<PAGE> 2
This Amendment No. 1 amends Item 7 of the Current Report on Form 8-K dated
November 30, 1998 (the "Current Report"), of TransWestern Publishing Company,
LLC (the "Company"), a wholly owned subsidiary of TransWestern Holdings L.P.,
filed with the Securities and Exchange Commission on December 15, 1998,
relating to the Company's acquisition of four directories in Michigan from
Universal Phone Books, Inc. and Universal Phone Books of Jackson, Inc.
("Universal") to include the information set forth below:
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a). FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED.
In accordance with Item 7(a), attached as Exhibit 99.1 are: the audited
combined balance sheet of Universal as of September 30, 1998, the related
audited combined statement of operations, statement of combined shareholder's
deficit, and combined statement of cash flows for the year then ended and the
accompanying notes.
(b). PRO FORMA FINANCIAL INFORMATION.
In accordance with Item 7(b), attached as Exhibit 99.2 are the unaudited pro
forma combined condensed financial statements and accompanying notes for
TransWestern Publishing Company LLC and Universal Phone Books, Inc. combined.
The pro forma financial information included herein reflects the pro forma
effects of the acquisition of Universal which occurred on November 30, 1998.
(c). EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ---------- --------------------------------------------------------------
<C> <S>
99.1 Audited combined balance sheet of Universal as of September
30, 1998, the related audited combined statement of
operations, statement of combined shareholder's deficit, and
combined statement of cash flows for the year then ended, and
the accompanying notes.
99.2 Unaudited proforma combined condensed consolidated balance
sheets of TransWestern Publishing LLC as of September 30,
1998, the unaudited pro forma combined condensed statement of
income for the nine and twelve months ended September 30,
1998, and the accompanying notes.
</TABLE>
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
February 12, 1999 on its behalf by the undersigned thereunto duly
authorized.
TRANSWESTERN PUBLISHING COMPANY LLC
(Registrant)
BY:TRANSWESTERN COMMUNICATIONS COMPANY, INC.
(General Partner)
DATE: February 12, 1998 BY: /s/Joan M. Fiorito
----------------- -----------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief Financial
Officer (Principal Financial and Accounting
Officer)
<PAGE> 4
Universal Phone Books, Inc.
Combined Financial Statements
Year ended September 30, 1998
<TABLE>
<CAPTION>
Contents
<S> <C>
Report of Independent Auditors 1
Audited Financial Statements
Combined Balance Sheet 2
Combined Statement of Operations 3
Statement of Combined
Shareholder's Equity 4
Combined Statement of Cash Flows 5
Notes to Combined
Financial Statements 6
</TABLE>
<PAGE> 5
Report of Ernst & Young LLP, Independent Auditors
The Partners
Universal Phone Books, Inc.
We have audited the accompanying combined balance sheet of Universal Phone
Books, Inc., and Universal Phone Books of Jackson, Inc. (the "Company") as of
September 30, 1998, and the related combined statements of operations,
shareholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the combined financial position of the Company at
September 30, 1998, and the combined results of their operations and their
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
San Diego, California
December 12, 1998
<PAGE> 6
<TABLE>
<CAPTION>
UNIVERSAL PHONE BOOKS, INC.
Combined Balance Sheet
September 30, 1998
<C> <S>
ASSETS
Current assets:
Trade receivables, less allowance for doubtful
accounts of $746,665 $ 4,701,617
Note receivable from related party 500,000
Deferred directory costs 2,757,507
Other current assets 118,814
-----------
Total current assets 8,077,938
-----------
Property and equipment, net 67,543
-----------
$ 8,145,481
===========
LIABILITIES AND SHAREHOLDERS' DEFICIT:
Current liabilities:
Bank overdraft $ 5,498
Notes payable to bank 363,600
Notes payable to shareholders 2,309,857
Accounts payable 428,564
Salaries and benefits payable 406,281
Customer deposits 4,601,698
Other accrued liabilities 64,454
-----------
Total current liabilities 8,179,952
===========
Shareholders' deficit
Universal Phone Books, Inc.
Common stock, $1 par value,
300,000 shares authorized,
154,523 shares issued and
outstanding at September 30, 1998 154,523
Accumulated deficit (1,337,558)
Universal Phone Books of Jackson, Inc.
Common stock, no par value,
60,000 shares authorized,
12,265 shares issued and
outstanding at September 30, 1998 12,265
Retained earnings 1,136,299
-----------
Total shareholders' deficit (34,471)
-----------
Total liabilities and shareholders' deficit $ 8,145,481
===========
</TABLE>
See accompanying notes.
<PAGE> 7
<TABLE>
<CAPTION>
UNIVERSAL PHONE BOOKS, INC.
Combined Statement of Operations
Year ended September 30, 1998
<C> <S>
Net revenues $ 7,143,230
Cost of revenues 2,133,747
-----------
Gross profit 5,009,483
-----------
Operating expenses:
Sales and marketing 1,434,193
General and administrative 1,975,716
Profit sharing expenses 198,622
-----------
Total operating expenses 3,608,531
-----------
Income from operations 1,400,952
-----------
Other income, net 70,350
Interest expense (310,255)
-----------
Income before state income taxes 1,161,047
Provision for income taxes 63,700
-----------
Net income $ 1,097,347
===========
</TABLE>
See accompanying notes.
<PAGE> 8
UNIVERSAL PHONE BOOKS, INC.
Combined Statement of Shareholders' Deficit
Year ended September 30, 1998
<TABLE>
<CAPTION>
Universal Phone Books, Inc.
Common stock
----------------- Accumulated
Shares Amount Deficit
--------------------------------------
<C> <S> <S> <S>
Balance at September 30, 1997 154,523 $154,523 $(2,060,719)
Net income - - 723,161
--------------------------------------
Balance at September 30, 1998 154,523 $154,523 $(1,337,558)
======================================
</TABLE>
<TABLE>
<CAPTION>
Universal Phone Books of Jackson, Inc.
Common stock
----------------- Retained
Shares Amount Earnings
-------------------------------------
<C> <S> <S> <S>
Balance at September 30, 1997 12,265 $ 12,265 $ 1,130,063
Dividends - - (367,950)
Net income - - 374,186
-------------------------------------
Balance at September 30, 1998 12,265 $ 12,265 $ 1,136,299
======================================
</TABLE>
See accompanying notes.
<PAGE> 9
<TABLE>
<CAPTION>
UNIVERSAL PHONE BOOKS, INC.
Combined Statement of Cash Flows
Year ended September 30, 1998
<C> <S>
OPERATING ACTIVITIES
Net income $ 1,097,347
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation 39,645
Loss on sales of assets 11,915
Changes in operating assets and liabilities:
Accounts receivable (90,916)
Deferred expenses (755,379)
Accounts payable 338,600
Deferred revenue 80,194
Accrued salaries and benefits 345,954
Accrued commissions 19,837
Other assets and liabilities (38,836)
---------
Net cash provided by operating activities 1,048,361
INVESTING ACTIVITIES
Purchase of property and equipment (3,999)
---------
Net cash used by investing activities (3,999)
FINANCING ACTIVITIES
Repayment of shareholders notes (421,682)
Dividends paid (367,950)
Repayments on bank debt (237,400)
---------
Net cash used in financing activities (1,027,032)
Net decrease in cash and cash equivalents 17,330
Net overdraft at the beginning of year (22,828)
---------
Net overdraft at the end of year $ (5,498)
=========
Supplemental disclosures of cash flow Information:
Interest paid $ 110,501
=========
</TABLE>
See accompanying notes.
<PAGE> 10
UNIVERSAL PHONE BOOKS, INC.
Notes to Combined Financial Statements
1. Summary of Significant Accounting Policies
Organization, Business Activities and Basis of Presentation
Universal Phone Books, Inc. (the "Company") was incorporated in 1989, and
publishes and distributes local yellow page directories in Lansing, Ann Arbor
and Saginaw, Michigan. Included in the Company's financial statements are
financial statements of Universal Phone Books of Jackson, Inc. ("Jackson,
Inc.") which was incorporated in 1991. Jackson Inc. distributes a local
yellow page directory in Jackson, Michigan.
The Company and Jackson, Inc. are managed and owned by three shareholders
whose interests are substantially the same in each company. The accompanying
combined financial statements have been prepared for the purpose of complying
with the rules and regulations of the Securities and Exchange Commission for
inclusion in a Form 8-K of TransWestern Publishing LLC.
Principles of Combination
These combined financial statements include the accounts of the Company and
Jackson Inc. All intercompany accounts and transactions have been eliminated
in combination.
Revenue Recognition, Deferred Directory Cost and Customer Deposits
Revenues from the sales of advertising placed in each directory are
recognized upon the distribution of directories in their individual market
areas. Advance payments received for directory advertising are shown as
customer deposits in the accompanying balance sheet. Expenditures directly
related to sales, production, printing and distribution of directories are
capitalized as deferred directory costs and matched against related revenues
upon distribution of the related directories.
Concentration of Credit Risk
The Company is subject to a concentration of credit risk as revenues are
within four major market areas in South Central Michigan. In addition,
credit losses have represented a cost of doing business due to the nature of
the customer base (predominately small businesses) and the use of extended
credit terms.
The Company establishes a bad debt reserve based on the historical experience
in each market area. Actual write-offs are recorded against the allowance
when management determines that an account is uncollectible. In general,
management declares an account uncollectible if a company has entered
bankruptcy, discontinued its operations, or fails to renew an advertisement
in the following year's directory.
<PAGE> 11
Summary of Significant Accounting Policies (continued)
Property and Equipment
Property and equipment is carried at cost, less depreciation and is
depreciated using the straight-line method over the estimated useful lives of
the assets (five to seven years).
Income Taxes
The Company has elected S-Corporation status for federal and state income tax
purposes. Accordingly, the income for the Company is included in the tax
returns of the shareholders and no provision for federal and state income
taxes was made in the accompanying statement of operations other than the
single business tax imposed on S-Corporations by Michigan.
Fair Values of Financial Instruments
The Company believes that the carrying amounts of its financial instruments
approximate their fair market values due to their short-term nature.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
about the future that affect the amounts reported in the financial statements
and disclosures made in the accompanying notes to the financial statements.
Actual results could differ from those estimates.
3. Note Receivable From Related Party
The Company has a note receivable amounting to $500,000 from a commercial
finance entity in which a shareholder of the Company is a shareholder of the
debtor. The principal amount is due December 31, 1998, with annual interest
of 12%, payable quarterly. Accrued interest of $15,000 is included in the
accompanying balance sheet.
4. Financial Statement Details
<TABLE>
<CAPTION>
Property and equipment consist of the following at September 30, 1998:
<C> <S>
Computer equipment $ 233,827
Office equipment 34,981
----------
268,808
Less accumulated depreciation (201,265)
----------
$ 67,543
</TABLE>
<TABLE>
<CAPTION>
Other assets consist of the following at September 30, 1998:
<C> <S>
Tax deposits $ 103,461
Interest receivable 15,000
Other 353
----------
$ 118,814
</TABLE>
<PAGE> 12
5. Notes Payable to Banks
The Company has a note payable to two banks with aggregate principal balances
of $363,600. The notes have interest rates of 6.25% ad 8.00% per annum and
are collateralized by the accounts receivable of the Company. The entire
principal balances are due within one year.
6. Notes Payable to Shareholders
The Company has various notes payable to two shareholders with aggregate
principal balances of $2,309,857 which are due on demand. The notes bear
interest at rates ranging from 8.25% to 9.00% per annum.
7. Lease Commitments
The Company leases office facilities throughout Michigan under operating
leases with remaining terms ranging from three to four years. Total rent
expense for the year ended September 30,1998 was $25,550. Annual minimum
lease payments due under these leases at September 30, 1998 are:
1999 $ 38,652
2000 40,224
2001 41,796
2002 21,600
-------
$142,272
=======
8. Profit Sharing Plan
The Company has established a Profit Sharing Plan and Trust whereby employees
may contribute up to 25% of their salary on an annual basis. The Company
matches up to 25% of the employees' contribution and the Company's portion
for the year ended September 30, 1998 totaled $207,743.
9. Year 2000 (Unaudited)
Many currently installed computer systems and software products are coded to
accept only two-digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four-digit entries to
distinguish 21st century dates from 20th century dates. As a result, in
approximately one year, computer systems and/or software used by many
companies may need to be upgraded to comply with such "Year 2000"
requirements.
The Company recognizes the need to ensure that its operations will not be
adversely impacted by the Year 2000 issue on a going concern basis. However,
as the Company sold substantially all of its net assets and operations
subsequent to year end (see Note 10), implementation of Year 2000
modifications will be accomplished by TransWestern Publishing LLC.
<PAGE> 13
10. Subsequent Events
On November 30, 1998, substantially all the assets of the Company were
purchased by TransWestern Publishing LLC for cash of approximately $13.9
million and a $2.0 million promissory note subject to adjustment based on
operating results of certain directories over an 18 month period.
<PAGE> 14
TransWestern Publishing Company LLC
Unaudited Pro Forma Combined Condensed Balance Sheets
September 30, 1998 (in thousands)
<TABLE>
<CAPTION>
TransWestern Universal Pro Forma
Publishing Phone Books, Adjustments Combined Pro
Company LLC Inc. (Note 5) Forma
------------ ------------ ------------ ------------
<C> <S> <S> <S> <S>
Assets Current assets:
Cash $ 2,102 $ -- $ (500)(c)$ 1,602
Trade receivables, net 21,458 4,702 (4,702)(a) 21,458
Deferred directory costs 7,292 2,758 (2,105)(a) 7,945
Other current assets 807 618 (618)(a) 807
---------- ---------- ---------- ----------
Total current assets 31,659 8,078 (7,925) 31,812
Property, equipment and
leasehold improvements, net 2,712 68 -- 2,780
Acquired intangibles, net 18,772 -- 15,801 (b) 34,573
Other assets, primarily
debt issuance costs, net 8,603 -- -- 8,603
---------- ---------- ---------- ----------
Total assets $ 61,746 $ 8,146 $ 7,876 $ 77,768
========== ========== ========== ==========
Liabilities and members' or
shareholders' deficit
Current liabilities:
Accounts payable and
bank overdraft $ 4,020 $ 434 $ (434)(a) $ 4,020
Salaries and benefits
Payable 3,424 406 (360)(a) 3,470
Accrued acquisition costs 316 -- 149 (d) 465
Accrued equity compensation
plan contribution 3,004 -- -- 3,004
Accrued interest 3,996 -- -- 3,996
Other accrued liabilities 781 428 (428)(a) 781
Customer deposits 13,370 4,602 (4,214)(a) 13,758
Note payable to shareholder -- 2,310 (2,310)(a) --
Current portion,
long-term debt 2,391 -- -- 2,391
---------- ---------- ---------- ---------
Total current liabilities 31,302 8,180 (7,597) 31,885
Long term debt:
Promissory note -- -- 2,000 (c) 2,000
Revolving loan 1,500 -- 13,439 (c) 14,939
Senior credit facility 76,813 -- -- 76,813
Series B 9 5/8% senior
subordinated notes 100,000 -- -- 100,000
Shareholders' deficit -- (34) 34 (e) --
Member's deficit (147,869) -- -- (147,869)
---------- ---------- ---------- ----------
Total liabilities
and members' or
shareholders deficit $ 61,746 $ 8,146 $ 7,876 $ 77,768
========== ========== ========== ==========
</TABLE>
See accompanying notes to unaudited pro forma combined condensed financial
statements.
<PAGE> 15
TransWestern Publishing Company LLC
Unaudited Pro Forma Combined Condensed Statement of Income
For the nine months ended September 30, 1998
(in thousands)
<TABLE>
<CAPTION>
TransWestern Universal
Publishing Phone Books, Pro Forma Combined
Company LLC Inc. Adjustments Pro Forma
------------ ------------ ------------ -----------
<C> <S> <S> <S> <S>
Net revenues $ 84,545 $ 3,914 $ -- $ 88,459
Cost of revenues 15,927 1,078 -- 17,005
--------- --------- --------- ---------
Gross profit 68,618 2,836 -- 71,454
Operating expenses:
Sales and marketing 34,127 563 -- 34,690
General and
administrative 12,853 1,341 2,370 (a) 16,564
--------- --------- --------- ---------
Total operating
expenses 46,980 1,904 2,370 51,254
. --------- --------- --------- ---------
Income (loss) from
Operations 21,638 932 (2,370) 20,200
Other income, net 244 48 -- 292
Interest expense (13,634) (310) (1,036)(b) (14,980)
--------- --------- --------- ---------
Net income (loss) from
continuing operations $ 8,248 $ 670 $ (3,406) $ 5,512
========= ========= ========= =========
Income (loss) from
continuing
operations per
Member Unit (Note 6) $ 8,248 $ 5,512
========= ========= ========= =========
</TABLE>
(a) Adjustment to reflect the nine month amortization of acquired intangibles
(five year life) based on the allocation of the assumed purchase price in
the September 30, 1998 pro forma balance sheet of TransWestern Publishing
Company LLC.
(b) Adjustment to reflect the incremental interest expense TransWestern
Publishing Company LLC would have incurred on the additional debt
resulting from the acquisition of Universal Phone Books, Inc., calculated
using the applicable borrowing rates during the period outstanding.
See accompanying notes to unaudited pro forma combined condensed
financial statements.
<PAGE> 16
TransWestern Publishing Company LLC
Unaudited Pro Forma Combined Condensed Statement of Income
For the year ended April 30, 1998
(in thousands)
<TABLE>
<CAPTION>
TransWestern Universal Pro Forma
Publishing Phone Books, Adjustments Combined Pro
Company LLC Inc. (Note 5) Forma
------------ ------------ ------------ -----------
<C> <S> <S> <S> <S>
Net revenues $ 100,143 $ 6,544 $ -- $ 106,687
Cost of revenues 20,233 2,142 -- 22,375
--------- --------- --------- ---------
Gross profit 79,910 4,402 -- 84,312
Operating expenses:
Sales and marketing 40,290 1,156 -- 41,446
General and administrative 16,588 2,002 3,160 (a) 21,750
Contribution to equity
compensation plan 5,543 -- -- 5,543
--------- --------- --------- ---------
Total operating expenses 62,421 3,158 3,160 68,739
--------- --------- --------- ---------
Income (loss) from
Operations 17,489 1,244 (3,160) 15,573
Other income, net 82 2 -- 84
Interest expense (13,387) (309) (1,381)(b) (15,077)
--------- --------- --------- ---------
Income (loss) from
from continuing
operations $ 4,184 $ 937 $ (4,541) $ 580
========= ========= ========= =========
Income (loss)
from continuing
operations
per Member Unit
(Note 6) $ 4,184 $ 580
========= ========= ========= =========
</TABLE>
(a) Adjustment to reflect the twelve month amortization of acquired
intangibles (five year life) based on the allocation of the assumed
purchase price in the September 30, 1998 pro forma balance sheet of
TransWestern Publishing Company LLC.
(b) Adjustment to reflect the incremental interest expense TransWestern
Publishing Company LLC would have incurred on the additional debt
resulting from the acquisition of Universal Phone Books, Inc., calculated
using the applicable borrowing rates during the period outstanding.
See accompanying notes to unaudited pro forma combined condensed
financial statements.
<PAGE> 17
Notes to Unaudited Pro Forma Combined Condensed Financial Statements
(in thousands)
Note 1.
Effective May 1, 1998 as reported on Form 8-K dated May 12, 1998, TWP elected
to change its fiscal year from April 30 to December 31. Accordingly, the
Company began reporting interim results on a calendar year basis. Each
unaudited pro forma combined condensed statement of income for the nine
months ended September 30, 1998 and year ended April 30, 1998 includes the
four month period ended April 1998.
Note 2.
The unaudited pro forma combined condensed financial statements reflect the
acquisition of certain net assets of Universal Phone Books, Inc.
("Universal") by TransWestern Publishing Company LLC ("TWP") on November 30,
1998 for a purchase price of approximately $16,900. The purchase price, which
includes estimated transaction costs of $501 was allocated as follows:
Acquired customer lists $ 15,801
Property and equipment 68
Deferral directory costs 653
Customer deposits and
other liabilities (434)
---------
$ 16,088
=========
Note 3.
The unaudited pro forma condensed financial statements have been prepared by
TWP based upon the historical financial statements of Universal and TWP and
may not be indicative of the results that may have actually occurred if the
combination had been in effect on the date indicated or for the periods
presented or which may be obtained in the future. The pro forma condensed
financial statements should be read in conjunction with the audited financial
statements and notes of Universal included in Item 7a to this filing.
Note 4.
The unaudited pro forma combined condensed statements of operations of TWP
and Universal for the year ended April 30, 1998 and nine months ended
September 30, 1998 assumes the purchase of Universal had been consummated on
May 1, 1997 and January 1, 1998, respectively. The pro forma information is
based on this historical financial statements of TWP and Universal giving
effect to the transaction under the purchase method of accounting and the
assumptions and adjustments in the accompanying footnotes to the pro forma
financial statements.
<PAGE> 18
Note 5.
The unaudited pro forma condensed balance sheet assumes the purchase had been
consummated on September 30, 1998. The pro forma information is based on the
historical financial statements of TWP and Universal giving effect to the
transaction under the purchase method of accounting and the assumptions and
adjustments as summarized below:
(a) Represents the elimination of assets and liabilities not included in the
Asset Purchase Agreement.
(b) Represents the purchase price assigned to the fair value of the
intangibles acquired (customer list).
(c) Represents the additional borrowings under the revolving loan, cash
payment and a seller promissory note to fund the acquisition of
Universal.
(d) Represents the accrual of estimated acquisition costs to be incurred by
TWP.
(e) Represents the elimination of shareholders' deficit of Universal at the
date of acquisition.
Note 6.
TWP's equity interest consists of a single class of authorized common units
(the "Member Units"). TransWestern Publishing Company, L.P. is the sole
member of TWP and accordingly holds all of the issued and outstanding Member
Units.
