FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ending October 8, 1995
(10 Accounting Periods)
Commission file number 0-783l
JOURNAL COMMUNICATIONS, INC.
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0382060
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Journal Square, P.O. Box 661, 333 W. State St., Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
414-224-2728
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year, if changed since
last report)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13
or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter
period that the registrant was required to file such
reports, and (2) has been subject to such filing
requirements for the past 90 days. YES X NO
Number of share of Common Stock Outstanding - October 8, 1995 13,854,632
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
Quarter Ended October 8, 1995 Commission file number 0-7831
(10 Accounting Periods)
INDEX
Page No.
Part I. Financial Information
Consolidated Condensed Balance Sheets
October 8, 1995 and December 31, 1994 2
Condensed Consolidated Statements of Income
Ten Periods Ended October 8, 1995
and October 9, 1994 3
Consolidated Condensed Statements of Cash Flows
Ten Periods Ended October 8, 1995
and October 9, 1994 4
Notes to Consolidated Condensed
Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 6
Part II. Other Information 8
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ended October 8, 1995 Commission file number 0-783l
(10 Accounting Periods)
Consolidated Condensed Balance Sheets
October 8, 1995 and December 31, 1994
(Dollars in thousands)
ASSETS 10/08/95 12/31/94
(Unaudited) (Note 3)
Current Assets:
Cash $ 10,867 $ 13,111
Short-term investments 67,775 38,964
Receivables 95,431 81,386
Inventories:
Paper and supplies 17,962 15,265
Work in process 5,317 4,812
Finished goods 8,082 5,366
-------- --------
31,361 25,443
Prepaid expenses 11,420 10,348
Net current assets of discontinued
operations-Note 3 -- 75,272
-------- --------
Total current assets 216,854 244,524
Property and equipment, less accumulated
depreciation of $202,965 and $184,888 158,106 149,687
Deferred charges and other assets 66,656 41,661
Goodwill 31,835 28,864
-------- --------
Total Assets $473,451 $464,736
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 36,316 $ 31,363
Taxes on income (13,346) 133
Accrued liabilities 59,375 49,039
Current portion of long-term obligations 5,760 3,201
-------- --------
Total current liabilities 88,105 83,736
Long-term obligations 4,393 2,946
Other liabilities and deferred credits 10,625 10,625
Stockholders' equity:
Common stock - Authorized and issued
14,400,000 ($0.25 par value) 3,600 3,600
Retained earnings 390,213 373,626
Treasury stock, at cost (23,485) (9,797)
-------- --------
Total stockholders' equity 370,328 367,429
-------- --------
Total liabilities and
stockholders' equity $473,451 $464,736
======== ========
Note: The balance sheet at December 31, 1994 has been derived from the
audited financial statements at that date but does not include all the
information and foot notes required by generally accepted accounting
principles for complete financial statements. Certain reclassifications
have been made in relation to the discontinued operations. See Note 3.
See accompanying notes to consolidated condensed financial statements.
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ended October 8, 1995 Commission file number 0-783l
(10 Accounting Periods)
Consolidated Condensed Statement of Income
(Dollars in thousands except share and per share amounts)
Four Periods Ended Ten Periods Ended
10/08/95 10/09/94 10/08/95 10/09/94
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Note 3) (Note 3)
Net Sales $ 185,153 $ 157,692 $ 446,157 $ 385,330
-------- -------- -------- --------
Operating costs and
expenses:
Cost of sales 110,653 89,507 259,736 213,694
Selling/administrative
expenses 56,314 48,327 138,600 119,746
Restructuring charges-
Note 4 642 -- 15,587 --
--------- --------- --------- ---------
167,609 137,834 413,923 333,440
--------- --------- --------- ---------
Operating Earnings 17,544 19,858 32,234 51,890
Dividend and interest
income 2,256 552 3,941 1,363
Interest expense (27) (69) (98) (162)
--------- --------- --------- ---------
Earnings before income
taxes 19,773 20,341 36,077 53,091
Provision for income
taxes 8,130 8,191 14,539 21,409
--------- --------- --------- ---------
Income from Continuing
Operations 11,643 12,150 21,538 31,682
Discontinued Operations-
Note 3:
Income (loss) from
operations net of
applicable income tax
expense (benefit) of
$(476), $707, $1,013
and $727 (113) 1,106 1,449 1,137
Gain on sale of Perry
Printing Corporation net
of applicable income
tax expense of $9,710
and $0 -- -- 14,565 --
--------- --------- --------- ---------
Net Income $ 11,530 $ 13,256 $ 37,552 $ 32,819
========= ========= ========= =========
Weighted average number
of common shares
outstanding 13,854,632 14,006,869 13,984,224 14,012,669
========== ========== ========== ==========
Earnings per share:
Continuing Operations .85 .87 1.55 2.26
Discontinued
Operations (.02) .08 1.14 .08
---------- ---------- ---------- ----------
$ .83 $ .95 $ 2.69 $ 2.34
========== ========== ========== ==========
Cash dividend per
share $ 0.55 $ 0.45 $ 1.55 $ 1.35
========== ========== ========== ==========
See accompanying notes to consolidated condensed financial statements.
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ended October 8, 1995 Commission file number 0-7831
(10 Accounting Periods)
Condensed Consolidated Statement of Cash Flows
(Dollars in thousands)
Ten Periods Ended
10/08/95 10/09/94
(Unaudited) (Unaudited)
(Note 3)
Cash flow from operating activities:
Net earnings $ 37,552 $ 32,819
Adjustments to net earnings for
Non-cash items:
Depreciation and amortization 26,720 26,812
Increase in accounts receivable (11,224) (13,269)
Increase in inventories (5,571) (6,443)
Increase (decrease) in accounts payable 3,459 8,064
Other current assets and liabilities (6,372) (5,952)
Gain on sale of assets of discontinued
operations-Note 3 (24,292) --
Discontinued operations - noncash
charges and working capital
changes-Note 3 (5,343) 9,804
--------- --------
Net cash provided by operating
activities $ 14,929 $ 51,835
--------- --------
Cash flow from investing activities:
Property and equipment expenditures (24,879) (27,043)
Assets of business acquired (16,014) (12,488)
Net (increase) decrease in short-term
investments (28,810) 14,092
Proceeds from sale of discontinued
operations - Note 3 91,390 32
Investing activities of discontinued
operations - Note 3 -- (4,040)
---------- --------
Net cash used for investing activities 21,687 (29,447)
--------- --------
Cash flow from financing activities:
Purchase of treasury stock (21,275) (1,834)
Reduction in long-term obligations (4,130) (1,898)
Sale and distribution of treasury stock 8,197 2,493
Cash dividends (21,652) (18,940)
--------- --------
Net cash used for financing
activities (38,860) (20,179)
--------- --------
Net increase (decrease) in cash (2,244) 2,209
Cash:
Beginning of year 13,111 12,794
--------- --------
End of year $ 10,867 $15,003
========= ========
See notes to condensed consolidated financial statements.
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ended October 8, 1995 Commission file number 0-7831
(10 Accounting Periods)
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with generally
accepted accounting principles for interim financial information
and with the instructions to Form 10-Q and Article 10 of
Regulations S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted
accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation
have been included. Operating results for the ten periods ended
October 8, 1995, are not necessarily indicative of the results
that may be expected for the year ended December 31, 1995. For
further information, refer to the consolidated financial
statements and footnotes thereto included in the Journal
Communications, Inc. annual report on Form 10-K for the year ended
December 31, 1994.
2. The Registrant divides its calendar year into thirteen four-week
accounting periods, except that the first and thirteenth periods
may be longer or shorter to the extent necessary to make each
accounting year end on December 31. Registrant follows a practice
of publishing its financial statement at the end of the third
accounting period (its first quarter) and at the end of the sixth
accounting period (its second quarter), and at the end of the
tenth accounting period (its third quarter).
3. Effective April 27, 1995, the Company sold its long-run catalog
and publication printing business assets. The Company has
accounted for this operation as a discontinued operation, using an
April 27, 1995 measurement date. Prior period financial
statements have been restated to reflect the discontinuation of
this business segment.
The Company has recorded an after tax gain on the sale of
$14,565,000. The sale agreement requires certain purchase price
adjustment calculations to be finalized in the fourth quarter of
fiscal 1995.
4. Journal/Sentinel Inc. merged The Milwaukee Journal and the
Milwaukee Sentinel into one newspaper called the Milwaukee Journal
Sentinel. Distribution of the Milwaukee Journal Sentinel began
April 2, 1995.
The merger resulted in a work force reduction. The Company
recorded severance and early retirement payments and other costs
associated with the launch of the Milwaukee Journal Sentinel of
$14,945,000 and $642,000 in the second and third quarter of 1995,
respectively. Continued improvements and process restructuring
are still being finalized. The Company anticipates that this
process will be completed by December 31, 1995.
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
As we move into the last quarter of the year, four of our seven
companies are headed for record earnings for 1995. The companies are
Journal Broadcast Group, Inc., ADD, Inc., MRC Telecommunications, Inc. and
IPC Software/Publishing Services.
In year-to-date earnings growth over last year, Journal Broadcast
Group is up $5 million; IPC is up $3 million; ADD Inc. is up $1.3 million,
and MRC Telecommunications is up about $200,000. Journal Sentinel Inc. is
$8.9 million behind last year due to newsprint price increases and lost
circulation revenue since the newspapers merged in April. NorthStar Print
Group Inc., which had a loss after 10 periods of 1994, had income of
$372,000 this year.
Our consolidated earnings from continuing operations year-to-date
were $53 million, compared to $53.9 million last year. In the third
quarter, which includes accounting period 7, 8, 9 and 10, earnings were
$20.7 million, up $400,000, or 2%, from last year's $20.3 million.
Earnings from IPC were up significantly in the third quarter this year.
Consolidated revenue year-to-date from continuing operations was
$446.2 million, up 15.8% from last years $385.3 million.
Dividends this year have totaled $1.55 per unit, versus $1.35 last
year. This year there were special dividends of 10 cents in June and
again in September. The special dividends were to help unitholders, most
of whom have stock loans, adjust to higher interest rates. At the end of
10 accounting periods, the option price was $36.17, or 90 cents more than
a year ago. The total yield, the option price increase plus the dividends
in the past 12 months, has been 8.5%.
At Journal Sentinel Inc., revenue year-to-date has been $162.9
million, up less than 1% over last years $161.7 million. Earnings were
$24.8 million, down significantly from last year's $33.7 million. A major
reason for this decline in earnings is the unprecedented rapid rise in the
price of newsprint, which is costing Journal Sentinel $8.6 million more
than last year. Several efforts to conserve newsprint, including reducing
the width of the web from 55 inches to 54 1/2 inches, have been
implemented for the fourth quarter. Circulation is conducting an
ambitious subscription drive in which new full rate subscribers are
receiving free gift certificates from local retail and food stores.
Journal Broadcast Group Inc. reported revenue for 10 periods at
$54.7 million, up 20% from last year's total, $45.6 million. Operating
earnings were $14.7 million. One year ago, operating earnings were $9.7
million. The Milwaukee television station, WTMJ-TV, led the increase, up
$2.8 million, and is No. 1 in households in every weekday newscast. Our
Las Vegas station, KTNV-TV, had earnings up $800,000 over last year. And
the Omaha radio stations, acquired in January, contributed $530,000 in
earnings.
ADD Inc. had revenue of $64.3 million, up 18% over last years
$54.4 million. Earnings were $10.7 million, up 13.6% from $9.4 million
last year. In the third quarter, Mega Direct, a direct marketing company
based in Clearwater, Fla., contributed $560,000 in earnings on revenue of
$5 million. Mega Direct was acquired by ADD inc. in June.
IPC Software/Publishing Services had revenue of $87.9 million;
last year the figure was $48.4 million. Earnings were $5.2 million, a $3
million increase from $2.2 million in 1994. The California printing
operations, which had start-up difficulties in 1994, have been producing
strong profits this year. We are hopeful that a new contract with
Microsoft Corp. will have a positive impact on the European operation.
NorthStar Print Group Inc. had revenue of $41.5 million, down from
$44.4 million last year. Operating earnings were $372,000, which is an
improvement over a loss of $273,000 last year. The Milwaukee plant is
focused on improved operational performance, and NorthStar is targeting
international sales opportunities, including printing beer labels for
Brazil's Brahma Brewing.
MRC Telecommunications Inc. had revenue of $30.7 million, up 15.7%
from the $26.5 million a year ago, due to increased sales in Norlight's
retail business. We also have now had our first full year of revenue from
Telephone Associates Long Distance. MRC's year-to-date earnings were 7.9
million, up 3% from $7.7 million last year.
PrimeNet DataSystems had revenue of $5.3 million, down from $5.9
million last year, as we have restructured the operation to better serve
our core customers. Mark Keefe, who took over in early October as
PrimeNet president, anticipates a positive earnings result in 1996.
Working capital for our combined operations was $128.7 million, up
from $106 million last year. The large increase is due to the Sale of
Perry Printing Corp. this year. Total assets were up slightly to $473.5
million. Stockholders' equity was $370.3 million.
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ended October 8, 1995 Commission file number 0-7831
(10 Accounting Periods)
Part II. Other Information
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K. A Form 8-K was filed during the third
quarter on the disposition of substantially all of the assets
of Perry Printing Corporation (Perry), a wholly-owned
subsidiary of Journal Communications. Included in the 8-K are
unaudited pro forma consolidated condensed statements of
income for the year ended December 31, 1994, and for the three
accounting periods ended March 26, 1995 presenting the
operating results of Journal Communications, Inc., excluding
the operations of Perry, as if such operations had been
disposed of at the beginning of the respective periods. The
pro-forma consolidated condensed balance sheet was prepared
assuming the Perry disposition took place as of March 26,
1995.
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 November 13, 1995 /s/ Robert A. Kahlor
Robert A. Kahlor, Chairman of the
Board
Date November 13, 1995 /s/ Peter P. Jarzembinski
Peter P. Jarzembinski, Senior Vice
President of Finance
<PAGE>
Exhibit Index
Exhibit No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS OF JOURNAL COMMUNICATIONS, INC. AS
OF AND FOR THE NINE MONTHS ENDED OCTOBER 8, 1995 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> OCT-08-1995
<CASH> 10,867
<SECURITIES> 67,775
<RECEIVABLES> 95,431
<ALLOWANCES> 0
<INVENTORY> 31,361
<CURRENT-ASSETS> 216,854
<PP&E> 361,071
<DEPRECIATION> 202,965
<TOTAL-ASSETS> 473,451
<CURRENT-LIABILITIES> 88,105
<BONDS> 4,393
<COMMON> 3,600
0
0
<OTHER-SE> 366,728
<TOTAL-LIABILITY-AND-EQUITY> 473,451
<SALES> 446,157
<TOTAL-REVENUES> 446,157
<CGS> 259,736
<TOTAL-COSTS> 398,336
<OTHER-EXPENSES> 15,587
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 98
<INCOME-PRETAX> 36,077
<INCOME-TAX> 14,539
<INCOME-CONTINUING> 21,538
<DISCONTINUED> 16,014
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,552
<EPS-PRIMARY> 2.69
<EPS-DILUTED> 2.69
</TABLE>
