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 For the fiscal year ended December 31, 1998
Commission File Number: 0-7832
JOURNAL EMPLOYEES' STOCK TRUST
(Exact name of registrant as specified in its charter)
Wisconsin 39-6153189
(State of organization) (I.R.S. employer identification number)
333 West State Street, P. O. Box 661, Milwaukee, Wisconsin 53201
Address of principal executive offices (zip code)
Registrant's telephone number, including area code:
414-224-2374
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
Units of Beneficial Interest
(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 ]
State the aggregate market value of the voting stock held
by non-affiliates of Registrant: Not Applicable.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of March 19, 1999:
Class Outstanding at March 19, 1999
Units of Beneficial Interest 24,552,705
Portions of Parts I, II and III are incorporated by reference to the Annual
Report of Journal Communications Inc. on Form 10-K for the year ended December
31, 1998, filed herewith as Exhibit 99.1. Portions of Part III are incorporated
by reference to the Proxy Statement of Journal Communications Inc., for the 1999
Annual Meeting of Journal Communications Inc., to be filed as Exhibit 99.2 upon
its publication on or about April 30, 1999.
1
<PAGE>
PART I
ITEM 1. BUSINESS
The Registrant is a trust created under the Journal Employees' Stock Trust
Agreement, dated May 15, 1937, as amended (the "Trust Agreement"), by all the
stockholders of The Journal Company (now known as Journal Communications Inc.),
a Wisconsin corporation (the "Company"), to promote stability and to enable its
employees to acquire ownership and control of the Company.
Under the Trust Agreement establishing the Registrant, stockholders of the
Company and the Company itself deposited shares of the Company's stock in the
Trust and received in exchange units of beneficial interest ("Units"), which in
turn have been sold to active employees of the Company and its subsidiaries.
Each Unit represents a beneficial interest in one share of the Company's common
stock. When Unitholders sell all or a portion of their units, they must sell
only through the corporate treasury to active employees designated by the
President of the Company or the Company at the formula price ("Option Price")
defined in the Trust Agreement. Unitholders are required to sell all of their
Units when they die or terminate employment, except that (i) retired employees
may retain a decreasing percentage of their Units for ten years after retirement
and (ii) employees who are terminated due to downsizing or divestiture may
retain a decreasing percentage of their Units for up to five (5) years. As of
the date hereof, the Registrant holds 25,920,000 shares, or ninety percent
(90%), of the outstanding common stock of the Company.
The Registrant engages in no business other than the record holding of Company
shares, the issuing of Units and, in limited instances, the voting of Company
shares held by it. Most expenses of administering the Trust are borne by the
Company.
There are five trustees of the Registrant, all employees of the Company, none of
whom receives any compensation in his capacity as trustee. The Registrant has no
employees.
For a further discussion of the Trust's operation and Unit ownership, see Item
5, "Market for Registrant's Common Stock and Related Stock Holder Matters," and
Item 12, "Security Ownership of Certain Beneficial Owners and Management," in
the Annual Report of Journal Communications Inc. on Form 10-K, filed herewith as
Exhibit 99.1 and incorporated herein by reference.
ITEM 2. PROPERTIES
The Registrant owns no physical properties. Its records are kept and its
administrative functions are performed in the offices of Journal Communications
Inc., in Milwaukee, Wisconsin.
ITEM 3. LEGAL PROCEEDINGS
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
2
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PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
Reference is made to Item 5, "Market For Registrant's Common Stock and Related
Stock Holder Matters," of the Annual Report of Journal Communications Inc., on
Form 10-K filed herewith as Exhibit 99.1, and incorporated by reference.
ITEM 6. SELECTED FINANCIAL DATA
Registrant incorporates herein by reference Item 6, "Selected Financial Data,"
of the Annual Report of Journal Communications Inc., on Form 10-K filed herewith
as Exhibit 99.1.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Registrant incorporates herein by reference Item 7, "Management's Discussion and
Analysis of Financial Condition and Results of Operations," of the Annual Report
of Journal Communications Inc., on Form 10-K filed
herewith as Exhibit 99.1.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS
AND SUPPLEMENTARY DATA
The Financial Statements With Report of Independent Public Auditors are
presented on the pages immediately following.
3
<PAGE>
Report of Ernst & Young LLP, Independent Auditors
The Trustees of Journal
Employees' Stock Trust
We have audited the accompanying statement of assets and liabilities of Journal
Employees' Stock Trust (the Trust) as of December 31, 1998, 1997, and 1996, and
the related statements of Journal Communications Inc. common stock held and
Trust certificates outstanding, Trust income, and cash flows for the years then
ended. These financial statements are the responsibility of the Trustees of the
Trust. 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 the
Trustees, 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 assets and liabilities of Journal Employees' Stock
Trust at December 31, 1998, 1997 and 1996, Journal Communications Inc. common
stock held and Trust certificates outstanding, Trust income, and cash flows for
the years then ended in conformity with generally accepted accounting
principles.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
January 29, 1999
4
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JOURNAL EMPLOYEES' STOCK TRUST
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1998, 1997 and 1996
1998 1997 1996
---- ---- ----
Assets:
Cash in bank $ 0 $100 $100
==== ==== ====
Liabilities:
Note payable to Journal Communications Inc. $ 0 $100 $100
==== ==== ====
See accompanying notes.
5
<PAGE>
JOURNAL EMPLOYEES' STOCK TRUST
STATEMENT OF JOURNAL COMMUNICATIONS INC.
COMMON STOCK HELD AND TRUST CERTIFICATES
OUTSTANDING
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
---------- ---------- ----------
Shares of Journal Communications Inc.
common stock:
Held at beginning and end of year 25,920,000 25,920,000 25,920,000
========== ========== ==========
Trust certificates evidencing Units
of Beneficial Interest in Journal
Communications Inc. common stock:
Outstanding at beginning and end of year 25,920,000 25,920,000 25,920,000
========== ========== ==========
See accompanying notes.
6
<PAGE>
JOURNAL EMPLOYEES' STOCK TRUST
STATEMENT OF TRUST INCOME
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
----------- ----------- -----------
Dividends on common stock of
Journal Communications Inc.
held by the Trust $27,887,406 $27,075,494 $25,010,263
=========== =========== ===========
Dividends to holders of Units of
Beneficial Interest $27,887,406 $27,075,494 $25,010,263
=========== =========== ===========
Dividends per share $1.10 $1.10 $1.10
See accompanying notes.
7
<PAGE>
JOURNAL EMPLOYEES' STOCK TRUST
STATEMENT OF CASH FLOWS
Years ended December 31, 1998, 1997 and 1996
1998 1997 1996
------------ ------------ ------------
Sources of cash:
Receipts from purchasers of
Units of Beneficial Interest $142,497,943 $113,015,360 $ 88,661,471
Dividends received from
Journal Communications Inc. 27,887,406 27,075,494 25,010,263
------------ ------------ ------------
170,385,349 140,090,854 113,671,734
Uses of cash:
Disbursements to sellers of
Units of Beneficial Interest (142,498,043) (113,015,360) (88,661,471)
Dividends paid to holders of
Units of Beneficial Interest (27,887,406) (27,075,494) (25,010,263)
------------ ------------ ------------
Net increase (decrease) in cash (100) --- ---
Cash at beginning of year 100 100 100
------------ ------------ ------------
Cash at end of year $ 0 $ 100 $ 100
============ ============ ============
See accompanying notes.
8
<PAGE>
JOURNAL EMPLOYEES' STOCK TRUST
NOTES TO FINANCIAL STATEMENTS
December 31, 1998, 1997 and 1996
1. Organization
------------
The only business of Journal Employees' Stock Trust (the Trust), under agreement
dated May 15, 1937, as amended, is the record holding of common stock of Journal
Communications Inc. (the Company), the issuance of Units of Beneficial Interest
in such shares (Units) and, in limited instances, the voting of shares of the
Company's common stock held by it. The Trust is administered by five trustees
who are officers/directors of the Company and receive no remuneration for
services performed for the Trust. The trustees are required to distribute all
Trust income (consisting solely of dividends paid by the Company), less such
amounts as the trustees deem necessary for payment of administrative expenses,
as soon as practicable after receipt. Since its origination, substantially all
expenses of the Trust have been paid by the Company, and cash dividends payable
to the Trust have been paid directly to the unitholders by the Company. The
Trust distributes all of its income and, therefore, pays no income taxes under
applicable income tax codes.
2. Common Stock of the Company
---------------------------
Upon deposit by the Company of shares of common stock, the Trust issues a like
number of Units and the Company offers such Units to its employees, or employees
of its subsidiaries (Employees). Sales of Units by the Company are made at the
formula price determined in accordance with the Trust Agreement.
3. Unitholders' Sales of Units of Beneficial Interest
--------------------------------------------------
Unitholders may sell all or a portion of their Units only to other employees
designated by the President of the Company or, under certain circumstances, to
shareholders of the Company, at the current formula price under the terms and
conditions of the Trust Agreement. If the Units are not sold in this manner, the
Units are freely transferable, subject to a five-year right of the Company to
purchase the Units at any time at the formula price. Payments for Units sold by
employees are deposited with the Trust by the purchaser and remitted by the
Trust to the seller.
4. Journal Communications' Stock Split
--------------------------------------
On December 1, 1998, the Board of Directors of the Company approved an increase,
effective January 5, 1999, in authorized common stock from 14,400,000 to
28,800,000 shares, reduced the par value from $.25 to $.125 per share and
approved a two-for-one common stock split. Because each share of stock is equal
to one unit of beneficial interest in the Trust, the stock split has resulted in
a two-for-one split of the units in the Trust. The total value of the units in
the Trust, however, remains the same. All references to shares, units, per-share
and per-unit amounts elsewhere in the financial statements have been restated to
reflect this stock split.
9
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following list shows the names and ages of Registrant's trustees and the
year in which each became a trustee. It also shows the positions held by each
trustee with Journal Communications Inc.
Position/Office
Name Age Trustee Since with the Company
---- --- ------------- ----------------
Steven J. Smith (48) March 9, 1990 Chairman & CEO
Douglas G. Kiel (50) March 7, 1995 President
Paul M. Bonaiuto (48) February 1, 1996 Executive Vice President/CFO
Richard A. Williams (61) January 14, 1997 Manager, Retirement Benefits &
Assistant Secretary
Keith K. Spore (56) January 7, 1999 Senior Vice President
All trustees are directors of Journal Communications Inc., and have been
employed by Journal Communications Inc., in key management positions for at
least five years. Mr. Smith has been Chairman of the Board of the Company since
December 1, 1998, and Chief Executive Officer since March 3, 1998. Previously,
he had been President since September 1992. Mr. Kiel has been President of the
Company since December 1, 1998. Previously, he had been Executive Vice President
of the Company since June 1997 and President of Journal Broadcast Group, Inc., a
wholly-owned subsidiary of the Company, since June 1992. Mr. Bonaiuto has been
an Executive Vice President of the Company since June 1997 and Chief Financial
Officer of the Company since January 1996. Previously, he had been elected a
Senior Vice President in March 1996. Prior to that, Mr. Bonaiuto had been a
director and Vice President of the Company and President of NorthStar Print
Group, Inc., a subsidiary of the Company, from June 1994 to January 1996; Senior
Vice President and Chief Financial Officer of Perry Printing Corporation, then a
subsidiary of the Company, from July 1992 to June 1994, and Executive Vice
President of The Peterson Group, Wilmington, Delaware, a private equity
investment firm. Mr. Williams was appointed Manager of Retirement Benefits in
February 1997 and Assistant Secretary of the Company in June 1997. Previously he
had been Human Relations Manager for Journal Sentinel Inc. None of the trustees
of the Registrant is a director or trustee of a publicly-owned, for-profit
corporation. Mr. Spore has been Senior Vice President of the Company since
September 1995 and President of Journal Sentinel Inc., a wholly-owned
subsidiary, since July 1995 and Publisher of the Milwaukee Journal Sentinel
since June 1996. Previously, he was Editorial Page Editor of the Milwaukee
Journal Sentinel.
10
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
The five trustees, all employees of Journal Communications Inc., do not receive
any compensation in their capacity as trustee. Information about compensation
paid to some of these trustees by Journal Communications Inc., in such trustees'
capacities as employees of Journal Communications Inc., will be presented in the
Proxy Statement of Journal Communications Inc., to be filed as Exhibit 99.2 on
or about April 30, 1999, and incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to Item 6, "Security Ownership of Certain Beneficial Owners
and Management," of the Proxy Statement of Journal Communications Inc., to be
filed as Exhibit 99.2 on or about April 30, 1999, and incorporated herein by
reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) l. Financial Statements and Schedules
The financial statements and schedules listed in the accompanying index
are filed as part of this annual report. 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 in the accompanying index to exhibits are filed as
part of this Annual Report on Form 10-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Registrant during the quarter
ended December 31, 1998.
11
<PAGE>
JOURNAL EMPLOYEES' STOCK TRUST
INDEX TO FINANCIAL STATEMENTS,
FINANCIAL STATEMENT SCHEDULES
AND EXHIBITS
(Item 14(a))
1. Financial Statements Form 10-K
Statement of Assets and Liabilities at
December 31, 1998, 1997 and 1996 5
Statement of Journal Communications Inc.
Common Stock Held and Trust Certificates
Outstanding for each of the three years in the
period ended December 31, 1998 6
Statement of Trust Income for each of the three
years in the period ended December 31, 1998 7
Statement of Cash Flows for each of the three
years in the period ended December 31, 1998 8
Notes to Financial Statements 9
2. Financial Statement Schedule None
3. Exhibits
(3.1) Articles of Association of Journal Communications Inc., as
amended (incorporated by reference to Exhibit 3.1 to Journal
Communications Inc.'s Annual Report on Form 10-K for the year
ended December 31, 1995 [Commission File No. 0-7831]).
(3.2) By-Laws of Journal Communications Inc. (incorporated by
referenced to Exhibit 3.1 to Journal Communications Inc.'s
Current Report on Form 8-K dated March 5, 1996 [Commission
File No. 0-7831]).
(4.1) The Journal Employees' Stock Trust Agreement dated May 15,
1937, as amended (incorporated by reference to Exhibit 9 to
the Annual Report on Form 10-K of Journal Communications Inc.
for the fiscal year ended December 31, 1995 [Commission File
No. 0-7831]).
(4.2) Further amendment to Stock Trust Agreement as approved by
unitholders on October 30, 1996 (incorporated by reference to
Exhibit A to the Definitive Proxy Statement of the Journal
Employees' Stock Trust included in the Trust's Schedule 14A
filed October 1, 1996 [Commission File No. 0-7832]).
(23) Consent of Ernst & Young LLP, Independent Auditors, filed
herewith.
(27) Financial Data Schedule, filed herewith
(99.1) Annual Report to Shareholders of Journal Communications Inc.,
on Form 10-K, filed herewith (incorporated by reference to the
Annual Report on Form 10-K of Journal Communications Inc. for
the year ended December 31, 1998 [Commission File No.
0-7831]).
12
<PAGE>
(99.2) Proxy Statement of Journal Communications Inc., to be filed
upon its publication on or about April 30, 1999.
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, hereunto duly authorized.
JOURNAL EMPLOYEES' STOCK TRUST
By: /s/ Steven J. Smith
Steven J. Smith, Trustee
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:
TRUSTEES OF JOURNAL EMPLOYEES' STOCK TRUST
Date: 3/31/99 /s/ Steven J. Smith
-----------------------------
Steven J. Smith
Date: 3/31/99 /s/ Douglas G. Kiel
-----------------------------
Douglas G. Kiel
Date: 3/31/99 /s/ Paul M. Bonaiuto
-----------------------------
Paul M. Bonaiuto
Date: 3/31/99 /s/ Richard A. Williams
-----------------------------
Richard A. Williams
Date: 3/31/99 /s/ Keith K. Spore
-----------------------------
Keith K. Spore
13
EXHIBIT 23
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the incorporation by reference,
(a) In the Registration Statement (Form S-8, No. 33-14771)
pertaining to Journal Employees' Stock Trust and in the
related prospectus, and
(b) In the Registration Statement (Form S-8, No. 333-15669)
pertaining to Journal Communications, Inc. Employees' Stock
Trust submitted to the Securities and Exchange Commission for
filing on November 5, 1996 with respect to 1,500,000 units of
beneficial interest in said trust, and in the related
prospectus
of our report dated January 29, 1999 with respect to the consolidated financial
statements of Journal Employees' Stock Trust included in this Annual Report
(Form 10-K) for the year ended December 31, 1998.
ERNST & YOUNG LLP
Milwaukee, Wisconsin
March 26, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF JOURNAL EMPLOYEES' STOCK TRUST AS OF AND FOR THE
YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 0
<CURRENT-LIABILITIES> 0
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 0
<SALES> 0
<TOTAL-REVENUES> 27,887<F1>
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 27,887<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 0
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1>The only revenue and expense associated with the trust pertain to dividends
received and paid out. All dividends received are in turn paid out, accounting
for net income of zero ($0).
<F2>Earnings per share is not applicable as net income is zero ($0).
</FN>
</TABLE>
