FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1 to Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ending October 4, 1998 Commission file number 0-7831
(10 Accounting Periods)
JOURNAL COMMUNICATIONS, INC.
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(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 4, 1998
14,000,113
FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
Quarter Ended October 4, 1998 Commission file number 0-7831
Item 2, "Management's Discussion and Analysis of Consolidated Financial
Condition and Results of Operations," Part I of the registrant's Quarterly
Report on Form 10-Q for quarter ended October 4, 1998 is amended to read in its
entirety as follows:
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
After 10 of the 13 four-week business periods of the year, consolidated revenue
was $552.1 million, up 10.5% from 1997. Consolidated net earnings were $43.7
million, up 4.4% from last year.
Journal Sentinel Inc. had pre-tax earnings of $33.1 million, up 11.1% from last
year at this time. Revenue was up 4.7% to $179.8 million. We are seeing some
slowdown in classified advertising, which earlier in the year had been showing
double-digit growth over 1997. However, preprints continue to remain strong;
year-to-date, preprints are almost 26% ahead of a year ago.
Journal Broadcast Corporation, Inc. had pre-tax earnings of $21.9 million.
Excluding the gain on the 1997 exchange of KQRC-FM in Kansas City, pre-tax
earnings are up 3% from last year. Revenue was up 11.7% to $83.1 million. At
KTNV-TV in Las Vegas, pre-tax earnings grew by 34%. The radio group in Omaha,
Neb., enjoyed an 83% growth in pre-tax earnings and WKTI-FM was up 9.9%, but
earnings were down substantially at WSYM-TV in Lansing, Mich. There was a
pre-tax loss at the Knoxville, Tenn., radio operations, where there were
start-up format projects.
NorthStar Print Group Inc. had year-to-date pre-tax earnings of $1.3 million,
down 39.1%, while revenue slipped 3.5% from 1997 to $42.8 million. Sales dropped
11.5% in Milwaukee, where an extensive reduction in operating costs has been
implemented. All three NorthStar divisions have focused on sales initiatives and
cost control.
Norlight Telecommunications Inc. had pre-tax earnings soar 98.4% to $16.7
million. Revenue climbed 36% to $60 million. The growth has been the result of
strong market conditions and Norlight's ability to effectively use the increased
capital allocated to them. A sharp focus on sales and customer service has
driven consistent success for Norlight in 1998.
At ADD, Inc., year-to-date pre-tax earnings were $4.3 million, a decline of
18.5% from 1997 excluding the gain on the sale of the Warner Robins, Ga.,
operation last year. Sales were up 25% to $82.5 million. The earnings decline is
attributed to the loss of
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FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
Quarter Ended October 4, 1998 Commission file number 0-7831
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
several large commercial printing customer and strong competition in several
geographic regions.
IPC Communication Services had a pre-tax loss of $8.3 million, all due to the
northern California operation. The Eastern Region in St. Joseph, Mich., southern
California and Europe all have been profitable. Without northern California, IPC
would be reporting pre-tax earnings of $1.7 million. Nevertheless, the closure
in northern California is being managed well, and, once that has been completed,
we expect IPC to contribute meaningfully to earnings. The costs associated with
the closure have reached $4.8 million. Year-to-date, worldwide sales were $94.9
million, up 4.2%.
PrimeNet Marketing Services reached $386,000 in pre-tax earnings, after a loss
at this point last year. Growing sales, which has been a focus for this year,
continued to be successful, with an increase from 1997 of 15.9% to $10.4
million.
Total assets have increased $27 million from December 31, 1997 to $576 million,
while stockholders' equity now exceeds $438 million.
Year 2000
Project Phases - The Company initiated an enterprise-wide effort in 1997 to
address the issues related to the ability of computer programs and embedded
technology to properly distinguish between years beginning with "20" and "19".
The project plan includes six phases:
1. An awareness phase, to educate and prepare staff at all levels for the
effort required to complete the project;
2. A planning phase, during which a comprehensive inventory of all technology
is completed, assessed for risk, investigated for known compliance, vendors
and suppliers surveyed, and strategies for upgrade or replacement of
non-compliant systems planned;
3. A remediation phase, during which corrective actions planned in the prior
phase are completed;
4. A testing phase, during which both corrected systems and those believed to
be compliant are verified for correct handling of the year calculations;
5. An implementation phase, which includes placing into production those
systems that passed tests successfully, and
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FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
Quarter Ended October 4, 1998 Commission file number 0-7831
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
6. A contingency planning phase, which includes planning for individual system
issues as well as each company's planning for Year 2000 related issues
outside of their control.
Current Status of the Year 2000 Project - By the end of 1998, the awareness
phase had been under way for more than a year and was expected to continue
throughout the project. The inventory was substantially completed including an
assessment of the risk associated with each item and vendor. Vendor surveys had
been sent to approximately 80% of the critical suppliers of the Company, and a
majority of the responses had been received. Through these efforts and those of
a consultant contracted in 1998 to assist with the planning phase, the
compliance status of over 80% of the inventory's technology was known. As a
result, corrective action for approximately two-thirds of the Company's
technology impacted by the Year 2000 had been planned.
Corrective actions were complete for a majority of the critical systems of the
Company by December 31, 1998. These included systems impacting the delivery of
goods or services, safety or revenues of the Company. The Company plans to
replace or upgrade all critical, date-impacted technology by July 1, 1999.
Non-critical systems are generally in the planning phase. In both cases, the
Company plans to use both internal and external resources to make the needed
corrections to software and embedded technologies.
Communications with vendors and suppliers are being reviewed to determine the
extent to which the Company may be vulnerable to the failure of these suppliers
to resolve their own Year 2000 issues. The Company will assess and attempt to
mitigate its risks with respect to the failure of these entities to be Year 2000
ready through a variety of options, including contingency planning and vendor
selection, where practical.
The Company plans to complete all phases of its Year 2000 project on time based
upon the results to date and certain assumptions of future events, including the
continued availability of resources, suppliers meeting their commitments to
deliver needed upgrades or replacements and other factors. However, actual
results could differ materially from those planned. Specific factors that might
cause such material differences include, but are not limited to, the
availability and cost of personnel needed to complete the project, the ability
to locate and correct all impacted technology and similar uncertainties.
Costs - Based on the assessment to date, the Company has estimated that the
operating
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FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
Quarter Ended October 4, 1998 Commission file number 0-7831
Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations
costs associated with the Year 2000 project to date have been $2.3 million. This
includes the cost of third-party resources used to assist in the assessment of
technology at each of the subsidiaries and an estimate of the internal labor
costs associated with the project.The total estimated capital costs, much of
which would have been incurred regardless of Year 2000 issues, were $5.9 million
through the end of 1998.
The Company estimates capital costs for 1999 and through the completion of the
project to be $1.2 million. Labor and other operating costs associated with the
project are estimated at $2.7 million for the same period. At this time, the
Company does not anticipate delaying any major information systems projects due
to the Year 2000 project.
Risks - The Year 2000 is a complex and significant project, and, accordingly,
contains the risk of underestimating the tasks, resources and costs associated
with its successful completion. The risk of not finding a material Year 2000
problem that may impact normal business activities or operation also exists. Due
to the general uncertainty inherent in the Year 2000 problem, resulting in part
from the uncertainty of the Year 2000 readiness of suppliers and customers, the
Company is unable to determine at this time whether the consequences of the Year
2000 failures will have a material impact on the Company's results of
operations, cash flows or financial condition. Through the efforts of the Year
2000 project, the Company is making every effort to reduce the level of
uncertainty about the Year 2000 problem and, through its contingency planning
efforts, mitigate the associated risks.
Contingency Plan - Each of the operating companies is expected to complete
contingency planning at the system and company level. In part, the contingency
plan's goal is to attempt to minimize identified third-party exposures. While
some of the subsidiaries have begun this effort, a majority of the companies are
expected to begin this effort in earnest in the latter half of 1999.
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FORM 10-Q
JOURNAL COMMUNICATIONS, INC.
For Quarter Ended October 4, 1998 Commission file number 0-7831
(10 Accounting Periods)
Part II. Other Information
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this amendment to be signed on its behalf by the
undersigned thereunto duly authorized.
JOURNAL COMMUNICATIONS, INC.
Registrant
Date March 18, 1999 /s/ Steven J. Smith
Steven J. Smith, Chairman and Chief
Executive Officer
Date March 18, 1999 /s/ Paul M. Bonaiuto
Paul M. Bonaiuto, Executive Vice President
and Chief Financial Officer