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Executives

Angela Lois - Director of Investor Relations

Steven J. Smith - Chairman, Chief Executive Officer and Member of Executive Committee

Andre J. Fernandez - President and Chief Financial Officer

Elizabeth Brenner - Executive Vice President, President of the Milwaukee Journal Sentinel, Chief Operating Officer of Publishing Businesses and Publisher of the Milwaukee Journal Sentinel

Analysts

Patrick C. Wang - Robert W. Baird & Co. Incorporated, Research Division

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Craig Huber

Journal Communications (JRN) Q4 2012 Earnings Call March 7, 2013 11:00 AM ET

Operator

Good morning, and welcome to the Journal Communications Fourth Quarter and Full Year 2012 Earnings Conference Call. As a reminder, this call is being taped. And now, I'd like to turn the call over to Journal Communications Investor Relations Director, Angela Lois. Please proceed, ma'am.

Angela Lois

Thank you, operator. Welcome to our conference call and webcast to review our fourth quarter and full year 2012 results. Our news release and detailed financial tables can be found at journalcommunications.com.

Joining me today are Steve Smith, Chairman of the Board and Chief Executive Officer; Andre Fernandez, President and Chief Financial Officer; and Betsy Brenner, Executive Vice President of Journal Communications and Chief Operating Officer of our Publishing business.

Before we get started, I'd like to remind you that this conference call contains certain forward-looking statements related to Journal Communications' businesses that are based on current expectations. Forward-looking statements are subject to certain risks, trends and uncertainties, including changes in advertising demand and other economic conditions that could cause actual results to differ materially from the expectations expressed in forward-looking statements.

All forward-looking statements should be evaluated with the understanding of their inherent uncertainties. The written policy on forward-looking statements can be found in Journal's most recently filed quarterly report on Form 10-Q as filed with the Securities and Exchange Commission.

Any discussion of EBITDA in today's conference call may be referenced back to our unaudited reconciliation of consolidated net earnings to consolidated EBITDA schedule, which accompanies today's earnings release. Unless otherwise indicated, all comparisons are to the fourth quarter ended December 25, 2011. Also note that for comparison purposes, there's an additional week in the fourth quarter of 2012.

And now, I'd like to turn the call over to Steve Smith, Chairman of the Board and Chief Executive Officer.

Steven J. Smith

Thank you, Angela, and good morning, everyone. Today, we are pleased to report a very successful fourth quarter and full year 2012. Operating earnings were up 92% for the quarter and 51% for the year, led by a revenue increase of 31% and 12%, respectively.

In Broadcast, revenue was up 53% in the fourth quarter and 27% for the year, helped by record political revenue.

While political revenue exceeded our expectations, with strong results in Wisconsin and Nevada, the same-station revenue, excluding political, and the extra week, was also up nearly 4% for the year despite the crowding-out effects of the elections.

I'm also pleased to report that the daily newspaper continues to deliver moderating revenue declines. For the quarter, they were up 7% and up slightly excluding the extra week, driven by retail ROP, strong digital growth and commercial print. For the full year, revenue was down 1% or 3% excluding the extra week.

Strategically, we took important steps and completed several significant transactions in the quarter in line with our overall goals. First, we closed on the purchase of NewsChannel 5, WTVF-TV, our new Nashville, Tennessee station, and one of the top CBS affiliates in the company. We couldn't be happier with this acquisition. And the station, once again, won the February sweeps from sign on to sign off in convincing fashion, winning most key dayparts and 63 out of the last 66 sweeps, an incredible performance. We are very pleased to have this exceptional team in the Journal family.

Also in Tennessee, we reached an agreement to purchase WNOX-FM in Knoxville, Tennessee, which will add to our successful radio cluster in that market.

In Wisconsin, we closed on the purchase of WACY-TV in Appleton, Wisconsin, solidifying our duopoly in the Green Bay market. We've operated the station under an LMA since 2004.

We also sold several weeklies and shoppers in Northern Wisconsin, narrowing our Journal Community Publishing Group's focus mainly to the Milwaukee suburban market.

Lastly, we successfully amended and restated our credit agreement. The agreement provides for a credit facility with commitments of $350 million. Andre will provide more detail on the credit facility and our recent transactions shortly.

In addition to these fourth quarter events, full year 2012 included the purchase of all of our outstanding Class C shares, as well as the purchase of 2 radio stations in Tulsa. It was truly an eventful year.

Throughout the coming year, you'll hear us describe how we plan to enhance our local brands, invest in digital initiatives, both in Publishing and Broadcast, and work to increase our overall revenue share. And we will continue to investigate opportunities to add scale to our Broadcast business.

We're also pleased to welcome Dean Blythe to our board. Dean has been Managing Director of TDF Ventures LLC, an advisory and investment firm, since 2009. His executive leadership experience in broadcast, targeted marketing and corporate development make him an ideal choice for our board, and he'll be a great asset to the board as we continue to grow our local market media business.

I'd like to end by congratulating everyone on our team for a very productive year. We are fortunate to be able to attract and retain such quality people who continue to advance the Journal brand.

Now, I'd like to turn the call over to Andre to provide both financial rundown, as well as details on our Broadcast segment results. Andre?

Andre J. Fernandez

Thanks, Steve, and good morning, everyone. As Steve mentioned, we have lots of activity here in the fourth quarter to report on, including an acquisition, a divestiture, a refinancing and an extra week. So as in the past, I'll provide you with an updated -- update on both our consolidated and Broadcast results while Betsy will follow me with a summary of our Publishing segment.

We had a strong fourth quarter, increasing revenue 31% while nearly doubling both our operating and net earnings. Even excluding the extra week in the quarter whose impact on revenue is contained in Table 4 to our earnings release, results were strong with total revenue up nearly 25% driven by a record political at Broadcast, and with revenue at the Milwaukee Journal Sentinel up slightly, helped by higher retail advertising.

Total expenses increased 20%, though only 11% excluding special items mentioned in our release and the extra week, driven by the higher revenue and in line with previous guidance.

EPS of $0.30 was more than double that of last year.

And for the full year, revenue increased 12%, led by a nearly 27% gain in Broadcast while both operating and net earnings were up over 50%.

Total expenses increased 7%, though only 4% excluding special items and the extra week.

EBITDA, adjusted for the special items in Table 5 of our release, was nearly $90 million for the full year, up from $66 million on the same basis for 2012.

Clearly, the highlight of the quarter was the acquisition of NewsChannel 5, a CBS affiliate in Nashville, Tennessee in December 2012, for total cash proceeds of $220 million. Additionally, our consolidated financials contain 3 weeks of results for the Nashville operation. Revenue of $2.9 million and pre-tax earnings of $1.7 million will both be disclosed in our 10-K.

Additional financial information regarding the Nashville station, including audited historical financials for the years 2009 through 2011, can be found in our 8-K filed on February 4, 2013.

We also had a small, though strategically important, divestiture in the quarter having sold nearly all of our newspapers and shoppers in Northern Wisconsin. Total consideration was $1.2 million in cash and a 3-year promissory note of $772,000. This transaction, combined with the sale of our Florida-based publications in 2011, further reduces our community newspaper footprint to principally the Milwaukee Metropolitan area while preserving a profitable commercial printing operation.

In connection with the Nashville acquisition, we also refinanced our credit facility in early December. Formerly comprised of a $225 million revolver with commitments to expand to $325 million and a December 2013 maturity date, we increased our total credit availability to $350 million, expandable to $450 million and extended the maturity date to December 2017. The agreement includes a term loan component for $150 million, in addition to a $200 million revolver, increased our leverage covenant to 3.75x, which is expandable to 4.25x and improved our pricing with initial pricing spread at LIBOR plus $225 million.

We also brought 3 new lenders into the credit. Total company debt at year end was $246 million and our leverage under our credit facility was 2.29x, which includes Nashville on a pro forma basis.

And finally, we prepaid several of the unsecured subordinated notes held by former Class C shareholders, repurchasing approximately $8.3 million of the notes and leaving a total of $15.9 million outstanding as of year end.

A quick word now regarding our pension position here at year end. The combined net pension liability for our defined benefit pension plan and our nonqualified pension plan, both of which were permanently suspended in January 2011, was $79 million here at year-end 2012, an increase of about $5 million from the end of 2011. Our recovery and pension returns was not enough to offset a further decline in interest rates as the discount rate fell another 60 basis points in 2012 to 3.95% We contributed approximately $2.8 million of cash to our pension plans in 2012, and fortunately, following pension relief legislation enacted in mid-2012, only expect to contribute approximately $1.4 million of cash to our pension plans during 2013. Our funded status as of year end was approximately 74%.

Moving on to our operating segments. Total Publishing revenue fell 0.6% in the fourth quarter and 5.2% for the full year, both excluding the extra week. Betsy will provide some color on the quarter in a moment, though revenue was clearly helped by improved retail trends, higher digital, stable circulation revenue along with gains in commercial print revenue contained in the other revenue line.

At the daily newspaper, advertising revenue was down only 1.6% in the fourth quarter, excluding the extra week, which was our best quarterly ad revenue performance in over 4 years.

Expenses for the year were down about 1%, excluding special items and the extra week, and are expected to decline in the low to mid-single digits for 2013, helped by lower depreciation as some assets acquired 10 years ago in connection with our printing facility are now fully depreciated.

Expense declines, combined with the prospect of further improving revenue trends of the daily newspaper and the divestiture of low-margin community newspapers and shoppers, positions the Publishing business for another solidly profitable year in 2013.

Shifting now to our Broadcast segment. Fourth quarter revenue increased nearly 53% as TV rose 76% and radio revenue was up 15%. Revenue benefited from our Nashville TV and Tulsa radio acquisitions. As you've heard from other TV broadcasters, political was the single largest revenue driver for us this quarter and throughout 2012. Total political revenue was a record $36.5 million for the year, easily surpassing our last record of $16.7 million set in 2010. Over 95% of our political was billed on television and helped by properties located in such key states as Nevada, Wisconsin and Arizona.

For the quarter, on a same-station basis and excluding political and the extra week, TV revenue was flat, with a 3% decline in local which was impacted by political crowd-out, partially offset by a 7% gain in national.

Higher auto spending helped national, up 9%, and continuing the improving trend in auto we saw throughout the year. Perhaps more encouraging was the trend we saw on TV in December with total revenue up 26% on a same-station basis, led by a 59% increase at auto, an evidence of pent-up demand following the political crowd-out in previous months.

Additionally, retrans revenue gained 29% and 27% in the quarter and full year, respectively, and we successfully renewed agreements with several important MVPDs at year end, including Comcast and Charter, and representing nearly 30% of our total subscribers. These renewals, combined with additional subscribers and revenue from our Nashville station, will result in higher retrans revenue and net retrans margin in the future. During 2013, we have pending renewals representing approximately 50% of our total subscribers.

On the network side, we are currently in negotiations with NBC to extend our affiliation agreements for 3 of our stations. We extended the affiliations through mid-March and hope to have the longer-term agreement finalized by the end of the first quarter.

Revenue trends here into the first quarter also appear encouraging. While not the torrid pace observed in December, same-station TV revenue, excluding political, appears to be up in the mid- to high single digits in the first quarter of '13 and the bulk of this growth represents retrans revenue with the remaining core revenue up more modestly in the low single digits.

On radio, revenue increased nearly 15% in Q4, but only 1.5% on a same-station basis excluding political and the extra week. And that was driven by a 4% gain in local and helped by such categories as auto, up over 20%. Political revenue was a more modest $700,000 in radio for the quarter and $1.7 million for the full year.

Looking ahead to the first quarter for radio, total revenue is pacing up in the mid-single digits, though in the low single digits on a same-station basis.

For the fourth quarter, total Broadcast expenses increased 16% on a same-station basis and excluding special items and the extra week, with 18% and 10% increases in TV and radio, respectively. Expenses were higher due to commissions on additional revenue, payroll, higher network compensation for TV and higher radio rights fees due to additional games.

And for the full year, on the same basis and excluding the special items in the week, Broadcast expenses increased 10% in line with previous guidance.

Now, for the full year 2013, total Broadcast expenses are expected to be up in the mid- to high teens while up only mid-single digits on a same-station basis and excluding impairment, due to increased headcount, higher network and rights fees on TV and radio, respectively, and other miscellaneous expenses. The expense variance should improve during 2013 as we cycle on headcount additions we made during 2012.

We took a $1.7 million impairment charge on our FCC licenses in the fourth quarter, split $700,000 on TV and $1 million on radio, the latter relating to reducing the long-term growth assumption on radio. This compares to a $900,000 charge taken in the fourth quarter of 2011 on television.

Corporate expenses were higher in both the fourth quarter and the full year, due to higher incentive compensation resulting from higher company profitability along with the extra week.

And finally, CapEx for the full year was $12.7 million or $2 million higher than last year as we resumed investment in infrastructure and facilities, high definition and digital news sharing.

And in 2013, our initial CapEx estimate is around $15 million, which includes our new Nashville station, as well as the continued rollout of HD capabilities in our markets.

So with that, I'll turn the call now over to Betsy to discuss the results of our Publishing segment.

Elizabeth Brenner

Thank you, Andre. As you heard, Publishing did have a solid fourth quarter. Total reported Publishing revenue was $46.7 million this quarter, up 5.7% or down 0.6% excluding the extra week. For the full year, Publishing revenue was down 3.5% or down 5.2% excluding the extra week. This represents improving performance across several categories as revenue declines moderated throughout the year. But the daily newspaper revenue was up 7.4% in the quarter and down 1.3% for the year. Excluding the extra week, revenue was up 0.7% in the quarter and down 3% for the year.

For comparison purposes, the following numbers exclude the extra week unless otherwise noted. For the quarter, advertising revenue with the daily newspaper was down 1.6%, our smallest quarterly decline in the last 4 years; strong digital performance, up 28%; and solid retail ROP results, up 5.9%, both contributed to the improved trend.

Advertising revenue for the year was down 6.9%. We benefited in the quarter from a number of targeted local sponsorships for major and midsized advertisers and by Green Bay Packer-related advertising.

Classified revenue, which continues to represent a smaller portion of our advertising business, was down 10% in the quarter; employment was down 8%, auto, down 30%; and real estate, down 11%.

For the full year, classified was down 17%; with employment down 19%; real estate down 20%; and classified auto down 36%. Auto revenue throughout the paper, including quarterly gains of 45% in our retail ROP segment, was down only 8% for the quarter and 14% for the year.

I'd like to focus for a moment on our digital performance in the quarter where we delivered strong results across a number of revenue areas. Total digital revenue increased 28% in the quarter and 8% in the year excluding the extra week. Retail sponsorships drove the quarter and our yearly performance together. We saw incremental revenue as we introduced real time bidding, fine tuned our digital inventory management and benefited from some political spend.

Journal Sentinel digital solutions, our local digital services agency, continued to attract new customers, 318 throughout 2012, all of them representing incremental revenue.

JS Everywhere digital-only subscribers grew modestly in the quarter. Note that 68% of these digital subscribers come from outside Southeastern Wisconsin. Recently, we've launched Android versions of our tablet and smartphone apps and moved all of our devices behind our digital subscription paywall in early February.

Circulation revenue in the quarter, excluding the extra week, was flat and up nearly 1% for the year. Price increases have offset volume declines.

Our other category, which includes commercial print and delivery, was up 14% in the quarter and 4% for the full year, excluding the extra week. Both the quarter and the year benefited from our expanded relationship with Sun-Times Media Holdings LLC and other new print contracts. Our other category also includes event revenue, which was up significantly in the quarter as a result of our annual wine and dine event.

Expenses at the daily newspaper, excluding special items and the extra week, were up almost 2% in the quarter, driven by increased ROP advertising and costs related to commercial printing. For the year, expenses decreased almost 1%, driven by reduced headcount and our continued focus on cost management.

As Steve mentioned, we sold our Northern Wisconsin newspapers and shoppers to Brown County Publishing. Brown County is a strategic buyer that wish to add to their existing footprint of community newspapers in Northern Wisconsin. We will continue to print these weeklies and shoppers under contract at our Waupaca printing plant. The sale allow us to focus more intently on our suburban Milwaukee publications.

As we move through the first quarter, the results are encouraging. We continue to see strong retail ROP and digital growth. We expect year-over-year revenue decline similar to that of the fourth quarter in the low single digits, excluding Northern Wisconsin.

Now, I'll turn the call back over to Steve for a few concluding comments.

Steven J. Smith

Thank you, Betsy. Looking ahead to the first quarter, we're excited to have NewsChannel 5 in Nashville, which will add significant revenue.

On a same-station basis, excluding political, we expect total Broadcast revenue to be up in the mid-single digits over the first quarter of 2012 and expect a modest increase in Broadcast expenses.

In Publishing, excluding Northern Wisconsin, we expect declines in the low single digits as a seasonally slow quarter is offset by commercial printing revenue growth.

Angela, we'll turn the call back over to you.

Angela Lois

Thanks, Steve. Operator, this concludes our prepared remarks. You may begin the question-and-answer session.

Question-and-Answer Session

Operator

[Operator Instructions] Our first question is from the line of Dan Leben from Robert W. Baird.

Patrick C. Wang - Robert W. Baird & Co. Incorporated, Research Division

This is Patrick Wang for Dan Leben today. So just really quick on the crowding-out effect after we saw the -- after the elections. Were there any particular categories that are hit the hardest? And then have you noticed any trends with the specific categories into the first quarter?

Andre J. Fernandez

Yes, this is Andre. I would say that the crowd-out was pretty universal. I think what to see, as I mentioned in my prepared remarks, to see auto back, which in December even our auto was down, particularly in October and November when the political was the heaviest. To see that come back was very encouraging and that's continued here into the first quarter. I think what comes to mind, I think, is trends we're seeing less of crowd-out. It's just we saw some national weakness on radio in the second half of the year. We're seeing that and that's also led by even auto, national and radio, telecom, restaurants. There were weakness in national radio in the second half of the year. It's not quite as weak here into the first quarter, but some of those category trends continue here into the first quarter.

Patrick C. Wang - Robert W. Baird & Co. Incorporated, Research Division

Okay. And then onto the digital subscriptions. It's -- we've seen some strong growth there, but have you noticed any trends changing in terms of migrations away from print?

Elizabeth Brenner

We really -- Patrick, we really haven't. I think our print volume declines are consistent with where we expected them to be throughout the year. We haven't seen any significant trade-off. If there's been any change in pattern, it's probably a reduction in page views on the part of our digital readers. Our unique visitors for the quarter were actually up almost 2%. Our page views were down 20%. So I think that tells us that we're holding the audience. They're just using the site less because of the table.

Operator

The next question is from Edward Atorino from Benchmark Company.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Pretty nice newspaper numbers. They're very different than lots of other people. I hate to say, is it just the economy where you are that's a lot better than that of other people? Are the newspapers doing anything to stimulate sales or get more dollars out of the marketplace?

Elizabeth Brenner

Ed, I think as we look at the Milwaukee economy, it's pretty consistent with that of the upper Midwest. I think we've been very fortunate in being able to approach our advertisers with a wide range of new promotions that have really caught their imagination. So as a result, we saw ROP growth during the quarter in some pretty traditional categories like department stores, like food, like auto dealers. All of those are areas where we were able to sign and sell pretty significant sponsorships and grow new dollars from existing customers.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

You have a year-to-year increase in the circulation price going, is that right?

Elizabeth Brenner

Yes, we raised pricing in January of last year and that, as you recall, was a pretty significant 15% increase to incorporate our digital subscription program.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

And do you plan another price increase soon?

Elizabeth Brenner

We did raise prices in January, not nearly as much as we did last year. It took about an average 7% increase.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

Do you have digital-only subscribers?

Elizabeth Brenner

We do.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

And are they paying?

Elizabeth Brenner

They are paying. They're paying $0.99 a week. We have 12,000 of them currently that have been with us pretty steadily and about close to 70%, actually 68% of them, come from outside our market. So we know they have a lot of interest in following the Green Bay Packers.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

And looking at the new station, do you need any investment there or is it pretty much go as it is?

Andre J. Fernandez

Yes, about Nashville yes. There's no -- from a capital standpoint, much of that work was already performed. So we don't think there's much in terms of physical investment. They're high-definition. The facilities are in good shape. There was actually, if you recall -- if you read in our 8-K, you'll see -- you'll remember the flood that was in Nashville a few years ago, which they were impacted by which they had to do some repairs and effectively rebuilt their newsroom. So we don't think that they've got much in the way of needed investment beyond just maintenance CapEx.

Steven J. Smith

It's a solid technical operation, Ed, and they will need ongoing capital to support the strength of the station, but nothing that you would consider outstanding.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

And have you changed any of their programmings you get with the Wheel and Fortune (sic) [Wheel of Fortune], whatever that is showing that would put in lower costs. Some stations have done that.

Andre J. Fernandez

No, we haven't.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

[indiscernible] Low-cost syndicated shows and put in other stuff.

Andre J. Fernandez

No, their lineup is essentially the same and it's working.

Steven J. Smith

And strong local programming as well.

Operator

[Operator Instructions] The next question comes from Craig Huber from Huber Research Partners.

Craig Huber

I have some general housekeeping questions, please, first. What was your digital ad revenue in dollars for both your newspaper division and Broadcasting for the full year, please?

Andre J. Fernandez

For the full year?

Steven J. Smith

Andre is going to go ahead and answer that, Craig.

Andre J. Fernandez

Yes, okay. So it was $16.9 million for the full year for the company, split $4.3 million of Broadcast and $12.6 million for Publishing. That was up 11% total company.

Craig Huber

That includes the extra week, of course, right?

Andre J. Fernandez

Correct.

Craig Huber

Okay. And then Betsy for the newsprint, what was the percent change adjusting for the divestitures per consumption for newsprint? What average price was the difference there versus a year ago?

Elizabeth Brenner

Consumption for the quarter, Craig, was up a little over 9%, 9.2%, and price was up 0.3%. Very, very stable. Price year-over-year was actually unchanged.

Craig Huber

The 9.2%, does that include the extra week?

Elizabeth Brenner

Yes.

Craig Huber

Do you have it without the extra week?

Elizabeth Brenner

I don't believe I do.

Craig Huber

I could just do an estimate on that. Your circulation volume, Betsy, for daily and Sunday in the quarter for your flagship paper, what's the percent change there, please?

Elizabeth Brenner

Daily for the quarter was down 2.8%. Sunday for the quarter was down 6.2%.

Craig Huber

Okay. And what about pricing, Betsy, for your advertisements across the 3 main categories? What's the percent change there versus a year ago?

Elizabeth Brenner

Percent change on retail advertising, Craig, down 26.3%; classified, down 14.8%; national, down 8.6% for a total blended number of 22.8% down.

Craig Huber

I'm sorry, that's pricing? So you're telling me the volume offset all that largely?

Elizabeth Brenner

It did. Volume and retail was up 54%. So we had some special incentives and actually sponsorship programs, which you also heard us mention is that the mix in retail advertising shifted pretty dramatically. We have a lot more business from our department stores, from our car dealers, both of which are lower rated and lot less business from, say, telecommunication advertisers, which would be higher rated. So the mix worked for us with the volume growth we saw, we saw the kind of revenue gains that we mentioned.

Craig Huber

What are you sort of planning on doing pricing for this year? I mean, those are monumental price changes.

Elizabeth Brenner

Oh, but if we can manage them with a stable newsprint price, we think it works to create a better marketplace in the newspaper.

Craig Huber

All right. Then on the Broadcasting side, please, what was the auto percent change adjusting for the acquisitions for radio and TV?

Andre J. Fernandez

Sure. I'll give you for the quarter and the year, how about that? So for TV, it was 18% -- up 18% in the quarter, up 21% for the year. That's x the acquisition and...

Craig Huber

It includes the extra week?

Andre J. Fernandez

Yes, that includes the week. And then radio was up 23% on the fourth quarter and 15% for the year, also including the week.

Steven J. Smith

And that was a -- just a reminder on auto, recall auto was actually down in 2011 for TV. So it was nice to see that recover.

Craig Huber

You don't happen to have those numbers without the extra week do you?

Andre J. Fernandez

I don't. I'd have to follow up with you on that.

Craig Huber

Okay. Can you just talk a little bit further about cost, Betsy, excluding the divestures, small divestitures. Were you playing for costs for your Publishing group for this year? The cash costs, let's put aside D&A. I know you mentioned that was a driver to pull down costs. Excluding that and excluding the extra week, how...

Elizabeth Brenner

Yes, we've done a pretty effective job of managing headcount FTEs at the company this year for 2012. We're down almost 9% over the course of the year. So we continue to manage that number very closely. We look for opportunities to outsource wherever we can. And we will continue -- without identifying specifics right now, we'll continue to look for every efficiency we can to continue to drive costs out of the business.

Craig Huber

Do you sort of think maybe core the cash costs then for your newspaper division, adjusting for the extra week and the divestitures, down sort of maybe low single digits, 2013?

Elizabeth Brenner

No, it's really -- it's fairly early in the year. I think we've distinguished ourselves by being able to drive those expenses down each year, and we'll do it again in 2013.

Craig Huber

Okay. My final question, if I could, and forgive the tone of this question. I've just noticed over the years, like other investors have, you guys have sold off an awful lot of noncore properties over the years, all the way back to your IPO days. What is your -- are you content to keep hanging on to your Milwaukee newspaper? I know it's your home market, but investors do ask it from time-to-time. Are you guys content to still be a newspaper company on top of your broadcasting as far as the eye can see here?

Steven J. Smith

Well, Craig, you're right. We have sold noncore assets and that is to focus -- it's Steve, to focus on the local media business and the strategy is to grow the Broadcast group with a focus on television, although you see us be opportunistic about radio opportunities over the last couple of years and to keep the Journal Sentinel strong and profitable. So we've talked about this in the past. The board, obviously, discusses all the strategic issues and is observant of what's going on in the industry. However, these are -- we're a relatively small company at $400 million. So with the local media focus, we do believe that we can drive both segments of this business going forward.

Craig Huber

I actually do have one other question. These small divestitures with the non-dailies, what's the annualized revenue run rate there, please, that you've divested?

Andre J. Fernandez

Yes, I've got it handy, hold on. We divested -- I'll give you the divested Northern Wisconsin. Is that okay?

Craig Huber

Sure.

Andre J. Fernandez

Yes, okay. For the full year, that was $8.5 million of revenue and $1.1 million of [indiscernible] earnings for the divested Northern Wisconsin publications on an annualized basis.

Operator

The next question comes from the line of Edward Atorino.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

I want to get into Craig's question. In looking at rates, the big decline is the realized, that's if you sell 100 pages at $1 and 1 page at $10, you're going to see the rating. Was there a rate change in your rate card [ph] of that kind of significance, or was it just the mix that resulted in sort of your realized rate declines?

Elizabeth Brenner

It was the mix and it was also our opportunity to put some special sponsorships in front of advertisers where they bought pages, volume for a reduced rate. But that helped drive the revenue and it also made for very attractive newspaper during the key holiday selling season.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

So it was the rate card though, right?

Elizabeth Brenner

We have...

Edward J. Atorino - The Benchmark Company, LLC, Research Division

One page costs you $1, 2 pages costs you $1.50.

Elizabeth Brenner

But we have custom rate programs for advertisers all year long. This is just something we did during the quarter.

Edward J. Atorino - The Benchmark Company, LLC, Research Division

You didn't slash your rate costs to that degree, though, no.

Elizabeth Brenner

No, because there's still plenty of advertisers paying their contracted rate and their rate card rate. Some big players were the ones that jumped in and took advantage of these sponsorship opportunities.

Operator

As there are no more questions, this concludes this morning's call. As a reminder, the replay of the call and an archive of the webcast will be available today through to November 3. Please refer to this morning's press release for the dial-in information for the replay of the call or visit the website at www.journalcommunications.com/investors for the archived webcast. Thank you.

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Source: Journal Communications Management Discusses Q4 2012 Results - Earnings Call Transcript
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