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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 June 25, 2000
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, 45,198,535 shares outstanding (exclusive of treasury shares) as of
August 7, 2000.
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JOURNAL REGISTER COMPANY
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
PAGE NO.
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets..................... 2
Condensed Consolidated Statements of Income .............. 3
Condensed Consolidated Statements of Cash Flows........... 4
Notes to Unaudited Condensed Consolidated
Financial Statements...................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............. 7
Item 3. Quantitative and Qualitative Disclosures About
Market Risk............................................... 11
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................................................... 12
Item 5. Other Information......................................... 12
Item 6. Exhibits and Reports on Form 8-K.......................... 12
Signature......................................................... 13
1
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
JOURNAL REGISTER COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
JUNE 25, DECEMBER 26,
2000 1999
---------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,884 $ 3,090
Accounts receivable, less allowance for doubtful
accounts of $6,555 at June 25, 2000 and
$6,293 at December 26, 1999 64,334 65,597
Inventories 9,383 9,899
Deferred income taxes 2,808 2,721
Other current assets 7,615 7,090
--------- ---------
Total current assets 87,024 88,397
Property, plant and equipment: 250,450 246,836
Less accumulated depreciation (148,127) (141,860)
--------- ---------
102,323 104,976
Intangible and other assets, net of accumulated
amortization of $50,048 at June 25, 2000 and
$42,751 at December 26, 1999 493,201 493,807
--------- ---------
Total assets $ 682,548 $ 687,180
========= =========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 26,000 $ 19,500
Accounts payable 9,396 14,617
Income taxes payable 241 438
Accrued interest 6,870 6,886
Other accrued expenses and current liabilities 30,638 31,439
--------- ---------
Total current liabilities 73,145 72,880
Senior debt, less current maturities 688,200 711,967
Deferred income taxes 22,616 20,291
Accrued retiree benefits and other liabilities 14,657 15,920
Income taxes payable 80,971 73,505
Commitments and contingencies
Stockholders' deficit:
Common stock, $.01 par value per share, 300,000,000
shares authorized, 48,437,581 issued at June 25,
2000 and December 26, 1999 484 484
Additional paid-in capital 358,244 358,244
Accumulated deficit (513,399) (536,156)
--------- ---------
Total (154,671) (177,428)
Less treasury stock 3,242,953 and 2,362,953 shares,
at cost on June 25, 2000 and December 26, 1999,
respectively (42,210) (29,795)
Accumulated other comprehensive loss, net of tax (160) (160)
--------- ---------
Net stockholders' deficit (197,041) (207,383)
--------- ---------
Total liabilities and stockholders' deficit $ 682,548 $ 687,180
========= =========
</TABLE>
SEE ACCOMPANYING NOTES.
2
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JOURNAL REGISTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 25, 2000 JUNE 30, 1999 JUNE 25, 2000 JUNE 30, 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Revenues:
Advertising $ 94,127 $ 90,653 $ 177,582 $ 170,223
Circulation 24,388 24,320 48,845 48,628
--------- --------- --------- ---------
Newspaper revenues 118,515 114,973 226,427 218,851
Commercial printing and other 5,578 6,193 10,873 12,217
--------- --------- --------- ---------
124,093 121,166 237,300 231,068
Operating expenses:
Salaries and employee benefits 39,767 39,692 79,527 78,689
Newsprint, ink and printing
charges 12,386 12,598 23,824 25,075
Selling, general and
administrative 12,072 11,107 24,185 21,456
Depreciation and amortization 7,081 7,277 14,166 14,509
Other 15,317 14,510 30,307 28,608
--------- --------- --------- ---------
86,623 85,184 172,009 168,337
Operating income 37,470 35,982 65,291 62,731
Net interest and other expense (13,071) (12,775) (26,285) (26,237)
--------- --------- --------- ---------
Income before provision for
income taxes and equity
interest 24,399 23,207 39,006 36,494
Provision for income taxes 9,638 9,355 15,408 14,702
--------- --------- --------- ---------
Net income before equity
interest 14,761 13,852 23,598 21,792
Equity interest (476) --- (841) ---
--------- --------- --------- ---------
Net income $ 14,285 $ 13,852 $ 22,757 $ 21,792
========= ========= ========= =========
Net income per common share
(basic and diluted): $.32 $ .30 $.50 $.46
Weighted average shares
outstanding:
Basic 45,221 46,577 45,416 47,148
Diluted 45,250 46,715 45,431 47,179
</TABLE>
SEE ACCOMPANYING NOTES.
3
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JOURNAL REGISTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED
JUNE 25, JUNE 30,
2000 1999
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 22,757 $ 21,792
Adjustments to reconcile net income to
net cash provided by operating activities:
Provision for losses on accounts receivable 2,036 2,187
Depreciation and amortization 14,166 14,509
Loss on equity investment 841 ---
Other, net (6,625) 6,980
-------- --------
Net cash provided by operating activities 33,175 45,468
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of newspaper properties --- (249)
Net additions to property, plant and equipment (3,714) (8,406)
Net proceeds from sale of property, plant and
equipment and other assets 15 ---
-------- --------
Net cash used in investing activities (3,699) (8,655)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of senior debt (17,267) (16,575)
Purchase of treasury shares (12,415) (23,989)
-------- --------
Net cash used in financing activities (29,682) (40,564)
-------- --------
Decrease in cash and cash equivalents (206) (3,751)
Cash and cash equivalents, beginning of period 3,090 8,542
-------- --------
Cash and cash equivalents, end of period $ 2,884 $ 4,791
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the year for:
Interest $ 26,792 $ 25,447
Income taxes 5,901 1,881
SEE ACCOMPANYING NOTES.
4
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JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 25, 2000
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.
Journal Register 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.
On November 9, 1999, the Company elected to change its fiscal year from a
calendar year end to a fiscal year ending on the Sunday closest to December
31st. Accordingly, the Company's 1999 fiscal year and 2000 second quarter ended
on December 26, 1999 and June 25, 2000, respectively.
The Company has authorized 1,000,000 shares of Preferred Stock, none of
which were issued or outstanding as of June 25, 2000.
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 June 25, 2000 and December 26, 1999 and the results of its
operations and cash flows for the periods ended June 25, 2000 and June 30, 1999.
These financial statements should be read in conjunction with the December 26,
1999 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
The following table sets forth the computation of weighted-average shares
outstanding for calculating both basic and diluted earnings per share:
Three months ended Six months ended
(in thousands) JUNE 25, JUNE 30, JUNE 25, JUNE 30,
2000 1999 2000 1999
-------- -------- -------- --------
Weighted-average shares for
basic earnings per share 45,221 46,577 45,416 47,148
Effect of dilutive securities:
Employee stock options 29 138 15 31
------ ------ ------ ------
Adjusted weighted-average
shares for diluted
earnings per share 45,250 46,715 45,431 47,179
====== ====== ====== ======
Options to purchase 3.4 million shares of common stock at a range of
$14.625 to $22.50 were outstanding during the three and six month periods ended
June 25, 2000, but were not included in the computation of the diluted EPS
because the exercise prices of those options were greater than the average
market price of the common shares. Similarly, options to purchase 1.7 million
and 2.6 million shares of common stock at a range of $17.63 to $22.50 and $14.75
to $22.50 were outstanding during the three and six month periods ended June 30,
1999, but were not included in the computation of diluted EPS.
5
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JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 25, 2000
3. COMMON STOCK
During 1999, the Company's Board of Directors, in connection with the
Company's stock repurchase program, authorized the use of up to $50.0 million
per year for the repurchase of Common Stock. Shares under the program are to be
repurchased at management's discretion, either in the open market or in
privately negotiated transactions. Since December 26, 1999 and as of June 25,
2000, the Company had repurchased 880,000 shares at a total cost of
approximately $12.4 million.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONJUNCTION WITH
THE HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO AND THE OTHER
FINANCIAL INFORMATION APPEARING ELSEWHERE IN THIS REPORT.
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 June 25, 2000, the Company owned and operated 25 daily newspapers
and 200 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 June 25, 2000, the Company had total paid daily
circulation of approximately 636,939, total paid Sunday circulation of
approximatley 619,963 and total non-daily distribution of approximately 4.6
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 the present, the Company successfully
completed 17 strategic acquisitions, acquiring 13 daily newspapers, 126
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.
The Company believes that its newspapers are generally effective in
addressing the needs of local readers and advertisers. The Company believes that
because its newspapers rely on a broad base of local retail and local classified
advertising rather than more volatile national and major account advertising,
its advertising revenues tend to be relatively stable.
As part of the Company's strategy, the Company focuses on increasing
advertising and circulation revenues and expanding readership at its existing
and newly acquired properties. The Company has also developed certain operating
policies and standards which it believes have resulted in significant
improvements in the cash flow and profitability of its existing and acquired
newspapers, including: (i) focusing on local content, (ii) maintaining and
improving product quality, (iii) enhancing distribution and (iv) promoting
community involvement.
In addition, the Company is committed to expanding its business through
its Internet initiatives. The Company's online mission is to make
journalregister.com Web sites the indispensable source of useful and reliable
community news, sports and information in their markets by making its web sites
the local information portal for their markets. The Company currently operates
147 individual Web sites featuring the Company's daily newspapers and non-daily
publications.
On November 9, 1999, the Company elected to change its fiscal year from a
calendar year end to a fiscal year ending on the Sunday closest to December
31st. Accordingly, the Company's 1999 fiscal year and 2000 second quarter ended
on December 26, 1999 and June 25, 2000, respectively.
THREE MONTHS ENDED JUNE 25, 2000 COMPARED TO THREE MONTHS ENDED JUNE 30, 1999
REVENUES. For the quarter ended June 25, 2000, revenues increased $2.9
million, or 2.4%, to $124.1 million. Newspaper revenues increased $3.5 million,
or 3.1%, to $118.5 million, principally due to advertising revenues which
increased approximately $3.5 million, or 3.8%, to $94.1 million. The increase in
advertising revenue was led by growth in classified revenue of 3.6% from the
prior year period. Commercial printing and other represented 4.5% of the
Company's revenues in the second quarter of 2000, as compared to 5.1% in the
second quarter of 1999. On-line revenue, included in advertising revenue,
increased approximately 9.3% from the prior year period.
SALARIES AND EMPLOYEE BENEFITS. Salaries and employee benefit expenses
were 32.0% of the Company's revenues for the second quarter of 2000 and 32.8%
for the second quarter of 1999. Salaries and employee benefits remained
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relatively flat in the second quarter of 2000, increasing $75,000 or 0.2% in
2000 to $39.8 million due to acquisitions.
NEWSPRINT, INK AND PRINTING CHARGES. In the second quarter of 2000,
newsprint, ink and printing charges were 10.0% of the Company's revenues, as
compared to 10.4% in the second quarter of 1999. Newsprint, ink and printing
charges decreased $212,000, or 1.7%, for the quarter ended June 25, 2000,
primarily due to a decrease in newsprint used in our commercial operations.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were 9.7% and 9.2% of the Company's revenues for the second quarters of
2000 and 1999, respectively. Selling, general and administrative expenses for
the quarter ended June 25, 2000 increased $965,000, or 8.7%, to $12.1 million,
from the second quarter of 1999, due primarily to increased promotion activity
associated with the Company's revenue growth.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses were
5.7% and 6.0% of the Company's revenues in the second quarters of 2000 and 1999,
respectively. Depreciation and amortization expenses decreased $196,000, or
2.7%, to $7.1 million for the quarter ended June 25, 2000.
OTHER EXPENSES. Other expenses accounted for 12.3% of the Company's
revenues for the second quarter of 2000, as compared to 12.0% for the second
quarter of 1999. Other expenses increased $807,000, or 5.6%, to $15.3 million
from $14.5 million due in part to increases in expenses associated with the
Company's internet operations.
OPERATING INCOME. Operating income increased $1.5 million, or 4.1%, for
the second quarter of 2000 to $37.5 million from $36.0 million for the second
quarter of 1999, primarily due to the Company's growth in revenue.
INTEREST EXPENSE. Interest expense remained relatively flat, decreasing
$362,000 from second quarter 1999 to second quarter 2000. The Company's average
senior debt outstanding during the second quarter of 2000 was $723.2 million, a
decrease of $44.4 million as compared to the second quarter of 1999. The effect
of reduced outstanding senior debt on interest expense was offset by increased
interest rates.
PROVISION FOR INCOME TAXES. The Company reported effective tax rates of
39.5% and 40.3% for second quarters ended June 25, 2000 and June 30, 1999,
respectively.
EQUITY INTEREST. As previously reported, during 1999, the Company
purchased an interest in AdOne, LLC ("AdOne"), an internet based classified
advertising service. The loss of $476,000 recorded during the second quarter of
2000 represents the Company's pro-rata share of AdOne's net loss for the period.
NET INCOME. Net income was $14.3 million, or $.32 per share, basic and
diluted, for the second quarter of 2000, as compared to $13.9 million, or $.30
per share, basic and diluted, for the second quarter of 1999.
OTHER INFORMATION. EBITDA for the second quarter of 2000 increased $1.3
million, or 3.0%, to $44.6 million from $43.3 million in the second quarter of
1999. Tangible net income at June 25, 2000 was $17.5 million, or $.39 per share,
as compared to $16.6 million or $.36 per share at June 30, 1999.
SIX MONTHS ENDED JUNE 25, 2000 COMPARED TO SIX MONTHS ENDED JUNE 30, 1999
REVENUES. For the six months ended June 25, 2000, revenues increased $6.2
million, or 2.7%, to $237.3 million. Newspaper revenues increased $7.6 million,
or 3.5%, to $226.4 million, principally due to advertising revenues which
increased approximately $7.4 million, or 4.3%, to $177.6 million. The increase
in advertising revenue was led by growth in classified revenue of 5.1% from the
prior year period. Commercial printing and other represented 4.6% of the
Company's revenues for the six months ended June 25, 2000, as compared to 5.3%
for the six months ended June 30, 1999. On-line revenue, included in advertising
revenue, increased approximately 13.3% from the prior year period.
SALARIES AND EMPLOYEE BENEFITS. Salaries and employee benefit expenses
were 33.5% of the Company's revenues for the first six months of 2000 and 34.1%
for the first six months of 1999. Salaries and employee benefits increased
$838,000, or 1.1%, in 2000 to $79.5 million due to acquisitions.
NEWSPRINT, INK AND PRINTING CHARGES. For the six months ended June 25,
2000, newsprint, ink and printing charges were 10.0% of the Company's revenues,
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as compared to 10.9% for the same period in 1999. Newsprint, ink and printing
charges decreased $1.3 million, or 5.0%, for the six months ended June 25, 2000,
primarily due to a decrease of approximately 7% in the price per ton of
newsprint.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative
expenses were 10.2% and 9.3% of the Company's revenues for the six months ended
June 25, 2000 and June 30, 1999, respectively. Selling, general and
administrative expenses for the six months ended June 25, 2000 increased $2.7
million, or 12.7%, to $24.2 million, from the $21.5 million for the six months
ended June 30, 1999, due primarily to increased promotion activity associated
with the Company's revenue growth.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses were
6.0% and 6.3% of the Company's revenues for the six months ended June 25, 2000
and June 30, 1999, respectively. Depreciation and amortization expenses
decreased $343,000 or 2.4%, to $14.2 million for the six months ended June 25,
2000.
OTHER EXPENSES. Other expenses accounted for 12.8% of the Company's
revenues for the six months ended June 25, 2000, as compared to 12.4% for the
six months ended June 30, 1999. Other expenses increased $1.7 million or 5.9%,
to $30.3 million from $28.6 million due in part to increases in expenses
associated with the Company's internet operations.
OPERATING INCOME. Operating income increased $2.6 million, or 4.1% for the
six months ended June 25, 2000 to $65.3 million from $62.7 million in 1999 due
to the Company's growth in revenue and newsprint cost savings.
INTEREST EXPENSE. Interest expense remained relatively flat, decreasing
$378,000, or 1.4%, from the first six months of 1999 as compared to the first
six months of 2000, as a result of reduced outstanding senior debt offset by an
increase in interest rates.
PROVISION FOR INCOME TAXES. The Company reported effective tax rates of
39.5% and 40.3% for the six months ended June 25, 2000 and June 30, 1999,
respectively.
EQUITY INTEREST. As previously reported, during 1999, the Company
purchased an interest in AdOne, LLC ("AdOne"), an internet based classified
advertising service. The loss of $841,000 recorded for the first six months of
2000 represents the Company's prorata share of AdOne's net loss for the period.
NET INCOME. Net income was $22.8 million, or $.50 per share, basic and
diluted, for the six months ended June 25, 2000, as compared to $21.8 million,
or $.46 per share, basic and diluted, for the six months ended June 30, 1999.
OTHER INFORMATION. EBITDA for the six months ended June 25, 2000 increased
approximately $2.2 million or 2.9%, to $79.5 million from $77.2 million for
period ended June 30, 1999. Tangible net income for the six months ended June
25, 2000 was $29.1 million, or $.64 per share, as compared to $27.4 million or
$.58 per share for the six months ended June 30, 1999.
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, 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
decreased $12.3 million to $33.2 million for the first six months of 2000. Net
cash provided by operating activities at June 25, 2000 primarily resulted from
net income before non-cash expenses (i.e., depreciation and amortization).
CASH FLOWS FROM INVESTING ACTIVITIES. Net cash used in investing
activities decreased $5.0 million to $3.7 million at June 25, 2000. During 1999,
the Company began the initial phases for its new Philadelphia printing facility.
As of June 25, 2000, approximately $6.8 million of expenditures were made in
connection with the facility. The total cost of the project is currently
estimated to be approximately $35.0 million and is expected to be completed in
the second half of 2001. The Company expects to fund this construction project
with cash flows from operations and borrowings. The Company has a capital
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expenditure program (excluding future acquisitions and the Philadelphia printing
facility) of approximately $14.0 million in place for 2000, 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 also expects to spend approximately $18
million in connection with the Philadelphia printing facility in 2000. 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.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash used in financing
activities was $29.7 million in the first six months of 2000, as compared to
$40.6 million for the first six months of 1999. The 2000 activity reflects the
use of approximately $17.3 million in connection with the repayment of senior
debt and $12.4 million in connection with the Company's stock repurchase
program.
The Company has a credit agreement (the "Credit Agreement") which provides
for $500.0 million in term loans and a $400.0 million revolving credit facility.
Amortization of the term loans commences on June 30, 2000 with final maturity on
September 30, 2006. The revolving credit facility reduces quarterly beginning
June 30, 2002 and matures on March 31, 2006.
The Credit Agreement also provides for an uncommitted multiple draw term
loan facility (the "Incremental Facility") in the amount of up to $500.0 million
as permitted by the administrative agent to be repaid under conditions as
defined in the Credit Agreement.
The amounts outstanding under the 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.
The Company generally manages its exposure to interest rate fluctuations
for its variable rate debt by entering into interest rate protection agreements.
The Company was required under the prior credit agreement and is required under
the Credit Agreement 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).
Interest rate protection agreements (IRPAs) relating to the Company's
borrowings included SWAP agreements with a notional principal amount of $325.0
million on June 25, 2000, and $619.0 million on December 26, 1999. These SWAP
agreements reduce by $75.0 million each year on January 31st and expire on
October 29, 2002. The agreements exchange a floating LIBOR rate plus an
applicable margin for a fixed LIBOR rate plus an applicable margin. For the six
months ended June 25, 2000, the Company's weighted average effective interest
rate on its outstanding debt balance was approximately 7.2%. This 7.2% takes
into account the effect of interest rate protection agreements in effect during
the period.
As of June 25, 2000, the Company had outstanding indebtedness under the
Credit Agreement, due and payable in installments through 2006, of $714.2
million, of which $214.2 million was outstanding under the revolving credit
facility. There was $185.8 million of unused and available funds under the
revolving credit facility at June 25, 2000.
10
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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 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 allow 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 June 25, 2000, the Company had in effect SWAP agreements for a notional
amount of $325 million. The fair market value of the SWAP at June 25, 2000, had
the SWAP been marked to market, would have resulted in a gain of approximately
$7.0 million. Assuming a 10% increase or reduction in interest rates for the six
months ended June 25, 2000, the effect on the Company's pre-tax earnings and
cash flows would be approximately $1.4 million.
RECENT EVENTS
On February 28, 2000, the Company announced its intent to sell its Ohio
and St. Louis area newspapers. The Ohio properties include four daily newspapers
with a total daily circulation of approximately 126,000. The Missouri and
Illinois properties include the Suburban Newspapers of Greater St. Louis,
representing non-daily distribution of approximately 1.7 million and a daily
newspaper in Alton, Illinois, with daily circulation of approximately 28,000 and
Sunday circulation of approximately 30,000. For the six months ended June 25,
2000 the Ohio and St. Louis area newspapers generated approximately $66.3
million in revenue.
SUBSEQUENT EVENTS
On June 26, 2000, the Company announced an agreement to sell the
Suburban Newspapers of Greater St. Louis, including the LADUE NEWS, to
Pulitzer Inc. of St. Louis for $165 million.
On July 31, 2000, the Company announced it had signed a letter of intent
to sell THE TELEGRAPH in Alton, Illinois to Freedom Communications, Inc.
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.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on May 16, 2000.
Proposals presented for a stockholder vote were (i) the election of two Class C
directors and (ii) the ratification of the appointment of Ernst & Young LLP as
independent auditors for the Company for the fiscal year 2000.
Each of the Class C directors nominated by the Company were elected with
the following voting results:
VOTES FOR VOTES WITHHELD
Robert M. Jelenic 43,052,810 11,486
John L. Vogelstein 43,052,861 11,435
The appointment of Ernst & Young LLP as the Company's independent
auditors for the fiscal year 2000 was approved with the following results:
VOTES CAST FOR VOTES CAST AGAINST ABSTENTIONS
43,061,970 2,326 0
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 Financial Data Schedule
(b) Reports on Form 8-K
None.
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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: August 8, 2000 JOURNAL REGISTER COMPANY
By: /S/ JEAN B. CLIFTON
-------------------------------
Jean B. Clifton
Executive Vice President &
Chief Financial Officer and
Secretary
13
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
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27 Financial Data Schedule
