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, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
JOURNAL COMMUNICATIONS, INC.
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0382060
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 661, 333 W. State St., Milwaukee, Wisconsin 53203
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(Address of principal executive offices) (Zip Code)
414-224-2728
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(Registrant's telephone number, including area code)
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(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 shares of Common Stock Outstanding - October 8, 2000
26,745,966
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
INDEX
Page No.
Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets
October 8, 2000 (Unaudited) and December 31, 1999 2
Unaudited Consolidated Condensed Statements of
Income Four and Ten Periods Ended October 8,
2000 and October 10, 1999 3
Unaudited Consolidated Condensed Statements of
Cash Flows Ten Periods Ended October 8, 2000 and
October 10, 1999 4
Notes to Consolidated Condensed
Financial Statements - October 8, 2000 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
Item 3. Quantitative and Qualitative Disclosure of
Market Risk 10
Part II. Other Information
Items 1-6 10
1
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
Part 1, Item 1. Financial Statements
Consolidated Condensed Balance Sheets
October 8, 2000 and December 31, 1999
(Dollars in thousands)
ASSETS 10/08/2000 12/31/1999
------ ---------- ----------
(Unaudited)
Current assets:
Cash and cash equivalents $ 8,913 $ 10,108
Receivables, less allowance for doubtful
accounts of $5,520 and $4,302 112,290 104,434
Inventories:
Paper and supplies 12,250 11,984
Work in process 2,328 2,758
Finished goods 5,505 5,133
--------- ---------
20,083 19,875
Prepaid expenses 7,775 8,756
Deferred income taxes 5,781 5,781
--------- ---------
Total current assets 154,842 148,954
Property and equipment, at cost, less
accumulated depreciation of $310,393
and $285,797 245,492 216,698
Goodwill , net 114,715 114,429
Broadcast licenses, net 124,245 123,348
Other intangibles assets, net 17,827 21,569
Other assets 6,582 14,072
--------- ---------
Total assets $ 663,703 $ 639,070
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Line of credit $ 20,735 $ 12,115
Accounts payable 48,799 52,092
Taxes on income 2,576 (1,324)
Accrued compensation 25,109 24,258
Deferred revenue 25,969 19,807
Accrued employee benefits 30,812 27,693
Other current liabilities 11,616 10,472
Current portion of long-term obligations 2,448 2,866
--------- ---------
Total current liabilities 168,064 147,979
Long-term obligations 4,237 4,991
Deferred income taxes 20,403 20,403
Stockholders' equity:
Common stock - authorized and issued
28,800,000 ($0.125 par value) 3,600 3,600
Retained earnings 531,727 504,115
Treasury stock, at cost (64,328) (42,018)
--------- ---------
Total stockholders' equity 470,999 465,697
--------- ---------
Total liabilities and stockholders' equity $ 663,703 $ 639,070
========= =========
Note: The balance sheet at December 31, 1999 has been derived from the audited
financial statements at that date but does not include all the information and
footnotes required by generally accepted accounting principles for complete
financial statements.
See accompanying notes to consolidated condensed financial statements.
2
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
Consolidated Condensed Statements of Income
(Dollars in thousands except share and per share amounts)
(Unaudited)
Four Periods Ended Ten Periods Ended
------------------ -----------------
10/08/2000 10/10/1999 10/08/2000 10/10/1999
---------- ---------- ---------- ----------
Revenue $ 249,607 $ 233,269 $ 617,014 $ 573,766
---------- ---------- ---------- ----------
Costs and expenses:
Cost of sales 131,536 121,117 323,413 300,601
Selling/administrative
expenses 85,178 79,064 209,420 187,429
---------- ---------- ---------- ----------
Total costs and expenses 216,714 200,181 532,833 488,030
---------- ---------- ---------- ----------
Operating earnings 32,893 33,088 84,181 85,736
Net interest income
and dividends 572 418 684 3,924
Net loss on sales of
assets (455) (375) (1,200) (289)
Other expense (223) -- (223) --
---------- ---------- ---------- ----------
Earnings before income
taxes 32,787 33,131 83,442 89,371
Provision for income
taxes 12,994 13,571 33,060 36,617
---------- ---------- ---------- ----------
Net earnings $ 19,793 $ 19,560 $ 50,382 $ 52,754
========== ========== ========== ==========
Weighted average number
of common shares
outstanding 26,996,816 27,272,082 27,100,880 27,405,946
========== ========== ========== ==========
Earnings per share $ 0.73 $ 0.72 $ 1.86 $ 1.92
========== ========== ========== ==========
Cash dividend per share $ 0.35 $ 0.28 $ 1.00 $ 0.84
========== ========== ========== ==========
See accompanying notes to consolidated condensed financial statements.
3
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
Consolidated Condensed Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
Ten Periods Ended
-----------------
10/08/2000 10/10/1999
---------- ----------
Cash flow from operating activities:
Net earnings $ 50,382 $ 52,754
Adjustments to reconcile net earnings to
net cash provided by operating activities
Depreciation and amortization 39,087 34,355
Net loss on sales of assets 1,200 289
Net changes in current assets and
current liabilities
Receivables (8,143) (13,094)
Inventories (381) 1,304
Accounts payable (3,018) 1,293
Other current assets and liabilities 17,877 9,063
-------- ---------
Net cash provided by operating activities 97,004 85,964
-------- ---------
Cash flow from investing activities:
Proceeds from sales of assets 3,022 220
Property and equipment expenditures (63,383) (46,146)
Acquisition of businesses (8,661) (127,784)
Other 7,447 (1,872)
-------- ---------
Net cash used for investing activities (61,575) (175,582)
-------- ---------
Cash flow from financing activities:
Net increase in line of credit 8,620 10,570
Net decrease in long-term obligations (1,376) (723)
Net purchases of treasury stock (16,804) (22,813)
Cash dividends (27,063) (23,087)
-------- ---------
Net cash used by financing activities (36,623) (36,053)
-------- ---------
Net decrease in cash and cash equivalents (1,195) (125,671)
Cash and cash equivalents
Beginning of year 10,108 131,051
-------- ---------
October 8, 2000 and October 10, 1999 $ 8,913 $ 5,380
======== =========
See accompanying notes to consolidated condensed financial statements.
4
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
Notes to Consolidated Condensed Financial Statements
----------------------------------------------------
(Dollars in thousands)
1. Basis of Presentation
The accompanying unaudited consolidated condensed 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.
Certain prior year amounts have been reclassified to conform to the 2000
presentation.
Operating results for the ten periods ended October 8, 2000 are not
necessarily indicative of the results that may be expected for the year
ended December 31, 2000. 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, 1999.
2. Accounting Periods
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
statements at the end of the third accounting period (its first quarter),
at the end of the sixth accounting period (its second quarter), and at the
end of the tenth accounting period (its third quarter).
3. Segment Information (Unaudited)
Four Periods Ended Ten Periods Ended
------------------ -----------------
10/08/2000 10/10/1999 10/08/2000 10/10/1999
---------- ---------- ---------- ----------
Revenues by operating segment
-----------------------------
Journal Sentinel Inc $ 71,960 $ 71,643 $ 182,989 $ 184,765
Journal Broadcast Group 48,021 44,110 113,208 95,569
Norlight Telecommunications 39,348 31,047 94,058 77,048
IPC Communication Services 35,089 32,090 86,616 79,480
Add Inc 34,410 34,543 85,917 85,391
NorthStar Print Group 17,874 17,405 45,575 44,465
PrimeNet Marketing Services 4,363 3,443 11,484 9,255
Corporate and eliminations (1,458) (1,012) (2,833) (2,207)
--------- ---------- --------- ---------
$ 249,607 $ 233,269 $ 617,014 $ 573,766
========= ========= ========= =========
5
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
Notes to Consolidated Condensed Financial Statements
----------------------------------------------------
(Dollars in thousands)
Four Periods Ended Ten Periods Ended
------------------ -----------------
10/08/2000 10/10/1999 10/08/2000 10/10/1999
---------- ---------- ---------- ----------
Earnings (losses) before
income taxes by operating
segment
--------------------------
Journal Sentinel Inc $ 9,605 $ 13,509 $ 31,098 $ 35,410
Journal Broadcast Group 10,516 8,146 20,783 21,235
Norlight Telecommunications 12,519 9,825 29,232 24,283
IPC Communication Services 1,346 434 3,824 1,553
Add Inc (35) 1,148 (536) 3,192
NorthStar Print Group (298) 271 1 643
PrimeNet Marketing Services (184) (901) 179 (1,139)
Corporate and eliminations (1,255) 281 (1,823) 270
Net interest income and
dividends 573 418 684 3,924
--------- --------- --------- ---------
$ 32,787 $ 33,131 $ 83,442 $ 89,371
========= ========= ========= =========
10/08/2000 12/31/1999
---------- ----------
(Audited)
Total assets by segment
-----------------------
Journal Sentinel Inc $ 91,309 $ 68,492
Journal Broadcast Group 281,572 277,834
Norlight Telecommunications 107,951 91,861
IPC Communication Services 54,254 56,438
Add Inc 71,806 72,950
NorthStar Print Group 29,118 29,339
PrimeNet Marketing Services 14,223 14,426
Corporate and eliminations 13,470 27,730
--------- ---------
$ 663,703 $ 639,070
========= =========
4. Comprehensive Income
Total comprehensive income was $19,043 and $49,169 for the four and ten
periods ended October 8, 2000, and $19,637 and $52,423 for the four and ten
periods ended October 10, 1999.
6
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
Results of Operations
Ten Accounting Periods Ended October 8, 2000 Compared to Ten Accounting Periods
-------------------------------------------------------------------------------
Ended October 10, 1999
----------------------
Consolidated revenue for the ten accounting periods ended October 8, 2000
increased 7.5% to $617 million, compared to $573.8 million for the same period
last year. Nearly 40% of the revenue increase is attributed to continued strong
demand for services from Norlight Telecommunications Inc.
Consolidated year-to-date pretax earnings slipped to $83.4 million, down 6.6%
from $89.4 million for the same period last year. Overall, the slow down in the
national economy and continued retail challenges have affected many of our
businesses. Pretax earnings at Norlight were up 20.4%, IPC Communication
Services more than doubled its earnings and PrimeNet Marketing Services moved
from a 1999 loss to a small profit. These increases were more than offset by
Journal Sentinel Inc., with year-to-date earnings down 12.2%, and Journal
Broadcast Group, down 2.1%, while NorthStar Print Group Inc.'s earnings dropped
sharply and Add Inc. recorded a pretax loss.
Pretax earnings were also adversely impacted by an increase in amortization
expense associated with the 1999 broadcast acquisitions, recording of reserves
for litigation and expenses associated with voluntary workforce reductions at
the Milwaukee Journal Sentinel. These items reduced year-to-date pretax earnings
by $6.3 million.
Journal Sentinel Inc had year-to-date pretax earnings of $31.1 million, down
12.2% from $35.4 million in the same period last year. Without the reserve
recorded for voluntary workforce reductions, the decrease in pretax earnings
would have been 7.9%. Revenue year-to-date was $183 million, down 1.0% from
$184.8 million last year. To date, it has proven difficult to recover from
advertising reductions by some key retail accounts and the closing of two major
retailers in the Milwaukee area. Newsprint costs are currently $84 more per ton
than last year, increasing expense by approximately $500,000 so far this year.
Work on a new production facility, with an approved cost of up to $106.6
million, is on schedule and on budget. The five-foot-thick press mat was being
poured in early November.
Journal Broadcast Group recorded revenue of $113.2 million for the ten periods
ended October 8, 2000, an 18.5% increase over 1999 revenue of $95.6 million.
Same station year-to-date revenue was $92.7 million compared to $86.1 million
last year. Pretax earnings were $20.8 million, down 2.1% from $21.2 million in
1999. Same station year-to-date pretax earnings were $22.3 million compared to
$20.8 million last year. Broadcast cash flow, calculated as pre-tax earnings
plus depreciation and amortization expense, increased to $31.3 million
year-to-date, compared with $28.3 million a year ago. Same station broadcast
cash flow was $29.3 million in 2000.
7
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
Revenue from the television operations for three quarters in 2000 was $58.2
million, compared with $51.8 million in the three quarters of 1999, an increase
of 12.2%. Same station revenue year-to-date was $2.5 million ahead of the same
period last year. The NBC affiliates, WTMJ-TV in Milwaukee and KMIR-TV in Palm
Springs, Calif., added $2.9 million in advertising revenue as a result of the
Olympics coverage during the quarter. Television earnings before taxes were
$18.7 million in three quarters in 2000 compared with $17.6 million in 1999.
Same station television pretax earnings of $18.2 million were $474,000 ahead of
last year.
Revenue from the radio operations was $55 million and $43.8 million for the
three quarters of 2000 and 1999, respectively, an increase of 25.8%. Same
station revenue year-to-date was $39.3 million, up 11.6% from last year. Radio
operations reported pretax earnings of $2.1 million in the three quarters ended
October 8, 2000 compared with $3.6 million in 1999. Same station radio pretax
earnings year-to-date jumped 32.3% to $4.1 million.
In April a change was made in the Boise, Idaho, market, acquiring KFXJ-FM, and
selling KSRV-AM/FM. In Boise, revenue year-to-date increased $1.3 million to
nearly $3 million for the six-station group. The turnaround effort has stemmed
losses in the operation, and the future looks very positive.
Norlight Telecommunications grew year-to-date revenue by 22.1% over a year ago,
to $94.1 million from $77 million in 1999. Pretax earnings were $29.2 million, a
20.4% increase over 1999. Capital spending commitments to Norlight this year
will exceed $40 million. Demand for capacity remains strong as the network
continues to expand, adding new territory in Minnesota next January and
completing the Indiana addition by the second quarter of 2001.
IPC Communication Services had revenue of $86.6 million, a 9% increase over the
same period last year. Pretax earnings of $3.8 million are up $1.6 million from
a year ago. Revenue and earnings growth principally came from the Western Region
and Europe. In the month of September, the Eastern Region shipped a record sales
volume to a major original equipment manufacturer in the computer industry.
However, IPC is expecting a slowdown in revenue and earnings growth in the
domestic regions in the fourth quarter.
Add Inc. recorded year-to-date revenue of $85.9 million and $85.4 million in
2000 and 1999, respectively. The company recorded year-to-date a pretax loss of
$536,000 compared with pretax earnings of $3.2 million for the same period last
year. The company's printing businesses has not delivered the earnings expected
by management. Operating results at the Ohio print plant have not recovered from
the loss of a major printing customer late last year. At Waupaca, Wis., startup
of a new press was slow, with excess waste and high labor costs. A slowdown at
Dixie Web held back growth in the Louisiana operation. These items reduced
pretax earnings at Add, Inc by $700,000 year-to-date. There have been recent
signs at all of the printing plants that waste and overtime are decreasing while
operating efficiencies are improving.
8
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
In Florida, where last year the Gainesville shopper was sold and the
Jacksonville shopper closed; the rebound has been strong. The weekly Ponte Vedra
Recorder, acquired in May 1999, also has added to Florida results for Add Inc.
NorthStar Print Group Inc. recorded year-to-date revenue of $45.6 million
compared with $44.5 million in 1999, an increase of 2.5%. Pretax earnings for
the ten periods in 2000 were $1,000 compared with pretax earnings of $643,000 in
the same period last year. The Green Bay, Wis., plant has benefited from
combining its operations with the Norway - Watertown label operation, but the
Norway - Watertown division has struggled with a lack of volume. Revenue at
Norway - Watertown of $25 million in 2000 was only $656,000 ahead of the same
period last year.
At PrimeNet Marketing Services, year-to-date revenue was up significantly, more
than $2.2 million, to $11.5 million in 2000 compared to $9.3 million in 1999.
Despite a slowdown at the close of the third quarter, year-to-date pretax
earnings were $179,000 compared with a pretax loss of $1.1 million last year.
Nonoperating Income and Taxes
Interest income from short-term investments decreased by $3.2 million, compared
to three quarters in 1999, as a result of a decrease in cash and cash
equivalents. These funds were principally used to acquire Great Empire
Broadcasting and KMIR-TV in 1999. The year-to-date effective tax rate was 39.6%
in 2000 compared to 41% in the same period in 1999. The change is the result of
implementing strategies that reduced state income taxes, the impact of foreign
net operating losses and permanent tax differences.
Liquidity and Capital Resources
Cash provided by operations was $97 million in three quarters in 2000 compared
to $86 million in three quarters in 1999. The increase in cash primarily comes
from the year-over-year increase in depreciation and amortization, which is a
non-cash item, the collection of a significant receivable for dividends due from
Perry-Judd's Inc. and the recording of reserves. Cash from operations primarily
is used to invest in capital projects, acquire businesses and pay dividends to
unitholders.
Cash used for investing purposes was $ $61.6 million year-to-date in 2000
compared to $175.6 million during the same time period in 1999. The Company
invested in the Norlight fiber optic network expansion and new presses for Add
Inc and IPC. In 1999, $127.8 was principally used to acquire the stock of Great
Empire Broadcasting and the assets of KMIR-TV. Cash provided by financing was
$36.6 million in three quarters in 2000 compared with cash used by financing of
$36.1 million in the same period in 1999. The Company sold more shares of
treasury stock in 2000 compared with the same period in 1999. The Company
increased its borrowing on its line of credit by $8.6 million since December 31,
1999.
9
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
As of October 8, 2000, $20.7 million of the Company's $45 million credit
facility was outstanding. The Company expects to use the line of credit to pay
for capital expenditures of Property and equipment, including initial payments
for the new Journal Sentinel production facility, and other general corporate
purposes.
Forward Looking Statements
This Interim Report on Form 10-Q contains forward-looking statements that my
state the Company's or management's current expectations. These statements are
subject to certain risks, trends, and uncertainties that could cause actual
results to differ materially from those anticipated. Among such risks, trends,
and uncertainties are changes in advertising demand, newsprint prices, interest
rates, regulatory rulings, the outcome of pending and future litigation, the
availability of quality broadcast programming at competitive prices, changes in
the terms and conditions of network affiliation agreements, quality and rating
of network over-the-air broadcast programs to the Company's customers, economic
conditions and the effect of acquisitions, investments, and dispositions on the
Company's results of operations or financial condition. The words "believe,"
"expect," "anticipate," "intends," "plans," "should," "projects," "considers,"
and similar expressions generally identify forward-looking statements. Readers
are cautioned not to place undue reliance on such forward-looking statements,
which are as of the date of this filing.
Item 3. Quantitative and Qualitative Disclosure of Market Risk
None.
Part II. Other Information
Item 1 - Legal Proceedings
No update since last filing.
Item 2 - Changes in Securities and Use of Proceeds
None
Item 3 - Defaults upon Senior Securities
Not applicable
Item 4 - Submission of Matter to a Vote of Security Holders
None
10
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
(a) Exhibit (27) Financial Data Schedule
(b) None
11
<PAGE>
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ending October 8, 2000 Commission file number 0-7831
--------------- ------
(10 Accounting Periods)
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 20, 2000 /s/ Steven J. Smith
--------------------------- ------------------------------------------
Steven J. Smith, Chairman and Chief
Executive Officer
Date November 20, 2000 /s/ Paul M. Bonaiuto
--------------------------- ------------------------------------------
Paul M. Bonaiuto, Executive Vice President
and Chief Financial Officer
