<PAGE> 2
TRANSWESTERN PUBLISHING COMPANY LLC
FORM 10-Q/A INDEX
<TABLE>
<CAPTION>
PAGE
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<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Balance Sheets as of September 30, 1998 (unaudited) and April 30, 1998 3
Statements of Income for the Three and Nine Months Ended
September 30, 1998 (unaudited) and 1997 (unaudited)
and Two Months Ended June 30, 1998 (unaudited) 4
Statements of Cash Flows for the Nine
Months Ended September 30, 1998 (unaudited)
and 1997 (unaudited) 5
Notes to Unaudited Financial Statements 6
</TABLE>
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
TRANSWESTERN PUBLISHING COMPANY LLC
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, APRIL 30,
1998 1998
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,102 $ 1,512
Trade receivable, (less allowance for doubtful accounts of $9,155
in September 1998 and $9,532 in April 1998)
21,458 26,127
Deferred directory costs 7,292 6,226
Other current assets 807 950
--------- ---------
Total current assets 31,659 34,815
Property, equipment and leasehold improvements, net 2,712 2,694
Acquired intangibles, net 18,772 14,326
Other assets, primarily debt issuance costs, net 8,603 8,969
--------- ---------
Total assets $ 61,746 $ 60,804
========= =========
LIABILITIES AND MEMBER DEFICIT
Current liabilities:
Accounts payable $ 4,020 $ 4,373
Salaries and benefits payable 3,424 3,075
Accrued acquisition costs 316 504
Accrued Equity Compensation Plan contribution 3,004 2,900
Accrued interest 3,996 4,841
Other accrued liabilities 781 1,124
Customer deposits 13,370 10,164
Current portion, long-term debt 2,391 2,391
--------- ---------
Total current liabilities 31,302 29,372
Long-term debt:
Revolving loan 1,500 --
Senior Credit Facility 76,813 77,344
Series B 9 5/8% Senior Subordinated Notes 100,000 100,000
Member deficit: (147,869) (145,912)
--------- ---------
Total liabilities and member deficit $ 61,746 $ 60,804
========= =========
</TABLE>
See accompanying notes.
<PAGE> 4
TRANSWESTERN PUBLISHING COMPANY LLC
STATEMENTS OF INCOME
(UNAUDITED)
(in thousands)
<TABLE>
<CAPTION>
TWO MONTHS
THREE MONTHS ENDED NINE MONTHS ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, JUNE 30,
--------------------- --------------------- --------
1998 1997 1998 1997 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net revenue $ 28,995 $ 25,539 $ 84,545 $ 73,292 $ 7,732
Cost of revenues 5,557 5,606 15,927 15,410 2,134
-------- -------- -------- -------- --------
Gross profit 23,438 19,933 68,618 57,882 5,598
Operating expenses:
Sales and marketing 12,188 10,442 34,127 30,037 4,501
General and administrative 4,355 3,893 12,853 12,272 2,485
-------- -------- -------- -------- --------
Total operating expenses 16,543 14,335 46,980 42,309 6,986
-------- -------- -------- -------- --------
Income (loss) from operations 6,895 5,598 21,638 15,573 (1,388)
Other income, net 75 104 244 300 64
Interest expense (4,571) (1,479) (13,634) (5,197) (3,032)
-------- -------- -------- -------- --------
Net income (loss) $ 2,399 $ 4,223 $ 8,248 $ 10,676 $ (4,356)
======== ======== ======== ======== ========
Net income (loss) per
Member unit $ 2,399 $ 4,223 $ 8,248 $ 10,676 $ (4,356)
======== ======== ======== ======== ========
</TABLE>
See accompanying notes.
<PAGE> 5
TRANSWESTERN PUBLISHING COMPANY LLC
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
1998 1997
-------- --------
<S> <C> <C>
(UNAUDITED)
OPERATING ACTIVITIES
Net income $ 8,248 $ 10,676
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 5,093 4,932
Amortization of deferred debt issuance costs 865 505
Provision for doubtful accounts 8,018 7,195
Changes in operating assets and liabilities, net of effects of
purchased directories:
Trade receivables (5,625) (2,406)
Write-off of doubtful accounts (7,251) (5,547)
Recoveries of doubtful accounts 402 451
Deferred directory costs 1,533 929
Other current assets (253) 193
Accounts payable 739 (149)
Accrued liabilities 1,477 (3,823)
Accrued interest 1,740 9
Customer deposits (1,725) (501)
-------- --------
Net cash provided by operating activities 13,261 12,454
INVESTING ACTIVITIES
Purchase of property, equipment and leasehold improvements (702) (1,133)
Payment for purchase of directories (15,468) --
-------- --------
Net cash used for investing activities (16,170) (1,133)
FINANCING ACTIVITIES
Borrowings under long-term debt agreements:
Revolving credit facility 24,866 14,500
Repayments of long-term debt
Revolving credit facility (23,175) (16,200)
Other long-term debt (430) (505)
Senior Term Loan (3,062) (6,500)
Distributions to member -- (3,700)
-------- --------
Net cash used for financing activities (1,801) (12,405)
-------- --------
Net decrease in cash (4,710) (1,084)
Cash at beginning of period 6,812 3,053
-------- --------
Cash at end of period $ 2,102 $ 1,969
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 11,029 $ 3,977
</TABLE>
See accompanying notes.
<PAGE> 6
TRANSWESTERN PUBLISHING COMPANY LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS ARE IN THOUSANDS)
1. BASIS OF PRESENTATION, ORGANIZATION AND BUSINESS ACTIVITIES
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three and nine-month periods ended
September 30, 1998 are not necessarily indicative of the results that may be
expected for the year ending December 31, 1998. For further information, refer
to the consolidated financial statements and footnotes thereto included in
Holdings' Form 10-K (SEC File No. 333-42085), for the fiscal year ended April
30, 1998.
In November 1997, TransWestern Publishing Company L.P. (the "Partnership")
changed its name to TransWestern Holdings L.P. ("Holdings") and formed and
contributed substantially all of its assets to TransWestern Publishing Company
LLC ("TransWestern" or the "Company"). TransWestern assumed or guaranteed all of
the liabilities of the Partnership. As a result, Holdings' only assets consist
of TransWestern's Member Units (as defined) and all of Capital's (as defined)
capital stock. All of the operations that were previously conducted by the
Partnership are now being conducted by TransWestern. Holdings has formed TWP
Capital Corp. ("Capital") as a wholly-owned subsidiary and TransWestern has
formed TWP Capital Corp. II ("Capital II") as a wholly-owned subsidiary. Neither
Capital nor Capital II has any significant assets or operations. In October
1997, the Partnership completed a $312 million recapitalization transaction (the
"Recapitalization").
The membership interests of TransWestern consist of a single class of
authorized common units (the "Member Units"). Holdings is the sole member of
TransWestern and accordingly, holds all 1,000 of the issued and outstanding
Member Units.
The accompanying consolidated financial statements give retroactive effect
to the formation of the Company and the contribution of assets and liabilities
by Holdings as if these events had occurred on the date of the Partnership's
formation. The accompanying financial statements present the historical
financial position and results of operations of TransWestern.
TransWestern publishes and distributes local yellow page directories in
thirteen states.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition, Deferred Directory Costs and Customer Deposits
Revenues from the sale 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 sheets. Expenditures directly related to
sales, production, printing and distribution of directories are capitalized as
deferred directory costs and matched against related revenues upon directory
distribution.
<PAGE> 7
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Concentration of Credit Risk
Credit is extended based upon customer collection history and generally a
deposit is required. The Company is not subject to a concentration of credit
risk due to the geographic and economic diversity of its customer base, however
credit losses have represented a cost of doing business due to the nature of the
customer base (predominantly small businesses) and the use of extended credit
terms.
A provision for doubtful accounts based on historical experience is
recorded at the time revenue is recognized for individual directories. Actual
write-offs are taken against the allowance when management determines that an
account is uncollectible. In general, management makes this determination when
an account has declared bankruptcy, has gone out of business or fails to renew
advertising for the following year's directory.
3. FINANCIAL STATEMENT DETAILS
<TABLE>
<CAPTION>
SEPTEMBER 30, APRIL 30,
1998 1998
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(UNAUDITED)
<S> <C> <C>
Computer and office equipment ..................... $ 5,649 $ 5,148
Furniture and fixtures ............................ 1,602 1,508
Leasehold improvements ............................ 291 278
------- -------
7,542 6,934
Less accumulated depreciation and amortization .... (4,830) (4,240)
------- -------
$ 2,712 $ 2,694
======= =======
</TABLE>
Acquired Intangibles (in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, APRIL 30,
1998 1998
------------- ----------
(UNAUDITED)
<S> <C> <C>
Customer Base.......................................$ 42,176 $ 35,791
Less accumulated amortization....................... (23,404) (21,465)
-------- --------
$ 18,772 $ 14,326
======== ========
</TABLE>
<PAGE> 8
Other Assets (in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, APRIL 30,
1998 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Debt issuance costs .............................. $ 9,124 $ 10,304
Other ............................................ 829 729
-------- --------
9,953 9,783
Less accumulated amortization .................... (1,350) (814)
-------- --------
$ 8,603 $ 8,969
======== ========
</TABLE>
4. DIRECTORY ACQUISITION
On July 16, 1998, the Company purchased all of the outstanding common stock
of Target Directories of Michigan ("Target") for cash of approximately $5.4
million. In connection with the acquisition, the Company also assumed certain
liabilities of Target totaling approximately $1.6 million. The acquisition
has been accounted for as a purchase and accordingly the purchase price has been
allocated to the tangible and intangible assets acquired based on their
respective fair values at the date of acquisition, as follows (in thousands):
<TABLE>
<S> <C>
Customer List $6,300
Deferred directory costs 1,009
Other current and non-current assets 691
</TABLE>
4. DIRECTORY ACQUISITION (CONTINUED)
Assuming that the acquisition of Target had occurred on the first day of
the Company's nine month period ended September 30, 1998 and fiscal year ended
April 30, 1997, respectively, the unaudited pro forma results of operations
would be as follows:
<TABLE>
<CAPTION>
September 30, April 30,
1998 1998
(Unaudited)
<S> <C> <C>
Net revenues....................................... $85,333 $102,240
Net income (loss).................................. 6,503 (1,800)
</TABLE>
The above pro forma results give effect to pro forma adjustments for the
amortization of acquired intangibles.
<PAGE> 9
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrants have duly caused this report to be signed on November 14, 1998 on
their behalf by the undersigned thereunto duly authorized.
TRANSWESTERN PUBLISHING COMPANY LLC
(Registrant)
BY: TransWestern Communications Company, Inc.
(General Partner)
BY:
------------------------------------------
Name: Joan M. Fiorito
Title: Vice President, Chief Financial
Officer and Assistant Secretary (Principal
Financial and Accounting Officer)
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-1-1998
<PERIOD-END> SEP-30-1998
<CASH> 2102
<SECURITIES> 0
<RECEIVABLES> 30613
<ALLOWANCES> (9155)
<INVENTORY> 0
<CURRENT-ASSETS> 31659
<PP&E> 7542
<DEPRECIATION> (4830)
<TOTAL-ASSETS> 61746
<CURRENT-LIABILITIES> 31302
<BONDS> (176813)
0
0
<COMMON> 0
<OTHER-SE> (147869)
<TOTAL-LIABILITY-AND-EQUITY> 61746
<SALES> 84545
<TOTAL-REVENUES> 84545
<CGS> 15927
<TOTAL-COSTS> 62907
<OTHER-EXPENSES> 244
<LOSS-PROVISION> 8018
<INTEREST-EXPENSE> 13634
<INCOME-PRETAX> 8248
<INCOME-TAX> 0
<INCOME-CONTINUING> 8248
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8248
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
