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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT No. 1 TO
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED COMMISSION FILE NUMBER
MARCH 31, 1999 333-46957
LIBERTY GROUP PUBLISHING, INC.
(Exact Name of Registrant as Specified in its Charter)
DELAWARE 36-4197635
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
3000 DUNDEE ROAD, SUITE 203 NORTHBROOK, ILLINOIS 60062
(Address of Principal Executive Offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (847) 272-2244
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 FOR THE PAST 90 DAYS. YES X NO
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I FINANCIAL INFORMATION PAGE
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Item 1 Unaudited Interim Consolidated Financial Statements
Unaudited Consolidated Balance Sheets at March 31, 1999 and December 31, 1998 ........... 1
Unaudited Consolidated Statements of Operations for the Three Months Ended March 31,
1999 and March 31, 1998 ............................................................ 2
Unaudited Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1999 and March 31, 1998 ................................. 3
Notes to the Unaudited Interim Consolidated Financial
Statements ........................................................................... 4
Item 2 Management's Discussion and Analysis of Financial Condition and Results of Operations ... 6
Item 3 Quantitative and Qualitative Disclosures About Market Risk............................... 10
PART II OTHER INFORMATION
Item 2 Changes in Securities and Use of Proceeds................................................ 11
Item 4 Submission of Matters to a Vote of Security Holders ..................................... 11
Item 6 Exhibits and Reports on Form 8-K ........................................................ 12
SIGNATURE PAGE ................................................................................................ 14
</TABLE>
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LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
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Assets
Current Assets:
Cash and cash equivalents $ 2,174 $ 1,025
Accounts receivable, net of allowance
for doubtful accounts of $1,070 and $1,182
in 1999 and 1998, respectively 15,930 15,021
Inventory 2,256 2,200
Prepaid expenses 1,074 240
Other current assets 65 144
---------- ------------
Total current assets 21,499 18,630
Property, plant and equipment, net 33,914 29,283
Intangible assets, net 382,141 350,754
Deferred financing costs, net 10,997 11,347
Other assets -- 54
---------- ------------
Total assets $ 448,551 $ 410,068
========== ============
Liabilities and stockholders' equity (deficit) Current Liabilities:
Borrowings under revolving credit facility $ 80,000 $ 46,000
Current portion of long-term liabilities 388 388
Accounts payable 3,235 2,658
Accrued Interest 3,658 7,459
Accrued expenses 10,082 7,023
Deferred revenue 6,733 5,777
---------- ------------
Total current liabilities 104,096 69,305
Long-term liabilities:
Senior subordinated notes 180,000 180,000
Senior discount debentures, redemption value $89,000 57,717 56,102
Long-term liabilities, less current portion 1,446 1,446
Deferred income taxes 13,715 8,455
---------- ------------
Total liabilities 356,974 315,308
Senior mandatory redeemable exchangeable cumulative preferred stock, $0.01 par
value, 21,000,000 shares authorized, 2,083,107 and 2,009,024
issued and outstanding at March 31, 1999 and December 31, 1998 53,358 51,460
Aggregate involuntary liquidation preference
$25 plus accrued dividends -- --
Junior mandatory redeemable cumulative
preferred stock, $0.01 par value, 175,000
shares authorized, 54,132 and 52,812 issued and
outstanding at March 31, 1999 and December 31, 1998 55,034 53,692
---------- ------------
Total mandatory redeemable preferred stock 108,392 105,152
Stockholders' equity(deficit)
Common stock, $0.01 par value, 80,000 shares
authorized, issued and outstanding at
December 31, 1998 1 1
Additional paid in capital 8,159 8,159
Subscriptions receivable (501) (501)
Accumulated deficit (24,474) (18,051)
Net assets -- --
---------- ------------
Total stockholders' equity (deficit) (16,815) (10,392)
---------- ------------
Total liabilities and stockholders' equity (deficit) $ 448,551 $ 410,068
========== ============
</TABLE>
See accompanying notes to consolidated financial statements.
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LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
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REVENUES:
Advertising $ 25,623 $ 16,091
Circulation 6,576 5,321
Job printing and other 2,804 1,574
-------- --------
Total revenues 35,003 22,986
OPERATING COSTS AND EXPENSES:
Operating costs 16,050 9,804
Selling, general and administrative 10,971 6,992
Depreciation and amortization 3,668 3,083
-------- --------
Income from operations 4,314 3,107
Interest expense 7,143 4,971
Amortization of debt issue costs 350 234
-------- --------
Income (loss) before income taxes (3,179) (2,098)
Income taxes -- --
-------- --------
Net income (loss) (3,179) (2,098)
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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LIBERTY GROUP PUBLISHING, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 1998
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Cash flows from operating activities:
Net income (loss) $(3,179) $ (2,098)
Adjustments to reconcile net
earnings to net cash provided
by operating activities:
Depreciation and amortization 3,668 3,083
Amortization of debt issue costs 350 234
Accretion of Senior discount notes 1,615 1,029
Changes in assets and liabilities, net of acquisitions:
Working capital-net (2,710) 2,013
Other assets 54 (610)
------- ---------
Net cash flows provided by (used in)
operating activities: (202) 3,651
------- ---------
Cash flows from investing activities:
Purchases of property, plant
and equipment (990) (76)
Acquisitions, net of cash
acquired (31,659) (317,339)
------- ---------
Net cash flows used in investing
activities: (32,649) (317,415)
------- ---------
Cash flows from financing activities:
Net proceeds from issuing
long-term debt -- 221,217
Net borrowings (repayments) under
revolving credit facility 34,000 --
Net proceeds from issuing preferred stock -- 91,750
Net proceeds from issuing common
stock -- 8,000
------- ---------
Net cash provided by (used in)
financing activities 34,000 320,967
------- ---------
Net increase in cash and cash
equivalents 1,149 7,203
Cash and cash equivalents, at
beginning of period 1,025 --
------- ---------
Cash and cash equivalents, at
end of period $ 2,174 $ 7,203
======= =========
Supplemental cash flow disclosure -
Cash interest paid -- --
</TABLE>
See accompanying notes to consolidated financial statements.
3
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LIBERTY GROUP PUBLISHING, INC.
NOTES TO UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(1) THE COMPANY, BASIS OF PRESENTATION AND ACQUISITION
Liberty Group Publishing, Inc. ("LGP") is a leading publisher of community
newspapers and related publications that are the dominant source of local news
and print advertising in their communities. LGP is a holding company for its
wholly-owned subsidiary Liberty Group Operating, Inc ("Operating Company"). The
interim consolidated financial statements include the accounts of LGP and
Operating Company and its consolidated subsidiaries (the "Company").
The accompanying unaudited interim consolidated financial statements have been
prepared pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and note disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. The accompanying interim consolidated financial statements as of
March 31, 1999 and for the three months ended March 31, 1999 and 1998 should be
read in conjunction with the December 31, 1998 audited consolidated financial
statements of the Company included in the Company's Form 10-K filed with the
Securities and Exchange Commission.
The Company began operations on January 27, 1998, upon the acquisition of
virtually all of the assets and certain liabilities that were used primarily in
the business of publishing, marketing and distributing a total of 166 community
newspapers and related publications. The effective date of the initial
acquisition was January 1, 1998, since that time, the Company has purchased an
additional 103 publications, for a total of 269 publications in 15 states across
the United States.
The Company has accounted for these acquisitions using the purchase method of
accounting. Accordingly, the costs of each acquisition has been allocated to the
assets acquired and liabilities assumed based upon their respective fair values
using independent valuations where appropriate. The costs of certain intangible
assets acquired are being amortized over periods ranging from 5 to 40 years.
(2) BORROWINGS
The acquisitions, including the payment of related fees and expenses, was
financed in part from the proceeds of $180.0 million from the issuance and sale
by the Operating Company of $180.0 million aggregate principal amount of 9.375%
Senior Subordinated Notes (the "Notes") due February 1, 2008 and the proceeds of
$50.5 million from the issuance and sale by LGP of $89.0 million aggregate
principal amount of 11.625% Senior Discount Debentures (the "Debentures") due
February 1, 2009.
The Notes were issued by the Operating Company and are general unsecured
obligations of the Operating Company. The Notes are irrevocably and
unconditionally joint and severally guaranteed by each of the Operating
Company's existing and future subsidiaries. The Notes are redeemable for cash at
the option of the Operating Company anytime after February 1, 2003 at stipulated
redemption amounts or, in certain limited circumstances, are partially
redeemable on or prior to February 1, 2001 at a redemption amount of 109.375% of
their principal amount. In the event of a change in control of the Operating
Company or the Company, the Company must offer to repurchase the Notes at 101%
of their principal amount.
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The Debentures issued by LGP are general unsecured obligations and pay no cash
interest until February 1, 2003. The Debentures will, however, accrete on a
semi-annual equivalent bonds basis to a full principal amount of $89.0 million
on February 1, 2003. Thereafter, cash interest on the Debentures will accrue and
be payable semi-annually on February 1 and August 1 of each year. The Debentures
are redeemable for cash at the option of LGP any time after February 1, 2003 at
stipulated redemption amounts or, in certain limited circumstances, are
partially redeemable on or prior to February 1, 2001 at a redemption amount of
111.625% of their accreted value. In the event of a change in control of LGP,
LGP must offer to repurchase the Debentures at 101% of their accreted value.
On January 27, 1998 the Operating Company entered into a five-year $125.0
million revolving credit facility (the "Revolving Credit Facility"). The
Revolving Credit Facility is secured by substantially all of the tangible and
intangible assets of the Operating Company. Borrowings under the revolving
credit facility bear interest at an annual rate, at the Company's option equal
to the Base Rate (as defined in the credit agreement) or the Eurodollar Rate (as
defined in the credit agreement) plus a margin that varies based upon a ratio
set forth in the credit agreement (the "Applicable Margin"). Under the terms of
the Revolving Credit Facility, the Company pays a fee equal to the Applicable
Margin for Eurodollar Rate Advances (as defined in the credit agreement) per
annum on the aggregate amount of outstanding letters of credit. The Operating
Company also pays a fee on the unused portion of the Revolving Credit Facility.
At March 31, 1999 the Operating Company has utilized $80.0 million of the
Revolving Credit Facility.
(3) STOCKHOLDERS' EQUITY
LGP has the authority to issue up to 21,255,000 shares of capital stock, of
which 21,175,000 shares are designated as Preferred Stock, par value $0.01 per
share, and 80,000 shares are designated as Common Stock, par value $0.01 per
share. The Company's initial capitalization consisted of (i) $45.0 million from
the issuance and sale of 1.8 million shares of 14.75% Senior Mandatory
Redeemable Exchangeable Cumulative Preferred Stock (the "Senior Preferred
Stock"), (ii) $49.0 million from the issuance and sale of 49,000 shares of 10%
Series B Junior Mandatory Redeemable Cumulative Preferred Stock (the "Junior
Preferred Stock"), and (iii) $8.0 million from the issuance and sale of 80,000
shares of Common Stock. 10% of the Common Stock is owned by the Company's senior
management team.
The Senior Preferred Stock issued by LGP Company is senior to the Common Stock
and Junior Preferred Stock of the Company, with respect to dividend
distributions and distributions upon the liquidation, winding up or dissolution
of the Company. Dividends may be paid, at the Company's option, at any dividend
payment date in cash or in additional shares of Senior Preferred Stock having a
liquidation preference equal to the dividend amount. The liquidation preference
of the Senior Preferred Stock is $25 per share. The Senior Preferred Stock is
redeemable at the option of the Company any time after February 1, 1999 at
stipulated redemption amounts and is mandatorily redeemable, subject to certain
conditions, on February 1, 2010 at a price equal to 100% of its liquidation
preference per share. In the event of a change in control of the Company, the
Company must offer to repurchase the Senior Preferred Stock at 100% of its
liquidation preference per share. Except as required by law, the holders of
shares of Senior Preferred Stock are generally not entitled or permitted to vote
on any matters voted upon by the
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stockholders of the Company. Subject to certain conditions, the Senior Preferred
Stock is exchangeable, on any dividend payment date, in whole, but not in part,
at the option of the Company for 14.375% Senior Subordinated Debentures (the
"Exchange Debentures") of the Company maturing February 1, 2010. The Exchange
Debentures are redeemable prior to maturity on substantially the same terms as
the Senior Preferred Stock.
To date, the Company has elected to pay all of its Senior Preferred Dividends in
additional shares of Senior Preferred Stock. At March 31, 1999, the Company had
accumulated but undeclared dividends of $1,280.
The Junior Preferred Stock issued by LGP is senior to the Common Stock of LGP,
with respect to dividend distributions and distributions upon the liquidation,
winding up or dissolution of the Company. Dividends may be paid, at the
Company's option, at any dividend payment date in cash or in additional shares
of Junior Preferred Stock having a liquidation preference equal to the dividend
amount. The Junior Preferred Stock is redeemable at the option of the Company in
2010 at a price equal to 100% of its liquidation preference per share and is
mandatorily redeemable on February 1, 2010 at a price equal to 100% of its
liquidation preference per share. In the event of a change in control of the
Company, the Company must offer to repurchase the Junior Preferred Stock at 100%
of its liquidation preference per share. Except as required by law, the holders
of shares of Junior Preferred Stock are generally not entitled or permitted to
vote on any matters voted upon by the stockholders of the Company.
To date, the Company has elected to pay all of its Junior Preferred Dividends in
additional shares of Junior Preferred Stock. At March 31, 1999, the Company had
accumulated but undeclared dividends of $902.
(4) RELATED PARTY TRANSACTIONS
On January 27, 1998 the Company entered into a Management Agreement with Leonard
Green & Partners, L.P. ("Green"), the principal stockholder of LGP, whereby
Green will provide management, consulting and financial planning services to the
Company for an annual management fee of $1.0 million. Green owns 100% of the
Junior Preferred Stock and 90% of the Common Stock.
(5) RECLASSIFICATIONS
Certain amounts in prior year's financial statements have been reclassified to
conform to the 1999 presentation.
(6) SUBSEQUENT EVENTS
On April 9, 1999 the Company announced it had reached an agreement in principle
for an exchange of newspapers. The Company will receive 5 daily newspapers and
several weekly publications located in Kansas, Louisiana, Missouri and New York.
In exchange, the Company will dispose of 6 daily newspapers and several weekly
publications in Northwestern Pennsylvania. No cash will be exchanged in this
transaction.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
historical financial statements of the Company, including the notes thereto
which has been summarized in the Company's Annual Report on Form 10-K,
SEC file number 333-46957. Certain information in this section includes
forward-looking statements pertaining to, among other things, competition in its
markets, availability of adequate acquisition opportunities, price and
availability of newsprint, significant use of leverage, general economic
conditions, and environmental matters.
OVERVIEW
The Company is a leading publisher of community newspapers and related
publications that are the dominant source of local news and print advertising in
their markets. The Company owns 269 publications, including 63 daily newspapers,
121 paid weekly newspapers, in 15 states. Revenues are derived from advertising
(73% of 1998 total revenues), circulation (20%) and job printing and other (7%).
The Company's primary operating costs and expenses are comprised of
operating costs and selling, general and administrative expenses. Salaries and
employee benefits are the Company's largest operating costs. The Company has
been able to control salaries and employee benefit expenses by realizing
efficiencies from the implementation of new technologies and the achievement of
synergies from its strategy of clustering its newspaper operations.
The Company began operations on January 27, 1998, upon the acquisition
of virtually all of the assets and certain liabilities that were used primarily
in the business of publishing, marketing and distributing a total of 166
community newspapers and related publications. The effective date of the initial
acquisition was January 1, 1998, since that time, the Company has purchased an
additional 103 publications, for a total of 269 publications in 15 states across
the United States.
The Company has accounted for these acquisitions using the purchase
method of accounting. Accordingly, the cost of each acquisition has been
allocated to the assets acquired and liabilities assumed based upon their
respective fair values using independent valuations where appropriate. The costs
of certain intangible assets acquired are being amortized over periods ranging
from 5 to 40 years.
As a result of the depreciation, amortization, and interest expense
related to these acquisitions, the Company has been and anticipates that it will
be, for the foreseeable future, in a tax loss position. Given the uncertainty as
to the timing of the Company's ability to utilize such losses to offset future
taxable income, the Company does not presently anticipate recording any tax
benefit associated with its pre-tax losses.
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RESULTS OF OPERATIONS - THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THREE
MONTHS ENDED MARCH 31, 1998
Total Revenues. Total revenues for the quarter ended March 31, 1999
increased by $12.0 million, or 52.3%, to $35.0 million from $23.0 million for
the quarter ended March 31, 1998. The increase in total revenues was primarily
due to acquisitions and was comprised of a $9.5 million increase in advertising
revenue and a $1.3 million increase in circulation revenue, while job printing
and other revenue increased by $1.2 million.
Operating Costs. Operating costs for the quarter ended March 31, 1999
were $16.0 million which was an increase of $6.2 million over the quarter ended
March 31, 1998. This increase was primarily driven by acquisitions. As a
percentage of revenue, operating costs increased from 42.7% to 45.9%, primarily
because properties acquired subsequent to March 31, 1998 had a higher cost
structure than existing properties.
Selling, General and Administrative. Selling, general and
administrative expenses for the quarter ended March 31, 1999 increased by $4.0
million, to $11.0 million from $7.0 million for the quarter ended March 31,
1998. The increase in selling, general and administrative expenses during the
quarter ended March 31, 1999 was primarily due to acquisitions. As a percentage
of revenue, selling, general and administrative expenses increased from 30.4% to
31.3%, primarily because properties acquired subsequent to March 31, 1998 had a
higher cost structure than existing properties.
Depreciation and Amortization. Depreciation and amortization expense
for the quarter ended March 31, 1999 increased by $0.6 million, to $3.7 million
from $3.1 million for the quarter ended March 31, 1998, as a result of the
depreciation and amortization of fixed assets and intangible assets acquired
during the period.
Interest Expense. Interest expense for the quarter ended March 31,
1999 increased by $2.1 million to $7.1 million from $5.0 million for the quarter
ended March 31, 1998. The increase in interest expense was primarily due to
interest on borrowings used to fund acquisitions subsequent to March 31, 1998.
EBITDA. EBITDA (which is defined as operating income before interest,
taxes, depreciation and amortization) for the quarter ended March 31, 1999
increased by $1.8 million, to $8.0 million from $6.2 million for the quarter
ended March 31, 1998. The increase in EBITDA during the quarter ended March 31,
1999 was primarily due to operating income generated by acquisitions, and lower
newsprint costs, offset by slightly higher labor costs.
Net Income (Loss). The Company incurred a net loss of $3.2 million for
the quarter ended March 31, 1999, compared to a net loss of $2.1 million for the
quarter ended March 31, 1998. The $1.1 million increase in net loss is
attributable to increased depreciation, amortization, and interest expense
associated with the acquisitions.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows From Operating Activities. Net cash from operating
activities for the three months ended March 31, 1999 decreased by $3.8 million
to ($0.2) million compared with cash provided of $3.6 million for the three
months ended March 31, 1998. The decrease is due to the timing of the payment of
semiannual interest on Operating Company's 9.375% subordinated notes.
Cash Flows From Investing Activities. Net cash used in investing
activities for the three months ended March 31, 1999 reflects the acquisition of
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Life Printing & Publishing, Inc. and the Halstad Shopper. The Company's capital
expenditures consist of the purchase of machinery, equipment, furniture and
fixtures relating to its publishing operations. The Company has no material
commitments for capital expenditures. The Company will continue to pursue its
strategy of opportunistically purchasing community newspapers in contiguous
markets and clusters of community newspapers in new markets. The Company will
only pursue acquisitions that it believes would contribute to the Company's
overall cash flow growth.
Cash Flows From Financing Activities. Net cash flows from financing
activities for the three months ended March 31, 1999 reflects borrowings made
under the Company's Revolving Credit Facility to fund acquisition costs. The
Company is subject to certain covenants that limit its ability to pay dividends
and make other restricted payments and does not expect to pay cash dividends in
the foreseeable future
Liquidity. The Company's principal sources of funds will be cash
provided by operating activities and borrowings under its Revolving Credit
Facility. The Company believes that such funds will provide the Company with
sufficient liquidity and capital resources to meet its current and financial
obligations for the foreseeable future. See Note 2 to the Unaudited Consolidated
Financial Statements for a summary of the terms of the Revolving Credit
Facility.
LGP is highly leveraged and has indebtedness that is substantial in
relation to its stockholders' deficit, tangible equity and cash flow. Total
interest expense for the three months ended March 31, 1999 was $7.1 million
including non-cash interest of $1.6 million and amortization of debt issuance
costs of $0.3 million. The degree to which LGP is leveraged could have
important consequences, including the following: (i) for the fiscal year ending
December 31, 1999, a substantial portion of the Company's cash flow from
operations must be dedicated to the payment of interest on the Notes and
interest on its other indebtedness, thereby reducing the funds available to the
Company for other purposes; (ii) indebtedness under the Revolving Credit
Facility is at variable rates of interest, which causes the Company to be
vulnerable to increases in interest rates; (iii) the Company is substantially
more leveraged than certain of its competitors, which might place the Company at
a competitive disadvantage; (iv) the Company may be hindered in its ability to
adjust rapidly to changing market conditions; (v) the Company's substantial
degree of leverage could make it more vulnerable in the event of a downturn in
general economic condition or other adverse events in its business; and (vi) the
Company's ability to obtain additional financing for working capital, capital
expenditures, acquisitions or general corporate purposes may be impaired.
Year 2000. The Company has implemented a program to assess, remediate
and mitigate the potential impact of the Year 2000 problem throughout the
Company. A Year 2000 problem will occur where date-sensitive software uses two
digit year date fields, sorting the year 2000 ("00") before the year 1999
("99"). The Year 2000 problem can arise in software, technology equipment, or
any other equipment or process that uses embedded software, resulting in data
corruption and processing errors.
The Company has evaluated its internal software and computer systems
and believes its costs associated with addressing the risk of operational
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disruption from internal software systems failures relating to Year 2000 issues
will be approximately $0.3 million in 1999.
Management believes that the Company's systems will be substantially
Year 2000 ready prior to the commencement of the Year 2000. The Company should
not have a material business risk from such Year 2000 issues provided the
Company's suppliers, vendors, service providers and customers, over which the
Company has no control, successfully address their own Year 2000 issues. The
Company will attempt to assess and monitor its suppliers, vendors, service
providers and customers Year 2000 remediation efforts.
Recent Acquisitions. During the quarter ended March 31, 1999, the
Company purchased all of the stock of Life Printing & Publishing, a chain of 17
weekly publications headquartered in Oak Brook, Illinois with a combined
circulation of 120,000 in the western suburbs of Chicago, Illinois.
The Company also purchased the 31,000 circulation Halstad Shopper
located in Halstad, Minnesota.
Safe Harbor Provision. This Form 10-Q contains "forward-looking
statements," which can be identified by the use of forward-looking terminology,
such as "may," "intend," "will," "expect," "anticipate," "estimate," "seek," or
"continue" or the negative thereof or other variations thereon or comparable
terminology. In particular, any statements, expressed or implied, concerning the
future operating results or the ability to generate revenues, income or cash
flow are forward-looking statements. Although LGP believes that the expectations
reflected in such forward-looking statements are reasonable, there can be no
assurance that such expectations will prove to have been accurate. LGP disclaims
any obligation to update any such forward-looking statements or to publicly
announce results of any revisions to any of the forward-looking statements
contained in this Form 10-Q to reflect future events or developments. All
forward-looking statements are expressly qualified by such cautionary
statements. Actual results could differ materially and adversely from the
forward-looking statements as a result of, among other things, competition in
the Company's markets, availability of attractive acquisition opportunities,
price and availability of newsprint, the Company's significant use of leverage,
general economic conditions and environmental matters.
Subsequent Events. On April 9, 1999, the Company announced it had
reached an agreement in principle for an exchange of newspapers. The Company
will receive 5 daily newspapers and several weekly publications located in
Kansas, Louisiana, Missouri and New York. In exchange, the Company will dispose
of 6 daily newspapers and several weekly publications in Northwestern
Pennsylvania. No cash will be exchanged in this transaction.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's subsidiary, Liberty Group Operating, Inc. has a $125.0 million
Revolving Credit Facility that matures in January of 2003. Borrowings under the
Revolving Credit Facility bear interest at an annual rate, at the Company's
option equal to the Base Rate (as defined in the Credit Agreement) or the
Eurodollar Rate (as defined in the Credit Agreement) plus a margin that varies
based upon a ratio set forth in the Credit Agreement. As a result the Company's
interest expense will be affected by changes in the Base Rate or in the
Eurodollar Rate. At March 31, 1999, the Company had borrowed $80 million
under this Revolving Credit Facility.
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Part II
ITEM 2. Changes in Securities and Use of Proceeds.
None
ITEM 4. Submission of Matters to a Vote of Securities Holders.
None
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ITEM 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
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EXHIBIT
NUMBER DESCRIPTION
27 Financial Data Schedule.
*
(b) Reports on Form 8-K.
On January 28, 1999 the Company filed a Form 8-K with respect to the
acquisition of Life Printing and Publishing Co., Inc. On March 29,
1999, the Company filed an Amendment to its Form 8-K with respect to
the acquisition of Life Printing and Publishing Co., Inc. The following
financial statements were included in the 8-K: Combined Balance Sheet,
Combined Statement of Income, Combined Statement of Stockholder's
Equity, Combined Statement of Cash Flows.
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SIGNATURES
Pursuant to the requirement of the Securities Exchange Act of 1934, the
registrant has duly caused this report to by signed on its behalf by the
undersigned thereunto duly authorized.
DATE: LIBERTY GROUP PUBLISHING, INC.
May 17, 1999 /s/ Kenneth L. Serota
Kenneth L. Serota
President and Chief Executive
Officer
/s/ Kevin O'Shea
Kevin O'Shea
Senior Vice President and
Chief Financial Officer
Principal Financial Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary information extracted from the balance sheet as
of March 31, 1999 and the statement of earnings for the three months ended March
31, 1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,174
<SECURITIES> 0
<RECEIVABLES> 17,000
<ALLOWANCES> (1,070)
<INVENTORY> 2,256
<CURRENT-ASSETS> 21,499
<PP&E> 35,685
<DEPRECIATION> (1,771)
<TOTAL-ASSETS> 448,551
<CURRENT-LIABILITIES> 104,096
<BONDS> 239,163
108,392
0
<COMMON> 1
<OTHER-SE> (16,816)
<TOTAL-LIABILITY-AND-EQUITY> 448,551
<SALES> 35,003
<TOTAL-REVENUES> 35,003
<CGS> 16,050
<TOTAL-COSTS> 16,050
<OTHER-EXPENSES> 14,639
<LOSS-PROVISION> 170
<INTEREST-EXPENSE> 7,493
<INCOME-PRETAX> (3,179)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,179)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,179)
<EPS-PRIMARY> (39.74)
<EPS-DILUTED> (39.74)
</TABLE>
