<PAGE>
=============================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO _________
333-45235
COMMISSION FILE NUMBER
[GRAPHIC OMITTED]
PERRY JUDD'S HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0365965
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
575 WEST MADISON STREET, WATERLOO, WISCONSIN 53594
(Address of principal executive offices) (Zip Code)
920-478-3551
(Registrant's telephone number, including area code)
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 in the past 90 days. YES [X] No [ ]
As of November 12, 1999 there were 860,010 shares of Registrant's Common
Stock outstanding, par value $.001 per share. There is no established public
trading market for the Registrant's Common Stock.
1
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999
INDEX
- -------------------------------------------------------------------------------
Page
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998......................... 3
Condensed Consolidated Statements of Operations for the
Three and Nine Months ended September 30, 1999 and
September 30, 1998............................................... 4
Condensed Consolidated Statements of Minority Interests,
Preferred Stock and Stockholders' Equity as of
September 30, 1999 and December 31, 1998........................ 5
Condensed Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 1999 and September 30, 1998..... 6
Notes to Condensed Consolidated Financial Statements.............. 7 - 8
Management's Discussion and Analysis of Financial Condition
and Results of Operations....................................... 9 - 12
PART II. OTHER INFORMATION............................................ 13
2
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 AND DECEMBER 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1999 1998
(Unaudited) (Note)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (including
restricted balances of $0 and $40,767,
respectively)........................................................ $ 3,814 $ 42,444
Accounts receivable - net of allowance for
doubtful accounts of $1,234 and $799,
respectively......................................................... 54,775 54,234
Inventories .......................................................... 19,724 14,576
Income tax receivable.................................................. 1,639 --
Deferred income taxes.................................................. 501 685
Other current assets................................................... 2,791 1,690
------------- -------------
Total current assets...................................... 83,244 113,629
Property, plant and equipment, at cost................................. 131,465 106,526
Accumulated depreciation and amortization.............................. (26,125) (22,550)
-------------- --------
Property, plant and equipment - net.................................. 105,340 83,976
Goodwill - net......................................................... 31,070 22,096
Other assets - net..................................................... 9,853 11,619
------------- -------------
TOTAL ASSETS.................................................................... $ 229,507 $ 231,320
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................................... $ 16,037 $ 17,049
Accrued expenses....................................................... 24,590 18,917
Current maturities of long-term debt................................... 5,587 4,084
------------- -------------
Total current liabilities................................. 46,214 40,050
Long-term debt......................................................... 130,336 139,101
Deferred income taxes.................................................. 15,982 12,508
Other long-term liabilities............................................ 10,013 8,729
------------- -------------
Total liabilities......................................... 202,545 200,388
------------- -------------
MINORITY INTERESTS: Redeemable preferred stock
Series B and D with stated redemption value
of $100 per share, aggregate liquidation value of
$9,069 and $8,267 at September 30, 1999 and
December 31, 1998, respectively........................................ 7,219 7,097
------------- -------------
STOCKHOLDERS' EQUITY:
Preferred stock - par value $0.001 per share,
775,000 shares authorized, 123,727 and 110,790
shares issued and outstanding, respectively.......................... 12,373 11,079
Common stock - par value $0.001 per share,
1,000,000 shares authorized, 860,010
shares issued and outstanding........................................ 1 1
Additional paid-in capital............................................. 21,500 21,500
Accumulated deficit.................................................... (14,131) (8,745)
-------------- --------------
Total stockholders' equity................................ 19,743 23,835
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................... $ 229,507 $ 231,320
============= =============
</TABLE>
Note: Derived from audited financial statements. See notes to condensed
consolidated financial statements.
3
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
NET SALES......................................................... $ 79,808 $ 71,962 $ 214,626 $ 218,767
OPERATING EXPENSES:
Costs of production.......................................... 64,764 57,459 173,661 173,250
Selling, general and administrative.......................... 8,093 7,713 24,342 24,094
Depreciation................................................. 2,936 2,717 8,782 8,840
Amortization of intangibles.................................. 512 500 1,541 1,480
------------ ----------- ------------ -----------
76,305 68,389 208,326 207,664
------------ ----------- ------------ -----------
INCOME FROM OPERATIONS............................................ 3,503 3,573 6,300 11,103
------------ ----------- ------------ -----------
OTHER (INCOME) EXPENSES:
Interest expense............................................. 3,577 4,026 10,847 11,727
Amortization of deferred financing costs..................... 293 299 880 885
Interest income.............................................. (144) (802) (851) (944)
(Gain) loss on sale of assets................................ (53) 158 (127) 59
Other, net................................................... 97 91 288 293
------------ ----------- ------------ -----------
3,770 3,772 11,037 12,020
------------ ----------- ------------ -----------
LOSS BEFORE INCOME TAXES.......................................... (267) (199) (4,737) (917)
BENEFIT (PROVISION) FOR INCOME TAXES.............................. (53) 97 1,448 98
------------- ----------- ------------ -----------
LOSS BEFORE DIVIDENDS ON
REDEEMABLE PREFERRED STOCK................................... (320) (102) (3,289) (819)
DIVIDENDS ON REDEEMABLE
PREFERRED STOCK.............................................. 269 263 803 785
------------ ----------- ------------ -----------
NET LOSS.......................................................... $ (589) $ (365) $ (4,092) $ (1,604)
============= ============ ============= ============
</TABLE>
See notes to condensed consolidated financial statements.
4
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
CONSOLIDATED STATEMENTS OF MINORITY INTERESTS, PREFERRED STOCK
AND STOCKHOLDERS' EQUITY (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
MINORITY INTERESTS PREFERRED STOCK COMMON STOCK
-------------------- -------------------- --------------------
CARRYING CARRYING CARRYING ACCUMULATED
SHARES VALUE SHARES VALUE SHARES VALUE DEFICIT
------ ----- ------ ----- ------ ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1998.............. 70,973 $7,097 110,790 $11,079 860,010 $21,501 $ (8,745)
Net loss....................... -- -- -- -- -- -- (4,092)
Stock dividends................ 1,219 122 12,937 1,294 -- -- (1,294)
------ ------- ------- ------- ------- ------- ---------
September 30, 1999............. 72,192 $7,219 123,727 $12,373 860,010 $21,501 $(14,131)
====== ======= ======= ======= ======= ======= =========
</TABLE>
See notes to condensed consolidated financial statements.
5
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND SEPTEMBER 30, 1998
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NINE MONTHS
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ................................................................. $ (4,092) $ (1,604)
Adjustments to reconcile net
loss to net cash flows
provided by operating activities:
Depreciation and amortization.............................................. 11,203 11,205
Deferred income tax provision.............................................. 94 709
(Gain) loss on sale of fixed assets........................................ (127) 59
Changes in operating assets and liabilities:
Accounts receivable - net.............................................. 2,615 (8,211)
Inventories............................................................ (4,044) (4,266)
Accounts payable and accrued expenses.................................. 548 5,625
Other assets and liabilities - net..................................... 99 (2,767)
-------- --------
Net cash provided by operating activities......................... 6,296 750
-------- --------
INVESTING ACTIVITIES -
Acquisition of business, net of cash acquired.............................. (24,118) --
Proceeds from sale of fixed assets......................................... -- 2,903
Proceeds from sale / leaseback............................................. -- 20,938
Proceeds from Port City sale............................................... -- 29,374
Additions to property, plant and equipment - net........................... (13,546) (16,951)
-------- --------
Net cash (used)/provided by investing activities $ (37,664) 36,264
-------- --------
FINANCING ACTIVITIES -
Financing costs incurred................................................... -- (241)
Increase in revolving debt................................................. -- 2,876
Debt repayments............................................................ (7,262) (1,565)
-------- --------
Net cash (used)/provided by financing activities (7,262) 1,070
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................ (38,630) 38,084
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................................. 42,444 3,779
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................ $ 3,814 $ 41,863
========= =========
</TABLE>
See notes to condensed consolidated financial statements.
6
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
1. BASIS OF PRESENTATION
The accompanying condensed consolidated interim financial statements
have been prepared by Perry Judd's Holdings, Inc. (along with its
subsidiaries, the "Company") pursuant to the rules and regulations of
the Securities and Exchange Commission and reflect normal and recurring
adjustments, which are, in the opinion of the Company, considered
necessary for a fair presentation. As permitted by these regulations,
these statements do not include all information required by generally
accepted accounting principles to be included in an annual set of
financial statements, however, the Company believes that the
disclosures are adequate to make the information presented not
misleading. It is suggested that these condensed consolidated financial
statements be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's latest
audited financial statements.
Effective February 1, 1999, the Company acquired all of the outstanding
capital stock of Heartland Press, Inc. ("Heartland") for approximately
$17.5 million, including acquisition costs. In addition, the Company
assumed approximately $6.6 million of Heartland's indebtedness, all of
which was paid in full upon consummation of the acquisition. The
acquisition was accounted for under the purchase method of accounting
and accordingly the results of operations are included in the
accompanying financial statements since the acquisition date. The
preliminary allocation of the purchase price is based upon the
estimated fair value of the assets acquired and liabilities assumed as
follows (in thousands):
<TABLE>
<S> <C>
Fair value of assets acquired (excluding cash)...... $ 21,420
Goodwill............................................ 9,636
Fair value of liabilities assumed................... (13,581)
Amounts paid to creditors........................... 6,643
--------
Cash paid for net assets acquired................... $ 24,118
========
</TABLE>
Concurrent with the acquisition of Heartland, a one-time fee of
$750,000 was paid to a company owned beneficially by the majority
stockholders of the Company for acquisition services related to the
transaction.
2. INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
<S> <C> <C>
Work-in-process............................ $ 8,874 $ 3,791
Raw materials and production supplies...... 10,850 10,785
------------ -------------
Total...................................... $ 19,724 $ 14,576
============ =============
</TABLE>
7
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
3. CONTINGENCIES
In connection with the acquisition of Perry Printing, the Company
issued 50,000 and 65,000 shares of Series A and B redeemable stock,
respectively, to the former owner of Perry Printing. During 1996, the
Company made two indemnity claims against the former owner of Perry
Printing, principally involving breaches of warranties and
representations made on certain assets under its Asset Purchase
Agreement. Redemption features of the Series A redeemable preferred
stock provided the Company with the option to offset such claims as
immediate redemption of the Series A redeemable preferred stock up to
the maximum redemption value of $5 million. Accordingly, the carrying
value of the Series A redeemable preferred stock was reduced to $-0- in
the financial statements at December 31, 1996. The former owner of
Perry Printing has objected to these claims for indemnification, and
management anticipates the claims may result in litigation. However,
management believes the Company's position on the claims will be
upheld.
Additionally, the Company has asserted a claim against the former owner
of Perry Printing for an approximate $1.8 million employee benefit
obligation incurred prior to April 28, 1995, which is now an obligation
of the Company to its employees covered by collective bargaining
agreements. This amount has been reflected as an increase to both
assets and liabilities pending resolution with the former owner of
Perry Printing. Management believes that its position will be upheld.
8
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
RESULTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1999 VERSUS NINE MONTHS ENDED SEPTEMBER 30,
1998.
Net sales decreased $4.2 million or 1.9% to $214.6 million for the nine
months ended September 30, 1999 from $218.8 million for the nine months ended
September 30, 1998. The decrease resulted primarily from the sale of Port City
Press ("Port City") on September 2, 1998 whose net sales of $24.4 million were
included in the prior years' nine month results, the acquisition of Heartland
Press, Inc. ("Heartland") on February 1, 1999 whose net sales of $19.3 million
are included in the first nine months of 1999, and the temporary displacement of
work by two major customers during the second quarter of 1999 of $5.4 million
resulting from unresolved negotiations at the Waterloo plant. Paper costs were
25.5% of net sales for the nine months ended September 30, 1999 versus 26.7% for
the nine months ended September 30, 1998.
Costs of production increased $0.4 million or 0.2% to $173.7 million
for the nine months ended September 30, 1999 from $173.3 million for the nine
months ended September 30, 1998, principally from the sale of Port City and the
acquisition of Heartland. Costs of production as a percent of net sales were
80.9% for the nine months ended September 30, 1999 as compared to 79.2%
experienced in the nine months ended September 30, 1998, principally from the
increase in operating lease expenses associated with equipment financing and the
sale and leaseback of real estate held by Judd's Inc. on August 17, 1998.
Selling, general and administrative expenses increased $0.2 million or
1.0% to $24.3 million for the nine months ended September 30, 1999 compared to
$24.1 million for the nine months ended September 30, 1998. Selling, general and
administrative expenses increased as a percent of net sales to 11.3% in the 1999
period compared to 11.0% in the 1998 period.
Depreciation expense of $8.8 million was the same for the nine months
ended September 30, 1999 and the nine months ended September 30, 1998.
Income from operations decreased $4.8 million to $6.3 million for the
nine months ended September 30, 1999 from $11.1 million for the nine months
ended September 30, 1998, due to the factors discussed in the preceding
paragraphs.
Interest expense decreased $0.9 million to $10.8 million for the nine
months ended September 30, 1999 from $11.7 million for the nine months ended
September 30, 1998 as a result of reduced debt levels during the 1999 period
compared to the 1998 period.
In March of 1999, two major customers of the Company, including Time,
Inc., placed the printing and production of several weekly issues with
competitors of the Company as a result of unresolved negotiations with
representatives of Southern Wisconsin Local 577M of the Graphic Communications
International Union, representing approximately 340 binding and finishing
employees at the Company's Waterloo, Wisconsin plant (the "GCIU Employees").
These publications accounted for approximately 10% of the Company's consolidated
revenues for 1998. During April 1999, the GCIU Employees voted to ratify the
Company's final offer. All work placed with competitors by these two major
customers was placed back into production at the Waterloo, Wisconsin plant
during the second quarter of 1999. As a result of this temporary loss of work,
the Company experienced a material adverse effect on its financial statements
with reductions in net sales and income from operations of approximately $5.4
million and $3.0 million, respectively, during the second quarter of 1999.
THREE MONTHS ENDED SEPTEMBER 30, 1999 VERSUS THREE MONTHS ENDED SEPTEMBER 30,
1998.
Net sales increased $7.8 million or 10.8% to $79.8 million for the
three months ended September 30, 1999 from $72.0 million for the three months
ended September 30, 1998. The increase resulted primarily from the addition of
sales from Heartland Press during the third quarter of 1999 and substantially
higher volume of production units from new and existing customers. Paper costs
were 25.1% of net sales for the three months ended September 30, 1999 versus
26.8% for the three months ended September 30, 1998.
Costs of production increased $7.3 million or 12.7% to $64.8 million
for the three months ended September 30, 1999 from $57.5 million for the three
months ended September 30, 1998, principally from the addition of Heartland's
production and overall increased volume of production. Costs of production as a
percent of net sales were 81.1% for the three months ended September 30, 1999 as
compared to 79.8% experienced in the three months ended September 30, 1998,
principally as a result of the increase in operating lease expenses associated
with equipment financing and the sale and leaseback of real estate held by
Judd's Inc. on August 17, 1998.
Selling, general and administrative expenses increased $0.4 million or
4.9% to $8.1 million for the three months ended September 30, 1999 compared to
$7.7 million for the three months ended September 30, 1998. Selling, general and
administrative expenses decreased as a percent of net sales to 10.1% in the 1999
period compared to 10.7% in the 1998 period.
Depreciation expense increased $0.2 million or 8.1% to $2.9 million for
9
<PAGE>
the three months ended September 30, 1999 from $2.7 million for the three
months ended September 30, 1998 as a result of including depreciation from
Heartland for the third quarter of 1999.
Income from operations decreased $0.1 million to $3.5 million for the
three months ended September 30, 1999 from $3.6 million for the three months
ended September 30, 1998, due to the factors discussed in the preceding
paragraphs.
Interest expense decreased $0.4 million to $3.6 million for the three
months ended September 30, 1999 from $4.0 million for the three months ended
September 30, 1999 as a result of reduced debt levels during the 1999 period
compared to the 1998 period.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has funded its capital and operating
requirements with a combination of cash flow from operations, borrowings and
external operating leases. Earnings before income taxes plus depreciation and
amortization was $6.5 million for the nine months ended September 30, 1999 and
$10.3 million for the nine months ended September 30, 1998.
Working capital was $37.0 million and $73.6 million at September 30,
1999 and December 31, 1998, respectively.
Since the inception of operations on April 28, 1995, the Company has
funded the majority of its needs for production equipment through operating
leases and borrowings under its Amended and Restated Credit Agreement dated
December 16, 1997, (the "Credit Agreement"). The Credit Agreement, which
provides for an aggregate commitment of $75 million, is comprised of a $45
million revolving credit facility based upon a borrowing base of eligible
accounts receivable and inventory amounts and a $30 million term loan facility.
The five-year Credit Agreement provides for monthly reductions in its term loan
facility and borrowings bear interest at rates that fluctuate with the prime
rate and the Eurodollar rate. As of September 30, 1999, the Company had
unutilized commitments of $45.0 million under its Credit Agreement.
The material adverse effect associated with the temporary loss of work
discussed under Results of Operations required certain financial covenants under
the Credit Agreement to be amended. Such amendment was completed in August,
1999, and the Company is currently in compliance with all of its financial
covenants under the Credit Agreement.
On February 1, 1999, the Company acquired all of the issued and
outstanding capital stock of Heartland Press, Inc. ("Heartland") for
approximately $17.5 million in cash, including acquisition costs. In addition,
the Company assumed approximately $6.6 million of Heartland's indebtedness, all
of which was paid in full upon consummation of the acquisition.
Concentrations of credit risk with respect to accounts receivable are
limited due to the Company's diverse operations and large customer base. As of
September 30, 1999, the Company had no significant concentrations of credit
risk.
The Company believes that its liquidity, capital resources and cash
flows are sufficient to fund planned capital expenditures, working capital
requirements and interest and principal payments for the foreseeable future.
10
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
YEAR 2000 ISSUE
The year 2000 issue is the result of computer programs having been
written using two digits rather than four to define the applicable year.
Consequently, any date-sensitive computer processing logic may recognize a date
using "00" for the year as the year 1900 rather than the year 2000. If not
remedied, this could result in erroneous warning messages, system failure or
miscalculations which could potentially disrupt operations or cause less than
optimum operating efficiencies.
The Company's business software applications have been reviewed for
their ability to operate correctly in the year 2000 and beyond. It was
determined that some software package version upgrades and modification of some
existing internally developed programs were required so that the computer
systems will properly utilize dates beyond December 31, 1999. The Company
believes that with minor modification and with the version upgrades, the year
2000 issue can be mitigated. However, if such modifications and conversions are
not made, or are not completed in a timely fashion, the year 2000 issue could
have a material impact on the operations of the Company.
The Company has completed communications with its significant suppliers
and customers to determine the extent to which the Company is vulnerable if
those parties fail to remedy their own year 2000 issues. There can be no
assurance that the systems of other companies on which the Company systems rely
will be converted in a timely fashion, or that a failure to convert by another
company would not have a material adverse effect on the Company. The Company has
determined that it has no exposure to contingencies related to the year 2000
issue for the printing services it has sold.
The Company has utilized both internal and external resources to modify
internally developed programs and upgrade package software where indicated. The
Company has completed its remediation phase of such modifications and expects to
complete its testing phase no later than November 1999. The indicated software
upgrades and version changes are being provided by the software developers as
part of the normal software support contracts for those products. These costs
were expensed as incurred in 1998 and are not expected to have a material effect
on the results of operations during 1999. There were no remediation costs
incurred during 1998 and such costs are not expected to exceed $250,000 during
1999.
The most reasonable, likely, worst case scenario would be for the
Company to fail to completely remediate certain legacy software programs used at
the Strasburg, Virginia operations. If unsuccessful in its attempts to remediate
these programs, the Company would adopt alternative, less efficient processes
and procedures until such remediation is complete.
The costs of the project and the date on which the Company expects to
complete the year 2000 efforts are based on management's best estimates, which
were derived utilizing numerous assumptions of future events including the
continued availability of certain resources, third party software developer
modification plans and other factors. However, there can be no guarantee that
these estimates will be accurate and actual results could potentially differ
materially from those estimates.
11
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
SEASONALITY
Results of operations for this interim period are not necessarily
indicative of results for the full year. The Company's operations are seasonal.
Historically, approximately two-thirds of its income from operations has been
generated in the second half of the fiscal year, primarily due to the higher
number of magazine pages, new product launches and back-to-school and holiday
catalog promotions.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information called for under this item is contained in Note 4 of
the Notes to Consolidated Financial Statements in the Company's Annual Report on
Form 10-K for the year ended December 31, 1998.
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The quarterly report on Form 10-Q includes forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995. All
statements of fact, including statements of historical fact, may contain
forward-looking statements. Forward-looking statements generally can be
identified by the use of forward-looking terminology such as "may", "will",
"expect", "intend", "estimate", "anticipate", "believe", or "continue" or the
negative thereof or variations thereon or similar terminology. Such
forward-looking statements are based upon information currently available in
which the Company's management shares its knowledge and judgement about factors
that they believe may materially affect the Company's performance. The Company
makes the forward-looking statements in good faith and believes them to have a
reasonable basis. However, such statements are speculative, speak only as of the
date made and are subject to certain risks, uncertainties and assumptions.
Should one or more of these risks or uncertainties materialize, or should
underlying assumptions prove incorrect, actual results could vary materially
from those anticipated, estimated or expected. Factors that might cause actual
results to differ materially from those in such forward-looking statements
include, but are not limited to, those discussed in "Management's Discussion and
Analysis of Financial Condition and Results of Operations", Part I. All
subsequent written and oral statements that the Company makes are qualified in
their entirety by these Risk Factors.
Readers are urged to carefully review and consider disclosures made in
this and other reports that the Company files with the Securities and Exchange
Commission that discuss factors germane to the Company's business.
12
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART II. OTHER INFORMATION
- -------------------------------------------------------------------------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibits required in accordance with Item 601 of Regulation S-K
are incorporated by reference herein as filed with registrant's
Annual Report on Form 10-K for the fiscal year ended December 31,
1998, dated March 31, 1999.
In addition, the Company has filed herewith the following
exhibits:
27.0 Financial Data Schedule for the period ended
September 30, 1999 (filed in electronic form only).
(b) Reports on Form 8-K
The following report on Form 8-K was filed during the quarterly
period ended September 30, 1999:
None
13
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
- -------------------------------------------------------------------------------
SIGNATURES
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 thereunto duly authorized.
PERRY JUDD'S HOLDINGS, INC.
Date: November 12, 1999 /s/ Verne F. Schmidt
---------------------------
Verne F. Schmidt
Senior Vice President and
Chief Financial Officer
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 3,814
<SECURITIES> 0
<RECEIVABLES> 56,009
<ALLOWANCES> (1,234)
<INVENTORY> 19,724
<CURRENT-ASSETS> 83,244
<PP&E> 131,465
<DEPRECIATION> (26,125)
<TOTAL-ASSETS> 229,507
<CURRENT-LIABILITIES> 46,214
<BONDS> 130,336
7,219
12,373
<COMMON> 21,501
<OTHER-SE> (14,131)
<TOTAL-LIABILITY-AND-EQUITY> 229,507
<SALES> 214,626
<TOTAL-REVENUES> 214,626
<CGS> 173,661
<TOTAL-COSTS> 208,326
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 184
<INTEREST-EXPENSE> 11,727
<INCOME-PRETAX> (4,737)
<INCOME-TAX> 1,448
<INCOME-CONTINUING> (3,289)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (4,092)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
