<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000.
[ ] 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 333-42085
TRANSWESTERN HOLDINGS L.P.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0560667
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
----------------
8344 CLAIREMONT MESA BOULEVARD
SAN DIEGO, CALIFORNIA 92111
(Address of principal executive offices) (Zip Code)
(858) 467-2800
(Registrant's telephone number, including area code)
Indicate by check mark whether each 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 [ ]
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<PAGE> 2
TRANSWESTERN HOLDINGS L.P.
FORM 10-Q INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of March 31, 2000 (unaudited) and
December 31, 1999 3
Consolidated Statements of Operations for the Three Months Ended
March 31, 2000 (unaudited) and 1999 (unaudited) 4
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 2000 (unaudited) and 1999 (unaudited) 5
Notes to Unaudited Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 15
Item 6. Exhibits and Reports on Form 8-K 15
SIGNATURES 16
</TABLE>
<PAGE> 3
TRANSWESTERN HOLDINGS L.P.
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
--------- ---------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 2,042 $ 1,167
Trade receivable, (less allowance for doubtful accounts of $10,463
at March 31, 2000 and $10,394 at December 31, 1999) 35,526 36,188
Deferred directory costs 10,731 10,037
Other current assets 1,054 1,198
--------- ---------
Total current assets 49,353 48,590
Non-current assets:
Property, equipment and leasehold improvements, net 3,330 3,423
Acquired intangibles, net 90,019 85,879
Other assets, primarily debt issuance costs, net 9,101 9,454
--------- ---------
Total non-current assets 101,450 98,756
--------- ---------
Total assets $ 151,803 $ 147,346
========= =========
LIABILITIES AND PARTNERSHIP DEFICIT
Current liabilities:
Accounts payable $ 7,147 $ 8,323
Salaries and benefits payable 3,781 5,735
Accrued acquisition costs 3,202 4,915
Accrued interest 5,477 2,131
Other accrued liabilities 1,020 1,011
Customer deposits 17,835 16,313
Current portion, long-term debt 1,741 1,741
--------- ---------
Total current liabilities 40,203 40,169
Long-term debt:
Series D 9 5/8% Senior Subordinated Notes 141,532 141,583
Series B 11 7/8% Senior Discount Notes, net 42,805 41,588
Senior Credit Facility 63,986 64,422
Revolving loan 49,800 40,100
Acquisition payables 4,420 4,910
--------- ---------
Total long-term debt 302,543 292,603
--------- ---------
Partnership deficit (190,943) (185,426)
--------- ---------
Total liabilities and partners deficit $ 151,803 $ 147,346
========= =========
</TABLE>
See accompanying notes.
<PAGE> 4
TRANSWESTERN HOLDINGS L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31
---------------------
2000 1999
-------- --------
<S> <C> <C>
Net revenue $ 34,936 $ 31,513
Cost of revenues 7,004 6,106
-------- --------
Gross profit 27,932 25,407
Operating expenses:
Sales and marketing 15,708 13,785
General and administrative 10,306 7,731
-------- --------
Total operating expenses 26,014 21,516
-------- --------
Income from operations 1,918 3,891
Other income (expense), net (18) 110
Interest expense (7,417) (6,432)
-------- --------
Net loss $ (5,517) $ (2,431)
======== ========
Net loss allocated to
General Partner units $ (95) $ (41)
======== ========
Net loss allocated to
Limited Partner units $ (5,422) $ (2,390)
======== ========
Net loss per General Partner unit $ (9.7) $ (4.2)
======== ========
Net loss per Limited Partner unit $ (2.86) $ (1.26)
======== ========
</TABLE>
See accompanying notes.
<PAGE> 5
TRANSWESTERN HOLDINGS L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
2000 1999
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES
Net loss $ (5,517) $ (2,431)
Adjustments to reconcile net loss to cash provided by
operating activities:
Depreciation and amortization 6,385 4,149
Amortization of deferred debt issuance costs 353 345
Amortization of Senior Note Discount 1,216 1,078
Provision for doubtful accounts 3,510 2,805
Changes in operating assets and liabilities, excluding the effects of
acquisitions:
Trade receivables 293 (4,116)
Write-off of doubtful accounts (3,440) (2,496)
Recoveries of doubtful accounts 299 93.
Deferred directory costs (694) (456)
Other current assets 144 (124)
Accounts payable (1,175) 723
Accrued liabilities (3,658) (1,942)
Accrued interest 3,346 3,713
Customer deposits 1,522 153
-------- --------
Cash provided by operating activities 2,584 1,494
INVESTING ACTIVITIES
Purchase of property, equipment and leasehold improvements (215) (238)
Acquisition of directories (10,044) (28,251)
Increase in other assets (714) (131)
-------- --------
Cash used for investing activities (10,973) (28,620)
FINANCING ACTIVITIES
Borrowings under long-term debt agreements:
Revolving credit facility 14,200 20,300.
Repayments of long-term debt
Revolving credit facility (4,500) (4,300)
Senior Term Loan (436) (435)
Partnership contribution - 84
-------- --------
Cash provided by financing activities 9,264 15,649
-------- --------
Net increase (decrease) in cash 875 (11,477)
Cash at beginning of period 1,167 14,067
-------- --------
Cash at end of period $ 2,042 $ 2,590
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest $ 2,490 $ 1,346
</TABLE> ======== ========
See accompanying notes.
<PAGE> 6
TRANSWESTERN HOLDINGS L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS ARE IN THOUSANDS)
1. GENERAL
The accompanying unaudited consolidated financial statements include the
accounts of TransWestern Holdings L.P. ("Holdings") and its wholly
owned subsidiary, TransWestern Publishing Company, LLC ("TransWestern"). All
significant inter-company transactions have been eliminated. Holdings' only
assets consist all of TransWestern's outstanding Member Units. Holdings has
formed TWP Capital Corp. ("Capital") as a wholly-owned subsidiary and the
Company has formed TWP Capital Corp. II ("Capital II") as a wholly-owned
subsidiary. Neither Capital nor Capital II has any significant assets or
operations. Target Directories of Michigan is the only other subsidiary of
TransWestern.
These financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC") and, in the
opinion of management, reflect all adjustments necessary to present fairly the
financial position, results of operations and cash flows for the periods
presented in conformity with generally accepted accounting principles. All
adjustments were of a normal recurring nature. All material intercompany
balances and transactions have been eliminated. These financial statements
should be read in conjunction with the consolidated financial statements and
notes thereto included in Holdings' Form 10-K for the fiscal year ended
December 31, 1999. The 10-K is available on the Internet at http://www.sec.gov.
<PAGE> 7
TRANSWESTERN HOLDINGS L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS ARE IN THOUSANDS)
2. FINANCIAL STATEMENT DETAILS
Property, Equipment and Leasehold Improvements
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
<S> <C> <C>
Computer and office equipment.................... $ 7,543 $ 7,342
Furniture and fixtures........................... 1,802 1,789
Leasehold improvements........................... 431 430
----------- -----------
9,776 9,561
Less accumulated depreciation and amortization... (6,446) (6,138)
----------- -----------
$ 3,330 $ 3,423
=========== ===========
</TABLE>
Acquired Intangibles
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
<S> <C> <C>
Customer Base.................................. $ 136,402 $ 128,074
Non compete and licensing agreements 4,100 2,160
----------- -----------
Less accumulated amortization.................. (50,483) (44,355)
----------- -----------
Acquired intangibles, net $ 90,019 $ 85,879
=========== ===========
</TABLE>
Other Non-Current Assets
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
2000 1999
----------- -----------
<S> <C> <C>
Debt issuance costs............................... $ 11,994 $ 11,994
Less accumulated amortization..................... (3,393) (3,040)
----------- -----------
Debt issuance costs, net $ 8,601 $ 8,954
Investment in Eversave, carried at cost 500 500
----------- -----------
Other Assets, net 9,101 $ 9,454
=========== ===========
</TABLE>
<PAGE> 8
3. DIRECTORY ACQUISITIONS
Desert Pages. On January 14, 2000 TransWestern purchased certain
tangible and intangible assets of Desert Pages, Inc. for a total of $8.0
million. The purchase price consists of $7.2 million in cash and a promissory
note of $0.8 million due in eighteen months, subject to adjustment based upon
the actual collections of accounts receivable outstanding as of the closing
during such period. Desert Pages published one directory in Palm Springs,
California. Also included in the purchase are the rights to publish a second,
new directory that has not yet been published.
Direct Media Corp. On February 15, 2000 TransWestern purchased certain
Tangible and intangible assets of Direct Media Corp. for a total of $3.4
million in cash. Direct media publishes eight directories serving southeastern
Georgia and the northeastern Florida area. Also included in the purchase are
the rights to publish a new directory in Georgia that has not yet been
published.
The acquisitions have been accounted for as asset purchases and
accordingly the purchase prices have 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 $ 8,460
Non-compete 2,940
Deferred directory costs 115
Other current and non-current assets 294
</TABLE>
Assuming that the above acquisitions had occurred on the first day of
Holdings three month period ended March 31, 2000 and March 31, 1999
the unaudited pro forma results of operations would be as follows:
<TABLE>
<CAPTION>
Three months ended March 31,
-----------------------------
2000 1999
------------ -----------
(Unaudited)
<S> <C> <C>
Net revenues....................................... $34,936 $32,320
Net loss................................. (5,689) (3,020)
</TABLE>
The above pro forma results give effect to pro forma adjustments for the
revenue, the amortization of acquired intangibles and interest expense on
borrowings that would have been required to fund the acquisitions.
<PAGE> 9
TRANSWESTERN HOLDINGS L.P.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(ALL DOLLAR AMOUNTS ARE IN THOUSANDS)
4. GUARANTEE
Target Directories of Michigan, Inc. ("Target"), which is wholly-owned
by TransWestern, fully and unconditionally guaranteed TransWestern's
outstanding 9 5/8% Series D Senior Subordinated Notes due 2007 on an unsecured
senior subordinated basis. Target is TransWestern's only consolidated operating
subsidiary, other than an inconsequential subsidiary which is a co-issuer of
such notes, and has no debt senior to such notes. Separate full financial
statements and other disclosures concerning Target have not been presented
because, in the opinion of management, such information is not material or
meaningful to investors. Target was acquired in July, 1998. Following is
summarized financial information concerning Target.
<TABLE>
<CAPTION>
Three months ended March 31,
---------------------------
2000 1999 ---------- --------
(Unaudited)
<S> <C> <C>
Statement of Operations:
Net revenues $976 $933
Gross profit 869 624
Operating income (loss) 36 118
Net loss (54) (58)
March 31,
2000 1999
Balance Sheet: ---------- --------
Current assets $843 $1,100
Non-current assets 4,141 5,430
Current liabilities 524 1,071
Non-current liabilities - 895
</TABLE>
<PAGE> 10
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS (UNAUDITED)
Overview
As used in this item and throughout this Quarterly Report on Form
10-Q, "we", "us", and "our" each refer to Holdings and TransWestern
collectively.
We recognize net revenues from the sale of advertising placed in
each directory when the completed directory is distributed. Costs directly
related to sales, production, printing and distribution of each directory are
capitalized as deferred directory costs and then matched against related net
revenues upon distribution. All of our other operating costs are recognized
during the period when incurred. As the number of directories increase, the
publication schedule is periodically adjusted to accommodate new books.
In addition, changes in distribution dates are affected by market and
competitive conditions and the staffing level required to achieve
the individual directory revenue goals. As a result, our directories
may be published in a month earlier or later than the previous year which
may move recognition of related revenues from one fiscal quarter or year to
another. Year to year results depend on both timing and performance factors.
Notwithstanding significant monthly fluctuation in net revenues recognized
based on actual distribution dates of individual directories, our bookings and
cash collection activities generally occur at a steady pace throughout the
year. The table below demonstrates that quarterly bookings, collection of
advance payments and total cash receipts, which includes both advance payments
and collections of accounts receivable, vary less than our net revenues or
EBITDA:
<TABLE>
<CAPTION>
---------------------------------------------------------------
1999 1999 1999 1999 2000
---------------------------------------------------------------
1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 1st Quarter
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net revenues ............... $ 31.5 $ 34.1 $ 38.2 $ 42.6 $ 34.9
EBITDA (a) ................. $ 8.2 $ 11.0 $ 12.0 $ 15.5 $ 8.5
Bookings (b) ............... $ 28.6 $ 32.1 $ 37.8 $ 35.1 $ 34.9
Advance payments ........... $ 14.4 $ 15.7 $ 17.6 $ 18.7 $ 17.0
Total cash receipts (c) .... $ 25.4 $ 28.3 $ 32.6 $ 34.6 $ 34.3
</TABLE>
(a) "EBITDA" is defined as income (loss) before extraordinary item plus
interest expense, and depreciation and amortization and is consistent
with the definition of EBITDA in the indentures relating to TransWestern's
notes and the senior credit facility. EBITDA is not a measure of
performance under generally accepted accounting principles (GAAP).
EBITDA should not be considered in isolation or as a substitute for net
income, cash flows from operating activities and other income or cash flow
statement data prepared in accordance with GAAP, or as a measure of
profitability or liquidity. However, management has included EBITDA because
it may be used by certain investors to analyze and compare companies on the
basis of operating performance, leverage and liquidity and to determine a
company's ability to service debt. Our definition of EBITDA may not be
comparable to that of other companies.
(b) "Bookings" is defined as the daily advertising orders received from
accounts during a given period and generally occur at a steady pace
throughout the year. Bookings generated by predecessor owners of acquired
directories are excluded.
(c) Total cash receipts includes both advance payments and collections of
accounts receivable.
<PAGE> 11
RESULTS OF OPERATIONS
The following table summarizes our results of operations as a percentage
of revenue for the periods indicated:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
--------------------------
2000 1999
--------- ---------
<S> <C> <C>
Net revenues .................. 100.0% 100.0%
Cost of revenues .............. 20.0 19.4
--------- ---------
Gross profit .................. 80.0 80.6
Sales and marketing ........... 45.0 43.8
General and administrative .... 29.5 24.5
--------- ---------
Income from operations ........ 5.5% 12.3%
========= =========
EBITDA Margin (a), (b) ........ 24.3% 26.0%
========= =========
</TABLE>
(a) For a definition of "EBITDA" see the immediately preceding section.
(b) "EBITDA Margin" is defined as EBITDA as a percentage of net revenues.
Management believes that EBITDA margin provides a valuable indication
of our company's ability to generate cash flows available for debt
service.
THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE THREE MONTHS ENDED
MARCH 31, 1999
Net revenues increased $3.4 million, or 10.9%, from $31.5 million in the
three months ended March 31, 1999 to $34.9 million in the same period in
2000. We published 51 directories in the three months ended March 31, 2000
compared to 43 in the same period in 1999. The net revenue growth was due to
$3.7 million from nine new directories, $5.3 million from nine directories
for which the publication date moved into the period and growth in the same 33
directories published during both periods of $1.8 million; offset by $7.4
million of net revenues associated with ten directories published in the
three months ended March 31, 1999 but not in the same period in 2000.
As a result of a combination of factors, including the addition of new
customers, price increases, increases in the amount of advertising by current
customers and new directory features such as colorization of ads, additional
ad sizes and additional headings, our same book revenue growth for the 33
directories published in both periods was 7.6%.
<PAGE> 12
Cost of revenues increased $0.9 million, or 14.7%, from $6.1 million in
the three months ended March 31, 1999 to $7.0 million in the same period
in 2000. The increase was the result of $1.1 million of costs associated with
nine new directories published in the three months ended March 31, 2000, and
$1.1 million in costs associated with nine directories published in the three
months ended March 31, 2000, but not in the same period in 1999; offset by $1.5
million of costs associated with ten directories published during the three
months ended March 31, 1999, but not in the same period in 2000. Production
support costs increased $0.2 million in the three months ended March 31, 2000
due to the directories acquired over the past twelve months.
As a result of the above, gross profit increased $2.5 million, or
9.9%, from $25.4 million in the three months ended March 31, 1999 to $27.9
million in the same period in 2000. Gross margin decreased from 80.6% in the
three months ended March 31, 1999 to 80.0% in the same period in 2000 as a
result of higher direct costs on newly acquired directories.
Selling and marketing expenses increased $1.9 million, or 13.9%, from
$13.8 million in the three months ended March 31, 1999 to $15.7 million in
the same period in 2000. The increase was attributable to increases of $0.5
million in sales support costs, $0.9 million in direct sales costs and $0.7
million in provision for bad debt (which was consistent with the increase in
net revenues), offset by an increase in recovered bad debts of $0.2 million.
Of the increase in sales support costs of $0.5 million, $0.3 million was
due to sales offices acquired since the first quarter of 1999 and $0.2 million
was due to general increase in costs associated with personnel and other costs
associated with our field sales offices. The increase in direct sales costs of
$0.9 million was as follows: $0.9 million of additional costs were for the nine
new directories, $1.3 million for nine directories moving into the period, and
$0.2 million of higher costs associated with the 33 same directories; offset by
$1.5 million of costs associated with ten directories that published in the
three months ended March 31, 1999 but not in the same period in 2000. Direct
sales costs as a percentage of revenue for the same 33 directories published
during both periods decreased from 21.1% to 20.6% in the three months ended
March 31, 2000 compared to the same period in 1999.
General and administrative expense increased $2.6 million, or 33.4%, from
$7.7 million for the three months ended March 31, 1999 to $10.3 million
for the same period in 2000. The increase is due to: amortization of acquired
customer base and other intangibles of $2.2 million, an increase in
depreciation of fixed assets of $0.1 million, an increase in incentive
compensation costs of $0.5 million offset by a decrease in professional service
costs of $0.2 million.
As a result of the above factors, income from operations decreased $2.0
million, or 50.7%, from $3.9 million in the three months ended March 31,
1999 to $1.9 million in the same period in 2000. Income from operations as a
percentage of net revenues decreased from 12.4% in the three months ended
March 31, 1999 to 5.5% in the same period in 2000.
Interest expense increased $1.0 million, or 15.3%, from $6.4 million in
the three months ended March 31, 1999 to $7.4 million in the same period
in 2000 due to higher rates of interest paid as a result of increases in
Prime and LIBOR rates as well as higher levels of debt.
As a result of the above factors, net income decreased $3.1 million, or
126.9%, from a loss of $2.4 million in the three months ended March 31, 1999
to a loss of $5.5 million in the same period in 2000.
<PAGE> 13
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities was $2.6 million in the three
months ended March 31, 2000 compared to $1.5 million provided in the same
period in 1999. The increase in cash provided by operations was primarily
due to higher collections of accounts receivable.
Net cash used by investing activities was $11.0 million in the three
months ended March 31, 2000, as compared to $28.6 million in the same period in
1999. Investing activities consist primarily of cash used to acquire
directories. In the three months ended March 31, 2000 $10.0 million was spent
compared to $28.3 million in the same period in the prior year. Acquisitions
made in the three months ended March 31, 2000 are discussed in note 3 of the
financial statements included in this Form 10-Q.
Net cash provided by financing activities was $9.3 million in the three
months ended March 31, 2000 as compared to $15.6 million in the same period
in 1999. These amounts are borrowings for acquisitions during the quarters,
and decreased as a result of fewer acquisition during the three months ended
March 31, 2000.
In connection with the recapitalization of our company in October 1997,
we incurred significant debt. As of March 31, 2000 we had total outstanding
long term indebtedness of $302.5 million, including $140 million of
TransWestern's Series D 9 5/8% Senior Subordinated Notes due 2007, (excluding
unamortized premium), $42.8 million of Holdings 11 7/8% Senior Discount Notes
due 2008, and $64.0 million of outstanding borrowings under the senior credit
facility, $49.8 million of outstanding borrowings under the revolving loan
facility, $4.4 million in acquisition related debt, all of which rank senior
to TransWestern's Series D notes. As of March 31, 2000 there was $20.2 million
of additional borrowing availability under the senior credit facility.
The senior credit facility and the indentures governing TransWestern's
notes significantly restrict the distribution of funds by TransWestern and the
other subsidiaries of Holdings. There can be assurance that the agreements
governing the indebtedness of Holdings' subsidiaries will permit such
subsidiaries to distribute funds to Holdings in amounts sufficient to pay the
accreted value of principal or interest on Holdings' Discount Notes when the
same becomes due, whether at maturity, upon acceleration or redemption or
otherwise. Holdings' Discount Notes will be effectively subordinated in right
of payment to all existing and future claims of creditors of subsidiaries or
Holdings, including the lenders under the senior credit facility, the holders
of TransWestern's notes and trade creditors.
Our principal sources of funds are cash flows from operating activities
and available funds under our revolving credit facility. Based upon the
successful implementation of management's business and operating strategy, we
believe that these funds will provide us with sufficient liquidity and capital
resources to meet our current and future financial obligations for the next
twelve months, including the payment of principal and interest on our notes, as
well as to provide funds for our working capital, capital expenditures and
other needs. Our future operating performance will be subject to future
economic conditions and to financial, business and other factors, many of which
are beyond our control. There can be no assurance that such sources of funds
will be adequate and that we will not require additional capital from
borrowings or securities offerings to satisfy such requirements. In addition,
we may require additional capital to fund future acquisitions and there can be
no assurance that such capital will be available.
<PAGE> 14
YEAR 2000
Although we have not experienced any Year 2000 ("Y2K") problems to date,
we cannot assure that unforeseen complications will not arise or that third
parties on which we rely in our day to day operations will have adequately
remedied against potential Y2K complications. If computer systems used by us
or our suppliers, the performance of products provided to us by our
suppliers, or the software applications we use to produce our products fail
or experience significant difficulties related to Y2K, our results of
operations and financial condition could be materially adversely affected.
FORWARD LOOKING STATEMENTS
This Quarterly Report on Form 10Q contains forward-looking statements
which are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are based on
the beliefs of our management as well as on assumptions made by and
information currently available to us at the time such statements
were made. When used in this Quarterly Report on Form 10Q, the words
"anticipate," "believe," "estimate," "expect," "intends" and similar
expressions, as they relate to our company are intended to identify forward-
looking statements. Actual results could differ materially from those
projected in the forward-looking statements. Important factors that could
affect our results include, but are not limited to, (i) our high level
of indebtedness; (ii) the restrictions imposed by the terms of our
indebtedness; (iii) the turnover rate amongst our account executives;
(iv) the variation in our quarterly results; (v) risks related to the fact
that a large portion of our sales are to small, local businesses; (vi) our
dependence on certain key personnel; (vii) risks related to the acquisition
and start-up of directories; (viii) risks related to substantial competition
in our markets; (ix) risks related to changing technology and new product
developments; (x) the effect of fluctuations in paper costs; (xi) the
sensitivity of our business to general economic conditions.
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
We are exposed to interest rate risk in connection with the term loan and
and the revolving loans outstanding under our senior credit facility, which
bear interest at floating rates based on LIBOR or the prime rate plus an
applicable borrowing margin. As of March 31, 2000 there was approximately
$64.0 million outstanding under the term loan (at an interest rate of 8.25% at
such time) and $49.8 million outstanding under the revolving loans (at the
LIBOR rate of 8.0% at such time). Based on such balances, an immediate
increase of one percentage point in the applicable interest rate would cause an
increase in interest expense of approximately $1.1 million on an annual basis.
We do not attempt to mitigate this risk through hedging transactions. All of
our sales are denominated in U.S. dollars, thus we are not subject to any
foreign currency exchange risks.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are a party to various litigation matters incidental to the conduct of
our business. Management does not believe that the outcome of any of the
matters in which we are currently involved will have a material adverse effect
on our financial condition or the results of our operations.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
Not applicable
<PAGE> 15
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibit Index
27.1 Consolidated Financial Data Schedule
(B) Reports on Form 8-K.
None
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on May 10, 2000 on
its behalf by the undersigned thereunto duly authorized.
TRANSWESTERN HOLDINGS L.P.
(Registrant)
BY: TransWestern Communications Company, Inc.
(General Partner)
BY: /s/ Ricardo Puente
--------------------------------------------
Name: Ricardo Puente
Title: President, Chief Executive Officer
and Director (Principal Executive
Officer)
BY: /s/ Joan Fiorito
--------------------------------------------
Name: Joan Fiorito
Title: Vice President, Chief Financial
Officer and Assistant Secretary
(Principal Financial and Accounting
Officer)
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