SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(X) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee Required) for the fiscal year ended December 31,
1994
Commission File Number: 0-7831
JOURNAL COMMUNICATIONS, INC.
(Exact name of Registrant as specified in its charter)
Wisconsin 39-0382060
(State of incorporation) (I.R.S. Employer identification number)
333 West State Street, Milwaukee, Wisconsin 53203
Address of principal executive offices (zip code)
Registrant's telephone number, including area code:
(414) 224-2728
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, Par Value $0.25 Per Share
(title of class)
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
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. [ X ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of March 9, 1995.
Class Outstanding at March 9, 1995
Common stock, par value $.25 14,115,831
<PAGE>
PART I
ITEM 1. BUSINESS
The Registrant is a diversified communications and media company. Its
1994 revenues, broken down by business segments, are as follows:
publishing - 42.2%; commercial printing - 40.9%; broadcast - 10.0%,
telecommunications - 5.7% and direct marketing - 1.2%. In addition to the
information provided below, see Item 6, "Selected Financial Data," Item 7,
"Management Discussion and Analysis" and Item 8, "Consolidated Financial
Statements and Supplementary Data."
Publishing
Journal/Sentinel Inc., a wholly-owned subsidiary of the Registrant,
publishes the two major daily newspapers in the Milwaukee, Wisconsin,
market. It has published the evening Milwaukee Journal (The Journal)
since 1882, the Sunday edition of The Journal since 1911, and the morning
Milwaukee Sentinel (the Sentinel) since it was acquired in 1962. Average
paid circulation for the twelve months ended March 31, 1994, for the last
five years, as audited by the Audit Bureau of Circulation, was:
1994 1993 1992 1991 1990
Journal 228,454 238,351 240,566 260,480 275,957
Sentinel 173,019 171,271 166,085 172,772 176,097
Sunday Journal 492,425 490,077 490,361 497,777 503,994
Advertising volume in column inches and units for the Company's Milwaukee
newspapers for the last five calendar years was:
(in thousands)
1994 1993 1992 1991 1990
Column Inches
Full Run 2,666.0 2,657.6 2,619.0 2,526.8 2,866.6
Part Run 213.4 260.9 181.3 195.5 205.3
Units
Preprint 2.4 1.9 1.6 1.5 1.5
There are 101 other newspapers and shoppers published in the four-county
Milwaukee market. Most of these are weekly publications, while a few are
biweekly, fortnightly or monthly. Of these 101 publications, 39 are paid
subscription and 62 are delivered without charge or are available free at
various public locations. These publications cover a wide variety of
interests, including community, business, labor, religious, ethnic,
foreign language or other special interest newspapers.
One other daily newspaper, The Freeman, is published in Waukesha and is
circulated in portions of Waukesha County. In addition, editions of USA
Today, Chicago Tribune, Chicago Sun Times, Madison Capitol-Times,
Wisconsin State Journal and New York Times are sold in the Milwaukee
market. Journal/Sentinel Inc.'s newspapers also compete for advertising
revenue or support with four (4) network-affiliated commercial television
stations, six (6) independent television stations, two (2) of which are
low power television stations, two public television stations and 35 AM
and FM radio stations located in the four-county market, several cable
television companies and some direct mail services. One network-
affiliated television station and two radio stations in the Milwaukee
market are owned by a subsidiary of the Registrant.
Journal/Sentinel Inc.'s newspapers have separate news reporting and
editorial staffs and separate news offices in Madison, West Bend, Port
Washington and Waukesha, Wisconsin. The Milwaukee Journal also has a news
office in Washington, D.C. The Milwaukee Sentinel also has a news office
in Stevens Point, Wisconsin. Both newspapers subscribe to the Associated
Press and Washington Post-Los Angeles Times news services. In addition,
The Milwaukee Journal subscribes to the New York Times and Scripps Howard
News Services; the Milwaukee Sentinel subscribes to the Knight-Ridder News
Service and Gannett News Service.
During 1994, newsprint consumption at the Milwaukee newspapers was higher
than the prior year. Newsprint is purchased from four Canadian and two
American suppliers. Supplies for 1995 are considered sufficient but
newsprint costs are increasing significantly.
Registrant also publishes, through other subsidiaries, eight (8) weekly
newspapers in southwestern Connecticut, seven (7) weekly newspapers and
one (1) monthly controlled-circulation business publication in Wisconsin,
three (3) weekly newspapers and one (1) daily newspaper in Florida, forty-
five (45) shopper publications, with twenty-three (23) in Wisconsin,
seventeen (17) in Ohio, two (2) in Florida, two (2) in Pennsylvania, two
(2) in Vermont, one (1) in Georgia and one (1) in New York; three (3)
paid auto publications, two (2) in Louisiana and one (1) in Wisconsin;
one (1) paid boating publication in Louisiana; three (3) free auto
publications in Ohio; seven (7) monthly real estate publications and four
(4) senior citizens' publications in Ohio published six (6) times per
year; and one (1) nationwide used car database.
In January 1995, Journal/Sentinel Inc. announced the merger of The
Milwaukee Journal and the Milwaukee Sentinel into one newspaper to be
called the Milwaukee Journal Sentinel. Distribution of the Milwaukee
Journal Sentinel will begin April 2, 1995. This merger will result in a
work force reduction. The Company estimates that severance and early
retirement payments and other costs associated with the launch of the
Milwaukee Journal Sentinel will result in a pre-tax charge of $15 million
to $17 million.
Commercial Printing
In June 1994, the former Perry Printing Corporation, a wholly-owned
subsidiary of Journal Communications, Inc., changed its name to NorthStar
Print Group, Inc. (NorthStar). NorthStar created a new subsidiary called
Perry Printing Corporation and contributed to Perry Printing Corporation
substantially all assets and liabilities of the Web Division of the former
Perry Printing Corporation. The Web Division operates in the long-run
heatset web offset printing business of trade magazines, catalogs and
free-standing newspaper inserts with plants in Waterloo and Baraboo,
Wisconsin. Ownership of the Packaging and Promotion Division of the
former Perry Printing Corporation, which operates in the sheetfed label
and advertising printing business, was retained by NorthStar. Ownership
of the real propery used by the Web Division was retained by NorthStar.
The principal raw materials for NorthStar and Perry are paper and ink.
Presently, paper markets, for the grades consumed by the companies, are
operating at capacity and management believes that paper availability at
reasonable prices is a concern for 1995. The inks utilized by the
companies are available in abundant supply from a number of suppliers.
Perry Printing competes with the top 12 domestic and foreign-owned
printing companies.
In January 1995, Journal Communications, Inc. announced the pending sale
of the business and substantially all of the assets of Perry Printing
Corporation. This sale is contingent upon certain events, including the
buyer obtaining acceptable financing. Upon closing this sale, which is
scheduled for late April 1995, the Company anticipates a gain exceeding
the costs to be incurred in the merger of the two newspapers.
Imperial Printing Company, a wholly-owned subsidiary acquired on October
6, 1992, specializes in the production of short to medium runs (1,000 to
50,000 copies) of medical and technical journals for various trade
associations, documentation manuals for hardware and software
manufacturers and the duplication of CD-ROM's, floppy disks and computer
tapes. Imperial is based in St. Joseph, Michigan, and has additional
operations in Fremont, San Jose and Irvine, California, Lille, France and
Amsterdam, Netherlands. No supply restrictions are anticipated in 1995
for the raw materials Imperial utilizes.
Broadcasting
WTMJ, Inc., a wholly-owned subsidiary, operates three television stations
and five radio stations in four states. All operate under licenses from
the Federal Communications Commission.
In Milwaukee, WTMJ, Inc. has been the pioneer and leading broadcaster
since it started AM operations in 1927, FM in 1941 (discontinued 1950-
1960) and television in 1947. News reporting and editorial operations at
WTMJ, Inc., are independent of the Registrant's newspaper operations.
Registrant's three (3) Milwaukee broadcast operations consistently rank
high in audience rating surveys. Competition for advertising revenue in
the ten-county area of dominant influence ("ADI") includes nine (9) other
commercial television stations, including two (2) low power television
stations, two (2) noncommercial stations, thirty-three (33) other radio
stations, several cable television companies, eight (8) daily newspapers
(including two owned by Registrant), and numerous weekly newspapers.
WTMJ, Inc. also operates KTNV-TV, Las Vegas, Nevada, an ABC affiliate;
WSYM-TV, Lansing, Michigan, a Fox affiliate, two leading radio stations in
Wausau, Wisconsin, WSAU-AM and WIFC-FM, and KQRC-FM, Kansas
City/Leavenworth, Kansas. WTMJ-TV is affiliated with the National
Broadcasting Company (NBC). WTMJ Radio is affiliated with the CBS and NBC
Radio networks. KTNV-TV, WSAU-AM and WIFC-FM, WKTI-FM and KQRC-FM are
affiliated with the American Broadcasting Company (ABC).
In January 1995, WTMJ, Inc. purchased KEZO AM/FM and KKCD-FM, Omaha,
Nebraska.
Telecommunications
MRC Telecommunications, Inc. (MRC), a wholly-owned subsidiary, provides
telecommunications services. Its services include terrestrial and
satellite transmission of broadcast-quality video signals. In addition,
MRC offers state-of-the-art, bulk, network transmission, including SONET
and bandwidth-on-demand, to other common carriers. NorLight, Inc., MRC's
business-to-business brand, markets advanced data circuits, frame relay,
and switched voice services including domestic, international and calling
card services, to medium and large businesses in Wisconsin, Michigan,
Minnesota and Illinois where NorLight is authorized by the public service
commissions to offer services. NorLight, Inc., is a wholly-owned
subsidiary of MRC. In mid-1994, NorLight purchased two long distance
telephone companies, Telephone Associates Long Distance, Inc. (TALD), and
Bemidji Long Distance, Inc. (BLD). Both TALD and BLD are switch-based
resellers with residential and business long distance voice customers in
Minnesota, Michigan and Wisconsin.
MRC Telecommunications, Inc., is a co-founding member of UniSPAN, a
national and international consortium of other regional carriers that
provide frame relay services.
Direct Marketing
PrimeNet Marketing, Inc., a wholly-owned subsidiary acquired January 11,
1994, is engaged in the business of providing personalized database
marketing services to merchandisers and manufacturers, which services
include the design and development of database systems; the creation,
maintenance and enhancement of data files; the development of personalized
communications for the purpose of executing specific promotions; mail
processing; receiving orders and/or requests through its 1-800 Response
Center; and fulfilling such orders and requests.
Employees
The Registrant and its subsidiaries, as of December 31, 1994, had
approximately 5,500 full-time and 2,300 part-time employees.
Financial Information About Industry Segments
Financial information about Registrant's industry segments is presented in
Note 8 to the Consolidated Financial Statements appearing on pages 23 and
24 of this report.
ITEM 2. PROPERTIES
Principal properties operated by the Registrant and its subsidiaries are
summarized as follows:
Subsidiary Location How Held Square Footage
Journal/Sentinel
Inc.
(Publishing)
Offices/Plant Milwaukee, WI Owned 464,000
Garage Milwaukee, WI Owned 67,500
Distribution
Center Milwaukee, WI Leased 46,000
ADD, Inc.
(Publishing)
Office/Plant WI, OH, GA, FL Owned or 233,900
VT, NY, PA, LA Leased
Buyers' Guide,
Inc.
(Publishing)
Office CT Leased 5,600
Auto Mart, Inc.
(Publishing)
Office Ohio Leased 4,300
WTMJ, Inc.
(Broadcasting)
Office and Studios Milwaukee, WI Owned 101,500
KTNV-TV Studios Las Vegas, NV Owned 20,300
WSYM-TV Studios Lansing, MI Leased 10,300
WSAU-AM/WIFC-FM
Studios Wausau, WI Owned 5,600
KQRC-FM Studios Kansas City/
Leavenworth, KS Leased 3,700
NorthStar Print
Group, Inc.
(Commercial Printing)
Office/Plant Brown Deer, WI Owned 127,300
Office/Plant Norway, MI Owned 101,700
Office/Plant Watertown, WI Owned 201,700
Label Products &
Design Inc.
(Commercial Printing)
Office and Plant Green Bay, WI Owned 40,000
Perry Printing Corp.
(Commercial Printing)
Office/Plant
and Warehouse Waterloo, WI Owned 458,700
Perry/Baraboo
Office/Plant Baraboo, WI Owned 313,800
Trumbull Printing,
Inc.
(Commercial Printing)
Office/Plant Trumbull, CT Owned 51,600
Imperial Printing
Company
(Commercial Printing)
Office/Plant/Warehouse St. Joseph, MI Leased 303,500
Office/Plant Fremont, CA Leased 98,700
Office/Plant Irvine, CA Leased 49,000
Office/Plant San Jose, CA Leased 83,000
MRC Telecommunica-
tions, Inc.
(Fiber optics & Rubicon, WI Owned 3,800
Microwave transmission Skokie, IL Owned 6,100
services) Afton, WI Owned 3,800
Arden Hills, MN Owned 1,700
Minneapolis, MN Leased 2,100
Brookfield, WI Leased 15,600
NorLight, Inc.
(Fiber optics &
Microwave transmission
services)
Office Minneapolis, MN Leased 1,300
TALD/Bemidji Duluth, MN Leased 5,200
Bemidji, MN
Nordoc Software
Services
(Commercial Printing)
Office/Plant Roncq, France Leased 80,700
Nordoc Europe B.V.
(Commercial Printing)
Office/Plant Amsterdam, Leased 11,500
Netherlands
PrimeNet Marketing,
Inc.
(Data Base Management)
Office/Plant Bloomington, MN Leased 79,500
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various claims and lawsuits incidental to its
business. In the opinion of legal counsel, claims and lawsuits in the
aggregate will not have a material effect on the Company's financial
position or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 4A. EXECUTIVE OFFICERS OF REGISTRANT
The executive officers of Registrant, as of March 1995, all of whom hold
office until the next annual meeting of the board of directors, which will
be held immediately following the annual meeting of shareholders on June
6, 1995, are:
Name Age Office Held Since
Robert A. Kahlor 61 Chairman of the
Board/CEO September 4, 1992
Steven J. Smith 44 President September 4, 1992
Thomas M. Karavakis 64 Senior Vice President June 2, 1987
Peter P. Jarzembinski 42 Senior Vice President/CFO December 1, 1992
Douglas G. Kiel 46 Senior Vice President June 2, 1992
Craig A. Hutchison 43 Senior Vice President June 5, 1990
Robert M. Dye 47 Vice President June 5, 1990
Gregory H. Forbes 45 Vice President June 8, 1993
James C. Currow 51 Vice President June 8, 1993
Paul M. Bonaiuto 44 Vice President June 8, 1993
Stephen O. Huhta 39 Vice President June 8, 1993
Ronald G. Kurtis 47 Vice President June 8, 1993
Nancy B. Carey 45 Vice President December 7, 1993
William T. Lutzen 33 Vice President June 7, 1994
Paul E. Kritzer 52 Vice President June 5, 1990
& Secretary September 1, 1992
Christine A.
Farnsworth 46 Assistant Secretary June 8, 1993
All of the executive officers of the Company except Messrs. Forbes,
Currow, Bonaiuto and Ms. Carey have been employed by the Company in key
management positions for more than five years.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK
AND RELATED STOCKHOLDER MATTERS
Registrant's common stock can be purchased only by full-time employees
with two (2) years of service. As of March 9, 1995, the Journal Employes'
Stock Trust owned of record 12,960,000 of the issued common stock shares
or 90% of the issued common stock of the Registrant. The Trust issues
units, each representing one share of the Registrant's stock, to eligible
employees ("unitholders"). On March 9, 1995, 2,852 unitholders owned
11,715,431 units (representing 81.4% of Registrant's issued common stock)
and thus were the beneficial owners of a like number of shares of the
Registrant's stock held by the Trust. The balance of 1,244,569 units
issued by the Trust were, on the above date, held by employee benefit
trusts and by the Company as treasury stock.
Prior to all meetings of shareholders of the Registrant, the Trustees are
required to deliver to each active employee-unitholder a proxy, with the
right of substitution, for the number of the Registrant's shares
represented by his or her units.
Unitholders may sell their units only to other employees designated by
President of the Registrant. Whenever a unitholder ceases to be an
employee, for any reason except retirement, he or she must offer his or
her units for resale to active employees designated by the President of
the Company. Employees who retire may retain a decreasing percentage of
their units for 10 years after retirement. All units held by retirees are
voted by the Trustees. Units may also be held by employee benefit trusts,
and unitholders may transfer units to trusts for individuals and for
charitable, educational or religious purposes. All units held by such
trusts are likewise voted by the Trustees of the Stock Trust. As of March
9, 1995, retirees, an employee benefit trust, and other trusts held
4,443,367 units, representing 30.9% of the Registrant's issued common
stock.
All of the Trustees under the Journal Employes' Stock Trust Agreement are
directors of the Registrant. They have no financial interest in the
Registrant's stock owned by the Trust other than through the units they
own individually.
The Registrant's unit option price and dividend history for the past
decade are presented in the following table:
Employee Stock Ownership Plan
Option Option Option Return on
Price Price Price Cash Total January 1
Year Jan. 1 Dec. 31 Increase Dividend Yield Option Price
1985 17.65 18.54 .89 2.38(1) 3.27 18.5
1986 18.54 20.94 2.40 1.25 3.65 19.7
1987 20.94 23.71 2.77 1.38 4.15 19.8
1988 23.71 26.65 2.94 1.50 4.44 18.7
1989 26.65 29.66 3.01 1.70 4.71 17.7
1990 29.66 31.48 1.82 1.70 3.52 11.9
1991 31.48 32.60 1.12 1.80 2.92 9.3
1992 32.60 33.60 1.00 1.80 2.80 8.6
1993 33.60 34.64 1.04 1.80 2.84 8.5
1994 34.64 35.40 .76 1.90(2) 2.66 7.7
(1) Includes special dividend on sale of Teltron, Inc., a cable
television subsidiary.
(2) Includes special dividend.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data of the Registrant is presented in the following
table on page 9.
<TABLE>
JOURNAL COMMUNICATIONS
10 YEARS IN REVIEW
<CAPTION>
1994 1993 1992 1991 1990 1989
<S> <C> <C> <C> <C> <C>
EARNINGS AND DIVIDENDS
(in thousands of dollars)
Earnings before taxes $73,267 $72,804 $67,831 $65,335 $66,913 $90,388
Net earnings 43,867 44,204 41,631 40,035 41,113 54,988
Earnings for option
price 43,867 44,204 41,631 40,626 49,443 54,988
Dividends 26,699 25,156 25,244 25,358 24,192 24,374
Earnings retained 17,168 19,048 16,387 14,677 16,921 30,614
PER SHARE
Net earnings $3.13 $3.16 $2.97 $2.84 $2.89 $3.83
Earnings for option
price 3.13 3.16 2.97 2.88 3.47 3.83
Dividends 1.90 1.80 1.80 1.80 1.70 1.70
Book value 26.04 24.76 23.40 22.11 21.54 20.08
Unit option price 35.40 34.64 33.60 32.60 31.48 29.66
NET SALES
(in thousands of dollars)
Publications $270,645 $250,298 $238,386 $232,756 $235,853 $232,371
Printing 259,478 226,548 175,643 167,371 173,660 174,837
Broadcast 63,445 54,850 52,891 52,088 56,456 54,087
Telecommunications 35,974 32,411 31,256 15,398 12,414 11,429
Direct Marketing 7,799 -- -- -- -- --
Other -- -- -- -- -- --
Eliminations (2,793) (3,501) (1,814) (1,631) (1,462) (1,608)
------- ------- ------- ------- ------- -------
Total net sales $634,548 $560,606 $496,362 $465,982 $476,921 $471,116
OPERATING EXPENSES
(in thousands of dollars)
Payroll $202,886<F5> $180,267<F4> $161,999<F3> $147,452 $144,517 $137,685
Materials and component
services 160,656 133,347 110,063 110,230 114,998 119,316
Depreciation and
amortization 39,260 38,102 33,669 32,066 28,498 27,332
Other services 160,974 137,607 125,167 116,486 116,161 103,883
-------- -------- -------- -------- -------- --------
Total expenses $563,776 $489,323 $430,898 $406,234 $404,174 $388,216
INVESTED CAPITAL
(in thousands of dollars)
Property and equipment $208,147 $199,375 $181,853 $177,128 $140,697 $132,435
Net working capital 102,421 100,780 95,774 93,847 128,859 125,841
Long-term obligations 3,040 3,679 2,332 1,958 1,700 1,903
Stockholders' equity 367,429 347,447 328,230 311,772 306,793 288,036
Total assets 476,418 437,429 409,863 389,958 401,371 364,860
Percent return on
stockholders' equity 12.6% 13.5% 13.4% 13.1% 14.3% 21.1%
Percent return on total
assets 10.0% 10.8% 10.7% 10.0% 11.3% 16.4%
<CAPTION>
Average Annual
Compound %
1988 1987 1986 1985 Increase
<S> <C> <C> <C> <C> <C>
EARNINGS AND DIVIDENDS
(in thousands of dollars)
Earnings before taxes $81,696 $74,914<F1> $73,262 $68,218<F1> 0.80%
Net earnings 49,633 41,614<F1> 38,762 35,818<F1> 2.28%
Earnings for option
price 51,745 41,944<F1> 38,762 35,926<F1> 2.24%
Dividends 21,496 19,576 17,783 15,384<F2> 6.32%
Earnings retained 28,137 22,038 20,979 15,105 1.43%
PER SHARE
Net earnings $3.46 $2.93<F1> $2.71 $2.51<F1> 2.48%
Earnings for option
price 3.61 2.95<F1> 2.71 2.52<F1> 2.44%
Dividends 1.50 1.38 1.25 1.08<F2> 6.48%
Book value 18.14 16.27 14.02 12.86 8.16%
Unit option price 26.65 23.71 20.94 18.54 7.45%
NET SALES
(in thousands of dollars)
Publications $222,209 $200,873 $183,504 $176,553 4.86%
Printing 157,848 142,046 119,812 112,077 9.78%
Broadcast 52,744 48,339 45,194 39,217 5.49%
Telecommunications 11,342 11,539 9,598 7,799 18.51%
Direct Marketing -- -- -- -- N.A.
Other -- 1,986 3,343 3,665 N.A.
Eliminations (940) (767) (635) (607) N.A.
------- ------- ------- ------- -------
Total net sales $443,203 $404,016 $360,816 $338,704 7.22%
OPERATING EXPENSES
(in thousands of dollars)
Payroll $129,802 $123,119 $111,050 $102,249 7.91%
Materials and component
services 111,846 100,285 85,664 81,883 7.78%
Depreciation and
amortization 27,372 21,348 18,035 16,130 10.39%
Other services 96,559 87,161 78,042 75,170 8.83%
-------- -------- -------- -------- --------
Total expenses $365,579 $331,913 $292,791 $275,432 8.28%
INVESTED CAPITAL
(in thousands of dollars)
Property and equipment $128,273 $114,667 $106,333 $89,194 9.87%
Net working capital 106,805 97,525 81,448 81,560 2.56%
Long-term obligations 2,681 9,273 6,953 7,606 N/A
Stockholders' equity 260,002 231,446 200,260 183,844 8.00%
Total assets 335,395 307,682 268,902 244,283 7.70%
Percent return on
stockholders' equity 21.4% 20.8% 21.1% 21.2%
Percent return on total
assets 16.1% 15.5% 15.9% 15.9%
<FN>
<F1> Does not include cummulative effect on prior years of change in accounting for deferred income taxes of $3,571,749 or
$0.25 per share in 1987 or the gain on sale of Teltron Inc.
<F2> Does not include special distribution of $2.62 per share.
<F3> Includes full year of Norlight, IPC since Oct. 6.
<F4> Includes full year of IPC, and Nordoc Software Services since Feb 28.
<F5> Includes full year of PrimeNet DataSystems and TALD since July 20.
</TABLE>
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Consolidated
Operating revenue in 1994 was $634.5 million, a 13.2% increase over 1993
sales of $560.6 million. Operating revenue in 1992 was $496.4 million.
In 1994, operating earnings were $70.8 million, a slight decrease from
1993 earnings of $71.3 million. In 1992, operating earnings were $65.5
million. During 1994, the improving economic conditions helped to
increase revenues and operating profits for the publications, broadcast
and telecommunications segments. Operating results, however, declined in
the printing segment and showed a loss in the direct marketing segment.
Publications
The publications segment includes daily and weekly newspapers, shoppers
and specialty publications.
In 1994, revenue was $270.6 million, up 8.1% over 1993 and 13.5% better
than 1992. In 1993 and 1992, revenues for this segment were $250.3
million and $238.4 million, respectively. Operating earnings in 1994 were
$45.8 million, an impressive 10.4% increase over the prior year.
Operating earnings for 1993 were $41.5 million, an increase of 1.6% over
1992 operating earnings of $40.8 million.
Journal/Sentinel Inc. is the largest company in this publications segment.
Revenue in 1994 increased by 6.5% to $209.5 million compared with $196.7
million in 1993. In 1994, operating earnings were up 14.1% from the prior
year. The increase in operating earnings was the result of increased
classified advertising revenue and lower newsprint cost. Newsprint costs
will significantly increase in 1995. Operating earnings in 1993 were down
from 1992. The major reason for the decline was the development of an
alternate delivery system.
Advertising revenue in 1994, 1993 and 1992 was $149.4 million, $138
million and $132.8 million, respectively. In 1994, classified revenue,
fueled by increases in employment lineage, was up 14% over 1993. Retail
advertising revenue was slightly ahead of 1993 figures. General
advertising revenue increased by 21%, primarily as a result of increased
volume. Pre-print revenues rose 2.2% compared to 1993. From 1992 to
1993, classified advertising revenue increased by 8%. Retail advertising
revenue was approximately equal to the prior year, while general
advertising declined by 13% during the 1992-93 period.
In 1994, circulation revenue was $56.5 million, up 1.2% from 1993. In
1993, circulation revenue was $55.9 million, while in 1992 it was $55.4
million.
ADD Inc. is the other operation in the publications segment. Its 1994
revenue was $61.1 million, a 14% increase over 1993 revenue of $53.6
million. In 1992, revenue was $47.7 million. Operating earnings in 1994
showed substantial growth over the prior year, increasing 21.4%. This
resulted not only from a double-digit revenue increase, but also from a
close monitoring of operating expenses. In 1994, revenue for the
Wisconsin and Ohio operations increased by 19% and 15%, respectively,
During 1994, the Vermont and Pennsylvania operations showed significant
improvement in operating earnings over the previous year.
Broadcast
In 1994, revenue was $63.4 million, an increase of 15.7% over 1993 revenue
of $54.9 million and 20% higher than 1992 revenue of $52.9 million.
Operating earnings in 1994 increased significantly over 1993 and 1992.
The 1994 increase was a result of strong gains in the automotive and
retail advertising categories and increased revenue from political
advertising.
In 1994, the company's television stations accounted for 72% of the
segment's revenue and 77% of its operating earnings. At the Milwaukee,
Las Vegas and Lansing television stations, the operating earnings showed
substantial growth over the prior year.
Operating earnings in 1994 for the Milwaukee, Kansas City and Wausau radio
stations were ahead of the 1993 operating results.
Operating costs and expenses have been tightly controlled for the last
three years.
Printing
Perry Printing Corporation was reorganized in June 1994, with its
Packaging and Promotion Division incorporated as NorthStar Print Group,
Inc., while the Web Printing Division continued as Perry Printing
Corporation.
In 1994, revenue for Perry Printing, which represents the long-run catalog
and publications printing business, was $117 million, a 10.4% increase
over the prior year's $105.9 million. In 1992, revenue was $107.3
million. Operating earnings for 1994 decreased by 14.3% over the prior
year. Waterloo's operating earnings increased compared to 1993 results.
The Baraboo operation, however, incurred a loss. This was the result of
the loss of a major insert customer and inefficiencies associated with the
start-up costs of a new press. In 1993, operating earnings increased 3.7%
from 1992.
The 1994 revenue for NorthStar Print Group, Inc. was $57.8 million, an
11.7% increase over the prior year's revenue of $51.8 million. In 1992,
revenue was $45.8 million. NorthStar incurred an operating loss for 1994.
In 1994, despite a revenue increase, the Norway/Watertown operation
incurred an operating loss due to capacity limitations and efficiency
problems. The Milwaukee and Green Bay operations showed significant
growth in revenue and operating earnings for 1994.
Imperial Printing Company's (IPC) 1994 revenue was $63.8 million, a 20.2%
increase over 1993 revenue of $53.1 million. The 1994 operating earnings
decreased by 26.7% compared to 1993 results. The start-up cost associated
with the new printing facility in Fremont, California, was the primary
reason for the decline in earnings. (1993 was the first full year of
operation for IPC as a Journal Communications, Inc. subsidiary) Nordoc
Software Services, located in France, showed a 10.2% revenue gain, but
incurred an operating loss for the year.
In 1994, revenue for Trumbull Printing Inc. was $11.3 million, a 45.2%
increase compared with 1993 revenue of $7.8 million. Revenue in 1993 was
up 5.7% over 1992 revenue. In 1994, operating earnings doubled the 1993
results.
Telecommunications
In the telecommunications segment, 1994 revenue increased by 11% to $36
million. This increase was a result of a substantial increase in the
private line circuits sold and MRC Telecommunications, Inc.'s entrance
into the switched voice services market. NorLight, Inc., purchased the
business and substantially all the assets of Telephone Associates Long
Distance, Inc. (TALD), and Bemidji Long Distance, Inc. (BLD) in mid-1994.
TALD and BLD are "resellers" of long distance services. Operating
earnings at MRC increased by 3.5% in 1994 compared to 1993 and 8.9%
compared to 1992.
Direct Marketing
On January 11, 1994, Journal Communications Inc. purchased the stock of
PrimeNet Marketing, Inc. (PrimeNet). PrimeNet specializes in proprietary
software, customized customer database management, third party fulfillment
and direct mail services. Revenue for 1994 was $7.8 million. PrimeNet
incurred an operating loss for the year as a result of the delay in
bringing its proprietary software to the marketplace.
Income Taxes
Income taxes were 40.1% of pre-tax earnings in 1994, 39.3% in 1993 and
38.6% in 1992. The percentage increase is a result of change in the
blended state tax rate and foreign losses with no tax benefit. Permanent
tax "differences" exist for goodwill amortization and the increase in cash
surrender value of the company's life insurance investment pool.
Net Earnings
Net earnings for 1994 were $43.9 million or $3.13 per share, versus net
earnings of $44.2 million, or $3.16 per share in 1993. In 1992, net
earnings for the year were $41.6 million or $2.97 per share.
Subsequent Events
In January 1995, Journal/Sentinel Inc. announced the merger of The
Milwaukee Journal and the Milwaukee Sentinel into one newspaper to be
called the Milwaukee Journal Sentinel. Distribution of the Milwaukee
Journal Sentinel will begin April 2, 1995. This merger will result in a
work force reduction. The Company estimates that severance and early
retirement payments and other costs associated with the launch of the
Milwaukee Journal Sentinel will result in a pre-tax charge of $15 million
to $17 million. On April 2, 1995, the name of the newspaper subsidiary
will change to Journal Sentinel Inc. from Journal/Sentinel Inc.
Also, during January 1995, Journal Communications, Inc., announced its
exit from the long-run catalog and publication printing business with the
pending sale of the business and substantially all of the assets of Perry
Printing Corporation, which had sales of $117 million in 1994 and total
assets of $87 million at December 31, 1994. This sale is contingent upon
certain events, including the buyer obtaining acceptable financing. Upon
closing this sale, which is scheduled for late April 1995, the Company
anticipates a gain exceeding the costs to be incurred in the merger of the
two newspapers.
Other Income and Expenses
Dividends and interest income of $1.7 million increased over the prior
year's amount of $1.5 million. The 1994 increase was a result of the rise
in short-term interest rates. In 1992, this amount was $2.5 million. The
1993 decrease over 1992 was a result of fewer dollars invested and
significantly lower interest rates. Company investments in the short-term
securities have decreased due to the use of funds for acquisitions and
capital expenditures for property and equipment.
Liquidity and Capital Resources
Cash provided by operations, which is the company's major source of
liquidity, totalled $69.7 million in 1994, $74.7 million in 1993 and $83.6
million in 1992.
Principal uses of cash during this period were for property and equipment
expenditures and acquisitions. Capital expenditures for property and
equipment were $41.6 million, $46.6 million and $26.2 million in 1994,
1993 and 1992, respectively. In 1995, capital expenditures are expected
to be considerably below the 1994 amount. The company has also remained
active in acquiring other businesses. During 1994, the company made
several acquisitions, expanding its telecommunications, shopper, direct
marketing and printing operations. As described in the notes to the
consolidated financial statements, the company purchased the assets of IPC
in 1992.
Cash used for financing activities was: 1994-$28.3 million; 1993-$28.5
million; and 1992-$28.3 million. Dividends paid during 1994 were $26.7
million or $1.90 per share. This compares with $25.2 million ($1.80 per
share) in 1993 and $25.2 million ($1.80 per share) in 1992.
Net working capital at the end of 1994 increased by $1.6 million to $102.4
million. Commitments for television programs not yet produced as of
December 31, 1994, were $12.2 million. The company has traditionally not
used debt as a source of funds. The company anticipates that amounts
necessary for capital expenditures, dividends, work force reductions and
other working capital requirements will continue to be available from
internally generated funds.
Effect of Inflation
The company's results of operations and financial conditions have not been
significantly affected by inflation. The company has reduced the effect
of rising costs through improvements in productivity, cost containment
programs and, where the competitive environment permits, increased selling
prices.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
Index to Financial Statements:
Form 10-K
Page Number:
Report of Independent Auditors 15
Consolidated Balance Sheets at December
31, 1994, 1993 and 1992 16
For each of the three years in the period
ended December 31, 1994:
--Consolidated Statements of Earnings
and Retained Earnings 17
--Consolidated Statements of Cash Flows 18
Notes to Consolidated Financial Statements 19-24
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Board of Directors and Stockholders
Journal Communications Inc.
We have audited the accompanying consolidated balance sheets of
Journal Communications Inc. as of December 31, 1994, 1993, and 1992, and
the related consolidated statements of earnings and retained earnings, and
cash flows for each of the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Journal Communications Inc. at December 31, 1994, 1993, and 1992, and its
consolidated results of operations and its cash flows for each of the
years then ended in conformity with generally accepted accounting
principles.
ERNST & YOUNG, LLP
Milwaukee, Wisconsin
February 10, 1995
<PAGE>
JOURNAL COMMUNICATIONS INC.
CONSOLIDATED BALANCE SHEETS
December 31
ASSETS 1994 1993 1992
Current assets:
Cash $ 13,111,281 $ 12,794,479 $ 10,987,033
Short-term invest-
ments (Note 1) 38,964,215 50,166,016 53,953,462
Receivables 100,237,579 76,563,404 66,554,692
Inventories:
Paper and supplies 20,783,847 16,994,981 15,686,927
Work in process 7,133,774 5,538,114 5,397,614
Finished goods 5,365,754 3,410,379 2,302,497
----------- ----------- -----------
Total inventories 33,283,375 25,943,474 23,387,038
Prepaid expenses 12,148,919 10,892,965 10,933,725
----------- ----------- -----------
Total current assets 197,745,369 176,360,338 165,815,950
Property and equipment,
at cost:
Land and land
improvements 11,662,835 11,306,421 9,483,943
Buildings 62,268,323 60,580,129 57,226,313
Equipment 392,723,282 368,218,666 329,801,757
----------- ----------- -----------
466,654,440 440,105,223 396,512,013
Less accumulated
depreciation 258,506,965 240,730,353 214,659,191
----------- ----------- -----------
Net property and
equipment 208,147,475 199,374,870 181,852,822
Corporate life insurance
investment pool 14,208,090 12,197,777 10,280,750
Other assets (Note 1) 27,453,149 27,335,976 29,292,884
Goodwill (Note 1) 28,864,047 22,160,252 22,620,282
----------- ----------- -----------
$476,418,130 $437,429,213 $ 409,862,688
=========== =========== ===========
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 38,228,173 $ 24,184,202 $ 24,396,813
Taxes on income 132,678 58,147 2,101,058
Accrued compensation 22,677,770 18,773,167 15,418,542
Customer service deposits 11,823,750 11,691,953 10,874,082
Accrued employee benefits
(Note 2) 13,226,647 11,528,998 7,006,467
Other current
liabilities 6,034,107 5,800,228 8,806,726
Current portion of
long-term obligations 3,201,437 3,543,434 1,438,193
---------- ---------- ----------
Total current
liabilities 95,324,562 75,580,129 70,041,881
Long-term obligations
(Note 5) 3,039,653 3,678,611 2,331,842
Deferred income taxes
(Note 3) 10,625,000 10,723,000 9,259,000
Stockholders' equity (Note 6):
Common stock, $.25 par value;
authorized and issued
14,400,000 shares 3,600,000 3,600,000 3,600,000
Retained earnings 373,625,977 355,878,873 336,553,427
Treasury stock, at
cost (Note 6) (9,797,062) (12,031,400) (11,923,462)
Total stockholders'
equity 367,428,915 347,447,473 328,229,965
------------ ------------ ------------
$476,418,130 $437,429,213 $409,862,688
============ ============ ============
See accompanying notes
<PAGE>
JOURNAL COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF EARNINGS AND RETAINED EARNINGS
Years ended December 31
1994 1993 1992
Earnings:
Operating revenue:
Publications:
Advertising $198,214,122 $182,536,690 $173,323,869
Circulation 57,951,504 57,272,146 56,510,619
Other 14,479,480 10,488,361 8,550,965
Broadcast 63,444,709 54,850,495 52,891,332
Printing 259,478,506 226,547,901 175,642,714
Telecommunications 35,973,931 32,411,290 31,256,362
Direct Marketing 7,799,072 -- --
Eliminations (2,793,364) (3,501,062) (1,813,650)
----------- ------------ -----------
$634,547,960 $560,605,821 $496,362,211
Operating costs and
expenses:
Cost of sales 392,725,551 342,809,366 301,583,400
Selling and administrative
expenses 171,050,305 146,513,746 129,314,942
------------ ------------ ------------
563,775,856 489,323,112 430,898,342
----------- ----------- -----------
Operating earnings 70,772,104 71,282,709 65,463,869
Other income(deductions):
Dividends and interest
- net 1,717,757 1,521,453 2,549,614
Gain (Loss) on sale
of assets 777,284 (44) (182,036)
----------- --------- ---------
2,495,041 1,521,409 2,367,578
----------- --------- ---------
Earnings before
income taxes 73,267,145 72,804,118 67,831,447
Provision for income
taxes (Note 3) 29,400,000 28,600,000 26,200,000
----------- ----------- -----------
Net earnings (per share,
1994 $3.13, 1993 $3.16,
1992 $2.97) (Note 1) $ 43,867,145 $ 44,204,118 $ 41,631,447
============ ============ ============
Retained earnings:
Balance at beginning
of year $355,878,873 $336,553,427 $320,163,437
Net earnings 43,867,145 44,204,118 41,631,447
Cash dividends (per
share, 1994 $1.90,
1993 $1.80, 1992
$1.80) (26,699,455) (25,156,340) (25,243,614)
Treasury stock
transactions (Note 6) 416,530 365,145 2,157
Currency translation
adjustment 162,884 (87,477) --
----------- ----------- -----------
Balance at end of year $373,625,977 $355,878,873 $336,553,427
=========== =========== ===========
See accompanying notes
<PAGE>
<TABLE>
JOURNAL COMMUNICATIONS INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Years ended December 31
1994 1993 1992
<S> <C> <C> <C>
Cash flow from operating activities:
Net earnings $43,867,145 $44,204,118 $41,631,447
Adjustments to net earnings
for non-cash items:
Depreciation and amortization 39,259,847 38,101,604 33,669,136
Deferred income taxes (200,000) (700,000) (300,000)
Net loss from sales of assets (777,284) 44 182,036
Change in:
Receivables (22,026,941) (10,238,101) 4,646,768
Inventories (7,046,339) (2,541,964) 2,045,264
Accounts payable 12,518,663 (250,735) 1,012,400
Other current assets
and liabilities 4,094,596 6,106,869 762,540
---------- ----------- ----------
Net cash provided by operating
activities 69,689,687 74,681,835 83,649,591
----------- ----------- ----------
Cash flow from investing activities:
Proceeds from sales of assets 3,698,133 773,593 883,418
Property and equipment expenditures (41,629,825) (46,555,743) (26,210,819)
Net (increase) decrease in
short-term investments 11,201,801 3,787,446 (5,166,867)
Assets of businesses acquired (12,697,391) (1,572,769) (31,088,347)
Other - net (1,688,639) (840,657) (1,532,613)
----------- ----------- ----------
Net cash used for investing
activities (41,115,921) (44,408,130) (63,115,228)
----------- ----------- ----------
Cash flow from financing activities:
Reduction in long-term obligations (4,208,377) (3,567,126) (3,156,800)
Purchase of treasury stock (1,834,240) (3,865,125) --
Sale and distribution of
treasury stock 4,485,108 4,122,332 70,234
Cash dividends (26,699,455) (25,156,340) (25,243,614)
----------- ----------- ----------
Net cash used for financing
activities (28,256,964) (28,466,259) (28,330,180)
----------- ----------- ----------
Net increase (decrease) in cash 316,802 1,807,446 (7,795,817)
Cash at beginning of year 12,794,479 10,987,033 18,782,850
----------- ----------- ----------
Cash at end of year $13,111,281 $12,794,479 $10,987,033
=========== =========== ==========
Cash paid for income taxes $29,108,000 $31,122,000 $25,438,000
=========== =========== ==========
</TABLE>
See accompanying notes
<PAGE>
JOURNAL COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1994, 1993 and 1992
1. Principal accounting policies
Basis of consolidation - The consolidated financial statements
include the accounts of Journal Communications, Inc., and its
wholly-owned subsidiaries (collectively, the Company). All
significant intercompany balances and transactions have been
eliminated.
Foreign currency translation - Assets and liabilities of foreign
subsidiaries are translated into U.S. dollars at year-end exchange
rates while income and expense items are translated at the average
exchange rates for the year. Resulting translation adjustments are
reflected in retained earnings.
Earnings per share - Earnings per share is based on the weighted
average shares outstanding during each period.
Short-term investments - Short-term investments, which consist
principally of government securities, commercial paper and bank
certificates of deposit with maturities of one year or less, are
stated at cost, which approximates market value. All short term
investments are held to maturity.
Inventories - Inventories are stated at the lower of cost (first
in, first out method) or market.
Property and Equipment - Property and equipment are recorded at
cost. Depreciation of property and equipment is computed
principally using the straight-line method.
Other assets - Identifiable intangible assets resulting from
acquisitions are amortized on the straight-line basis. Accumulated
amortization relating to intangible assets at December 31, 1994,
1993 and 1992 was $15,782,025, $11,393,585 and $8,371,103,
respectively. Other assets also include the costs of television
program contracts, recorded under the gross method, which are
deferred and amortized over the estimated number of runs of the
related programs.
Goodwill - Goodwill arising from acquisitions subsequent to
November 1, 1970, is amortized on the straight-line basis over 40
years. Goodwill prior to November 1, 1970 is amortized when it is
determined that such intangible assets have a limited useful life.
At December 31, 1994, $3,095,000 of goodwill is not being
amortized. Accumulated amortization at December 31, 1994, 1993 and
1992 was $9,406,125, $8,723,367 and $8,082,677, respectively.
Reclassification - Certain reclassifications have been made to the
1993 financial statements to conform with the 1994 presentation.
2. Employee benefit plans
Contributory and noncontributory pension and savings plans cover
substantially all employees. The amount charged against earnings
with respect to all of these plans was $6,225,000, $5,712,000 and
$5,256,000 in 1994, 1993 and 1992, respectively.
Net pension cost for the defined benefit plan includes the
following components:
(thousands of dollars)
1994 1993 1992
Service cost $2,481 $ 2,233 $2,175
Interest on projected
benefit obligation 5,526 5,551 5,186
Less return on plan assets 865 (4,768) (2,325)
Net amortization and deferral (6,570) (683) (3,034)
------- ------- ------
Net pension cost $2,302 $ 2,333 $2,002
====== ======= ======
Actuarial assumptions used to project the benefit obligations and the
net pension cost were:
1994 1993 1992
Discount rate 8.00% 7.25% 8.00%
Rate of increase in
compensation levels 5.25% 4.75% 5.50%
Expected long-term rate of
return on plan assets 9.50% 9.50% 9.50%
The assets of the plan consist primarily of government and other bonds
and listed stocks. The accrued pension liability at December 31, 1994,
1993 and 1992 was $7,715,000, $8,107,000 and $6,155,000, respectively.
The funded status of the plan at December 31 was as follows:
(thousands of dollars)
1994 1993 1992
Actuarial present value of
benefit obligations:
Vested benefits $60,232 $62,651 $54,076
Nonvested benefits 3,074 3,449 2,885
------- ------- -------
Accumulated benefit
obligation 63,306 66,100 56,961
Effect of projected
compensation levels 13,073 14,477 13,429
------- ------- -------
Projected benefit obligation 76,379 80,577 70,390
Plan assets at fair value 57,342 60,473 59,619
------- ------- -------
Projected benefit obligation
in excess of plan assets $19,037 $20,104 $10,771
======= ======= =======
On January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions" (SFAS 106). This standard requires that
the expected cost of postretirement health and life insurance benefits
be charged to expense during the years the employees render service.
The Company has elected to amortize the unfunded obligation of
$25,324,000 at January 1, 1993, over a period of 20 years. The
incremental effect of this change in accounting method was to increase
1993 postretirement benefit expense by $2,014,000. Prior to 1993, the
Company recognized postretirement benefit expense in the year that the
benefits were paid. Postretirement benefits paid in 1992 were
$1,337,000.
Postretirement benefit expense includes the following components:
(thousands of dollars)
1994 1993
Service cost $ 572 $ 454
Interest cost on accumulated postretirement
benefit obligation 1,991 2,073
Amortization of transition obligation 1,266 1,266
------ ------
Postretirement benefit expense $3,829 $3,793
====== ======
The funded status of the plans on an aggregate basis at December 31 was
as follows:
(thousands of dollars)
1994 1993
Accumulated postretirement benefit
obligation:
Retirees $15,156 $16,243
Fully eligible participants 1,645 1,919
Other active participants 8,131 9,469
------- ------
Total accumulated postretirement
benefit obligation 24,932 27,631
Less: Unrecognized transition
obligation 22,102 24,058
Unrecognized actuarial loss 837 (1,559)
------- ------
Accrued postretirement benefit cost
liability $ 3,667 $ 2,014
======= =======
For measurement purposes, benefit cost trend rates of 9.5% and 8.5%
annually were assumed in 1994 for pre-age 65 and 65 and over groups,
respectively. These rates gradually decrease to 5.5% through 2008 for
the pre-age 65 group and through 2004 for the 65 and over group and
remained level thereafter. The benefit cost trend rates have a
significant effect on the amounts reported. Increasing the assumed
benefit cost trend rates by 1% in each year would increase the
accumulated postretirement benefit obligation at December 31, 1994 by
5.4% and the aggregate service and interest cost components of
postretirement benefit expense for 1994 by 4.5%, respectively. The
weighted average discount rate used in determining the accumulated
postretirement benefit obligation was 8.0% and 7.5% for 1994 and 1993,
respectively.
3. Income Taxes
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109). SFAS 109 requires recognition of deferred tax
assets and liabilities for the expected future tax consequences of
events that have been included in the financial statements or tax
returns. Under this method, deferred tax assets and liabilities are
determined based on the difference between the financial statement and
tax basis of assets and liabilities using enacted tax rates for the year
in which the differences are expected to reverse. The impact of
adopting SFAS 109 was not material to 1993 operations.
The provision for income taxes consists of the following:
(thousands of dollars)
1994 1993 1992
Current
Federal $23,100 $23,300 $21,400
State 6,500 6,000 5,100
------ ------ ------
29,600 29,300 26,500
Deferred (200) (700) (300)
------- ------- -------
$29,400 $28,600 $26,200
======= ======= =======
The components of the net deferred tax liability as of December 31 were
as follows:
(thousands of dollars)
1994 1993
Deferred tax assets:
Accrued employee benefit $ 3,940 $ 3,304
Intangible assets 896 357
Inventories 94 348
Accrued compensation 3,609 3,350
Accounts receivable 727 891
Deferred revenue 172 172
State loss carryforward 1,056 461
Other 1,172 1,048
------ ------
Total deferred tax assets $11,666 $ 9,931
Deferred tax liabilities:
Property, plant and equipment $21,508 $20,408
Other 783 246
------ ------
Total deferred tax liabilities $22,291 $20,654
Net deferred tax liability included
in balance sheet $10,625 $10,723
======= =======
4. Litigation
In September 1991, the Company paid $18.7 million in settlement of a
patent infringement lawsuit. A technical question remains upon which
management and legal counsel believe the Company will prevail. The
Company was required to renew a $16.8 million bond until the court
rules. The bond is fully guaranteed by standby letters of credit which
are partially collateralized by $8.5 million of short-term investments.
5. Long-term obligations
December 31
1994 1993 1992
Capital lease & other obliga-
tions, average interest 8%
(in 1994) $2,017,912 $1,579,020 $ 403,115
Television program contracts,
due through 1997 4,223,178 5,643,025 3,366,920
---------- ---------- ----------
6,241,090 7,222,045 3,770,035
Less current portion 3,201,437 3,543,434 1,438,193
---------- ---------- ----------
$3,039.653 $3,678,611 $2,331,842
========== ========== ==========
In addition, the Company has the rights to broadcast certain television
programs during the years 1995-1999 under contracts aggregating
$12,170,000.
6. Stockholders' equity
The Company periodically purchases units of beneficial interest in The
Journal Employes' Stock Trust (JESTA) for use in its Incentive
Compensation and Suggest and Share Plans and for resale to its employees.
Treasury stock activity is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
Units Amount Units Amount Units Amount
<S> <C> <C> <C> <C> <C> <C>
Beginning
balance 366,574 $12,031,400 375,214 $11,923,462 377,384 $11,991,539
Purchases 52,500 1,834,241 112,245 3,865,125 -- --
Sales (127,825) (4,068,579) (120,885) (3,757,187) (2,170) (68,077)
-------- ---------- ------- ---------- -------- ----------
Ending
balance 291,249 $ 9,797,062 366,574 $12,031,400 375,214 $11,923,462
======== ========== ======== ========== ======== ===========
Gain on
sales $ 416,530 $ 365,145 $ 2,157
========== ========== ===========
</TABLE>
7. Acquisition
On October 6, 1992, the Company acquired the business and substantially
all of the assets of Imperial Printing Company. The cash purchase price
was approximately $30.7 million, with additional contingent payments, not
to exceed $6.8 million, payable over six years, if target profit levels
are achieved. Contingent payments, if made, will be accounted for as an
adjustment to the purchase price.
The acquisition was accounted for using the purchase method. Accordingly,
the operating results and cash flow of the acquired business are included
in the Company's consolidated financial statements from the date of
acquisition. Had Imperial Printing Company been acquired as of January 1,
1992, the effect of the acquisition on the Company's consolidated results
of operations would not have been material.
8. Segment analysis (thousands of dollars)
<TABLE>
<CAPTION>
Sales Earnings
1994 1993 1992 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Publications $270,645 $250,298 $238,386 $45,789 $41,491 $40,828
Broadcast 63,445 54,850 52,891 14,589 10,853 9,637
Printing 259,478 226,548 175,643 6,183 12,204 7,109
Telecommunications 35,974 32,411 31,256 9,023 8,715 8,283
Direct Marketing 7,799 -- -- (1,487) -- --
Corporate &
eliminations (2,793) (3,501) (1,814) (3,325) (1,980) (393)
-------- -------- -------- ------ ------- -------
$634,548 $560,606 $496,362
======== ======== ========
Total segment
operating earnings 70,772 71,283 65,464
Corporate - other income 2,495 1,521 2,367
------- ------- -------
Earnings before income taxes $73,267 $72,804 $67,831
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
December 31
Identifiable total assets Depreciation Capital expenditures
1994 1993 1992 1994 1993 1992 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Publications $ 93,130 $ 92,943 $ 84,152 $ 6,257 $ 6,296 $ 5,651 $ 8,283 $ 9,971 $ 7,380
Broadcast 52,268 50,347 48,693 2,811 2,586 2,511 4,310 3,451 2,965
Printing 200,711 170,671 150,196 14,919 13,894 11,764 21,419 27,499 13,390
Telecom-
munications 61,172 56,024 58,357 7,265 6,843 6,808 6,404 5,206 2,449
Direct
Marketing 9,214 -- -- 629 -- -- 923 -- --
Corporate 59,923 67,444 68,465 149 121 102 291 429 27
------- ------- ------- ------ ------ ----- ------ ------ ------
$476,418 $437,429 $409,863 $32,030 $29,740 $26,836 $41,630 $46,556 $26,211
======== ======== ======== ======= ======= ======= ======= ======= =======
</TABLE>
9. Subsequent Events
In January 1995, Journal/Sentinel Inc. announced the merger of The
Milwaukee Journal and the Milwaukee Sentinel into one newspaper to
be called the Milwaukee Journal Sentinel. Distribution of the
Milwaukee Journal Sentinel will begin April 2, 1995. This merger
will result in a work force reduction. The Company estimates that
severance and early retirement payments and other costs associated
with the launch of the Milwaukee Journal Sentinel will result in a
pre-tax charge of $15 to $17 million.
Also, during January 1995, the Company announced the exit from the
long-run catalog and publication printing business with the pending
sale of the business and substantially all of the assets of Perry
Printing Corporation, which had sales of $117 million in 1994 and
total assets of $87 million at December 31, 1994. This sale is
contingent upon certain events including the buyer obtaining
acceptable financing. Upon closing this sale, the Company
anticipates a gain exceeding the costs to be incurred in the merger
of the two newspapers.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS OF THE REGISTRANT
Directors Barr, Nye, Resler, Scherr and Scott are elected representatives
of the Unitholders Council and have been employed by the Company for more
than five years. Mr. Bonaiuto, Mr. Currow, Mr. Forbes and Ms. Carey have
less than five years of service with the Company. The other directors,
except for Mr. Meissner, have been employed by the Company or its
subsidiaries in key management positions for more than five years.
Information regarding the executive officers of the Company is set forth
in Part I, Item 4A above. Mr. Meissner is President of Morgan&Myers/The
Barkin Group, a Milwaukee public relations firm. The following chart
states the equity ownership of each Director in the Registrant:
Units
Held
Held as of Percent of
Office March 9, Ownership
Name Age Since 1995(1) *denotes <1%
Margaret E. Barr 47 June 7, 1994 7,700 *
Paul M. Bonaiuto 44 June 8, 1993 9,000 *
Nancy B. Carey 45 December 7, 1993 4,590 *
James C. Currow 50 June 8, 1993 5,540 *
Robert M. Dye 46 March 6, 1990 35,530 *
Christine A.
Farnsworth 46 June 8, 1993 26,550 *
Gregory H. Forbes 45 June 8, 1993 10,000 *
Stephen O. Huhta 39 June 8, 1993 23,705 *
Craig A.
Hutchison 43 June 6, 1989 47,785 *
Peter P. Jarzembinski 42 March 9, 1990 46,725 *
Robert A. Kahlor 61 March 6, 1973 79,435 *
Thomas M. Karavakis 64 June 5, 1984 67,035 *
Douglas G. Kiel 46 June 4, 1991 24,965 *
Paul E. Kritzer 52 June 5, 1990 35,070 *
Ronald G. Kurtis 47 June 8, 1993 39,800 *
David G. Meissner 57 June 7, 1988 --(2) --(2)
Jeffrey S. Nye 45 June 7, 1994 9,600 *
Gerald D. Resler 49 June 7, 1994 10,120 *
Barbara T. Scherr 35 June 7, 1994 1,505 *
Albert V. Scott 43 June 7, 1994 1,720 *
Steven J. Smith 44 June 2, 1987 58,580 *
(1) A "Unit" is equivalent to a share of the common stock of Journal
Communications, Inc.
(2) Mr. Meissner owns no Units but is an officer and director of
Matex Inc. which owns 1,320,000 shares of Journal stock. Mr.
Meissner's wife is also an officer and director of Matex Inc.
and together with her children owns or has a beneficial interest
in 33% of the outstanding common stock of Matex Inc. Mrs.
Meissner also has a 33% beneficial interest in 120,000 shares of
Journal Communications, Inc. common stock. Other members of
Mrs. Meissner's family own or have a beneficial interest in the
remaining 67% of the Matex Inc. shares and the 120,000 shares of
Journal stock.
ITEM 11. EXECUTIVE COMPENSATION
Information in response to this item is incorporated herein by reference
to the Company's proxy statement, which shall be filed with the Securities
and Exchange Commission no later than three (3) weeks prior to the
Company's Annual Meeting which shall be held Tuesday, June 6, 1995.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
Information in response to this item is incorporated herein by reference
to the Company's proxy statement, which shall be filed with the Securities
and Exchange Commission no later than three (3) weeks prior to the
Company's Annual Meeting which shall be held Tuesday, June 6, 1995.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information in response to this item is incorporated herein by reference
to the Company's proxy statement, which shall be filed with the Securities
and Exchange Commission no later than three (3) weeks prior to the
Company's Annual Meeting which shall be held Tuesday, June 6, 1995.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
AND REPORTS ON FORM 8-K
(a) 1. Financial Statements and Financial Statement Schedules
The following consolidated financial statements of the Registrant
are included in Item 8:
Form 10-K
Page Number
Consolidated Balance Sheets at
December 31, 1994, 1993 and 1992 16
Consolidated Statements of Earnings
and Retained Earnings for each of
the three years in the period ended
December 31, 1994 17
Consolidated Statements of Cash Flows
for each of the three years in the
period ended December 31, 1994 18
Notes to Consolidated Financial Statements 19-24
All schedules are omitted since the required information is not
present, or is not present in amounts sufficient to require
submission of the schedule, or because the information required is
included in the consolidated financial statements and notes
thereto.
2. Exhibits
The exhibits listed below are filed as part of this annual report.
(3) Articles of Incorporation and Bylaws
as previously filed, hereby incorporated
by reference
(21) Subsidiaries of the Registrant filed
herewith
(23) Consent of Independent Auditors filed
herewith
(27) Financial Data Schedule
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this
Annual Report to be signed on its behalf by the undersigned, thereunto
duly authorized.
JOURNAL COMMUNICATIONS, INC.
By: /s/ Robert A. Kahlor
Robert A. Kahlor
Chairman of the Board and CEO
Principal Executive Officer
By: /s/ Peter P. Jarzembinski
Peter P. Jarzembinski
Senior Vice President and CFO
Principal Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
/s/ Margaret E. Barr March 31, 1995
Margaret E. Barr, Director
/s/ Paul M. Bonaiuto March 31, 1995
Paul M. Bonaiuto, Director
/s/ Nancy B. Carey March 31, 1995
Nancy B. Carey, Director
/s/ James C. Currow March 31, 1995
James C. Currow, Director
/s/ Robert M. Dye March 31, 1995
Robert M. Dye, Director
/s/ Christine A. Farnsworth March 31, 1995
Christine A. Farnsworth, Director
March , 1995
Gregory H. Forbes, Director
March , 1995
Stephen O. Huhta, Director
March , 1995
Craig A. Hutchison, Director
/s/ Peter P. Jarzembinski March 31, 1995
Peter P. Jarzembinski, Director
/s/ Robert A. Kahlor March 31, 1995
Robert A. Kahlor, Director
March , 1995
Thomas M. Karavakis, Director
/s/ Douglas G. Kiel March 31, 1995
Douglas G. Kiel, Director
/s/ Paul E. Kritzer March 31, 1995
Paul E. Kritzer, Director
/s/ Ronald G. Kurtis March 31, 1995
Ronald G. Kurtis, Director
March , 1995
David G. Meissner, Director
/s/ Jeffrey S. Nye March 31, 1995
Jeffrey S. Nye, Director
/s/ Gerald D. Resler March 31, 1995
Gerald D. Resler, Director
/s/ Barbara T. Scherr March 31, 1995
Barbara T. Scherr, Director
/s/ Albert V. Scott March 31, 1995
Albert V. Scott, Director
/s/ Steven J. Smith March 31, 1995
Steven J. Smith, Director
<PAGE>
JOURNAL COMMUNICATIONS, INC.
INDEX TO EXHIBITS
(Item 14(a))
Exhibits Form 10-K
Page Number
(3) Articles of Incorporation and Bylaws
as previously filed, hereby incorporated
by reference N/A
(21) Subsidiaries of the Registrant filed
herewith N/A
(23) Consent of Independent Auditors filed
herewith N/A
(27) Financial Data Schedule N/A
N/A = Not Applicable
Exhibit No. 21
JOURNAL COMMUNICATIONS, INC.
Subsidiaries of the Registrant
The following list shows the subsidiaries of the Registrant, their
respective states of incorporation and the percentage of voting securities
of each subsidiary owned by its immediate parent. All companies listed
have been included in the consolidated financial statements filed
herewith.
Percent of Voting
Securities Owned
State/Country by Registrant or
Subsidiary of Incorporation Immediate Parent
Journal/Sentinel Inc. Wisconsin 100% by Registrant
WTMJ, Inc. Wisconsin 100% by Registrant
NorthStar Print Group, Inc. Wisconsin 100% by Registrant
Perry Printing Corporation Wisconsin 100% by NorthStar
Print Group
ADD, Inc. Wisconsin 100% by Registrant
MRC Telecommunications, Inc. Wisconsin 100% by Registrant
NorLight, Inc. Wisconsin 100% by MRC
Telephone Associates Long
Distance, Inc. Minnesota 100% by NorLight, Inc.
Bemidji Long Distance, Inc. Minnesota 100% by NorLight, Inc.
PrimeNet Marketing, Inc. Minnesota 100% by Registrant
Trumbull Printing, Inc. Connecticut 100% by Registrant
Imperial Printing Company Michigan 100% by Registrant
Buyers' Guide, Inc. North Carolina 100% by ADD, Inc.
Label Products & Design,
Inc. Wisconsin 100% by NorthStar
Print Group
Boca Publishing Company,
Inc. Wisconsin 100% by ADD, Inc.
Auto Mart Publications, Inc. Ohio 100% by ADD, Inc.
Nordoc Software Services France 99% by Imperial
Printing*
Nordoc Europe BV. Netherlands 100% by Imperial
Printing
_____________________________
* 1% by other subsidiaries of the Registrant
The Registrant has no controlling parent. Twelve million nine
hundred and sixty thousand (12,960,000) shares, 90% of the Registrant's
issued common stock at December 31, 1994, are owned of record by Journal
Employes' Stock Trust. The right to vote these shares in most instances
resides in the employees who hold units of beneficial interest in that
trust. Accordingly, the Registrant is not controlled by Journal Employes'
Stock Trust and does not consider it to be a "parent" of the Registrant
within the meaning of Regulation 12b-2(k). See Item 12 "Security
Ownership of Certain Beneficial Owners and Management."
Exhibit No. 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference,
(a) in the Registration Statement (Form S-8 No. 2-79770) pertaining to
Journal Communications, Inc. Employes' Individual Retirement
Agreement and in the related prospectus,
(b) in the Registration Statement (Form S-8 No. 33-14771) pertaining to
Journal Employes' Stock Trust and in the related prospectus, and
(c) in the Registration Statement (Form S-8) pertaining to Journal
Communications, Inc. Employes' Stock Trust and in the related
prospectus submitted to the Securities and Exchange Commission for
filing on March 12, 1991 with respect to 500,000 units of beneficial
interest in said trust,
of our report dated February 10, 1995, with respect to the consolidated
financial statements of Journal Communications, Inc., included in this
Annual Report (Form 10-K) of Journal Communications, Inc.
Milwaukee, Wisconsin ERNST & YOUNG, LLP
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF JOURNAL COMMUNICATIONS INC. AS OF
AND FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 13,111,281
<SECURITIES> 38,964,215
<RECEIVABLES> 100,237,579
<ALLOWANCES> 0
<INVENTORY> 33,283,375
<CURRENT-ASSETS> 197,745,369
<PP&E> 466,654,440
<DEPRECIATION> 258,506,965
<TOTAL-ASSETS> 476,418,130
<CURRENT-LIABILITIES> 95,324,562
<BONDS> 3,039,653
<COMMON> 3,600,000
0
0
<OTHER-SE> 363,828,915
<TOTAL-LIABILITY-AND-EQUITY> 476,418,130
<SALES> 329,116,126
<TOTAL-REVENUES> 634,547,960
<CGS> 0<F1>
<TOTAL-COSTS> 563,775,856
<OTHER-EXPENSES> (777,284)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (1,717,757)
<INCOME-PRETAX> 73,267,145
<INCOME-TAX> 29,400,000
<INCOME-CONTINUING> 43,867,145
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 43,867,145
<EPS-PRIMARY> 3.13
<EPS-DILUTED> 3.13
<FN>
<F1> Cost of tangible goods sold is not separately reported.
</TABLE>
