Guess what? A major company in town is whacking millions of dollars worth of post retirement benefits for its employees even as it creates golden parachutes worth millions for a handful of top execs.
Surely the Milwaukee Journal Sentinel's Dan Bice will be on this one, right? Maybe Cary Spivak and the Watchdog Patrol or whatever the hell they're called?
Sadly, as anyone who's read the headline of this story knows, that's unlikely to happen. Because the employer in question is none other than Journal Communications. So I guess it's up to the Brawler.
Way back in December, the Brawler, following the Milwaukee Business Journal, reported that Journal Communications was going to gut retiree health coverage. The gory details are available for all to see -- that is journalists who have the inclination or permission -- in the company's 10-K filing with the Securities and Exchange Commission.
Here's how the 10-K describes JRN's move (p. 71):
The ... postretirement benefits curtailment gain is the result of an amendment adopted on October 31, 2006. The amendment eliminated all postretirement health benefits for full-time active employees who have not attained age 50 by December 31, 2006. In addition, effective for full-time employees who retire on or after April 1, 2007, the amendment eliminated the employer contribution for medical benefits after such persons attain age 65.
Ah, the bloodless yet bloody prose of SEC filings! So how much dough did Journal Comms save on this move?
Well, if you flip to page 69 and look at handy chart laying out the company's postretirement benefit obligations, you'll see that as of Dec. 25, 2005, Journal had an "other postretirement benefits" obligation of $33,693,000. Yet as of Dec. 25, 2006, Journal owed a mere $21,906,000.
What accounted for the change? That would be the line item "curtailment" -- as described in the above passage from page 71 -- which represented $11,908,000.
Now please note, these costs are not going to go away! Journal retirees will not be automatically cleansed of nearly $12 million worth of ailments. It'll be other sources of cash that will be addressing the hospital bills. Unless, of course, conservative lore is correct and all these people are spending too much anyway! Time to talk to shop steward Patrick McIlheran about the magic of HSAs!
But take the rag away from your face! some might say. Surely Journal Comms retirees can cover their chemo, their operations and whatnot out of their retirement money. So what's the harm?
But maybe not, as Journal has also seen fit to slash their pensions as well. Here's how the 10-K describes this "curtailment":
The pension plan curtailment gain is the result of a plan amendment adopted on April 27, 2006. The amendment eliminated participation in the plan for new employees as of April 30, 2006. In addition, employees eligible to participate in our pension plan have made a one-time irrevocable election to either (i) continue participation in the pension plan or (ii) freeze the accrual benefits under the pension plan as of December 2006 and receive an annual contribution of 3% of eligible wages into the Investment Savings Plan beginning in 2007. Future pension benefit accruals will be reduced for participants electing to receive the contribution into their ISP account.
On page 70, the 10-K said this "curtailment" represented a $1,682,000 gain for the company in 2006. The postretirement benefit curtailment represented a $720,000 gain in 2006. Gotta love those loyal employees!
While some might say the Journal can't afford these extravagances, please remember the Journal has a 10-year contract with its CEO who could walk away with a golden parachute of more than $5 million -- more than $3 million of that in cash -- if the company were to be sold.
So yeah, bury the rag into your face, now is the time for your tears.
Postscript: The Brawler wonders how labor relations will fare at the Milwaukee Journal Sentinel under this cost-cutting regime, particularly given one of the shop stewards is one Patrick McIlheran, who sees nothing wrong with excessive executive compensation packages and views contract negotiations as legalized extortion (his words). According to the 10-K a contract with a bargaining group representing 14 employees expired in 2006 and 7 agreements expire in the next two years.
Clarification: As described in the above links, the CEO's severance benefits precedes the curtailments. The "change in control" benefit packages for other top execs, however, are of a more recent vintage.