Executives
Steven Smith – Chairman, CEO
Doug Kiel – President, Vice Chairman & CEO of Journal Broadcasting Group
Paul Bonaiuto – CFO, Executive Vice President
Betsy Brenner – Executive Vice President
Sarah Wilkins
Analysts
Peter Salkowski – Goldman Sachs
Mark Bacurin – Robert W. Baird & Company, Inc.
Tracy Young – Bear Stearns
Craig Huber – Lehman Brothers
John Conrich – Sandler Capital
Mike Caputo – Cramer Rosenthal
Journal Communications, Inc. (JRN) Q1 2008 Earnings Call April 22, 2008 11:00 AM ET
Operator
Good day ladies and gentlemen and welcome to the fourth quarter 2008 Journal Communications earnings conference call. (Operator Instructions)
This conference call contains forward-looking statements related to the Journal Communications businesses that are based on current expectations. Forward-looking statements are subject to risks, trends and uncertainties including changes in advertising demand and other economic conditions that could cause actual results to differ materially from expectations expressed in forward-looking statements. All forward-looking statements should be evaluated with the understanding of their inherent uncertainty.
Journal Communications written policy on forward-looking statements can be found on page one of the Company’s most recent annual report on from 10K as filed with the Securities and Exchange Commission.
I would like to turn the call over to Steve Smith, Chairman of the Board and Chief Executive Officer, please go ahead Mr. Smith.
Steven Smith
Thank you JD and welcome everyone. Paul Bonaiuto, Executive vice President and Chief Financial Officer will participate in this morning’s call. Doug Kiel, President of Communications and CEO of our Broadcast Group and Betsy Brenner, Executive VP of Journal and Chief Operating Officer of our Publishing business will be available during the Q&A session.
Any discussion of EBITDA today’s conference call may be referenced back for our unaudited reconciliation of consolidated debt earnings to consolidated EBITDA schedule which accompanies today’s earnings release.
Unless otherwise indicated, all comparisons are to the first quarter ended April 1, 2007.
This morning’s Journal Communications reported net earnings of $6.7 million for the quarter ended March 30, 2008. Earnings from continued operations were 6.3 million, basic and diluted earnings from share from continuing operations were $0.10 for both and basic and net earnings per share were $0.11 for both. For the first quarter revenue of $134.3 million decreased about 6%.
The weak economy continued to negatively impact our advertising based businesses for the first quarter of 2008, especially in the real estate and employment classified categories at the Daily Newspaper and broadly across our Las Vegas, Ft. Myers, Naples and Tucson Broadcast Properties.
We were encouraged by growth in the interactive revenue across our businesses, which was up 23% to $4.5 million for the first quarter of 2008. We are maintaining strict cost control and seeking operating efficiencies wherever possible.
We remain focused on creating compelling local content across our immediate businesses. Nothing demonstrates this more convincingly that the Milwaukee Journal Sentinel receipt of the 2008 Pulitzer Prize in the category of local reporting for David Umhoefer’s 2007 investigation of the Milwaukee County Pension System. His stories uncovered a pension plan which allowed some veteran county employees to purchase additional years of service for time they spent for seasonal or part-time employees before joining the pension plan.
In selecting Dave, the Pulitzer Prize Committee cited his writings as distinguished examples of reporting on significant issues of local concern demonstrating originality and community expertise.
It is the first Pulitzer ever awarded to a member of the staff of the Milwaukee Journal Sentinel, which had been a finalist for the prize in ’03 and ’06. Our predecessor Milwaukee Journal was awarded five Pulitzers most recently in 1977.
The Journal Sentinel recently won a prestigious award from the Sigma Delta Phi administered by the Society of Professional Journalist for non deadline reporting for a two-part series entitled Chemical Fallout, which detailed the potential dangers of common household products.
In mid-March, Journal Broadcast Group entered into an asset purchase agreement with Tucson Communications and Cascade Broadcasting group to purchase KWBA TV in Sierra Vista, Arizona, serving the Tucson television market, subject to regulatory approval and customary closing conditions. KWBA is affiliated with the CW Network. You will recall, in the Tucson market, we currently own KGON, the ABC affiliate as well as one AM and three FM radio stations.
The acquisition of KWBA is directly on the strategy for Journal as we seek to build our cross platform businesses in growth markets such as Tucson. With two television stations and four radio stations in this market, we can increase our hyper local presence in Tucson, particularly our local news focus and even better serve our viewers and listeners in the Tucson area.
Despite tough economic conditions, our television stations in Lansing, Palm Springs and Boise grew revenues in the first quarter of ’08, with operating earnings up significantly in Lansing and Boise.
We are also pleased with the smooth transition to the digital format in our new facility at KTNB TV in Las Vegas, which is our first all high definition station.
We continue to have news rating momentum in the first quarter ’08 in several key areas, which set us up well for the upcoming political season and the remainder of the year.
In the February Nielsen’s, we were number one in the late news in the key 25-54 adult demographic in Milwaukee, Ft Myers and Lansing.
In radio, revenue performance was mixed across our markets, which Paul will detail shortly.
In early April, the Milwaukee Brewer’s and our news radio 620 WTMJ announced the completions of a multi-year radio rights agreement that continues the long standing partnership between the two organizations. We were pleased to extend this partnership to bring the Milwaukee Brewers on radio to fans all over Wisconsin. The Brewers noted that WTMJ Radio’s commitment to covering the team is second to none and this relationship is among the great sports traditions in the region.
Broadcast Developmental or non-transactional advertising revenue is expected to continue to play a large role in our future growth. In the first quarter of 2008, it reached $3.9 million in TV and $3.4 million in radio up about 7% in total.
Broadcast Interactive revenue in 2008 first quarter was about $867,000 an increase of 53% over last year’s first quarter.
In Publishing, Journal Sentinel continues to face ongoing advertising revenue challenges with declines of the newspaper reported across all advertising categories.
To help offset decreasing revenues, Journal Sentinel continues to keep a sharp focus on cost containment aided by reductions in payroll and benefit expenses and newsprint costs.
In mid-March, Journal Sentinel joined the consortia among Yahoo and a group of leading U.S. newspaper companies to combine the newspaper’s unmatched local news and advertising reach with the leading technologies and audience of Yahoo and important global internet brand and one of the most trafficked internet destinations worldwide.
Journal Interactive Division produces the Newspaper’s companion website JSonline.com as well as JobNoggin.com and Packerinsider.com among others. The strategic partnership will enhance jsonline’s advertising revenue using Yahoo’s graphical advertising technology, leverage Journal Interactive’s leading local online sales force to create an all-in-one buying opportunity for local Milwaukee area advertisers and distribute Milwaukee Journal Sentinel’s and JSOnline’s high quality news content broadly across the Yahoo network.
Journal Interactive continues to post solid growth and for the first quarter 2008, accounted for more than 10% of the advertising revenue at our daily newspaper up from about 7.6% in last year’s first quarter.
At The Daily Newspaper, interactive revenue was up 17% to $3.6 million in the first quarter of 2008. Jobnoggin.com, our co-branded employment site with Monster Worldwide launched late in ’07 is registering more than a million page views per month...
In January, we launched SportsBubbler.com a portal into the world of Wisconsin’s sports. The website includes information created by our staff as well as Wisconsin’s sport fans around the globe who can submit links to stories and videos around the web, share photo’s they have taken, participate in live chats with other fans and more. Although it is still in beta testing mode, we are pleased with the page views to date and will keep you informed on its progress.
Our hyper-local community now websites, which launch in late ’06 and early 2007, continue to gain traction, with revenues up more than 15% for the quarter compared with the same period last year.
Aggregate page views in the first quarter 2008, reached more than 1 million per month double last year’s quarterly page views.
In the first quarter 2008, non-traditional revenue comprised almost 19% of Journal Sentinel’s business. Journal Sentinel’s commercial printing and commercial delivery revenues remain strong, up about 29% and 5%, respectively, for the quarter.
Our reach of our print products and online brands in the Milwaukee areas are formidable reaching 83% of the metro Milwaukee adults each week according to the Scarborough’s Research 2008 report.
At our Community Newspapers and Shopper Division, revenue and operating earnings from continuing operations declined in the 2008 first quarter due primarily to weak automotive advertising and real estate markets, especially in Florida.
Late in the quarter, Journal Community Publishing Group acquired two free shopper publications serving North Central Wisconsin reflecting our plan to deepen our local media offerings in this state.
Revenue at IPC declined slightly in 2008’s first quarter as a number of our customers, especially in the real estate area, reduced their spending due to weakness in the economy.
I would like to as Paul to begin his in-depth financial review, Paul.
Paul Bonaiuto
Thank you Steve, for the first quarter 2008, revenue of $134.3 million decreased 6.2% as we continue to experience ongoing advertising weakness across our businesses. Net earnings were $6.7 million compared to 73.3 million in the first quarter of 2007, which included a $65.1 million gain net of tax from discontinued operations of Norlight and certain clusters of our community newspapers and shoppers division.
For the first quarter 2008, the gain from discontinued operations of $400,000 reflects a reduction in the reserve for preliminary settlement of environmental charges related to NorStar Print Group.
For the 2008 first quarter, other expense, which primarily consists of interest expense, decreased about $700,000 to 2.3 million reflecting a decrease in average debt outstanding due to divestitures and partially offset by expenses related to the purchases of the Company's common stock.
Net employee benefit costs Company wide of approximately $4.3 million reflected an increase of about $600,000 due to unusually high health care costs.
For the first quarter 2008, our effective tax rate was 39.1% compared to 39.6.
Turning now to our segment performance, publishing revenue declined nearly 9% in the first quarter 2008, largely due to the softening economy coupled with ongoing secular influences. This resulted in continued weakness in retail and classified advertising, which was further exacerbated by the impact of the early Easter holiday.
At the Daily Newspaper, total revenue of $51.6 million was down 8.5%. Advertising revenue of $35 million decreased about 12%. As just mentioned, weakness in retail and classified advertising were major factors in this decline. We estimate that the net negative impact of the Easter holiday, on retain and classified advertising to approximate $500,000.
Retail revenue of $20 million was down approximately 3.8% largely reflecting decreases in our OP and preprints. Our OP declines were most prominently seen in the auto and building and hardware categories. Retail preprints were down 5.5% year over year for the quarter. Classified advertising at the Daily Newspaper of $12.3 million, which includes both print and online, decreased about 21% for the first quarter of 2008, reflecting the weak economy.
Looking specifically at the classified verticals, employment was down approximately 27%, auto declined about 5%, real estate was down about 32% reflecting ongoing softness in both home sales and rentals and the other classified vertical increased about 3% year over year.
On a combined retail and classified basis, for all products at the Daily Newspaper, auto advertising was down about $500,000 for nearly 15% compare3d to last year. Our national advertising revenue category decreased approximately 17% to $2 million for the quarter. This reflects the decreases in all categories. The direct marketing category at The Daily Newspaper was down about 29%. This decline primarily represents decreases in both solo mailings and postage billed customers.
Although interactive advertising is reflected in the various revenue categories, total online revenue remains strong increasing by roughly 17% to $3.6 million for the quarter. Interactive Classified revenue of $2.1 million increased 5%.
Looking specifically at the first quarter 2008, online classified advertising verticals employment decreased by about 2% to $1.1 million due to the weaker economy. Auto increased about 27% to almost $750,000; however, real estate/rentals decreased by roughly 18%.
Moving beyond advertising revenue, circulation revenue of $12.3 million for the first quarter was down 3%. Other revenue at the Daily Newspaper of $4.3 million was up almost 10% for the quarter principally reflecting gains in commercial printing and commercial delivery partially offset by a decrease in brokered printing. For the 2008 first quarter, the commercial print revenue increase reflecting the New Chicago Reader contract.
For the quarter, operating earnings from publishing decreased approximately 16% to $4.2 million largely reflecting once again decreased revenues.
At the Daily Newspaper, operating earnings totaled $4.5 million down roughly 22%. Operating margin was 8.8% down from 10.3% reported last year.
Total expenses for the 2008 first quarter at the Daily Newspaper, were $47.1 million down about 3.8 million or 7% compared to last year. Newsprint costs were down by $900,000 reflecting a 3.9% decrease in pricing and an approximate 11.5% reduction in consumption.
The November 2007 workforce reduction as well as other labor savings efforts resulted in labor and benefit savings of $1.4 million. We also experienced the $600,000 reduction in postage related to the lower sales of direct mail.
During to our Community Newspapers and Shoppers, revenue from continuing operations for the first quarter of $9.1 million was down about 9% compared to last year reflecting declines in all revenue categories. Weak automotive advertising continued to affect both retail and classified and very soft real estate advertising affected our Florida market in particular.
Circulation revenue at the Community Newspapers and Shoppers of $261,000 reflected the change to a pre-distribution model of the Community Newspapers in the Milwaukee area in February 2007. As a result, year over year declines in circulation revenue will no longer be affected by this change. Other revenue decreased approximately 10%.
The Community Newspapers and Shoppers operations reported an operating loss of 294,000 for the first quarter reflecting the decline in revenues as well as an increase in healthcare and cost related to an environmental cleanup at a former site. This compares favorably to a loss of 788,000 recorded in last year’s first quarter. Notwithstanding the headwinds of revenue declines and unusual costs, this business was able to reduce its loss compared to last year by nearly a half a million dollars through tight cost controls across the operations.
For the first quarter, Broadcasting revenue decreased about 4.5% to $49.3 million. Broadcasting operating earnings of $7.1 million were down almost 29% in the first quarter of 2008 largely reflecting the decrease in revenues.
For the first quarter, revenue from television stations decreased about 1.1 million or 3% to $32.4 million.
Political and issue advertising revenue for the 2008 quarter was 1.7 million compared to 500,000 last year.
Operating earnings from television stations decreased nearly 41% to $3.6 million. This largely reflects the declines in revenue at our Las Vegas and Ft. Myers/Naples stations and increase cost for programming and production depreciation related to our investment and high definition platforms and bad debt expense.
Moving on to radio, for the first quarter 2008, revenue decreased $1.3 million for almost 7% to 16.9 million. This was due in large part to decline in advertising a portion of which reflects changes in a Milwaukee Sports affiliation agreement that previously included advertising and is now based on a fee per game. Absent the impact this sport’s affiliation agreement change, revenues declined by 3.8%. Our Wichita operations posted mid-single digit growth in revenues with Omaha and Knoxville essentially flat and the remainder of our markets reporting increases.
Operating earnings from radio stations of $3.5 million increased about 9%.
In printing services for 2008 first quarter, revenue decreased about 2% to $16.5 million. Operating earnings from printing services decreased 22% to $779,000 due to increased employee benefit cost and prior year non-recurring lease income partially offset by favorable production efficiencies.
For the 2008 first quarter, revenue for the other segment of $7.7 million decreased approximately 6% due to softness in the mailing services part of our direct marketing business. Other operating earnings were $400,000.
Our balance sheet remains sound. For the 2008 first quarter, operating cash flow was $10.4 million. At the end of the first quarter 2008, debt was $210.1 million reflecting our divestitures partially offset by share repurchasing. Shareholder equity stood at $459.3 million. Our capital expenditures from continuing operations in the 2008 first quarter were $3.2 million compared to 7.8 million last year.
We remain committed to returning value to our shareholders. During the first quarter 2008, the Company repurchased 4, 127,600 of its Class A shares completing its fourth 5 million share operation. From 2005 through March 30, 2008, we have repurchased a total of 20 million shares of our common stock of which 16.8 million were class A shares.
For the second quarter of 2008, Journal Communications currently anticipates that its publishing revenues will be down compared to the prior year reflecting continued challenges in classified advertising partially offset by continued strength and online commercial printing and commercial distribution at the Daily Newspaper. Both radio and television revenues are expected to be down slightly.
I would like to turn the call back over to Steve for a brief wrap up before we open it up for Q&A, Steve.
Steve Smith
Thank you Paul, despite economic headwinds, we continue to deliver relevant products to our audiences, expand our market reach and effectively sell advertising to our customers through both our traditional channels as well as our new digital products.
Within a difficult operating environment, we are managing expenses and implementing efficiencies throughout our operations while aggressively pursuing digital and new media initiatives.
We remain focused on building our audience by providing compelling and pertinent local products. Our tradition for excellence in print and broadcast journalism keeps our valuable brands in the forefront of their respective communities. We believe we are positioned to weather cyclical advertising challenges as we continue to address longer term industry challenges by enhancing our current products and developing new ones, growing our non-traditional revenue streams in both publishing and broadcasting, maintaining tight cost controls and expanding our presence in specific local markets.
In broadcasting, we continue to believe that revenues in the second half of ’08 will benefit from strong advertising demand for the Summer Olympics on our three NBC stations as well as substantial political and issue advertising in key battleground states including Wisconsin, Nevada, Florida, Michigan and Missouri.
Moving into ’09 and beyond, we expect to capture cable retransmission fees that we believe will have a positive effect on our bottom line.
We have not waivered in our enthusiasm for the opportunities that we believe are ahead of us in Las Vegas and Ft. Myers where we see the economic slowdown to be a temporary step back.
As I said in the first quarter, we firmly believe that over the long term, we will benefit from significant growth in these markets and our positioning our television stations there to be ratings leaders.
Our Las Vegas station with its state of the art digital facility is competitively well positioned and will soon debut perhaps the markets strongest anchorwoman whom we signed in ’07 to a multi-year contract.
In radio, we are particularly enthused with the strength of our relationship with the Brewers and the Packers as well as the new morning team at WTMJ Radio.
We are also seeing a rebound in Omaha where our sales organization has been strengthened.
At our Daily Newspaper, our newsroom is energized as ever with the receipt of the Pulitzer Prize. As always, we seek to integrate the content of our Daily Newspaper, weekly’s and non-traditional revenue sources, diversified revenues across multiple products and deepen our product offerings.
Journal Interact’s ongoing initiatives are delivering increased audience share and continued advertising growth across a wide range of publishing websites. While we still see economic weakness in our Milwaukee market, we are resolute in our pursuit of non-traditional revenue growth and we are keeping our costs under control.
As Paul said, we have a very strong balance sheet with low debt. Our solid cash flow enables us to consider further investments in our business, potential acquisitions, ongoing share repurchases and continued cash dividends.
Reiterating what I said last quarter, we believe local content and local advertising continued to offer opportunities despite secular changes for traditional media and the current economic challenges.
One last thing before we move to the Q&A portion of our call, I would like to take a minute to thank Sarah Wilkins for her excellent service to Journal Communications and our JRN shareholders. Many of you have heard Sarah on this call for a number of years. She has moved on to Joy Global, another fine Milwaukee Company where she will handle their communications and investor relations and utilize her past experience in the mining business. We thank Sarah and wish her great success at Joy Global.
Operator, this concludes my remarks; you may begin the question and answer session.
Question-and-Answer Session
Operator
Your first call is from the line of Tracy Young of Bear Stearns, please proceed.
Tracy Young – Bear Stearns
Good morning, I have two questions. The first relates to the Auto category, what percentage does that represent of total ad revenues for radio and for television? Also, what are the core expenses from both radio and television?
Steve Smith
Tracy, I couldn’t hear what category you said.
Tracy Young – Bear Stearns
The auto category.
Doug Kiel
I’ve got it; hello Tracy, this is Doug Kiel.
In auto as a category for television in the first quarter was about 21% of the overall revenue. Radio is about 15% that continues to decline as a percentage. Both radio and TV auto as a category in the first quarter was down just slightly over 6% from the year earlier.
Tracy Young – Bear Stearns
Thank you and on the expense side, what is the core expense for both radio and television first quarter?
Doug Kiel
Tracy, Doug again, radio expenses were well under control in the first quarter, down about 6.1% from the year earlier. In television, the expenses increased year to year about 5%; however that drops to about 4.3% with the addition of expenses related to the new television station KPSC, which we added in Palm Springs.
Here is some detail on the expenses for the first quarter, many of which we will not be repeating and I will talk about that in a second. Depreciation expense related to the addition of our new HD infrastructure is Las Vegas and elsewhere and digital newsgathering equipment, which we put in Milwaukee and Omaha that was about $215,000. Barter programming expense was about 181 that will not be returning. Syndication programming costs were higher not because we bought anything extra or lost our discipline there, we have been very disciplined there; but because of a reversal of liability for one additional year for Ft. Myer’s program that was about $160,000. Everybody Loves Raymond except for the cost in the first quarter. Higher employee healthcare costs due to the experience that we had, which was unfavorable about $146,000 and then costs associated with building out companion websites around our various stations in our broadcast group about $143,000 and that won’t be repeating.
Let me add, the expense situation in the broadcast group, a tally for the first quarter was up about 1.2%, which was higher than we would have liked. We have been focusing on that. We expect consolidate expenses for the group, radio and TV together, when 2008 winds up to be just about flat; down a little bit in radio from the previous year and up just slightly in television.
One thing that I would like to add, we have an expense reduction program underway in the broadcast division aimed at finding permanent savings. In payroll alone, our employee count is down just over 3% from the beginning of 2008 until the end of the first quarter.
Since we anticipated looking at the fourth quarter of last year was shaping up that this could occur, we had started reducing our employee count during the fourth quarter of last year. Going from late fall till now; it is down about 5%.
We expect the annualized savings of our payroll reduction program to be about $3 million, slightly more than that, we expect in this calendar year, 2008, a net of severance cost to save about $2 million; but I might add on the employee side, we have also slowed the pace of hiring for those jobs that are important filled and out to about two months and that will garner some additional savings as we go through this year, Tracy.
Tracy Young – Bear Stearns
Thank you very much.
Operator
Your next call is from the line of Mark Bacurin of Robert W. Baird please proceed.
Mark Bacurin - Robert W. Baird
Good morning everyone, a couple of questions, I guess as it relates to cost containment issues across all the different segments; you have been aggressively going after this but given where we are in the economy and the secular issues, it sounds like there is probably more to come. I was hoping maybe we could re-visit some of the segment target operating margins and whether or not your thoughts have changed in regards to what those margin’s longer term goals may be.
Steve Smith
Mark, it is Steve. We have not set out a new operating margins target in any of our presentations. Obviously, we are in a challenging situation from a revenue standpoint. Page after page, you certainly heard that.
We are also living the expense side, I can tell you that Betsy and the people who are running our other business units are absolutely focused on that and margins continue to be an issue we talk about; but we haven’t set out those specific targets probably in recent months because of the fact, we are continuing to work on that everyday and I think especially coming out of the first quarter, it is difficult to do that. It is absolutely a focus for management.
Mark Bacurin - Robert W. Baird
Is there a plan to come out with some new revised expectations or are you just going to keep plugging away and do all you can do?
Steve Smith
I think the best I can say is it’s totally a focus right now; but it’s not in the slide deck for the presentation at Baird as of yet. It is certainly something that as the horizon clears a bit we certainly can do again.
Doug Kiel
I think in the throws of a downturn in the economy coupled with some of the secular challenges we see, especially in publishing, Mark, it is hard for us to see what that next several years might look like; but, we are as Steve said, intently focused on managing our cost. On a market by market basis, Mark, we are looking at it in at every market because that’s the way we manage the business is on an individual market basis as well as looking at the overall.
Mark Bacurin - Robert W. Baird
I think, Doug, it does run down to the thousand dollar level on the cost side indicates you are pretty focused on it.
Steve Smith
Yes, indeed.
Mark Bacurin - Robert W. Baird
Next, Doug, I guess this one is for you.
As we look at the upcoming Summer Olympics and then also this year’s political races given you have several congressional races going on as well, can you give us some feel for how this year’s political and Olympic contribution might look relative to the 2006 timeframe also, in context of a weaker overall economic environment?
Doug Kiel
Yes Mark, we are still very excited about the second half of the year and excited is the right word for us. Let’s talk about the Olympics first. As we’ve said before that generally a summer is slightly less than the winter, we did $3.2 million in the last Winter Olympics. Our Olympic sale and our folks, we built our sales groups and solution base big ticket item folks and so they are really sinking their teeth into the Olympic state, they love that and our early casing has temporary goods so we are still feel that is a tremendous venue to have. We are excited about that Summer Olympics and we are thrilled to have it on three stations, as you know that’s the Olympics.
Political, what we have said is that we do about $16 million or so combined radio and TV in ’06 and we were saying all along that we expect this political issue season to be slightly less than that. I will say that in the first quarter you say the number we had. I know we had some nervous people in our financial group because we had predicted what our political would be and everyone wants to know when it is coming and they ask on calls like this and you don’t know until it comes.
A lot of that political in the first quarter this year was nearly spot on just slightly higher than what we had internally projected and a lot of it came in the last quarter. We were thankful for that and that’s what political is going to b e. There will be less in the second quarter although we have some booked already that is a wild card in our second quarter. The sooner the democratic side of this race gets concluded, the earlier that spigot nationwide will be turned on. As folks get out and try to make up lost time.
Otherwise, for us it’s a third quarter phenomenon, we still feel we are positioned to extremely well in the markets as Steve and Paul outlined to get more than our fair share of the political dollars.
Mark Bacurin - Robert W. Baird
Great, that is helpful and then Steve you did mention that ’09 potential uplift from cable retransmission opportunity presumably you have already had some conversations there. Can you give us any colour on what you might be looking at in terms of revenue lift there for ’09?
Steve Smith
Mark, I will let Doug handle that because he is busy with that.
Doug Kiel
We have been really involved with this, as you know; we put together a comprehensive plan on the re-transmission consent strategy. It goes back several years because we had some other issues to resolve in our market place. Our duopolies strategy where we purchase KPSC, of course and now have an agreement in Tucson. Also, part of that in terms of having multiple platforms to go to cable and say, we have a platform that is more than just one station. As you know, we have announced that making all offering and some of our secondary channels and we have a couple of other products that are all part of this strategy. We have about 2.5 million cable subs around the country and that number has grown just slightly. About 50% are subject to agreements that Sunset in the fall of this year and 22% additional in the fall of 2009 and that is the timeframe for us to go ahead and discuss. We are in discussions across our platform as these agreements get closer to Sunset. We feel, as we said, very strongly that we will be able to monetize this opportunity.
Secondarily to add before we close, we do about a million two per year and have been and that has slightly increased every year in the fees that we get from Echo Star and Direct TV for television stations around the country. This is money ahead of us most in ’09 and then ahead.
Mark Bacurin - Robert W. Baird
Paul, you did mention you have wrapped up now the 4-5 million repurchase plan. Presumably you will be going back to the board for an additional authorization and then the question is should we continue to model in share repurchase activity for the rest of the quarters in ’08?
Paul Bonaiuto
I can’t speak for what actions the Board might take; certainly, that’s been an active part of their consideration set in the past as to how they will utilize our balance sheet; but I certainly can’t speak for the Board ahead of their decision.
Steve Smith
Mark, it is Steve. We will discuss the future share repurchase strategies at the upcoming Board meeting.
Mark Bacurin - Robert W. Baird
What is the date for that?
Steve Smith
May first.
Mark Bacurin - Robert W. Baird
Perfect, thank you.
Operator
Your next call is from the line of Peter Salkowski of Goldman Sachs, please proceed.
Peter Salkowski - Goldman Sachs
Starting with Betsy on the Publishing side, the retail category and in March certainly greatly impacted, I would assume, by the change in Easter. I was wondering if you could give us a sense for how that category is trending in April, in the first part of the second quarter here.
Betsy Wilder
The Easter impact, Pete, as Paul mentioned, was about $500,000. Pretty evenly split between retail and classified, for the most part classified get us on the real estate side we didn’t have people out looking for homes that weekend.
Retail, I think, is creeping up a little bit. The categories where we see softness are those directly related to the economy. We continue to struggle and building supplies and services, hardware, furniture categories. We also carry some retail business from classified advertisers like automotive dealers and real estate advertisers who run their retail pages and then finally the categories we are seeing some lift from in retail surprisingly are financial are also tied to rates and the economy is seeing some pick up with some new products out there and then just other a lot of smaller advertisers across the board.
Peter Salkowski - Goldman Sachs
On the expense side, newsprint I know Paul gave the numbers in regards to where it was in the first quarter consumption and price. I was wondering your expectations for the rest of the year with regards to price and volume.
Betsy Wilder
As you know, you have been talking to a lot of our peers in the industry, price increases that were passed along on the first and now it looks like the second quarters appear to be sticking. We will start to see that lift in price hit us in the fourth period of this year. The savings that we were able to realize through volume consumption through tighter newspapers, through just overall fewer pages, as well as anniversary in period three, the cut down of our presses last year, those all attributed savings we saw this quarter and those will reverse and start to see increases hit us in period four.
Peter Salkowski - Goldman Sachs
Doug, on the broadcast side, could you give us a sense for the guidance for the second quarter on broadcasting. First of all, what level of political, I think you said you expected to be down in second quarter versus first quarter, correct me if I am wrong and also let the pacing looks like for the second quarter on the TV side.
Doug Kiel
It is hard to quote political; let’s talk about the basing. It is hard to say with infinity what the political will wind up being in the second quarter. We haven’t really talked about that in the past quarter by quarter. It will be less than the first and we have had some booking there and the wild card depends on how this democratic race winds up. The pacing overall for the second quarter looks similar to the first. Advertisers are booking relatively light. Both are pacing down slightly, which we mean low single digits again, that wild card being if we get something politically an issue that we don’t expect.
In radio, let’s take radio and TV separately for a second to drill down. Radio will be positively impacted in the second quarter by the exchange that we are putting in baseball season versus basketball. As Paul mentioned earlier, basketball, we were paying a per game basis; we were not selling the advertising. Brewers, a very hot team, interest has been strong. We have an excellent sales organization and they’ve done a great job. Radio, it’s down very low single digits.
Television, we have a political issue, that picture will clear up a little bit as far as we go forward and again there sound in the single digits when we get done with the quarter.
Peter Salkowski - Goldman Sachs
Great, thank you very much.
Operator
(Operator Instructions)
Your next call is from the line of Craig Huber of Lehman Brothers, please proceed.
Craig Huber - Lehman Brothers
Just looking at your publishing operations for a second, could you give us the non-newsprint cash cost percent change for the first quarter?
Steve Smith
If we look at the Daily Newspaper, we had 38.9 million of non-newspaper cash costs for a decrease of 5.3%. At our Community Newspapers and Shoppers, we show a decline on our raw data basis of 11.9%; but adjusting for a modest one time item that we had in the first quarter of last year at the Community Publishing Group, it declined to 10.5%. That decline was really experienced across every expense category and really reflected some highly disciplined cost management.
Overall for publishing, we see $47.4 million in the first quarter for non-paper cash cost and on an adjusted basis, a decline of 6.3%.
Craig Huber - Lehman Brothers
Can you also talk about your flash of newspaper, where you are now for your ad rate hikes for this year? Were there any categories you actually can’t price as flat or even decreased this year?
Betsy Wilder
For the most part, we have been realizing a yield of about 1.2% on all rates across all categories and that was a result of the price increase we passed along in January for all of our contract advertisers and then on a rolling basis throughout the year as individual contracts come up. No categories in particular did we target for increases. We negotiate individually but for the most part, given the value of the paper and everything we have done to improve it over the course year, we translated that to a published rate increase in the cart of about 3%. We are dealing, as I mentioned, 1.2% of that.
Craig Huber - Lehman Brothers
Can you just talk a little more about what you are seeing that your new supers ad revenue here the month of April combined basis. Is the fall off similar to what you saw in March or is it better?
Betsy Wilder
I think I said we’ve got Easter comparison’s in April and looking forward, I think this market was really impacted by some terrible weather over the course of the first quarter. We saw that reflected in our automotive sales, real estate and in retail. Primarily, it hit us on the weekend and that was a big swing. Of course, the early Easter impacted first quarter as well to the tune of about $500,000. Looking at second quarter, we are realizing in period four, better comparisons still down to last year but down in the solid single digits rather than down at the double digits.
Craig Huber - Lehman Brothers
What about your small (inaudible) is it similar?
Betsy Wilder
For the most part, because of the Florida impact, which Paul mentioned, that hurt us a little more. Our papers down at our papers down at the Northern edge of Florida; but I would say Northern Wisconsin for the most part, tracking again solid single digits down from last year.
Craig Huber - Lehman Brothers
Thank you very much.
Operator
Your next call is a follow up from the line of Tracy Young of Bear Stearns, please proceed.
Tracy Young - Bear Stearns
This is a housekeeping question, what was your average price for the shares that were repurchased during the quarter?
Steve Smith
Tracy, it is Steve. We repurchased 20 million shares over that period of time.
Paul Bonaiuto
I think she is asking just for the first quarter, Steve.
Steve Smith
Overall it is $10.97 and first quarter was right around $7 or $7.60.
Operator
Your next call is from the line of John Conrich of Sandler Capital please proceed.
John Conrich - Sandler Capital
By the way, I can understand the weather factor. Everybody here in New York did watch the New York Packer game. It was cold just watching it.
Just a few quickies, what is the flex of newspaper head count down in percentage terms versus a year ago, 15 months ago, whatever?
Betsy Wilder
John, we are down 9.3% that is a drop of 130.6 FTEs.
John Conrich - Sandler Capital
This is versus what?
Betsy Wilder
Versus period three last year, it is period three to period three.
John Conrich- Sandler Capital
Okay and I didn’t quite catch the re-transmission discussion. You said you are doing 1.2 million at roughly annualized now, correct?
Doug Kiel
John, this is Doug Kiel, we are doing 1.2 just on the satellite piece of that Direct TV and EchoStar. What I had said is that we have lined up all the renewals that are deals Sunset. We have 50% that are subject to agreements with just cable companies that Sunset in the fall of this year and a rate of another 22% of fall of ’09. That is ahead of us. Our total subs for just cable is 2.5 million.
John Conrich - Sandler Capital
2.5 million?
Doug Kiel
Yes.
John Conrich - Sandler Capital
That is cable homes?
Doug Kiel
That is just cable homes.
John Conrich - Sandler Capital
I want to ask you also, going back to the head count again, the 9.3% decline versus a year ago, was a year ago generally the take or were you already cutting before that?
Betsy Wilder
No, the peak for our business tends to be the fourth quarter; I can give you the bear age for the fourth quarter as well.
John Conrich - Sandler Capital
And the head count?
Betsy Wilder
Yes, I know. When we look at year end ’07, we are down 6.7 % from the FTEs we had at year end ’07 to end of first quarter ’08.
John Conrich - Sandler Capital
The way to look at it really is year over year then because of the seasonality?
Steve Smith
John, it is Steve. You realize that that has been coming down. Betsy has been decreasing head count every year for the last three and four years, right? I mean, your FTEs have been coming down every year.
Betsy Brenner
The reduced head count, Paul is looking up the number right now.
Paul Bonaiuto
If you go back to 2005, we stood at FTEs at the end of the year at just about 1500.
At the end of ’08 we were a little under 1300, so if you look at the change by a percent what we would have seen is a decline of 14% from ’05 to the end of ’08.
Betsy Brenner
You recall, we took a voluntary buyout last November, which reduced head count at the Daily Newspaper by 56 full time positions.
John Conrich - Sandler Capital
Right now, I would imagine, you are simply not filling open positions except in directive. Is there any voluntary formal proposal out there right now to the employees?
Betsy Brenner
Not right now, but because we have been very aggressive about extruding and reducing positions, going dark in areas where we don’t need those bodies, we have been able to have a steady reduction in head count and at the same time, redeploy people to interactive and the sales floor where we need them.
John Conrich - Sandler Capital
How do you manage going forward this flagship paper? You are ascending down now and add revenue roughly 10%; obviously, God forbid that is the long term trend; but not know whether the long-term trend is zero or plus two or minus four, really not knowing what is going forward, how do you know where to settle out in terms of your expense structure or are you about as lean and mean as you can get right now?
Betsy Brenner
No, I think we have identified a sizeable reduction that will continue through ’08 and beyond. We are committed to getting the size of the Company aligned with our revenue base and if that continues to fluctuate, we are constantly looking for savings and efficiencies across the entire operation both at the Weekly Community Papers and at the Daily.
John Conrich - Sandler Capital
Last quick question, you mentioned in the first quarter that the operating margins for the flagship paper was about 8%, what would the OCF margin be? Would it be around 12%?
I don’t know what G&A is as a percentage of revenue.
Paul Bonaiuto
John, if we looked at our EBITDA margin thus far, our EBITDA margin at the Newspaper was about 14.5% and the margin on operating earnings perspective was 8.8 to be precise.
John Conrich - Sandler Capital
8.8% and normally the first quarter is the low margin quarter?
Paul Bonaiuto
Normally, the first quarter is one of the lower margin quarters.
John Conrich- Sandler Capital
What would be lower than the first quarter? I don’t know of anything.
Steve Smith
John, this is Steve; that is a fair statement.
John Conrich- Sandler Capital
Okay, the caveat is you have been helped by newsprint and now you are going to be hurt by newsprint.
Steve Smith
You are exactly right.
John Conrich - Sandler Capital
Thanks for your help Sarah, good luck to you; I have found you to be a great help; you are a great talent.
Sarah Wilder
Thank you, John. I really appreciate that; I am sitting here kind of silently in the corner helping us get through this last call.
John Conrich - Sandler Capital
Stay in touch with me, please.
Operator
Your next call is from the line of Mike Caputo of Cramer Rosenthal, please proceed.
Mike Caputo - Cramer Rosenthal
Just some clarity on the buy back, are you all the way through your existing buy back or is there some room left? Then, what size would you go back to the Board and ask for and then talk about your priorities for pre-cash flow this year.
Doug Kiel
We are all the way through the fourth authorization so we have completed the fourth and repurchased 20 million shares.
Steve, do you want to talk to the next question regarding the future?
Steve Smith
I think that we have done 4 -5 million share buy backs in a row; but we can’t be predictive in terms of what the Board will do. That has been the history of the buy back. We will have that conversation in about a week.
Mike Caputo - Cramer Rosenthal
Your priorities for a free cash flow this year?
Steve Smith
The decision by the Board with respect to share repurchases is going to be a heavy influence. I think that our position on this is, we want to grow the business; we have said, we want to evaluate opportunities to fit us strategically and I think that you’ve seen the commitments that we have made in Palm Springs and Tucson and even the Waupaca County, the small ones in Wisconsin are right on the strategy that we have articulated. We clearly continue; we want to build this Company long term. We think we’ve got exceptional markets with the current situation though, I think that the share repurchase, a solid dividend and looking for acquisitions is how we are thinking about it. Along with a reasonable capital as we build out the digital television across our platform.
Paul Bonaiuto
What I would add is with one quarter behind us, when you look at how we have used our cash, we used $31 million for repurchases, $6 million for acquisitions, $3 million for CapEx and then our standard dividend was about $5 million.\
Mike Caputo - Cramer Rosenthal
Thanks.
Operator
Your next question is a follow up from the line of John Conrich of Sandler Capital.
John Conrich - Sandler Capital
Just some quickie follow ups; I may have missed this. What are the CapEx estimates for this year for the whole Company?
Paul Bonaiuto
We have been talking about $35 million in the past; I would suggest that we are probably looking at something closer to the $30 million range. As part of tightly managing costs, clearly we are very closely evaluating our capital spending. We are not going to diminish our capital spending in those very important digital areas in the broadcast arena; but anything that has some discretion to it, we are going to step back from this year.
John Conrich - Sandler Capital
Are the tax cash rate rough estimates for this year basically the same as the book rate?
Paul Bonaiuto
We are close.
John Conrich - Sandler Capital
Cash taxes may be a little less than the book taxes?
Paul Bonaiuto
Taxes should be a little less just simply because of some of the intangibles that we had. If you go back prior to 2007 where we had some unusual items, those approximated let’s say around $8 million pre tax.
John Conrich - Sandler Capital
Thanks.
Operator
There are no more questions at this time; this concludes the Q&A. I would send the call back over to Steve Smith for closing remarks.
Steve Smith
Thank you JD; once again thank you all for joining us for this morning call. We appreciate your interest in Journal Communications. As a reminder, a replay of the call will be available today through April 24. Please refer to this morning’s press release for the dial in information for the replay of the call.
Have a great day, everybody.
Operator
Thank you for your participation in today’s conference. This concludes our presentation and you may now disconnect. Have a great day.
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