Attached files
file | filename |
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EX-31.2 - EXHIBIT 31.2 - SHERIDAN GROUP INC | ex31_2.htm |
EX-31.1 - EXHIBIT 31.1 - SHERIDAN GROUP INC | ex31_1.htm |
EX-32.1 - EXHIBIT 32.1 - SHERIDAN GROUP INC | ex32_1.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
DC 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, 2009
o
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
FOR
THE TRANSITION PERIOD
FROM TO
COMMISSION
FILE NUMBER 333–110441
THE
SHERIDAN GROUP, INC.
(Exact
name of registrant as specified in its charter)
Maryland
|
52–1659314
|
(State
or other jurisdiction of incorporation or organization)
|
(I.R.S.
Employer Identification No.)
|
11311
McCormick Road, Suite 260
|
|
Hunt
Valley, Maryland
|
21031–1437
|
(Address
of principal executive offices)
|
(Zip
Code)
|
410–785–7277
(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 for
the past 90 days. Yes o No x
Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit and post such
files). Yes ¨ No ¨
Indicate
by check mark whether the Registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer or a smaller reporting company. See
definitions of “large accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer x (Do
not check if a smaller reporting company)
|
Smaller
reporting company o
|
Indicate
by check mark whether the Registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.) Yes o No x
There was
1 share of Common Stock outstanding as of November 12, 2009.
1
The Sheridan Group, Inc. and Subsidiaries
Quarterly
Report
For the
Quarter Ended September 30, 2009
INDEX
Page
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3
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Item
1.
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3
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3
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4
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5
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6
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7
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Item
2.
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11
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Item
3.
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21
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Item
4T.
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21
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21
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Item
1.
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21
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Item
1A.
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21
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Item
2.
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21
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Item
3.
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21
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Item
4.
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22
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Item
5.
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22
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Item
6.
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22
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23
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PART I — FINANCIAL INFORMATION
Item
1. Financial Statements.
THE
SHERIDAN GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September
30,
|
December
31,
|
|||||||
ASSETS
|
2009
|
2008
|
||||||
Current
assets:
|
||||||||
Cash
and cash equivalents
|
$ | 397,694 | $ | 16,396,628 | ||||
Accounts
receivable, net of allowance for doubtful accounts of $1,319,199 and
$1,080,208, respectively
|
31,483,848 | 34,266,288 | ||||||
Due
from parent company
|
270,054 | 73,488 | ||||||
Due
from affiliated companies
|
- | 588,724 | ||||||
Inventories,
net
|
13,398,978 | 17,803,085 | ||||||
Other
current assets
|
7,196,093 | 5,123,210 | ||||||
Refundable
income taxes
|
- | 2,894,829 | ||||||
Total
current assets
|
52,746,667 | 77,146,252 | ||||||
Property,
plant and equipment, net
|
118,314,484 | 127,063,798 | ||||||
Intangibles,
net
|
33,916,039 | 35,004,531 | ||||||
Goodwill
|
40,979,426 | 40,979,426 | ||||||
Deferred
financing costs, net
|
1,739,640 | 2,604,547 | ||||||
Due
from parent - non current
|
2,020,375 | - | ||||||
Due
from affiliated companies - non current
|
- | 554,357 | ||||||
Other
assets
|
1,812,383 | 1,743,828 | ||||||
Total
assets
|
$ | 251,529,014 | $ | 285,096,739 | ||||
LIABILITIES
|
||||||||
Current
liabilities:
|
||||||||
Accounts
payable
|
$ | 15,259,555 | $ | 23,291,403 | ||||
Accrued
expenses
|
14,421,466 | 21,880,095 | ||||||
Income
taxes payable
|
982,609 | - | ||||||
Total
current liabilities
|
30,663,630 | 45,171,498 | ||||||
Notes
payable and revolving credit facility
|
148,680,879 | 164,946,468 | ||||||
Deferred
income taxes and other liabilities
|
30,123,990 | 30,096,364 | ||||||
Total
liabilities
|
209,468,499 | 240,214,330 | ||||||
STOCKHOLDER'S
EQUITY
|
||||||||
Common
stock, $0.01 par value; 100 shares authorized; 1 share issued and
outstanding at September 30, 2009 and December 31, 2008
|
- | - | ||||||
Additional
paid-in capital
|
42,043,537 | 51,135,564 | ||||||
Retained
earnings (accumulated deficit)
|
16,978 | (6,253,155 | ) | |||||
Total
stockholder's equity
|
42,060,515 | 44,882,409 | ||||||
Total
liabilities and stockholder's equity
|
$ | 251,529,014 | $ | 285,096,739 |
The
accompanying notes are an integral part of the consolidated financial
statements.
THE SHERIDAN GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2009 and 2008
(Unaudited)
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
September 30,
|
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
Net
sales
|
$ | 73,340,611 | $ | 86,768,330 | $ | 221,018,395 | $ | 261,882,261 | ||||||||
Cost
of sales
|
57,753,708 | 69,783,746 | 176,676,605 | 211,864,902 | ||||||||||||
Gross
profit
|
15,586,903 | 16,984,584 | 44,341,790 | 50,017,359 | ||||||||||||
Selling
and administrative expenses
|
9,074,061 | 10,136,166 | 27,861,953 | 31,423,142 | ||||||||||||
(Gain)
loss on disposition of fixed assets
|
(11,149 | ) | (18,646 | ) | 2,450 | 141,830 | ||||||||||
Related
party guaranty
|
- | 3,550,000 | - | 3,550,000 | ||||||||||||
Restructuring
costs
|
- | - | 154,908 | - | ||||||||||||
Amortization
of intangibles
|
349,504 | 424,402 | 1,088,349 | 1,293,564 | ||||||||||||
Total
operating expenses
|
9,412,416 | 14,091,922 | 29,107,660 | 36,408,536 | ||||||||||||
Operating
income
|
6,174,487 | 2,892,662 | 15,234,130 | 13,608,823 | ||||||||||||
Other
(income) expense:
|
||||||||||||||||
Interest
expense
|
4,178,743 | 4,592,838 | 13,265,081 | 13,824,479 | ||||||||||||
Interest
income
|
(18,949 | ) | (34,551 | ) | (51,392 | ) | (165,591 | ) | ||||||||
Gain
on redemption of notes payable
|
(5,410,811 | ) | - | (7,193,906 | ) | - | ||||||||||
Other,
net
|
(218,518 | ) | 268,454 | (397,436 | ) | 679,877 | ||||||||||
Total
other (income) expense
|
(1,469,535 | ) | 4,826,741 | 5,622,347 | 14,338,765 | |||||||||||
Income
(loss) before income taxes
|
7,644,022 | (1,934,079 | ) | 9,611,783 | (729,942 | ) | ||||||||||
Income
tax provision (benefit)
|
2,437,457 | (1,851,323 | ) | 3,341,650 | (1,317,153 | ) | ||||||||||
Net
income (loss)
|
$ | 5,206,565 | $ | (82,756 | ) | $ | 6,270,133 | $ | 587,211 |
The
accompanying notes are an integral part of the consolidated financial
statements.
THE SHERIDAN GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDER’S EQUITY
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
(Accumulated
|
||||||||||||||||||||
Additional
|
Deficit)
/
|
Total
|
||||||||||||||||||
Common Stock
|
Paid-In
|
Retained
|
Stockholder's
|
|||||||||||||||||
Shares
|
Amount
|
Capital
|
Earnings
|
Equity
|
||||||||||||||||
Balance
as of December 31, 2008
|
1 | - | $ | 51,135,564 | $ | (6,253,155 | ) | $ | 44,882,409 | |||||||||||
Cash
dividend
|
- | - | (9,105,227 | ) | - | (9,105,227 | ) | |||||||||||||
Share-based
compensation
|
- | - | 13,200 | - | 13,200 | |||||||||||||||
Net
income
|
- | - | - | 6,270,133 | 6,270,133 | |||||||||||||||
Balance
as of September 30, 2009
|
1 | - | $ | 42,043,537 | $ | 16,978 | $ | 42,060,515 |
The
accompanying notes are an integral part of these consolidated financial
statements.
THE SHERIDAN GROUP, INC. AND SUBSIDIARIES
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE
NINE MONTHS ENDED SEPTEMBER 30, 2009 and 2008
(Unaudited)
September
30,
|
September
30,
|
|||||||
2009
|
2008
|
|||||||
Cash
flows provided by operating activities:
|
||||||||
Net
income
|
$ | 6,270,133 | $ | 587,211 | ||||
Adjustments
to reconcile net income to net cash provided by operating
activities
|
||||||||
Depreciation
|
12,920,045 | 12,400,208 | ||||||
Amortization
of intangible assets
|
1,088,349 | 1,293,564 | ||||||
Provision
for doubtful accounts
|
322,711 | 96,815 | ||||||
Provision
for inventory realizability and LIFO value
|
78,712 | 16,630 | ||||||
Stock-based
compensation
|
13,200 | 9,000 | ||||||
Amortization
of deferred financing costs and debt discount, included in interest
expense
|
606,515 | 996,119 | ||||||
Deferred
income tax (benefit) provision
|
(35,877 | ) | 822,917 | |||||
Gain
on redemption of notes payable
|
(7,193,906 | ) | - | |||||
Loss
on disposition of fixed assets
|
2,450 | 141,830 | ||||||
Changes
in operating assets and liabilities
|
||||||||
Accounts
receivable
|
2,459,729 | (1,141,147 | ) | |||||
Inventories
|
4,325,395 | (1,272,524 | ) | |||||
Other
current assets
|
(682,387 | ) | (480,232 | ) | ||||
Refundable
income taxes
|
2,934,809 | (3,788,409 | ) | |||||
Other
assets
|
151,459 | 1,138,850 | ||||||
Accounts
payable
|
(6,565,260 | ) | (3,657,629 | ) | ||||
Accrued
expenses
|
(2,967,808 | ) | 1,084,684 | |||||
Accrued
interest
|
(4,490,821 | ) | (4,228,424 | ) | ||||
Income
taxes payable
|
982,609 | (72,513 | ) | |||||
Other
liabilities
|
(164,687 | ) | (568,268 | ) | ||||
Net
cash provided by operating activities
|
10,055,370 | 3,378,682 | ||||||
Cash
flows used in investing activities:
|
||||||||
Purchases
of property, plant and equipment
|
(5,673,470 | ) | (13,516,779 | ) | ||||
Proceeds
from sale of fixed assets
|
14,476 | 97,080 | ||||||
Advances
paid to former affiliated company, net
|
- | (832,529 | ) | |||||
Advances
paid to parent company, net
|
(2,216,941 | ) | (183,003 | ) | ||||
Net
cash used in investing activities
|
(7,875,935 | ) | (14,435,231 | ) | ||||
Cash
flows (used in) provided by financing activities:
|
||||||||
Borrowing
of working capital facility
|
39,657,209 | - | ||||||
Repayment
of working capital facility
|
(33,931,000 | ) | - | |||||
Repayment
of long term debt
|
(14,539,500 | ) | - | |||||
Payment
of deferred financing costs in connection with long term
debt
|
(259,851 | ) | - | |||||
Proceeds
from capital contribution from parent company
|
- | 5,400 | ||||||
Dividends
paid
|
(9,105,227 | ) | - | |||||
Net
cash (used in) provided by financing activities
|
(18,178,369 | ) | 5,400 | |||||
Net
decrease in cash and cash equivalents
|
(15,998,934 | ) | (11,051,149 | ) | ||||
Cash
and cash equivalents at beginning of period
|
16,396,628 | 20,517,198 | ||||||
Cash
and cash equivalents at end of period
|
$ | 397,694 | $ | 9,466,049 | ||||
Non-cash
investing and financing activities
|
||||||||
Asset
additions in accounts payable
|
$ | 215,412 | $ | 601,711 |
The
accompanying notes are an integral part of the consolidated financial
statements.
THE SHERIDAN GROUP, INC. and SUBSIDIARIES
Notes
to Condensed Consolidated Financial Statements
(Unaudited)
1.
|
Company
Information
|
The
accompanying unaudited interim financial statements of The Sheridan Group, Inc.
and Subsidiaries (together, the “Company”) have been prepared by us pursuant to
the rules of the Securities and Exchange Commission (the “SEC”). In our opinion,
the accompanying unaudited condensed consolidated interim financial statements
contain all adjustments necessary to present fairly, in all material respects,
our financial position as of September 30, 2009 and our results of operations
for the three and nine month periods ended September 30, 2009 and 2008 and our
cash flows for the nine month periods ended September 30, 2009 and 2008. All
such adjustments are deemed to be of a normal and recurring nature and all
material intercompany balances and transactions have been eliminated. The
year-end condensed balance sheet data was derived from audited financial
statements, but does not include all disclosures required by accounting
principles generally accepted in the United States of America.
These
condensed consolidated financial statements should be read in conjunction with
the annual consolidated financial statements and the notes thereto of the
Company included in its Annual Report on Form 10–K for the year ended December
31, 2008. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed or omitted. The
results of operations for the three and nine months ended September 30, 2009 are
not necessarily indicative of the results to be expected for the full fiscal
year.
The
preparation of condensed consolidated financial statements in conformity with
accounting principles generally accepted in the United States of America
requires us to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.
Certain
previously reported amounts have been reclassified to conform to the current
year presentation.
New
Accounting Standards
On
July 1, 2009, we adopted Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of
Financial Accounting Standards (“SFAS”) No. 168, “The FASB Accounting
Standards Codification and Hierarchy of Generally Accepted Accounting
Principles, a replacement of FASB Statement No. 162.” ASC 105-10
establishes the FASB ASC as the source of authoritative accounting principles
recognized by the FASB to be applied in preparation of financial statements in
conformity with generally accepted accounting principles in the United States of
America. The adoption of this standard had no impact on our consolidated
financial statements.
The
following recently issued but not yet enacted accounting standards have not yet
been codified by the FASB, as described in the previous paragraph.
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets, an amendment of SFAS No. 140” (“SFAS 166”). The objective of this
Statement is to improve the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its
financial reports about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance, and cash flows; and a
transferor’s continuing involvement in transferred financial assets. SFAS 166
will be effective for us beginning January 1, 2010. We are currently evaluating
the impact of adopting SFAS 166 on our consolidated financial
statements.
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.46(R)”
(“SFAS 167”). This Statement carries forward the scope of Interpretation 46(R),
with the addition of entities previously considered qualifying special-purpose
entities, as the concept of these entities was eliminated in SFAS 166. SFAS
167 will be effective for us beginning January 1, 2010. We are currently
evaluating the impact of adopting SFAS 167 on our consolidated financial
statements.
2.
|
Inventory
|
Components
of net inventories at September 30, 2009 and December 31, 2008 were as
follows:
(in
thousands)
|
September
30,
|
December
31,
|
||||||
2009
|
2008
|
|||||||
Work-in-process
|
$ | 6,788 | $ | 8,243 | ||||
Raw
materials (principally paper)
|
6,871 | 9,820 | ||||||
13,659 | 18,063 | |||||||
Excess
of current costs over LIFO inventory value
|
(260 | ) | (260 | ) | ||||
Net
inventory
|
$ | 13,399 | $ | 17,803 |
3.
|
Notes
Payable and Working Capital
Facility
|
On August
21, 2003, we completed a private debt offering of 10.25% senior secured notes
totaling $105.0 million, priced to yield 10.50%, that mature August 15, 2011
(the “2003 Notes”). On May 25, 2004, we completed a private debt offering of
10.25% senior secured notes totaling $60.0 million, priced to yield 9.86%, that
mature August 15, 2011 (the “2004 Notes”). The 2004 Notes have identical terms
to the 2003 Notes. The carrying value of the notes was $143.0 million as of
September 30, 2009 and $164.9 million as of December 31, 2008.
The
indenture governing the 2003 Notes and the 2004 Notes contains various
restrictive covenants. It, among other things: (i) limits our ability and the
ability of our subsidiaries to incur additional indebtedness, issue shares of
preferred stock, incur liens and enter into certain transactions with
affiliates; (ii) places restrictions on our ability to pay dividends or make
certain other restricted payments; and (iii) places restrictions on our ability
and the ability of our subsidiaries to merge or consolidate with any other
person or sell, assign, transfer, convey or otherwise dispose of all or
substantially all of our assets.
The 2003
Notes and the 2004 Notes are collateralized by security interests in
substantially all of the assets of the Company and our subsidiaries, subject to
permitted liens. The capital stock, securities and other payment rights of our
subsidiaries will constitute collateral for the 2003 Notes and the 2004 Notes
only to the extent that Rule 3–10 and Rule 3–16 of Regulation S–X under the
Securities Act do not require separate financial statements of a subsidiary to
be filed with the SEC. Payment obligations under the 2003 Notes and the 2004
Notes are guaranteed jointly and severally, fully and unconditionally, by all of
our subsidiaries. The Sheridan Group, Inc. owns 100% of the outstanding stock of
all of its subsidiaries and has no material independent assets or operations.
There are no restrictions on the ability of The Sheridan Group, Inc. to obtain
funds by dividend, advance or loan from its subsidiaries.
In an
event of default, the holders of at least 25% in aggregate principal amount of
the 2003 Notes and the 2004 Notes, may declare the principal, premium, if any,
and accrued and unpaid interest on the 2003 Notes and the 2004 Notes to be due
and payable immediately.
During
the first nine months of 2009, we paid $15.0 million, which included $0.5
million of accrued interest, to redeem senior secured notes with a face value of
$22.1 million. Deferred financing costs and unamortized debt discount
attributable to these notes, along with commission fees, totaled $0.3 million
and $0.4 million during the three and nine months ended September 30, 2009,
respectively. As a result of the redemptions, we recognized a net gain of $5.4
million and $7.2 million during the three and nine months ended September 30,
2009, respectively.
Concurrent
with the offering of the 2003 Notes, we entered into a working capital facility
agreement. The working capital facility was amended concurrently with the
offering of the 2004 Notes. Terms of the working capital facility allowed for
revolving debt of up to $30.0 million, including letters of credit commitments
of up to $5.0 million, subject to a borrowing base test. Borrowings under the
working capital facility bore interest at the bank’s base rate or the LIBOR rate
plus a margin of 1.75% at our option. We agreed to pay an annual commitment fee
on the unused portion of the working capital facility at a rate of 0.35%. In
addition, we agreed to pay an annual fee of 1.875% on all letters of credit
outstanding.
On June
16, 2009, we executed an agreement to amend our working capital facility. Terms
of the working capital facility allow for revolving debt of up to $20.0 million,
including letters of credit commitments of up to $5.0 million, subject to a
borrowing base test. The interest rate on borrowings under the working capital
facility is a fluctuating rate equal to the highest of (a) the Federal Funds
Rate plus 0.50%, (b) the bank’s prime rate, or (c) the LIBOR rate plus a margin
of 3.75%. At our option, we can elect a LIBOR option for a specified
period. Any such borrowings bear interest at the specified LIBOR rate plus a
margin of 3.75%. We have agreed to pay an annual commitment fee on the unused
portion of the working capital facility at a rate of 0.50%. In addition, we have
agreed to pay an annual fee of 3.875% on all letters of credit outstanding. The
working capital facility is scheduled to mature on March 25, 2011. As of
September 30, 2009, we had $5.7 million outstanding under the working capital
facility, had unused amounts available of $12.8 million and had $1.4 million in
outstanding letters of credit. As of December 31, 2008, we had no borrowings
outstanding under the working capital facility, had unused amounts available of
$28.6 million and had $1.4 million in outstanding letters of
credit.
Borrowings
under the working capital facility are collateralized by the assets of the
Company and our subsidiaries, subject to permitted liens. The working capital
facility contains various covenants including provisions that restrict our
ability to incur or prepay indebtedness, including the 2003 Notes and the 2004
Notes, or pay dividends. It also requires us to satisfy financial tests, such as
an interest coverage ratio and the maintenance of a minimum amount of earnings
before interest, taxes, depreciation and amortization (as defined in the working
capital facility agreement). We have complied with all of the restrictive
covenants as of September 30, 2009.
In an
event of default, all principal and interest due under the working capital
facility may become immediately due and payable.
4.
|
Accrued
Expenses
|
Accrued
expenses as of September 30, 2009 and December 31, 2008 consisted of the
following:
September
30,
|
December
31,
|
|||||||
2009
|
2008
|
|||||||
Payroll
and related expenses
|
$ | 3,940,636 | $ | 3,963,599 | ||||
Profit
sharing accrual
|
425,172 | 2,123,887 | ||||||
Accrued
interest
|
1,883,827 | 6,374,647 | ||||||
Customer
prepayments
|
2,574,857 | 2,984,787 | ||||||
Deferred
revenue
|
1,210,670 | 1,298,435 | ||||||
Self-insured
health and workers' compensation accrual
|
1,974,294 | 2,298,030 | ||||||
Other
|
2,412,010 | 2,836,710 | ||||||
$ | 14,421,466 | $ | 21,880,095 |
5.
|
Business
Segments
|
We are a
specialty printer in the United States offering a full range of printing and
value–added support services for the journal, magazine, book, catalog and
article reprint markets. Our business includes three operating segments
comprised of “Publications,” “Books” and “Specialty Catalogs.” The Publications
segment is focused on the production of short-run journals, medium-run journals
and specialty magazines and is comprised of the assets and operations of The
Sheridan Press, Dartmouth Printing, Dartmouth Journal Services and United Litho.
Our Books segment is focused on the production of short-run books and is
comprised of the assets and operations of Sheridan Books. The Specialty Catalogs
segment, which is comprised of the assets and operations of The Dingley Press,
is focused on catalog merchants that require run lengths between 50,000 and
8,500,000 copies.
The
accounting policies of the operating segments are the same as those described in
Note 2 “Summary of Significant Accounting Policies” in the consolidated
financial statements in our most recent Annual Report on Form 10–K for the year
ended December 31, 2008. The results of each segment include certain allocations
for general, administrative and other shared costs. However, certain costs, such
as corporate profit sharing and bonuses and the amortization of a non–compete
agreement with our former Chairman of the Board, are not allocated to the
segments. Our customer base resides in the continental United States and our
manufacturing, warehouse and office facilities are located throughout the East
Coast and Midwest.
We had no
customers which accounted for 10% or more of our total net sales for the three
and nine month periods ended September 30, 2009 and 2008.
The
following table provides segment information as of September 30, 2009 and 2008
and for the three and nine month periods then ended:
Three months ended
September 30,
|
Nine months ended
September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
(in
thousands)
|
||||||||||||||||
Net
sales
|
||||||||||||||||
Publications
|
$ | 40,326 | $ | 46,911 | $ | 126,588 | $ | 141,176 | ||||||||
Specialty
catalogs
|
17,770 | 22,899 | 51,841 | 72,054 | ||||||||||||
Books
|
15,259 | 17,088 | 42,604 | 48,839 | ||||||||||||
Intersegment
sales elimination
|
(14 | ) | (130 | ) | (15 | ) | (187 | ) | ||||||||
Consolidated
total
|
$ | 73,341 | $ | 86,768 | $ | 221,018 | $ | 261,882 | ||||||||
Operating
income
|
||||||||||||||||
Publications
|
$ | 4,712 | $ | 4,509 | $ | 13,528 | $ | 13,393 | ||||||||
Specialty
catalogs
|
524 | 330 | 695 | 435 | ||||||||||||
Books
|
1,620 | 1,893 | 2,532 | 4,521 | ||||||||||||
Corporate
expenses
|
(682 | ) | (3,839 | ) | (1,521 | ) | (4,740 | ) | ||||||||
Consolidated
total
|
$ | 6,174 | $ | 2,893 | $ | 15,234 | $ | 13,609 | ||||||||
September
30,
|
December
31,
|
|||||||||||||||
2009 | 2008 | |||||||||||||||
Assets
|
||||||||||||||||
Publications
|
$ | 144,547 | $ | 165,194 | ||||||||||||
Specialty
catalogs
|
56,238 | 65,403 | ||||||||||||||
Books
|
45,303 | 51,386 | ||||||||||||||
Corporate
|
5,441 | 3,114 | ||||||||||||||
Consolidated
total
|
$ | 251,529 | $ | 285,097 |
A
reconciliation of total segment operating income to consolidated income before
income taxes is as follows:
Three
months ended
September
30,
|
Nine
months ended
September
30,
|
|||||||||||||||
(in
thousands)
|
2009
|
2008
|
2009
|
2008
|
||||||||||||
Total
operating income (as shown above)
|
$ | 6,174 | $ | 2,893 | $ | 15,234 | $ | 13,609 | ||||||||
Interest
expense
|
(4,179 | ) | (4,593 | ) | (13,265 | ) | (13,824 | ) | ||||||||
Interest
income
|
19 | 35 | 51 | 165 | ||||||||||||
Gain
on redemption of notes payable
|
5,411 | - | 7,194 | - | ||||||||||||
Other,
net
|
219 | (269 | ) | 398 | (680 | ) | ||||||||||
Income
(loss) before income taxes
|
$ | 7,644 | $ | (1,934 | ) | $ | 9,612 | $ | (730 | ) |
6.
|
Income
Taxes
|
Our
effective income tax rate was 31.9% and 95.7% for the third quarter 2009 and
2008, respectively, and 34.8% and 180.4% for the first nine months of 2009 and
2008, respectively. The effective income tax rate was higher in the three and
nine months ended September 30, 2008 because the impact of the permanent
differences in relation to the projected income before income taxes for the year
ended December 31, 2008, was more significant than compared to 2009. The
significant permanent differences related primarily to the increase in uncertain
tax positions, including penalties and interest.
7.
|
Fair
Value Measurements
|
We
adopted the new guidance on fair value measurements for financial assets and
liabilities as of January 1, 2008. The new guidance defines fair value as
the price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at the
measurement date (an exit price). It also outlines a valuation framework and
creates a fair value hierarchy in order to increase the consistency and
comparability of fair value measurements and the related disclosures and
prioritizes the inputs used in measuring fair value as follows:
Level 1:
Observable inputs such as quoted prices in active markets;
Level 2:
Inputs, other than quoted prices in active markets, that are observable either
directly or indirectly; and
Level 3:
Unobservable inputs in which there is little or no market data which require the
reporting entity to develop its own assumptions.
Our
financial instruments consist of long-term investments in marketable securities
(held in trust for payment of non-qualified deferred compensation) and long-term
debt. The new guidance permits an entity to measure certain financial assets and
financial liabilities at fair value that were not previously required to be
measured at fair value. We have elected not to measure any financial assets or
financial liabilities, including long-term debt, at fair value which were not
previously required to be measured at fair value. We classify the investments in
marketable securities within level 1 of the hierarchy since quoted market prices
are available in active markets.
We
believe that the carrying amounts of cash and cash equivalents, accounts and
notes receivable, accounts payable and accrued expenses reported in the
consolidated balance sheets approximate their fair values due to the short
maturity of these instruments. The estimated fair value of our publicly traded
debt, based on quoted market prices, was approximately $120.0 million and $115.7
million as of September 30, 2009 and December 31, 2008,
respectively.
8.
|
Related
Party Transactions
|
On
January 5, 2009, we executed a waiver to our previous working capital facility.
The waiver allowed us to pay dividends and make loans to our parent company, TSG
Holdings Corp. (“Parent”), which is not a registrant with the SEC, in the
aggregate amount of up to $14.0 million, provided that our Parent used the
entire cash proceeds of such dividend and loan solely to purchase capital stock
issued by our Parent (the “Stock Purchase”) from Participatiemaatschappij
Giraffe B.V. (“Giraffe”) and to pay related expenses in connection therewith.
During the first quarter of 2009, we paid a dividend in the aggregate amount of
$9.1 million and made a loan in the principal amount of $2.0 million to our
Parent. The loan will mature on January 4, 2012 and will accrue interest at the
rate of 1.36% per year payable in cash or in kind on February 15 and August 15
each year. In connection with the Stock Purchase, Euradius Acquisition Co., a
wholly owned subsidiary of our Parent, sold all of the outstanding stock of
Euradius International Dutch Bidco B.V. (“Euradius”) to Giraffe. This resulted
in our Parent fully divesting its interest in Euradius, which was our Parent's
only investment other than The Sheridan Group, Inc. Neither Euradius nor its
subsidiaries were guarantors of the 2003 or 2004 Notes. Neither Euradius nor its
subsidiaries were subsidiaries of ours and their financial results were not
included in our consolidated financial statements.
We
engaged in transactions with affiliates of our Parent, in the normal course of
business, prior to the Stock Purchase. These transactions primarily involved
administrative costs and management fees paid on behalf of the affiliates. In
connection with the Stock Purchase, our Parent ceased to have an ownership
interest in an affiliate that owed us approximately $1.1 million as of September
30, 2009 and December 31, 2008. As such, we reclassified this amount from due
from affiliated companies to other current assets, effective on the date of the
Stock Purchase. The amount owed by the former affiliate is to be paid in full by
January 9, 2010.
We have a
10–year management agreement with our principal equity sponsors, expiring in
August of 2013, under which an annual management fee is payable equal to the
greater of $500,000 or 2% of EBITDA (as defined in the management agreement)
plus reasonable out–of–pocket expenses. We expensed $0.2 million and $0.7
million in such fees for the three and nine month periods ended September 30,
2009, respectively, and $0.2 million and $0.6 million for the three and nine
month periods ended September 30, 2008, respectively.
9.
|
Contingencies
|
We are
party to legal actions as a result of various claims arising in the normal
course of business. We believe that the disposition of these matters will not
have a material adverse effect on the financial condition, results of operations
or liquidity of the Company.
10.
|
Restructuring
and Other Exit Costs
|
In
January 2009, we announced our plan to consolidate some administrative and
production operations at our DPC facility in Hanover, New Hampshire.
Approximately 20 positions at our ULI facility in Ashburn, Virginia were
eliminated as a result of this action. We recorded a minimal amount and $0.2
million of restructuring costs during the three and nine month periods ended
September 30, 2009, respectively. The costs relate primarily to guaranteed
severance payments and employee health benefits. We do not expect to record any
additional expenses in connection with this consolidation.
11.
|
Subsequent
Events
|
Subsequent
events have been evaluated through November 12, 2009, which is the date the
financial statements were issued.
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations.
The
following discussion should be read in conjunction with, and is qualified in its
entirety by reference to, our historical consolidated financial statements and
related notes included in the Annual Report on Form 10–K for the fiscal year
ended December 31, 2008. References to the “Company” refer to The Sheridan
Group, Inc. The terms “we,” “us,” “our” and other similar terms refer to the
consolidated businesses of the Company and all of its
subsidiaries.
Forward–Looking
Statements
This
Quarterly Report on Form 10–Q includes “forward–looking
statements.” Forward–looking statements are those that do not relate
solely to historical fact. They include, but are not limited to, any statement
that may predict, forecast, indicate or imply future results, performance,
achievements or events. They may contain words such as “anticipate,” “believe,”
“continue,” “could,” “estimate,” “expect,” “intend,” “likely,” “may,” “plan,”
“predict,” “project,” “should,” “will,” “would” or words or phrases of similar
meaning. They may relate to, among other things:
|
·
|
our
liquidity and capital resources, including our ability to refinance our
debt;
|
|
·
|
competitive
pressures and trends in the printing
industry;
|
|
·
|
prevailing
interest rates;
|
|
·
|
legal
proceedings and regulatory matters;
|
|
·
|
general
economic conditions;
|
|
·
|
the
liquidity and capital resources of our customers and potential
customers;
|
|
·
|
predictions
of net sales, expenses or other financial
items;
|
|
·
|
future
operations, financial condition and prospects;
and
|
|
·
|
our
plans, objectives, strategies and expectations for the
future.
|
Forward–looking
statements involve risks and uncertainties that may cause actual results to
differ materially from the forward–looking statements, might cause us to modify
our plans or objectives, may affect our ability to pay timely amounts due under
our outstanding notes and/or may affect the value of our outstanding notes. New
risk factors can emerge from time to time. It is not possible for us to predict
all of these risks, nor can we assess the extent to which any factor, or
combination of factors, may cause actual results to differ from those contained
in forward–looking statements. Given these risks and uncertainties, actual
future results may be materially different from what we plan or expect. We
caution you that any forward–looking statement reflects only our belief at the
time the statement is made. We will not update these forward–looking statements
even if our situation changes in the future.
Overview
Company
Background
We are a
leading specialty printer offering a full range of printing and value-added
support services for the journal, catalog, magazine, book and article reprint
markets. The services we offer include: digital proofing, preflight checking,
offshore composition, copy editing, subscriber services, mail sortation,
distribution and back issue fulfillment. We utilize a decentralized management
structure, which provides our customers with access to the resources of a large
company, while maintaining the high level of service and flexibility of a
smaller company.
The
Notes
On August
21, 2003, we completed a private debt offering of 10.25% senior secured notes
totaling $105 million, priced to yield 10.50%, that mature August 15, 2011 (the
“2003 Notes”). On May 25, 2004, we completed a private debt offering of 10.25%
senior secured notes totaling $60 million, priced to yield 9.86%, that mature
August 15, 2011 (the “2004 Notes”). The 2004 Notes have identical terms to the
2003 Notes.
The 2003
Notes and the 2004 Notes are collateralized by security interests in
substantially all of the assets of the Company and our subsidiaries, subject to
permitted liens. The capital stock, securities and other payment rights of the
Company’s subsidiaries will constitute collateral for the 2003 Notes and the
2004 Notes only to the extent that Rule 3-10 and Rule 3-16 of Regulation S-X
under the Securities Act do not require separate financial statements of a
subsidiary to be filed with the SEC. Payment obligations under the 2003 Notes
and the 2004 Notes are guaranteed jointly and severally, fully and
unconditionally, by all of the Company’s subsidiaries. The Sheridan Group, Inc.
owns 100% of the outstanding stock of all of our subsidiaries and has no
material independent assets or operations. There are no restrictions on the
ability of The Sheridan Group, Inc. to obtain funds by dividend, advance or loan
from its subsidiaries.
In the
event of default, the holders of at least 25% in aggregate principal amount of
the 2003 Notes and the 2004 Notes, may declare the principal, premium, if any,
and accrued and unpaid interest on the 2003 Notes and the 2004 Notes to be due
and payable immediately.
Critical
Accounting Estimates
In the
ordinary course of business, we make a number of estimates and assumptions
relating to the reporting of results of operations and financial position in the
preparation of financial statements in conformity with generally accepted
accounting principles. We believe the estimates, assumptions and judgments
described in the section “Management’s Discussion and Analysis of Financial
Condition and Results of Operations - Critical Accounting Estimates” included in
our most recent Annual Report on Form 10–K for the year ended December 31, 2008,
have the greatest potential impact on our financial statements, so we consider
these to be our critical accounting policies. These policies include our
accounting for allowances for doubtful accounts, impairment of goodwill and
other identifiable intangibles, income taxes and self–insurance. These policies
require us to exercise judgments that are often difficult, subjective and
complex due to the necessity of estimating the effect of matters that are
inherently uncertain. Actual results could differ significantly from those
estimates under different assumptions and conditions. We believe the consistent
application of these policies enables us to provide readers of our financial
statements with useful and reliable information about our operating results and
financial condition.
Results
of Operations
Our
business includes three reportable segments comprised of “Publications,”
“Specialty Catalogs” and “Books.” The Publications business segment is focused
on the production of short-run journals, medium-run journals and specialty
magazines and is comprised of the assets and operations of The Sheridan Press,
Dartmouth Printing, Dartmouth Journal Services and United Litho. Our Books
segment is focused on the production of short-run books and is comprised of the
assets and operations of Sheridan Books. The Specialty Catalogs segment, which
is comprised of the assets and operations of The Dingley Press, is focused on
catalog merchants that require run lengths between 50,000 and 8,500,000
copies.
The
following tables set forth, for the periods indicated, information derived from
our condensed consolidated statements of operations, the relative percentage
that those amounts represent to total net sales (unless otherwise indicated),
and the percentage change in those amounts from period to period. These tables
should be read in conjunction with the commentary that follows
them.
Three months ended September
30:
Percent
of revenue
|
||||||||||||||||||||||||
Three months ended September
30,
|
Increase (decrease)
|
Three months ended September
30,
|
||||||||||||||||||||||
(in
thousands)
|
2009
|
2008
|
Dollars
|
Percentage
|
2009
|
2008
|
||||||||||||||||||
Net
sales
|
||||||||||||||||||||||||
Publications
|
$ | 40,326 | $ | 46,911 | $ | (6,585 | ) | (14.0 | %) | 55.0 | % | 54.1 | % | |||||||||||
Specialty
catalogs
|
17,770 | 22,899 | (5,129 | ) | (22.4 | %) | 24.2 | % | 26.4 | % | ||||||||||||||
Books
|
15,259 | 17,088 | (1,829 | ) | (10.7 | %) | 20.8 | % | 19.7 | % | ||||||||||||||
Intersegment
sales elimination
|
(14 | ) | (130 | ) | 116 |
nm
|
- | (0.2 | %) | |||||||||||||||
Total
net sales
|
$ | 73,341 | $ | 86,768 | $ | (13,427 | ) | (15.5 | %) | 100.0 | % | 100.0 | % | |||||||||||
Cost
of sales
|
57,754 | 69,784 | (12,030 | ) | (17.2 | %) | 78.7 | % | 80.4 | % | ||||||||||||||
Gross
profit
|
$ | 15,587 | $ | 16,984 | $ | (1,397 | ) | (8.2 | %) | 21.3 | % | 19.6 | % | |||||||||||
Selling
and administrative expenses
|
$ | 9,074 | $ | 10,136 | $ | (1,062 | ) | (10.5 | %) | 12.4 | % | 11.7 | % | |||||||||||
Loss
(gain) on sale of fixed assets
|
(11 | ) | (19 | ) | 8 | (42.1 | %) | - | - | |||||||||||||||
Related
party guaranty
|
- | 3,550 | (3,550 | ) |
nm
|
- | 4.1 | % | ||||||||||||||||
Restructuring
costs
|
- | - | - |
nm
|
- | - | ||||||||||||||||||
Amortization
of intangibles
|
350 | 424 | (74 | ) | (17.5 | %) | 0.5 | % | 0.4 | % | ||||||||||||||
Total
operating expenses
|
$ | 9,413 | $ | 14,091 | $ | (4,678 | ) | (33.2 | %) | 12.9 | % | 16.2 | % | |||||||||||
Operating
income
|
||||||||||||||||||||||||
Publications
|
$ | 4,712 | $ | 4,509 | $ | 203 | 4.5 | % | 11.7 | % | 9.6 | % | ||||||||||||
Specialty
catalogs
|
524 | 330 | 194 | 58.8 | % | 2.9 | % | 1.4 | % | |||||||||||||||
Books
|
1,620 | 1,893 | (273 | ) | (14.4 | %) | 10.6 | % | 11.1 | % | ||||||||||||||
Corporate
expenses
|
(682 | ) | (3,839 | ) | 3,157 | 82.2 | % |
nm
|
nm
|
|||||||||||||||
Total
operating income
|
$ | 6,174 | $ | 2,893 | $ | 3,281 | 113.4 | % | 8.4 | % | 3.4 | % | ||||||||||||
Other
(income) expense
|
||||||||||||||||||||||||
Interest
expense
|
$ | 4,179 | $ | 4,593 | $ | (414 | ) | (9.0 | %) | 5.7 | % | 5.3 | % | |||||||||||
Interest
income
|
(19 | ) | (35 | ) | 16 | (45.7 | %) | - | - | |||||||||||||||
Gain
on redemption of notes payable
|
(5,411 | ) | - | (5,411 | ) |
nm
|
(7.4 | %) | - | |||||||||||||||
Other,
net
|
(219 | ) | 269 | (488 | ) |
nm
|
(0.3 | %) | 0.3 | % | ||||||||||||||
Total
other (income) expense
|
$ | (1,470 | ) | $ | 4,827 | $ | (6,297 | ) |
nm
|
(2.0 | %) | 5.6 | % | |||||||||||
Income
(loss) before income taxes
|
7,644 | (1,934 | ) | 9,578 |
nm
|
10.4 | % | (2.2 | %) | |||||||||||||||
Income
tax provision (benefit)
|
2,437 | (1,851 | ) | 4,288 |
nm
|
3.3 | % | (2.1 | %) | |||||||||||||||
Net
income (loss)
|
$ | 5,207 | $ | (83 | ) | $ | 5,290 |
nm
|
7.1 | % | (0.1 | %) |
_____________________
nm - not
meaningful
Commentary:
Net sales
for the third quarter of 2009 decreased $13.4 million or 15.5% versus the third
quarter of 2008, due primarily to reductions in print run lengths resulting from
the ongoing economic recession coupled with decreases in paper and shipping
costs, which are passed on to our customers. Net sales for the Publications
segment decreased $6.6 million or 14.0% compared to the same period a year ago
principally due to lower paper and freight costs as well as sales declines in
magazines as reductions in print advertising have led our customers to reduce
run lengths, page counts and frequency of publication. Net sales for the
Specialty Catalogs segment decreased $5.1 million or 22.4% compared with the
same period a year ago as sales in this segment continue to be adversely
impacted by lower paper and freight costs combined with a reduction in print run
lengths for catalogs reflecting reduced consumer spending. Net sales for the
Books segment decreased $1.8 million or 10.7% in the third quarter of 2009 as
compared with the year ago period due primarily to fewer titles being produced
as book publishers deal with the economic recession. Lower paper and freight
costs also contributed to the dollar sales decline in Books.
Gross
profit for the third quarter of 2009 decreased by $1.4 million or 8.2% compared
to the third quarter of 2008. The gross profit decrease was attributable
primarily to the reduction in sales mentioned previously coupled with lower
revenue from recyclable materials partially offset by lower variable costs,
reductions in healthcare and utility costs, and cost reductions pertaining to
staffing, benefits and discretionary spending. Additionally, the non-recurrence
of 2008 start-up costs associated with the new digital product offering in the
Publications segment also helped partially offset the adverse impact of the
decline in sales and recyclables revenue. Gross margin of 21.3% of net sales for
the third quarter of 2009 reflected a 1.7 margin point increase versus the third
quarter of 2008. The gross margin increase was due principally to reductions in
pass through costs of freight and paper as well as the reductions in health
care, utility and variable costs combined with cost reduction
efforts.
Operating
income of $6.2 million for the third quarter of 2009 represented an increase of
$3.3 million or 113.4 % as compared to operating income of $2.9 million for the
third quarter of 2008. This increase was primarily attributable to the
non-recurrence of 2008 related party guaranty costs to satisfy obligations in
connection with the shutdown of GPN Asia, a former affiliate of our parent
company. In the Publications segment, operating income increased by
$0.2 million during the third quarter of 2009 as compared to the year ago period
due to reductions in staffing, employee benefit plans and discretionary spending
coupled with lower healthcare claims, lower material and utility
costs, and the absence of start-up costs associated with the new digital product
offering which more than offset the adverse impact of lower sales volume and
lower revenue from recyclable materials. In the Specialty Catalogs segments,
operating income increased by $0.2 million as a result of reductions in staffing
and discretionary spending coupled with lower utility costs which offset the
impact of lower sales volume and the lower revenue from recyclable materials
compared to the same period year ago. Operating income in the Books segment
decreased $0.3 million in the third quarter of 2009 as compared to the third
quarter of 2008 due primarily to the decline in sales volume and lower revenue
from recyclable materials. These adverse impacts were partially offset by
significant reductions in staffing and employee benefits in the Books
segment.
During
the third quarter of 2009, we recorded gains on the redemption of notes payable
of $5.4 million. There were no comparable transactions during the third quarter
of 2008. The redemption of notes payable was the primary reason our
interest expense decreased $0.4 million during the third quarter of 2009 as
compared to the same period last year.
Other
income was $0.2 million for the third quarter of 2009 as compared to other
expense of $0.3 million during the same period last year. This increase was due
primarily to the increase in the market value of investments held in the
deferred compensation plan during the quarter. The market value of these
investments decreased during the same period in 2008.
Income
before income taxes of $7.6 million for the third quarter of 2009 represented a
$9.6 million increase as compared to the same period last year. The increase was
due primarily to the gains on the redemptions of notes payable, the
non-recurrence of related party guaranty costs in connection with the shutdown
of GPN Asia and the increase in the market value of investments held in the
deferred compensation plan during the quarter.
Our
effective income tax rate was 31.9% for the third quarter of 2009 compared to
95.7% for the same period in 2008. The effective income tax rate was higher in
the three months ended September 30, 2008 because the impact of the permanent
differences in relation to the projected income before income taxes for the year
ended December 31, 2008, was more significant than compared to 2009. The
significant permanent differences related primarily to the increase in uncertain
tax positions, including penalties and interest.
Net
income of $5.2 million for the third quarter of 2009 represented a $5.3 million
increase as compared to a net loss of $0.1 million for the third quarter of 2008
due to the factors mentioned previously.
Nine months ended September
30:
Percent
of revenue
|
||||||||||||||||||||||||
Nine months ended September
30,
|
Increase (decrease)
|
Nine months ended September
30,
|
||||||||||||||||||||||
(in
thousands)
|
2009
|
2008
|
Dollars
|
Percentage
|
2009
|
2008
|
||||||||||||||||||
Net
sales
|
||||||||||||||||||||||||
Publications
|
$ | 126,588 | $ | 141,176 | $ | (14,588 | ) | (10.3 | %) | 57.3 | % | 53.9 | % | |||||||||||
Specialty
catalogs
|
51,841 | 72,054 | (20,213 | ) | (28.1 | %) | 23.4 | % | 27.5 | % | ||||||||||||||
Books
|
42,604 | 48,839 | (6,235 | ) | (12.8 | %) | 19.3 | % | 18.6 | % | ||||||||||||||
Intersegment
sales elimination
|
(15 | ) | (187 | ) | 172 |
nm
|
- | - | ||||||||||||||||
Total
net sales
|
$ | 221,018 | $ | 261,882 | $ | (40,864 | ) | (15.6 | %) | 100.0 | % | 100.0 | % | |||||||||||
Cost
of sales
|
176,676 | 211,865 | (35,189 | ) | (16.6 | %) | 79.9 | % | 80.9 | % | ||||||||||||||
Gross
profit
|
$ | 44,342 | $ | 50,017 | $ | (5,675 | ) | (11.3 | %) | 20.1 | % | 19.1 | % | |||||||||||
Selling
and administrative expenses
|
$ | 27,862 | $ | 31,423 | $ | (3,561 | ) | (11.3 | %) | 12.6 | % | 12.0 | % | |||||||||||
Loss
on sale of fixed assets
|
2 | 142 | (140 | ) |
nm
|
- | 0.1 | % | ||||||||||||||||
Related
party guaranty
|
- | 3,550 | (3,550 | ) |
nm
|
- | 1.3 | % | ||||||||||||||||
Restructuring
costs
|
155 | - | 155 |
nm
|
0.1 | % | - | |||||||||||||||||
Amortization
of intangibles
|
1,089 | 1,293 | (204 | ) | (15.8 | %) | 0.5 | % | 0.5 | % | ||||||||||||||
Total
operating expenses
|
$ | 29,108 | $ | 36,408 | $ | (7,300 | ) | (20.1 | %) | 13.2 | % | 13.9 | % | |||||||||||
Operating
income
|
||||||||||||||||||||||||
Publications
|
$ | 13,528 | $ | 13,393 | $ | 135 | 1.0 | % | 10.7 | % | 9.5 | % | ||||||||||||
Specialty
catalogs
|
695 | 435 | 260 | 59.8 | % | 1.3 | % | 0.6 | % | |||||||||||||||
Books
|
2,532 | 4,521 | (1,989 | ) | (44.0 | %) | 5.9 | % | 9.3 | % | ||||||||||||||
Corporate
expenses
|
(1,521 | ) | (4,740 | ) | 3,219 | 67.9 | % |
nm
|
nm
|
|||||||||||||||
Total
operating income
|
$ | 15,234 | $ | 13,609 | $ | 1,625 | 11.9 | % | 6.9 | % | 5.2 | % | ||||||||||||
Other
(income) expense
|
||||||||||||||||||||||||
Interest
expense
|
$ | 13,265 | $ | 13,824 | $ | (559 | ) | (4.0 | %) | 6.0 | % | 5.3 | % | |||||||||||
Interest
income
|
(51 | ) | (165 | ) | 114 | (69.1 | %) | - | (0.1 | %) | ||||||||||||||
Gain
on redemption of notes payable
|
(7,194 | ) | - | (7,194 | ) |
nm
|
(3.2 | %) | - | |||||||||||||||
Other,
net
|
(398 | ) | 680 | (1,078 | ) |
nm
|
(0.2 | %) | 0.3 | % | ||||||||||||||
Total
other expense
|
$ | 5,622 | $ | 14,339 | $ | (8,717 | ) | (60.8 | %) | 2.6 | % | 5.5 | % | |||||||||||
Income
(loss) before income taxes
|
9,612 | (730 | ) | 10,342 |
nm
|
4.3 | % | (0.3 | %) | |||||||||||||||
Income
tax provision (benefit)
|
3,342 | (1,317 | ) | 4,659 |
nm
|
1.5 | % | (0.5 | %) | |||||||||||||||
Net
income
|
$ | 6,270 | $ | 587 | $ | 5,683 |
nm
|
2.8 | % | 0.2 | % |
______________________
nm
- not meaningful
Commentary:
Net sales
for the first nine months of 2009 decreased $40.9 million or 15.6% versus the
first nine months of 2008, due primarily to reductions in print run lengths
resulting from the ongoing economic recession coupled with decreases in paper
and shipping costs, which are passed on to our customers, as well as decreases
in paper costs resulting from the largest customer in Specialty Catalogs buying
their own paper rather than having us supply it. Net sales for the Publications
segment decreased $14.6 million or 10.3% compared to the same period a year ago
principally due to sales declines in magazines as reductions in print
advertising have led our customers to reduce run lengths, page counts and
frequency of publication. Lower paper and freight costs also contributed to the
decline in Publications sales. Net sales for the Specialty Catalogs segment
decreased $20.2 million or 28.1% compared with the same period a year ago with
approximately 40% of the decrease due to our largest customer supplying their
own paper, beginning in the second quarter of 2008, instead of purchasing
it through us. Specialty Catalogs sales continue to be adversely impacted by a
reduction in print run lengths for catalogs reflecting reduced consumer spending
and the impact of lower paper and freight costs. Net sales for the Books segment
decreased $6.2 million or 12.8% in the first nine months due primarily to fewer
titles being produced as book publishers deal with the economic
recession.
Gross
profit for the first nine months of 2009 decreased by $5.7 million or 11.3%
compared to the first nine months of 2008. The gross profit decrease was
attributable primarily to the reduction in sales mentioned previously coupled
with lower revenue from recyclable materials partially offset by lower variable
costs, lower utility and healthcare costs, and cost reductions in staffing,
employee benefit plans, and discretionary spending. The absence of start-up
costs associated with a digital product offering in Publications also helped
partially offset the adverse volume impact. Gross margin of 20.1% of net sales
for the first nine months of 2009 reflected a 1.0 margin point increase versus
the first nine months of 2008. The gross margin increase was due principally to
reductions in pass through costs of freight and paper as well as other costs as
described previously which offset the margin impact of the decrease in
sales.
Operating
income of $15.2 million for the first nine months of 2009 represented an
increase of $1.6 million or 11.9% as compared to operating income of $13.6
million for the first nine months of 2008. This increase was primarily
attributable to the non-recurrence of 2008 related party guaranty costs to
satisfy obligations in connection with the shutdown of GPN Asia (a former
affiliate of our parent company), reductions in selling and administrative costs
due to cost management of staffing, employee benefits and discretionary costs
coupled with lower administrative costs associated with the new digital product
initiative, partially offset by gross profit reductions discussed previously.
Operating income in the Publications segment during the first nine months of
2009 increased slightly as compared to the same period in 2008 as decreases in
sales and lower revenues from recyclables were fully offset by cost management
of staffing, benefits and discretionary spending as well as lower utility,
material and healthcare costs and the non-recurrence of the 2008 start-up costs
of the new digital product offering. Operating income in the Specialty Catalogs
segment increased $0.3 million during the first nine months of 2009 as compared
to the same period in 2008 as decreases in sales and lower revenues from
recyclables were more than offset by reductions in staffing as well as lower
material, utility, discretionary and legal costs. Operating income in the Books
segment decreased $2.0 million in the first nine months of 2009 compared to the
year ago period due principally to the lower sales volume coupled with the lower
revenue from recyclable materials. Reductions in Books staffing and employee
benefits, as well as lower material costs, partially offset the adverse sales
volume and recyclables revenue impact.
During
the first nine months of 2009, we recorded gains on the redemption of notes
payable of $7.2 million. There were no comparable transactions during the first
nine months of 2008. The redemption of notes payable was the primary
reason our interest expense decreased $0.6 million during the first nine months
of 2009 as compared to the same period last year.
Other
income was $0.4 million for the first nine months of 2009 as compared to other
expense of $0.7 million during the same period last year. This increase was due
primarily to the increase in the market value of investments held in the
deferred compensation plan during the first nine months of 2009. The market
value of these investments decreased during the first nine months of
2008.
Income
before income taxes of $9.6 million for the first nine months of 2009
represented a $10.3 million increase as compared to the same period last year.
The increase was due primarily to the gains on the redemption of notes payable,
the non-recurrence of related party guaranty costs in connection with the
shutdown of GPN Asia and the increase in the market value of investments held in
the deferred compensation plan partially offset by the net impact of lower
sales and the cost reductions mentioned previously.
Our
effective income tax rate was 34.8% for the first nine months of 2009 compared
to 180.4% for the same period in 2008. The effective income tax rate
was higher in the nine months ended September 30, 2008 because the impact of the
permanent differences in relation to the projected income before income taxes
for the year ended December 31, 2008, was more significant than compared to
2009. The significant permanent differences related primarily to the increase in
uncertain tax positions, including penalties and interest.
Net
income of $6.3 million for the first nine months of 2009 represented a $5.7
million increase as compared to net income of $0.6 million for the first nine
months of 2008 due to the factors mentioned previously.
Liquidity
and Capital Resources
We had
cash of $0.4 million as of September 30, 2009 compared to $16.4 million as of
December 31, 2008. For the nine months ended September 30, 2009, we utilized
cash on hand to fund operations, make investments in new plant and equipment,
make the semi-annual interest payments on the senior secured notes, repurchase
our senior secured notes and pay a cash dividend and make a loan to our parent
company.
Operating
Activities
Net cash
provided by operating activities was $10.1 million for the first nine months of
2009 compared to $3.4 million for the first nine months of 2008. This $6.7
million improvement was primarily the result of an increase in net income of
$5.7 million coupled with favorable working capital changes of $9.0 million
offset by a net increase in non-cash income of $8.0 million. The primary
non-cash income was the $7.2 million gain on the redemption of notes payable
during the first nine months of 2009. The working capital changes
included:
|
·
|
a
decrease in accounts receivable in the first nine months of 2009 as
compared to the first nine months of 2008 due primarily to lower sales
volume;
|
|
·
|
inventory
levels at the end of the third quarter of 2009 were significantly lower as
compared to the end of 2008 and the third quarter of 2008 due primarily to
efforts to reduce inventory balances in line with our lower production and
sales levels; additionally, inventory levels had risen at the end of the
third quarter of 2008 due to the impact of the temporary build-up of paper
inventories in the Specialty Catalogs segment to ensure production
supply;
|
|
·
|
an
increase in refundable income taxes during the first nine months of 2008
due to the payment of estimated income taxes and the income tax benefit
recorded in anticipation of a taxable loss in 2008 as compared to the
decrease in refundable income taxes during the first nine months of 2009
due to the receipt of income tax refunds and the income tax provision
recorded in anticipation of taxable income in
2009.
|
These
sources of cash were partially offset by reductions in accounts payable and
accrued expenses. The accounts payable reduction was primarily due to the lower
production levels brought on by lower sales and the timing of certain vendor
payments during the third quarter of 2009 as compared to the third quarter of
2008 and the end of 2008. The accrued expense reduction was primarily
due to the payments made to satisfy the guaranty costs in connection with the
shutdown of GPN Asia.
Investing
Activities
Net cash
used in investing activities was $7.9 million for the first nine months of 2009
compared to $14.4 million for the first nine months of 2008. This $6.5 million
decrease in cash used was primarily the result of lower capital spending and the
non-recurrence of advances made in 2008 to former affiliates in the first nine
months of 2009 as compared to the same period last year. These decreases were
partially offset by an increase in cash we advanced to our parent
company (the majority of which was used to repurchase its capital stock
resulting in the complete divestiture of its interest in Euradius International
Dutch Bidco, B.V.) in the first nine months of 2009 as compared to the same
period last year.
Financing
Activities
Cash used
in financing activities was $18.2 million for the first nine months of 2009 and
was minimal for the first nine months of 2008. The $18.2 million increase in
cash used was primarily the result of the $14.5 million we paid to repurchase
our senior secured notes, the $9.1 million dividend paid to our parent company
to enable it to repurchase its capital stock resulting in the complete
divestiture of its interest in Euradius, and the $0.3 million in deferred
financing costs we paid in connection with the amendment to our working capital
facility, offset by the $5.7 million net borrowings under our working capital
facility.
We expect
our principal sources of liquidity will be cash flow generated from operations
and borrowings under our working capital facility. We expect our principal uses
of cash will be to meet debt service requirements, finance our capital
expenditures and provide working capital. We may from time to time seek to
purchase or retire our outstanding debt, including the 2003 Notes and 2004
Notes, through cash purchases, in open market purchases, privately negotiated
transactions or otherwise. Such repurchases, if any, will depend on prevailing
market conditions, our liquidity requirements, contractual restrictions and
other factors. The amounts involved may be material. We estimate that our
capital expenditures for the remainder of 2009 will total about $5.2 million.
Based on our current level of operations, we believe that our cash flow from
operations and available cash will be adequate to meet our future short–term and
long–term liquidity needs. Our future operating performance and ability to
extend or refinance our indebtedness will be dependent on future economic
conditions and financial, business and other factors that may be beyond our
control.
Indebtedness
As of
September 30, 2009, we had total indebtedness of $148.7 million comprised of
$143.0 million due under the 2003 Notes and the 2004 Notes, with a scheduled
maturity of August 2011, and $5.7 million due under our working capital facility
which matures in March 2011. We will have significant interest payments due on
the outstanding notes as well as interest payments due on any borrowings under
our working capital facility. Total cash interest payments related to our
working capital facility and the 2003 Notes and the 2004 Notes are expected to
be in excess of $14.6 million on an annual basis.
The terms
of our working capital facility, as amended, are substantially as set forth
below. Revolving advances are available from the lender in an aggregate
principal amount of up to $20.0 million, subject to a borrowing base test. We
are able to repay and reborrow such advances until the March 2011 maturity date.
As of September 30, 2009, we had unused amounts available of $12.8 million and
had $1.4 million in outstanding letters of credit.
Working
Capital Facility and Indenture
Our
working capital facility and the indenture governing the 2003 Notes and the 2004
Notes contain various covenants which limit our discretion in the operation of
our businesses. Among other things, our working capital facility restricts our
ability to prepay other indebtedness, including the 2003 Notes and the 2004
Notes, incur other indebtedness or pay dividends. We amended our
working capital facility on June 16, 2009. The amended agreement prohibits us
from repurchasing the 2003 Notes and the 2004 Notes unless certain conditions
are met, including that the amount expended for note repurchases after May 25,
2009 may not exceed $20.0 million in the aggregate, and that immediately after
each note repurchase, there must be at least $5.0 million available under the
working capital facility. The working capital facility also requires us to
satisfy certain financial tests including an interest coverage ratio and to
maintain a minimum EBITDA (as defined in and calculated pursuant to our working
capital facility, such EBITDA being referred to hereinafter as “WCF EBITDA”),
both calculated for the period consisting of the four preceding consecutive
fiscal quarters. WCF EBITDA is defined in and calculated pursuant to our working
capital facility and is used below solely for purposes of calculating our
compliance with the covenants in our working capital facility. Failure to
satisfy the financial tests in our working capital facility would constitute a
default under our working capital facility. The required interest coverage ratio
is at least 1.80 to 1.00 and the minimum WCF EBITDA requirement (calculated on a
rolling twelve months) is $33.0 million. (Prior to the amendment the required
interest coverage ratio was at least 2.00 to 1.00 and the minimum WCF EBITDA
requirement was $36.0 million, both calculated on the same basis as the amended
working capital facility.) For the twelve months ended September 30, 2009, our
interest coverage ratio was 2.45 to 1.00 and our WCF EBITDA for purposes of our
working capital facility was $40.8 million. In addition, our working capital
facility prohibits us from making any payments with respect to the 2003 Notes
and the 2004 Notes if we fail to perform our obligations under, or fail to meet
the conditions of, our working capital facility or if payment creates a default
under our working capital facility.
WCF
EBITDA calculated pursuant to the working capital facility is defined as net
income (loss) before interest expense, income taxes, depreciation, amortization,
management fees (as defined in the management agreement) and other non–cash
charges and non-recurring items (including all fees and costs relating to the
transactions contemplated by the working capital facility) as defined in the
working capital facility. WCF EBITDA calculated pursuant to the working capital
facility is a non-GAAP measure and not an indicator of financial performance or
liquidity under generally accepted accounting principles and may not be
comparable to similarly captioned information reported by other companies. In
addition, it should not be considered as an alternative to, or more meaningful
than, income before income taxes, cash flows from operating activities or other
traditional indicators of operating performance or liquidity.
The
following table provides a reconciliation of WCF EBITDA to cash flows from
operating activities for the nine month periods ended September 30, 2009 and
2008 (in thousands). The financial covenants under our working capital facility,
as noted above, are based upon a rolling twelve months. Therefore, WCF EBITDA
for the twelve months ended September 30, 2009 includes the amounts presented in
the following table as well as the amounts from the third and fourth quarters of
2008.
Nine Months Ended September
30,
|
||||||||
2009
|
2008
|
|||||||
Net
cash used in operating activities
|
$ | 10,055 | $ | 3,379 | ||||
Accounts
receivable
|
(2,460 | ) | 1,141 | |||||
Inventories
|
(4,325 | ) | 1,273 | |||||
Other
current assets
|
682 | 480 | ||||||
Refundable
income taxes
|
(2,935 | ) | 3,789 | |||||
Other
assets
|
(151 | ) | (1,139 | ) | ||||
Accounts
payable
|
6,565 | 3,658 | ||||||
Accrued
expenses
|
2,968 | (1,085 | ) | |||||
Accrued
interest
|
4,491 | 4,229 | ||||||
Income
taxes payable
|
(983 | ) | 73 | |||||
Other
liabilities
|
165 | 568 | ||||||
Provision
for doubtful accounts
|
(323 | ) | (97 | ) | ||||
Deferred
income tax provision
|
36 | (823 | ) | |||||
Provision
for inventory realizability and LIFO value
|
(79 | ) | (17 | ) | ||||
Loss
on disposition of fixed assets, net
|
(2 | ) | (142 | ) | ||||
Income
tax provision (benefit)
|
3,342 | (1,317 | ) | |||||
Cash
interest expense
|
12,658 | 12,828 | ||||||
Management
fees
|
673 | 558 | ||||||
Non
cash adjustments:
|
||||||||
(Increase)
decrease in market value of investments
|
(73 | ) | 226 | |||||
Amortization
of prepaid lease costs
|
65 | 68 | ||||||
Loss
on disposition of fixed assets
|
15 | 227 | ||||||
Interest
income
|
(51 | ) | - | |||||
Related
party guaranty
|
- | 3,550 | ||||||
Restructuring
costs
|
155 | - | ||||||
Bank
fees for abandoned line of credit renewal
|
308 | - | ||||||
Working
Capital Facility EBITDA
|
$ | 30,796 | $ | 31,427 |
The
indenture governing the 2003 Notes and the 2004 Notes also contains various
restrictive covenants. It, among other things: (i) limits our ability and the
ability of our subsidiaries to incur additional indebtedness, issue shares of
preferred stock, incur liens and enter into certain transactions with
affiliates; (ii) places restrictions on our ability to pay dividends or make
certain other restricted payments; and (iii) places restrictions on our ability
and the ability of our subsidiaries to merge or consolidate with any other
person or sell, assign, transfer, convey or otherwise dispose of all or
substantially all of our assets.
Contractual
Obligations
The
following table summarizes the Company’s future minimum non-cancellable
contractual obligations as of September 30, 2009:
Remaining
Payments Due by Period
|
||||||||||||||||||||
2010
to
|
2012
to
|
2014
and
|
||||||||||||||||||
Total
|
2009
|
2011
|
2013
|
beyond
|
||||||||||||||||
(in
thousands)
|
||||||||||||||||||||
Long
term debt, including interest (1)
|
$ | 166,702 | $ | - | $ | 166,702 | $ | - | $ | - | ||||||||||
Operating
leases
|
6,799 | 965 | 5,360 | 465 | 9 | |||||||||||||||
Purchase
obligations (2)
|
4,554 | 1,368 | 2,874 | 312 | - | |||||||||||||||
Other
long-term obligations (3)
|
504 | 38 | 302 | 164 | - | |||||||||||||||
Total
(4)
|
$ | 178,559 | $ | 2,371 | $ | 175,238 | $ | 941 | $ | 9 |
__________________________
(1)
|
Includes
the $142.9 million aggregate principal amount due on the senior
secured notes plus interest at 10.25% payable semi-annually through August
15, 2011.
|
(2)
|
Represents
payments due under purchase agreements for consumable raw materials and
commitments for construction projects and equipment
acquisitions.
|
(3)
|
Represents
payments due under non-compete arrangements with our former Chairman of
the Board.
|
(4)
|
At
September 30, 2009, we have recognized approximately $2.0 million of
liabilities for unrecognized tax benefits. There is a high degree of
uncertainty with respect to the timing of future cash outflows associated
with our unrecognized tax benefits because they are dependent on various
matters including, among others, tax examinations, changes in tax laws or
interpretation of those laws and expiration of statutes of limitation. Due
to these uncertainties, our unrecognized tax benefits have been excluded
from the contractual obligations table
above.
|
Off
Balance Sheet Arrangements
At
September 30, 2009 and December 31, 2008, we did not have any relationships with
unconsolidated entities or financial partnerships, such as entities often
referred to as structured finance or special purpose entities, which would have
been established for the purpose of facilitating off–balance sheet arrangements
or other contractually narrow or limited purposes. We therefore are not
materially exposed to any financing, liquidity, market or credit risk that could
arise if we had engaged in such relationships.
New
Accounting Standards
On
July 1, 2009, we adopted Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 105-10 (formerly Statement of
Financial Accounting Standards (“SFAS”) No. 168, “The FASB Accounting
Standards Codification and Hierarchy of Generally Accepted Accounting
Principles, a replacement of FASB Statement No. 162.” ASC 105-10
establishes the FASB ASC as the source of authoritative accounting principles
recognized by the FASB to be applied in preparation of financial statements in
conformity with generally accepted accounting principles in the United States of
America. The adoption of this standard had no impact on our consolidated
financial statements.
The
following recently issued but not yet enacted accounting standards have not yet
been codified by the FASB, as described in the previous paragraph.
In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers of Financial
Assets, an amendment of SFAS No. 140” (“SFAS 166”). The objective of this
Statement is to improve the relevance, representational faithfulness, and
comparability of the information that a reporting entity provides in its
financial reports about a transfer of financial assets; the effects of a
transfer on its financial position, financial performance, and cash flows; and a
transferor’s continuing involvement in transferred financial assets. SFAS 166
will be effective for us beginning January 1, 2010. We are currently evaluating
the impact of adopting SFAS 166 on our consolidated financial
statements.
In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No.46(R)”
(“SFAS 167”). This Statement carries forward the scope of Interpretation 46(R),
with the addition of entities previously considered qualifying special-purpose
entities, as the concept of these entities was eliminated in SFAS 166. SFAS
167 will be effective for us beginning January 1, 2010. We are currently
evaluating the impact of adopting SFAS 167 on our consolidated financial
statements.
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
Market
risk represents the risk of changes in value of a financial instrument,
derivative or non–derivative, caused by fluctuations in interest rates, foreign
exchange rates and equity prices. Changes in these factors could cause
fluctuations in results of our operations and cash flows. In the ordinary course
of business, we are exposed to foreign currency and interest rate risks. These
risks primarily relate to the sale of products and services to foreign customers
and changes in interest rates on our long–term debt.
Foreign
Exchange Rate Market Risk
We
consider the U.S. dollar to be the functional currency for all of our entities.
All of our net sales and virtually all of our expenses in the three and nine
months ended September 30, 2009 and 2008 were denominated in U.S. dollars.
Therefore, foreign currency fluctuations had a negligible impact on our
financial results in those periods.
Interest
Rate Market Risk
We could
be exposed to changes in interest rates. Our working capital facility is
variable rate debt. Interest rate changes, therefore, generally do not affect
the market value of such debt but do impact the amount of our interest payments
and, therefore, our future earnings and cash flows, assuming other factors are
held constant. During the first nine months of 2009, we had borrowings under our
working capital facility and we estimate that a 1.0% increase in interest rates
would have resulted in a negligible amount of additional interest expense for
the nine months ended September 30, 2009. All of our other debt carries fixed
interest rates.
Item 4T. Controls and Procedures
Evaluation
of Disclosure Controls and Procedures
As of the
end of the period covered by this report, we conducted an evaluation, under the
supervision and with the participation of our principal executive officer
(“CEO”) and principal financial officer (“CFO”), of the design and operation of
our disclosure controls and procedures (as defined in Rules 13a–15(e) and
15d–15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based
on this evaluation, the CEO and CFO concluded that our disclosure controls and
procedures are effective to provide reasonable assurance that information
required to be disclosed by us in reports we file or submit under the Exchange
Act is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission, and
that information required to be disclosed in the reports we file or submit under
the Exchange Act is accumulated and communicated to our management, including
the CEO and CFO, to allow timely decisions regarding required
disclosures.
Changes
in Internal Control Over Financial Reporting
There was
no change in our internal control over financial reporting that occurred during
the period covered by this report that has materially affected, or is reasonably
likely to materially affect, our internal control over financial
reporting.
PART II — OTHER INFORMATION
Item
1. Legal Proceedings
From time
to time, we are party to various legal actions in the ordinary course of our
business. In our opinion, these matters are not expected to have a material
adverse effect on our business, financial condition or results of
operations.
Item 1A. Risk Factors
In
addition to the other information set forth in this report, you should carefully
consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual
Report on Form 10-K for the year ended December 31, 2008, which could materially
affect our business, financial condition or future results. The risks described
in our Annual Report on Form 10-K are not the only risks facing us. Additional
risk and uncertainties not currently known to us or that we currently deem to be
immaterial also may materially adversely affect our business, financial
condition or operating results.
Item 2. Unregistered Sales of Equity Securities and Use of
Proceeds
None.
Item 3. Defaults upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security
Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits
Exhibits
Certification
of Chief Executive Officer pursuant to Rule 13a–14(a) or 15d–14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes–Oxley Act of 2002.
|
|
Certification
of Chief Financial Officer pursuant to Rule 13a–14(a) or 15d–14(a) of the
Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
Sarbanes–Oxley Act of 2002.
|
|
Certification
pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes–Oxley Act of 2002, executed by John A. Saxton, President and
Chief Executive Officer of The Sheridan Group, Inc. and Robert M. Jakobe,
Chief Financial Officer of The Sheridan Group,
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.
The
Sheridan Group, Inc.
|
|||
Registrant
|
|||
By:
|
/s/
John A. Saxton
|
||
John
A. Saxton
|
|||
President
and Chief Executive Officer
|
Date: November 12,
2009
23