ITEM 1. BUSINESS
The Registrant is a diversified communications and media company. Its 1993 revenues, broken down by business segments, are as follows: publishing - 44.1%; commercial printing - 40.4%; broadcast - 9.8% and telecommunications - 5.7%. 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, 1993, for the last five years, as audited by the Audit Bureau of Circulation, was:
1993 1992 1991 1990 1989
Journal 238,351 240,566 260,480 275,957 272,454 Sentinel 171,271 166,085 172,772 176,097 178,736 Sunday Journal 490,077 490,361 497,777 503,994 508,188
Advertising volume in column inches and units for the Company's Milwaukee newspapers for the last five calendar years was:
(in thousands) 1993 1992 1991 1990 1989 Column Inches Full Run 2,657.6 2,619.0 2,526.8 2,866.6 2,951.0 Part Run 260.9 181.3 195.5 205.3 137.5 Units Preprint 1.9 1.6 1.5 1.5 1.5
There are 108 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 108 publications, 39 are paid subscription and 69 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 it is circulated in portions of Waukesha County. In addition, editions of USA Today, Chicago Tribune and New York Times are sold in the Milwaukee market.
Journal/Sentinel Inc.'s newspapers also compete for advertising revenue or support with three (3) 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 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.
During 1993, newsprint consumption at the Milwaukee newspapers was higher than the prior year. Newsprint is purchased from four Canadian and two American suppliers and supplies for 1994 are considered sufficient.
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- four (44) shopper publications, with twenty-one (21) in Wisconsin, fifteen (15) 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; three (3) free auto publications in Ohio; five (5) monthly real estate publications and three (3) senior citizens' publications in Ohio published six (6) times per year; and one (1) paid monthly memorabilia collector publication in Wisconsin.
Commercial Printing
Perry Printing Corporation, Waterloo, Wisconsin, a wholly-owned subsidiary, utilizes a wide array of printing technologies. These include heat-set web offset, sheet-fed offset, rotogravure and flexographic processes that are used to print high-quality, multi-color national consumer and trade magazines, catalogs, free-standing newspaper inserts, out-of-home media, point-of-purchase-point-of-sale materials and labels for consumer goods and industry manufacturers.
Perry's principal raw materials are paper and ink. Presently, paper markets, for the grades consumed by the company, are operating at levels well below capacity and management does not believe that paper availability will be a concern for 1994. The inks utilized by the company are available in abundant supply from a number of suppliers. Perry Printing competes with the top 15 domestic and foreign-owned printing companies.
Imperial Printing Company, a wholly-owned subsidiary acquired on October 6, 1992, specializes in the production of short to medium runs (1,000 to 100,000 copies) of medical and technical journals for various trade associations, documentation manuals for hardware and software manufacturers and in the duplication of floppy disks and computer tapes. Imperial is based in St. Joseph, Michigan and has additional operations in Fremont and Irvine, California. The 1993 purchase of a printing plant in northern France allowed Imperial to expand its European marketing effort. No supply restrictions in 1994 are anticipated 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 eight (8) other commercial television stations, including two (2) low power television 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).
Telecommunications
MRC Telecommunications, Inc., a wholly-owned subsidiary, provides telecommunications transmission services as a licensed common carrier in Wisconsin, Minnesota, Illinois and Michigan. Its services include terrestrial and satellite transmission of message/data, video and audio signals for long distance telephone companies, resellers, corporate users (through its NorLight, Inc., subsidiary), and television and radio networks, using fiber optics, microwave and satellite technologies.
Employees
The Registrant and its subsidiaries, as of December 31, 1993, had approximately 4,900 full-time and 2,500 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 below is this report.
ITEM 2.
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 Leased 231,000 VT, NY, PA, LA
Buyers' Guide, Inc. (Publishing) Office CT Leased 5,600
Striplin Publishing, 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
Perry Printing Corp. (Commercial Printing) Office/Plant and Warehouse Waterloo, WI Owned 445,700 Perry/Baraboo Office/Plant Baraboo, WI Owned 313,800 Perry/Milwaukee Office/Plant Brown Deer, WI Owned 127,300 Perry/Norway Office/Plant Norway, MI Owned 101,700 Perry/Watertown Office/Plant Watertown, WI Owned 201,700 Label Products & Design Inc. (Commercial Printing) Office and Plant Green Bay, WI Owned 40,000
Trumbull Printing, Inc. (Commercial Printing) Office/Plant Trumbull, CT Owned 51,600
Imperial Printing Company (Commercial Printing) Office, Plant and Warehouse St. Joseph, MI Leased 321,000 Office/Plant Fremont, CA Leased 30,000 Office/Plant Irvine, CA Leased 49,000
MRC Telecommunications, 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 3,400
Nordoc Software Services (Commercial Printing) Office/Plant Roncq, France Leased 41,800
ITEM 3.
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.
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 1994, 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 7, 1994, are:
Name Age Office Held Since
Robert A. Kahlor 60 Chairman of the Board/CEO September 4, 1992 Steven J. Smith 43 President September 4, 1992 Thomas M. Karavakis 63 Senior Vice President June 2, 1987 Peter P. Jarzembinski 41 Senior Vice President/CFO December 1, 1992 Douglas G. Kiel 45 Senior Vice President June 2, 1992 Craig A. Hutchison 42 Senior Vice President June 5, 1990 Robert M. Dye 46 Vice President June 5, 1990 Gregory H. Forbes 44 Vice President June 8, 1993 James C. Currow 50 Vice President June 8, 1993 Paul M. Bonaiuto 43 Vice President June 8, 1993 Stephen O. Huhta 38 Vice President June 8, 1993 Ronald G. Kurtis 46 Vice President June 8, 1993 Paul E. Kritzer 51 Vice President June 5, 1990 & Secretary September 1, 1992
All of the executive officers of the Company except Messrs. Forbes, Currow and Bonaiuto have been employed by the Company in key management positions for more than five years.
PART II ITEM 5.
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 February 23, 1994, 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 at that date. The Trust issues units, each representing one share of the Registrant's stock, to eligible employees ("unitholders"). On February 23, 1994, 2,885 unitholders owned 11,763,541 units (representing 82% 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 1,196,459 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 February 23, 1994, retirees, an employee benefit trust, and other trusts held 4,547,036 units, representing 31.6% 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
1984 14.73 16.72 1.99 1.00 2.99 20.3% 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
(1) Includes special dividend on sale of Teltron
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Selected financial data of the Registrant is presented in the following table:
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Consolidated
Operating revenue in 1993 was $560,606,000, an increase of 12.9% over 1992 sales of $496,362,000. Operating revenue in 1991 was $465,982,000. 1993 operating earnings increased by 8.9% from $65,464,000 in 1992 to $71,283,000 for 1993. 1991 operating earnings were $59,748,000. All segments of the company contributed to the increase 1993 operating results. These results were achieved despite only a modest upturn in economic conditions during 1993.
Publications
The publications segment includes daily and weekly newspapers, shoppers and specialty publications.
1993 revenue was $250,298,000, up 5.0% over 1992 and 7.5% greater than 1991. 1992 and 1991 revenue for this segment was $238,386,000 and $232,756,000, respectively. Operating earnings in 1993 were $41,491,000, an increase of 1.6% over the prior year. Operating earnings for 1992 were $40,828,000, an impressive 18.3% increase over 1991 operating earnings of $34,520,000.
Journal/Sentinel Inc. is the largest company in the publications segment. 1993 revenue increased by 3.1% to $196,673,000 compared to $190,727,000 in 1992. However, 1993 operating earnings were down 4.8% from the prior year. The decline in operating earnings was due to increased operating costs, including those costs attributable to the development of an alternate circulation delivery system.
Advertising revenue in 1993, 1992 and 1991 was $137,974,000, $132,764,000 and $130,596,000, respectively. In 1993, retail advertising revenue was approximately equal to the prior year while classified advertising increased by 8% over 1992. General advertising revenue declined 13%, but on a much smaller base. Preprint revenue increased 11% over 1992 primarily as a result of increased volume. From 1991 to 1992, retail and classified advertising revenue increased by 1.9% and 3.5%, respectively, while general advertising revenue declined 7.2%.
1993 circulation revenue was $55,860,000, up slightly from 1992. 1992 circulation revenue was $55,396,000, while in 1991 it was $55,179,000.
ADD Inc. is the other operation in the publications segment. Its 1993 revenue was $53,625,000, a 12.5% increase over 1992 revenue of $47,659,000. 1991 revenue was $44,506,000. 1993 operating earnings showed significant growth over the prior year, increasing 24.5%. This resulted not only from the increase in revenue, but also from closely monitoring its operating expenses. 1993 revenue for the Wisconsin and Ohio operations increased 17% and 15%, respectively. During 1993, operations in both the East and South continued to experience improved operating results as their regional economies began to recover from the recession.
Broadcast
1993 revenue was $54,850,000, an increase of 3.7% over 1992 revenue of $52,891,000. 1993 operating earnings increased slightly over the prior year. The 1993 revenue increase was significant, since 1992 included $4.0 million in revenue from both the summer Olympics and election year political advertising.
In 1993, the company's television stations accounted for 69% of this segment's revenue, and 71% of its operating earnings. Operating results at the Las Vegas and Lansing television stations were ahead of 1992, while the Milwaukee station was below its 1992 results.
1993 operating earnings for the Milwaukee and Kansas City radio stations were ahead of 1992, while Wausau was below its 1992 operating results.
Operating costs and expenses were tightly controlled for 1993, 1992 and 1991.
Printing
Perry Printing Corp.'s 1993 revenue was $157,673,000, a 3.0% increase over the prior year's $153,098,000. 1991 revenue was $157,974,000. Operating earnings for 1993 increased by 39.5% over the prior year. 1992 operating earnings declined by 55% from 1991. The 1993 increase in both sales and operating earnings is due to the Norway and Baraboo operations.
Trumbull Printing Inc.'s 1993 revenue of $7,807,000 was up 5.7% over 1992 revenue of $7,385,000. However, operating earnings increased significantly over the prior year.
1993 was the first full year of operations for Imperial Printing Company (IPC). Revenues in 1993 were $53,096,000, while operating earnings were $5.2 million. During February 1993, IPC acquired Nordoc Software Services located in France.
The French company showed very good growth during the year.
Telecommunications
The company's telecommunications segment's 1993 revenue increased by 3.7% to $32,411,000. This increase is a result of a substantial increase in the volume of circuits sold, since the competitive nature of the telecommunications industry has resulted in a drop in the average circuit mile price charged. In 1992, revenue of $31,265,000 more than doubled the prior year. In 1991, revenue was $15,398,000. With continued growth in the telecommunications industry, 1993 operating earnings increased by 5.2% over 1992.
Other Income and Expenses
Dividends and interest income have continued to decline from $2,550,000 in 1992, to $1,521,000 in 1993. In 1991, this amount was $6,636,000. The decrease over the last three years resulted from a combination of less dollars invested and at significantly lower interest rates. Company investments in short-term securities have decreased due to the use of funds for acquisitions and capital expenditures of property and equipment.
Income Taxes
Income taxes were 39.3% of pre-tax earnings in 1993, 38.6% in 1992, and 38.7% in 1991. The increase in 1993 over the 1992 tax rate reflects the increase in the federal statutory tax rate from 34% to 35%. Permanent tax differences exist for goodwill amortization and the increase in the cash surrender value of the company's life insurance investment pool.
Net Earnings
Net earnings for 1993 were $44,204,000, or $3.16 per share, versus net earnings of $41,631,000, or $2.97 per share. In 1991, net earnings for the year were $40,035,000, or $2.84 per share.
Liquidity and Capital Resources
Cash provided by operations is the company's major source of liquidity and totalled $64,453,000 in 1993, $83,650,000 in 1992 and $61,195,000 in 1991. The reduction in cash provided by operations in 1993 is attributable to a revenue increase which resulted in a substantial increase in accounts receivable. The reduction in cash provided by operations in 1991 resulted from the litigation payment made on a patent infringement lawsuit.
Principal uses of cash during this period were for property and equipment expenditures and acquisitions. Capital expenditures for property and equipment were $36,327,000, $26,211,000 and $22,775,000 in 1993, 1992 and 1991, respectively. 1994 capital expenditures will approximate the 1993 expenditure range. The company has also remained active in acquiring other businesses. During 1993, the company made smaller acquisitions expanding its shopper and printing operations. As described in the notes to consolidated financial statements (included in Item 8), the company purchased the assets of Imperial Printing Company in 1992 and the assets of NorLight in 1991.
Cash used for financing activities was: 1993-$28,466,000; 1992- $28,330,000; and 1991-$38,182,000. Dividends paid during 1993 were $25,156,000, or $1.80 per share. This compares to $25,244,000 ($1.80 per share) in 1992 and $25,358,000 ($1.80 per share) in 1991.
Net working capital at the end of 1993 increased $15.2 million to $111,009,000. Committments for television programs not yet produced as of December 31, 1993, were $4,858,000. The company has traditionally not used debt as a source of funds. The company anticipates that amounts necessary for capital expenditures, dividends 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.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Index to Financial Statements:
Form 10-K Page Number:
Report of Independent Auditors 12
Consolidated Balance Sheets at December 31, 1993, 1992 and 1991 13
For each of the three years in the period ended December 31, 1993: --Consolidated Statements of Earnings and Retained Earnings 14 --Consolidated Statements of Cash Flows 15
Notes to Consolidated Financial Statements 16-21
Report of 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, 1993, 1992, and 1991, and the related consolidated statements of earnings and retained earnings, and cash flows for each of the years then ended. Our audit also included the financial statement schedules listed in the Index in Item 14(a). These financial statements and schedules are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedules 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, 1993, 1992, and 1991, and its consolidated results of operations and its cash flows for each of the years then ended in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects the information set forth therein.
As discussed in Notes 2 and 3 to the consolidated financial statements, the Company changed its method of accounting for postretirement benefits other than pensions and income taxes effective January 1, 1993.
ERNST & YOUNG
Milwaukee, Wisconsin February 10, 1994
See accompanying notes
See accompanying notes
See accompanying notes
JOURNAL COMMUNICATIONS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1993, 1992 and 1991
l. Principal accounting policies
Basis of consolidation - The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated.
Foreign currency translation - Assets and liabilities of French 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.
Inventories - Inventories are stated at the lower of cost (first in, first out method) or market.
Depreciation - 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, 1993, 1992 and 1991 was $11,393,585, $8,371,103 and $6,049,956, 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, 1993, $3,095,000 of goodwill is not being amortized. Accumulated amortization at December 31, 1993, 1992 and 1991 was $8,723,367, $8,082,677 and $7,469,696, respectively.
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 $5,712,000, $5,256,000 and $4,611,000 in 1993, 1992 and 1991, respectively.
Net pension cost for the defined benefit plan includes the following components: (thousands of dollars) 1993 1992 1991
Service cost $ 2,233 $ 2,175 $ 2,040 Interest on projected benefit obligation 5,551 5,186 4,873 Less return on plan assets (4,768) (2,325) (10,064) Net amortization and deferral (683) (3,034) 4,980 ------- ------- ------- Net pension cost $ 2,333 $ 2,002 $ 1,829 ======= ======= =======
Actuarial assumptions used to project the benefit obligations and the net pension cost were: 1993 1992 1991
Discount rate 7.25% 8.00% 8.00%
Rate of increase in compensation levels 4.75% 5.50% 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 actuary estimated a pension liability at December 31, 1993, 1992 and 1991 of $8,107,000, $6,155,000 and $4,962,000, respectively.
The funded status of the plan was as follows:
Actuarial present value of benefit obligations: (thousands of dollars) December 31,
1993 1992 1991
Vested benefits $62,651 $54,076 $49,599 Nonvested benefits 3,449 2,885 2,388 ------- ------- ------- Accumulated benefit obligation 66,100 56,961 51,987 Effect of projected compensation levels 14,477 13,429 14,082 ------- ------- ------ Projected benefit obligation 80,577 70,390 66,069 Plan assets at fair value 60,473 59,619 60,147 ------- ------ ------ Projected benefit obligation in excess of plan assets $20,104 $10,771 $ 5,922 ======= ====== =======
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 and 1991 were $1,337,000 and $1,372,000, respectively.
Postretirement benefit expense for 1993 includes the following components:
(thousands of dollars)
Service cost $ 454 Interest cost on accumulated postretirement benefit obligation 2,073 Amortization of transition obligation 1,266 ------ Postretirement benefit expense $3,793 ======
The funded status of the plans on an aggregate basis at December 31, 1993 was as follows: (thousands of dollars)
Accumulated postretirement benefit obligation: Retirees $16,243 Fully eligible participants 1,919 Other active participants 9,469 ------ Total accumulated postretirement benefit obligation 27,631 Less: Unrecognized transition obligation 24,058 Unrecognized actuarial loss 1,559 ------ Accrued postretirement benefit cost liability $ 2,014 ======
For measurement purposes, benefit cost trend rates of 10% and 9% annually were assumed in 1993 for pre-age 65 and 65 and over groups, respectively. These rates gradually decrease to 5% through 2010 for the pre-age 65 group and through 2008 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, 1993 by 5.8% and the aggregate service and interest cost components of postretirement benefit expense for 1993 by 5.0%, respectively. The weighted average discount rate used in determining the accumulated postretirement benefit obligation was 7.5%.
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) 1993 1992 1991 Current Federal $23,300 $21,400 $15,600 State 6,000 5,100 5,000 ------- ------- ------- 29,300 26,500 20,600 Deferred (700) (300) 4,700 ------- ------- ------- $28,600 $26,200 $25,300 ======= ======= =======
The components of the net deferred tax liability as of December 31, 1993 were as follows:
Deferred tax assets: Accrued employee benefit $ 3,304,000 Inventories 348,000 Accrued compensation 3,350,000 Accounts receivable 891,000 Deferred revenue 172,000
State credit carryforward 461,000 Other 1,405,000 -----------
Total deferred tax assets $ 9,931,000
Deferred tax liabilities: Property, plant and equipment $20,408,000 Other 246,000 -----------
Total deferred tax liabilities $20,654,000
Net deferred tax liability included in balance sheet $10,723,000 ===========
4. Litigation
In September 1991, the Company paid $18.7 million in partial settlement of a patent infringement lawsuit. The one remaining issue is a technical question 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
1993 1992 1991
Capital lease & other obligations, average interest 8% $1,579,020 $ 403,115 $ 590,910 Television program contracts, due through 1997 5,643,025 3,366,920 3,150,125 ---------- ---------- ---------- 7,222,045 3,770,035 3,741,035 Less current portion 3,543,434 1,438,193 1,782,915 ---------- ---------- ---------- $3,678,611 $2,331,842 $1,958,120 ========== ========== ==========
In addition, Company has the rights to broadcast certain television programs during the years 1994-1997 under contracts aggregating $4,858,000.
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:
7. Acquisitions
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, beginning in 1994, if target profit levels are achieved. Contingent payments, if made, will be accounted for as an adjustment to the purchase price.
On December 4, 1991, the Company acquired the business and substantially all of the assets of NorLight. The cost of the acquisition totalled approximately $43 million in cash and liabilities assumed.
The acquisitions were accounted for using the purchase method. Accordingly, the operating results and cash flows of the acquired businesses are included in the Company's consolidated financial statements from the date of acquisition. Had Imperial Printing Company and NorLight been acquired as of January 1, 1991 and 1990, respectively, the effect of the acquisitions on the Company's consolidated results of operations would not have been material.
8. Segment analysis (thousands of dollars)
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None.
PART III ITEM 10.
ITEM 10. DIRECTORS OF THE REGISTRANT
Directors Auer, Engelmann, Felix, Gigowski, Schwartz, Thompson and Weyer are elected representatives of the Unitholders Council and have been employed by the Company for more than five years. Mr. Bonaiuto, Mr. Currow and Mr. Forbes 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 and Chief Executive Officer of Morgan&Myers/The Barkin Group, a Milwaukee public relations firm. The following chart states the equity ownership of each Director in the Registrant:
ITEM 11.
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 7, 1994.
ITEM 12.
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 7, 1994.
ITEM 13.
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 7, 1994.
PART IV ITEM 14.
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, 1993, 1992 and 1991 13
Consolidated Statements of Earnings and Retained Earnings for each of the three years in the period ended December 31, 1993 14
Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, 1993 15
Notes to Consolidated Financial Statements 16-21
The following consolidated financial statements schedules of the Registrant are filed as a part of this report:
Form 10-K Page Number
Schedule I-Consolidated Short-Term Investments at December 31, 1993 25
Schedule V-Consolidated Property & Equipment for each of the three years in the period ended December 31, 1993 26
Schedule VI-Consolidated Accumulated Depreciation of Property & Equipment for each of the three years in the period ended December 31, 1993 27
Schedule X-Consolidated Supplementary
Income Statement Information for each of the three years in the period ended December 31, 1993 28
All other 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 are filed as part of this annual report.
JOURNAL COMMUNICATIONS, INC. SCHEDULE I - CONSOLIDATED SHORT-TERM INVESTMENTS December 31, 1993
Amount Market at cost (1) Value
U. S. Government securities $41,087,798 $41,385,219
Certificates of deposit 5,500,000 5,500,000
Commercial paper 3,500,000 3,500,000
Common stock 62,881 76,975
Preferred stock 15,337 48,300 ----------- ---------- $50,166,016 $50,510,494 =========== ==========
(1) Amount at which each portfolio of equity security issues and each other security issue is carried in the consolidated balance sheet
Depreciation is provided on the straight line basis over the estimated useful lives of the respective assets. Land improvements - 10 to 20 years; Buildings - 20 to 50 years; Equipment - 7 to 20 years
JOURNAL COMMUNICATIONS, INC. SCHEDULE X - CONSOLIDATED SUPPLEMENTARY INCOME STATEMENT INFORMATION
Years Ended December 31, 1993, 1992 and 1991
Charged to Costs and Expenses
1993 1992 1991
Maintenance and repairs $8,649,250 $7,770,945 $5,786,945
Amortization of intangible assets: Film contracts $2,948,269 $1,839,634 $2,110,056 Consulting and Non-competition agreements 3,310,064 2,527,278 2,641,572 Goodwill 633,227 635,606 1,244,194 Other 1,469,717 1,830,247 1,972,440 ---------- --------- --------- TOTAL $8,361,277 $6,832,765 $7,968,262 ========== ========== ==========
Advertising costs $4,571,539 $4,251,128 $5,334,383 ========== ========= ==========
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: ROBERT A. KAHLOR Robert A. Kahlor Chairman of the Board and CEO Principal Executive Officer
By: 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:
JAMES M. AUER March 29, 1994 James M. Auer, Director
Paul M. Bonaiuto, Director
Nancy B. Carey, Director
James C. Currow, Director
ROBERT M. DYE March 29, 1994 Robert M. Dye, Director
Corinne A. Engelman, Director
CHRISTINE A. FARNSWORTH March 29, 1994 Christine A. Farnsworth, Director
BARBARA L. FELIX March 29, 1994 Barbara L. Felix, Director
Gregory H. Forbes, Director
KAREN A. GIGOWSKI March 29, 1994 Karen A. Gigowski, Director
Stephen O. Huhta, Director
Craig A. Hutchison, Director
PETER P. JARZEMBINSKI March 29, 1994 Peter P. Jarzembinski, Director
ROBERT A. KAHLOR March 30, 1994 Robert A. Kahlor, Director
Thomas M. Karavakis, Director
Douglas G. Kiel, Director
PAUL E. KRITZER March 29, 1994 Paul E. Kritzer, Director
RONALD G. KURTIS March 30, 1994 Ronald G. Kurtis, Director
David G. Meissner, Director
CECIL G. SCHWARTZ March 29, 1994 Cecil G. Schwartz, Director
STEVEN J. SMITH March 29, 1994 Steven J. Smith, Director
Lloyd M. Thompson, Director
DONALD J. WEYER March 29, 1994 Donald J. Weyer, Director
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
(22) Subsidiaries of the Registrant filed herewith
(23) Consent of Independent Auditors filed herewith
N/A = Not Applicable