to improved revenue in the near term.  We do not expect that revenues at our daily newspaper will return to revenue levels reported in 2009 or prior years given the secular changes affecting the newspaper industry.  Revenue levels in our broadcasting business will continue to be affected by increased competition for audiences.

22

Results of Operations

Second Quarter Ended June 27, 2010 compared to the Second Quarter Ended June 28, 2009

Our consolidated revenue in the second quarter of 2010 was $104.4 million, an increase of $0.1 million, or 0.1%, compared to $104.3 million in the second quarter of 2009. Our consolidated operating costs and expenses in the second quarter of 2010 were $59.0 million,  a decrease of $4.7 million, or 7.4%, compared to $63.7 million in the second quarter of 2009. Our consolidated selling and administrative expenses in the second quarter of 2010 were $31.0 million, a decrease of $0.1 million, or 0.2%, compared to $31.1 million in the second quarter of 2009.  There was no broadcast license impairment in the second quarter of 2010 compared to $19.0 million in the second quarter of 2009.

The following table presents our total revenue by segment, total operating costs and expenses, selling and administrative expenses, broadcast license impairment and total operating earnings (loss) as a percent of total revenue for the second quarter of 2010 and the second quarter of 2009 (dollars in millions):

				Percent of Total						Percent of Total
	2010			Revenue			2009			Revenue
Revenue:
Publishing	$	47.4			45.4	%	$	49.4			47.4	%
Broadcasting		47.0			45.0			43.8			42.0
Printing services		10.1			9.7			11.2			10.8
Corporate eliminations		(0.1	)		(0.1	)		(0.1	)		(0.2	)
Total revenue		104.4			100.0			104.3			100.0
Total operating costs and expenses		59.0			56.5			63.7			61.1
Selling and administrative expenses		31.0			29.7			31.1			29.8
Broadcast license impairment		--			--			19.0			18.2
Total operating costs and expenses, selling and administrative expenses and broadcast license impairment		90.0			86.2			113.8			109.1
Total operating earnings (loss)	$	14.4			13.8	%	$	(9.5	)		(9.1	)%

In the newspaper industry, classified advertising has historically been the most sensitive to economic cycles because it is driven by the demand of employment, real estate transactions and automotive sales.  Newspaper classified advertising also has been the most impacted by secular changes affecting the newspaper industry.  Classified advertising continues to move away from printed products to online products.  We face increasing competition for online advertising and are losing the benefit of a strong base of print classified advertising against which we can upsell online advertisements.  Our publishing businesses experienced a 10.8% decrease in classified advertising revenue in the second quarter of 2010 compared to the second quarter of 2009.  Retail advertising revenue decreased 7. 5% in the second quarter of 2010 compared to the second quarter of 2009 primarily in consumer-driven categories.  We believe consumers are still cautious in regards to spending discretionary income.  The revenue decreases were in the food, finance and insurance, small retailers and home improvement categories. Secular changes affecting the newspaper industry also are resulting in the need to continue to reduce costs and align our cost structure in the face of continued decreasing revenues.

At our broadcasting business, advertising revenue increased in the second quarter of 2010 compared to the second quarter of 2009 primarily due to increases in political and issue advertising revenue and national advertising revenue.  The increase in political and issue advertising revenue is part of the normal two-year advertising cycle which affects our television stations in particular.  Automotive advertising increased $1.8 million, or 30.8%, in the second quarter of 2010 compared to the second quarter of 2009 primarily at our television stations.

The decrease in printing services revenue was primarily due to the effects of the current economic environment and the dynamics of the printing industry.  Revenue from printing publications and revenue from computer-related customers decreased in the second quarter of 2010 compared to the second quarter of 2009.

The decrease in total operating costs and expenses was primarily due to a decrease in payroll-related costs reflecting the savings from workforce reduction initiatives implemented in 2009, a decrease in costs related to the decrease in revenue at our publishing and printing services businesses, a decrease in barter and syndicated programming expenses, partially offset by a decrease in the gain related to insurance proceeds from our tower replacement in Wichita, Kansas.  Selling and administrative expenses were essentially even due to decreases in bad debt and legal expenses which were offset by an increase in incentive compensation expense due to the increase in overall consolidated operating earnings. Overall, we expect total year-over-year expense decreases to continue to moderate and ultimately level off in the second half of 2010.

23

Our consolidated operating earnings were $14.4 million in the second quarter of 2010 compared to an operating loss of $9.5 million in the second quarter of 2009.  The following table presents our operating earnings (loss) by segment for the second quarter of 2010 and the second quarter of 2009 (dollars in millions):

	2010			Percent of Total Operating Earnings			2009			Percent of Total Operating Loss
Publishing	$	6.6			46.0	%	$	4.4			(46.2	)%
Broadcasting		9.7			67.1			(11.8	)		124.7
Printing services		0.5			3.5			(0.2	)		2.0
Corporate		(2.4	)		(16.6	)		(1.9	)		19.5
Total operating earnings (loss)	$	14.4			100.0	%	$	(9.5	)		100.0	%

The increase in total operating earnings was primarily due to the decreases in expenses and the increase in revenue at our broadcasting businesses, as well as the decrease in non-cash impairment charges.

Publishing

Revenue from publishing in the second quarter of 2010 was $47.4 million, a decrease of $2.0 million, or 4.1%, compared to $49.4 million in the second quarter of 2009.  Operating earnings from publishing were $6.6 million in the second quarter of 2010, an increase of $2.2 million, or 51.7%, compared to operating earnings of $4.4 million in the second quarter of 2009.

The following table presents our publishing revenue by category and operating earnings for the second quarter of 2010 and the second quarter of 2009:

	2010						2009
	Daily Newspaper		Community Newspapers & Shoppers		Total		Daily Newspaper		Community Newspapers & Shoppers		Total		Percent Change
	(dollars in millions)
Advertising revenue:
Retail	$	15.8	$	5.8	$	21.6	$	16.8	$	6.6	$	23.4		(7.5	)
Classified		5.2		1.3		6.5		5.7		1.5		7.2		(10.8	)
National		1.1		--		1.1		1.2		--		1.2		(8.2	)
Direct Marketing		0.1		--		0.1		0.1		--		0.1		(50.0	)
Other		--		0.1		0.1		--		0.1		0.1		(41.3	)
Total advertising revenue		22.2		7.2		29.4		23.8		8.2		32.0		(8.5	)
Circulation revenue		12.5		0.5		13.0		12.8		0.5		13.3		(2.4	)
Other revenue		4.3		0.7		5.0		3.3		0.8		4.1		24.5
Total revenue	$	39.0	$	8.4	$	47.4	$	39.9	$	9.5	$	49.4		(4.1	)
Operating earnings	$	5.4	$	1.2	$	6.6	$	3.3	$	1.1	$	4.4		51.7

Advertising revenue accounted for 62.0% of total publishing revenue in the second quarter of 2010 compared to 64.9% in the second quarter of 2009.  The ongoing secular changes in the newspaper industry and the current economic environment have caused advertisers to decrease their advertising spending across all of our advertising revenue categories.  In addition, due to the changing mix of revenue categories, frequency and placement of advertising in the newspaper and customer choices to reduce the size of advertisements, we have seen a decrease in the average rate per inch of advertising in the second quarter of 2010 compared to the second quarter of 2009.

Retail advertising revenue in the second quarter of 2010 was $21.6 million, a decrease of $1.8 million, or 7.5%, compared to $23.4 million in the second quarter of 2009.  The $1.0 million decrease at our daily newspaper was primarily due to a decrease in preprint advertising and the loss of certain advertisers from our total market coverage product (our non-subscriber product), partially offset by an increase in retail online advertising revenue.  Retail ROP advertising revenue in the second quarter of 2010 was essentially even compared to the second quarter of 2009.  Revenue decreases were in the food, finance and insurance, small retailers, communications and department stores categories and were offset by increases in health services, furniture and furnishings and real estate categories. We believe cons umers are still cautious in regards to spending discretionary income and advertisers are still decreasing their spending.  The same trends persisted in our community newspapers and shoppers business.  The $0.8 million decrease in revenue at our community newspapers and shoppers was primarily due to decreases in automotive and real estate advertising.

24

Classified advertising is generally the most sensitive to economic cycles because it is driven by the demand of employment, real estate transactions and automotive sales.  As a result of the ongoing secular trend of classified advertising transitioning to the internet and the current economic environment, our publishing businesses experienced a decrease in classified advertising revenue in the second quarter of 2010 compared to the second quarter of 2009.  Classified advertising revenue in the second quarter of 2010 was $6.5 million, a decrease of $0.7 million, or 10.8%, compared to $7.2 million in the second quarter of 2009.  At our daily newspaper, classified advertising revenue decreased $0.5 million, or 9.5%, in the second quarter of 2010 compared to the second quarter of 2009.  Specifically, the real estate category decreased $0.4 million, or 27.7%, and automotive decreased $0.1 million, or 6.0%, compared to the second quarter of 2009.  Employment classified advertising revenue was essentially even compared to the second quarter of 2009.  The average rate per inch of classified advertising has decreased in the second quarter of 2010 compared to the second quarter of 2009 primarily due to the planned decrease in rates for employment classified revenue which, historically, has been at a higher rate than other categories.  At our community newspapers and shoppers business, classified advertising revenue decreased $0.2 million, or 15.8%, in the second quarter of 2010 compared to the second quarter of 2009 primarily due to decreases in automotive, employment and real estate classified advertising revenue.

The total decrease in retail and classified automotive ROP and online advertising at our daily newspaper in the second quarter of 2010 was $0.1 million, or 6.1%, compared to the second quarter of 2009.

Interactive advertising revenue at our publishing businesses is reported in the various advertising revenue categories.  Total retail and classified interactive advertising revenue was $2.8 million in the second quarter of 2010, an increase of $0.3 million, or 10.6%, compared to $2.5 million in the second quarter of 2009.  In the second quarter of 2010 at our daily newspaper, interactive retail advertising revenue increased 13.3% and interactive classified advertising revenue increased 8.2% compared to the second quarter of 2009.

National advertising revenue in the second quarter of 2010 was $1.1 million, a decrease of $0.1 million, or 8.2%, compared to $1.2 million in the second quarter of 2009.  The decrease was primarily due to a decrease in preprint advertising in the business services and finance and insurance categories, partially offset by an increase in ROP advertising in the business services, food and other categories.

Direct marketing revenue, consisting of revenue from the sale of direct mail products of our daily newspaper, was $0.1 million in both the second quarter of 2010 and the second quarter of 2009.  In May 2009, we shut down the operations of our Milwaukee-area direct marketing facility but we continue to facilitate this service for some of our customers.

Other advertising revenue, consisting of revenue from company-sponsored event advertising at our community newspapers and shoppers, was $0.1 million in both the second quarter of 2010 and the second quarter of 2009.

Circulation revenue accounted for 27.4% of total publishing revenue in the second quarter of 2010 compared to 26.9% in the second quarter of 2009.  Circulation revenue of $13.0 million in the second quarter of 2010 decreased $0.3 million, or 2.4%, compared to $13.3 million in the second quarter of 2009.  At our daily newspaper, circulation revenue decreased $0.3 million in the second quarter of 2010 compared to the second quarter of 2009 primarily due to a decrease in the number of daily and Sunday copies sold for both home delivery and single copy at our daily newspaper.  Partially offsetting this decrease was an increase in revenue for the “TV Cue” section, a product which is now priced separately and delivered with the Sunday edition, and an increase in home delivery prices implemented in 20 09.  At our community newspapers and shoppers business, circulation revenue of $0.5 million in the second quarter of 2010 was even compared to the second quarter of 2009.

Other revenue, which consists of revenue from promotional and commercial distribution and commercial printing revenue at our daily newspaper and commercial printing at the printing plants for our community newspapers and shoppers, accounted for 10.6% of total publishing revenue in the second quarter of 2010 compared to 8.2% in the second quarter of 2009.  Other revenue was $5.0 million in the second quarter of 2010, an increase of $0.9 million, or 24.5%, compared to $4.1 million in the second quarter of 2009.  The $1.0 million increase at our daily newspaper was primarily due to an increase in commercial printing revenue from new printing customers for whom we began printing in the second half of 2009.  At our community newspapers and shoppers business, other revenue decreased $0.1 million, or 1.9%, in the second quarter of 2010 compared to the second quarter of 2009 primarily due to the loss of certain customers.

Publishing operating earnings in the second quarter of 2010 were $6.6 million, an increase of $2.2 million, or 51.7%, compared to operating earnings of $4.4 million in the second quarter of 2009.  In an effort to partially offset the impact of the decrease in advertising revenue, our publishing businesses significantly reduced their expense platforms in 2009 and continued to benefit from these reductions in the second quarter of 2010.  Total expenses decreased $4.2 million, or 9.5%, in the second quarter of 2010 compared to the second quarter of 2009 primarily due to a decrease of $3.3 million in payroll-related costs and workforce reduction charges.  Excluding payroll-related costs, operating costs and expenses decreased $0.9 million in the second quarter of 2010 compared to the second quarter of 2009, th e most significant of which were costs related to the total market coverage (TMC) product (which was transitioned from mail delivery to carrier delivery in 2009), building-related costs and outside printing costs, partially offset by an increase in newsprint and paper costs and material costs.  Total newsprint and paper costs for our publishing businesses in the second quarter of 2010 were $4.6 million, an increase of $0.1 million, or 2.5%, compared to $4.5 million in the second quarter of 2009 due to a 3.3% increase in average newsprint pricing per metric ton and an increase in newsprint consumption due to an increase in commercial printing revenue.

25

Broadcasting

Revenue from broadcasting in the second quarter of 2010 was $47.0 million, an increase of $3.2 million, or 7.5%, compared to $43.8 million in the second quarter of 2009.  Operating earnings from broadcasting in the second quarter of 2010 were $9.7 million compared to an operating loss of $11.8 million in the second quarter of 2009.  The second quarter of 2009 included a $19.0 million non-cash broadcast license impairment charge and a $1.7 million gain related to insurance proceeds from our radio tower replacement in Wichita, Kansas.  In the second quarter of 2010, we recorded an additional $0.2 million gain for the completion of the Wichita, Kansas radio tower replacement.

The following table presents our broadcasting revenue, broadcast license impairment and operating earnings (loss) for the second quarter of 2010 and the second quarter of 2009:

	2010						2009								Percent
	Television		Radio		Total		Television			Radio		Total			Change
	(dollars in millions)
Revenue	$	29.3	$	17.7	$	47.0	$	26.7		$	17.1	$	43.8			7.5
Broadcast license impairment	$	--	$	--	$	--	$	14.9		$	4.1	$	19.0		NA
Operating earnings (loss)	$	5.4	$	4.3	$	9.7	$	(12.8	)	$	1.0	$	(11.8	)	NA

Revenue from our television stations in the second quarter of 2010 was $29.3 million, an increase of $2.6 million, or 10.0%, compared to $26.7 million in the second quarter of 2009.  We experienced a revenue increase in all but one of our television markets.  Compared to the second quarter of 2009, political and issue advertising revenue increased $1.3 million, or 322.3%; national increased $0.9 million, or 18.0%; and retransmission revenue increased $0.6 million, or 54.8%.  Partially offsetting these revenue increases was a decrease in other revenue of $0.2 million.  Local advertising revenue in the second quarter of 2010 was even compared to the second quarter of 2009.  Television advertising revenue and rates in even-numbered years typically benefit from political and issue advertisi ng because there tends to be more pressure on available inventory as the demand for advertising increases and we have the opportunity to increase the average unit rates we charge our customers.  We have television stations in a number of states with competitive political races in 2010 and we expect political and issue advertising revenue to increase in the second half of 2010 compared to the second half of 2009; however, in the current economic environment, we cannot predict that our rates will increase even if the demand for our available inventory increases.

Our television stations experienced revenue increases in a number of categories, specifically automotive, professional services, travel, and furniture and electronics, partially offset by decreases in the communications, casinos and gambling and restaurants.  Automotive advertising revenue represented 17.4% of television advertising revenue in the second quarter of 2010 compared to 12.9% in the second quarter of 2009.  Automotive advertising revenue increased $1.7 million, or 48.4%, in the second quarter of 2010 compared to the second quarter of 2009.  Our television stations are working to grow their local customer base by creating new local content and programs that converge television with digital platforms.  We are launching additional local advertising programs targeted towards non-tradition al advertisers across our television markets.  Interactive revenue was $0.4 million in both the second quarter of 2010 and the second quarter of 2009.  Interactive revenue is reported in local advertising revenue.

Operating earnings from our television stations in the second quarter of 2010 were $5.4 million compared to a loss of $12.8 million in the second quarter of 2009. During the second quarter of 2009, our television stations recorded a $14.9 million non-cash impairment charge for seven broadcast licenses.  The increase in operating earnings was primarily due to decreases in expenses and the impact from the increase in advertising revenue.  Our television stations continue to reduce their expense platform. Total television expenses in the second quarter of 2010 were $23.9 million, a decrease of $15.6 million compared to $39.5 million in the second quarter of 2009.  The decrease in total television expenses was primarily due to the decrease in the non-cash impairment charge, a decrease of $0.6 million in payrol l-related costs and a decrease in barter and syndicated programming expenses.  These expense decreases were partially offset by increases in advertising and promotional expenses, network programming expenses and third-party commissions.

Revenue from our radio stations in the second quarter of 2010 was $17.7 million, an increase of $0.6 million, or 3.5%, compared to $17.1 million in the second quarter of 2009.  We experienced a revenue increase in four of our radio markets.  Compared to the second quarter of 2009, local advertising revenue increased $0.5 million, or 3.1%, and national advertising revenue increased $0.1 million, or 8.8%.  Our radio stations experienced revenue increases in a number of categories, specifically, professional services, entertainment, media, casino and gambling and automotive, partially offset by decreases in the home improvement and financial categories.  Automotive advertising represented 13.1% of radio advertising revenue in the second quarter of 2010 compared to 13.0% in the second quarter of 2009 .  Automotive advertising revenue increased $0.1 million, or 3.7%, in the second quarter of 2010 compared to the second quarter of 2009.   Our radio stations are working to grow their local customer base by attracting new radio advertising customers with non-traditional advertising programs.  Interactive revenue was $0.4 million in both the second quarter of 2010 and the second quarter of 2009.  Interactive revenue is reported in local advertising revenue.

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Operating earnings from our radio stations in the second quarter of 2010 were $4.3 million, an increase of $3.3 million, or 312.2%,  compared to $1.0 million in the second quarter of 2009.  During the second quarter of 2009, our radio stations recorded a $4.1 million non-cash impairment charge for 11 broadcast licenses and a $1.7 million gain related to insurance proceeds from our tower replacement in Wichita, Kansas.  In the second quarter of 2010, we recorded an additional $0.2 million gain for the completion of the Wichita, Kansas tower replacement.  The increase in operating earnings was primarily due to a decrease in expenses and the increase in advertising revenue.  Our radio stations continue to reduce their expense platform.  Total radio expenses in the second quarter of 2010 were $13.4 million, a decrease of $2.7 million, or 16.3%, compared to $16.1 million in the second quarter of 2009.  The decrease in total radio expenses was primarily due to the decrease in the non-cash impairment charge, partially offset by the decrease in the gain related to the tower replacement.

Printing Services

Revenue from printing services in the second quarter of 2010 was $10.1 million, a decrease of $1.1 million, or 10.0%, compared to $11.2 million in the second quarter of 2009.  Operating earnings from printing services in the second quarter of 2010 were $0.5 million compared to an operating loss of $0.2 million in the second quarter of 2009.

The decrease in printing services revenue was primarily due to the ongoing challenges of the printing industry due to lower demand for printed products.  Revenue from printing publications and revenue from computer-related customers decreased in the second quarter of 2010 compared to the second quarter of 2009.  Our printing services’ customers continue to reduce their print volumes, cease to print and/or take their printing needs out for bid in order to achieve lower pricing.

The increase in operating earnings from printing services was primarily due to employee, operating and production related cost reduction initiatives.  These cost savings were partially offset by the impact from the decrease in revenue.

Corporate

Revenue and expense eliminations were $0.1 million in the second quarter of 2010 and in the second quarter of 2009.  The corporate segment reflects the unallocated costs of our corporate executive management, as well as expenses related to corporate governance.   The unallocated expenses were $2.4 million in the second quarter of 2010 compared to $1.9 million in the second quarter of 2009 primarily due to an increase in director stock compensation expense and an increase in incentive compensation expense due to the increase in overall consolidated operating earnings.

Other Income and Expense and Taxes

Interest income was insignificant in the second quarter of 2010.  Interest expense was $0.5 million in the second quarter of 2010 compared to $0.7 million in the second quarter of 2009.  The decrease was due to a decrease in both the average borrowings during the year and the interest rate on our borrowings. Amortization of deferred financing costs was $0.1 million in both the second quarter of 2010 and the second quarter of 2009.

Our effective tax rate was 40.1% in the second quarter of 2010 compared to an effective tax benefit rate of 55.6% in the second quarter of 2009.  In 2009, the effective tax rate was impacted by the operating loss created by the non-cash impairment charge and a favorable adjustment to our income tax reserve due to the lapsing of certain open tax years.

Discontinued Operations

Loss from discontinued operations, net of income taxes, was $0.2 million in the second quarter of 2010 compared to $0.3 million in the second quarter of 2009.  Income tax benefit was $0.2 million in both the second quarter of 2010 and the second quarter of 2009.

There was no revenue from PrimeNet in the second quarter of 2010 compared to $5.2 million in the second quarter of 2009.

We recorded a $0.2 million net loss primarily for shut down related costs in the second quarter of 2010 compared to $0.3 million net loss from its operations in the second quarter of 2009.

During the first quarter of 2010, we sold substantially all of the operating assets of our PrimeNet direct marketing services business located in St. Paul, Minnesota and Clearwater, Florida in two separate transactions with unrelated parties.  On February 3, 2010, certain direct mail and mail services operating assets located in St. Paul, Minnesota were sold for $0.1 million.   The remaining Minnesota-based assets were shutdown in April, and accordingly, we recorded $0.4 million for shutdown related costs in the second quarter of 2010.  In a separate transaction, on February 8, 2010, we sold the Clearwater, Florida-based operations of PrimeNet for a $0.7 million note repayable over four years and a $0.1 million working capital note repayable over three years.  We recorded receivables of $0.6 million and $0.1 million, respectively, representing the fair value of the notes discounted at a market rate of interest.  The consideration received in each transaction approximates the net book value of the assets sold.

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Net Earnings (Loss)

Our net earnings in the second quarter of 2010 were $8.1 million compared to an operating loss of $4.8 million in the second quarter of 2009.  The increase was due to the increase in operating earnings from continuing operations for the reasons described above, the decrease in interest expense and the decrease in loss from discontinued operations, partially offset by the increase in income tax expense.

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

In the second quarter of 2010, basic and diluted net earnings per share of class A and B common stock were $0.14 for both.  This compared to net loss per share of $0.11 for both in the second quarter of 2009.  Basic and diluted earnings per share of class A and B common stock from continuing operations were $0.14 for both in the second quarter of 2010.  Basic and diluted loss per share from continuing operations was $0.10 for both in the second quarter of 2009.  Basic and diluted loss per share from discontinued operations was $0.01 for both in the second quarter of 2009.

Two Quarters Ended June 27, 2010 compared to the Two Quarters Ended June 28, 2009

Our consolidated revenue in the two quarters of 2010 was $202.9 million, a decrease of $2.9 million, or 1.4%, compared to $205.8 million in the two quarters of 2009.  Our consolidated operating costs and expenses in the two quarters of 2010 were $118.8 million,  a decrease of $15.5 million, or 11.5%, compared to $134.3 million in the two quarters of 2009. Our consolidated selling and administrative expenses in the two quarters of 2010 were $59.6 million, a decrease of $2.8 million, or 4.5%, compared to $62.4 million in the two quarters of 2009.  There was no broadcast license impairment in the two quarters of 2010 compared to $19.0 in the two quarters of 2009.

The following table presents our total revenue by segment, total operating costs and expenses, selling and administrative expenses, broadcast license impairment and total operating earnings (loss) as a percent of total revenue for the two quarters of 2010 and the two quarters of 2009 (dollars in millions):

				Percent of Total						Percent of Total
	2010			Revenue			2009			Revenue
Revenue:
Publishing	$	91.9			45.3	%	$	97.6			47.4	%
Broadcasting		89.6			44.2			83.0			40.3
Printing services		21.8			10.7			25.5			12.4
Corporate eliminations		(0.4	)		(0.2	)		(0.3	)		(0.1	)
Total revenue		202.9			100.0			205.8			100.0
Total operating costs and expenses		118.8			58.5			134.3			65.3
Selling and administrative expenses		59.6			29.4			62.4			30.3
Broadcast license impairment		--			--			19.0			9.2
Total operating costs and expenses, selling and administrative expenses and broadcast license expense		178.4			87.9			215.7			104.8
Total operating earnings (loss)	$	24.5			12.1	%	$	(9.9	)		(4.8	)%

Our publishing business experienced a 12.2% decrease in classified advertising revenue in the two quarters of 2010 compared to the two quarters of 2009.  Retail advertising revenue decreased 9.4% in the two quarters of 2010 compared to the two quarters of 2009 primarily in consumer-driven categories.  We believe consumers are still cautious in regards to spending discretionary income.  The revenue decreases were in the home improvement, dining and entertainment and business services categories. Secular changes affecting the newspaper industry also are resulting in the need to continue to reduce costs and align our cost structure in the face of continued decreasing revenues.

At our broadcasting business, advertising revenue increased in the two quarters of 2010 compared to the two quarters of 2009 primarily due to an increase in Olympic advertising revenue, an increase in political and issue advertising revenue, an increase in retransmission revenue and an increase in national advertising revenue.  The increase in Olympic and political and issue advertising revenue is part of the normal two-year advertising cycle which affects our television stations in particular.  Automotive advertising increased $3.0 million, or 27.5%, in the two quarters of 2010 compared to the two quarters of 2009 primarily at our television stations.

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The decrease in printing services revenue was primarily due to the effects of the current economic environment and the difficult business environment of the printing industry.  Revenue from printing publications and revenue from computer-related customers decreased in the two quarters of 2010 compared to the two quarters of 2009.

The decrease in total operating costs and expenses was primarily due to a decrease in payroll-related costs reflecting the savings from workforce reduction initiatives implemented in 2009, a decrease in costs related to the decrease in revenue at our printing services business and our publishing businesses, a decrease in the gain related to insurance proceeds from our tower replacement in Wichita, Kansas, a decrease in newsprint and paper costs and decreases in barter and syndicated programming expenses.  The decrease in selling and administrative expenses was primarily due to decreases in payroll-related costs reflecting the savings from the 2009 workforce reduction initiatives, a decrease in bad debt expense, a decrease in legal expenses and overall cost reduction initiatives as our businesses continue to reduce expenses in response to the decrease in revenue. We expect total year-over-year expense decreases to continue to moderate and ultimately level off in the second half of 2010.

Our consolidated operating earnings were $24.5 million in the two quarters of 2010 compared to an operating loss of $9.9 million in the two quarters of 2009.  The following table presents our operating earnings (loss) by segment for the two quarters of 2010 and the two quarters of 2009 (dollars in millions):

				Percent of Total Operating						Percent of Total Operating
	2010			Earnings			2009			Loss
Publishing	$	10.0			40.9	%	$	3.7			(38.1	)%
Broadcasting		17.4			71.0			(10.1	)		102.1
Printing services		1.1			4.5			0.1			(0.7	)
Corporate		(4.0	)		(16.4	)		(3.6	)		36.7
Total operating earnings (loss)	$	24.5			100.0	%	$	(9.9	)		100.0	%

The increase in total operating earnings was primarily due to the decreases in expenses and the impact from the increase in revenue at our broadcasting businesses, as well as the decrease in non-cash impairment charges.

Publishing

Revenue from publishing in the two quarters of 2010 was $91.9 million, a decrease of $5.7 million, or 5.8%, compared to $97.6 million in the two quarters of 2009.  Operating earnings from publishing were $10.0 million in the two quarters of 2010, an increase of $6.3 million, or 166.6%, compared to $3.7 million in the two quarters of 2009.

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The following table presents our publishing revenue by category and operating earnings for the two quarters of 2010 and the two quarters of 2009:

	2010						2009
	Daily Newspaper		Community Newspapers & Shoppers		Total		Daily Newspaper		Community Newspapers & Shoppers		Total		Percent Change
	(dollars in millions)
Advertising revenue:
Retail	$	29.7	$	10.6	$	40.3	$	32.0	$	12.5	$	44.5		(9.4	)
Classified		10.1		2.3		12.4		11.4		2.7		14.1		(12.2	)
National		2.3		--		2.3		2.6		--		2.6		(10.4	)
Direct Marketing		0.1		--		0.1		0.5		--		0.5		(74.6	)
Other		--		0.1		0.1		--		0.1		0.1		(34.2	)
Total advertising revenue		42.2		13.0		55.2		46.5		15.3		61.8		(10.6	)
Circulation revenue		25.1		0.9		26.0		25.4		1.0		26.4		(1.4	)
Other revenue		9.3		1.4		10.7		7.8		1.6		9.4		14.1
Total revenue	$	76.6	$	15.3	$	91.9	$	79.7	$	17.9	$	97.6		(5.8	)
Operating earnings	$	8.9	$	1.1	$	10.0	$	3.2	$	0.5	$	3.7		166.6

Advertising revenue accounted for 60.0% of total publishing revenue in the two quarters of 2010 compared to 63.3% in the two quarters of 2009.  The ongoing secular changes in the newspaper industry and the current economic environment have caused advertisers to decrease their advertising spending across all of our advertising revenue categories.  In addition, due to the changing mix of revenue categories, frequency and placement of advertising in the newspaper and customer choices to reduce the size of advertisements, we have seen a decrease in the average rate per inch of advertising in the two quarters of 2010 compared to the two quarters of 2009.

Retail advertising revenue in the two quarters of 2010 was $40.3 million, a decrease of $4.2 million, or 9.4%, compared to $44.5 million in the two quarters of 2009.  The $2.3 million decrease at our daily newspaper was primarily due to a decrease in preprint and ROP advertising in consumer-driven categories and the loss of certain advertisers from our total market coverage product, partially offset by an increase in retail online advertising revenue.  The decreases were in the communications, food, finance and insurance, department stores, home improvement and dining and entertainment categories, partially offset by increases in the health services and real estate categories.  We believe consumers are still cautious in regards to spending discretionary income and advertisers are still decreasing their spe nding.  The same trends persisted in our community newspapers and shoppers business.  The $1.9 million decrease in revenue at our community newspapers and shoppers was primarily due to decreases in automotive and real estate advertising.

Classified advertising is generally the most sensitive to economic cycles because it is driven by the demand of employment, real estate transactions and automotive sales.  As a result of ongoing secular trend of classified advertising transitioning to the internet and the current economic environment, our publishing businesses experienced a decrease in classified advertising revenue in the two quarters of 2010 compared to the two quarters of 2009.  Classified advertising revenue in the two quarters of 2010 was $12.4 million, a decrease of $1.7 million, or 12.2%, compared to $14.1 million in the two quarters of 2009.  At our daily newspaper, classified advertising revenue decreased $1.3 million, or 11.6%, in the two quarters of 2010 compared to the two quarters of 2009.  Specifically, the real est ate category decreased $0.7 million, or 24.7%; employment decreased $0.4 million, or 11.3%; and other decreased $0.2 million, or 5.8%.  In the two quarters of 2010, automotive classified advertising revenue decreased 3.8% compared to the two quarters of 2009.  The average rate per inch of classified advertising has decreased in the two quarters of 2010 compared to the two quarters of 2009 primarily due to the decrease in rates for automotive and other classified revenue.  At our community newspapers and shoppers business, classified advertising revenue decreased $0.4 million, or 14.6%, in the two quarters of 2010 compared to the two quarters of 2009 primarily due to decrease in automotive, employment and real estate classified advertising revenue.

The total decrease in retail and classified automotive advertising revenue at our daily newspaper in the two quarters of 2010 was $0.2 million, or 6.8%, compared to the two quarters of 2009 due to a decrease in ROP and preprint advertising revenue, partially offset by an increase in online advertising revenue.

Interactive advertising revenue at our publishing businesses is reported in the various advertising revenue categories.  Total retail and classified interactive advertising revenue was $5.2 million in the two quarters of 2010, an increase of $0.7 million, or 14.4%, compared to $4.5 million in the two quarters of 2009.  In the two quarters of 2010 at our daily newspaper, interactive retail advertising revenue increased 23.0% and interactive classified advertising revenue increased 5.1% compared to the two quarters of 2009.

National advertising revenue in the two quarters of 2010 was $2.3 million, a decrease of $0.3 million, or 10.4%, compared to $2.6 million in the two quarters of 2009.  The decrease was primarily due to a decrease in preprint advertising in the business services category, partially offset by an increase in ROP advertising in the health services, food and communications categories.

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Direct marketing revenue, consisting of revenue from the sale of direct mail products of our daily newspaper, was $0.1 million in the two quarters of 2010, a decrease of $0.4 million, or 74.6%, compared to $0.5 million in the two quarters of 2009.  In May 2009, we shut down the operations of our Milwaukee-area direct marketing facility but we continue to facilitate this service for some of our customers.

Other advertising revenue, consisting of revenue from company-sponsored event advertising at our community newspapers and shoppers, was $0.1 million in both the two quarters of 2010 and the two quarters of 2009.

Circulation revenue accounted for 28.3% of total publishing revenue in the two quarters of 2010 compared to 27.0% in the two quarters of 2009.  Circulation revenue of $26.0 million in the two quarters of 2010 decreased $0.4 million, or 1.4%, compared to $26.4 million in the two quarters of 2009.  At our daily newspaper, circulation revenue decreased $0.3 million in the two quarters of 2010 compared to the two quarters of 2009 primarily due to a decrease in the number of Sunday and daily copies sold for home delivery and daily copies sold at single copy outlets.  Partailly offsetting this decrease was an increase in revenue for the “TV Cue” section, a product which is now priced separately and delivered with the Sunday edition, and the impact from price increases implemented in 2009.   At our community newspapers and shoppers business, circulation revenue decreased $0.1 million in the two quarters of 2010 compared to the two quarters of 2009.

Other revenue, which consists of revenue from promotional and commercial distribution and commercial printing revenue at our daily newspaper and commercial printing at the printing plants for our community newspapers and shoppers, accounted for 11.7% of total publishing revenue in the two quarters of 2010 compared to 9.7% in the two quarters of 2009.  Other revenue was $10.7 million in the two quarters of 2010, an increase of $1.3 million, or 14.1%, compared to $9.4 million in the two quarters of 2009.  The $1.5 million increase at our daily newspaper was primarily due to an increase in commercial printing revenue from new printing customers for which we began printing in the second half of 2009.  At our community newspapers and shoppers business, other revenue decreased $0.2 million, or 11.2%, in the two quarters of 2010 compared to the two quarters of 2009 primarily due to the loss of certain customers.

Publishing operating earnings in the two quarters of 2010 were $10.0 million, an increase of $6.3 million, or 166.6%, compared to $3.7 million in the two quarters of 2009.  In an effort to partially offset the impact of the decrease in advertising revenue, our publishing businesses significantly reduced their expense platforms in 2009 and continued to do so in the two quarters of 2010.  Total expenses decreased $12.0 million, or 12.7%, in the two quarters of 2010 compared to the two quarters of 2009 primarily due to a decrease of $7.6 million in payroll-related costs.  Excluding payroll-related costs, operating costs and expenses decreased $3.8 million in the two quarters of 2010 compared to the two quarters of 2009, the most significant of which was newsprint and paper costs, costs related to the total ma rket coverage (TMC) product (which was transitioned from mail delivery to carrier delivery in 2009), a decrease in outside printing costs and a decrease in delivery costs.  Total newsprint and paper costs for our publishing businesses in the two quarters of 2010 were $8.5 million, a decrease of $1.2 million, or 12.7%, compared to $9.7 million in the two quarters of 2009 due to an 11.5% decrease in average newsprint pricing per metric ton and a 1.3% decrease in newsprint consumption. Additionally, bad debt expense decreased $0.5 million in the two quarters of 2010 compared to the two quarters of 2009.

Broadcasting

Revenue from broadcasting in the two quarters of 2010 was $89.6 million, an increase of $6.6 million, or 8.0%, compared to $83.0 million in the two quarters of 2009.  Operating earnings from broadcasting in the two quarters of 2010 was $17.4 million compared to an operating loss of $10.1 million in the two quarters of 2009.  The two quarters of 2009 included a $19.0 million non-cash broadcast license impairment charge and a $1.7 million gain related to insurance proceeds from our radio tower replacement in Wichita, Kansas.  In the two quarters of 2010, we recorded an additional $0.3 million gain for the completion of the Wichita, Kansas radio tower replacement.

The following table presents our broadcasting revenue, broadcast license impairment and operating earnings (loss) for the two quarters of 2010 and the two quarters of 2009:

	2010						2009								Percent
	Television		Radio		Total		Television			Radio		Total			Change
	(dollars in millions)
Revenue	$	57.7	$	31.9	$	89.6	$	52.6		$	30.4	$	83.0			8.0
Broadcast license impairment	$	--	$	--	$	--	$	14.9		$	4.1	$	19.0		NA
Operating earnings (loss)	$	10.6	$	6.8	$	17.4	$	(12.2	)	$	2.1	$	(10.1	)	NA

Revenue from our television stations in the two quarters of 2010 was $57.7 million, an increase of $5.1 million, or 9.7%, compared to $52.6 million in the two quarters of 2009.  We experienced a revenue increase in all but three of our television markets.  Compared to the two quarters of 2009, Olympic advertising revenue increased $2.2 million, or 100.0%, due to the broadcast of the 2010 Winter Olympics on our NBC affiliates in February 2010; political and issue advertising revenue increased $1.9 million; retransmission revenue increased $0.9 million, or 40.2%, and national advertising revenue increased $0.6 million, or 6.2%.  Partially offsetting these revenue increases was a decrease in local advertising revenue of $0.5 million, or 1.4%.  Television advertising revenue and rates in even-numbere d years typically benefit from political and issue advertising because there tends to be more pressure on available inventory as the demand for advertising increases and we have the opportunity to increase the average unit rates we charge our customers.  We have television stations in a number of states with competitive political races in 2010 and we expect political and issue advertising revenue to increase in the second half of 2010 compared to the second half of 2009; however, in the current economic environment, we cannot predict that our rates will increase even if the demand for our available inventory increases.

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Our television stations experienced revenue increases in a number of categories, specifically automotive, professional services, medical, media, travel, home products, and beverages, partially offset by decreases in the communications, casino and gambling, restaurants and financial categories.  Automotive advertising revenue represented 17.1% of television advertising revenue in the two quarters of 2010 compared to 13.4% in the two quarters of 2009.  Automotive advertising revenue increased $2.8 million, or 40.3%, in the two quarters of 2010 compared to the two quarters of 2009.  Our television stations are working to grow their local customer base by creating new local content and programs that converge television with digital platforms.  We are launching additional local advertising programs ta rgeted at non-traditional advertisers across our television markets.  Interactive revenue was $0.7 million in both the two quarters of 2010 and the two quarters of 2009.  Interactive revenue is reported in local advertising revenue.

Operating earnings from our television stations in the two quarters of 2010 were $10.6 million compared to a loss of $12.2 million in the two quarters of 2009.  During the two quarters of 2009, our television stations recorded a $14.9 million non-cash impairment charge for seven broadcast licenses.  The increase in operating earnings was primarily due to the decrease in expenses and the impact from the increase in advertising revenue.  Our television stations continue to reduce their expense platform. Total television expenses in the two quarters of 2010 were $47.1 million, a decrease of $17.7 million, or 27.3 %, compared to $64.8 million in the two quarters of 2009.

The decrease in total television expenses was primarily due to the decrease in the non-cash impairment charge, a decrease of $2.3 million in payroll-related costs, a decrease in barter and syndicated programming expenses and a decrease in legal expenses.  These expense decreases were partially offset by increases in advertising and promotional expenses, network programming expenses and third-party commissions.

Revenue from our radio stations in the two quarters of 2010 was $31.9 million, an increase of $1.5 million, or 5.1%, compared to $30.4 million in the two quarters of 2009.  We experienced a revenue increase in four of our radio markets.  Compared to the two quarters of 2009, local advertising revenue increased $1.2 million, or 4.3%, in part due to the broadcast of two additional Green Bay Packers games in January 2010; national advertising revenue increased $0.2 million, or 10.6%; and other revenue increased $0.1 million or 12.2%.  Our radio stations experienced revenue increases in a number of categories, specifically, professional services, medical, entertainment, media, automotive and casino and gambling, partially offset by decreases in the home improvement, financial and recreation categories. &# 160;Automotive advertising represented 12.7% of radio advertising revenue in the two quarters of 2010 compared to 12.8% in the two quarters of 2009.  Automotive advertising revenue increased $0.2 million, or 4.4%, in the two quarters of 2010 compared to the two quarters of 2009.  Our radio stations are working to grow their local customer base by attracting new radio advertising customers with non-traditional advertising programs.  Interactive revenue was $0.8 million in the two quarters of 2010, a decrease of $0.1 million, or 9.6%, compared to $0.9 million in the two quarters of 2009.  Interactive revenue is reported in local advertising revenue.

Operating earnings from our radio stations in the two quarters of 2010 were $6.8 million, an increase of $4.7 million, or 218.9%,  compared to $2.1 million in the two quarters of 2009.  During the two quarters of 2009, our radio stations recorded a $4.1 million non-cash impairment charge for 11 broadcast licenses and a $1.7 million gain related to insurance proceeds from our tower replacement in Wichita, Kansas.  In the two quarters of 2010, we recorded an additional $0.3 million gain for the completion of the Wichita, Kansas tower replacement.  The increase in operating earnings was primarily due to a decrease in expenses and the impact from the increase in advertising revenue.  Our radio stations continue to reduce their expense platform.  Total radio expenses in the two qua rters of 2010 were $25.1 million, a decrease of $3.2 million, or 11.1%, compared to $28.3 million in the two quarters of 2009.  The decrease in total radio expenses was primarily due to the decrease in the non-cash impairment charge, a decrease of $0.8 million in payroll-related costs, a decrease in bad debt expense and a decrease in depreciation expense.  Partially offsetting these expense decreases was a decrease in the gain related to the Wichita tower replacement, an increase in sports rights fees due to the broadcast of additional Green Bay Packers games and a charge recorded for the expected loss from the broadcast rights fee of a sports contract.

Printing Services

Revenue from printing services in the two quarters of 2010 was $21.8 million, a decrease of $3.7 million, or 14.8%, compared to $25.5 million in the two quarters of 2009.  Operating earnings from printing services in the two quarters of 2010 were $1.1 million, an increase of $1.0 million, or 1,320.5%, compared to $0.1 million in the two quarters of 2009.

The decrease in printing services revenue was primarily due to the ongoing challenges in the printing industry due to lower demand for printed products.  Revenue from printing publications and revenue from computer-related customers decreased in the two quarters of 2010 compared to the two quarters of 2009.  Our printing services’ customers continue to reduce their print volumes, cease to print and/or take their printing needs out for bid in order to achieve lower pricing.

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The increase in operating earnings from printing services was primarily due to employee, operating and production related cost reduction initiatives.  These cost savings were partially offset by the impact from the decrease in revenue.

Corporate

Revenue and expense eliminations in the two quarters of 2010 were $0.4 million compared to $0.3 million in the two quarters of 2009. The corporate segment reflects the unallocated costs of our corporate executive management, as well as expenses related to corporate governance.  The unallocated expenses were $4.0 million in the two quarters of 2010 compared to $3.6 million in the two quarters of 2009 primarily due to an increase in director stock compensation expense and an increase in incentive compensation expense due to the increase in overall consolidated operating earnings.

Other Income and Expense and Taxes

Interest income was insignificant in the two quarters of 2010.  Interest expense was $1.1 million in the two quarters of 2010 compared to $1.5 million in the two quarters of 2009.  The decrease was due to a decrease in both the average borrowings during the year and the interest rate on our borrowings. Amortization of deferred financing costs was $0.2 million in the two quarters of 2010 and the two quarters of 2009.

Our effective tax rate was 40.1% in the two quarters of 2010 compared to an effective tax benefit rate of 62.6% in the two quarters of 2009.  In 2009, the effective tax benefit rate was impacted by a settlement with the WDR and the loss from continuing operations created by the non-cash impairment charge.  The settlement with the WDR had a $1.2 million impact on our effective tax rate in 2009.

Discontinued Operations

Loss from discontinued operations, net of income taxes, was $0.6 million in the two quarters of 2010 compared to $0.4 million in the two quarters of 2009.  Income tax benefit was $0.4 million in the two quarters of 2010 compared to $0.3 million in the two quarters of 2009.

Revenue from PrimeNet in the two quarters of 2010 was $2.1 million compared to $10.5 million in the two quarters of 2009.

We recorded a $0.6 million net loss from operations and shut down related costs in the two quarters of 2010 compared to a $0.4 million net loss from its operations in the two quarters of 2009.

Net Earnings (Loss)

Our net earnings in the two quarters of 2010 were $13.4 million compared to a net loss of $4.7 million in the two quarters of 2009.  The increase was due to the increase in operating earnings from continuing operations for the reasons described above and by the decrease in interest expense, partially offset by the increase in income tax expense and the increase in loss from discontinued operations.

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

In the two quarters of 2010, basic and diluted net earnings per share of class A and B common stock were $0.23 for both.  This compared to net loss per share of $0.11 for both in the two quarters of 2009.  Basic and diluted earnings per share of class A and B common stock from continuing operations were $0.24 for both in the two quarters of 2010.  Basic and diluted loss per share from continuing operations was $0.10 for both in the two quarters of 2009.  Basic and diluted loss per share from discontinued operations was $0.01 for both in the two quarters of 2010 and the two quarters of 2009.

Liquidity and Capital Resources

Cash balances were $2.7 million as of June 27, 2010.  We believe our expected cash flows from operations and borrowings available under our credit facility, which were $177.2 million as of June 28, 2010, will meet our needs until the credit facility expires on June 2, 2011.  We are in the process of extending our existing credit facility on a long-term basis and expect to finalize the agreement in the near future.

We have an unsecured revolving credit facility that expires on June 2, 2011. The interest rate on borrowings is either LIBOR plus a margin that ranges from 37.5 basis points to 87.5 basis points, depending on our leverage, or the base rate, which equals the higher of the prime rate set by U.S. Bank, N.A. or the Federal Funds Rate plus 100 basis points.  As of June 27, 2010 and December 27, 2009, we had borrowings of $117.8 million and $151.4 million, respectively, under the facility at a weighted average rate of 0.89% and 1.00%, respectively.  Cash provided by operating activities was used primarily to decrease our borrowings during the two quarter of 2010.  Fees in connection with the facility of $1.7 million are being amortized over the term of the facility using the straight-line method.

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We estimate the fair value of our unsecured revolving facility at June 27, 2010 and December 27, 2009 to be $114.0 million and $143.7 million, respectively, based on discounted cash flows using an interest rate of 4.12% and 4.47%, respectively.  This fair value measurement falls within Level 3 of the fair value hierarchy.  The facility includes the following two financial covenants, which remain constant over the term of the agreement:

●           A consolidated funded debt ratio of not greater than 4-to-1, as determined for the four fiscal quarter period preceding the date of determination.  This ratio compares, for any period, our funded debt to our earnings before interest, taxes, depreciation and amortization, as adjusted for non-operational impairment charges recorded as a result of applying the FASB’s guidance for impairment testing for goodwill and other intangible assets not subject to amortization.  As of June 27, 2010, our consolidated funded debt ratio was 1.60-to-1, resulting in a current maximum borrowing capacity of $295.0 million.  As of June 27, 2010, we were able to borrow an additional $1 77.2 million under our credit facility.  Our future borrowing capacity is subject to change due to changes in our future operating results.

●           An interest coverage ratio of not less than 3-to-1, as determined for the four fiscal quarter period preceding the date of determination.  This ratio compares, for any period, our earnings before interest, taxes, depreciation and amortization, as adjusted for non-operational impairment charges recorded as a result of applying the FASB’s guidance for impairment testing for goodwill and other intangible assets not subject to amortization to our interest expense.  As of June 27, 2010, our interest coverage ratio was 30.95–to-1.

While we have classified our unsecured revolving credit facility as a current liability in our consolidated condensed balance sheet at June 27, 2010, we are in the process of extending our existing credit facility on a long-term basis and expect to finalize the agreement in the near future.  If we are unable to extend our existing credit facility before the agreement expires on June 2, 2011, we may have to replace our credit facility with one or more capital sources that might contain more restrictive financial and operating terms.  If we are unable to obtain alternative sources of capital, it may be necessary to significantly restructure our business.

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

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

Our consolidated adjusted EBITDA in the second quarter of 2010 was $21.1 million, an increase of $4.6 million, or 27.7%, compared to $16.5 million in the second quarter of 2009.  Our consolidated adjusted EBITDA in the two quarters of 2010 was $38.0 million, an increase of $14.8 million, or 63.6%, compared to $23.2 million in the two quarters of 2009.

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The following table presents a reconciliation of our consolidated net earnings to consolidated adjusted EBITDA for the second quarter and two quarters of 2010 and the second quarter and two quarters of 2009:

	Second Quarter Ended					Two Quarters Ended
	June 27, 2010		June 28, 2009			June 27, 2010		June 28, 2009
	(dollars in millions)
Net earnings (loss)	$	8.1	$	(4.8	)	$	13.4	$	(4.7	)
Loss from discontinued operations, net		0.2		0.3			0.6		0.4
Provision (benefit) for income taxes		5.6		(5.7	)		9.4		(7.1	)
Total other expense, net		0.5		0.7			1.1		1.5
Depreciation		6.2		6.5			12.5		13.1
Amortization		0.5		0.5			1.0		1.0
Broadcast license impairment		--		19.0			--		19.0
Adjusted EBITDA	$	21.1	$	16.5		$	38.0	$	23.2

Adjusted EBITDA for the four fiscal quarter period preceding June 27, 2010 was $73.8 million.  We expect to be able to continue to pay down debt over the next 12 months and to remain in compliance within our debt covenants.

We have $2.5 million of standby letters of credit for business insurance purposes.

During 2009, we undertook several actions, along with our workforce reduction initiatives, in order to offset decreases in revenue and to help maintain financial flexibility in this difficult economic environment.  During 2009 and the two quarters of 2010, we paid down debt by $97.3 million.  In February 2009, we suspended our matching contribution to our 401(k) plan through 2010.  We plan to restore our matching contribution to our 401(k) plan in 2011.  In March 2009, our board of directors approved an amendment to our 401(k) plan to suspend the annual employer contribution for all active employees and an amendment to our pension plans to suspend benefit accruals for 18 months beginning July 1, 2009.  In April 2009, a 6% employee-wage reduction program was initiated for most full-time employees for the remainder of 2009.  We plan to maintain the broad-based reduced compensation levels during 2010; however, we provided a one-time cash bonus totaling $1.6 million in the third quarter of 2010 for the employees affected by the 2009 wage reduction program.

In 2009, we made significant progress to align our costs with the changing nature of our businesses, and we continued our cost alignment in the two quarters of 2010.  The ongoing costs associated with workforce reductions during the two quarters of 2010 were as follows:

	Balance at December 27, 2009		Charge for Separation Benefits		Payments for Separation Benefits			Balance at June 27, 2010
	(dollars in millions)
Publishing
Daily newspaper	$	1.5	$	0.4	$	(1.2	)	$	0.7
Total publishing		1.5		0.4		(1.2	)		0.7
Broadcasting		0.2		0.4		(0.4	)		0.2
Printing services		--		--		--			--
Total	$	1.7	$	0.8	$	(1.6	)	$	0.9

Dividends

In April 2009, our board of directors suspended dividends on our class A and class B shares given the challenging economic environment at the time.  Our board of directors also suspended the payment of the cumulative dividend on our class C shares.  The accumulated class C dividend of approximately $0.14 per share must be paid prior to the payment of any future dividends on our class A and class B shares.  As of the end of the two quarters of 2010, we have $2.3 million accrued for class C dividends.  Our board of directors consistently reviews our dividend payment policy, as well as our ability to pay cash dividends, at each quarterly board of directors meeting.

Cash Flow

Continuing Operations

During 2010 and 2009, we have primarily used our cash to reduce our debt.  We are accomplishing this, in part, by suspending payment of cash dividends to shareholders, increasing efforts to collect receivables and extending payment terms for our payables.

Cash provided by operating activities was $37.9 million in the two quarters of 2010 compared to $47.0 million in the two quarters of 2009.  The decrease was primarily due to an $8.7 million refund of an income and franchise tax audit payment due to a settlement with the WDR in the two quarters of 2009.

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Cash used for investing activities was $5.1 million in the two quarters of 2010 compared to $9.3 million in the two quarters of 2009.  Capital expenditures were $5.8 million in the two quarters of 2010 compared to $3.8 million in the two quarters of 2009.  Our capital expenditures at our daily newspaper in the two quarters of 2010 related primarily to production equipment and building improvements.  Our capital expenditures in our broadcasting segment in the two quarters of 2010 related primarily to completing a replacement of a tower that was destroyed in an ice storm in 2009 and various technology upgrades.  In 2009, we received $2.0 million in insurance proceeds for our tower that was destroyed in an ice storm, and in the two quarters of 2010, we received an additional $0.7 million for such to wer.  We believe these capital expenditures will help us to better serve our advertisers, viewers and listeners and will help to facilitate our cost control initiatives.  In 2010, our capital expenditures are expected to increase slightly over the amount of capital expenditures in 2009.  We currently expect to receive $0.2 million in proceeds from the minimum guaranteed commission and seller financing of working capital from the sale of the Clearwater, Florida based operations of PrimeNet.  During the two quarters of 2009, we acquired KNIN-TV in Boise, Idaho for $6.6 million.

Cash used for financing activities was $33.3 million in the two quarters of 2010 compared to $38.1 million in the two quarters of 2009.  Borrowings under our credit facility in the two quarters of 2010 were $43.6 million and we made payments of $77.2 million, reflecting a $33.6 million decrease in our debt outstanding compared to borrowings of $69.6 million and payments of $106.4 million in the two quarters of 2009 for a decrease in debt outstanding of $36.8 million.  We did not pay cash dividends in the two quarters of 2010 while we paid $1.5 million in cash dividends in the two quarters of 2009.

Discontinued Operations

Cash used by discontinued operations was $0.2 million in both the two quarters of 2010 and the two quarters of 2009.

New Accounting Standards

In January 2010, the FASB issued amended guidance for fair value measurements and disclosures.  The guidance requires new disclosures about the transfers between Levels 1 and 2 and clarifies existing disclosures about the different classes of assets and liabilities measured at fair value and the valuation techniques and inputs used for fair value measurements which fall in either Level 2 or 3.  This guidance is effective for interim and annual periods beginning after December 15, 2009.  We adopted this guidance in the first quarter of 2010 and the adoption did not have a material impact on our consolidated financial statements.  The guidance also requires new disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. 
60;Those disclosures are effective for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years.

In 2009, the FASB issued amended guidance for consolidating variable interest entities (VIEs).  The guidance amends the evaluation criteria to identify the primary beneficiary of a variable interest entity and requires ongoing reassessment of whether an enterprise is the primary beneficiary of the variable interest entity.  The guidance also replaces the quantitative-based risks and rewards calculation for determining which reporting entity, if any, has a controlling financial interest in a VIE with an approach focused on identifying which reporting entity has the power to direct the activities of a VIE that most significantly impact the entity’s economic performance and (1) the obligation to absorb losses of the entity or (2) the right to receive benefits from the entity. The amended guidance also requires ad ditional disclosures about a reporting entity’s involvement in VIEs.  We adopted this guidance in the first quarter of 2010. The impact of this guidance has resulted in the consolidation of an unrelated party, ACE TV, Inc.  The guidance was applied retrospectively with a cumulative-effect adjustment to noncontrolling interest as of the beginning of fiscal year 2010.  See Note 12 to our unaudited consolidated condensed financial statements.

Critical Accounting Policies

There are no material changes to the disclosures regarding critical accounting policies made in our Annual Report on Form 10-K for the year ended December 27, 2009.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK

There are no material changes to the disclosures regarding interest rate risk and foreign currency exchange risk made in our Annual Report on Form 10-K for the year ended December 27, 2009.

ITEM 4. CONTROLS AND PROCEDURES

We carried out an evaluation, under the supervision and with the participation of our Disclosure Committee, including our Chief Executive Officer and our Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Securities Exchange Act of 1934, as amended, Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q.  Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in our Securitites Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to them to allow timely decisions regarding required disclosure.

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There has been no change in our internal control over financial reporting that occurred during our last fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

There are no material changes to the disclosures regarding risk factors made in Part I, Item 1A. of our Annual Report on Form 10-K for the year ended December 27, 2009, as updated in Item 1A of our Quarterly Report on Form 10-Q for the first quarter ended March 28, 2010.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. RESERVED

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

(a) Exhibits

Exhibit No. Description

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

(31.2) Certification by Andre J. Fernandez, Executive Vice President, Finance & Strategy and Chief Financial Officer of Journal Communications, Inc., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

(32) Certification of Steven J. Smith, Chairman and Chief Executive Officer and Andre J. Fernandez, Executive Vice President, Finance & Strategy and Chief Financial Officer of Journal Communications, Inc., pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

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

	JOURNAL COMMUNICATIONS, INC.
	Registrant
Date:  August 11, 2010	/s/ Steven J. Smith
	Steven J. Smith, Chairman and Chief Executive Officer
Date:  August 11, 2010	/s/ Andre J. Fernandez
	Andre J. Fernandez, Executive Vice President, Finance & Strategy
	and Chief Financial Officer

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