SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
(Amendment No. ____)
Filed by the Registrant [ X ]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, for Use of
the Commission Only
[ ] Definitive Proxy Statement (as permitted by Rule
14a-6(e)(2))
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section
240.14a-12
Journal Employees' Stock Trust
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-
11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the date
of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
PRELIMINARY PROXY MATERIAL
JOURNAL EMPLOYEES' STOCK TRUST
333 West State Street
Milwaukee, Wisconsin 53203
(414) 224-2719
NOTICE OF SPECIAL MEETING OF UNITHOLDERS
October ___, 1996
A Special Meeting of Unitholders of the Journal Employees' Stock Trust
(the "Trust") will be held in the Board of Directors Room on the sixth
floor of Journal Communications, Inc., 333 West State Street, Milwaukee,
Wisconsin 53203 on _______, October __, 1996, at 9:30 a.m. for the purpose
of considering a proposal to amend the Journal Employees' Stock Trust
Agreement (the "Trust Agreement") to change the formula used to price
units of beneficial interest ("Units") issued by the Trust.
Unitholders of record as of Wednesday, September 18, 1996, who are active
employees of Journal Communications, Inc. (the "Company") or its
subsidiaries or that are employee benefits trusts (as defined in the Trust
Agreement) will be entitled to attend and vote at this meeting or any
adjournment thereof. Employee benefit trusts are the Journal
Communications Investment Savings Plan and trusts established by active
employees of the Company or its subsidiaries to provide retirement
benefits.
Regardless of the number of Units you own, it is important that you be
represented at the meeting. Therefore, please sign, date and return the
enclosed White Proxy Ballot in the return envelope provided. If you
attend the meeting, you may revoke your proxy and vote in person if you so
desire.
By Order of the Trustees,
Robert A. Kahlor
Trustee
Dated: September ___, 1996
JOURNAL EMPLOYEES' STOCK TRUST
333 West State Street
Milwaukee, Wisconsin 53203
(414) 224-2719
PROXY STATEMENT
Solicitation of Proxies
The enclosed White Proxy Ballot ("Proxy") is a proxy solicited
by the trustees (the "Trustees") of the Journal Employees' Stock Trust
(the "Trust") for use at the Special Meeting of Unitholders of the Trust
at 9:30 a.m. on _______, October __, 1996 (the "Special Meeting"), in the
Board of Directors Room on the sixth floor of Journal Communications,
Inc., 333 West State Street, Milwaukee, Wisconsin 53203. In addition to
the use of the mails, the Trustees may, if they deem it desirable, solicit
proxies personally, by telephone, by e-mail, by facsimile or by other
written communication. Solicitations will also be made by regular
employees of Journal Communications, Inc. (the "Company") and its
subsidiaries. All costs relating to the solicitation of proxies will be
borne by the Company. A Unitholder who executes a Proxy may revoke it by
delivering written notice to Christine A. Farnsworth, Assistant Secretary
of the Company, before the Special Meeting. Any Proxy that is not
properly revoked will be voted at the meeting in accordance with the
instructions given on the enclosed form of Proxy. This proxy statement
and enclosed Proxy are being sent to Unitholders on or about Monday,
September __, 1996.
Outstanding Voting Securities
The Trust has one class of securities authorized and
outstanding - units of beneficial interest ("Units"). Unitholders of
record as of Wednesday, September 18, 1996, who are active employees of
the Company or any of its subsidiaries or that are Employee Benefit Trusts
(as defined in The Journal Employees' Stock Trust Agreement (the "Trust
Agreement")) are entitled to notice of the Special Meeting, to attend the
Special Meeting and to vote the Units held by them on that date. Each
Unit is entitled to one vote. Employee Benefit Trusts are The Journal
Communications Investment Savings Plan and trusts established by active
employees of the Company or any of its subsidiaries to provide retirement
benefits.
The proposed amendment to the Trust Agreement will be adopted if
it is approved by (i) the affirmative vote of at least two-thirds of the
Units outstanding owned by active employees of the Company or any of its
subsidiaries and Employee Benefit Trusts, (ii) the written consent of all
of the Trustees and (iii) such stockholder-eligibles (as defined in the
Trust Agreement) as own at least 80 percent of the shares of stock of the
Company then owned by stockholder-eligibles (collectively, the "Requisite
Approvals"). Consequently, any Units eligible to vote at the Special
Meeting and not voted at the Special Meeting, whether due to abstention or
otherwise, will have the effect of a vote against the proposed amendment.
As of Wednesday, September 18, 1996, 12,960,000 Units were
outstanding, of which 6,230,172 Units were held by active employees of the
Company and its subsidiaries, 192,000 Units were held by The Journal
Communications Investment Savings Plan and 81,490 Units were held in
Employee Benefit Trusts established by seven active employees. Units held
by the Company, retirees, other former employees of the Company and
employees' charitable, educational or religious trusts are not eligible to
vote on this matter.
Ownership Information of Certain Beneficial Owners and Management
All of the Trustees are directors and officers of the Company
and receive no additional compensation for serving as Trustees.
Individual Trustees have no beneficial interest in the shares of Company
stock owned by the Trust other than through the Units they own
individually. The following chart states the number of Units held as of
the close of business on Wednesday, September 18, 1996, by Trustees and
the percentage of the outstanding Units eligible to vote at the Special
Meeting:
Units Owned Percentage
Trustee Beneficially Owned
Robert A. Kahlor 90,435 *
Steven J. Smith 73,880 *
Thomas M. Karavakis 82,035 *
Douglas G. Kiel 30,000 *
Paul M. Bonaiuto 13,000 *
------- ----
All Trustees as a Group 289,350 4.5%
____________________
* Less than 1%.
Proposed Amendment to Trust Agreement
The Trust was founded in 1937 and is the oldest employee-
ownership program in the country. In the 59 years since it was founded,
the Trust has provided a financially secure retirement for several
generations of employees of the Company, and during this period the Option
Price (as defined below) has grown every year. The Trustees believe that
the strength of the Trust has been its stability and steady growth. The
Trustees also believe, however, that changes that have occurred since 1937
warrant amending the Trust Agreement to change the formula (the "Option
Price Formula") used to determine the price (the "Option Price") at which
Units are bought and sold.
The Trustees believe the proposed amendment to the Trust
Agreement will cause the Option Price to more closely reflect the price at
which Units would trade if they were publicly-traded securities. In
considering the proposed amendment, the Trustees wanted the Option Price
to more closely reflect market value, to preserve the integrity of the
Option Price Formula, to avoid adding undue volatility to the Option Price
Formula and to phase in the proposed amendment over time.
The Trust Agreement provides that Unitholders may buy and sell
Units only in accordance with the terms of the Trust Agreement. The Trust
Agreement provides, among other things, that all purchases and sales of
Units generally must be made at the Option Price which is determined
according to the Option Price Formula. The Trust Agreement further
provides that Unitholders may sell their Units at any time and must sell
their Units upon the occurrence of certain specified option events (as
defined in the Trust Agreement), including termination of employment with
the Company. The Trust Agreement also restricts the persons who may
purchase Units to active employees of the Company or its subsidiaries, the
Company and stockholder-eligibles (as defined in the Trust Agreement).
Pursuant to the terms of the Trust Agreement, purchasers buy Units from
existing Unitholders rather than from the Trust.
The Trust Agreement currently provides that the aggregate Option
Price for all Units is determined by (A) adding (i) the book value of the
Company as of the close of the fiscal year preceding the valuation date
("Book Value"); (ii) the net income or net loss, as the case may be,
realized by the Company between the close of the last fiscal year and the
close of the accounting period next preceding the valuation date; and
(iii) an amount equal to 39 times the average accounting period net income
of the Company available for dividends during the 65 accounting periods
preceding the valuation date ("Earnings"), and (B) subtracting the amount
of dividends, if any, paid on Company common stock after the close of the
last fiscal year. The Option Price is determined by dividing the
aggregate Option Price for all Units by the number of Units outstanding on
the valuation date.
The proposed amendment to the Option Price Formula will, if it
receives the Requisite Approvals, amend the Option Price Formula by
multiplying both the Book Value and Earnings components of the Option
Price Formula by a number specified in Exhibit A (the "Multiplier"). This
Multiplier will cause the Option Price to be higher than under the current
Option Price Formula following periods when the Company has net income and
cause the Option Price to be lower than under the current Option Price
Formula following periods when the Company has net losses when compared to
the existing Option Price Formula. If the proposed amendment to the
Option Price Formula receives the Requisite Approvals, then Unitholders
will receive a higher price upon the sale of their Units than if the
Option Price Formula were not amended assuming the Company has net
earnings. In addition, however, Unitholders will pay a higher price for
future purchases of Units than if the Option Price Formula were not
amended (assuming the Company has net earnings) because the Option Price
Formula determines the price at which Units are both bought and sold.
The Trustees believe the current Option Price is approximately
one-half of the price at which Units would trade if they were publicly
traded securities based on current market conditions. A common method
used to estimate the market value of a security is the price-earnings
ratio (the "P-E Ratio"), which compares the price of the security to the
earnings attributable to such security. The P-E Ratio of the Company
(i.e. the Option Price divided by the earnings per Unit) is about one-half
of the P-E Ratio of publicly traded media companies in the Company's peer
group based on current market conditions. The Company's P-E Ratio is
currently approximately 9. The P-E Ratio of other media company
securities has been approximately 17 to 20. Some media company securities
currently have P-E Ratios as high as 20 to 24.
The Trustees believe the proposed amendment to the Option Price
Formula will, if it receives the Requisite Approvals, cause the Option
Price to be approximately 75% of the price at which the Units would trade
if they were publicly-traded securities at the end of the phase-in period,
based upon current market conditions. The proposed amendment will
increase the Option Price by 50% over the five-year phase-in period, or
8.5% compounded annually, exclusive of changes to the Option Price
resulting from earnings or losses of the Company. The Trustees have
proposed to increase the Option Price to approximately 75% of the price at
which the Units would trade if they were publicly traded securities based
upon current market conditions rather than 100% of such estimated price to
avoid overvaluing the Units. The Trustees believe the stock market
valuations for media companies currently are high and believe it is
appropriate to leave a cushion in the Option Price, which may limit Unit
price volatility in the event of an economic downturn. The Trustees
believe adjusting the Option Price Formula to approximately 75% of the
price at which the Units would trade based upon current market conditions
if they were publicly traded securities leaves an appropriate cushion.
The proposed amendment will, if it receives the Requisite
Approvals, modify the Option Price Formula for all currently outstanding
Units and all Units issued in the future. All other rights relating to
the Units, including voting rights (if any) and dividend rights, will
remain unchanged by the proposed amendment. The Company has no plans at
this time to increase the regular quarterly dividend, which has been $.55
per share of the Company's stock since March 1996. The dividend amount is
set by the Board of Directors of the Company based on the earnings
strength of the Company, the cash needed for capital projects and
acquisitions and, to some extent, the prime interest rate. Most employee
Unitholders use their dividends to help pay the interest expense on their
loans. The proposed amendment may increase the ability of Unitholders to
leverage additional Unit purchases. However, if the amount borrowed
increases and the dividend remains the same, the out-of-pocket interest
expense (total interest expense less dividends) on stock loans will
increase. There are no arrearages or defaults with respect to the Units.
The proposed amendment will not increase the operating expenses
of the Company. Pursuant to the terms of the Trust Agreement, purchasers
buy Units from existing Unitholders. As a result, persons who purchase
Units will pay more to the selling Unitholder than they would if the
proposed amendment were not effected. Similarly, Unitholders who sell
Units, typically retirees or terminated employees, will receive a higher
price for their Units than they would if the proposed amendment were not
effected, which will be paid by the purchasing Unitholders.
The proposed amendment will affect the Company's cash flow to
the extent the Company buys or sells Units. The Company will pay more to
purchase Units and will receive more when it sells Units if the proposed
amendment is approved to the same extent as other persons who purchase or
sell Units. In addition, the proposed amendment, if it receives the
Requisite Approvals, may result in the Company purchasing more Units than
it would under the existing Option Price Formula. Pursuant to the Trust
Agreement, the Company has purchased Units from selling Unitholders at
times that the number of Units available for sale exceeds the current
demand to purchase them. To the extent the proposed amendment increases
the Option Price and therefore reduces demand for Units, the proposed
amendment may result in the Company purchasing more Units than it would
under the existing Option Price Formula.
The Multiplier will be phased in over a five-year period
commencing with transactions initiated after December 31, 1996, in
accordance with the schedule in Exhibit A. If the proposed amendment had
been implemented on January 1, 1991, the actual Unit prices for the years
1991 to 1995, adjusted on a pro rata basis by the Multiplier, would have
yielded the following pro forma Unit prices:
Pro Forma
Multiplier Actual Year-End Year-End
Date Unit Price Multiplier Unit Price
Year-End 1991 $32.60 1.1 $35.86
Year-End 1992 33.60 1.2 40.32
Year-End 1993 34.64 1.3 45.03
Year-End 1994 35.40 1.4 49.56
Year-End 1995 36.24 1.5 54.36
The text of the proposed amendment to the Trust Agreement is
attached hereto as Exhibit A and incorporated herein by reference.
THE TRUSTEES RECOMMEND A VOTE FOR THIS PROPOSAL.
Financial and Other Information
This Proxy Statement incorporates documents by reference which
are not presented herein or delivered herewith. Such documents (other
than exhibits to such documents unless such exhibits are specifically
incorporated by reference) are available to any person, including any
beneficial owner, to whom this Proxy Statement is delivered, upon written
or oral request, without charge, directed to Christine A. Farnsworth,
Assistant Secretary, Journal Communications, Inc., 333 West State Street,
Milwaukee, Wisconsin 53203 (telephone number (414) 224-2719). To ensure
timely delivery of the documents, any requests should be made by October
__, 1996.
Certain financial information about the Trust and the Company
is contained in the Trust's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996 and Annual Report on Form 10-K for the year ended
December 31, 1995, and the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1996 and Annual Report on Form 10-K for the year
ended December 31, 1995, which are incorporated herein by reference.
Representatives of Ernst & Young LLP, principal accountants for the Trust,
are not expected to be present at the Special Meeting.
IT IS IMPORTANT THAT PROXIES BE RETURNED PROMPTLY. THEREFORE,
UNITHOLDERS ARE REQUESTED TO DATE, SIGN AND RETURN THE WHITE PROXY BALLOT
AS SOON AS POSSIBLE. SIGNED BUT UNMARKED BALLOTS WILL BE VOTED "FOR" THE
PROPOSAL TO AMEND THE TRUST AGREEMENT.
Exhibit A
PROPOSED AMENDMENT TO THE
JOURNAL EMPLOYEES' STOCK TRUST AGREEMENT
Proposed additions are surrounded by quotation marks.
Proposed deletions are bracketed.
_______________________________________
25: Formula for Option Price of Journal Stock. The price,
called the "option price," at which any share of Journal stock shall
be subject to purchase pursuant to the options provided in Section 24
shall be determined on a consolidated basis in accordance with
generally accepted accounting principles practiced by the Company as
shown by the books and records of the Company and its subsidiaries,
as follows:
The book value of all outstanding Journal stock as of the close
of the fiscal year next preceding the date of the trustees' offer
shall first be determined. This figure shall be increased by the net
income or decreased by the net loss, as the case may be, realized
between the close of such fiscal year and the close of the accounting
period next preceding the date of the trustees' offer, and from the
amount thus obtained shall be subtracted the amount of dividends, if
any, paid on such Journal stock after the close of such fiscal year.
To this result there shall be added an amount equal to 39 times the
average accounting period net income of the Company available for
dividends on Journal stock during the 65 accounting periods next
preceding the date of the trustees' offer; but in computing such net
income there shall be deducted dividends, if any, paid or payable on
any stock having priority over Journal stock. "For transactions
initiated after December 31, 1996, the sum thus obtained shall be
multiplied by a figure, called the "multiplier", which is shown
below." The "product" [sum] thus obtained shall be divided by the
number of shares of Journal stock outstanding as of the date of the
trustees' offer and the quotient shall be the option price of each
share of Journal stock. In the event that there shall have been any
change in the capitalization of the Company between the end of the
fiscal year next preceding the date of the trustees' offer and the
date of the trustees' offer, the trustees shall make such adjustment
in the option price as may be necessary fairly to reflect such
change. The trustees shall make a tentative determination of such
option price and payment to the trustees of the sum so determined
shall be sufficient exercise of the option, subject to such
adjustment of such tentative option price as may subsequently be
requisite.
"The multiplier shall be as follows:
1997 1998 1999 2000 2001
Period 1 1.0076923 1.1076923 1.2076923 1.3076923 1.4076923
Period 2 1.0153846 1.1153846 1.2153846 1.3153846 1.4153846
Period 3 1.0230769 1.1230769 1.2230769 1.3230769 1.4230769
Period 4 1.0307692 1.1307692 1.2307692 1.3307692 1.4307692
Period 5 1.0384615 1.1384615 1.2384615 1.3384615 1.4384615
Period 6 1.0461538 1.1461538 1.2461538 1.3461538 1.4461538
Period 7 1.0538462 1.1538462 1.2538462 1.3538462 1.4538462
Period 8 1.0615385 1.1615385 1.2615385 1.3615385 1.4615385
Period 9 1.0692308 1.1692308 1.2692308 1.3692308 1.4692308
Period 10 1.0769231 1.1769231 1.2769231 1.3769231 1.4769231
Period 11 1.0846154 1.1846154 1.2846154 1.3846154 1.4846154
Period 12 1.0923077 1.1923077 1.2923077 1.3923077 1.4923077
Period 13 1.1 1.2 1.3 1.4 1.5
For every period in 2002 and thereafter, the multiplier shall be
1.5."
IMPORTANT-PLEASE READ: This form is
UHID machine read and as such must be filled out in
the following manner:
DEPARTMENT 1. Please use a #2 PENCIL.
2. Color in bubble completely. Do not use Xs
CLOCK or check marks.
3. Do not damage any part of this form.
UNITS Especially the left edge. Thank you!
I hereby appoint ROBERT A. KAHLOR and STEVEN J. SMITH, and each of them,
each with full power to act without the other, and, each with full power
of substitution, as my proxy to vote all Units of Beneficial Interest the
undersigned is entitled to vote at the Special Meeting of Unitholders of
The Journal Employees' Stock Trust (the "Trust") to be held in the Board
of Directors Room on the sixth floor of Journal Communications, Inc., 333
West State Street, Milwaukee, Wisconsin, on the _____ day of October, 1996
at 9:30 a.m. or at any adjournment thereof, as follows, hereby revoking
any proxy previously given.
JOURNAL COMMUNICATIONS, INC. PROXY
Special Meeting of Unitholders, October ___, 1996
Solicited by the Trustees of the Journal Employees' Stock Trust
MARK ONLY ONE BOX
FOR the proposal to amend the
Journal Employees' Stock Trust Agreement
AGAINST the proposal to amend the
Journal Employees' Stock Trust Agreement
THE TRUSTEES RECOMMEND A VOTE "FOR" THE PROPOSAL IN ITEM 1
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED UNITHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR THE PROPOSAL. IF THIS PROXY IS NOT RETURNED, ANY UNITS
NOT VOTED, WHETHER DUE TO ABSTENTION OR OTHERWISE, WILL HAVE THE EFFECT OF
A VOTE AGAINST THE PROPOSAL.
I hereby acknowledge receipt of the Notice of said Special Meeting and the
accompanying Proxy Statement.
Dated: _______________________, 1996
Signed: _________________________________________________________
* NOTE: Please sign exactly as your name appears hereon. When signed as
trustee, please add title.
PLEASE MAIL IN ENVELOPE ENCLOSED - NO POSTAGE REQUIRED