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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from ______ to ______
Commission File Number: 1-12955
Journal Register Company
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-3498615
(State or Other Jurisdiction of Incorporation (I.R.S. Employer
or Organization) Identification No.)
50 West State Street, Trenton, New Jersey 08608-1298
(Address of Principal Executive Offices) (Zip Code)
(609) 396-2200
(Registrant's Telephone Number, Including Area Code)
(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 [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date: common stock, $.01 par value
per share - 46,534,081 outstanding (exclusive of treasury shares) as of May 13,
1999.
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JOURNAL REGISTER COMPANY
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
Page No.
--------
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets at March 31,
1999 (Unaudited) and December 31, 1998................... 1
Condensed Consolidated Statements of Income for the
three months ended March 31, 1999 and 1998 (Unaudited)... 2
Condensed Consolidated Statements of Cash Flows for
the three months ended March 31, 1999 and 1998
(Unaudited).............................................. 3
Notes to Unaudited Condensed Consolidated
Financial Statements..................................... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...................... 6
Item 3. Quantitative and Qualitative Disclosures About
Market Risk.............................................. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings........................................ 11
Item 2. Changes in Securities and Use of Proceeds................ 11
Item 3. Defaults Upon Senior Securities.......................... 11
Item 4. Submission of Matters to a Vote of Security Holders...... 11
Item 5. Other Information........................................ 11
Item 6. Exhibits and Reports on Form 8-K......................... 11
Signature ......................................................... 12
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
JOURNAL REGISTER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
March 31, December 31,
1999 1998
------------- --------------
ASSETS
Current assets:
Cash and cash equivalents $ 9,219 $ 8,542
Accounts receivable, less allowance for
doubtful accounts of $5,473 in
1999 and $4,632 in 1998 55,738 58,244
Inventories 8,277 8,440
Deferred income taxes 2,684 2,522
Other current assets 4,282 4,130
------------- --------------
Total current assets 80,200 81,878
Property, plant and equipment: 231,962 230,160
Less accumulated depreciation (133,316) (130,182)
------------- --------------
98,646 99,978
Intangible and other assets, net of accumulated
amortization of $31,970 in 1999
and $28,297 in 1998 488,168 490,013
------------- --------------
Total assets $ 667,014 $ 671,869
============= ==============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable $ 11,834 $ 12,107
Income taxes payable 942 829
Accrued interest 7,019 6,374
Other accrued expenses and current liabilities 31,553 30,814
------------- --------------
Total current liabilities 51,348 50,124
Senior debt, less current maturities 762,425 765,000
Deferred income taxes 14,870 14,029
Accrued retiree benefits and other liabilities 15,560 17,078
Income taxes payable 55,072 50,951
Commitments and contingencies
Stockholders' deficit:
Common stock, $.01 par value per
share, 300,000,000 shares authorized,
48,437,581 issued and outstanding at
March 31, 1999 and December 31, 1998 484 484
Additional paid-in capital 358,236 358,236
Accumulated deficit (575,881) (583,821)
------------- --------------
Total (217,161) (225,101)
Less treasury stock, 1,141,800 shares at cost (14,888) ---
Accumulated other comprehensive loss, net of
tax of $153 (212) (212)
------------- --------------
Net stockholders' deficit (232,261) (225,313)
-------------- --------------
Total liabilities and stockholders' deficit $ 667,014 $ 671,869
============= ==============
See accompanying notes.
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JOURNAL REGISTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share data)
(Unaudited)
Three months ended
March 31,
1999 1998
----------------- ---------------
Revenues:
Advertising $ 79,570 $ 63,940
Circulation 24,308 20,134
----------------- ---------------
Newspaper revenues 103,878 84,074
Commercial printing and other 6,024 5,587
----------------- ---------------
109,902 89,661
Operating expenses:
Salaries and employee benefits 38,997 30,912
Newsprint, ink and printing charges 12,477 11,896
Selling, general and administrative 10,349 8,158
Depreciation and amortization 7,232 4,939
Other 14,098 11,454
----------------- ---------------
83,153 67,359
----------------- ---------------
Operating income 26,749 22,302
Interest and other expense (13,462) (8,698)
----------------- ---------------
Income before provision for income taxes 13,287 13,604
Provision for income taxes 5,347 5,041
----------------- ---------------
Net income $ 7,940 $ 8,563
================= ===============
Net Income per common share (basic
and diluted): $ .17 $ .18
Weighted average shares outstanding:
Basic 47,725 48,438
Diluted 47,725 48,706
SEE ACCOMPANYING NOTES.
2
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JOURNAL REGISTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
----------------------------------------
1999 1998
-------------- ---------------
<S> <C> <C>
Cash flows from operating activities:
Net income $7,940 $ 8,563
Adjustments to reconcile net income to
net cash provided by operating
activities:
Provision for losses on accounts receivable 899 618
Depreciation and amortization 7,232 4,939
other, net 4,303 5,173
-------------- ---------------
Net cash provided by operating activities 20,374 19,293
Cash flows from investing activities:
Additions to property, plant and equipment (2,238) (2,171)
Net proceeds from sale of property, plant
and equipment and other
assets 4 5
Purchase of newspaper properties -- (36,086)
-------------- ---------------
Net cash used in investing activities (2,234) (38,252)
Cash flows from financing activities:
Proceeds from issuance of senior facilities -- 39,000
Repayments of senior debt (2,575) (17,148)
Purchase of treasury shares (14,888) -
-------------- ---------------
Net cash (used in) provided by financing activities (17,463) 21,852
-------------- ---------------
Increase in cash and cash equivalents 677 2,893
Cash and cash equivalents, beginning of period 8,542 8,183
-------------- ---------------
Cash and cash equivalents, end of period $ 9,219 $11,076
============== ===============
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest $ 12,749 $8,845
Income taxes 434 344
</TABLE>
SEE ACCOMPANYING NOTES.
3
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JOURNAL REGISTER COMPANY
NOTES TO UNUADITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
1. ORGANIZATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include Journal
Register Company (the "Company") and all of its wholly-owned subsidiaries. The
Company was incorporated on March 11, 1997 and became a publicly traded company
in May of 1997.
The Company (through its consolidated subsidiaries) primarily publishes
daily and non-daily newspapers serving markets in Connecticut, Philadelphia and
its surrounding areas, Ohio, the greater St. Louis area, central New England and
the Capital-Saratoga and Mid-Hudson, New York regions; and has commercial
printing operations in Connecticut, Ohio and Pennsylvania.
The condensed consolidated interim financial statements included herein
have been prepared by the Company, without audit, in accordance with generally
accepted accounting principles ("GAAP") and pursuant to the rules and
regulations of the Securities and Exchange Commission. The condensed
consolidated interim financial statements do not include all the information and
footnote disclosure required by GAAP for complete financial statements. In the
opinion of the Company's management, the accompanying unaudited condensed
consolidated financial statements contain all material adjustments (consisting
only of normal recurring accruals) necessary to present fairly its financial
position as of March 31, 1999 and December 31, 1998 and the results of its
operations and cash flows for the periods ended March 31, 1999 and 1998. These
financial statements should be read in conjunction with the December 31, 1998
audited Consolidated Financial Statements and Notes thereto. The interim
operating results are not necessarily indicative of the results to be expected
for an entire year.
2. EARNINGS PER COMMON SHARE
For the three-month period ended March 31, 1999, there was no dilutive
effect from the employee stock options, therefore, the weighted average number
of shares outstanding (basic and diluted) was 47,725,341. Options to purchase
approximately 2.5 million shares of common stock at a range of $14.00 to $22.50
were outstanding at March 31,1999 but were not included in the computation of
the diluted earnings per share because the options' exercise price was greater
than the average market price of the common shares.
3. COMMON STOCK
On January 11, 1999, the Company's Board of Directors authorized a
share repurchase program of up to two million shares of the Company's common
stock. At March 31, 1999, the Company had repurchased 1,141,800 shares at a
total cost of approximately $14.9 million.
On April 8, 1999, the Company's Board of Directors authorized the
repurchase of an additional one million shares of its common stock under its
stock repurchase program. Subsequent to March 31, 1999, the Company repurchased
an additional 761,700 shares on the open market. Shares under the program are to
be repurchased at management's discretion, either in the open market or in
privately negotiated transactions.
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JOURNAL REGISTER COMPANY
NOTES TO UNUAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999
4. ACQUISITIONS
On July 15, 1998, the Company completed its acquisition of the
Pennsylvania, New York and Ohio newspaper businesses of The Goodson Newspaper
Group (including Mark Goodson Enterprises, Ltd.) for approximately $300 million
in cash (the "Goodson Acquisition"). The Company applied the purchase method of
accounting for this transaction. Accordingly, the total acquisition cost, on a
preliminary basis, was allocated to the tangible assets and liabilities acquired
based upon their estimated fair market value on the effective date of the
acquisition of approximately $17.1 million and $7.9 million, respectively.
Intangible assets of approximately $300 million were recorded for the subscriber
lists and excess of the purchase price over the value of identifiable net assets
and are being amortized in accordance with the Company's policy.
The following table presents the unaudited pro forma results of
operations of the Company as though the Goodson Acquisition occurred on January
1, 1998.
Three months ended
March 31, 1998
------------------
(in thousands)
Net Revenues $ 105,864
Net Income 5,467
Net income per share (basic and diluted): $ .11
The pro forma results are not necessarily indicative of what actually
would have occurred if the acquisition had been in effect for the period
presented and are not intended to be a projection of future results.
5. COMPREHENSIVE LOSS
The March 31, 1999 accumulated other comprehensive loss relates to a
minimum pension liability adjustment of $212,000 net of tax recorded at December
31, 1998.
6. SEGMENTS
In 1998, the Company adopted Financial Accounting Standards Board, No.
131, "Disclosure About Segments of an Enterprise and Related Information." In
accordance with FASB 131, the Company concluded that it operates in one
reportable segment. The Company determined its operating segment based on
individual operations that the chief operating decision maker reviews for
purposes of assessing performance and making operational decisions. The combined
operations have similar economic characteristics and each operation has similar
products, services, customers, production processes and distribution systems.
7. RECLASSIFICATIONS
Certain reclassifications were made to the 1998 financial statements to
conform with the 1999 presentation.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company's business is publishing newspapers in the United States,
where its publications are primarily daily and non-daily newspapers. The
Company's revenues are derived primarily from advertising, paid circulation and
commercial printing.
As of March 31, 1999, the Company owned and operated 24 daily
newspapers and 185 non-daily publications strategically clustered in seven
geographic areas: Connecticut; Philadelphia and its surrounding areas; Ohio; the
greater St. Louis area; central New England; and the Capital-Saratoga and
Mid-Hudson, New York regions. As of March 31, 1999, the Company had total paid
daily circulation of approximately 653,000 and total non-daily distribution of
approximately 3.7 million.
The Company's objective is to continue its growth in revenues, EBITDA
and net income. The principal elements of the Company's strategy are to: (i)
expand advertising revenues and readership; (ii) grow by acquisition; (iii)
capture synergies from geographic clustering; and (iv) implement consistent
operating policies and standards. From 1993 through present, the Company
successfully completed 13 strategic acquisitions, acquiring 12 daily newspapers,
117 non-daily publications and three commercial printing companies, two of which
print a number of the non-daily publications. The third is a premium quality
sheet-fed printing company.
Newspaper companies tend to follow a distinct and recurring seasonal
pattern. The first quarter of the year (January-March) tends to be the weakest
quarter because advertising volume is then at its lowest level. Conversely, the
fourth quarter (October -December) tends to be the strongest quarter as it
includes heavy holiday season advertising.
The first quarter of 1999 includes the results of the following
acquisitions: The Saratogian, Saratoga Springs, New York, acquired March 9,
1998; the Goodson Acquisition, completed July 15, 1998; and Taconic Media,
Dutchess County, New York, acquired September 21, 1998.
THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE MONTHS ENDED MARCH 31, 1998
REVENUES. In the three months ended March 31, 1999, revenues increased
$20.2 million, or 22.6% to $109.9 million, primarily due to acquisitions.
Newspaper revenues in the first quarter increased $19.8 million, or 23.6%, to
$103.9 million, principally due to increased advertising revenue as a result of
acquisitions. Circulation revenues increased approximately $4.2 million, or
20.7%, to $24.3 million during the three months ended March 31, 1999. Commercial
printing and other represented 5.5% of the Company's revenues in the first
quarter of 1999, as compared to 6.2% in the first quarter of 1998.
SALARIES AND EMPLOYEE BENEFITS. Salaries and employee benefit expenses
were 35.5% of the Company's revenues in the first quarter of 1999 as compared to
34.5% in the first quarter of 1998. Salaries and employee benefits increased
$8.1 million, or 26.2%, in the first quarter of 1999 to $39.0 million, primarily
due to acquisitions.
NEWSPRINT, INK AND PRINTING CHARGES. In the first quarter of 1999,
newsprint, ink and printing charges were 11.4% of the Company's revenues, as
compared to 13.3% in the first quarter of 1998. Newsprint, ink and printing
charges in the three months ended March 31, 1999 increased approximately
$581,000, or 4.9%, as compared to the prior year period. The increase in the
first quarter of 1999 compared to 1998 is a result of the volume increases
related to the Company's acquisitions, offset by a decrease in newsprint prices
of approximately 3%, as well as savings related to the web width reduction at
the New Haven Register.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses were 9.4% and 9.1% of the Company's revenues in the
first quarters of 1999 and 1998, respectively. Selling, general and
administrative expenses for the first quarter of 1999 increased $2.2 million, or
26.9%, to $10.3 million, due to the Company's acquisitions, commissions related
to increased sales and additional costs associated with the company's revenue
generating activities.
6
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DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
were 6.6% of the Company's revenues in the first quarter of 1999 as compared to
5.5% in the first quarter of 1998. Depreciation and amortization expenses in the
first quarter of 1999 increased $2.3 million, or 46.4%, to $7.2 million due to
increased amortization resulting from the Company's acquisitions in the third
quarter of 1998.
OTHER EXPENSES. Other expenses accounted for 12.8% of the Company's
revenues in the first quarters of both 1999 and 1998. Other expenses increased
$2.6 million, or 23.1%, to $14.1 million in the first quarter of 1999, primarily
due to acquisitions and increased circulation, promotion and distribution
expenses.
OPERATING INCOME. Operating income increased $4.4 million, or 19.9%,
for the first quarter of 1999 as compared to the first quarter of 1998. The
increase in operating income as compared to the prior year period is
attributable to the growth in the Company's advertising revenue, results of
continued cost savings strategies implemented at the Company's operating
subsidiaries and the effect of acquisitions during the first three months of
1999.
INTEREST EXPENSE. Interest expense increased $4.7 million, or 54.1%, in
the first quarter of 1999 as compared to the first quarter of 1998, as a result
of increased borrowing in connection with the Company's acquisitions including
the Goodson Acquisition, offset in part by a decrease in average borrowing
rates.
PROVISION FOR INCOME TAXES. The Company reported an effective tax rate
of 40.2% for the first quarter of 1999 as compared to 37.1% for the first
quarter of 1998. The increase in the effective tax rate from the first quarter
of 1998 is a result of the Company's 1998 acquisitions, primarily the Goodson
Acquisition completed in the third quarter of 1998.
NET INCOME. Net income was $7.9 million, or $.17 per share, basic and
diluted, for the first quarter of 1999 as compared to $8.6 million or $.18 per
share, basic and diluted, for the first quarter of 1998. The decrease as
compared to the first quarter of 1998 is a direct result of the current dilutive
effect of increased intangible amortization expense in connection with the
Goodson Acquisition.
OTHER INFORMATION. EBITDA(1)for the first quarter of 1999 was $34.0
million, an increase of $7.0 million from the prior year period. Tangible net
income1 increased 11.6% to $10.7 million in the first quarter of 1999 as
compared to the first quarter of 1998.
- --------
(1)EBITDA is defined by the Company as operating income (loss) plus
depreciation, amortization and other non-cash, special or non-recurring
charges. Tangible net income is defined as net income plus after-tax
amortization. EBITDA and tangible net income are not intended to represent
cash flow from operations and should not be considered as alternatives to
operating or net income computed in accordance with generally accepted
accounting principles ("GAAP"), as indicators of the Company's operating
performance, as alternatives to cash from operating activities (as determined
in accordance with GAAP) or as measures of liquidity. The Company believes
that EBITDA is a standard measure commonly reported and widely used by
analysts, investors and other interested parties in the media industry.
Accordingly, this information has been disclosed herein to permit a more
complete comparative analysis of the Company's operating performance relative
to other companies in the industry. However, not all companies calculate
EBITDA and tangible net income using the same methods; therefore, the EBITDA
and tangible net income figures set forth above may not be comparable to
EBITDA and tangible net income reported by other companies. Certain covenants
contained in the Company's credit agreement are based upon EBITDA.
7
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LIQUIDITY AND CAPITAL RESOURCES
The Company's operations have historically generated strong positive
cash flow. The Company believes cash flows from operations will be sufficient to
fund its operations, capital expenditures and long-term debt obligations. The
Company also believes that cash flows from operations and future borrowings and
its ability to issue common stock as consideration for future acquisitions, will
provide it with the flexibility to fund its acquisition strategy while
continuing to meet its operating needs, capital expenditures and long-term debt
obligations.
CASH FLOWS FROM OPERATIONS. Net cash provided by operating activities
in the first three months of 1999 increased $1.1 million to $20.4 as compared to
the first three months of 1998. Net cash provided by operating activities in
1999 primarily resulted from net income before non-cash expenses (i.e.,
depreciation and amortization), of $15.2 million.
CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing
activities decreased $36.0 million to $2.2 million in the first three months of
1999. In 1999, the Company's capital expenditures increased by $67,000. The
Company has a capital expenditure program (excluding future acquisitions) of
approximately $17.0 million in place for 1999, which includes spending on
technology, including prepress and business systems, computer hardware and
software, other machinery and equipment, plants and property, vehicles and other
assets. The Company believes its capital expenditure program is sufficient to
maintain its current level and quality of operations. The Company reviews its
capital expenditure program periodically and modifies it as required to meet
current needs. The Company expects to continue to fund the 1999 capital
expenditure program from operating cash flow. The success of the Company's
operations in Philadelphia and surrounding areas has necessitated the
construction of a centralized production facility, scheduled to begin in the
first quarter of 2000. Costs for this facility are currently estimated to be
approximately $35.0 million. The Company expects to fund this construction
project with cash flows from operations and borrowings.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash used in financing
activities was $17.5 million in the first three months of 1999 as compared to
net cash provided by financing activities of $21.9 million in the first three
months of 1998 as a result of increased borrowings due to the Company's
acquisitions. The 1999 activity reflects the use of funds of approximately $14.9
million in connection with the Company's stock repurchase program.
The amounts outstanding under the Company's credit agreement bear
interest at (i) 1 3/4% to 1/2% above LIBOR (as defined in the credit agreement)
or (ii) 1/2% to 0% above the higher of (a) the Prime Rate (as defined in the
credit agreement) or (b) 1/2% above the Federal Funds Rate (as defined in the
credit agreement). The interest rate spreads ("the applicable margins") are
dependent upon the ratio of debt to trailing four quarters Cash Flow (as defined
in the credit agreement) and reduce as such ratio declines.
In connection with the requirements of the Company's credit facility,
the Company is required to maintain interest rate protection agreements for a
certain percentage of its outstanding debt, based upon the Total Leverage Ratio
(as defined in the credit agreement). On January 29, 1999, certain SWAP
agreements entered into during 1998 became effective. The agreements exchange a
floating LIBOR rate plus the applicable margin for a fixed LIBOR rate of
approximately 5.85% plus the applicable margin on $400.0 million of debt, in the
aggregate. The $400.0 million interest rate protection agreements are
specifically attributable to certain LIBOR loans (as defined in the Company's
credit agreement), reduce by $75.0 million per year and expire in October 2002.
As of March 31, 1999, the Company had outstanding indebtedness under
the credit facility, due and payable in installments through 2006, of $762.4
million, of which $262.4 million was outstanding under the revolving credit
facility. There was $137.6 million of unused and available funds under the
revolving credit facility at March 31, 1999.
YEAR 2000
In 1996, the Company began the initial planning of a comprehensive
initiative to address the Year 2000 issue. The Company organized a Year 2000
oversight team led by the Company's senior information technology officer to
develop a strategy of evaluation, implementation, testing and contingency
planning to address the Company's Year 2000 readiness. The evaluation phase,
8
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which began in September 1996 and was completed by December 1996, involved
performing a complete, company-wide inventory to identify all internal and
external, general purpose and production hardware and software systems, commonly
referred to as information technology ("IT") systems, that required modification
to become Year 2000 compliant. In conjunction with the Company's internal
assessment, the Company communicated with key third parties, namely suppliers of
production equipment as well as financial institutions to determine their state
of Year 2000 readiness, implementation of Year 2000 compliant systems and
related contingency plans. The Company has received responses from approximately
80% of such key third parties and is evaluating the impact on the Company. The
Company will continue to correspond with critical vendors and modify the
Company's contingency plans as necessary.
In January of 1997, the Company began the implementation phase of
replacing or modifying system hardware and software as required. To date the
Company has completed the implementation and testing phase at approximately 65%
of its operating properties. The remaining properties are in the process of
implementation and are expected to be completed within the Company's target
deadline of September 30, 1999. Although no formal plan has been documented the
Company is developing contingency plans to address potential non-compliance both
internally and externally. The Company expects to have its contingency plans
formalized by September 30, 1999.
In accordance with GAAP, the Company's direct Year 2000 costs,
including modifying computer software or converting to new programs, are
expensed as incurred. Additionally, a majority of the hardware costs for
replacement systems will be capitalized as ordinarily accounted for in the
normal course of business. These system replacements represent upgrades
consistent with the Company's goal to maintain and improve operational
efficiencies. The Company has capitalized approximately $700,000 in the first
quarter of 1999 related to new hardware and software in connection with its Year
2000 compliance plan and expects to capitalize an additional $5.3 million during
the remainder of the year.
Although the Company believes it has taken all of the necessary steps
to ensure that the Company will be Year 2000 compliant, there can be no
assurances that the Company will be able to complete all of the modifications in
the required time frame, that all third parties will be Year 2000 compliant or
that unforeseen Year 2000 issues will not arise. The Company's assessment at
this time is that the failure of any of the Company's IT or non-IT systems, or
failure by a third party to become Year 2000 compliant would not have a material
adverse effect on the Company, although there can be no assurances that a
material adverse effect could not result.
RECENT EVENTS
On April 8, 1999, the Company's Board of Directors authorized the
repurchase of an additional one million shares of its common stock under its
stock repurchase program. The original repurchase program, authorized on January
11, 1999, allowed for the repurchase of up to two million shares. As of May 10,
1999, the Company had repurchased 1,903,500 shares on the open market. Shares
under the program are to be repurchased at management's discretion, either in
the open market or in privately negotiated transactions.
INFORMATION RELATING TO FORWARD-LOOKING STATEMENTS
Management's Discussion and Analysis of Financial Condition and Results
of Operations and other sections of this Form 10-K include forward-looking
statements, which may be identified by use of terms such as "believes,"
"anticipates," "plans," "will," "likely," "continues," "intends" or "expects."
These forward-looking statements relate to the plans and objectives of the
Company for future operations. In light of the risks and uncertainties inherent
in all future projections, the inclusion of forward-looking statements herein
should not be regarded as a representation by the Company or any other person
that the objectives or plans of the Company will be achieved. Many factors could
cause the Company's actual results to differ materially from those in the
forward-looking statements, including, among other things: (i) a decline in
general economic conditions, (ii) the unavailability or material increase in the
price of newsprint, (iii) an adverse judgement in pending or future litigation,
(iv) increased competitive pressure from current competitors and future market
entrants, (v) sales of substantial amounts of the common stock in the public
markets, or the perception that such sales could occur, and (iv) the factors
discussed in the Company's Form 10-K for 1998 in "Item 7. Management's
Discussion and Analysis of Financial Condition and Results of
Operations--Certain Factors Which May Affect the Company's Future Performance."
The following factors should not be construed as exhaustive. The Company
undertakes no obligation to release publicly the results of any future revisions
it may make to forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
9
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk arising from changes in interest
rates associated with its long-term debt obligations. The Company's long-term
debt is at variable interest rates based on certain interest rate spreads
applied to LIBOR, the Prime Rate or Federal Funds Rate each as defined in the
credit agreement. To manage its exposure to fluctuations in interest rates, the
Company, as required by its credit agreement, enters into certain interest rate
protection agreements, which allows the Company to exchange variable rate
interest for fixed rate, maturing at specific intervals. The difference to be
paid or received as interest rates change is accrued and recognized as an
adjustment of interest expense related to the debt. The related amount payable
to or receivable from counterparties is included in accrued interest. The
Company's use of these agreements is limited to hedging activities and not for
trading or speculative activity.
At March 31, 1999, the Company had in effect SWAP agreements for a
notional amount of $400 million. The fair market value of the SWAPs at March 31,
1999, had the SWAPs been marked to market, would have resulted in a loss of
approximately $4.5 million. Assuming a 10% increase or reduction in interest
rates for the three months ended March 31, 1999, the effect on the Company's
pre-tax earnings and cash flows would be approximately $644,000.
10
<PAGE>
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.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) Reports on Form 8-K
None.
11
<PAGE>
SIGNATURE
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 hereunto duly authorized.
Date: May 13, 1999 JOURNAL REGISTER COMPANY
By: /s/ Jean B. Clifton
---------------------------------
Jean B. Clifton
Executive Vice President &
Chief Financial Officer
(signing on behalf of the registrant
and as principal financial officer)
12
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
27.1 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE>5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED BALANCE SHEETS AND THE CONDENSED CONSOLIDATED STATEMENTS
OF INCOME OF JOURNAL REGISTER COMPANY FOR THE QUARTER ENDED MARCH 31, 1999, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 9,219
<SECURITIES> 0
<RECEIVABLES> 61,211
<ALLOWANCES> 5,473
<INVENTORY> 8,277
<CURRENT-ASSETS> 80,200
<PP&E> 231,962
<DEPRECIATION> 133,316
<TOTAL-ASSETS> 667,014
<CURRENT-LIABILITIES> 51,348
<BONDS> 762,425
0
0
<COMMON> 484
<OTHER-SE> (232,745)
<TOTAL-LIABILITY-AND-EQUITY> 667,014
<SALES> 0
<TOTAL-REVENUES> 109,902
<CGS> 0
<TOTAL-COSTS> 65,572
<OTHER-EXPENSES> 7,232
<LOSS-PROVISION> 899
<INTEREST-EXPENSE> 13,394
<INCOME-PRETAX> 13,287
<INCOME-TAX> 5,347
<INCOME-CONTINUING> 7,940
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,940
<EPS-PRIMARY> 0.17
<EPS-DILUTED> 0.17
</TABLE>
