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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
OR
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: 333-50117
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AMERICAN LAWYER MEDIA, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 13-3980414
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
345 PARK AVENUE SOUTH
NEW YORK, NEW YORK 10010
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (212) 779-9200
Securities Registered Pursuant to Section 12(b) of the Act: NONE
Securities Registered Pursuant to Section 12(g) of the Act: NONE
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Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes /X/ No / /
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
(APPLICABLE ONLY TO CORPORATE REGISTRANTS)
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
As of March 30, 2000, 100 shares of Common Stock, par value $.01 per share,
were outstanding, all of which were held by American Lawyer Media
Holdings, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
SEE EXHIBIT INDEX
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PART I
ITEM 1. BUSINESS
UNLESS THE CONTEXT OTHERWISE REQUIRES: (I) THE "COMPANY" REFERS TO AMERICAN
LAWYER MEDIA, INC. AND ITS SUBSIDIARIES; AND (II) "HOLDINGS" REFERS TO AMERICAN
LAWYER MEDIA HOLDINGS, INC., WHICH IS THE PARENT COMPANY OF THE COMPANY, AND TO
HOLDINGS' PREDECESSOR, CRANBERRY PARTNERS, LLC. REFERENCES HEREIN TO THE
COMPANY'S ESTIMATED CIRCULATION INCLUDE TOTAL PAID AND FREE CIRCULATION FOR ALL
OF THE COMPANY'S PERIODICALS. REFERENCES HEREIN TO READERSHIP INCLUDE ESTIMATED
CIRCULATION PLUS COMBINED PASS-ALONG READERSHIP UNADJUSTED FOR ANY OVERLAP THAT
EXISTS AMONG READERS OF THE COMPANY'S VARIOUS PUBLICATIONS.
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS. SUCH STATEMENTS ARE BASED
UPON THE BELIEFS AND ASSUMPTIONS OF, AND ON INFORMATION AVAILABLE TO, THE
MANAGEMENT OF THE COMPANY AT THE TIME SUCH STATEMENTS ARE MADE. THE FOLLOWING
ARE OR MAY CONSTITUTE FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995: (I) STATEMENTS PRECEDED BY OR
FOLLOWED BY OR THAT INCLUDE THE WORDS "MAY," "WILL," "COULD," "SHOULD,"
"BELIEVE," "EXPECT," "FUTURE," "POTENTIAL," "ANTICIPATE," "INTEND," "PLAN,"
"ESTIMATE" OR "CONTINUE" OR THE NEGATIVE OR OTHER VARIATIONS THEREOF AND
(II) STATEMENTS REGARDING MATTERS THAT ARE NOT HISTORICAL FACTS. SUCH
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO VARIOUS RISKS AND UNCERTAINTIES,
INCLUDING WITHOUT LIMITATION, (I) GENERAL ECONOMIC CONDITIONS AND DEVELOPMENTS
IN THE LEGAL SERVICES INDUSTRY OR THE PUBLISHING INDUSTRY, (II) PRODUCT DEMAND
AND PRICING, (III) THE SUCCESS OF NEW INITIATIVES, (IV) INCREASED COMPETITION
WITH RESPECT TO SERVICES IT PROVIDES AND FOR ADVERTISING AND SUBSCRIPTION
REVENUE, AND (V) SUFFICIENCY OF CASH FLOW TO FUND ITS OPERATIONS.
COMPANY OVERVIEW
The Company publishes 22 periodicals serving legal and business
professionals, including several leading national periodicals and regional
publications serving four of the five largest state legal markets. The Company's
nationally-recognized periodicals include THE AMERICAN LAWYER, a monthly
magazine containing articles and features targeted to attorneys practicing in
large law firms, and THE NATIONAL LAW JOURNAL, the nation's largest selling
legal newspaper, which covers the law, lawyers and the business of the legal
profession. The Company's regional publications are led by the NEW YORK LAW
JOURNAL, which has the largest paid circulation of any regional legal newspaper
in the United States. In addition to the NEW YORK LAW JOURNAL, the Company
publishes seven other daily newspapers serving Atlanta, Philadelphia, Northern
California, Miami, Fort Lauderdale and Palm Beach, as well as eight weekly
newspapers serving New Jersey, Delaware, Texas, Washington, D.C., Connecticut,
California, Georgia and Pennsylvania. In September 1999, the Company launched
THE DAILY DEAL, a daily publication and Web site that focuses on international
deals and the deal-making community of bankers, accountants, lawyers, venture
capitalists and business professionals, which the Company sold in March 2000.
See RECENT DEVELOPMENTS.
In addition to the periodicals referred to above, the Company publishes
CORPORATE COUNSEL, a leading magazine for corporate in-house attorneys, LAW
TECHNOLOGY NEWS and AMLAW TECH, two leading legal technology magazines, as well
as IP WORLDWIDE, a leading specialty magazine focusing on intellectual property.
The Company also creates and packages information for attorneys and business
professionals through its Professional Information division. This business
includes a portfolio of publications covering a variety of specialized legal
interests and practice areas, including 37 newsletters and 111 books on topics
of national and regional interest. The Company also publishes various
directories used by legal professionals.
The Company, under its LegalTech trademark, is a leading producer of trade
shows and conferences relating to law practice technology. In addition, the
Company organizes and sponsors numerous professional seminars and conferences
that cover issues of current legal interest.
The Company derives its revenues principally from advertising and
subscriptions, with additional revenues generated by its Professional
Information division and its LegalTech and seminars divisions. For
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the twelve months ended December 31, 1999, approximately 57% of the Company's
revenues were from advertising, 18% were from subscriptions, 24% were from
ancillary products and services and 1% were from Internet services.
At the beginning of 1999, the Company's Internet business consisted of
various web sites that offered a myriad of legal resources to serve lawyers,
legal professionals, law students, business people and consumers. Its Law News
Network site (www.lawnewsnetwork.com), launched in December 1998, provided
updated legal news and information from the Company's publications as well as
original content, online advertising and specialized legal subscription
services. The Company's Internet business also included Law Journal Information
Systems, a division which included MA/3000, a case tracking and docketing
software package that allows litigators to track court activity published in the
NEW YORK LAW JOURNAL, and QDS, which offers subscribers faxed copies on request
of both published and unpublished state and federal court opinions for New York.
In May 1999, the Company reorganized its Internet business under a
wholly-owned subsidiary, Professional On-Line, Inc. In July 1999, the Company
completed the sale of its Internet business to Law.com, Inc. ("Law.com"), the
holding company for a leading Internet destination for legal information,
e-commerce and e-services, for $1.0 million in cash and the Company retained a
preferred stock interest with a face amount of $3.75 million. The sale consisted
of various national and regional web sites of Law News Network, the uniform
resource locators for these web sites and substantially all of the Law Journal
Information Systems division. In December 1999, Law.com redeemed all of the
preferred stock for $3.75 million plus accrued dividends.
As part of the sale, the Company entered into a license agreement with
Law.com, which provides for an exclusive license to Law.com of digital and
electronic distribution rights to all of the Company's content through 2004.
PRODUCT LINES
PERIODICALS. The Company's newspaper and magazine business publishes 22
national, regional and local periodicals that serve legal and business
professionals. The Company's periodicals have a combined circulation of
approximately 300,000. The subscription renewal rate for the Company's
periodicals has historically averaged approximately 80%.
NEWSPAPERS. The Company's newspapers provide news, features, analysis and
commentary about the world of law and advocacy. Feature articles and stories
covering the local, state and federal courts and law firms are supplemented by
reports and analyses of cutting-edge legal issues. The Company is committed to
providing high quality and balanced coverage of its local markets. Most of the
Company's newspapers serve as the newspaper of record for their respective legal
markets. Lawyers look to the newspapers for reports on local court rulings and
opinions, as well as information regarding local court dockets.
As of December 31, 1999, the Company published sixteen daily and weekly
newspapers including THE NATIONAL LAW JOURNAL, the leading national legal
newspaper in the United States, and the NEW YORK LAW JOURNAL, which has the
largest circulation of any regional legal newspaper. In the aggregate, the
Company's newspapers serve nine state markets, including New York, New Jersey,
Pennsylvania, Georgia, Florida, Texas, California, Connecticut and Delaware, and
the District of Columbia, which cover approximately 45% of all active attorneys
in the United States. Each of the Company's regional newspapers has a
significant presence in its respective market.
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The following table sets forth information regarding the Company's
newspapers:
NEWSPAPERS
ESTIMATED
YEAR OF TOTAL TOTAL
TITLE MARKET FOUNDING CIRCULATION(1) READERSHIP(2)
- ----- ------------------- -------- -------------- -------------
WEEKLY NEWSPAPERS
THE NATIONAL LAW JOURNAL.............. National 1978 31,000 140,000
NEW JERSEY LAW JOURNAL................ New Jersey 1878 9,569 59,700
TEXAS LAWYER.......................... Texas 1985 10,341 65,100
LEGAL TIMES........................... Washington, D.C. 1978 10,776 75,600
THE CONNECTICUT LAW TRIBUNE........... Connecticut 1974 3,228 23,800
DELAWARE LAW WEEKLY................... Delaware 1998 500 2,000
PENNSYLVANIA LAW WEEKLY............... Pennsylvania 1978 3,100 13,020
CALIFORNIA LAW WEEK(3)................ California 1999 12,000 N/A(4)
DAILY NEWSPAPERS
NEW YORK LAW JOURNAL.................. New York 1888 15,425 66,700
THE RECORDER.......................... Northern California 1877 8,027 48,500
THE LEGAL INTELLIGENCER............... Pennsylvania 1843 3,050 12,810
FULTON COUNTY DAILY REPORT............ Georgia 1890 6,615 37,700
MIAMI DAILY BUSINESS REVIEW........... South Florida 1926 5,148 37,800
BROWARD DAILY BUSINESS REVIEW......... South Florida 1926 2,772 20,400
PALM BEACH DAILY BUSINESS REVIEW...... South Florida 1926 1,990 14,700
THE DAILY DEAL(5)..................... National 1999 18,000 N/A(4)
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(1) References in the table above to the Company's total circulation include
total paid and free circulation.
(2) References in the table above to the Company's estimated total readership
include total circulation plus combined pass-along readership unadjusted for
any overlap that exists among readers of the Company's various publications.
(3) CALIFORNIA LAW WEEK ceased publishing in December 1999.
(4) For these recently launched publications, insufficient information is
currently available.
(5) In March 2000, the Company sold THE DAILY DEAL. See RECENT DEVELOPMENTS.
MAGAZINES. THE AMERICAN LAWYER anchors the Company's magazine portfolio.
Founded in 1979, THE AMERICAN LAWYER is a glossy magazine that features stories
on the strategies, successes, failures and personalities of the most important
figures in the legal world. The target audience for the publication is attorneys
practicing in large law firms and corporate legal departments across the United
States. THE AMERICAN LAWYER has been the winner of National Magazine awards
granted by the American Society of Magazine Editors four times, and has been
nominated for 22 such awards since its founding.
The Company's other magazines focus on specific practice areas or segments
within the legal profession and certain topics applicable to the business of
law. The Company's specialty legal magazines include CORPORATE COUNSEL, one of
the nation's largest magazines focused on issues of importance to in-house
lawyers at large and mid-size corporations, and IP WORLDWIDE, which covers
developments in intellectual property law. The Company also publishes two
leading technology magazines targeted to the legal community, AMLAW TECH and LAW
TECHNOLOGY NEWS, which focus on information technology and its applications to
the practice of law. AMLAW TECH is targeted toward persons at law firms with
purchase-
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making authority and is distributed to all readers of THE AMERICAN LAWYER, while
LAW TECHNOLOGY NEWS is targeted toward attorneys and information services
departments in law offices. At the end of 1999, the Company introduced L
magazine, a law and lifestyle quarterly publication for law students.
The Company publishes the following six magazines:
MAGAZINES
ESTIMATED
YEAR OF TOTAL TOTAL
TITLE FOUNDING FREQUENCY CIRCULATION(1) READERSHIP(2)
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THE AMERICAN LAWYER................. 1979 12 times per year 16,000 118,400
AMLAW TECH.......................... 1996 4 times per year 16,000 118,400(3)
CORPORATE COUNSEL................... 1994 11 times per year 35,000 70,000(4)
IP WORLDWIDE........................ 1995 6 times per year 10,000 20,000(4)
LAW TECHNOLOGY NEWS................. 1993 14 times per year 47,000 94,000(4)
L................................... 1999 4 times per year(5) 60,000 120,000(4)
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(1) References in the table above to the Company's total circulation include
total paid and free circulation.
(2) References in the table above to the Company's estimated total readership
include total circulation plus combined pass-along readership unadjusted for
any overlap that exists among readers of the Company's various publications.
(3) AMLAW TECH is distributed for free to subscribers of THE AMERICAN LAWYER.
(4) These magazines are distributed primarily free of charge. For these
publications, the Company assumes only two readers per copy.
(5) L was only distributed once in 1999, as it was founded in December.
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NEWSLETTERS. The Company's newsletter division publishes 37 newsletters
that cover specialized legal practice areas. Circulation for the Company's
newsletters ranges from approximately 250 to 2,000, with an average circulation
of over 700. The total number of paid subscribers for all newsletters was
approximately 18,200 as of December 31, 1999. In February 2000, the Company
discontinued publication of four of its weekly newsletters. See RECENT
DEVELOPMENTS. The following table sets forth a list of the Company's newsletters
as of December 31, 1999:
NEWSLETTERS
Accounting for Law Firms
The Bankruptcy Strategist
Broadcast Law Report
Business Crimes Bulletin
Commercial Leasing Law & Strategy
Corporate Control Alert
Corporate Law Weekly
The Corporate Counsellor
Criminal Justice Weekly
Employment Law Strategist
Employment Law Weekly
Entertainment Law & Finance
Environmental Compliance and Litigation Strategy
Equipment Leasing
E-Commerce Law Weekly
E-Commerce Law & Strategy
e Securities
Fen Phen Litigation Strategist
Healthcare Fraud and Abuse
The Intellectual Property Law Strategist
The Internet Newsletter: Legal & Business Aspects
IP Law Weekly
Law Firm Partnership & Benefits Report
Leader's Franchising Business & Law Alert
Legal Tech
Managed Care Law Strategist
Marketing for Lawyers
The Matrimonial Strategist
Medical Malpractice Law & Strategy
Medical/Legal Aspects of Breast Implants
New York Employment Law & Practice
New York Family Law Monthly
New York Real Estate Law Reporter
Personal Injury Reporter
Product Liability Law & Strategy
Securities Law Weekly
Shopping Center Law Report
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BOOKS. The Company currently publishes 111 books on a broad array of legal
topics. These books generally focus on practical legal subjects that arise in
the daily professional lives of lawyers. Most of the Company's books are updated
once or twice per year with inserts to keep the material current. The Company
focuses on publishing books that cover particularly dynamic areas of law that
lend themselves to frequent supplementation.
The Company most often develops the concept for a new book and then solicits
an author to write the text. However, in certain cases, the Company has received
unsolicited manuscripts which it has ultimately published. Authors who have
written books for the Company include prominent attorneys and judges such as
Martin Lipton, Judge Jed Rakoff, James Freund and James Goodale. The following
tables set forth the Company's current offering of books:
BOOKS
STATE AND LOCAL SUBJECTS
Encyclopedia of New Jersey Causes of Action
Georgia Bench Book
1999 Harris County Bench Book Supplement (Texas)
Texas Auto Insurance Policy Annotated
Marketing and Maintaining a Family Law Mediation Practice
Mediation: A Texas Practice Guide
New Jersey Brownfields Law
New Jersey Employment Law
New Jersey Federal Civil Procedure
New Jersey Insurance Law
New Jersey Product Liability Law
New York County Bench Book 2000
Pennsylvania Tax Handbook
Pennsylvania District and County Reports
Pennsylvania Court Rules
Pennsylvania: The Legal Directory
Pleadings and Pretrial Practice (Connecticut)
Representing Clients in Mediation
1999 Tarrant County Bench Book (Texas)
1999-2000 Texas Criminal Codes and Rules, Annotated
2000 Assigned Judges Bench Book
NATIONAL SUBJECTS
A Practical Guide to Equal Employment Opportunity
A Practical Guide to the Occupational Safety and Health Act
Acquisitions Under the Hart-Scott-Rodino Antitrust Improvements Act
All About Cable
Alternative Dispute Resolution in the Work Place
Anatomy of a Merger: Strategies and Techniques for Negotiating Corporate
Acquisitions
Antitrust Basics
Antitrust: An Economic Approach
Changing the Situs of a Trust
Class Actions: The Law of 50 States
Communications Law and Practice
Computer Law: Drafting and Negotiating Forms and Agreements
Corporate Internal Investigations
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Corporate Privileges and Confidential Information
Corporate Sentencing Guidelines: Compliance and Mitigation
Divorce, Separation and the Distribution of Property
Doing Business on the Internet: Forms and Analysis
Due Diligence in Business Transactions
Employee Benefits Law: ERISA and Beyond
Encyclopedia of Matrimonial Clauses
Environmental Enforcement: Civil and Criminal
Environmental Law Lexicon
Environmental Regulation of Real Property
Estate Planning
Executive Compensation
Executive Stock Options and Stock Appreciation Rights
Federal Bank Holding Company Law
Federal Rules of Civil Procedure
Federal Taxation of Intellectual Property Transfers
Federal Taxation of Real Estate
Federal Taxation of S Corporations
Federal Trade Commission: Law, Practice and Procedure
Ferrara on Insider Trading and The Wall
Franchising: Realities and Remedies
Franchising: Realities and Remedies Forms Volume
Going Private
Grand Jury Practice
Ground Leases and Land Acquisition Contracts
Health Care Fraud: Enforcement and Compliance
Hospital Liability
"I'd Rather Do It Myself": How to Set Up Your Own Law Firm
Insurance Coverage Disputes
Intellectual Property Law: Commercial, Creative and Industrial Property
Intellectual Property Licensing Forms and Analysis
Internet and Online Law
Law Firm Accounting and Financial Management
Law Firm Partnership Agreements
Lawyering: A Realistic Approach to Legal Practice
Legal Research and Law Library Management
Lender Liability and Banking Litigation
Licensing of Intellectual Property
Limited Liability Companies and Limited Liability Partnerships
Marketing the Law Firm: Business Development Techniques
Maximizing Law Firm Profitability: Hiring, Training and Developing
Productive Lawyers
Merit Systems Protection Board: Rights and Remedies
Model Terms of Engagement
Modern Visual Evidence
Multimedia Law: Forms and Analysis
Negotiated Acquisitions of Companies, Subsidiaries and Divisions
Negotiating and Drafting Office Leases
Negotiation: Strategies for Law and Business
Partnership and Joint Venture Agreements
Private Equity Funds: Business Structure & Operations
Private Real Estate Syndications
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Product Liability
Product Liability: Winning Strategies and Techniques
Products Liability: Recreation and Sports Equipment
Real Estate, A Guide for the Profession
Real Estate Financing
Reorganizations under Chapter 11 of the Bankruptcy Code
Representing High-Tech Companies
RICO: Civil and Criminal, Law and Strategy
Savings Institutions: Mergers, Acquisitions and Conversions
Securities Practice and Electronic Technology
Securities Regulation: Liabilities and Remedies
Sex Discrimination and Sexual Harassment in the Workplace
Shareholder Derivative Litigation: Besieging the Board
Shopping Center and Store Leases
Start-Up and Emerging Companies: Planning, Financing and Operating the
Successful Business
State Antitrust Law
Structured Settlements and Periodic Payment Judgments
Takeovers and Freezeouts
Tax Aspects of Divorce and Separation
The Law and Practice of Secured Transactions: Working with Article 9
The Preparation and Trial of Medical Malpractice Cases
Trade Secrets
Travel Law
Use of Statistics in Equal Employment Opportunity Litigation
White Collar Crime: Business and Regulatory Offenses
Winning Attorney's Fees from the U.S. Government
CONFERENCES AND SEMINARS. Under its LegalTech tradename, the Company
produces conferences and exhibitions relating to law practice technology in New
York, Los Angeles, Chicago, Miami, Atlanta and Houston. In 2000, the Company
plans to produce Legal Tech shows in New York, Los Angeles, Chicago, Miami,
Atlanta, Dallas, Toronto, Canada and London, England. The conferences are
generally three-day events that include vendor exhibits, a seminar program and a
variety of workshops and focus sessions. Attendees typically include attorneys
in private practice, corporate counsel, law firm administrators and information
technology personnel, while exhibitors include a variety of software, hardware,
publishing and other technology product related companies. The Company conducts
a number of seminars for lawyers and other professionals in related fields. The
Company's seminars complement its other products and services both by serving as
powerful marketing vehicles for the Company's existing books and newsletters and
by generating ideas for new seminars, books and newsletters. Seminars also
introduce the Company to lawyers who may subsequently write articles or books
for the Company. The following table sets forth the seminars and conferences
held in 1999:
SEMINARS
Civil Litigation Practice
Year 2000 Litigation
Acquisitions Of Subsidiaries, Divisions and Private Companies
Distribution and Dealer Termination
Failure to Diagnose Breast Cancer
Computer Law
General Counsel Conference
Negotiating Joint Ventures and Strategic Alliances
Failure to Diagnose Fetal Distress
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Counseling Start-up and Emerging Companies
Negotiating the Modern Lease
Law Firm Marketing Beyond the New Millennium
Negotiating Contracts in the Entertainment Industry
Trial of Obstetrical Malpractice Case
Negotiating Corporate Acquisitions
Internet Security Summit
International Money Laundering
China Update
Avoiding Ethical Pitfalls
Facing Experienced Practitioners
Ethics in the 21(st) Century
Ethics for Corporate Lawyers and Business Litigators
Internet and Electronic Commerce
CONFERENCES
LegalTech New York (January)
LegalTech Miami
LegalTech Los Angeles
LegalTech New York (September)
LegalTech Chicago
LegalTech Houston
LegalTech Atlanta
PRINTING AND DISTRIBUTION
Layouts for the Company's publications are prepared in-house, while the
large majority of the Company's printing activities, and all of its distribution
activities, are outsourced.
COMPETITION
The Company competes for advertising and subscription revenues with
publishers of special-interest legal newspapers and magazines with similar
editorial content. However, in most of the Company's markets, its newspaper is
the only newspaper focused on serving the legal community. The Company also
competes for advertising revenues with other national legal publications, as
well as general-interest magazines and other forms of media, including broadcast
and cable television, radio, direct marketing and electronic media. Factors that
may affect competition for advertisers include effective costs of such
advertising compared to other forms of media, and the size and characteristics
of the readership of the Company's publications. The Company also faces
significant competition from other legal publishers and legal service providers
in all media.
INTELLECTUAL PROPERTY
The Company owns a number of registered and unregistered trademarks for use
in connection with its business, including trademarks in the titles of its major
periodicals such as THE AMERICAN LAWYER, CORPORATE COUNSEL, THE NATIONAL LAW
JOURNAL and NEW YORK LAW JOURNAL. Provided that trademarks remain in continuous
use in connection with similar goods or services, their term can be perpetual,
subject, with respect to registered trademarks, to the timely renewal of such
registrations in the United States Patent and Trademark Office.
The Company approaches copyright ownership with respect to its publications
in the same manner as is generally customary within the publishing industry.
Consequently, the Company owns the copyright in all
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of its newspapers, magazines and newsletters, as compilations, and also owns the
copyright in most of its books. With respect to the specific articles in its
publications, the Company generally obtains the assignment of all right, title
and interest in original materials created by the Company's full-time
journalists and editors as well as by paid contributors. For articles authored
by outside contributors, the Company generally obtains only the exclusive
"first-time publication" and non-exclusive republication rights. Judicial
opinions, court schedules and docketing information are provided to the Company
directly by the courts, on a non-exclusive basis, and are public information. In
connection with the sale of the Company's Internet business to Law.com, the
Company entered into an exclusive content license with Law.com which grants
Law.com the right to publish all Company content in electronic or digital
format. The license runs through 2004.
The Company licenses the content of certain of its publications and forms to
third parties, including West Publishing Company and LEXIS/NEXIS, on a
non-exclusive basis, for republication and dissemination on electronic databases
marketed by the licensees. After the expiration of their initial terms (the
latest of which is September 2002 and May 2002, respectively), the licenses
automatically renew, subject to either parties' right to terminate at the end of
each subsequent term.
Some of the Company's products, such as the DAILY DECISION SERVICE and PICS,
which offers subscribers faxed copies on request of both published and
unpublished state and federal court opinions for New Jersey and Pennsylvania,
respectively, utilize the extensive databases of court decisions compiled by the
Company. The Company also has extensive subscriber and other customer databases
which it believes would be extremely difficult to replicate. The Company
attempts to protect these databases and lists as trade secrets by restricting
access thereto and/or by the use of non-disclosure agreements. There can be no
assurance, however, that the means taken to protect the confidentiality of these
items will be sufficient, or that others will not independently develop similar
databases and customer lists.
EMPLOYEES AND LABOR RELATIONS
As of December 31, 1999, the Company employed approximately 960 full-time
employees, 21 of whom are subject to a single collective bargaining agreement.
The Company believes that its relations with its employees are satisfactory.
SIGNIFICANT TRANSACTIONS
SALE OF INTERNET ASSETS TO LAW.COM. In July 1999, the Company sold the
common stock of its wholly-owned subsidiary, Professional On-Line, Inc., which
held the Company's Internet business, to Law.com for $1.0 million in cash and
the Company retained a preferred stock interest with a face amount of
$3.75 million. In December 1999, Law.com redeemed the preferred stock for
$3.75 million plus accrued dividends of $187,500. The Company and Law.com
entered into an exclusive content license which grants Law.Com the right to
publish all Company content in electronic or digital format through 2004 as part
of the transaction. Law.com is the holding company for a leading Internet
destination for legal information, e-commerce and e-services whose stockholders
include substantially all of the stockholders of Holdings.
RECENT DEVELOPMENTS
RESTRUCTURING OF WEEKLY NEWSLETTER DIVISION. In February 2000, the Company
restructured its weekly newsletter division by discontinuing publication of four
of its weekly newsletters. The Company will continue to publish IP LAW WEEKLY
and E-COMMERCE LAW WEEKLY which serve reader demand for information in these two
growing practice areas.
SALE OF THE BUSINESS OF THE DAILY DEAL AND CORPORATE CONTROL ALERT. On
March 28, 2000, the Company sold the business of the Company and certain of the
Company's wholly-owned subsidiaries constituting THE DAILY DEAL and CORPORATE
CONTROL ALERT (the "Business") to TDD, L.L.C., a newly formed limited liability
company (the "Purchaser"), owned by substantially all of the same stockholders
as Holdings. The
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consideration for the sale was $7.5 million in cash and a $2.5 million face
amount of a membership interest in the Purchaser with a preferred return (the
"Preferred Membership Interest"). In addition, the Purchaser will pay the
Company the aggregate amount of operating losses incurred by the Company in
connection with the operation of the Business for the month of March 2000. The
Preferred Membership Interest accretes at 12.25% compounded annually, is
convertible into 3.0% of the common equity of the Purchaser, has anti-dilution
protection for dividends in the form of additional equity interests,
combinations, splits and reclassifications and has anti-dilution protection up
to the first $25.0 million of equity capital including the Preferred Membership
Interest issued by the Purchaser.
STOCK SPLIT. On March 7, 2000, The Board of Directors of Holdings approved
a 10-for-1 split of its common stock, par value $0.01 per share. Prior to the
stock split, Holdings had 200,000 shares of common stock authorized and 120,000
shares of common stock outstanding. After giving effect to the stock split,
Holdings has 2,000,000 shares of common stock authorized and 1,200,000 shares of
common stock outstanding.
ITEM 2. PROPERTIES
The Company operates from various locations throughout the United States.
Its corporate headquarters are based in New York. Information relating to the
Company's corporate headquarters and other significant regional offices which
are owned or leased is set forth in the following table:
STREET ADDRESS CITY/STATE SQUARE FOOTAGE LEASE EXPIRATION
- -------------- ------------------- -------------- ----------------
345 Park Avenue South....................... New York, NY 55,000 Sept. 2008
105 Madison Avenue.......................... New York, NY 50,000 Sept. 2008
238 Mulberry Street......................... Newark, NJ 7,022 Dec. 2006
10 United Nations Plaza..................... San Francisco, CA 14,632 Sept. 2009
800 Wilshire Blvd........................... Los Angeles, CA 2,624 May 2004
900 Jackson Street.......................... Dallas, TX 10,190 Dec. 2003
1010 Brazos................................. Austin, TX 1,300 June 2004
7000 Regency Square, Suites 242-243......... Houston, TX 3000 June 2004
190 Pryor Street, S.W....................... Atlanta, GA 20,000 Owned
1730 M Street, N.W.......................... Washington, DC 11,113 Mar. 2002
1730 K Street............................... Washington, D.C. 5,782 Mar. 2001
1 Post Road................................. Fairfield, CT 6,520 Dec. 2001
363 Main Street............................. Hartford, CT 414 Dec. 2001
1 S.E. Third Avenue......................... Miami, FL 19,742 Sept. 2004
150 N.E. 7(th) Street....................... Miami, FL 17,701 Sept. 2004
633 South Andrews Avenue.................... Fort Lauderdale, FL 3,408 Jan. 2003
330 Clematis Street......................... W. Palm Beach, FL 2,927 Jan. 2004
901 Market Street........................... Wilmington, DE 1,089 Aug. 2001
1617 JFK Blvd............................... Philadelphia, PA 11,997 July 2001
222 Friend Street........................... Boston, MA 1,533 Dec. 2002
321 S. Plymouth Court, Suite 800............ Chicago, IL 600 Oct. 2000
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to various litigation matters incidental to the
conduct of its business. The Company does not believe that the outcome of any of
the matters in which it is currently involved will have a material adverse
effect on its financial condition or on the results of its operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MARKETS
The Company is a wholly-owned subsidiary of American Lawyer Media
Holdings, Inc. There is no public trading market for the Company's common stock.
The Company has never paid any cash dividends on its common stock.
ITEM 6. SELECTED FINANCIAL DATA
In August 1997, U.S. Equity Partners, L.P. and its affiliates and certain
other investors controlled by or managed by WP Management Partners, LLC., the
merchant banking arm of Wasserstein Perella Group, Inc. (the "Investors"),
through Holdings, acquired substantially all of the assets and assumed certain
of the liabilities related to American Lawyer Media, L.P. (the "ALM
Acquisition"), and in December 1997, Holdings acquired all of the issued and
outstanding capital stock of National Law Publishing Company, Inc. (the "NLP
Acquisition"). The two acquisitions (the "Acquisitions") have been accounted for
using the purchase method of accounting. The results of operations of American
Lawyer Media, L.P. have been included in the financial statements of the Company
since August 1, 1997, the effective date of the ALM Acquisition, and the results
of operations of National Law Publishing Company have been included in the
financial statements of the Company since December 22, 1997, the closing date of
the NLP Acquisition. As a result, the Acquisitions affect the Company's results
of operations in certain significant respects. In connection with the ALM
Acquisition, the purchase price was $63.0 million and the excess of the purchase
price over the book value of net tangible assets acquired was $67.7 million. The
aggregate purchase price for the NLP Acquisition was $203.2 million, and the
excess of the purchase price over the book value of net tangible assets acquired
was $257.6 million. The excess purchase price of both Acquisitions has been
allocated to the tangible and intangible assets acquired by the Company based
upon their respective fair values as of the acquisition date.
The following tables present selected historical financial information
(i) for American Lawyer Media, L.P. and its subsidiaries ("Old ALM"), as of and
for the years ended December 31, 1995 and 1996, (ii) for National Law Publishing
Company, Inc. and its subsidiaries ("NLP"), as of and for the years ended
December 31, 1995 and 1996, (iii) for Old ALM, as of and for the seven months
ended July 31, 1997, (iv) for the Company, as of and for the five months ended
December 31, 1997 and the years ended December 31, 1998 and 1999, and (v) for
NLP, as of and for the period from January 1, 1997 through December 21, 1997.
The financial data for the Company, as of and for the five months ended
December 31, 1997 and the years ended December 31, 1998 and 1999, and the
financial data for Old ALM for the years ended December 31, 1995 and 1996 and
the seven months ended July 31, 1997 were derived from financial statements
audited by Arthur Andersen LLP. The financial data for NLP as of and for the
period from January 1, 1997 through December 21, 1997 were derived from
financial statements audited by Arthur Andersen LLP and financial data for NLP
for the years ended December 31, 1995 and 1996 were derived from financial
statements audited by Leslie Sufrin and Company, P.C. Results of operations for
the interim periods presented are not necessarily indicative of the results of
operations for the full year. The selected financial information should be read
in conjunction with MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS and the historical financial statements and notes
thereto included elsewhere in this Report. See INDEX TO FINANCIAL STATEMENTS.
13
AMERICAN LAWYER MEDIA, L.P.
AND AMERICAN LAWYER MEDIA, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
PREDECESSOR AMERICAN LAWYER MEDIA, INC.
--------------------------------------------- ---------------------------------------------
TWELVE TWELVE SEVEN FIVE
MONTHS MONTHS MONTHS MONTHS
ENDED ENDED ENDED ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, JULY 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1995 1996 1997 1997 1998 1999
------------- ------------- ------------- ------------- ------------- -------------
OPERATING DATA:
Revenues:
Periodicals:
Advertising................. $ 25,037 $ 26,659 $ 18,146 $ 13,410 $ 67,510 $ 75,887
Subscription................ 10,884 11,304 6,719 5,260 23,172 23,570
Ancillary products and
services.................... 8,387 8,467 4,532 4,142 28,208 31,791
Internet services............. 3,238 5,474 2,148 1,162 2,639 1,244
-------- -------- -------- -------- --------- ---------
Total revenues............ 47,546 51,904 31,545 23,974 121,529 132,492
-------- -------- -------- -------- --------- ---------
Operating costs and expenses:
Editorial....................... 7,073 7,141 4,023 3,323 15,523 22,940
Production and distribution..... 12,587 12,469 6,919 5,766 26,266 29,821
Selling......................... 6,913 7,479 4,640 3,656 19,002 27,806
General and administrative...... 16,506 16,829 9,531 7,145 30,012 32,029
Internet services............... 10,854 11,886 6,464 2,988 4,667 3,313
Depreciation and amortization... 2,680 2,488 1,590 3,273 26,302 27,298
Shutdown of ALM Internet
services...................... -- -- -- 3,000 -- --
-------- -------- -------- -------- --------- ---------
Total operating costs and
expenses................ 56,613 58,292 33,167 29,151 121,772 143,207
-------- -------- -------- -------- --------- ---------
Operating loss.................. (9,067) (6,388) (1,622) (5,177) (243) (10,715)
Interest expense................ (1,384) (1,972) (1,420) (2,420) (18,346) (18,962)
Other income.................... -- -- -- -- -- 187
Benefit for income tax.......... -- -- -- -- 3,403 3,078
-------- -------- -------- -------- --------- ---------
Loss before minority interest... (10,451) (8,360) (3,042) (7,597) (15,186) (26,412)
Minority interest............... 2,334 172 -- -- -- --
-------- -------- -------- -------- --------- ---------
Net loss.................. $ (8,117) $ (8,188) $ (3,042) $ (7,597) $ (15,186) $ (26,412)
======== ======== ======== ======== ========= =========
BALANCE SHEET DATA:
(At end of period)
Working deficit................. $ (7,066) $ (7,009) $ (5,895) $ (8,676) $ (14,844) $ (14,257)
Total assets.................... 19,313 19,482 18,982 359,958 366,775 348,414
Long-term debt (including
current maturities)........... 22,114 30,150 34,742 175,000 183,500 193,300
Partners' (deficit) and
stockholder's equity.......... (19,759) (26,300) (29,342) 101,178 100,992 74,320
OTHER DATA:
EBITDA(1):
Periodicals and ancillary
products and services......... $ 1,229 $ 2,512 $ 4,284 $ 2,922 $ 28,087 $ 18,652
Internet services............... (7,616) (6,412) (4,316) (4,826) (2,028) (2,069)
-------- -------- -------- -------- --------- ---------
Total..................... $ (6,387) $ (3,900) $ (32) $ (1,904) $ 26,059 $ 16,583
======== ======== ======== ======== ========= =========
Capital expenditures:
Periodicals and ancillary
products and services......... $ 864 $ 1,118 $ 439 $ 357 $ 3,767 $ 11,196
Internet services............... 617 1,084 1,532 7 144 90
-------- -------- -------- -------- --------- ---------
Total..................... $ 1,481 $ 2,202 $ 1,971 $ 364 $ 3,911 $ 11,286
======== ======== ======== ======== ========= =========
- ------------------------------
(1) "EBITDA" is defined as income before interest, income taxes, depreciation
and amortization and gain on sale of assets. EBITDA is not a measure of
performance under generally accepted accounting principles ("GAAP"). Items
excluded from income in calculating EBITDA are significant components in
understanding and evaluating Old ALM's and ALM's financial performance.
While EBITDA should not be considered in isolation or as a substitute for
net income, cash flows from operating activities and other income or cash
flow statement data prepared in accordance with GAAP or as a measure of
profitability or liquidity, management understands that EBITDA is
customarily used in evaluating publishing companies. The EBITDA measures
presented herein may not be comparable to similarly titled measures of other
companies.
14
NATIONAL LAW PUBLISHING COMPANY, INC.
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS)
PERIOD FROM
YEARS ENDED JANUARY 1, 1997
DECEMBER 31, THROUGH
------------------- DECEMBER 21,
1995 1996 1997
-------- -------- ---------------
OPERATING DATA:
Revenues:
Periodicals:
Advertising............................................. $21,387 $23,319 $26,402
Subscription............................................ 9,694 9,759 9,504
Ancillary products and services........................... 12,729 13,398 13,926
Internet services......................................... 264 747 1,109
------- ------- -------
Total revenues........................................ 44,074 47,223 50,941
------- ------- -------
Operating costs and expenses:
Editorial................................................. 5,778 5,929 5,837
Production and distribution............................... 8,146 8,679 9,872
Selling................................................... 9,776 8,991 8,211
General and administrative................................ 7,620 8,047 8,722
Internet services......................................... 2,947 1,704 1,657
Depreciation and amortization............................. 6,329 7,487 7,283
Special compensation charge............................... -- -- 6,926
------- ------- -------
Total operating costs and expenses.................... 40,596 40,837 48,508
------- ------- -------
Operating income............................................ 3,478 6,386 2,433
Interest expense, net....................................... (5,458) (6,013) (5,137)
Other income (expense)...................................... (211) 181 --
------- ------- -------
(Loss) income before income taxes........................... (2,191) 554 (2,704)
Benefit (provision) for income taxes........................ 523 (3,007) (2,508)
Net loss.............................................. $(1,668) $(2,453) $(5,212)
======= ======= =======
BALANCE SHEET DATA: (at end of period)
Working deficit............................................. $(4,717) $(2,081) $(2,204)
Total assets................................................ 154,125 147,311 139,610
Long-term debt (including current maturities)............... 70,900 70,300 59,500
Stockholder's equity........................................ 65,620 63,167 64,782
OTHER DATA:
EBITDA(1):
Periodicals and ancillary products and services............. $12,490 $14,830 $10,264
Internet services........................................... (2,683) (957) (548)
------- ------- -------
Total................................................. $ 9,807 $13,873 $ 9,716
======= ======= =======
Capital expenditures:
Periodicals and ancillary products and services............. $ 436 $ 486 $ 473
Internet services........................................... 172 26 42
------- ------- -------
Total................................................. $ 608 $ 512 $ 515
======= ======= =======
- ------------------------------
(1) EBITDA is not a measure of performance under GAAP. Items excluded from
income in calculating EBITDA are significant components in understanding and
evaluating NLP's financial performance. While EBITDA should not be
considered in isolation or as a substitute for net income, cash flows from
operating activities and other income or cash flow statement data prepared
in accordance with GAAP or as a measure of profitability or liquidity,
management understands that EBITDA is customarily used in evaluating
publishing companies. The EBITDA measures presented herein may not be
comparable to similarly titled measures of other companies.
15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following discussion should be read in conjunction with the SELECTED
FINANCIAL DATA and the historical consolidated financial statements of the
Company, including the notes thereto, included elsewhere in this Form 10-K.
OVERVIEW
In August and December 1997, the Investors consummated the ALM Acquisition
and the NLP Acquisition, respectively. The Acquisitions have been accounted for
using the purchase method of accounting. The results of operations of Old ALM
have been included in the financial statements of the Company since August 1,
1997, the effective date of the ALM Acquisition, and the results of operations
of NLP have been included in the financial statements of the Company since
December 22, 1997, the closing date of the NLP Acquisition. As a result, the
Acquisitions affect the Company's results of operations in certain significant
respects. In connection with the ALM Acquisition, the purchase price was
$63.0 million and the excess of the purchase price over the book value of net
tangible assets acquired was $67.7 million. The aggregate purchase price for the
NLP Acquisition was $203.2 million, and the excess of the purchase price over
the book value of net tangible assets acquired was $257.6 million. The excess
purchase price of both Acquisitions has been allocated to the tangible and
intangible assets acquired by the Company based upon their respective fair
values as of the acquisition date.
In March 1998, the Company acquired all the assets and certain liabilities
of Corporate Presentations, Inc., an operator of legal technology trade shows
("LegalTech"), for approximately $10.8 million. The excess purchase price over
the net liabilities acquired was $11.3 million. In April 1998, the Company
acquired the legal publishing-related assets and certain liabilities of Legal
Communications, Ltd. ("LCL") for approximately $20.1 million. The excess
purchase price over the net assets acquired was allocated $14.3 million and
$6.3 million to identified intangibles and goodwill, respectively. The
allocation was based on the assets' respective fair values at acquisition date.
The results of operations of these acquisitions have been included in the
Company's results of operations since their respective acquisition dates.
16
The following table presents the results of operations (in thousands) for
the years ended December 31, 1999 and 1998 and the pro forma calculation for the
combined period ended December 31, 1997:
The total combined information for the period ended December 31, 1997 is
derived from the financial information for Old ALM for the seven months ended
July 31, 1997 and for ALM for the five months ended December 31, 1997, including
adjustments for the ALM Acquisition and financial information for NLP for the
period from January 1, 1997 through December 31, 1997. As a result, the
financial information for the combined year ended December 31, 1997 has not been
prepared on a basis in conformity with GAAP.
OLD ALM AMERICAN LAWYER MEDIA, INC. NLP
-------------- --------------------------- ------------ PRO
SEVEN MONTHS FIVE MONTHS PRO FORMA JAN. 1, 1997 FORMA
ENDED ENDED TOTAL THROUGH TOTAL YEAR ENDED YEAR ENDED
JULY 31, DECEMBER 31, COMBINED DECEMBER 21, COMBINED DECEMBER 31, DECEMBER 31,
1997 1997 1997 1997 1997 1998 1999
-------------- ------------ ------------ ------------ --------- ------------ ------------
OPERATING DATA:
Revenues:
Periodicals:
Advertising....... $18,146 $13,410 $31,556 $26,402 $ 57,958 $ 67,510 $ 75,887
Subscription...... 6,719 5,260 11,979 9,504 21,483 23,172 23,570
Ancillary products
and services...... 4,532 4,142 8,674 13,926 22,600 28,208 31,791
Internet services... 2,148 1,162 3,310 1,109 4,419 2,639 1,244
------- ------- ------- ------- -------- -------- --------
Total revenues........ 31,545 23,974 55,519 50,941 106,460 121,529 132,492
------- ------- ------- ------- -------- -------- --------
Operating costs and
expenses:
Editorial........... 4,023 3,323 7,346 5,837 13,183 15,523 22,940
Production and
distribution...... 6,919 5,766 12,685 9,872 22,557 26,266 29,821
Selling............. 4,640 3,656 8,296 8,211 16,507 19,002 27,806
General and
administrative.... 9,531 7,145 16,676 8,722 25,398 30,012 32,029
Internet services... 6,464 2,988 9,452 1,657 11,109 4,667 3,313
Depreciation and
amortization...... 1,590 3,273 4,863 7,283 12,146 26,302 27,298
Shutdown of ALM
Internet
services.......... -- 3,000 3,000 -- 3,000 -- --
Special compensation
charge............ -- -- -- 6,926 6,926 -- --
------- ------- ------- ------- -------- -------- --------
Total operating costs
and expenses........ 33,167 29,151 62,318 48,508 110,826 121,772 143,207
------- ------- ------- ------- -------- -------- --------
Operating (loss)
income.............. $(1,622) $(5,177) $(6,799) $ 2,433 $ (4,366) $ (243) $(10,715)
======= ======= ======= ======= ======== ======== ========
RESULTS OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
For the year ended December 31, 1998, the financial results include the
acquisitions of LegalTech in March 1998 and LCL in April 1998 as well as the
acquisition of a regional publication entitled DELAWARE LAW MONTHLY (the
"Delaware Acquisition") in October 1998, since their respective acquisition
dates.
OVERVIEW. Revenues increased by $11.0 million, or 9.0%, from
$121.5 million for the year ended December 31, 1998 to $132.5 million for the
year ended December 31, 1999. Total operating costs and expenses increased
$21.4 million, or 17.6%, from $121.8 million for the year ended December 31,
1998 to $143.2 million for the year ended December 31, 1999 due primarily to new
initiatives launched by the
17
Company during 1999. These initiatives included the launch of a new daily
publication entitled THE DAILY DEAL, a daily publication and Web site that
focuses on international deals and the deal-making community of bankers,
accountants, lawyers, venture capitalists and business professionals, which was
sold in March 2000, and a new high-end newsletter division, which published six
weekly newsletters focusing on various legal topics during 1999. As a result,
the operating loss increased $10.5 million from a loss of $0.2 million for the
year ended December 31, 1998 to a loss of $10.7 million for the year ended
December 31, 1999 and EBITDA decreased $9.5 million, or 36.4%, from
$26.1 million for the year ended December 31, 1998 to $16.6 million for the year
ended December 31, 1999. Internet services revenues decreased $1.4 million, or
52.9%, from $2.6 million for the year ended December 31, 1998 to $1.2 million
for the year ended December 31, 1999. Internet services expenses decreased
$1.4 million, or 29.0%, from $4.7 million for the year ended December 31, 1998
to $3.3 million for the year ended December 31, 1999. The reduction in Internet
services revenues and expenses in 1999 was due to the sale of the common stock
of the entity holding the Company's Internet business to Law.com during the
third quarter of 1999. Excluding the Internet services business and new
initiatives, revenues increased $11.6 million, or 9.8%, from $118.9 million for
the year ended December 31, 1998 to $130.5 million for the year ended
December 31, 1999. In addition, excluding the Internet services business and new
initiatives, EBITDA also increased $1.0 million, or 3.6%, from $28.1 million in
1998 to $29.1 million in 1999.
REVENUES. Advertising revenues increased $8.4 million, or 12.4%, from
$67.5 million for the year ended December 31, 1998 to $75. 9 million for the
year ended December 31, 1999. The acquisition of LCL accounted for $2.0 million
of this increase recorded during the first quarter of this year with no revenue
for LCL recorded during the first quarter of 1998. Excluding the revenues from
LCL, advertising revenues increased $6.4 million, or 9.5% during 1999. This
increase in advertising revenues was due to a growth in classified, law firm and
legal advertising, but was partially offset by a decline in display advertising.
Advertising growth was also due to an increase in advertising rates along with
an increase in advertising pages.
Subscription revenue increased $0.4 million, or 1.7%, from $23.2 million for
the year ended December 31, 1998 to $23.6 million for the year ended
December 31, 1999. Growth in subscription revenue in 1999 resulted primarily
from the acquisition of LCL at the end of the first quarter of 1998.
Revenue from ancillary products and services increased $3.6 million, or
12.7%, from $28.2 million for the year ended December 31, 1998 to $31.8 million
for the year ended December 31, 1999. The acquisition of LegalTech and LCL
during early 1998 accounted for approximately $2.5 million, or 69% of the
growth, with no LegalTech and LCL revenues recorded during the first three
months of 1998. The remaining increase was due to higher licensing and royalty
fees received by the Company and to increased book and newsletter revenue.
However, the increase in revenue was partially offset by lower printing revenue.
In addition, lower information service income was recorded in 1999 as a result
of the sale of the Company's Internet business to Law.com during the third
quarter of 1999.
Revenue from Internet services decreased $1.4 million, or 52.9%, from
$2.6 million for the year ended December 31, 1998 to $1.2 million for the year
ended December 31, 1999. The decrease is attributable to the sale of the
Company's Internet business to Law.com during the third quarter of 1999.
OPERATING COSTS AND EXPENSES. Total operating costs and expenses increased
$21.4 million, or 17.6%, from $121.8 million for the year ended December 31,
1998 to $143.2 million for the year ended December 31, 1999. Included in
operating costs and expenses for 1999 was $3.3 million recorded during the first
quarter of 1999 for LCL and LegalTech with no expenses recorded during the same
period of 1998. In addition, start-up and operating costs and expenses for the
Company's new initiatives during 1999 totaled $11.2 million with no similar
costs or expenses during 1998. Excluding the above-mentioned items, total
operating costs and expenses increased $6.9 million, or 5.6%. The remaining
increase in operating costs and expenses resulted primarily from higher costs in
all categories due to the overall growth in revenues.
18
Editorial expenses increased $7.4 million, or 47.8%, from $15.5 million for
the year ended December 31, 1998 to $22.9 million for the year ended
December 31, 1999. The acquisition of LCL and start-up costs for the new
initiatives accounted for $3.6 million of the increase and general salary
increases and the hiring for a number of key vacant positions accounted for the
remaining increase.
Production and distribution expenses increased $3.6 million, or 13.5%, from
$26.3 million for the year ended December 31, 1998 to $29.8 million for the year
ended December 31, 1999. The acquisition of LCL and LegalTech increased expenses
by $1.3 million and the new initiatives launched during 1999 accounted for
$1.4 million of the increase. Excluding the acquisitions of LCL and LegalTech
and new initiatives, production and distribution expenses increased
$0.9 million, or 3.3% over prior year costs. This increase primarily resulted
from the introduction of a new weekly publication in California (CALIFORNIA LAW
WEEK), which has since been discontinued, along with higher materials costs and
increased runs in an effort to increase coverage in some markets.
Selling expenses increased $8.8 million, or 46.3%, from $19.0 million for
the year ended December 31, 1998 to $27.8 million for the year ended
December 31, 1999. LCL and LegalTech accounted for $1.0 million of the increase
and costs incurred for the new initiatives accounted for $4.1 million of the
increase. Excluding these items mentioned above, selling expenses increased
$3.7 million, or 19.4%. This increase resulted primarily from higher commission
costs related to an increase in revenues, increased headcount and increased
direct mailing efforts and other marketing related costs.
General and administrative expenses increased $2.0 million, or 6.7%, from
$30.0 million for the year ended December 31, 1998 to $32.0 million for the year
ended December 31, 1999. This increase reflects $0.7 million of costs associated
with the acquisitions of LCL and LegalTech. The remaining expense increase
relates primarily to the launching of the new initiatives during 1999, which
included increased total occupancy and other related general overhead costs.
Internet services expenses decreased $1.4 million, or 29.0%, from
$4.7 million for the year ended December 31, 1998 to $3.3 million for the year
ended December 31, 1999. This decrease is attributable to the sale of the
Company's Internet business to Law.com during the third quarter of 1999.
Depreciation and amortization expenses increased $1.0 million, or 3.8%, from
$26.3 million for the year ended December 31, 1998 to $27.3 million for the year
ended December 31, 1999. An increase in amortization of goodwill during 1999 was
due to the acquisitions of LCL and LegalTech during early 1998. The increase in
depreciation during 1999 was due to increased capital expenditures in 1999 for
new and upgraded systems in order to ensure Year 2000 compliance and to replace
outdated systems with new systems and facilities to support the new initiatives
and the Company's core growth.
OPERATING LOSS. As a result of the above factors, the operating loss
increased $10.5 million from a $0.2 million loss for the year ended
December 31, 1998 to a $10.7 million loss for the year ended December 31, 1999.
EBITDA decreased $9.5 million, or 36.4%, from $26.1 million for the year ended
December 31, 1998 to $16.6 million for the year ended December 31, 1999.
Excluding the Internet services business and new initiatives, EBITDA increased
$1.0 million, or 3.6% from $28.1 million at December 31, 1998 to $29.1 million
at December 31, 1999.
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
The following discussion includes the year ended December 31, 1997 which is
derived from the financial information for Old ALM for the seven months ended
July 31, 1997 and for ALM for the five months ended December 31, 1997, including
adjustments for the ALM Acquisition, and financial information for NLP for the
periods from January 1, 1997 through December 21, 1997, presented above. As a
result, the financial information for the combined year ended December 31, 1997
has not been prepared on a basis in conformity with GAAP.
19
For the year ended December 31, 1998, the financial results include the
acquisitions of LegalTech, LCL and the Delaware Acquisition, since their
respective acquisition dates.
OVERVIEW. Revenues increased by $15.1 million, or 14.2%, from
$106.5 million for the year ended December 31, 1997 to $121.5 million for the
year ended December 31, 1998. Total operating costs and expenses increased
$10.9 million, or 9.9%, from $110.8 million for the year ended December 31, 1997
to $121.8 million for the year ended December 31, 1998, due primarily to a
$14.2 million increase in depreciation and amortization resulting from the ALM
and NLP Acquisitions. As a result, the operating loss decreased $4.1 million, or
94.4%, from a loss of $4.4 million for the year ended December 31, 1997 to a
loss of $0.2 million for the year ended December 31, 1998, while EBITDA
increased $18.3 million, or 234.9%, from $7.8 million for the year ended
December 31, 1997 to $26.1 million for the year ended December 31, 1998.
Internet services revenues decreased $1.8 million, or 40.3%, from $4.4 million
for the year ended December 31, 1997 to $2.6 million for the year ended
December 31, 1998. Internet services expenses decreased $6.4 million, or 58.0%,
from $11.1 million for the year ended December 31, 1997 to $4.7 million for the
year ended December 31, 1998. Also included in the operating costs and expenses
for 1997 was a special compensation charge of $6.9 million reflecting stock
option and bonus payments related to the sale of NLP. Accordingly, excluding the
net operating loss from Internet services, the shutdown charge, and the one time
special compensation charge, operating income decreased $10.5 million, or 85.4%,
from $12.2 million for the year ended December 31, 1997 to $1.8 million for the
year ended December 31, 1998, while EBITDA increased $3.7 million, or 15.1%,
from $24.4 million to $28.1 million over the same periods.
REVENUES. Advertising revenues increased $9.6 million, or 16.5%, from
$58.0 million for the year ended December 31, 1997 to $67.5 million for the year
ended December 31, 1998. The acquisition of LCL accounted for $3.9 million of
this increase. Without LCL, revenues increased $5.7 million, or 9.8%, due
principally to an increase in advertising rates as well as an overall increase
in advertising pages.
Subscription revenues increased $1.7 million, or 7.9%, from $21.5 million
for the year ended December 31, 1997 to $23.2 million for the year ended
December 31, 1998. This increase was primarily due to the acquisition of LCL.
Revenues from ancillary products and services increased $5.6 million, or
24.8%, from $22.6 million for the year ended December 31, 1997 to $28.2 million
for the year ended December 31, 1998. The additions of LCL and LegalTech
accounted for $3.1 million of the increase. The $2.5 million balance of this
increase was due to an increase in the number of book updates released along
with increased royalty income. In addition, a portion of book sales historically
recorded in the fourth quarter were shipped and included in the first quarter
results of 1998.
Revenues from Internet services decreased $1.8 million, or 40.3%, from
$4.4 million for the year ended December 31, 1997 to $2.6 million for the year
ended December 31, 1998. This decrease is attributable primarily to the shutdown
of Counsel Connect, Old ALM's Internet service.
OPERATING COSTS AND EXPENSES. Total operating costs and expenses increased
$10.9 million, or 9.9%, from $110.8 million for the year ended December 31, 1997
to $121.8 million for the year ended December 31, 1998. This increase is due to
a $14.2 million increase in depreciation and amortization resulting from the ALM
and NLP Acquisitions. The inclusion of $7.1 million in costs and expenses of LCL
and LegalTech as well as other normal operating costs and expense increases were
offset by the reduction in Internet services expenses.
Editorial expenses increased by $2.3 million, or 17.8%, from $13.2 million
for the year ended December 31, 1997 to $15.5 million for the year ended
December 31, 1998 as a number of key vacant positions were filled. The addition
of LCL accounted for $0.7 million of the increase.
20
Production and distribution expenses increased $3.7 million, or 16.4%, from
$22.6 million for the year ended December 31, 1997 to $26.3 million for the year
ended December 31, 1998. The addition of LCL and LegalTech accounted for
$2.0 million of the increase. The remainder of this increase is primarily the
result of the increased book sales as well as higher paper usage at ALM's
printing facilities.
Selling expenses increased $2.5 million, or 15.1%, from $16.5 million for
the year ended December 31, 1997 to $19.0 million for the year ended
December 31, 1998. This increase is primarily the result of the additions of LCL
and LegalTech.
General and administrative expenses increased $4.6 million, or 18.2%, from
$25.4 million for the year ended December 31, 1997 to $30.0 million for the year
ended December 31, 1998. This increase reflects $2.0 million of costs associated
with the addition of LCL and LegalTech. The balance of the increase is primarily
the result of transition costs associated with the Company's new corporate
structure and salary increases.
Internet services expenses decreased $6.4 million, or 58.0%, from
$11.1 million for the year ended December 31, 1997 to $4.7 million for the year
ended December 31, 1998. This decrease is the direct result of the shutdown of
Counsel Connect.
Depreciation and amortization expenses increased $14.2 million, or 116.5%,
from $12.1 million for the year ended December 31, 1997 to $26.3 million for the
year ended December 31, 1998. These expenses are not comparable for the two
periods due to purchase accounting adjustments related to the ALM and NLP
Acquisitions.
OPERATING LOSS. As a result of the above factors, the operating loss
decreased $4.1 million, or 94.4%, from $4.4 million for the year ended
December 31, 1997 to $0.2 million for the year ended December 31, 1998. EBITDA
increased $18.3 million, or 234.9%, from $7.8 million for the year ended
December 31, 1997 to $26.1 million for the year ended December 31, 1998.
Excluding the one-time charges in 1997 related to the shutdown of Counsel
Connect and special compensation charge, EBITDA increased $8.4 million, or
47.2%, from $17.7 million for the year ended December 31, 1997 to $26.1 million
for the year ended December 31, 1998. Excluding all Internet services and the
special compensation charge, EBITDA increased $3.7 million, or 15.1%, from
$24.4 million for the year ended December 31, 1997 to $28.1 million for the year
ended December 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
CAPITAL EXPENDITURES. Capital expenditures were $11.8 million for the year
ended December 31, 1999. The amount of capital expenditures in 1999 was higher
than historical and expected future spending due to an investment in new
editorial and advertising systems to replace outdated systems and ensure Year
2000 compliance and due to the implementation of new systems and facilities
needed for the new initiatives and to support the Company's core growth.
NET CASH USED IN OPERATING ACTIVITIES. Net cash used in operating
activities was $0.7 million for the year ended December 31, 1999, which
primarily reflects depreciation and amortization of $27.3 million, an increase
in accounts payable of $4.3 million and non-cash interest recorded during 1999
of $0.8 million, offset by a net loss of $26.4 million, an increase in accounts
receivable of $3.3 million, a decrease in other non-current liabilities of
$2.4 million and an increase in other assets of $1.5 million. The use of funds
during 1999 primarily resulted from the Company's net loss, of which
$10.6 million resulted from new initiatives started during 1999. Excluding these
new initiatives would have resulted in net cash provided by operating activities
of $9.9 million.
NET CASH USED IN INVESTING ACTIVITIES. Net cash used in investing
activities was $8.0 million for the year ended December 31, 1999, which
primarily resulted from capital expenditures of $11.8 million offset by the
proceeds related to the sale of the Company's Internet business to Law.com
during the third quarter of 1999.
21
NET CASH PROVIDED BY FINANCING ACTIVITIES. Net cash provided by financing
activities totaled $9.8 million for the year ended December 31, 1999, which
reflects a drawdown of $9.8 million under the Revolving Credit Facility
(described below).
WORKING CAPITAL. The Company traditionally has had favorable cash flow
characteristics resulting from its high level of advance payments by
subscribers, low working capital investment, minimal capital expenditure needs,
predictable cost structure and high margins. Because cash receipts associated
with subscriptions are received toward the beginning of a subscription cycle,
the Company's periodicals business requires minimal investment in working
capital. During 1999, the Company incurred startup costs for the new initiatives
resulting in EBITDA losses totaling approximately $10.3 million. Additionally,
the Company invested $11.8 million in capital expenditures as described above.
These two factors, both unusual, combined to produce an unfavorable cash flow
for 1999.
LIQUIDITY. The Company's principal sources of funds are anticipated to be
cash flows from operating activities, which may be supplemented by borrowings
under the Revolving Credit Facility (described below). The Company believes that
these funds will be sufficient to meet its current and future financial
obligations, including the payment of interest on the $175,000,000 of 9.75%
senior notes and the outstanding balance under the Company's Revolving Credit
Facility, working capital, capital expenditures and other obligations. No
assurance can be given, however, that this will be the case. The Company's
future operating performance and ability to service or refinance the Notes and
to repay, extend or refinance any credit agreements to which it is a party will
be subject to future economic conditions and to financial, business and other
factors, many of which are beyond the Company's control.
MATERIAL FINANCINGS
The Company has borrowed funds to finance its operations through the
transactions described below.
REVOLVING CREDIT FACILITY. On March 25, 1998, the Company entered into a
$40 million, five-year senior secured revolving credit facility (the "Revolving
Credit Facility") with a group of banks to be available for working capital and
general corporate purposes, including acquisitions and capital expenditures.
The Revolving Credit Facility is guaranteed by Holdings and by all existing
and future subsidiaries of the Company. In addition, the Revolving Credit
Facility is secured by a first priority security interest in substantially all
of the properties and assets of the Company and its existing and future domestic
subsidiaries, including a pledge of all of the stock of such subsidiaries, and a
pledge by Holdings of all of the stock of the Company. The Revolving Credit
Facility contains customary covenants commensurate with the size of the
Revolving Credit Facility that, among other things, restrict the ability of the
Company and its subsidiaries to take certain actions.
On April 14, 1998, Holdings contributed an aggregate of $15 million to the
equity capital of the Company. The proceeds of the equity contribution were used
to fund acquisitions and to provide capital for aggressive internal growth. On
April 26, 1999, Holdings and the Company amended the Revolving Credit Facility,
effective as of March 29, 1999. This amendment (INTER ALIA) limits the Company's
ability to borrow in excess of $20 million under the Revolving Credit Facility
until certain ratios are achieved, modifies certain of the covenants and
modifies the interest calculation mechanism. Effective July 20, 1999, the
Revolving Credit Facility was further amended to provide for the sale of the
Company's Internet business to Law.com and to modify certain debt covenants. On
March 8, 2000 (effective March 28, 2000), the Revolving Credit Facility was
further amended to modify certain of the covenants, to permit the transaction
described below under RECENT DEVELOPMENTS--SALE OF THE BUSINESS OF THE DAILY
DEAL AND CORPORATE CONTROL ALERT and to increase the borrowing limit described
above from $20 million to $22.5 million.
22
SENIOR NOTES FINANCING. In December 1997, the Company issued $175,000,000
aggregate principal amount of 9.75% Senior Notes due 2007 (the "Notes"). The
Notes are unsecured general obligations of the Company and are fully and
unconditionally guaranteed on a joint and several and senior unsecured basis, by
each of the Company's existing and future subsidiaries. The subsidiary
guarantors comprise all of the direct and indirect subsidiaries of the Company
and each of the subsidiary guarantors is a wholly-owned subsidiary of the
Company. Separate financial statements of, and other disclosures concerning the
subsidiary guarantors are not included herein because of the subsidiary
guarantors' full and unconditional guarantee of the Notes and management has
determined that separate financial statements and other disclosures concerning
the subsidiary guarantors are not material and would not provide any additional
meaningful disclosure. There are currently no contractual or regulatory
restrictions limiting the ability of the subsidiary guarantors to make
distributions to the Company. The Notes may be redeemed at any time by the
Company, in whole or in part, at various redemption prices that include accrued
and unpaid interest. The Notes contain certain covenants that, among other
things, limit the incurrence of additional indebtedness by the Company and its
subsidiaries, the payment of dividends and other restricted payments by the
Company and its subsidiaries, asset sales, transactions with affiliates, the
incurrence of liens, and mergers and consolidations. Assuming there is no
redemption of the Notes prior to maturity, the entire principal will be payable
on December 15, 2007.
YEAR 2000 COMPLIANCE.
The Company did not experience any significant malfunctions or errors in its
operating or business systems related to the "Year 2000" issue. Based on
operations since January 1, 2000, the Company does not expect any significant
impact to its ongoing business as a result of the "Year 2000" issue. However, it
is possible that the full impact of the date change, which was of concern due to
computer programs that use two digits instead of four digits to define years,
has not been fully recognized. For example, it is possible that Year 2000 or
similar issues such as leap year-related problems may occur with billing,
payroll or financial closings at month, quarterly or year-end. The Company
believes that any such problems are likely to be minor and correctable. In
addition, the Company could still be negatively impacted if customers or
suppliers are adversely affected by the Year 2000 or similar issues. The Company
is not aware of any significant Year 2000 or similar problems that have arisen
for its customers and suppliers.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
On March 25, 1998, the Company and ALM entered into the Revolving Credit
Facility. Each revolving loan shall bear interest on the outstanding principal
amount from the borrowing date until it becomes due at a rate per annum equal to
the "Base Rate" or the Eurodollar rate plus the "Applicable Margin" of 1.5% for
base rate loans and 2.5% for Eurodollar rate loans. The Base Rate is the higher
of the Bank of America publicly announced "Reference Rate" or the Federal Funds
Rate plus 0.5%. The amount outstanding under the Revolving Credit Facility was
$18.3 million at December 31, 1999. The interest rate at December 31, 1999 was
9.15%. A 10% increase in the average rate, during 1999, would have increased the
Company's net loss to approximately $26.5 million.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Index to Financial Statements and Exhibits, which appears on Page F-1
hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
23
PART III
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES OF THE REGISTRANT
The following table sets forth certain information regarding each of the
executive officers, directors and certain other key employees of the Company and
Holdings, as of March 15, 2000.
NAME AGE POSITION
- ---- -------- ------------------------------------------
EXECUTIVE OFFICERS, DIRECTORS AND KEY
EMPLOYEES OF THE COMPANY AND HOLDINGS
Bruce Wasserstein......................... 52 Chairman and Director
William L. Pollak......................... 44 President, Chief Executive Officer and
Director
Anup Bagaria.............................. 27 Vice President and Director
Bruce Barnes.............................. 38 Director
Michael J. Biondi......................... 42 Director
Robert C. Clark........................... 56 Director
Donald G. Drapkin......................... 52 Director
James A. Finkelstein...................... 51 Director
Andrew G.T. Moore, II..................... 64 Director
Jack Berkowitz............................ 53 Vice President, Strategic Planning
Michael Cronan............................ 34 Vice President, Marketing
Sally Feldman............................. 43 Vice President, Professional Information
Division
Stephen C. Jacobs......................... 38 Vice President, Corporate Affairs, General
Counsel and Secretary
Leslye G. Katz............................ 45 Vice President, Chief Financial Officer
Kevin Vermeulen........................... 36 Vice President, Group Publisher
Each Director is elected annually and serves until the next annual meeting
of stockholders or until his or her successor is duly elected and qualified. The
Independent Directors are each compensated $20,000 per year for their service as
Directors and receive reimbursement of expenses incurred from their attendance
at Board of Directors meetings. Directors will also be eligible to participate
in an equity participation plan to be established.
The Board has established an executive committee (the "Executive Committee")
consisting of three members, currently Bruce Wasserstein, Bruce Barnes and Anup
Bagaria. The Executive Committee has been delegated the authority to approve
(i) the acquisition and divestiture by the Company or an affiliate of the
Company of all or a portion of one or more business entities for a price of up
to $25 million, (ii) the appointment of senior officers of the Company or its
affiliates and termination of such employment, (iii) the preparation and
approval of short-term and long-term budgets, and (iv) other material
policy-level decisions to the extent permitted by the Delaware General
Corporation Law.
EXECUTIVE OFFICERS, DIRECTORS AND KEY EMPLOYEES OF THE COMPANY AND HOLDINGS
Bruce Wasserstein is Chairman of the Board of Directors of the Company and
Holdings since December 1997. He is Chairman, Chief Executive Officer and
founder of Wasserstein Perella Group, Inc. ("WPG"). Previously, Mr. Wasserstein
served as a Director and the Chairman of Maybelline, Inc. and as a Director of
Collins & Aikman Corp. Before establishing WPG, Mr. Wasserstein was Co-Head of
Investment Banking at The First Boston Corporation, and a Managing Director and
Member of its Management
24
Committee. Prior to joining First Boston in 1977, Mr. Wasserstein was an
attorney at Cravath, Swaine & Moore in New York City. Mr. Wasserstein graduated
with honors from the University of Michigan in 1967. In 1971 he graduated from
Harvard Business School as a Baker Scholar with high distinction, and earned a
J.D., CUM LAUDE, from Harvard Law School. In 1972 he was a Knox Traveling Fellow
at Cambridge University. Mr. Wasserstein is a member of the Council on Foreign
Relations. He has served as a member of the SEC's Advisory Committee on Tender
Offers and as a member of the Visiting Committees of Harvard Law School, the
University of Michigan and Columbia Journalism School. Mr. Wasserstein is also
on the board of numerous private companies.
William L. Pollak has served as President, Chief Executive Officer and
Director of the Company and Holdings since March 1998. Before joining the
Company, Mr. Pollak spent 16 years at the New York Times, where he held a
variety of positions, most recently as Executive Vice President, Circulation.
Anup Bagaria has served as a Vice President and Director of the Company and
Holdings since their founding since November 1998. He is a Managing Director of
Wasserstein Perella & Co., Inc. He graduated from the Massachusetts Institute of
Technology. Mr. Bagaria also serves on the board of various private companies.
Bruce R. Barnes has served as a director of the Company and Holdings since
November 1998. Dr. Barnes has been Managing Director of Wasserstein Perella &
Co., Inc. since February 1997 and has been a senior member of its Merchant
Banking Group since September 1998. He was Executive Vice President of Ziff
Brothers Investments, L.L.C., a private investment company, from January 1995 to
June 1996. Prior to that, at Ziff Communications Company, a privately-held
publishing and media company, Dr. Barnes was Senior Vice President and Chief
Financial Officer from September 1993 to December 1994 and was Vice President
and Special Assistant to the Chairman from November 1992 to September 1993.
Dr. Barnes received a B.A. in Economics MAGNA CUM LAUDE and a Ph.D. in Economics
from the University of Pennsylvania. Dr. Barnes is also a director of Collins &
Aikman Corporation and various private companies.
Michael J. Biondi has served as a Director of the Company and Holdings since
March 1998. He is Chairman and Chief Executive Officer of Wasserstein Perella &
Co., Inc. Mr. Biondi holds M.B.A. and J.D. degrees from the Wharton School and
the University of Pennsylvania Law School, respectively. Prior to joining
Wasserstein Perella, Mr. Biondi was a member of the First Boston Mergers &
Acquisitions Group, and practiced law at Skadden, Arps, Slate, Meagher & Flom
LLP.
Robert C. Clark has served as a Director of the Company and Holdings since
their founding. He has been Dean of the Harvard Law School since 1989 and is the
Royall Professor of Law. Mr. Clark is a trustee of Teachers' Insurance Annuity
Association (TIAA). He is currently a Director of Collins & Aikman Corp. and of
Household International, Inc.
Donald G. Drapkin has served as a Director of the Company and Holdings since
their founding. He has been a Director and Vice Chairman and Director of
MacAndrews & Forbes Holdings Inc. and various of its affiliates since 1987.
Mr. Drapkin also is a Director of the following corporations which file reports
pursuant to the Exchange Act: Algos Pharmaceutical Corporation, Anthracite
Capital, Inc., BlackRock Asset Investors, Cardio Technologies, Inc., The Molson
Companies Limited, Revlon Consumer Products Corporation, Revlon, Inc., Playboy
Enterprises, Inc., Weider Nutrition International, Inc., and VIMRX
Pharmaceuticals Inc. On December 27, 1996, Marvel, Marvel Holdings, Marvel
Parent and Marvel III of which Mr. Drapkin was a Director on such date, and
several subsidiaries of Marvel filed voluntary petitions for reorganization
under Chapter 11 of the United States Bankruptcy Code.
James A. Finkelstein has served as a Director of the Company and Holdings
since March 1998. He has been President and Chief Executive Officer of JAF
Communications, LLC since July 1998. Prior to that, Mr. Finkelstein served as
President and Chief Executive Officer of NLP and its predecessor companies
beginning in 1974. He joined the New York Law Publishing Company in 1970. He was
the former publisher
25
of the NEW YORK LAW JOURNAL and the founder and publisher of THE NATIONAL LAW
JOURNAL. He currently serves on the Faculty of Arts and Sciences Board of
Overseers at New York University.
Andrew G. T. Moore, II has served as a Director of the Company and Holdings
since their founding. He is a Managing Director of Wasserstein Perella and is a
former Justice of the Delaware Supreme Court. Justice Moore served on the
Delaware Supreme Court for 12 years until 1994. Justice Moore has served as the
Lehmann Distinguished Visiting Professor of Law at Washington University in St.
Louis. He has also served as an adjunct professor of law at the Georgetown
University Law Center, University of Iowa College of Law and Widener University
School of Law, where he taught seminars in advanced corporation law. He also
teaches comparative principles of international corporation law at the Tulane
University Institute of European Legal Studies in Paris, and has been a guest
lecturer at various law schools and national corporate law programs in the
United States, Canada and Europe.
Jack Berkowitz has served as Vice President, Strategic Planning of the
Company since January 1999. Prior to joining the Company, Mr. Berkowitz served
as a consultant to the Company during 1998. Mr. Berkowitz is a 25 year veteran
of the publishing industry. As a consultant, in addition to the Company, his
client roster has included Cowles Business Media, Hearst Magazines, Time Inc.,
Felker Media, Associated Newspapers and Adweek. Mr. Berkowitz had previously
served as Executive Vice President of the Village Voice and President of The
Nation.
Michael Cronan has served as Vice President, Marketing of the Company since
September 1999 and served as the Company's Director of Circulation for National
Publications from April 1999 until September 1999. Prior to joining the Company,
Mr. Cronan served in various positions with McGraw Hill Cos. From February 1995
until April 1999 and most recently served as the director of sales and marketing
with its Construction Information Group On-line. In this capacity, Mr. Cronan
developed design, branding and content and implemented successful e-commerce
subscription systems for CIG On-Line's Web sites.
Sally Feldman has served as Vice President, Professional Information
Division of the Company since October 1999. Prior to joining the Company,
Ms. Feldman served as Director of Marketing and Communications at Skadden, Arps,
Slate, Meagher & Flom LLP where she was responsible for all aspects of global
marketing and public relations.
Stephen C. Jacobs has served as Vice President, General Counsel and
Secretary of the Company since May 1998. Prior to joining the Company,
Mr. Jacobs was Assistant General Counsel, Global Transactions for American
International Group, Inc.
Leslye G. Katz has served as Vice President and Chief Financial Officer of
the Company since September 1998. Prior to joining the Company, Ms. Katz served
as Vice President and Treasurer of IMS Health, Inc. Previously, she held senior
financial management positions for 18 years in the publishing industry, most
recently as Senior Vice President and Chief Financial Officer of Reuben H.
Donnelley.
Kevin Vermeulen has been Vice President, National Advertising of the Company
since 1998. Prior to that he was a Vice President of Sales for NLP, which he
joined in October 1992.
26
ITEM 11. EXECUTIVE COMPENSATION
The following Summary Compensation Table includes individual compensation
information for the Chief Executive Officer and certain other executive officers
of the Company for the year ended December 31, 1999 (collectively, the "Named
Executive Officers") for services rendered in all capacities to the Company
during the year ended December 31, 1999. All numbers relating to option grants
relate to options to purchase shares in Holdings and include the effect of a
10-for-1 stock split in
March 2000. See BUSINESS--RECENT DEVELOPMENTS--STOCK SPLIT.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION
----------------------------------------------------------------------------------------
LONG TERM COMPENSATION
----------------------------------
SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ LTIP
NAME AND COMPENSATION AWARDS SALES PAYOUTS
PRINCIPAL POSITION YEAR ($) SALARY ($) BONUS ($) ($) (#) ($)
- ------------------ -------- ---------- --------- ------------ ---------- ---------- --------
William Pollak, President and Chief 1999 416,212 217,516 -- -- 12,000 --
Executive Officer..................... 1998(2) 325,000 400,000 -- -- -- --
1997 -- -- -- -- -- --
Jack Berkowitz, Vice President, 1999(3) 215,000 42,500 -- -- 1,800 --
Strategic Planning.................... 1998 -- -- -- -- -- --
1997 -- -- -- -- -- --
Stephen C. Jacobs, Vice President, 1999 206,625 100,000 -- -- 1,200 --
Corporate Affairs and General 1998(4) 132,692 50,000 -- -- -- --
Counsel............................... 1997 -- -- -- -- -- --
Leslye G. Katz, Vice President and Chief 1999 305,000 150,000 -- -- 3,000 --
Financial Officer..................... 1998(6) 100,000 73,500 -- -- -- --
1997 -- -- -- -- -- --
Kevin Vermeulen, Vice President, Group 1999 165,667 34,507 -- -- 1,800 --
Publisher............................. 1998 134,047 10,000 -- -- -- --
1997(8) 260,505 -- -- -- -- --
ALL OTHER
NAME AND COMPENSATION
PRINCIPAL POSITION ($)
- ------------------ ------------
William Pollak, President and Chief 294,326(1)
Executive Officer..................... 539,256(1)
--
Jack Berkowitz, Vice President, --
Strategic Planning.................... --
--
Stephen C. Jacobs, Vice President, --
Corporate Affairs and General --
Counsel............................... --
Leslye G. Katz, Vice President and Chief 204,200(5)
Financial Officer..................... 204,200(5)
--
Kevin Vermeulen, Vice President, Group 105,303(7)
Publisher............................. 120,614(7)
--
- ------------------------------
(1) Represents payments made by the Company to Mr. Pollak pursuant to the terms
of his employment agreement with the Company to reimburse him for the value
of options forfeited upon his resignation from his former employer.
(2) Mr. Pollak's employment with the Company pursuant to his employment
agreement commenced as of March 9, 1998.
(3) Mr. Berkowitz's employment with the Company pursuant to his employment
agreement commenced as of January 1, 1999.
(4) Mr. Jacobs' employment with the Company pursuant to his employment agreement
commenced as of May 4, 1998.
(5) Represents payments made by the Company to Ms. Katz pursuant to the terms of
her employment agreement with the Company to reimburse her for the value of
options forfeited upon her resignation from her previous employer.
(6) Ms. Katz's employment with the Company pursuant to her employment agreement
commenced as of September 1, 1998.
(7) Represents commissions earned by Mr. Vermeulen pursuant to the terms of his
employment agreement.
(8) The 1997 compensation information for Mr. Vermeulen includes salary, bonus
and commission in the aggregate. A breakdown of this amount was not easily
ascertainable.
27
OPTION/SAR GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS+
------------------------------------------------------
PERCENT OF
NUMBER OF TOTAL POTENTIAL
SECURITIES OPTIONS/SARS REALIZABLE VALUE AT
UNDERLYING GRANTED TO EXERCISE OF ASSUMED ANNUAL RATES OF
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION STOCK PRICE APPRECIATION
NAME GRANTED (#) FISCAL YEAR ($/SH) DATE FOR OPTION TERM
- ---- ------------ ------------ ----------- ---------- ----------------------------
5% 10%
($) ($)
-------- --------
William Pollak................. 12,000 40.0% $75 10/13/09 * *
Jack Berkowitz................. 1,800 6.1% $75 10/13/09 * *
Stephen C. Jacobs.............. 1,200 4.0% $75 10/13/09 * *
Leslye Katz.................... 3,000 10.1% $75 10/13/09 * *
Kevin Vermeulen................ 1,800 6.1% $75 10/13/09 * *
- ------------------------
* As of December 31, 1999, each of the outstanding options was
out-of-the-money and therefore the potential realizable value was less than
zero.
+ Each of the options is exercisable for a share of Holdings common stock.
EMPLOYMENT AGREEMENTS
Each of William Pollak, President and Chief Executive Officer, and Leslye
Katz, Vice President and Chief Financial Officer, has entered into an employment
agreement with the Company for a five year term effective March 9, 1998 and
September 1, 1998, respectively. The employment agreements provide for an annual
salary of $400,000, in the case of Mr. Pollak, and $300,000, in the case of
Ms. Katz, subject to increases of 5% annually during the term. In addition, the
employment agreements provide for bonuses of (i) $400,000 after the first year
of the term and between 50% and 150% of the base salary, as determined by the
Board of Directors, in each of the remaining years of the term, for Mr. Pollak,
and (ii) $150,000 after the first year of the term and between 25% and 75% of
the base salary, as determined by the Board of Directors, in each of the
remaining years of the term, for Ms. Katz. Under the employment agreements, if
the executives' employment is terminated by the Company without cause or by the
executive with good reason, the executive will be entitled to severance equal to
the amount of the executive's salary and bonus accrued but unpaid through the
termination date and one year's salary in the cases of Mr. Pollak and Ms. Katz,
commencing on the termination date, together with any accrued but unpaid bonus.
Each of Mr. Pollak and Ms. Katz is also entitled to payments for options granted
to them and forfeited upon their resignations from their prior employers.
The Company has also entered into employment agreements with each of its
executive officers providing for varying bonuses, severance provisions and
termination rights.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the outstanding shares of the Company are beneficially owned by
Holdings. The following table sets forth certain information regarding
beneficial ownership of Holdings as of December 31, 1999 by (i) each person (or
group of affiliate persons) known by the Company to be the beneficial owner of
more than 5% of the outstanding Common Stock of Holdings, (ii) each Director,
Director nominee, and the Chief Executive Officer and Vice President of the
Company, and (iii) all directors and executive officers of
28
the Company as a group. The share numbers below include the effect of a 10-for-1
stock split in March 2000. See BUSINESS--RECENT DEVELOPMENTS--STOCK SPLIT.
PERCENTAGE OF
TOTAL SHARES OF
NUMBER OF SHARES COMMON STOCK
NAME AND ADDRESS OF BENEFICIAL OWNER OF COMMON STOCK OUTSTANDING
- ------------------------------------ ---------------- ---------------
U.S. Equity Partners, L.P.(1).................. 569,960 47.49%
U.S. Equity Partners (Offshore), L.P(2)........ 144,110 12.01%
ALM Employee Partners, L.L.C.(3)............... 80,000 6.67%
Wasserstein & Co., Inc.(4)..................... 405,930 33.83%
Total........................................ 1,200,000 100.00%
- ------------------------
(1) Includes approximately 2.9% of the issued and outstanding common stock of
Holdings held by a co-investor of U.S. Equity Partners, L.P. ("USEP") which
has granted WP Management Partners, LLC ("WPMP"), the general partner of
USEP, an irrevocable proxy to vote such shares of common stock.
Wasserstein & Co., Inc. shares voting and dispositive power with respect to
the shares held by USEP. See footnote (4).
(2) Wasserstein & Co., Inc. shares voting and dispositive power with respect to
the shares held by U.S. Equity Partners (Offshore), L.P. See footnote (4).
(3) ALM Employee Partners, L.L.C. is managed by WP Plan Management
Partners, Inc., a wholly-owned subsidiary of Wasserstein & Co., Inc.
Wasserstein & Co., Inc. shares voting and dispositive power with respect to
the shares held by ALM Employee Partners, L.L.C. See footnote (4).
(4) Does not include: 569,960 shares as to which Wasserstein & Co. shares voting
and dispositive power with USEP; 144,110 shares as to which Wasserstein &
Co. shares voting and dispositive power with U.S. Equity Partners
(Offshore), L.P.; and 80,000 shares as to which Wasserstein & Co. shares
voting and dispositive power with ALM Employee Partners, L.L.C.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company is a wholly-owned subsidiary of Holdings. A majority of
Holdings' equity securities are held by USEP and its affiliates. USEP is a
Delaware limited partnership investment fund of which WPMP is the general
partner. WPMP is controlled by Wasserstein Perella & Co., Inc. WPMP is entitled
to receive a monitoring fee in an amount not to exceed $1.0 million in respect
of any year.
The Company may engage in transactions with its affiliates, including
entities owned or controlled by certain of its principal shareholders. The
Company believes that such transactions will be no more favorable to the Company
than similar transactions with non-affiliates.
In July 1999, the Company sold the common stock of its wholly-owned
subsidiary, Professional On-Line, Inc., which held the Company's Internet
business, to Law.com for $1.0 million in cash and the Company retained a
preferred stock interest with a face amount of $3.75 million. On March 28, 2000,
the Company sold its business constituting THE DAILY DEAL and CORPORATE CONTROL
ALERT to TDD, L.L.C. The stockholders of Law.com and TDD, L.L.C. include
substantially all of the stockholders of Holdings. See SIGNIFICANT TRANSACTIONS
and RECENT DEVELOPMENTS.
In connection with the sale of the Company's Internet business to Law.com,
the Company entered into an exclusive five-year license agreement with Law.com
granting Law.com the right to publish all Company content in electronic or
digital format. See SIGNIFICANT TRANSACTIONS. The Company believes that the
transactions referred to in the preceding paragraph were effected on arms-length
terms and conditions.
In 1999, $260,000 in fees, related to the sale of the Company Internet
business to Law.Com, were paid to Wasserstein & Co., Inc.
29
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(A) FINANCIAL STATEMENTS
See Index to Financial Statements that appears on page F-1 hereof. No
Schedules are provided as the Schedules are either not applicable, or the
information has been otherwise provided in the Financial Statements.
(B) REPORTS ON FORM 8-K
The Company has filed a report on Form 8-K, dated July 27, 1999, and filed
August 24, 1999, relating to the sale of the Company's Internet business to
Law.com.
(C) EXHIBITS
The exhibits listed on the Exhibit Index following the signature page hereof
are filed herewith in response to this Item.
30
INDEX TO FINANCIAL STATEMENTS
PAGE
--------
CONSOLIDATED FINANCIAL STATEMENTS OF AMERICAN LAWYER MEDIA,
INC.
Report of Independent Public Accountants as of and for the
Years Ended December 31, 1999 and 1998 and the Five Months
Ended December 31, 1997................................... F-2
Consolidated Balance Sheets as of December 31, 1999 and
December 31, 1998......................................... F-3
Consolidated Statements of Operations for the Years Ended
December 31, 1999 and 1998 and the Five Months Ended
December 31, 1997......................................... F-4
Consolidated Statements of Changes in Stockholder's Equity
for the Years Ended December 31, 1999 and 1998 and the
Five Months Ended December 31, 1997....................... F-5
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1999 and 1998 and the Five Months Ended
December 31, 1997......................................... F-6
Notes to the Consolidated Financial Statements as of
December 31, 1999, 1998 and 1997.......................... F-7
FINANCIAL STATEMENTS OF AMERICAN LAWYER MEDIA, L.P. (OLD
ALM)
Report of Independent Public Accountants as of and for the
Seven Months Ended
July 31, 1997............................................. F-20
Balance Sheet as of July 31, 1997........................... F-21
Statement of Operations for the Seven Months Ended July 31,
1997...................................................... F-22
Statement of Changes in Partners' Capital and Accumulated
Deficit for the Seven Months Ended July 31, 1997.......... F-23
Statement of Cash Flows for the Seven Months Ended July 31,
1997...................................................... F-24
Notes to the Financial Statements as of July 31, 1997....... F-25
CONSOLIDATED FINANCIAL STATEMENTS OF NATIONAL LAW PUBLISHING
COMPANY, INC.
Report of Independent Public Accountants as of and for the
Period from January 1, 1997 through December 21, 1997..... F-30
Consolidated Balance Sheet as of December 21, 1997.......... F-31
Consolidated Statement of Operations for the Period from
January 1, 1997 through
December 21, 1997......................................... F-32
Consolidated Statement of Stockholders' Equity for the
Period from January 1, 1997 through December 21, 1997..... F-33
Consolidated Statement of Cash Flows for the Period from
January 1, 1997 through
December 21, 1997......................................... F-34
Notes to the Consolidated Financial Statements as of
December 21, 1997......................................... F-35
F-1
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Lawyer Media, Inc.:
We have audited the accompanying consolidated balance sheets of American
Lawyer Media, Inc. (a Delaware corporation) as of December 31, 1999 and 1998 and
the related consolidated statements of operations, changes in stockholder's
equity and cash flows for the years ended December 31, 1999 and 1998 and the
five months ended December 31, 1997. Th