<PAGE>
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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 JUNE 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 August 16, 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.
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
INDEX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets as of
June 30, 1999 and December 31, 1998................................3
Condensed Consolidated Statements of Operations for the
Three and Six Months ended June 30, 1999 and June 30, 1998.........4
Condensed Consolidated Statements of Minority Interests,
Preferred Stock and Stockholders' Equity as of
June 30, 1999 and December 31, 1998................................5
Condensed Consolidated Statements of Cash Flows for the
Six Months ended June 30, 1999 and June 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
</TABLE>
2
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
JUNE 30, 1999 AND DECEMBER 31, 1998
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
ASSETS 1999 1998
---------- ------------
(Unaudited) (Note)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents (including
restricted balances of $4,241 and $40,767,
respectively)........................................................ $ 11,608 $ 42,444
Accounts receivable - net of allowance for
doubtful accounts of $1,197 and $799,
respectively......................................................... 48,465 54,234
Inventories .......................................................... 21,347 14,576
Deferred income taxes.................................................. 524 685
Other current assets................................................... 3,173 1,690
------------- -------------
Total current assets...................................... 85,117 113,629
Property, plant and equipment, at cost................................. 128,119 106,526
Accumulated depreciation and amortization.............................. (23,275) (22,550)
-------------- --------
Property, plant and equipment - net.................................. 104,844 83,976
Goodwill - net......................................................... 31,301 22,096
Other assets - net..................................................... 10,430 11,619
------------- -------------
TOTAL ASSETS.................................................................... $ 231,692 $ 231,320
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable....................................................... $ 12,506 $ 17,049
Accrued Expenses....................................................... 24,582 18,917
Current maturities of long-term debt................................... 9,288 4,084
------------- -------------
Total current liabilities................................. 46,376 40,050
Long-term debt......................................................... 131,856 139,101
Deferred income taxes.................................................. 15,890 12,508
Other long-term liabilities............................................ 10,059 8,729
------------- -------------
Total liabilities......................................... 204,181 200,388
------------- -------------
MINORITY INTERESTS: Redeemable preferred stock
Series B and D with stated redemption value
of $100 per share, aggregate liquidation value of
$8,800 and $8,267 at June 30, 1999 and
December 31, 1998, respectively........................................ 7,179 7,097
------------- -------------
STOCKHOLDERS' EQUITY:
Preferred stock - par value $0.001 per share,
775,000 shares authorized, 119,255 and 110,790
shares issued and outstanding, respectively.......................... 11,925 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.................................................... (13,094) (8,745)
-------------- --------------
Total stockholders' equity................................ 20,332 23,835
------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY...................................... $ 231,692 $ 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 SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
1999 1998 1999 1998
<S> <C> <C> <C> <C>
NET SALES......................................................... $ 63,374 $ 69,859 $ 134,818 $146,805
OPERATING EXPENSES:
Costs of production.......................................... 51,075 54,244 108,897 115,791
Selling, general and administrative.......................... 8,425 8,612 16,249 16,381
Depreciation................................................. 3,114 3,045 5,846 6,123
Amortization of intangibles.................................. 458 574 1,029 980
------------ ----------- ------------ -----------
63,072 66,475 132,021 139,275
------------ ----------- ------------ -----------
INCOME FROM OPERATIONS............................................ 302 3,384 2,797 7,530
------------ ----------- ------------ -----------
OTHER (INCOME) EXPENSES:
Interest expense............................................. 3,601 3,837 7,270 7,701
Amortization of deferred financing costs..................... 294 189 587 586
Interest income.............................................. (265) (52) (707) (142)
Gain on sale of assets....................................... (16) (58) (74) (99)
Other, net................................................... 100 94 191 202
------------ ----------- ------------ -----------
3,714 4,010 7,267 8,248
------------ ----------- ------------ -----------
LOSS BEFORE INCOME TAXES.......................................... (3,412) (626) (4,470) (718)
BENEFIT FOR INCOME TAXES.......................................... 1,205 108 1,501 1
------------ ----------- ------------ -----------
LOSS BEFORE DIVIDENDS ON
REDEEMABLE PREFERRED STOCK................................... (2,207) (518) (2,969) (717)
DIVIDENDS ON REDEEMABLE
PREFERRED STOCK.............................................. 268 262 534 522
------------ ----------- ------------ -----------
NET LOSS.......................................................... $ (2,475) $ (780) $ (3,503) $ (1,239)
============= ============ ============= ===========
</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)
SIX MONTHS ENDED JUNE 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....................... -- -- -- -- -- -- (3,503)
Stock dividends................ 813 82 8,465 846 -- -- (846)
------ ------ ------- ------- ------- ------- --------
June 30, 1999.................. 71,786 $7,179 119,255 $11,925 860,010 $21,501 $(13,094)
====== ====== ======= ======= ======= ======= ========
</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)
SIX MONTHS ENDED JUNE 30, 1999 AND JUNE 30, 1998
(DOLLARS IN THOUSANDS)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SIX MONTHS
1999 1998
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss ................................................................. $ (3,503) $ (1,239)
Adjustments to reconcile net loss to net cash flows provided by operating
activities:
Depreciation and amortization.............................................. 7,462 7,689
Deferred income tax provision.............................................. (20) (294)
Gain on sale of fixed assets............................................... (74) (99)
Changes in operating assets and liabilities:...............................
Accounts receivable - net.............................................. 8,925 501
Inventories............................................................ (5,668) (2,682)
Accounts payable and accrued expenses.................................. (1,394) 422
Other assets and liabilities - net..................................... (237) (460)
-------------- --------------
Net cash provided by operating activities......................... 5,491 3,838
------------- -------------
INVESTING ACTIVITIES -
Acquisition of business, net of cash acquired.............................. (24,118) --
Additions to property, plant and equipment - net........................... (10,168) (10,978)
-------------- --------------
Net cash used by investing activities............................. (34,286) (10,978)
FINANCING ACTIVITIES -
Financing costs incurred................................................... -- (204)
Increase in revolving debt................................................. -- 5,026
Debt repayments............................................................ (2,041) (1,045)
-------------- --------------
Net cash (used)/provided by financing activities.................. (2,041) 3,777
-------------- -------------
DECREASE IN CASH AND CASH EQUIVALENTS........................................... (30,836) (3,363)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD.................................. 42,444 3,779
------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD........................................ $ 11,608 $ 416
============= =============
</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>
June 30, December 31,
1999 1998
<S> <C> <C>
Work-in-process............................. $ 9,784 $ 3,791
Raw materials and production supplies....... 11,563 10,785
------------ -------------
Total....................................... $ 21,347 $ 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
- -------------------------------------------------------------------------------
RECENT DEVELOPMENTS
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"), two major customers of the
Company, including Time, Inc., placed the printing and production of several
weekly issues with competitors of the Company. 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.
RESULTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1999 VERSUS SIX MONTHS ENDED JUNE 30, 1998.
Net sales decreased $12.0 million or 8.2% to $134.8 million for the six
months ended June 30, 1999 from $146.8 million for the six months ended June 30,
1998. The decrease resulted primarily from the sale of Port City Press ("Port
City") on September 2, 1998 whose net sales of $18.4 million were included in
the prior years' six month results, the acquisition of Heartland Press, Inc.
("Heartland") on February 1, 1999 whose net sales of $11.7 million are included
in the first six 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 (See "Recent Developments"). Paper
costs were 25.8% of net sales for the six months ended June 30, 1999 versus
26.7% for the six months ended June 30, 1998.
Costs of production decreased $6.9 million or 6.0% to $108.9 million
for the six months ended June 30, 1999 from $115.8 million for the six months
ended June 30, 1998, principally due to the sale of Port City and the
acquisition of Heartland. Costs of production as a percent of net sales were
80.8% for the six months ended June 30, 1999 as compared to 78.9% experienced in
the six months ended June 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 decreased $0.2 million or
0.8% to $16.2 million for the six months ended June 30, 1999 compared to $16.4
million for the six months ended June 30, 1998 principally due to the sale of
Port City and the acquisition of Heartland. Selling, general and administrative
expenses increased as a percent of net sales to 12.1% in the 1999 period
compared to 11.1% in the 1998 period primarily due to the reduction in net sales
discussed above.
Depreciation expense decreased $0.3 million or 4.5% to $5.8 million for
the six months ended June 30, 1999 from $6.1 million for the six months ended
June 30, 1998 as a result of the Port City sale and Heartland acquisition.
Income from operations decreased $4.7 million to $2.8 million for the
six months ended June 30, 1999 from $7.5 million for the six months ended June
30, 1998, due to the factors discussed in the preceding paragraphs.
Interest expense decreased $0.4 million to $7.3 million for the six
months ended June 30, 1999 from $7.7 million for the six months ended June 30,
1998 as a result of reduced debt levels during the 1999 period compared to the
1998 period.
THREE MONTHS ENDED JUNE 30, 1999 VERSUS THREE MONTHS ENDED JUNE 30, 1998.
Net sales decreased $6.5 million or 9.3% to $63.4 million for the three
months ended June 30, 1999 from $69.9 million for the three months ended June
30, 1998. The decrease resulted from the sale of Port City on September 2, 1998
whose net sales of $9.3 million were included in the prior years' second
quarter's results, the acquisition of Heartland on February 1, 1999 whose net
sales of $7.3 million are included in the second quarter 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 (See "Recent Developments"). Paper costs were 24.0% of net sales for the
three months ended June 30, 1999 versus 25.4% for the three months ended June
30, 1998.
Costs of production decreased $3.1 million or 5.8% to $51.1 million for the
three months ended June 30, 1999 from $54.2 million for the three months ended
June 30, 1998, principally from the sale of Port City and the acquisition of
Heartland. Costs of production as a percent of net sales were 80.6% for the
three months ended June 30, 1999 as compared to 77.6% experienced in the three
months ended June 30, 1998, principally as
9
<PAGE>
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
- -------------------------------------------------------------------------------
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 decreased $0.2 million or
2.2% to $8.4 million for the three months ended June 30, 1999 compared to $8.6
million for the three months ended June 30, 1998 principally due to the sale of
Port City and the acquisition of Heartland. Selling, general and administrative
expenses increased as a percent of net sales to 13.3% in the 1999 period
compared to 12.3% in the 1998 period, primarily due to the reduction in net
sales discussed above.
Depreciation expense increased $0.1 million or 2.2% to $3.1 million for
the three months ended June 30, 1998 from $3.0 million for the three months
ended June 30, 1998 as a result of the Port City sale and Heartland acquisition.
Income from operations decreased $3.1 million to $0.3 million for the
three months ended June 30, 1999 from $3.4 million for the three months ended
June 30, 1998, due to the factors discussed in the preceding paragraphs.
Interest expense decreased $0.2 million to $3.6 million for the three
months ended June 30, 1999 from $3.8 million for the three months ended June 30,
1998 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 $3.0 million for the six months ended June 30, 1999 and $7.0
million for the six months ended June 30, 1998.
Working capital was $38.7 million and $73.6 million at June 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 June 30, 1999, the Company had unutilized
commitments of $45 million under its Credit Agreement.
The material adverse effect associated with the temporary loss of work
discussed under ("Recent Developments") 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
June 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 has been
determined that some software package version upgrades and modification of some
existing internally developed programs will be 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 largely 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 will utilize both internal and external resources to modify
internally developed programs and upgrade package software where indicated. The
Company plans to complete the year 2000 project no later than September 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 plans 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 June 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 June 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: August 16, 1999 /s/ Verne F. Schmidt
----------------------------
Verne F. Schmidt
Senior Vice President and
Chief Financial Officer
14
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<PAGE>
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<S> <C>
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<PERIOD-START> JAN-01-1999
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7,179
11,925
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