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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 28, 1997
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Garden State Newspapers, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 22-2675173
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
1560 Broadway, Suite 1450, Denver, CO 80202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (303) 837-0886
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N/A
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(Former name or former address, if changed since last report.)
Amendment No. 1
The Company's current report on Form 8-K, dated March 5, 1997, is
hereby amended and supplemented as follows.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
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Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
The following Financial Statements and Pro Forma Financial Information are
hereby filed as a part of this report.
(a) Financial Statements of Business Acquired
(1) Audited combined financial statements of the operations and
the assets acquired and liabilities assumed in conjunction
with the February 28, 1997, acquisition of the Sentinel &
Enterprise, The Daily News, The Daily Nonpareil and various
related publications, (also referred to as Acquired
Newspapers II) for the years ended December 31, 1996,
December 30, 1995 and December 31, 1994, respectively.
(b) Pro Forma Financial Information (Unaudited)
(1) Unaudited pro forma condensed consolidated statement of
operations for the nine months ended March 31, 1997, and the
year ended June 30, 1996.
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Combined Financial Statements
Acquired Newspapers II
(Formerly Divisions of Thomson
Newspapers Inc.)
Years ended December 31, 1996,
December 30, 1995 and December 31, 1994
with Report of Independent Auditors
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Acquired Newspapers II
(Formerly Divisions of Thomson Newspapers Inc.)
Combined Financial Statements
Years ended December 31, 1996, December 30, 1995,
and December 31, 1994
CONTENTS
Report of Independent Auditors .......................................... 1
Audited Combined Financial Statements
Combined Statements of Assets Acquired and Liabilities Assumed........... 2
Combined Statements of Operations........................................ 3
Combined Statements of Cash Flows ....................................... 4
Notes to Combined Financial Statements .................................. 5
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Report of Independent Auditors
Board of Directors
Garden State Newspapers, Inc.
We have audited the accompanying combined statements of assets acquired and
liabilities assumed of the Acquired Newspapers II (formerly Divisions of
Thomson Newspapers Inc.--see Note 1) as of December 31, 1996 and December 30,
1995, and the related combined statements of operations and cash flows for the
years ended December 31, 1996, December 30, 1995, and December 31, 1994. These
financial statements are the responsibility of Acquired Newspapers' II
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
The combined statements of net assets acquired and liabilities assumed have
been prepared pursuant to the Asset Purchase Agreement described in Note 1
between Thomson Newspapers Inc. and Garden States Newspapers, Inc. dated
February 27, 1997, and are not intended to be a complete presentation of the
combined assets and liabilities of the Acquired Newspapers II.
In our opinion, the combined statements of assets acquired and liabilities
assumed referred to above present fairly, in all material respects, the
combined assets acquired and liabilities assumed of the Acquired Newspapers II
as of December 31, 1996 and December 30, 1995 pursuant to the Asset Purchase
Agreement referred to in Note 1 in conformity with generally accepted
accounting principles, and the combined statements of operations and cash flows
of the Acquired Newspapers II referred to above present fairly, in all material
respects, the operations and cash flows for the years ended December 31, 1996,
December 30, 1995 and December 31, 1994 in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Denver, Colorado
April 23, 1997
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Acquired Newspapers II
(Formerly Divisions of Thomson Newspapers Inc.)
Combined Statements of Assets Acquired and Liabilities Assumed
<TABLE>
<CAPTION>
DECEMBER 31 DECEMBER 30
1996 1995
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(in thousands)
ASSETS ACQUIRED
<S> <C> <C>
Current assets:
Cash $ 1 $ 1
Trade accounts receivable, less allowance for
doubtful accounts of $237 and
$284, respectively 2,476 2,655
Other receivables 1 2
Inventories of newsprint and supplies 454 438
Prepaid expenses and other current assets 111 85
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Total current assets 3,043 3,181
Property, plant and equipment:
Land 566 566
Buildings and improvements 4,536 4,536
Machinery and equipment 12,344 11,158
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Total property, plant and equipment 17,446 16,260
Less accumulated depreciation and amortization 11,119 10,182
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Net property, plant and equipment 6,327 6,078
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$ 9,370 $ 9,259
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LIABILITIES ASSUMED AND NET ASSETS ACQUIRED
Current liabilities:
Trade accounts payable $ 21 20
Accrued employee compensation 249 256
Accrued liabilities 211 338
Unearned income 684 541
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Total current liabilities assumed 1,165 1,155
Net assets acquired 8,205 8,104
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$ 9,370 $ 9,259
=====================
</TABLE>
See accompanying notes.
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Acquired Newspapers II
(Formerly Divisions of Thomson Newspapers Inc.)
Combined Statements of Operations
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
DECEMBER 31 DECEMBER 30 DECEMBER 31
1996 1995 1994
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(in thousands)
<S> <C> <C> <C>
Revenues:
Advertising $15,057 $15,408 $15,571
Circulation 6,520 6,698 6,420
Other 1,838 1,660 1,071
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Total revenues 23,415 23,766 23,062
Costs and expenses:
Cost of sales 6,910 6,494 5,935
Selling, general and administrative 9,935 10,353 10,208
Depreciation 937 751 757
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Total costs and expenses 17,782 17,598 16,900
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Income before income taxes 5,633 6,168 6,162
Income tax expense 2,253 2,467 2,465
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Net income $ 3,380 $ 3,701 $ 3,697
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</TABLE>
See accompanying notes.
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Acquired Newspapers II
(Formerly Divisions of Thomson Newspapers Inc.)
Combined Statements of Cash Flows
<TABLE>
<CAPTION>
FISCAL YEARS ENDED
DECEMBER 31 DECEMBER 30 DECEMBER 31
1996 1995 1994
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(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C> <C>
Net income $ 3,380 $ 3,701 $ 3,697
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 937 751 757
Provision for losses on accounts receivable (47) 8 58
Changes in operating assets and liabilities:
(Increase) decrease in accounts receivable 227 (202) (171)
(Increase) decrease in inventories (16) (119) 36
Increase in prepaid expenses and other assets (26) (3) (89)
Increase (decrease) in accounts payable and
accrued liabilities (133) (18) (102)
Increase (decrease) in unearned income 143 (15) 51
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Net cash flows from operating activities 4,465 4,103 4,237
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of machinery and equipment (1,186) (579) (221)
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Net cash flows from investing activities (1,186) (579) (221)
CASH FLOWS FROM FINANCING ACTIVITIES
Transfer to Thomson Newspapers Inc. (3,279) (3,524) (4,016)
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Net cash flows from financing activities (3,279) (3,524) (4,016)
Increase (decrease) in cash -- -- --
Cash at beginning of year 1 1 1
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Cash at end of year $ 1 $ 1 $ 1
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</TABLE>
See accompanying notes.
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Acquired Newspapers II
(Formerly Divisions of Thomson Newspapers Inc.)
Notes to Combined Financial Statements
December 31, 1996
1. COMBINED FINANCIAL STATEMENTS
The accompanying combined financial statements reflect the operations of the
Sentinel & Enterprise, The Daily News, The Daily Nonpareil and various related
publications (collectively referred to as the "Acquired Newspapers" or "Acquired
Newspaper II"), which operated as various divisions of Thomson Newspapers Inc.
On February 27, 1997 pursuant to a signed Asset Purchase Agreement, Thomson
Newspaper Inc. ("Thomson") sold substantially all of the assets used in the
publication of the Acquired Newspapers to Garden State Newspapers, Inc. ("Garden
State"). In addition, Garden State agreed to assume certain liabilities directly
related to the operation of the Acquired Newspapers. The Acquired Newspapers are
in the business of publishing daily and weekly newspapers.
The accompanying combined financial statements include the accounts of the
Acquired Newspapers described above. These statements are presented as if the
Acquired Newspapers had existed as an entity separate from its parent, Thomson,
during the periods presented and include the historical assets, liabilities,
revenue and expenses that are directly related to the operations of the
Acquired Newspapers. All transactions between the Acquired Newspapers have been
eliminated upon combination. Because the Acquired Newspapers operations were
included in the financial statements of Thomson on a divisional basis, there
are no separate historical equity accounts for the Acquired Newspapers. The
financial information included herein may not necessarily be indicative of what
the financial position, results of operations or cash flows would have been if
the Acquired Newspapers were a separate, stand-alone company during the periods
presented.
2. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
USE OF ESTIMATES
The preparation of financial statements in accordance with generally accepted
accounting principles requires the use of estimates and assumptions that affect
the reported amounts of assets, liabilities, revenues and expenses.
Actual results could differ from these estimates.
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Acquired Newspapers II
(Formerly Divisions of Thomson Newspapers Inc.)
Notes to Combined Financial Statements
2. SIGNIFICANT ACCOUNTING POLICIES AND OTHER MATTERS
INVENTORIES
Inventories, which largely consist of newsprint, are valued at a standard
intercompany cost charged by Thomson. The Acquired Newspapers unaudited pro
forma cost of sales related to newsprint used would have been approximately
$6.9 million, $6.5 million and $5.2 million for the years ended December 31,
1996, December 30, 1995 and December 31, 1994, respectively, based on Garden
State's average historical newsprint costs.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment are recorded at cost. Buildings and machinery
and equipment are depreciated using the straight-line method over the expected
useful lives of individual assets.
LONG-LIVED ASSETS
The carrying value of long-lived assets is reviewed annually; if at any time the
facts or circumstances at any of the Acquired Newspapers operations indicate
impairment of long-lived asset values, as a result of a continual decline in
performance or as a result of fundamental changes in a newspaper's market, a
determination is made as to whether the carrying value of the newspaper's
long-lived assets exceeds estimated realizable value. For purposes of this
determination, estimated realizable value is evaluated based on values placed
on comparable newspaper properties, generally based on a multiple of revenue
and operating profit (before depreciation and amortization).
INCOME TAXES
The operations of the Acquired Newspapers have historically been included in
Thomson's federal and state income tax returns. For the combined statements of
operations the provision for income tax expense was calculated on a separate
return basis at an effective combined federal and state tax rate of 40%. Under
the terms of the Asset Purchase Agreement all tax assets and liabilities are
excluded from the purchase and accordingly have not been reflected in the
combined statements of assets acquired and liabilities assumed.
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Acquired Newspapers II
(Formerly Divisions of Thomson Newspapers Inc.)
Notes to Combined Financial Statements (continued)
3. PENSION AND 401(k) PLANS
Certain employees of the Acquired Newspapers participated in Thomson's defined
benefit pension plan (the "Plan"). The cost of an employees participation in
the Plan is based on an estimate from Thomson, the cost of which has been
included in the accompanying financial statements. Upon acquisition the Plan
benefits were frozen and the participants were fully vested in those benefits.
However, because Garden State did not acquire the Plan or any ongoing,
liability of participation in the Plan, no disclosure of the Plan's asset,
liabilities, service cost, interest cost or other component of pension expense
has been included herein. Expenses associated with this Plan for the years ended
December 31, 1996, December 30, 1995 and December 31, 1994 were $131,327,
$129,969 and $105,585, respectively.
The expense associated with the 401(k) plan for the years ended December 31,
1996, December 30, 1995 and December 31, 1994 was immaterial to the combined
financial statements.
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GARDEN STATE NEWSPAPERS, INC.
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma consolidated statements of operations for
the nine months ended March 31, 1997, and the year ended June 30, 1996, give
effect to the acquisition of substantially all the assets used in publishing
the Pasadena Star-News, Whittier Daily News, San Gabriel Valley Tribune,
Times-Standard, The Evening Sun and various related publications purchased on
October 31, 1996; the February 28, 1997, acquisition of the Sentinel &
Enterprise, The Daily News and The Daily Nonpareil and various related
publications; and the sale of the Potomac News on February 13, 1997,
collectively referred to as the "Acquisitions/Disposition," as if the
acquisitions and disposition had occurred on July 1, 1996 and July 1, 1995,
respectively.
These pro forma statements are not necessarily indicative of the future
operations or of the consolidated results of operations had the
Acquisitions/Disposition actually taken place on July 1, 1996 or July 1, 1995.
The pro forma financial information should be read in conjunction with the
Company's historical financial statements and notes thereto appearing in the
Company's Forms 10-K and 10-Q for the periods ending June 30, 1996 and March
31, 1997, respectively.
The Company has previously filed Form 8-Ks for the October 31, 1996,
acquisition and the February 13, 1997, disposition described above. No pro
forma balance sheet was filed as the assets acquired have been included in the
balance sheet filed as a part of the March 31, 1997, Form 10-Q.
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GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Nine Months Ended March 31, 1997
(In Thousands)
<TABLE>
<CAPTION>
(Note 1) (Note 2) (Note 3)
October 31, February 13, February 28,
1996 1997 1997
Acquisition Disposition Acquisition
and and and
Pro Forma Pro Forma Pro Forma Total
As Reported Adjustments Adjustments Adjustments Pro Forma
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . $ 215,819 $ 23,225 $ (7,524)(a) $ 15,282 $ 246,802
COST AND EXPENSES
Cost of sales . . . . . . . . . . . . 77,260 7,539 (a)(c)(d) (2,617)(a) 4,245 (a) 86,427
Selling, general & administrative . . 91,925 9,571 (b)(c) (2,790)(a) 6,408 (b)(c) 105,114
Depreciation & amortization . . . . . 17,290 2,151 (e) (810)(a) 1,547 (d) 20,178
Interest expense . . . . . . . . . . . 23,145 3,303 (f) -- 185 (e) 26,633
Other (net) . . . . . . . . . . . . . 15,735 -- 32 (a) -- 15,767
-------- -------- -------- -------- ---------
TOTAL COST & EXPENSES . . . . . . . . 225,355 22,564 (6,185) 12,385 254,119
GAIN ON SALE OF NEWSPAPER PROPERTY . . 30,883 -- -- -- 30,883
INCOME BEFORE INCOME TAXES . . . . . . 21,347 661 (1,339) 2,897 23,566
INCOME TAX BENEFIT (EXPENSE) . . . . . 397 (16)(g) (32)(b) (191)(f) 158
-------- -------- -------- -------- ---------
NET INCOME . . . . . . . . . . . . . . $ 21,744 $ 645 $ (1,371) $ 2,706 $ 23,724
======== ======== ======== ======== =========
</TABLE>
See notes to unaudited pro forma financial information.
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GARDEN STATE NEWSPAPERS, INC. AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30, 1996
(In Thousands)
<TABLE>
<CAPTION>
(Note 1) (Note 2) (Note 3)
October 31, February 13, February 28,
1996 1997 1997
Acquisition Disposition Acquisition
and and and
Pro Forma Pro Forma Pro Forma Total
As Reported Adjustments Adjustments Adjustments Pro Forma
----------- ----------- ----------- ----------- ---------
<S> <C> <C> <C> <C> <C>
OPERATING REVENUES . . . . . . . . . . $ 245,430 $ 68,912 $ (12,040)(a) $ 23,688 $ 325,990
COST AND EXPENSES
Cost of sales . . . . . . . . . . . . 98,469 28,700 (a)(c)(d) (4,525)(a) 7,086 (a)(c) 129,730
Selling, general & administrative . . 102,238 24,611 (b)(c) (4,287)(a) 9,602 (b)(c) 132,164
Depreciation & amortization . . . . . 21,841 6,453 (e) (2,369)(a) 2,321 (d) 28,246
Interest expense . . . . . . . . . . . 27,414 9,909 (f) -- 278 (e) 37,601
Other (net) . . . . . . . . . . . . . 4,511 -- (223)(a) -- 4,288
--------- -------- --------- -------- ---------
TOTAL COST & EXPENSES . . . . . . . . 254,473 69,673 (11,404) 19,287 332,029
GAIN ON SALE OF NEWSPAPER PROPERTY . . 8,291 -- -- -- 8,291
--------- -------- --------- -------- ---------
INCOME (LOSS) BEFORE
INCOME TAXES . . . . . . . . . . . . . (752) (761) (636) 4,401 2,252
INCOME TAX BENEFIT (EXPENSE) . . . . . 2,012 -- (g) (274)(b) (289)(f) 1,449
--------- -------- --------- -------- ---------
NET INCOME (LOSS) . . . . . . . . . . . $ 1,260 $ (761) $ (910) $ 4,112 $ 3,701
========= ======== ========= ======== =========
</TABLE>
See notes to unaudited pro forma financial information.
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GARDEN STATES NEWSPAPERS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION
NOTE 1: UNAUDITED PRO FORMA ADJUSTMENTS FOR THE OCTOBER 31, 1996, ACQUISITION
The following are pro forma adjustments to the historical financial
statements of the newspapers acquired on October 31, 1996. Actual
operations of these newspapers have been included from November 1,
1996.
(a) Adjust cost of sales to reflect the newsprint savings of
adjusting the web width of the presses to 50 inches and to
reflect the Company's historical cost of newsprint.
(b) Pension expense was eliminated as the pension plan was not
acquired and no new defined benefit pension plan will be
installed at any of the acquired newspapers.
(c) Certain personnel who were employed by the newspapers prior to
acquisition were not hired or replaced by Garden State
subsequent to the acquisition. Accordingly, the cost of
employing these individuals has been eliminated.
(d) Effective with the acquisition, certain cost savings have been
implemented with respect to the acquired newspapers including
the cost of acquiring plates, comics, TV books and Sunday
magazines. The cost savings have been reflected as a pro forma
adjustment.
(e) Depreciation and amortization expense of the acquired assets
has been adjusted to reflect the fair market value of the
acquired assets and the useful lives assigned to these assets.
(f) Interest expense has been adjusted to reflect the borrowings
and rates of debt utilized in the acquisition of the assets.
(g) Income taxes reflect the estimated state taxes that would be
due if Garden State had owned the acquired newspapers during the
pro forma periods presented. Historical income taxes have been
eliminated.
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GARDEN STATE NEWSPAPERS, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL INFORMATION--CONTINUED
NOTE 2: UNAUDITED PRO FORMA ADJUSTMENTS FOR THE FEBRUARY 13, 1997, DISPOSITION
The following pro forma adjustments have been made to reflect the
February 13, 1997, sale of the Potomac News.
(a) Eliminate revenues and expenses directly associated with the
operations of the Potomac News.
(b) Income taxes have been adjusted to eliminate the deferred tax
benefit associated with the Potomac News assets and liabilities.
NOTE 3: UNAUDITED PRO FORMA ADJUSTMENTS FOR THE FEBRUARY 28, 1997, ACQUISITION
The following are pro forma adjustments to the historical financial
statements of the newspapers acquired on February 28, 1997. Actual
operations of these newspapers have been included from March 1, 1997.
(a) Adjust cost of sales to reflect the newsprint saving of
adjusting the web width of the presses to 50 inches and to
reflect the Company's historical cost of newsprint.
(b) Pension expense was eliminated as the pension plan was not
acquired and no new defined benefit pension plan will be
installed at any of the acquired newspapers.
(c) Certain adjustments have been made to compensation to reflect
the Company's cost after acquisition.
(d) Depreciation and amortization expense of the acquired assets
has been adjusted to reflect the fair market value of the
acquired assets and the useful lives assigned to these assets.
(e) Interest expense has been adjusted to reflect the borrowings
and rates of debt utilized in the acquisition of the assets.
(f) Income taxes reflect the estimated state taxes that would be
due if Garden State had owned these acquired newspapers during
the pro forma periods presented. Historical income taxes have
been eliminated.
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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 hereunto duly authorized.
GARDEN STATE NEWSPAPERS, INC.
Date: May 12, 1997 By: /s/ Joseph J. Lodovic, IV
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Joseph J. Lodovic, IV
Executive Vice President,
Chief Financial Officer
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