10-Q 1 sdc474.txt 10-Q QUARTERLY REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: June 30, 2003 Or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURIIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 0-7832 JOURNAL EMPLOYEES' STOCK TRUST (Exact name of registrant as specified in its charter) WISCONSIN 39-6153189 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 333 W. State Street, Milwaukee, Wisconsin 53203 (Address of principal executive offices) (Zip Code) 414-224-2728 Registrant's telephone number, including area code 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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act) Yes No X ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of July 23, 2003: Class Outstanding at July 23, 2003 Units of Beneficial Interest 25,920,000* * 2,884,263 of which were held by Journal Communications, Inc. in treasury 1 JOURNAL EMPLOYEES' STOCK TRUST INDEX Page No. ---- Part I. Financial Information Item 1. Financial Statements Statements of Financial Position As of June 30, 2003 (Unaudited) and December 31, 2002 3 Unaudited Statements of Trust Activity Three and Six Months ended June 30, 2003 and 2002 4 Unaudited Statements of Cash Flows Six Months ended June 30, 2003 and 2002 5 Notes to Financial Statements June 30, 2003 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 Item 3. Quantitative and Qualitative Disclosure About Market Risk 8 Item 4. Controls and Procedures 8 Part II. Other Information Items 1 - 4. 8 Items 5 - 6. 9 2 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS JOURNAL EMPLOYEES' STOCK TRUST Statements of Financial Position June 30, 2003 December 31, 2002 ------------- ----------------- (Unaudited) Assets $ -- $ -- ======= ======= Liabilities and Stock Trust Equity $ -- $ -- ======= ======= See accompanying notes. 3 JOURNAL EMPLOYEES' STOCK TRUST Unaudited Statements of Trust Activity (in thousands, except per share amounts)

~~PAGE~~Three ~~NO.~~Months Ended June 30 Six Months Ended June 30 -------------------------- ~~Part~~------------------------ I.2003 ~~Financial~~2002 ~~Information~~2003 ~~Item~~2002 1.------- ~~Financial~~------- ~~Statements~~------- ~~Statements~~------- ofDividends ~~Financial~~on ~~Position~~common Asstock of ~~September~~Journal 30Communications, ~~2002~~Inc. ~~(Unaudited)~~held ~~and~~by ~~December~~the ~~31,~~stock ~~2001~~trust 3$ ~~Unaudited~~6,911 ~~Statements~~$ of7,175 ~~Trust~~$13,822 ~~Activity~~$14,254 ~~Three~~======= ~~and~~======= ~~Nine~~======= ~~Months~~======= ~~ended~~Dividends ~~September~~to ~~30,~~holders ~~2002~~of ~~and~~units ~~2001 4 Unaudited Statements~~ of ~~Cash~~beneficial ~~Flows~~interest ~~Nine~~$ ~~Months~~6,483 ~~ended~~$ ~~September~~7,175 30$13,119 ~~2002~~$14,254 ~~and~~Distribution ~~2001~~in 5lieu ~~Notes~~of dividends to ~~Financial~~holders ~~Statements~~of ~~September~~units ~~30,~~of ~~2002~~beneficial 6interest ~~Item~~428 2.-- ~~Management's~~703 ~~Discussion~~-- ~~and~~------- ~~Analysis~~------- of------- ~~Financial~~------- ~~Condition~~$ ~~and~~6,911 ~~Results~~$ ~~of Operations~~ 7,175 ~~Item~~$13,822 3.$14,254 ~~Quantitative~~======= ~~and~~======= ~~Qualitative~~======= ~~Disclosure~~======= ~~About~~Dividends ~~Market~~per ~~Risk~~share 7$ ~~Item 4~~0.30 ~~Controls~~$ ~~and~~0.30 ~~Procedures~~$ 70.60 ~~Part~~$ II0.60 ~~Other~~======= ~~Information~~======= ~~Items~~======= ~~1-6. 7~~=======

See accompanying notes. 4 JOURNAL EMPLOYEES' STOCK TRUST Unaudited Statements of Cash Flows (in thousands) Six Months Ended June 30 ------------------------------- 2003 2002 ----------- ----------- Sources of cash: Receipts from purchasers of units of beneficial interest $ -- $ 136,534 Dividends received from Journal Communications, Inc. 13,821 14,254 ----------- ----------- $ 13,821 $ 150,788 Uses of cash: Disbursements to sellers of units of beneficial interest -- (136,534) Dividends paid to holders of units of beneficial interest (13,118) (14,254) Distributions in lieu of dividends to holders of units of beneficial interest (703) -- ----------- ----------- $ (13,821) $ (150,788) Net change in cash $ -- $ -- Cash at beginning of year -- -- ----------- ----------- Cash at June 30 $ -- $ -- =========== =========== See accompanying notes. 5 JOURNAL EMPLOYEES' STOCK TRUST NOTES TO FINANCIAL STATEMENTS Quarter ended June 30, 2003 (in thousands, except share amounts) 1. Organization The primary business of Journal Employees' Stock Trust (the Stock Trust) is being the holder of record of certain shares of common stock of Journal Communications, Inc. (the Company), the issuance of, record keeping and transactions in units of beneficial interest (units) that represent shares of common stock of the Company owned by the Stock Trust, voting (including issuance and tabulation of unitholder proxies) of the common stock of the Company owned by the Stock Trust, and such other matters as are specified in the Journal Employees Stock Trust Agreement, dated May 15, 1937, as amended (the Trust Agreement). The Stock Trust is administered by five trustees who are currently officers and directors of the Company and receive no remuneration for services performed for the Stock Trust. The trustees are required to distribute all Stock 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 Stock Trust have been paid by the Company, and cash dividends payable to the Stock Trust have been paid by the Company directly to the employees and former employees who own units (unitholders). 2. Common Stock of the Company The Stock Trust is the holder of record of 90% of the Company's common stock. The Stock Trust has issued one unit for each share of common stock which the Stock Trust holds. 3. Suspension of Purchase and Sale of Units On October 25, 2002, the Company's board of directors directed management and the Company's financial adviser to explore potential sources for additional permanent capital for the Company. The Company indicated at that time that it expected the process could take from six to nine months. As a result, the Company suspended the purchase and sale of units under the Trust Agreement while the Company explores additional permanent capital. On May 14, 2003, the Company announced a plan for a new permanent capital structure, including a share exchange, an initial public offering and the amendment and termination of JESTA. In the share exchange, current shareholders and unitholders would receive shares of class B common stock, which would have 10 votes per share. A Registration Statement on Form S-1 was filed with the Securities and Exchange Commission related to the initial public offering. Class A common stock with one vote per share would be offered to the public. The Company filed a joint proxy statement/prospectus with the SEC relating to the new capital structure on Form S-4. The plan is subject to the approval of the Company's shareholders and unitholders, including approvals required under JESTA. The Company also filed a Registration Statement on Form S-2 offering to rescind the sale of all of the units of beneficial interest purchased during certain periods by employees or former employees who purchased the units in California, Idaho, Louisiana, Maryland, Minnesota, Missouri, Nebraska and Tennessee because our sales of these units may have been in violation of certain state securities laws' requirements. 6 4. Unitholders' Sales of Units of Beneficial Interest Unitholders may offer to sell their units only in accordance with the terms and conditions of the Trust Agreement, which provides four classes of optionees the right to elect to purchase units offered for sale. Units sold to the Company are sold at the option price in effect on the date of the sale. The Company, as one of the optionees under the Trust Agreement, is not obligated to purchase units, though in recent years for the convenience of unitholders, it has elected to do so. There is no assurance the Company will elect to buy units offered for sale in the future. For the past few years until the October 25, 2002 suspension of purchasing and selling of units, the Company had elected to offer units owned by the Company for sale to eligible Company employees through a rotation system. 5. Distributions in Lieu of Dividends During Suspension of Trading The Trust Agreement provides that a unitholder will receive the unit price for units subject to an option event when they are sold, plus either (i) interest, as set by the trustees, (currently at 3.4%, or 60 basis points below the prime interest rate) if other unitholders or the Grant family shareholders ultimately buy the units subject to the option event, or (ii) the dividends declared by the Company's Board of Directors if the Company ultimately buys the units subject to the option event. The Company suspended the purchase and sales of units on October 25, 2002; however, option events still occur pursuant to the terms of the Trust Agreement (for example, when a unitholder leaves employment of the Company). As a result, it cannot be determined who will purchase units subject to option events during the suspension period (and, similarly, it cannot be determined whether the unitholder whose units are subject to an option event during the suspension period will eventually receive interest or dividends). In order to avoid inconvenience to unitholders that may result from the delay in paying either interest or dividends during the suspension period, the trustees have determined that the Stock Trust will make payments to unitholders whose units become subject to option events during the suspension period in an amount equal to the dividends paid by the Company during this period. When the units are eventually sold, the unitholder will receive the sale proceeds calculated in accordance with the terms of the Trust Agreement, less the amount of these payments. These payments were $428,000 and $703,000 in the three and six months ended June 30, 2003, respectively. 6. Common Stock Held and Units Outstanding At June 30, 2003 and December 31, 2002, the Stock Trust held 25,920,000 shares of the Company's common stock and has issued a like number of units of beneficial interest. 7 JOURNAL EMPLOYEES' STOCK TRUST ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Distributable stock trust income is based solely on dividends from Journal Communications, Inc. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK None. ITEM 4. CONTROLS AND PROCEDURES The Stock Trust carried out an evaluation, under the supervision and with the participation of certain of the Trustees of the Stock Trust, of the effectiveness of the design and operation of the Stock Trust's disclosure controls and procedures, as defined in Exchange Act Rules 13a-14(c) and 15d-14(c), as of the end of the end of the period covered by this Quarterly Report on Form 10-Q. Based on that evaluation, they concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the Stock Trust's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to them to allow timely decisions regarding required disclosure. There has been no change in the Stock Trust's internal control over financial reporting that occurred during the Stock Trust's last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Stock Trust's internal control over financial reporting. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None. ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 8 JOURNAL EMPLOYEES' STOCK TRUST ITEM 5. OTHER INFORMATION The primary business of the Stock Trust is being the holder of record of certain shares of common stock of the Company, the issuance of, record keeping and transactions in units that represent shares of common stock of the Company owned by the Stock Trust, voting (including issuance and tabulation of unitholder proxies) of the common stock of the Company owned by the Stock Trust, and such other matters as are specified in the Trust Agreement. The Company files annual, quarterly and special reports, proxy statements and other information with the SEC, some of which contain information about the Company and its operations. SEC filings of the Company are available to the public over the Internet at the SEC's web site at http://www.sec.gov. You may read and copy any filed document at the SEC's public reference rooms in Washington, D.C. at 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549, and at the SEC's regional offices in New York, New York and Chicago, Illinois. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a) Exhibits Exhibit No. Description ----------- ----------- 99.1 Certification by Steven J. Smith (Trustee) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (This certification, required as Exhibit 31 under Item 601(a) of Regulation S-K, is filed as Exhibit 99.1 pursuant to SEC interim filing guidance.) 99.2 Certification by Paul M. Bonaiuto (Trustee) pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (This certification, required as Exhibit 31 under Item 601(a) of Regulation S-K, is filed as Exhibit 99.2 pursuant to SEC interim filing guidance.) 99.3 Certification by Steven J. Smith and Paul M. Bonaiuto (Trustees) pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (This certification, required as Exhibit 32 under Item 601(a) of Regulation S-K, is furnished in accordance with Item 601(b)(32)(ii) of Regulation S-K as Exhibit 99.3 pursuant to SEC interim filing guidance.) b) Reports on Form 8-K The Stock Trust did not file any report on Form 8-K during the period covered by this quarterly report. 9 Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: July 23, 2003 By: /s/ Steven J. Smith ------------------------------- Steven J. Smith Trustee Date: July 23, 2003 By: /s/ Paul M. Bonaiuto ------------------------------- Paul M. Bonaiuto Trustee 10

September 30, 2002 December 31, 2001 ------------------ ----------------- (Unaudited) Assets $ -- $ -- ========= ========= Liabilities $ -- $ -- ========= =========

Three Months Ended September 30 Nine Months Ended September 30 ------------------------------- ------------------------------ 2002 2001 2002 2001 ---- ---- ---- ---- Dividends on common stock of Journal Communications, Inc. held by the Stock Trust $ 6,977 $ 8,956 $ 21,231 $26,359 ======== ======== ========== ======= Dividends to holders of units of beneficial interest $ 6,977 $ 8,956 $ 21,231 $26,359 ======== ======== ========== ======= Dividends per share $ 0.30 $ 0.35 $ 0.90 $ 1.05 ======== ======== ========== =======

Nine Months Ended September 30 ---------------------------------- 2002 2001 --------- --------- Sources of cash: Receipts from purchasers of units of beneficial interest $ 160,937 $ 164,323 Dividends received from Journal Communications, Inc. 21,231 26,359 --------- --------- 182,168 190,682 Uses of cash: Disbursements to sellers of units of beneficial interest (160,937) (164,323) Dividends paid to holders of units of beneficial interest (21,231) (26,359) --------- --------- (182,168) (190,682) Net change in cash -- -- Cash at beginning of year -- -- --------- --------- Cash at September 30 $ -- $ -- ========= =========

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