Journal Holds its own Q&A Session


ChatIt is the practice of companies on the verge of a major transaction to eschew the standard conference call with investors and analysts, thereby depriving the financial community from asking any questions.

However, Journal went to the trouble of asking itself the questions it thought might be asked.

We hereby pass it along to you from Journal:

1. Discuss political and issue and Olympics revenue performance.
We were very pleased with political and issue advertising revenue of over $18 million this year, $17 million on television and $1 million on radio. This total exceeded what we saw in our last non-presidential election year.
Our Olympics revenue of $2.6 million also exceeded our expectations, above the levels we saw back in the 2010 Winter games.

2. Discuss local and national advertising performance.
Local television revenue was down 0.5% and down 0.6% for the year, primarily driven by the displacement of incremental political advertising. National revenue was flat in the quarter and down for the year, attributable to both political displacement and pullbacks earlier in the year experienced across the industry.
We finished the year strong in the important local category for radio, up 6.5% in the quarter and 2.6% on the year. While we did see some declines in national, it is important to remember that national is a very small component of radio spot revenue.

3. How was automotive advertising revenue on both television and radio?
Television automotive revenue was down 1% in the fourth quarter primarily due to political displacement. Pre-election, we experienced declines but after the election we saw a return to healthy growth for December that nearly offset the displacement impact. For the year, television automotive revenue was up 1%.
Automotive revenue was a significant growth factor for radio, particularly in the fourth quarter, up 13%, and also on the year, up 3%, which helped propel our strong local revenue performance.

4. Did you have any major cable or satellite renewals in 2014?
We announced the Dish Network renewal in December. The Dish Network renewal was our only significant renewal in 2014.

5. Discuss advertising revenue performance for fourth quarter and full year 2014.
Advertising revenue performance slowed in the fourth quarter, down 7.2%, as retailers grew cautious about heavy promotional spending in the face of stronger-than-expected holiday sales that began in October.
Gains in ROP spending by department stores in the fourth quarter could not offset preprint losses in the same category, as faster-paced promotional decisions were made weekly with efficiencies in mind. ROP declines in finance, auto dealers, communications and entertainment impacted business at the daily newspaper for the quarter. Preprint losses were impacted by the loss of two major insert advertisers we discussed last quarter. The challenges we faced in the second half of the year and overall industry headwinds led to advertising revenue being down 4.5% for the full year.
The Milwaukee Journal Sentinel appointed Dani Longoria, managing director of national media sales at Scripps, as VP Advertising Sales. Dani joined us from Knoxville and began her new duties in Milwaukee this week.

6. What was impacting your digital results?
Publishing digital advertising revenue was down 8.6%. We experienced declines in remnant/refresh advertising and in retail display sponsorships, which have been challenged by the growth of third-party networks with aggressive rating programs. Audience retargeting programs and classified upsells were digital bright spots where we saw some growth.
Annual digital advertising revenue for publishing was virtually flat, down 0.2%.

7. Discuss circulation revenue performance for the fourth quarter and full year 2014.
Circulation revenue was down 1.4% in the quarter and 3.4% for the year. We saw volume declines in both home delivery and single copy. Circulation revenue declines were also impacted by a previously discussed change in our methodology to defer revenue during the subscription grace period. While this impacts revenue, it has minimal impact to earnings. Excluding this change, the decline would have been more moderate.

8. What expense savings did you realize or put into effect in the fourth quarter?
Newshole reductions for the daily newspaper were implemented in the fourth quarter as well as call center changes and reductions in wire services and marketing expected to yield in excess of $1.0 million in annual savings.

9. What was your workforce reduction charge in the fourth quarter and full year 2014?
Severance in the fourth quarter was $1.9 million, with annualized anticipated payroll savings of $2.6 million. For the year, total severance was $2.7 million, with $3.2 million in anticipated annualized savings tied to the reduction of approximately 43 FTEs.

10. Can you give an update on pension?
We were not required to make a contribution in 2014 to our qualified defined benefit pension plan. The underfunded status of the qualified defined benefit pension plan increased by $29.7 million in the year ended December 31, 2014 to $72.6 million at December 31, 2014 due primarily to: (1) an unfavorable effect of $16.8 million from a decrease in discount rates; (2) an unfavorable effect of $13.0 million from an increase in life expectancies, resulting in an increase in the benefit obligations; (3) interest cost of $7.1 million; and (4) other actuarial adjustments of $0.5 million; partially offset by (5) a favorable effect of $7.7 million from actual returns on plan assets.