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Previous: OMEGA PROTEIN CORP, 10-Q, EX-27, 2000-11-13 |
Next: PERRY-JUDDS INC, 10-Q, EX-27, 2000-11-13 |
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, 2000
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
PERRY JUDD'S HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
| Delaware (State or other jurisdiction of incorporation or organization) |
51-0365965 (IRS Employer Identification Number) |
|
| 575 West Madison Street, Waterloo, Wisconsin (Address of principal executive offices) |
|
53594 (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 13, 2000 there were 901,317 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.
PERRY JUDD'S HOLDINGS, INC.
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2000
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Page |
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| PART I. | FINANCIAL INFORMATION | |||
| Condensed Consolidated Balance Sheets as of September 30, 2000 and December 31, 1999 | 3 | |||
| Condensed Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2000 and September 30, 1999 | 4 | |||
| Condensed Consolidated Statements of Minority Interests, Preferred Stock and Stockholders' Equity as of September 30, 2000 and December 31, 1999 | 5 | |||
| Condensed Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2000 and September 30, 1999 | 6 | |||
| Notes to Condensed Consolidated Financial Statements | 7 - 9 | |||
| Management's Discussion and Analysis of Financial Condition and Results of Operations | 10 - 12 | |||
| PART II. | OTHER INFORMATION | 13 | ||
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2
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND SHARE DATA)
| |
September 30, 2000 |
December 31, 1999 |
|||||||
|---|---|---|---|---|---|---|---|---|---|
| |
(Unaudited) |
(Note) |
|||||||
| ASSETS | |||||||||
| CURRENT ASSETS: | |||||||||
| Cash and cash equivalents | $ | 3,290 | $ | 3,932 | |||||
| Accounts receivable—net of allowance for doubtful accounts of $1,286 and $1,020, respectively | 55,750 | 66,774 | |||||||
| Inventories | 19,811 | 18,806 | |||||||
| Deferred income taxes | 1,282 | 823 | |||||||
| Other current assets | 1,972 | 1,867 | |||||||
| Total current assets | 82,105 | 92,202 | |||||||
| Property, plant and equipment, at cost | 137,169 | 130,432 | |||||||
| Accumulated depreciation and amortization | (37,472 | ) | (27,562 | ) | |||||
| Property, plant and equipment—net | 99,697 | 102,870 | |||||||
| Goodwill—net | 30,617 | 31,321 | |||||||
| Other assets—net | 6,529 | 7,858 | |||||||
| TOTAL ASSETS | $ | 218,948 | $ | 234,251 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | |||||||||
| CURRENT LIABILITIES: | |||||||||
| Accounts payable and accrued expenses | $ | 38,752 | $ | 45,694 | |||||
| Current maturities of long-term debt | 11,019 | 6,083 | |||||||
| Redeemable preferred stock dividends | 95 | 2,080 | |||||||
| Redeemable preferred stock | — | 7,260 | |||||||
| Total current liabilities | 49,866 | 61,117 | |||||||
| Long-term debt | 124,300 | 128,818 | |||||||
| Deferred income taxes | 14,508 | 14,820 | |||||||
| Other long-term liabilities | 10,031 | 10,125 | |||||||
| Total liabilities | 198,705 | 214,880 | |||||||
| MINORITY INTERESTS: | |||||||||
| Redeemable Preferred Stock Series A with stated redemption value of $100 per share, aggregate liquidation value of $4,394 | 3,198 | — | |||||||
| STOCKHOLDERS' EQUITY: | |||||||||
| Preferred stock—par value $0.001 per share, 775,000 shares authorized, 143,356 and 128,366 shares issued and outstanding, respectively | 14,336 | 12,837 | |||||||
| Common stock—par value $0.001 per share, 1,000,000 shares authorized, 901,317 and 860,010 shares issued and outstanding, respectively | 1 | 1 | |||||||
| Additional paid-in capital | 21,500 | 21,500 | |||||||
| Accumulated deficit | (18,792 | ) | (14,967 | ) | |||||
| Total stockholders' equity | 17,045 | 19,371 | |||||||
| TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY | $ | 218,948 | $ | 234,251 | |||||
| Note: | Derived from audited financial statements. See notes to condensed consolidated financial statements. Certain amounts have been reclassified to conform with the current presentation. |
3
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
| |
Three Months Ended September 30 |
Nine Months Ended September 30 |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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2000 |
1999 |
2000 |
1999 |
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| NET SALES | $ | 88,137 | $ | 79,808 | $ | 237,408 | $ | 214,626 | |||||||
| OPERATING EXPENSES: | |||||||||||||||
| Costs of production | 69,556 | 64,764 | 187,966 | 173,661 | |||||||||||
| Selling, general and administrative | 8,538 | 8,093 | 25,315 | 24,342 | |||||||||||
| Depreciation | 3,373 | 2,936 | 10,121 | 8,782 | |||||||||||
| Amortization of intangibles | 326 | 512 | 1,147 | 1,541 | |||||||||||
| 81,793 | 76,305 | 224,549 | 208,326 | ||||||||||||
| INCOME FROM OPERATIONS | 6,344 | 3,503 | 12,859 | 6,300 | |||||||||||
| OTHER (INCOME) EXPENSES: | |||||||||||||||
| Interest expense | 3,472 | 3,577 | 10,405 | 10,847 | |||||||||||
| Amortization of deferred financing costs | 293 | 293 | 880 | 880 | |||||||||||
| Interest income | (147 | ) | (144 | ) | (500 | ) | (851 | ) | |||||||
| Gain on sale of assets | (48 | ) | (53 | ) | (151 | ) | (127 | ) | |||||||
| Other, net | 92 | 97 | 286 | 288 | |||||||||||
| 3,662 | 3,770 | 10,920 | 11,037 | ||||||||||||
| INCOME (LOSS) BEFORE INCOME TAXES | 2,682 | (267 | ) | 1,939 | (4,737 | ) | |||||||||
| (PROVISION) BENEFIT FOR INCOME TAXES | (1,442 | ) | (53 | ) | (1,170 | ) | 1,448 | ||||||||
| INCOME (LOSS) BEFORE DIVIDENDS AND ACCRETION ON REDEEMABLE PREFERRED STOCK | 1,240 | (320 | ) | 769 | (3,289 | ) | |||||||||
| DIVIDENDS AND ACCRETION ON REDEEMABLE PREFERRED STOCK | 2,549 | 269 | 3,095 | 803 | |||||||||||
| NET LOSS | $ | (1,309 | ) | $ | (589 | ) | $ | (2,326 | ) | $ | (4,092 | ) | |||
See notes to condensed consolidated financial statements.
4
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, 2000
(DOLLARS IN THOUSANDS)
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Minority interests |
Preferred Stock |
Common Stock |
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|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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Shares |
Carrying Value |
Shares |
Carrying Value |
Shares |
Carrying Value |
Accumulated Deficit |
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| December 31, 1999 | 72,598 | $ | 7,260 | 128,366 | $ | 12,837 | 860,010 | $ | 21,501 | $ | (14,967 | ) | ||||||||
| Net loss | — | — | — | — | — | — | (2,326 | ) | ||||||||||||
| Stock dividends | 813 | 81 | 14,990 | 1,499 | — | — | (1,499 | ) | ||||||||||||
| Redemption of Series B and D Redeemable Preferred Stock | (73,411 | ) | (7,341 | ) | — | — | — | — | — | |||||||||||
| Reinstatement of Series A Redeemable Preferred Stock | 43,941 | 3,143 | — | — | — | — | — | |||||||||||||
| Accretion on Series A Redeemable Preferred Stock | — | 55 | — | — | — | — | — | |||||||||||||
| Stock Options Exercised at $.01 per share | — | — | — | — | 41,307 | — | — | |||||||||||||
| September 30, 2000 | 43,941 | $ | 3,198 | 143,356 | $ | 14,336 | 901,317 | $ | 21,501 | $ | (18,792 | ) | ||||||||
See notes to condensed consolidated financial statements.
5
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(DOLLARS IN THOUSANDS)
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Nine Months |
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|---|---|---|---|---|---|---|---|---|---|---|---|
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2000 |
1999 |
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| OPERATING ACTIVITIES: | |||||||||||
| Net loss | $ | (2,326 | ) | $ | (4,092 | ) | |||||
| Adjustments to reconcile net loss to net cash flows provided by operating activities: | |||||||||||
| Depreciation and amortization | 12,148 | 11,203 | |||||||||
| Accretion on redeemable preferred stock | 1,001 | — | |||||||||
| Deferred income tax provision | 108 | 94 | |||||||||
| Gain on sale of fixed assets | (151 | ) | (127 | ) | |||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable—net | 11,024 | 2,615 | |||||||||
| Inventories | (1,005 | ) | (4,044 | ) | |||||||
| Accounts payable and accrued expenses | (6,942 | ) | 548 | ||||||||
| Redeemable preferred stock dividends | (609 | ) | — | ||||||||
| Other assets and liabilities—net | (1 | ) | 99 | ||||||||
| Net cash provided by operating activities | 13,247 | 6,296 | |||||||||
| INVESTING ACTIVITIES— | |||||||||||
| Acquisition of business, net of cash acquired | — | (24,118 | ) | ||||||||
| Additions to property, plant and equipment—net | (6,966 | ) | (13,546 | ) | |||||||
| Net cash used by investing activities | (6,966 | ) | (37,664 | ) | |||||||
| FINANCING ACTIVITIES— | |||||||||||
| Increase in revolving debt | 4,983 | — | |||||||||
| Redemption of Redeemable Series B and D Preferred Stock | (7,341 | ) | — | ||||||||
| Debt repayments | (4,565 | ) | (7,262 | ) | |||||||
| Net cash used by financing activities | (6,923 | ) | (7,262 | ) | |||||||
| NET DECREASE IN CASH AND CASH EQUIVALENTS | (642 | ) | (38,630 | ) | |||||||
| CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD | 3,932 | 42,444 | |||||||||
| CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 3,290 | $ | 3,814 | |||||||
See notes to condensed consolidated financial statements.
6
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 final allocation of the purchase price is based upon the estimated fair value of the assets acquired and liabilities assumed as follows (in thousands):
| Fair value of assets acquired (excluding cash) | $ | 21,420 | |||
| Goodwill | 8,697 | ||||
| Fair value of liabilities assumed | (12,642 | ) | |||
| Amounts paid to creditors | 6,643 | ||||
| Cash paid for net assets acquired | $ | 24,118 | |||
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:
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September 30, 2000 |
December 31, 1999 |
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|---|---|---|---|---|---|---|---|
| Work-in-process | $ | 7,520 | $ | 6,535 | |||
| Raw materials and production supplies | 12,291 | 12,271 | |||||
| Total | $ | 19,811 | $ | 18,806 | |||
7
3. REDEEMABLE PREFERRED STOCK SERIES A
At April 28, 1995, Series A redeemable preferred stock issued in the amount of $5.0 million reflected an original issue discount of $2.5 million which was the difference between the fair value at the time of issuance and the April 28, 2005 redemption value. The difference was accreted by charging operations until redemption. Each share of redeemable Series A, $0.001 par value, $100 redemption value, nonconvertible, non-voting preferred stock entitles its holder to receive an annual cash dividend equivalent to redemption value times 90% of the prime interest rate. At December 31, 1995, 50,000 shares were authorized and 47,350 shares were issued and outstanding. During 1996, the carrying value of the Series A redeemable preferred stock was written down to $-0- to offset certain purchase accounting adjustments and no accretion was recorded. During the third quarter ended September 30, 2000, the Company reached a settlement with the former owner of Perry Printing resulting in a partial reinstatement of Redeemable Series A Preferred Stock. Pursuant to the settlement agreement dated August 31, 2000, effective June 30, 2000, 43,940.68 shares of Series A Redeemable Preferred Stock were reinstated at an accreted value of $3,143,000 and $1,452,000 of accumulated dividends were paid. (See Note 4)
Redeemable Preferred Stock Series B
Effective June 30, 2000, the outstanding shares of Redeemable Preferred Stock Series B were redeemed during the three months ended September 30, 2000. Each share of Series B, $0.001 par value, $100 redemption value, nonconvertible, non-voting preferred stock entitled its holder to receive cash dividends of 12.5% of redemption value and stock dividends of 2.5% of redemption value (issued in Redeemable Preferred Stock D). At June 30, 2000 and December 31, 1999, 65,000 shares were authorized, issued and outstanding and are mandatorily redeemable on November 1, 2000. Accrued and unpaid dividends were approximately $2.2 million and $1.8 million at June 30, 2000 and December 31, 1999, respectively. (See Note 4).
Redeemable Preferred Stock Series D
Effective June 30, 2000, the outstanding shares of Redeemable Preferred Stock Series D were redeemed during the three months ended September 30, 2000. Each share of Series D, $0.001 par value, $100 redemption value, nonconvertible, non-voting preferred stock entitled its holder to receive cash dividends equivalent to 15% of carrying value. At June 30, 2000 and December 31, 1999, 100,000 shares were authorized with 8,411 and 7,598 shares issued and outstanding, respectively. Series D preferred shares are mandatorily redeemable on November 1, 2000. Accrued and unpaid dividends were approximately $0.3 million and $0.2 million at June 30, 2000 and December 31, 1999, respectively. (See Note 4).
4. SETTLEMENT OF CONTINGENCIES
In connection with the acquisition of Perry Printing, the Company issued 50,000 and 65,000 shares of Series A and B redeemable preferred 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
8
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 objected to these claims. Additionally, the Company 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.
On November 24, 1999, the former owner of Perry Printing filed a complaint against the Company seeking damages of approximately $3,000,000 and the payment of certain preferred stock dividends. On January 6, 2000, the Company answered by denying the former owner's allegations and asserted counter claims in an aggregate amount of approximately $7,000,000.
On August 31, 2000, the Company reached a settlement agreement, effective June 30, 2000, with the former owner of Perry Printing concerning the two indemnity claims and the employee benefit obligation claim. Pursuant to this agreement, the Company paid the former owner of Perry Printing the redemption value of Redeemable Preferred Stock Series B and D including unpaid dividends of $2,545,000 through June 30, 2000, and dividends of $1,452,000 relating to Redeemable Preferred Stock Series A which was partially reinstated in the amount of 43,940.68 shares. These Series A shares were recorded in the financial statements at their estimated fair value as of the April 28, 1995 acquisition date of $2,197,000 plus an adjustment for accretion through June 30, 2000 of $946,000.
5. SUBSEQUENT EVENT
On October 19, 2000, the Company sold substantially all the net assets of its subsidiary Judd's Online, Inc. to a subsidiary of Susquehanna Media Corporation for approximately $6.3 million, net of closing costs. The after-tax gain resulting from this sale is expected to approximate $2.6 million. Net sales of Judd's Online were approximately $4.2 million for the nine months ended September 30, 2000 and $2.3 million for the nine months ended September 30, 1999. Concurrent with the sale of Judd's Online, a one-time fee of $300,000 was paid to a company owned beneficially by the majority stockholders of the Company for acquisition services related to the transaction.
9
PERRY JUDD'S HOLDINGS, INC.
PART I. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Nine Months ended September 30, 2000 versus Nine Months ended September 30, 1999.
Net sales increased $22.8 million or 10.6% to $237.4 million for the nine months ended September 30, 2000 from $214.6 million for the nine months ended September 30, 1999. The increase resulted primarily from the return of work at the Waterloo Plant which was temporarily displaced during the second quarter of 1999 due to labor negotiations which were unresolved at the time, an additional month of activity related to Heartland, Inc. ("Heartland") which was acquired on February 1, 1999 and an overall increase in volume from new and existing customers. Paper costs were 24.8% of net sales for the nine months ended September 30, 2000 versus 25.5% for the nine months ended September 30, 1999.
Costs of production increased $14.3 million or 8.2% to $188.0 million for the nine months ended September 30, 2000 from $173.7 million for the nine months ended September 30, 1999, principally due to increases in production due to the factors mentioned in the preceding paragraph. Costs of production as a percent of net sales were 79.2% for the nine months ended September 30, 2000 as compared to 80.9% experienced in the nine months ended September 30, 1999.
Selling, general and administrative expenses increased $1.0 million or 4.1% to $25.3 million for the nine months ended September 30, 2000 compared to $24.3 million for the nine months ended September 30, 1999. Selling, general and administrative expenses decreased as a percent of net sales to 10.7% in the 2000 period compared to 11.3% in the 1999 period.
Depreciation expense increased $1.3 million or 14.8% to $10.1 million for the nine months ended September 30, 2000 from $8.8 million for the nine months ended September 30, 1999 as a result of new assets placed in service within the past twelve months.
Income from operations increased $6.5 million to $12.8 million for the nine months ended September 30, 2000 from $6.3 million for the nine months ended September 30, 1999, due to the factors discussed in the preceding paragraphs.
Interest expense decreased $0.4 million or 3.7% to $10.4 million for the nine months ended September 30, 2000 from $10.8 million for the nine months ended September 30, 1999 due to reduced debt levels.
Dividends and accretion on redeemable preferred stock increased $2.3 million to $3.1 million for the nine months ended September 30, 2000 from $0.8 million for the nine months ended September 30, 1999 resulting from the reinstatement of Redeemable Preferred Stock Series A in connection with the August 31, 2000 settlement agreement with the former owner of Perry Printing.
Three Months ended September 30, 2000 versus Three Months ended September 30, 1999.
Net sales increased $8.3 million or 10.4% to $88.1 million for the three months ended September 30, 2000 from $79.8 million for the three months ended September 30, 1999. The increase resulted from substantially higher volume of production units from new and existing customers. Paper costs were 25.6% of net sales for the three months ended September 30, 2000 versus 25.1% for the three months ended September 30, 1999.
10
Costs of production increased $4.8 million or 7.4% to $69.6 million for the three months ended September 30, 2000 from $64.8 million for the three months ended September 30, 1999, principally from the overall increased volume of production. Costs of production as a percent of net sales were 78.9% for the three months ended September 30, 2000 as compared to 81.1% experienced in the three months ended September 30, 1999.
Selling, general and administrative expenses increased $0.4 million or 4.9% to $8.5 million for the three months ended September 30, 2000 compared to $8.1 million for the three months ended September 30, 1999. Selling, general and administrative expenses decreased as a percent of net sales to 9.7% in the 2000 period compared to 10.1% in the 1999 period.
Depreciation expense increased $0.5 million or 17.2% to $3.4 million for the three months ended September 30, 2000 from $2.9 million for the three months ended September 30, 1999 as a result of new assets placed in service within the past twelve months.
Income from operations increased $2.8 million to $6.3 million for the three months ended September 30, 2000 from $3.5 million for the three months ended September 30, 1999, due to the factors discussed in the preceding paragraphs.
Interest expense decreased $0.1 million to $3.5 million for the three months ended September 30, 2000 from $3.6 million for the three months ended September 30, 2000 as a result of reduced debt levels during the period.
Dividends and accretion on redeemable preferred stock increased $2.2 million to $2.5 million for the nine months ended September 30, 2000 from $0.3 million for the nine months ended September 30, 1999 resulting from the reinstatement of redeemable Preferred Stock Series A in connection with the August 31, 2000 settlement agreement with the former owner of Perry Printing.
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 $14.1 million for the nine months ended September 30, 2000 and $6.5 million for the nine months ended September 30, 1999.
Working capital was $32.2 million and $31.1 million at September 30, 2000 and December 31, 1999, 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 (the "Credit Agreement"), which expires on December 15, 2002. The Credit Agreement is comprised of a $45 million revolving credit facility based upon a borrowing base of eligible accounts receivable and inventory amounts and a term loan facility with an outstanding balance of $15.3 million at September 30, 2000. The 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, 2000, the Company had borrowings of $5.0 million under its revolving credit facility.
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, 2000, the Company had no significant concentrations of credit risk.
11
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.
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, 1999.
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
PERRY JUDD'S HOLDINGS, INC.
PART II. OTHER INFORMATION
On August 31, 2000, the Company reached a settlement agreement, effective June 30, 2000, with the former owner of Perry Printing concerning the two indemnity claims and the employee benefit obligation claim. Pursuant to this agreement, the Company paid the former owner of Perry Printing the redemption value of Redeemable Preferred Stock Series B and D including unpaid dividends of $2,545,000 through June 30, 2000, and dividends of $1,452,000 relating to Redeemable Preferred Stock Series A which was partially reinstated in the amount of 43,940.68 shares. These Series A shares were recorded in the financial statements at their estimated fair value as of the April 28, 1995 acquisition date of $2,197,000 plus an adjustment for accretion through June 30, 2000 of $946,000.
Item 6. Exhibits and Reports On Form 8-K
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, 1999, dated March 28, 2000.
In addition, the Company has filed herewith the following exhibits:
| 27.0 | Financial Data Schedule for the period ended September 30, 2000 (filed in electronic form only). |
The following report on Form 8-K was filed during the quarterly period ended September 30, 2000:
None
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PERRY JUDD'S HOLDINGS, INC.
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 13, 2000 |
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/s/ VERNE F. SCHMIDT Verne F. Schmidt Senior Vice President and Chief Financial Officer |
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