Community newspapers is a profitable entity and not the money pit management has portrayed, according to an intense investigation by union organizers.
According to transcripts from analyst press conferences regarding the quarterly report, CNI newspapers, a division of Journal Communications, are profitable.
Further more, any indication that the weekly newspaper group is the cause of red numbers is the result of management deliberate decisions and not a down turn in the number of subscribers, the amount earned from advertising or a market adjustment caused by an unfavorable status on Wall Street.
Steve Smith, CEO and Board Chairman, told a group of analysts during a 2006 second quarterly report presentation that community newspapers and shoppers continue to "focus on margin improvement."
Margin is net income divided by net sales income and is used as a internal indicator of how an business division like community newspapers is performing.
"Our community newspapers and shopper group continues to focus on margin improvement. Margins in the second quarter were 16.1 percent versus 9 percent in the second quarter of 2005 -- clearly helped by the one-time insurance recovery of $1.1 million. Excluding this benefit, however, margins were nearly 12% -- an improvement of about 300 basis points over 2005," Smith said according to a transcript.
Smith continued to say it was the hand of God that caused the papers and shoppers to appear in the red.
"At our community newspapers and shoppers, revenues of $24.7 million was down 6 percent compared to last year. The revenue reduction from the impact of Hurricane Katrina and the Louisiana print plant shutdown accounted for virtually all of the decrease," he said.
During the presentation of the 2006 third quarter numbers, Smith reiterated community newspapers strength.
"We are very pleased with the continued improvement in our community newspapers and shopper business, where the operating earnings margin was 8.4%. This reflects a number of economies we put in place in the past year, including the outsourcing of back office functions for community newspapers by Journal Sentinel," he said.
During the third quarter, CNI announced the revamp of its Milwaukee area community newspapers. CNI also discontinued ten shopper publications, replacing them with Marketplace, a shared mail product for the Milwaukee market.
By year end, eleven weekly community newspapers were planned to match the coverage provided by 18 neighborhood web sites. According to Smith, the combination of print and web sites will enable CNI to provide unrivaled neighborhood coverage in the greater Milwaukee area around-the-clock online and once a week in print.
"At our community newspapers and shoppers, revenue of $22.5 million was down 8 percent compared to last year," Paul Bonaiuto, company Executive Vice President and CFO, alluding to a small adjustment. "About half of the revenue decline was due to the impact of Hurricane Katrina and the Louisiana print plant shutdown."
Bonaiuto, however. made no indication of the division being unprofitable.
The division "recorded operating earnings of $1.9 million, up almost sevenfold from operating earnings of $249,000 in last year’s third quarter. This increase was due to $1.6 million in hurricane-related costs incurred in the 2005 third quarter. Operating margin was 8.4 percent," he said.
During the presentation of the last 2006 quarter, Smith talked about efficiency, shared costs and best practices as being the result of a continued move to a more synergy within the company's publishing and advertising efforts.
"Journal Community Publishing Group made a significant efficiency move in late 2006 by closing its Heartland, Wisconsin print plant and consolidating all of Wisconsin community publishing printing at our Waupaca print and press location with expected annualized savings of $750,000," he said.
He later said: "At our community newspapers and shoppers, revenues of $23.1 million was essentially flat compared to last year. Excluding the extra week, revenue decreased 6 percent."
Again, Smith the head of the company never making mention of any concern on his part in terms of community newspapers and shoppers and their impact on the bottom line.
During the review of the first quarter numbers with stock watchers, Smith begins to turn a critical eye on the changes that impacted his company's bottom line. Those changes, which included the reorganization of many facets of the division, were a concerted effort to be more profitable and not to save a sinking ship.
Circulation revenue at the community newspapers and shoppers of $477,000 decreased 35.9 percent, largely reflecting the change in the distribution model of the community newspapers in the Milwaukee area. This change, however, provides advertisers with a more effective way to zone their advertising and to target the neighborhood customers they most want to reach," he said.
"Despite a disappointing first quarter at our community newspapers and shoppers, we still expect to improve margins at that division," Smith later added.
