EXHIBIT 99.2
PALM COAST DATA HOLDCO, INC.
Unaudited Consolidated Balance Sheet
December 31, 2006
(In thousands, except share data)
Assets
Current assets:
Cash ................................................... $ 1,273
Accounts receivable, net of allowance of $23 ........... 10,102
Postage deposits ....................................... 129
Prepaid expenses and other assets ...................... 1,333
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Total current assets ........................... 12,837
Property, plant, and equipment, net ...................... 15,594
Intangible assets, net ................................... 18,420
Deferred financing costs, net ............................ 848
Goodwill ................................................. 25,969
Other .................................................... 413
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Total assets ................................... $ 74,081
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Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable ....................................... $ 1,850
Accrued expenses ....................................... 5,005
Advances from customers ................................ 2,363
Current portion of long-term debt ...................... 2,831
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Total current liabilities ...................... 12,049
Long-term debt ........................................... 43,200
Deferred compensation .................................... 2,433
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Total liabilities .............................. 57,682
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Shareholders' equity:
Common stock class A, $0.01 par value;
3,031 shares authorized; 1,311 issued ................ --
Common stock class B, $0.01 par value;
23,664 shares authorized; 21,743 share issued --
Additional paid-in capital ............................. 23,054
Accumulated deficit .................................... (6,655)
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Total shareholders' equity ..................... 16,399
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Total liabilities and shareholders' equity ..... $ 74,081
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See accompanying notes to unaudited consolidated financial statements.
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PALM COAST DATA HOLDCO, INC.
Unaudited Consolidated Statements of Operations
For the Six Months Ended December 31, 2006 and for the period
from August 10, 2005 (date of inception) to December 31, 2005
(In thousands)
2006 2005
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Revenue ........................... $ 27,478 $ 20,933
Cost of revenue ................... 17,981 13,849
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Gross margin ............ 9,497 7,084
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Operating expenses:
Marketing and client services ... 2,802 1,975
General and administrative ...... 4,852 3,612
Amortization of intangible assets 864 679
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Total operating expenses 8,518 6,266
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Operating income ........ 979 818
Interest expense, net ............. 3,262 2,463
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Loss before income taxes (2,283) (1,645)
Income tax benefit ................ -- --
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Net loss ................ $ (2,283) $ (1,645)
====================
See accompanying notes to unaudited consolidated financial statements.
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PALM COAST DATA HOLDCO, INC.
Unaudited Consolidated Statements of Cash Flows
For the Six Months Ended December 31, 2006 and for the period
from August 10, 2005 (date of inception) to December 31, 2005
(In thousands)
2006 2005
--------------------
Operating activities:
Net loss .................................................. $ (2,283) $ (1,645)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation ............................................ 1,025 836
Amortization of intangible assets ....................... 864 679
Loss on disposal of property ............................ 36 --
Interest paid with in-kind notes payable ................ 562 275
Non-cash interest expense ............................... 113 86
Deferred compensation ................................... 217 28
Changes in operating assets and liabilities:
Accounts receivable ................................... (1,358) (1,797)
Postage deposits ...................................... (18) (129)
Prepaid expenses and other assets ..................... (399) (40)
Other long-term assets ................................ 54 17
Accounts payable ...................................... 266 1,211
Accrued expenses ...................................... 650 1,038
Advances from customers ............................... 200 (1,007)
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Net cash used in operating activities ............. (71) (448)
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Investing activities:
Purchase of property, plant, and equipment ................ (445) (989)
Net cash paid for acquisition ............................. (37) (68,898)
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Net cash used in investing activities ............. (482) (69,887)
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Financing activities:
Repayment of long-term debt ............................... (563) (500)
Repayment of revolving line of credit ..................... (1,200) (991)
Proceeds from issuance of common stock .................... -- 23,054
Proceeds from long-term debt .............................. -- 46,256
Payment of debt issuance cost ............................. (16) (1,154)
Proceeds from revolving line of credit .................... 1,500 991
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Net cash provided by (used in) financing activities (279) 67,656
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Net decrease in cash .............................. (832) (2,679)
Cash, beginning of period ................................... 2,105 4,242
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Cash, end of period ......................................... $ 1,273 $ 1,563
====================
Supplemental cash flow information:
Interest paid ............................................. $ 2,834 $ 850
See accompanying notes to unaudited consolidated financial statements.
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PALM COAST DATA HOLDCO, INC.
Notes to Unaudited Consolidated Financial Statements
1. ORGANIZATION AND BASIS OF PRESENTATION
NATURE OF BUSINESS
Palm Coast Data Holdco, Inc. ("PCD Inc."), through its subsidiary, Palm Coast
Data LLC ("PCD LLC"), provides magazine publishers and membership organizations
with customer management and fulfillment services, including front-end
processing, account management, direct mail services, letter shop services,
print management, reporting and online communications.
BASIS OF PRESENTATION
The unaudited consolidated financial statements include the unaudited
consolidated balance sheet of PCD Inc. as of December 31, 2006 and the unaudited
consolidated statement of operations and unaudited consolidated statement of
cash flows for the six-months ended December 31, 2006 and for the period August
10, 2005 (date of inception) to December 31, 2005.
The unaudited consolidated financial statements should be read in conjunction
with the historical consolidated financial statements and accompanying notes
thereto of PCD Inc. included in this current report on Form 8-K/A.
All intercompany transactions have been eliminated.
INTERIM FINANCIAL INFORMATION
The unaudited consolidated financial statements have been prepared pursuant to
the rules and regulations of the Securities and Exchange Commission and, in
management's opinion, include all adjustments necessary for a fair presentation
of results for the periods presented.
USE OF ESTIMATES
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
ACQUISITION OF PALM COAST DATA HOLDCO, INC. BY AMREP CORPORATION
On January 16, 2007, AMREP Corporation, through a subsidiary of its Kable Media
Services, Inc. subsidiary, acquired PCD Inc. pursuant to the terms of that
certain Agreement and Plan of Merger (the "Agreement"), dated as of November 7,
2006 (the "Acquisition"). The Agreement provided for the Acquisition to occur by
the merger of the Kable Media Services, Inc. subsidiary with and into PCD Inc.,
with PCD Inc. surviving the merger. As a result of the merger, PCD Inc. is now a
direct wholly-owned subsidiary of Kable Media Services, Inc.
The merger consideration totaled approximately $92.0 million plus an additional
amount for working capital and certain other adjustments preliminarily estimated
at $3.7 million. The acquisition was financed with existing cash and borrowings.
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