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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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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 September 24, 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 (I.R.S. Employer
of Incorporation 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, 45,205,588 shares outstanding (exclusive of treasury shares) as of
November 7, 2000.
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JOURNAL REGISTER COMPANY
INDEX TO FORM 10-Q
PART I. FINANCIAL INFORMATION
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PAGE NO.
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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 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........................... 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.................................................................... 12
Item 2. Changes in Securities and Use of Proceeds............................................ 12
Item 3. Defaults Upon Senior Securities...................................................... 12
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..................................................... 13
Signature ..................................................................................... 13
</TABLE>
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PART I. FINANCIAL INFORMATION
JOURNAL REGISTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
SEPTEMBER 24, DECEMBER 26,
2000 1999
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ASSETS
Current assets:
Cash and cash equivalents $ 1,079 $ 3,090
Accounts receivable, less allowance for doubtful accounts of $6,996 at
September 24, 2000 and $6,293 at December 26, 1999 56,414 65,597
Inventories 8,658 9,899
Deferred income taxes 2,905 2,721
Other assets 8,525 7,090
-------------- ---------------
Total current assets 77,581 88,397
Property, plant and equipment: 217,543 246,836
Less accumulated depreciation (125,127) (141,860)
-------------- ---------------
92,416 104,976
Intangible and other assets, net of accumulated amortization of $53,233 at
September 24, 2000 and $42,751 at December 26, 1999 489,087 493,807
-------------- ---------------
Total Assets $ 659,084 $ 687,180
============== ===============
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Current maturities of long-term debt $ 27,562 $ 19,500
Accounts payable 8,913 14,617
Income taxes payable 11,414 438
Accrued interest 5,651 6,886
Other accrued expenses and liabilities 36,391 31,439
-------------- ---------------
Total current liabilities 89,931 72,880
Senior debt, less current maturities 502,911 711,967
Deferred income taxes 26,095 20,291
Accrued retiree benefits and other liabilities 13,661 15,920
Income taxes payable 115,482 73,505
Commitments and contingencies
Stockholders' deficit:
Common stock, $.01 par value per share, 300,000,000 shares authorized,
48, 437,581 issued at September 24, 2000 and December 26, 1999 484 484
Additional paid-in capital 358,250 358,244
Accumulated deficit (405,326) (536,156)
Less treasury stock 3,243,981 and 2,362,953 shares, at cost on
September 24, 2000 and December 26, 1999, respectively (42,244) (29,795)
Accumulated other comprehensive loss, net of tax (160) (160)
-------------- ---------------
Net stockholders' deficit (88,996) (207,383)
-------------- ---------------
Total Liabilities and Stockholders' Deficit $ 659,084 $ 687,180
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</TABLE>
SEE ACCOMPANYING NOTES.
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JOURNAL REGISTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 24, SEPTEMBER 30, SEPTEMBER 24, SEPTEMBER 30,
2000 1999 2000 1999
---------------- ------------- -------------- ---------------
<S> <C> <C> <C> <C>
Revenues:
Advertising $ 82,572 $ 88,656 $ 260,154 $ 258,879
Circulation 23,637 24,616 72,482 73,244
--------------- ------------- ------------- ----------------
Newspaper revenues 106,209 113,272 332,636 332,123
Commercial printing and other 6,734 6,273 17,607 18,490
--------------- ------------- ------------- ----------------
112,943 119,545 350,243 350,613
Operating expenses:
Salaries and employee benefits 37,721 40,515 117,248 119,204
Newsprint, ink and printing charges 11,900 12,122 35,724 37,197
Selling, general and administrative 11,363 12,098 35,548 33,554
Depreciation and amortization 6,892 7,399 21,058 21,908
Other 13,920 14,902 44,227 43,510
--------------- ------------- ------------- ----------------
81,796 87,036 253,805 255,373
Operating income 31,147 32,509 96,438 95,240
Net interest and other expense (11,935) (13,264) (38,220) (39,501)
Gain on sale of newspaper properties 141,123
--- 141,123 ---
--------------- ------------- ------------- ----------------
Income before provision for income taxes
and equity interest 160,335 19,245 199,341 55,739
Provision for income taxes 51,961 7,663 67,369 22,365
--------------- ------------- ------------- ----------------
Net income before equity interest 108,374 11,582 131,972 33,374
Equity interest (301) (67) (1,142) (67)
--------------- ------------- ------------- ----------------
Net income $108,073 $ 11,515 $130,830 $ 33,307
=============== ============= ============= ================
Net income per common share:
Basic $2.39 $.25 $2.89 $.71
Diluted $2.37 $.25 $2.88 $.71
Weighted average shares outstanding:
Basic 45,196 46,536 45,343 46,942
Diluted 45,598 46,775 45,457 47,057
</TABLE>
SEE ACCOMPANYING NOTES.
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JOURNAL REGISTER COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
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NINE MONTHS ENDED
SEPTEMBER 24, 2000 SEPTEMBER 30, 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 130,830 $ 33,307
Adjustments to reconcile net income to net cash provided by operating
activities:
Provision for losses on accounts receivable 3,276 3,189
Increase in deferred income taxes 5,621 3,044
Depreciation and amortization 21,058 21,908
Loss on equity investment 1,142 --
Gain on sale of newspaper properties (141,123) --
Other, net 35,362 7,091
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Net cash provided by operating activities 56,166 68,539
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of newspaper properties -- (14,668)
Net additions to property, plant and equipment (5,823) (14,866)
Net additions to construction in progress (8,642) (620)
Increase in investments (2,121) (862)
Proceeds from sale of newspaper properties 171,846 --
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Net cash provided by (used in) investing activities 155,260 (31,016)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of senior debt (200,994) (16,000)
Purchase of treasury shares (12,500) (23,989)
Proceeds from exercise of stock options 57 87
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Net cash used in financing activities (213,437) (39,902)
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Decrease in cash and cash equivalents (2,011) (2,379)
Cash and cash equivalents, beginning of period 3,090 8,542
--------- ---------
Cash and cash equivalents, end of period $ 1,079 $ 6,163
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest (net of amount capitalized) $ 40,720 $ 38,415
Income taxes $ 8,795 $ 3,021
</TABLE>
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SEE ACCOMPANYING NOTES.
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JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 24, 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.
Journal Register Company (through its consolidated subsidiaries)
primarily publishes daily and non-daily newspapers serving markets in
Connecticut, Philadelphia and its surrounding areas, Ohio, central New England
and the Capital-Saratoga and Mid-Hudson, New York regions. The Company also owns
and manages 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 last Sunday in December.
Accordingly, the Company's 1999 fiscal year and 2000 third quarter ended on
December 26, 1999 and September 24, 2000, respectively.
The Company has authorized 1,000,000 shares of Preferred Stock, none of
which were issued or outstanding during the periods for which the financial
statements are presented.
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 September 24, 2000 and December 26, 1999 and the results of its
operations and cash flows for the periods ended September 24, 2000 and September
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:
<TABLE>
<CAPTION>
Three months ended Nine months ended
(In thousands) September 24, September 30, September 24, September 30,
2000 1999 2000 1999
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Weighted-average shares for basic
earnings per share 45,196 46,536 45,343 46,942
Effect of dilutive securities:
Employee stock options 402 239 114 115
------------- ------------ ------------- ------------
Adjusted weighted-average shares for
diluted earnings per share 45,598 46,775 45,457 47,057
============= ============ ============= ============
</TABLE>
Options to purchase 1.6 million shares of common stock at a range of
$17.63 to $22.50 and $16.31 to $22.50 were outstanding during the three and nine
month periods ended September 24, 2000, respectively, 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 1.6 million shares of common stock at a range of $17.63 to
$22.50 were outstanding during the three and nine month periods ended September
30, 1999, respectively, but were not included in the computation of diluted EPS.
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JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 24, 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 September
24, 2000, the Company had repurchased 880,000 shares at a total cost of
approximately $12.4 million.
4. DISPOSITIONS
On August 10, 2000, the Company completed its sale of substantially all
of the assets of the Suburban Newspapers of Greater St. Louis and all of the
issued and outstanding capital stock of The Ladue News, Inc. ("St. Louis") to
Pulitzer Inc. for $165.0 million in cash, plus working capital. The Suburban
Newspapers of Greater St. Louis consisted of 38 free and 2 paid weekly
newspapers with a non-daily distribution of approximately 1.6 million in the
greater St. Louis, Missouri area. The Ladue News, Inc. published a weekly
newspaper serving approximately 40,000 households in St. Louis. All of the
proceeds were used to reduce the Company's outstanding debt.
The Company reported a pretax gain of $141.1 million ($88.4 million after tax)
which is subject to the finalization of customary purchase price adjustments and
closing costs related to the sale. The following unaudited pro forma operating
results for the Company assume the sale occurred on December 31, 1998:
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 24, September 30, September 24, September 30,
2000 1999 2000 1999
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Revenues $106,782 $106,118 $318,665 $312,076
Net income $19,919 $11,240 $42,997 $32,629
Basic earnings per share $.26 $.24 $.77 $.70
Diluted earnings per share $.26 $.24 $.77 $.69
</TABLE>
5. SUBSEQUENT EVENT
On October 24, 2000, the Company announced the completion of the sale
of its Alton, Illinois newspaper, THE TELEGRAPH, to Freedom Communications, Inc.
The Company expects to record a gain on the sale. Proceeds from the sale will be
used to reduce debt and for general corporate purposes.
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JOURNAL REGISTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 24, 2000
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 November 1, 2000, the Company owned and operated 24 daily
newspapers and 151 non-daily publications strategically clustered in six
geographic areas: Connecticut; Philadelphia and its surrounding areas; Ohio;
central New England; and the Capital-Saratoga and Mid-Hudson, New York regions.
As of November 1, 2000, the Company had total paid daily circulation of
approximately 582,547, total paid Sunday circulation of approximately 562,561
and total non-daily distribution of approximately 2.6 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. In two transactions in August and October 2000 the
Company disposed of the operations in its St. Louis cluster.
The Company believes that its newspapers are 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
over one hundred 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 last Sunday in December.
Accordingly, the Company's 1999 fiscal year and 2000 second quarter ended on
December 26, 1999 and September 24, 2000, respectively.
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THREE MONTHS ENDED SEPTEMBER 24, 2000 COMPARED TO THREE MONTHS ENDED SEPTEMBER
30, 1999
ALL PRO FORMA INFORMATION PRESENTED HERE REFLECTS THE FINANCIAL RESULTS OF THE
COMPANY ASSUMING THE SALE OF ST. LOUIS OCCURRED ON DECEMBER 31, 1998.
SUMMARY. Net income excluding certain non-recurring items for the third
quarter ended September 24, 2000 was $11.7 million, or $.26 per diluted share,
compared to $11.5 million, or $.25 per diluted share for the three months ended
September 30, 1999. Including the non-recurring items, net income was $108.1
million, or $2.37 per diluted share for the third quarter of 2000. The
non-recurring items include (i) the August 10, 2000 sale of St. Louis to
Pulitzer Inc. for $165.0 million in cash, which resulted in an after-tax gain of
$88.4 million and (ii) the reversal of certain tax accruals. EBITDA for the
third quarter of 2000, assuming the sale of St. Louis took place on December 31,
1998, increased to $36.9 million in the current quarter from $36.5 million in
the third quarter of 1999.
REVENUES. As a result of the August sale of the St. Louis properties,
for the quarter ended September 24, 2000, revenues
decreased to $112.9 million from $119.5 million.
PRO FORMA REVENUE. Pro forma revenues increased $664,000 or 0.6%. Newspaper
revenues increased $197,000. The increase in newspaper revenue was the result of
higher advertising revenues, particularly at the Company's Taunton,
Massachusetts and Fall River, Massachusetts newspapers. Restating the prior
year's quarter to conform to the Company's change from a calendar year end to a
fiscal year end, advertising revenues increased by 3.2% to $76.4 million for the
third quarter of 2000. Commercial printing and other revenue increased $467,000
and represented 6.3% of the Company's revenues in the third quarter of 2000, as
compared to 5.9% in the third quarter of 1999. On-line revenue, included in
advertising revenue, increased $133,000 or approximately 21.1% from the prior
year period.
SALARIES AND EMPLOYEE BENEFITS. Salaries and employee benefit expenses
were 33.4% of the Company's revenues for the third quarter of 2000 compared to
33.9% for the third quarter of 1999. Salaries and employee benefits decreased
6.9% or $2.8 million to $37.7 million for 2000. On a pro forma basis, salaries
and employee benefits decreased 2.4% or $869,000 to $36.0 million primarily due
to one less day in the third quarter of 2000 as compared to the 1999 third
quarter.
NEWSPRINT, INK AND PRINTING CHARGES. In the third quarter of 2000,
newsprint, ink and printing charges were 10.5% of the Company's revenues, as
compared to 10.1% in the third quarter of 1999. Newsprint, ink and printing
charges decreased $222,000, or 1.8%, for the quarter ended September 24, 2000.
On a pro forma basis, newsprint, ink and printing charges increased $807,000, or
8.3%. Supplier price increases of approximately 17% were offset by reduced
consumption. The reduction in consumption was primarily due to one less day in
the quarter and the Company's continued focus on cost controls including a
reduction in newsprint waste, a reduction in single copy returns and a reduced
page size in the Company's Lake County, Ohio newspaper.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses were 10.1% of the Company's revenues for the third
quarter of 2000 and the third quarter of 1999. Selling, general and
administrative expenses for the quarter ended September 25, 2000 decreased
$735,000, or 6.1%, to $11.4 million, as compared to the third quarter of 1999.
On a pro forma basis, selling, general and administrative expenses increased
$449,000, or 4.5% to $10.4 million due primarily to increased promotional
activity associated with the Company's revenue growth.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
were 6.1% and 6.2% of the Company's revenues in the third quarter of 2000 and
1999, respectively. Depreciation and amortization expenses decreased $507,000,
or 6.9%, to $6.9 million for the quarter ended September 24, 2000. On a pro
forma basis, depreciation and amortization decreased $290,000, or 4.1%, to $6.7
million.
OTHER EXPENSES. Other expenses accounted for 12.3% of the Company's
revenues for the third quarter of 2000, as compared to 12.5% for the third
quarter of 1999. Other expenses decreased $982,000 or 6.6%, to $13.9 million
from $14.9 million in 1999. On a pro forma basis, other expenses decreased
$109,000, or 0.8%, to $13.0 million.
OPERATING INCOME. Operating income decreased $1.4 million, or 4.2%, for
the third quarter of 2000 to $31.1 million from $32.5 million for the third
quarter of 1999 as a result of the August sale of St. Louis. On a pro forma
basis, operating income increased $676,000, or 2.3%, to $30.2 million.
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NET INTEREST AND OTHER EXPENSE. Net interest and other expense
decreased $1.3 million as compared to the 1999 third quarter principally due to
interest income earned on the proceeds from the sale of St. Louis and lower
interest expense due to a reduction in the Company's debt balances with cash
provided by operations partially offset by higher interest rates.
PROVISION FOR INCOME TAXES. The provision for income taxes increased by
$44.3 million from September 30, 1999 to September 24, 2000 due to $52.7 million
of income taxes provided for the gain on the sale of St. Louis partially offset
by an approximate $8.0 million reduction of income tax provision due to the
reversal of certain income tax accruals which were determined to no longer be
required.
EQUITY INTEREST. As previously reported, in late August of 1999, the
Company purchased an equity interest in AdOne, LLC ("AdOne"), an internet based
classified advertising service. The loss on equity interest of $301,000 recorded
during the third quarter of 2000 represents the Company's pro-rata share of
AdOne's net loss for the period and compares to $67,000 in the prior year
quarter.
OTHER INFORMATION. Tangible net income at September 24, 2000 was $14.6
million, or $.32 per share, as compared to $14.4 million or $.31 per share at
September 30, 1999.
NINE MONTHS ENDED SEPTEMBER 24, 2000 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1999
ALL PRO FORMA INFORMATION PRESENTED HERE REFLECTS THE FINANCIAL RESULTS OF THE
COMPANY ASSUMING THE SALE OF ST. LOUIS OCCURRED ON DECEMBER 31, 1998.
SUMMARY. Net income for the year-to-date period ended September 24,
2000 was $130.8 million, or $2.88 per diluted share, versus $33.3 million, or
$.71 per diluted share for the 1999 year-to-date period. Excluding the gain on
the sale of St. Louis, the tax reversal and non-cash equity interest, earnings
per diluted share increased by 10.4% for the year-to-date period ended September
24, 2000 as compared to the 1999 year-to-date period. EBITDA for the nine months
ended September 24, 2000 on a pro forma basis, increased $3.5 million to $110.8
million as compared to the prior year-to-date period.
REVENUES. As a result of the August sale of St. Louis for the nine
months ended September 24, 2000, revenues decreased to $350.2 million from
$350.6 million.
PRO FORMA REVENUES. Pro forma revenues increased $6.6 million, or 2.1%.
Newspaper revenues increased $7.4 million, or 2.5% to $301.1 million due to an
increase in advertising revenues which increased approximately $8.1 million, or
3.7%, to $228.8 million, partially offset by a decrease in circulation revenue
of $687,000. Restating the prior year-to-date to conform to the Company's change
from a calendar year end to a fiscal year end, advertising revenues increased by
4.2% to $228.8 million for the nine months ended September 24, 2000. Commercial
printing and other revenue represented 5.5% of the Company's revenues for the
nine months ended September 24, 2000, as compared to 5.9% for the nine months
ended September 30, 1999. On-line revenue, included in advertising revenue,
increased approximately $460,000 or 22.7% from the prior year-to-date period.
SALARIES AND EMPLOYEE BENEFITS. Salaries and employee benefit expenses
were 33.5% of the Company's revenues for the first nine months of 2000 compared
to 34.0% for the first nine months of 1999. Salaries and employee benefits
decreased $2.0 million, or 1.6%, in 2000 to $117.2 million. Pro forma salaries
and employee benefits decreased $487,000, or 0.5%.
NEWSPRINT, INK AND PRINTING CHARGES. For the nine months ended
September 24, 2000, newsprint, ink and printing charges were 10.2% of the
Company's revenues, as compared to 10.6% for the same period in 1999. Newsprint,
ink and printing charges decreased $1.5 million or 4.0% for the nine months
ended September 24, 2000 as compared to the prior year-to-date period. Pro forma
newsprint, ink and printing charges decreased $628,000, or 2.1%.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative expenses were 10.1% and 9.6% of the Company's revenues for the
nine months ended September 24, 2000 and September 30, 1999, respectively. On a
pro forma basis, selling, general and administrative expenses for the nine
months ended September 24, 2000 increased $2.6 million from $28.4 million to
$31.0 million due primarily to increased promotion activity associated with the
Company's revenue growth.
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DEPRECIATION AND AMORTIZATION. Depreciation and amortization expenses
were 6.0% and 6.2% of the Company's revenues for the nine months ended September
24, 2000 and September 30, 1999, respectively. Depreciation and amortization
expenses decreased $850,000, or 3.9%, to $21.1 million for the nine months ended
September 24, 2000. On a pro forma basis, depreciation and amortization
decreased $526,000, or 2.5%, to $20.2 million.
OTHER EXPENSES. Other expenses accounted for 12.6% of the Company's
revenues for the nine months ended September 24, 2000, as compared to 12.4% for
the nine months ended September 30, 1999. On a pro forma basis, other expenses
increased $1.5 million, or 4.0%, to $39.5 million due in part to increases in
expenses associated with the Company's internet operations.
OPERATING INCOME. Operating income increased $1.2 million, or 1.3%, for
the nine months ended September 24, 2000 to $96.4 million from $95.2 million in
1999. Pro forma operating income increased $4.1 million, or 4.7%, to $90.6
million.
NET INTEREST AND OTHER EXPENSE. Net interest and other expense
decreased $1.3 million from the first nine months of 1999 as compared to the
first nine months of 2000, principally due to interest income earned on the
proceeds from the sale of St. Louis.
PROVISION FOR INCOME TAXES. The provision for income taxes increased by
$45.0 million from September 30, 1999 to September 24, 2000, primarily due to
$52.7 million income taxes provided for the sale of St. Louis partially offset
by an approximately $8.0 million reduction of income taxes due to the reversal
of certain accruals which were determined to no longer be required.
EQUITY INTEREST. As previously reported, in late August of 1999, the
Company purchased an equity interest in AdOne, LLC ("AdOne"), an internet based
classified advertising service. The loss on equity interest of $1.1 million
recorded for the first nine months of 2000 represents the Company's pro rata
share of AdOne's net loss for the period and compares to $67,000 in the prior
year.
OTHER INFORMATION. Tangible net income for the nine months ended
September 24, 2000 was $43.8 million, or $.96 per share, as compared to $41.8
million or $.89 per share for the nine months ended September 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 $12.4 million to $56.2 million for the first nine months of 2000.
CASH FLOWS FROM INVESTING ACTIVITIES. Net cash provided by investing
activities was $155.3 million for the nine month period ended September 24,
2000. Proceeds from the sale of St. Louis were approximately $171.8 million.
During 1999, the Company began the initial phases of its new Philadelphia
printing facility. As of September 24, 2000, approximately $9.7 million of
expenditures were made in connection with the facility. The Company anticipates
spending approximately $18.0 million in connection with the Philadelphia
printing facility in 2000. The total cost of the project is currently estimated
to be approximately $35.4 million and is expected to be completed in the fourth
quarter of 2001. The Company expects to fund this construction project with cash
flows from operations and borrowings.
The Company has a capital expenditure program (excluding future acquisitions and
the Philadelphia printing facility) of approximately $14.0 million in place for
2000. The Company believes its capital expenditure program is sufficient to
maintain and improve its current level and quality of operations.
CASH FLOWS FROM FINANCING ACTIVITIES. Net cash used in financing
activities was $213.4 million in the first nine months of 2000, as compared to
$39.9 million for the first nine months of 1999 primarily due to the reduction
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in debt from the use of the proceeds of the sale of St. Louis. The 2000 activity
reflects the use of approximately $201.0 million for the repayment of senior
debt and $12.5 million in connection with the Company's stock repurchase
program.
On October 24, 2000 the Company announced the completion of the sale of its
Alton, Illinois newspaper, THE TELEGRAPH, to Freedom Communications, Inc.
Proceeds from the sale will be used to reduce debt and for general corporate
purposes.
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 commenced 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
September 24, 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 nine
months ended September 24, 2000, the Company's weighted average effective
interest rate on its outstanding debt balance was approximately 7.1%. This 7.1%
takes into account the effect of interest rate protection agreements in effect
during the period.
As of September 24, 2000, the Company had outstanding indebtedness under the
Credit Agreement, due and payable in installments through 2006, of $529.9
million, of which $36.4 million was outstanding under the revolving credit
facility. There were $363.6 million of unused and available funds under the
revolving credit facility at September 24, 2000.
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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 to 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 September 24, 2000, the Company had in effect SWAP agreements for a
notional amount of $325 million. The fair market value of the SWAP at September
24, 2000, had the SWAP been marked to market, would have resulted in a gain of
approximately $4.0 million. Assuming a 10% increase or reduction in interest
rates for the nine months ended September 24, 2000, the effect on the Company's
pre-tax earnings and cash flows would be approximately $2.1 million.
SUBSEQUENT EVENTS
On October 24, 2000 the Company announced the completion of the sale of its
Alton, Illinois newspaper, THE TELEGRAPH, to Freedom Communications, Inc. The
Company expects to record a gain on the sale. Proceeds from the sale will be
used to reduce debt and for general corporate purposes. The terms of the
transaction have not been disclosed.
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.
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ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
27 Financial Data Schedule.
(b) Reports on Form 8-K.
A report on Form 8-K was filed by the Company on August 25,
2000, reporting the pro forma impact of the sale of St. Louis on previously
issued financial statements.
A report on Form 8-K was filed by the Company on July 20, 2000
reporting an agreement to sell the Suburban Newspapers of Greater St. Louis
(including The Ladue News) to Pulitzer, Inc.
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: November 7, 2000 JOURNAL REGISTER COMPANY
By: /S/ JEAN B. CLIFTON
----------------------------------------
Jean B. Clifton
Executive Vice President,
Chief Financial Officer and Secretary
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27 Financial Data Schedule
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EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
27 Financial Data Schedule
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