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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
(Mark One)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934 (Fee Required)
For the fiscal year ended December 31, 1993
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or
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from ___________________ to _________________________
Commission file Number 2-28286
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The Bureau of National Affairs, Inc.
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(Exact name of Registrant as specified in its charter)
Delaware 53-0040540
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1231 25th St., N. W., Washington, D. C. 20037
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(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including Area Code (202) 452-4200
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Securities Registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:Class A common stock,
$1.00 par value.
Indicate by check mark whether the registrant (l) 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, 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. ( X )
The market value of the Class A voting stock held by non-affiliates of
the registrant as of February 26, 1994 was $58,599,988 (all voting stock is
owned by employees of the registrant and its subsidiaries). In determining this
figure, The Bureau of National Affairs, Inc. (the "Company"), has assumed that
all of its officers, directors, and persons known to the Company to be the
Page 1 of 89 Pages
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beneficial owners of more than five percent of the Company's Class A common
stock are affiliates. Such assumption should not be deemed conclusive for any
other purpose.
The number of shares outstanding of each of the registrant's classes of
common stock, as of February 26, 1994 was 3,198,694 Class A common shares,
4,916,264 Class B common shares, and 442,770 Class C common shares.
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the Company's definitive Proxy Statement, filed with the SEC
on March 25, 1994 are incorporated by reference into Part III of this Form 10-K.
The Bureau of National Affairs, Inc.
INDEX TO FORM 10-K
For the fiscal year ended December 31, 1993
Page No.
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PART I.
Item 1. Business.............................................. 3-14
Item 2. Properties............................................ 15
Item 3. Legal Proceedings..................................... 16
Item 4. Submission of Matters to a Vote of Security Holders... 16
Item X. Executive Officers of the Registrant.................. 17-18
PART II.
Item 5. Market for the Registrant's Common Stock and Related
Security Holder Matters............................. 19
Item 6. Selected Financial Data............................... 20
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 21-24
Item 8. Financial Statements and Supplementary Data........... 25-53
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure................. 54
PART III.
Item 10. Directors and Executive Officers of Registrant........ 54
Item 11. Executive Compensation................................ 54
Item 12. Security Ownership of Beneficial Owners and
Management.......................................... 54
Item 13. Certain Relationships and Related Transactions........ 54
PART IV.
Item 14. Exhibits, Financial Statement Schedules, and
Report on Form 8-K.................................. 55-56
SIGNATURES........................................................... 57
EXHIBIT INDEX........................................................ 58
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PART I
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ITEM 1. Business
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General Development of Business and Narrative Description of Business
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Business of BNA and Subsidiaries
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The Bureau of National Affairs, Inc. (BNA), is a leading publisher of
specialized business, legislative, judicial, and regulatory information
services. BNA was founded in 1929, and was incorporated in its present form as
an employee owned company in 1947. BNA is independent, for profit, and is the
oldest fully employee-owned company in the United States.
BNA and its publishing subsidiaries, Tax Management Inc. and Pike & Fischer,
Inc., are engaged in providing labor, legal, economic, tax, health care and
other regulatory information to business, professional, and academic users.
They prepare, publish, and market looseleaf subscription information services in
print and compact disc formats, books, pamphlets, and research reports.
Sales are made principally in the United States through field sales personnel
who are supported by direct mail, space advertising, and telemarketing.
Customers include lawyers, accountants, business executives, human resource
professionals, health care administrative professionals, labor unions, trade
associations, educational institutions, government agencies, and libraries in
the United States and throughout the world.
The BNA Electronic Media Division develops online databases and other electronic
products from BNA services and other information, creates original electronic
databases, and engages in research and development for electronic delivery of
BNA information. These products are marketed through online database vendors
such as Mead Data Central, West Publishing Company, Dialog, Cambridge
Information Group, and others.
BNA Software, a division of Tax Management Inc., develops, produces, and markets
tax and financial planning software for use on personal computers. Sales are
made to accountants, lawyers, tax and financial planners, and others. The
products are marketed through direct mail, space advertising, and BNA field
sales representatives.
BNA International Inc. is the company's agent for sale of its domestic services
in the United Kingdom, Europe, Africa, and Asia, and also engages in independent
publishing activity, including adaptation of the company's domestic products for
sales abroad.
The McArdle Printing Co., Inc. provides printing services to mid-Atlantic area
customers. It utilizes modern equipment and technology in printing information
products for publishers, trade associations, professional societies, other non-
profit organizations, financial institutions and governmental organizations.
Approximately 65 percent of its business is derived from the BNA publishing
companies.
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BNA Communications Inc. (BNAC) is engaged in the business of producing,
publishing, and marketing programs for training in the Equal Employment
Opportunity and safety and health related fields. The programs promote
awareness, compliance, prevention, and training for managers and employees in
industry and government, using audio visual and printed materials.
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Item 1 General Development of Business and Narrative Description
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of Business (Continued)
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Review of Operations
BNA's results for 1993 reflect the company's decision to bring to market as
quickly as possible a new line of CD-ROM products to meet a growing demand for
information in this exciting format and to protect its circulation base from
aggressive new competition. The strategy carried a high price tag, but the
enthusiastic response to the company's first CD-ROM offerings confirms the
validity of the decision.
The first CD-ROM product, TAX MANAGEMENT PORTFOLIOS PLUS, was launched late in
1992. It was followed in June of 1993 with BNA'S ENVIRONMENTAL LIBRARY ON
CD-ROM. BNA'S HUMAN RESOURCES LIBRARY ON CD-ROM was introduced in September,
and BNA's COMPENSATION & BENEFITS LIBRARY and TAX MANAGEMETN'S TAX PRACTICE
SERIES ON CD-ROM came to market as the year drew to a close. Together these
five products accounted for sales of over $10 million in 1993.
The increasing importance of CD-ROM and other electronic products has made
replacement of the company's aging editorial/production systems a high priority,
and this, too, was begun in 1993. The present systems were designed for print.
Their use to create electronic product is costly, slow, and cumbersome.
A strong performance by the corporate investment portfolios, a banner year for
BNA Software, the absence of ETSI losses, and a substantial reduction in the
losses of other operations more than offset major expenses for new products,
systems, and technology by the parent company, and consolidated net income rose
to $11.3 million in 1993, a gain of 19.5 percent from comparable earnings of the
previous year.
Investment income increased by 40 percent to $6.2 million for the year.
Realization of nearly $2 million in securities capital gains, which had resulted
from declining market interest rates, was a major portion of the increase and is
unlikely to be repeated in 1994.
Despite higher cash outlays for capital expenditures, loan repayments, and
repurchases of treasury shares, cash and investments increased by $10 million.
With year-end cash and investment balances totalling $85 million, BNA's
liquidity and financial reserves remain strong relative to the company's
obligations.
Expenses for 1993 included a charge of $4 million for post-retirement health
care benefits. This charge is the result of a new accounting rule (SFAS 106)
adopted in 1992. It is expected to increase with medical cost inflation and
growth in employment rolls.
Turnover in the ranks of management during the year demonstrated once again that
the company has a depth of talent to match its financial strength. Vacant
positions were filled from within and the business, including all of the
sweeping new initiatives undertaken, advanced without missing a beat.
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The year saw a continued growth in total circulation units, although some of the
CD-ROM sales resulted in cancellations of print services. It is not yet clear
how much of an effect electronic alternatives will have on print circulation.
The 1994 print renewal cycle should provide some enlightenment.
Consolidated revenues exceeded $200 million for the first time in the company's
history. Revenue gains were achieved by the parent company and by all of its
publishing subsidiaries.
A REVIEW OF 1993 OPERATIONS OF THE PARENT COMPANY AND EACH SUBSIDIARY FOLLOWS:
THE BUREAU OF NATIONAL AFFAIRS, INC.
Parent company revenues of $141 million in 1993 were 6.2 percent higher than in
the previous year. Subscription service revenue was up by 6.9 percent. The
Electronic Media Division also reported a year-to-year gain. Revenues were lower
for the Book Division and for BNA PLUS.
Much was accomplished during the year. Ten new services, including the parent
company's first three CD-ROMs, were launched; two well-established older
services, BNA POLICY AND PRACTICE SERIES and LABOR RELATIONS REPORTER, were
extensively revised to reflect the current state of the law and to accommodate
new material; substantial progress was made on the company's new business system
to become operational in 1994; and work began in earnest on a new publishing
system following a thorough study of the company's present and future needs and
the available outside resources to meet these needs.
New subscription sales of BNA and Tax Management services rose by 25 percent
from the previous year to a record $29.3 million. BNA'S ENVIRONMENTAL LIBRARY
ON CD-ROM, introduced in June, was the leading product of the year with sales of
$3.5 million. The HUMAN RESOURCES LIBRARY ON CD-ROM, a fall launch, was second
among top-sellers for the parent company, followed by LABOR RELATIONS REPORTER
with its new AMERICANS WITH DISABILITIES CASES section and completely revised
WAGE HOUR MANUAL.
A major capital expenditure was made mid-year to equip the field sales force
with laptop computers and CD-ROM drives so that representatives could
effectively demonstrate the company's new line of electronic products. Sales &
Marketing and Information Systems combined expertise and conducted intensive
training programs throughout the country. Representatives embraced the new
technology with astonishing speed and the results speak for themselves.
The leading new print product of the year was HEALTH CARE POLICY REPORT,
flagship of the new Health Care Services Division. The division acquitted
itself well in its first full year of operations with sales of $1.6 million. It
ended the year with three successful products and a fourth scheduled for launch
in the first quarter of 1994.
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HEALTH CARE ELECTRONIC DATA REPORT was merged with its sister new product,
HEALTH CARE POLICY REPORT, within a few months when initial sales fell short of
pre-launch projections. The aggressive new product development program called
for in the company's current strategic plan requires a close monitoring of
performance and prompt action where a product fails to meet its circulation
goals and shows little promise of achieving profitability in a reasonable period
of time.
Three services were terminated in the course of 1993 and subscribers were
offered alternative, related services in their stead. A fourth service, BNA'S
EASTERN EUROPE REPORT, was transferred to BNA International, where its chances
for success are enhanced by a lower cost structure and more targeted foreign
marketing. A fifth, BNA'S NATIONAL ENVIRONMENT WATCH, was given a new name and
charter to appeal to a more promising market segment. It has become BNA'S
ENVIRONMENT COMPLIANCE BULLETIN and is the company's first product with state-
specific inserts produced by the editors through a desktop publishing system.
Efforts to raise BNA's already high level of customer satisfaction remained a
priority in an atmosphere of rapidly evolving needs and increasing competitive
pressure. The Customer Satisfaction Committee appointed in 1992 worked
effectively to heighten company-wide awareness of customer concerns and made
significant progress on recommendations in the Customer Satisfaction Audit
Report.
Customer-oriented initiatives resulted in a better system for collecting and
responding to subscriber comments, expanded service hours, and enhanced
subscription retention efforts. The need for complete and accurate information
about customers remained prominent in the design of the company's new business
information system.
BNA PLUS
BNA PLUS, the company's highly regarded subscriber support arm, stepped up to
new challenges presented by the addition of CD-ROM products to BNA's already
formidable range of information services. Working in close partnership with the
newly formed technical support group in the Information Systems Division, PLUS
personnel helped to educate both subscribers and sales representatives as each
new disk product appeared. More than 100,000 calls were handled in 1993,
representing a 20 percent increase over the previous year.
The three PLUS business units (documents, compilations, and custom research)
produced revenues of $1.7 million in 1993. The combined revenue of the
documents and compilations units, $1.4 million, increased 16.8 percent over
1992. Custom research revenue dropped from year-to-year as a result of a
decision to convert custom environmental regulation monitoring to subscription
services sold by the field sales force.
ELECTRONIC MEDIA DIVISION
The Electronic Media Division achieved record online revenues and profits in
1993. Revenues of $2.9 million were 7 percent greater than 1992, and operating
profit was $509,000, an 18 percent increase.
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The Division also explored products for emerging media other than traditional
online and CD-ROM, with the objective of preserving BNA's competitive position
in the rapidly changing electronic environment.
EMD ended the year with 292 products on seven online systems, including a new
distributor, Legi-Slate. Electronic-only daily updating services were added to
Legi-Slate, a subsidiary of the Washington Post Company, at mid-year. Two new
online dailies, BNA's CORPORATE COUNSEL DAILY and BNA'S EMPLOYMENT POLICY & LAW
DAILY, were introduced on Lexis, Westlaw, and Dialog.
Other new electronic products launched in 1993 included: AMERICANS WITH
DISABILITIES CASES on Lexis, Westlaw and the Human Resource Information Network
(HRIN); HEALTH CARE PLOICY REPORT and MEDICARE REPORT on Lexis and HRIN; and
HEALTH LAW REPORTER and DAILY ENVIRONMENT REPORT on Lexis. DAILY LABOR REPORT
and UNITED STATES LAW WEEK were relaunched in a standardized coding format,
while UNITED STATES LAW WEEK Section 4 -- Supreme Court Opinions -- was added to
Lexis and Westlaw. EMD also worked very closely with Westlaw, which had keyed
the 45-year electronic archive of U.S. PATENTS QUARTERLY, to bring that archive
to BNA for use as a proprietary CD-ROM product.
Through the newly created BNA Ventures, the management and staff of EMD
participated in evaluating the array of joint venture, alliance, and acquisition
opportunities created by the new electronic era. Through BNA Ventures, the best
of these possibilities will be appropriately evaluated and pursued.
BNA BOOKS
With $4.4 million in revenues in 1993, the BNA Book Division nearly equalled its
record-setting $4.5 million in 1992, a year that saw the publication of the
third edition of DEVELOPING LABOR LAW. By mid-1993, cumulative sales of
DEVELOPING LABOR LAW topped $1 million with 5,500 units sold. The Division
reduced its operating loss to $166,000 in 1993, a 32 percent improvement from
the previous year.
One half of the Division's new products in 1993 were authored by BNA or former
BNA employees. Four such products -- BNA'S DIRECTORY OF U.S. LABOR
ORGANIZATIONS, BNA'S STATE ADMINISTRATIVE CODES AND REGISTERS DIRECTORY, BNA'S
STATE AND FEDERAL COURT DIRECTORY, and CODES OF PROFESSIONAL RESPONSIBILITY --
won national recognition in LEGAL INFORMATION ALERT'S survey of the 50 most
useful reference sources for law librarians.
SUPREME COURT PRACTICE, 7TH EDITION, was released in 1993. The treatise,
considered the "bible" in the field, has been published by BNA since 1950.
ENVIRONMENTAL TAX HANDBOOK was produced with Tax Management Inc., and readily
met with critical and commercial success. Also, the Division reached agreement
with the ABA Section on Labor and Employment Law to incorporate sections of
EMPLOYEE BENEFITS LAW into a new BNA CD-ROM product.
The Division added to its successful Fact Sheet product line with new products
on flexible spending accounts, COBRA, and the Americans with Disabilities Act.
All fact sheets, including 1992's highly successful fact sheet on preventing
sexual harassment, exceeded budget expectations.
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New technology continued to translate into immediate cost savings on the
production side of the business. Approximately one quarter of the Division's
titles employed desktop publishing technology in 1993, saving up to two-thirds
of the average expense for traditional composition methods.
By mid-year, it was clear, however, that the ambitious growth plan set out for
the Book Division in 1989 needed to be modified. The Division managers met
throughout the budgeting process and put together an entirely new plan for 1994
- -1996, which calls for more immediate profitability along with lower revenue
growth expectations.
Even greater use of BNA editorial talent and materials is contemplated under the
new plan. The Division will take advantage of the company's new technologies to
produce more spinoff book products and will seek to contribute more materials to
CD-ROM efforts. Also, the Division will emphasize renewable products and
regular supplementation in its new product development efforts. These
strategies should hold the Division in good stead for the future.
TAX MANAGEMENT INC.
Tax Management had another record-breaking year with 1993 revenues of $38.2
million for services and BNA Software. Net income of $5.1 million made it the
most profitable year ever, and the parent company was paid a $3.6 million
dividend.
Tax Management print and CD-ROM new service sales of $6 million exceeded 1992
sales by 53 percent. TAX PRACTICE SERIES ON CD-ROM, launched in September, was
an immediate sales success, and TAX MANAGEMENT PORTFOLIOS PLUS, launched in the
fall of 1992, continued to gain circulation.
CD-ROM subscribers benefitted from the addition of the Internal Revenue Code,
Treasury Regulations, and IRS publications, as well as IRS Forms and additional
finding tools. Providing this public domain information, licensed from other
vendors, increases the value of the CD-ROM services and compliments the unique
benefits of Tax Management proprietary information. To accommodate market
preferences, the portfolios are available in either CCH ACCESS or Folio
versions.
During the year, Tax Management published the equivalent of 50 new or revised
portfolios, including major coverage of mergers and acquisitions, the foreign
tax credit, and partnership transactions. Coverage of the 1993 tax act was
unprecedented with TAX WEEKLY REPORT providing section-by-section explanations
at each stage in the legislative process. Although the act affected more than
140 portfolios and 130 TAX PRACTICE SERIES chapters, updating was completed in
record time.
New marketing initiatives in advertising, mail promotion, and client relations
also achieved outstanding results. The client relations and training unit built
stronger subscriber allegiance through telephone interviews and training, while
also generating sales leads for field follow-up that resulted in $275,000 in
firm sales.
Product Specialists also contributed to the on-going training of representatives
and provided valuable information to marketing and editorial operations for
product development and enhancement.
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BNA SOFTWARE
1993 was the most financially successful year in the history of BNA Software.
Total revenues grew by 11.4 percent over the previous year, reaching $8.5
million, and the division's operating profit rose to $1.9 million, which was
21.8 percent of revenues.
BNA Software capitalized on the uncertainty surrounding new tax legislation with
the release of a special version of the BNA INCOME TAX SPREADSHEET incorporating
the Clinton tax proposals. This pre-enactment release generated many new sales
and a great deal of goodwill.
BNA Software's rapid release of updates incorporating the new law as well as an
aggressive customer retention program led to improved renewal rates and higher
than expected year-end circulation.
The major revenue-producing products for the software division continue to be
the BNA INCOME TAX SPREADSHEET, the BNA ESTATE TAX SPREADSHEET, and the BNA
FIXED ASSET MANAGEMENT SYSTEM.
PIKE & FISCHER, INC.
Pike & Fischer's net income rose to $776,000 in 1993, exceeding 1992 earnings by
more than 24 percent. As a result, it was possible to pay the parent company a
$600,000 dividend for 1993, $100,000 more than in any previous year.
At $4.7 million, 1993 operating revenues were the highest in the company's 54-
year history. While unfavorable economic conditions in the fertilizer industry
resulted in a decline in revenues from the Green Markets product group, this
shortfall was more than offset by increases in revenues from other Pike &
Fischer publications and from editorial services contracts. Overall, operating
revenues were 4 percent higher than in 1992.
Although revenues moved up only slightly, careful cost management resulted in an
18 percent rise in operating profit. Operating profit exceeded $1 million for
the first time, even though the company recorded more than $390,000 in non-cash
amortization expenses, mostly related to the 1991 Green Markets purchase.
Management's principal focus in 1993 was on improving the quality of existing
publications. The most ambitious project begun in 1993 was a reengineering of
Pike & Fischer's flagship telecommunications publication, RADIO REGULATION. The
service's 32-year-old digest classification system was thoroughly re-examined
and refined and more than 2,000 pages of reclassified digests were sent to
subscribers. Subscribers also received the new DESK GUIDE TO COMMUNICATIONS LAW
RESEARCH, a 400-page paperbound collection of the most important tables and
indexes from fifteen volumes of the basic Radio service. Plans for a Third
Series were formulated and are being refined in discussions with the Radio
Advisory Board, which was established in the fall of 1992. Finally, work was
started on adding a CD-ROM component to the service, for release in the first
quarter of 1994.
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Other enhancements to existing products included the introduction of an
electronic mail edition of the Green Markets newsletter to permit the
publication to compete better in international markets, where fast, inexpensive
delivery is essential. A GREEN MARKETS ELECTRONIC ARCHIVE containing the full
text of all articles published in 1992 and 1993 made its debut at the end of the
year.
In addition, ADLAW BULLETIN, a newsletter designed to accompany Pike & Fischer's
administrative law service and to be sold separately, was developed and
launched. Pike & Fischer also produced its first electronic publication for
both Windows and DOS, CABLE TV RULES ON DISK.
BNA INTERNATIONAL INC.
BNA International continued to reap the rewards of its restructuring and
dramatically reduced the losses of previous years. The subsidiary company's
after-tax loss dropped to $57,000 for 1993, compared to a loss of $535,000 in
the prior year.
BNAI service revenues grew to $2 million, partly as a result of acquiring BNA'S
EASTERN EUROPE REPORT mid-year, but also from circulation gains for all BNAI
services. Foreign sales of parent company products were marginally ahead of
1992. Demand for BNA's environmental and intellectual property services
remained strong in most markets, and interest in tax and environment CD-ROM
products began to grow as this technology became more widely available
internationally.
The drive to reduce costs and improve efficiency continued, and considerable
savings were made in the editorial, production and marketing departments. BNAI
relocated to new, less costly, and more functional offices in September, 1993.
Although there were no new product introductions in 1993, a number of
significant changes were made to existing BNAI services to improve their
performance in 1994. Plans were developed to exploit an expanded market by
replacing FOREIGN INVESTMENT IN THE U.S. with DIRECT INVESTMENT IN NORTH
AMERICA, a more broadly focused service covering developments in the United
States, Canada, and Mexico following adoption of the North American Free Trade
Agreement (NAFTA). Also, a survey of WORLD PHARMACEUTICALS REPORT subscribers
resulted in revisions to the format of that service, and both TAX PLANNING
INTERNATIONAL and WORLD INTELLECTUAL PROPERTY REPORT were re-designed to
increase their utility.
Research was also carried out on the potential for a new service to be sold only
outside the U.S. A positive response led to the decision to publish U.S.
BUSINESS LAW REPORT in February, 1994. The new service will rely on existing
BNA domestic products for source material and will be edited specifically for an
international audience. The service will have the additional benefit of making
BNA better known in the international markets.
With its stronger financial position, BNAI is now actively turning its attention
to growth. The year 1994 will be when the company completes its turnaround and
identifies the new products that will generate increased revenues and profits
from international markets in the future. The company's 1994 budget calls for a
breakeven performance.
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BNA COMMUNICATIONS, INC.
BNAC achieved the second highest revenue level in its history in 1993 despite a
very difficult year in the training media industry. Revenues of $5.6 million
from the sale of all video-based training products were 2.3 percent lower than
the company record set in 1992.
Results across product lines were mixed. Revenue from the company's human
resources group of products increased by 4.7 percent while revenue from the
safety product line dropped by 21.2 percent. While cost saving measures were
instituted to help overcome the lower revenue, the company recorded a loss of
$53,000 for 1993, compared to a profit in 1992 before the cumulative effects of
accounting changes.
The company strived aggressively to maintain and strengthen its dominant
position in the EEO/AA and workforce diversity training arena. Revenue from
this product line increased by nearly 5 percent in 1993 and has grown by 90
percent over the last five years. Two major new products, MYTHS VS. FACTS and
A WINNING BALANCE, were released in this product line. Both have been embraced
by the market and have solidified BNAC's leadership position in fair employment
practice/diversity training. With the several new human resource products
scheduled for release in the first half of 1994, there is every reason to expect
continued growth.
The decline in the company's safety program sales was attributable to a lack of
regulatory activity, a difficult economy, and increased competition. Late in
1993, BNAC made a number of changes designed to reestablish its place in the
safety training market. Among those changes are a newly created safety sales
group, a segmented marketing program, including a separate SAFETY COMMUNICATOR
newsletter, and the creation of a subscription-based, renewable safety product
called SAFETY TRAINING SUBSCRIPTION PROGRAM.
With its new product releases on schedule and the focus on the company's safety
business that will result from a separate sales and marketing activity, BNAC is
optimistic that 1994 will be a growth year -- just as five of the past six years
have been.
THE McARDLE PRINTING CO., INC.
The McArdle Printing Company continued to operate in a commercial printing
market that remained sluggish and highly competitive throughout 1993. However,
both revenues and net earnings were slightly higher than in the preceding year.
Operating revenues were $22.5 million, a gain of 1.3 percent from the previous
year. Net income increased 1 percent to $682,000 and the subsidiary paid a
$300,000 dividend to the Parent Company.
BNA continued to be McArdle's largest customer in 1993. From the time the two
were established as independent companies in 1947, the printing, binding and
mailing of BNA publications has been McArdle's largest single source of
revenue. Including a large increase in Tax Management printing produced at
McArdle, BNA publications accounted for 65 percent of McArdle's operating
revenue for the year.
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McArdle's top priority continues to be increasing revenues and fully utilizing
the operating capacity it has established. A comprehensive and aggressive
marketing program, combined with continuous training of the sales staff are
leading efforts to accomplish this goal.
During the latter part of 1993, McArdle instituted a Total Quality Management
(TQM) program at the company. McArdle management is convinced that the
implementation and maintenance of this program will increase quality,
productivity, customer satisfaction, and employee satisfaction, on a continuous
and lasting basis.
McArdle's desktop printing operation was complemented by the recent addition of
a Linotron Imagesetter and a DuPont black and white scanner. This new equipment
further enhances the quality and productivity in both McArdle's communications
and prepress operations.
With the newly implemented TQM program and the further expansion of the
communication system, desktop publishing, and prepress capabilities, McArdle is
well positioned to meet BNA's present and future printing needs and to compete
successfully in the commercial market by offering competitively priced, high
quality, and on-time printing services.
BNA WASHINGTON INC.
BNA Washington's building and office renovation activity was heavier in 1993
than in the previous year. The major project was the reconfiguration and
renovation of office space and base building upgrades required by safety and ADA
compliances regulations at the company's Rockville, Maryland, facility.
Many smaller relocation and office redesign projects were accomplished at BNA's
downtown facilities. The projects were initiated to meet BNA's growth and
operational restructuring activity and varied in size and scope. All in all,
some 21 projects were undertaken and involved approximately 500 employees and
81,000 square feet of office space.
BNAW successfully negotiated a contract with Caldor Corporation for the sale of
the Silver Spring, Maryland, site of McArdle Printing Company's former plant,
which was demolished during the summer. Settlement is contingent upon Caldor's
obtaining appropriate building permits from Montgomery County for a department
store and adjacent parking facilities. It is expected that Caldor will get the
permits and that the sale will be concluded in late 1994 or early 1995.
A long term strategic facility plan was initiated by BNAW in the latter part of
the year. The objective of the plan is to evaluate BNA's long-term growth needs
and to determine what options are available to meet these needs. The plan is
scheduled to be completed by the end of June, 1994.
BNAW's 1993 operating revenues included $1.8 million from outside tenants.
13
<PAGE>14
PART I
------
Item 1. Business
--------
General Development of Business and Narrative Description of Business Cont.
- ----------------------------------------------------------------------------
The Bureau of National Affairs, Inc. ("BNA" or the "Company") operates primarily
in the business information publishing industry. Operations consist of the
production and marketing of information products in print and electronic form,
and outside printing services. Activities in other industry segments are less
than 10 percent of total revenue.
As a response to customer demand, advances in technology, and competition, the
Company has recently increased its efforts to publish information in the CD-ROM
format. CD-ROM's allow the economical addition of value-added features such as
searching capabilities and additional information content.
Competition in the business information industry continues to intensify and some
competitors are larger and have greater resources than BNA. The Company has
invested in sales aids to help its sales force demonstrate the CD-ROM products
to customers. Additionally, the Company has embarked on a plan to redesign its
publishing system to more effectively produce information for electronic or
print delivery. This process is expected to be developed over several years.
The number of employees of BNA and its subsidiaries was 1,796 at December 31,
1993.
14
<PAGE>15
PART I
------
Item 2. Properties
----------
BNA Washington Inc. owns and manages the buildings presently used by BNA
and some of its Washington area subsidiaries. Principal operations are
conducted in three adjacent buildings at 1227-1231 25th Street, NW,
Washington, D.C. The office building at 1227 25th Street is being used
primarily by BNA and also for commercial leasing. BNA also leases office
space at 1250 23rd Street, NW, Washington, D.C.
BNA's Circulation Department and BNA Communications Inc. operate in an
owned facility at 9435 Key West Avenue, Rockville, Maryland. Pike &
Fischer, Inc. leases office space for its operations at 4600 East-West
Highway, Bethesda, Maryland. BNA International Inc. conducts its
operations from leased offices at Heron House, 10 Dean Farrar Street,
London, England. The McArdle Printing Co., Inc. owns its office and plant
facilities at 800 Commerce Drive, Upper Marlboro, Maryland. Property at
the former printing site in Silver Spring, Maryland is being held for
investment.
15
<PAGE>16
PART I
------
Item 3. Legal Proceedings
-----------------
The Company is involved in certain legal actions arising in the ordinary course
of business. In the opinion of management the ultimate disposition of these
matters will not have a material adverse effect on the Company's consolidated
financial statements.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
On October 6, 1993, a consent solicitation was sent to all Class A and Class B
shareholders. The solicitation sought shareholders' consent to increase the
authorized shares of Class B common stock by 500,000 shares, and decrease the
authorized shares of Class A common stock by 500,000 shares. BNA stockholders
have consented to the adoption of the amendment.
As of October 29, the holders of 2,671,148 shares of Class A common stock had
returned their consent forms. Of these, 2,632,673, or 79%, consented to the
proposal, 31,232, or 1%, withheld consent, and 7,243, or .22%, abstained.
Holders of 3,979,730 shares of Class B common stock had returned their consent
forms as of October 29. Of these, 3,978,645, or 84%, consented to the proposal,
1,085, or .02%, withheld consent, and 0, or 0%, abstained.
Under the laws of the State of Delaware, in which BNA is incorporated, and under
BNA's Certificate of Incorporation, the affirmative consents of a majority of
the 3,349,054.40 outstanding shares of Class A stock, or 1,708,018 shares, and
the affirmative consents of a majority of the 4,762,546 outstanding shares of
Class B stock, or 2,428,898 were required to adopt the proposed amendment.
16
<PAGE>17
PART I
------
Item X. EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
The following persons were executive officers of The Bureau of National Affairs,
Inc., at December 31, 1993. Executive officers are elected annually by the
Board of Directors and serve until their successors are elected.
Name Age Present position and prior experience
---- --- -------------------------------------
William A. Beltz 64 President and Chief Executive Officer
Elected president and editor-in-chief in
1979 and chief executive officer in 1980.
Joined BNA in 1956.
John P. Boylan, Jr. 54 Vice President for Administration
Elected to present position in 1986.
Previously was corporate manager of data
processing from 1975 to 1986. Joined BNA
in 1974 after employment at Fisher-Stevens,
Inc. (a former BNA subsidiary) since 1962.
Robert Brooks 44 Vice President and Director of Sales and
Marketing. Elected to present position in
1991. Previously General Manager of BNA
Software since 1984. Joined BNA in 1974.
Kathleen D. Gill 47 Vice President and Executive Editor
Elected to vice president and executive
editor in 1993. Previously was associate
editor for business and human resources
services since 1987. Joined BNA in 1970.
John E. Jenc 51 Treasurer
Elected to present position in 1990.
Joined BNA as Controller in 1981.
George J. Korphage 47 Vice President and Chief Financial Officer
Elected vice president in 1988 and chief
financial officer in 1989. Previously was
manager of financial planning and analysis
since 1985. Joined BNA in 1972.
John V. Schappi 64 Vice President for Human Resources
Elected to present position in 1987.
Previously was associate editor for labor
services since 1972. Joined BNA in 1955.
(Continued)
17
<PAGE>18
Item X. EXECUTIVE OFFICERS OF THE REGISTRANT (Continued)
------------------------------------
Name Age Present position and prior experience
---- --- -------------------------------------
John D. Stewart 78 Chairman of the Board
Served as Chairman of the Board since 1970.
Previously was president and editor-in-
chief from 1964 to 1979, and chief
executive officer from 1979 to 1980.
Joined BNA in 1939.
Paul N. Wojcik 45 Vice President, General Counsel, and
Corporate Secretary
Elected vice president and general counsel
in 1988 and corporate secretary in 1989.
Previously was corporate counsel and
assistant corporate secretary from 1984 to
1988. Joined BNA in 1972.
18
<PAGE>19
PART II
-------
Item 5. Market for the Registrant's Common Stock and Related Security
-------------------------------------------------------------
Holder Matters
--------------
Market Information, Holders, and Dividends
- ------------------------------------------
There is no established public trading market for any of BNA's three classes of
stock, but the Stock Purchase and Transfer Plan provides a market in which Class
A stock can be bought and sold.
The Board of Directors establishes semi-annually the price at which Class A
shares can be bought and sold through the Stock Purchase and Transfer Plan and
declares cash dividends. In accordance with the corporation's bylaws, the price
and dividends on non-voting Class B and Class C stock are the same as on Class
A stock. Dividends have been paid continuously for 44 years, and they are
expected to continue.
As of March 1, 1994, there were 1,354 Class A shareholders, 204 Class B
shareholders, and 48 Class C shareholders. The company repurchased 87,000
shares of Class B stock from retired employees or their estates in the 12 months
ending March 1, 1994.
Established stock price and dividends declared during 1993 and 1992 were as
follows:
Stock Price
January 1, 1992 - March 21, 1992 $17.00
March 22, 1992 - March 27, 1993 17.50
March 28, 1993 - September 25, 1993 19.50
September 26, 1993 - December 31, 1993 20.50
Dividends Declared
March 21, 1992 $ .42
September 19,1992 .42
March 27, 1993 .45
September 25, 1993 .45
The principal market for trading of voting shares of common stock of The Bureau
of National Affairs, Inc., is through the Trustee of the Stock Purchase and
Transfer Plan.
19
<PAGE>20
PART II
-------
Item 6. Selected Financial Data
-----------------------
<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED OPERATING AND FINANCIAL SUMMARY: 1993-1989
(Dollar amounts in thousands, except per share data)
<CAPTION>
1993 1992 1991 1990 1989
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Operating Revenues $200,818 $193,036 $181,347 $175,447 $163,377
Operating Expenses 191,144 182,959 171,622 162,735 148,470
- ----------------------------------------------------------------------------------------------------------
Operating Profit 9,674 10,077 9,725 12,712 14,907
Non-operating Income (Expense):
Investment Income 6,190 4,411 3,941 4,534 4,105
Interest Expense (431) (503) (917) (1,101) (1,215)
Other Income (Expense), Net 303 (850) (55) 1,924 (850)
- ----------------------------------------------------------------------------------------------------------
Income from Continuing Operations Before Income Taxes
and Cumulative Effects of Accounting Changes 15,736 13,135 12,694 18,069 16,947
Income Taxes 4,482 3,718 4,092 6,428 6,686
- ----------------------------------------------------------------------------------------------------------
Income from Continuing Operations Before
Cumulative Effects of Accounting Changes 11,254 9,417 8,602 11,641 10,261
Cumulative Effects of Accounting Changes (a) -- (19,482) -- -- --
- ----------------------------------------------------------------------------------------------------------
Net Income (Loss) $11,254 ($10,065) $8,602 $11,641 $10,261
- ----------------------------------------------============================================================
Profit Ratios (b):
% of Operating Revenues 5.6 4.9 4.7 6.6 6.3
% of Stockholders' Equity 21.4 20.2 14.0 20.0 19.7
- ----------------------------------------------------------------------------------------------------------
Earnings (Loss) Per Share From:
Continuing Operations $1.32 $1.11 $1.03 $1.40 $1.25
Discontinued Operations -- -- -- -- --
Cumulative Effects of Accounting Changes -- (2.30) -- -- --
Total Earnings (Loss) Per Share $1.32 (1.19) 1.03 1.40 1.25
Dividends Per Share 0.90 .84 .82 .80 .72
- ----------------------------------------------============================================================
Balance Sheet Data:
Total Assets $251,517 $229,035 $192,592 $185,213 $175,086
Long-Term Debt 1,332 1,534 5,721 8,892 11,180
- ------------------------------------------------==========================================================
Employee Data:
Number of Employees 1,796 1,718 1,797 1,773 1,693
Total Employment Costs $111,443 $104,345 $95,287 $88,259 $77,179
- ------------------------------------------------==========================================================
Stockholders' Data at Year-End:
Book Value Per Share $6.14 $5.47 $7.34 $7.01 $6.35
Number of Stockholders 1,568 1,577 1,523 1,466 1,359
Common Shares Outstanding (In thousands) 8,553 8,521 8,394 8,294 8,208
- ----------------------------------------------============================================================
<FN>a
(a) Includes the cumulative effects of the changes in accounting for other postretirement benefits and
for income taxes.
<FN>b
(b) Based on net income excluding the cumulative effects of accounting changes.
</TABLE>
20
<PAGE>21
PART II
-------
Item 7. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
1993 vs. 1992 - Consolidated
Consolidated revenues of $201 million were up 4 percent from the prior year's
$193 million. Excluding the cumulative effects of accounting changes recorded
in 1992, consolidated net income for 1993 increased 19.5 percent to $11.3
million. This increase in comparable earnings was primarily the result of
higher non-operating income, as operating profit showed a slight decline.
Services (print and CD subscriptions and online products) accounted for all of
the revenue increase as non-service revenues (software, outside printing,
training media, books, and others) declined slightly. Service revenues amounted
to 85.2 percent of consolidated revenues in 1993 and 84.6 percent in 1992, and
increased 4.9 percent on higher prices and new print and CD product sales. Some
of the CD sales replaced print products, but since CD products have more value-
added features, they afford an opportunity for higher pricing than their print
counterparts. Accordingly, while total service circulation increased only 1
percent, the annual subscription file dollar value, a more current measure of
total subscription service business, increased 7.7 percent during 1993. The
increase in service revenues was negatively affected by the absence of ETSI, the
online network division which was sold in December, 1992. ETSI recorded
revenues of $2,681,000 in 1992 and $2,472,000 in 1991. Non-service revenues
amounted to $29.6 million, and declined .6 percent as higher software division
sales were offset by lower sales for books, information-on-demand, training
media, and printing sales to outside customers.
Operating expenses increased 4.5 percent in 1993. The expense increase was
mainly due to eleven new services developed and launched in 1993, including four
in CD format, and higher systems development costs. Product development
expenses increased 16.9 percent to $5.3 million, reflecting increased CD and
print service development efforts. Operating expenses in 1993 include an
identifiable $3.9 million for developing improved business and publishing
systems. The overall expense increase was lessened by the absence of ETSI,
which recorded operating expenses of $4,435,000 in 1992 and $4,813,000 in 1991.
Operating profit declined 4 percent from 1992. The effect on operating profit
from increased product and systems development expenses was mitigated by the
absence of ETSI, which had a $1.8 million operating loss in 1992, and
substantial improvements in the operating results for the international business
unit and the tax planning software business.
Non-operating income nearly doubled as investment income increased 40.3 percent
to $6.2 million due to substantially higher gains on sales of securities and
larger portfolio balances. Nearly $2 million in gains were recorded in 1993, an
amount not expected to be matched in 1994. A net gain on disposal of assets in
1993 compared to a net loss in 1992 increased other net non-operating income
$1.1 million.
Earnings per share were $1.32 per share compared to $1.11 per share (before
cumulative effects of accounting changes) in 1992. The consolidated federal,
state, and local effective income tax rate was 28.5 percent in 1993 compared to
28.3 percent in 1992. A significant non-recurring item lowered the effective
income tax rate in each year. In 1993, the effective rate was reduced 2 percent
by the effect of the federal income tax rate change on net deferred tax assets.
(Continued)
21
<PAGE>22
In 1992, the effective rate was reduced 2.4 percent by a one-time realization of
previously non-deductible expenses.
The 1993 operating results reflect a substantial investment in developing and
launching new products and in developing improved publishing and business
systems. The Company is undertaking these efforts in response to customers'
demand for information in an electronic format and to make operations more
efficient. The development effort is ongoing and will negatively affect
operating results, but management believes these expenditures are necessary to
protect and enhance the Company's long-term value.
Effective no later than 1994, the Company must account for the cost of providing
continuing compensation and health care benefits for former employees in
accordance with Statement of Financial Accounting Standards (SFAS) 112--
Employers' Accounting for Postemployment Benefits. The effect of adopting the
new accounting standard has not been computed, but it is not expected to
materially affect the financial position of the Company.
1992 vs. 1991 - Consolidated
Results for 1992 were negatively impacted by the new accounting
standards adopted during the fourth quarter. Consolidated net income before the
cumulative effects of the accounting changes was $9.4 million, compared to $8.6
million in 1991, an increase of 9.5 percent. As discussed in Notes 5 and 8 to
the consolidated financial statements, the Company adopted SFAS 106,--Employers'
Accounting for Postretirement Benefits Other Than Pensions and SFAS 109--
Accounting for Income Taxes retroactive to January 1, 1992. The cumulative
effect of these accounting changes was a net expense of $19.5 million. Annual
operating expenses for 1992 also included an additional $4.3 million as a result
of adopting SFAS 106. Consolidated net loss for 1992 was $10.1 million.
Consolidated revenues of $193 million in 1992 increased 6.4 percent from $181.3
million in 1991. Service revenues amounted to 84.6 percent of total revenues in
1992 and 84.2 percent in 1991. Service revenues increased 6.9 percent in 1992
on higher prices and increased circulation. Seven new subscription services
were launched in 1992 and subscription circulation increased 3 percent. Non-
service revenues amounted to $29.8 million and increased 3.8 percent over 1991.
Operating expenses increased 6.6 percent due to higher employment expenses
(including accrued postretirement benefits and severance expenses), more
published pages, a $1.1 million increase in identifiable product development
costs, and $2 million in identifiable expenses for improved business and
publishing systems. The consolidated operating profit for 1992 was $10.1
million, an increase of 3.6 percent over 1991.
Overall favorable comparisons for non-operating items added to the year-to-year
increase in income before cumulative effects of accounting changes. Investment
income increased due to higher average portfolio balances during the year.
Interest expense decreased due to lower interest rates and lower average
outstanding debt. Other income (expense) was a higher net expense in 1992
compared to 1991 due to pre-tax losses recorded on the disposals of property,
equipment, and a business unit.
The consolidated federal, state, and local effective income tax rate was 28.3%
in 1992 compared to 32.2% in 1991. The lower rate reflects the benefits
realized for previously non-deductible expenses, and a higher level of tax-
exempt investment income.
(Continued)
22
<PAGE>23
Segments
The Company operates primarily in the business information publishing industry.
Operations consist primarily of the production and marketing of information
products in print and electronic form, and outside printing services.
Activities in other industry segments provide less than ten percent of total
revenues.
Deferred Tax Assets
In accordance with SFAS 109, the Company has recorded $12 million of net
deferred tax assets as of year-end 1993. This amount includes $17.9
million related to the accrued postretirement benefits liability. No
valuation allowance has been provided for the realization of the deferred
tax assets.
In assessing the realizability of the deferred tax assets, management
considers whether it is more likely than not that the deferred tax assets
will be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods
in which those temporary differences become deductible. The Company has
a consistent history of profitability and taxable income, and management
believes this trend will continue. Factors supporting this conclusion are
consistent profitable operations, a quality reputation in the markets
served by the Company, a high renewal rate for subscription products, a
growing deferred revenue liability (representing payments and orders for
future fulfillment), and the recent successful introduction of products
using new CD and electronic delivery methods.
In the opinion of management, it is more likely than not that the existing
deferred tax assets will be realized in future years, and no valuation
allowance is necessary.
Financial Resources and Cash Flows
The Company maintains its financial reserves in cash and investment
securities which, along with its operating cash flows, are sufficient to
fund ongoing cash expenditures for operations and to support employee
ownership. Cash provided from operating activities amounted to $23.5
million in 1993, $34 million in 1992, and $22.4 million in 1991. Cash
flow from operations declined in 1993 due to a 5.3 percent increase in
expenditures and slightly lower collections. Cash flows from operations
had increased substantially in 1992 due to a one-time change in the
subscription billing cycle.
Cash outlays for capital expenditures were $9.1 million in 1993, compared
with $5.2 million in 1992, and $17.4 million in 1991. This included
equipment purchases, office furnishings, and building improvements.
Capital expenditures in 1991 also reflect major renovations of older
office space and equipment purchases for the new printing facility, and
$1.6 million for purchased publications. Capital expenditures, are
expected to be $7 million in 1994.
Sales of capital stock to employees provided $2.8 million of equity
capital in 1993. Dividends paid to shareholders amounted to $7.7 million
in 1993, $7.1 million in 1992, and $6.9 million in 1991. Other 1993
financing expenditures included $3.2 million for debt principal repayments
and $2.2 million for repurchases of Class B and Class C capital stock.
(Continued)
23
<PAGE>24
For 1994, financing requirements include $4.2 million for scheduled debt
repayment and $1.1 million for known repurchases of Class B and Class C
stock.
With $85 million in cash and investment portfolios, the financial position
and liquidity of the Company remains very strong. Should additional
funding become necessary in the future, the Company has substantial debt
capacity based on its operating cash flows and real estate equity which
could be mortgaged. Since subscription monies are collected in advance,
cash flows from operations, along with existing financial reserves and
proceeds from the sales of capital stock, have been sufficient in past
years to meet all operational needs, new product introductions, capital
expenditures, debt repayments, and, in addition, provide funds for
dividend payments and the repurchase of Class B and Class C stock tendered
by shareholders.
24
<PAGE>25
PART II
-------
Item 8. Financial Statements and Supplementary Data
-------------------------------------------
THE BUREAU OF NATIONAL AFFAIRS, INC.
Consolidated Financial Statements
December 31, 1993 and 1992
(With Independent Auditors' Report Thereon)
25
<PAGE>26
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
The Bureau of National Affairs, Inc.:
We have audited the consolidated financial statements of The Bureau of National
Affairs, Inc. as listed in the accompanying index in Part IV, Item 14(a)(1). In
connection with our audits of the consolidated financial statements, we have
also audited the financial statement schedules as listed in the accompanying in-
dex in Part IV, Item 14(a)(2). These consolidated financial statements and fi-
nancial statement schedules are the responsibility of the Company's management.
Our responsibility is to express an opinion on these consolidated financial
statements and financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of The Bureau of
National Affairs, Inc. as of December 31, 1993 and 1992, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 1993 in conformity with generally accepted accounting
principles. Also in our opinion, the related financial statement schedules,
when considered in relation to the basic consolidated financial statements taken
as a whole, present fairly, in all material respects, the information set forth
herein.
As discussed in Note 6 to the consolidated financial statements, the Company
changed its method of accounting for investments to adopt the provisions of the
Financial Accounting Standards Board (SFAS) 115 - Accounting for Certain
Investments in Debt and Equity Securities, at December 31, 1993.
s\ KPMG Peat Marwick
--------------------
Washington, D. C.
February 22, 1994
26
<PAGE>27
<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(In thousands of dollars)
<CAPTION>
Percent of
Operating Revenues
1993 1992 1991 1993 1992 1991
---------------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES (Notes 1, 2, and 3) $200,818 $193,036 $181,347 100.0% 100.0% 100.0%
-------- -------- -------- ------ ------ ------
OPERATING EXPENSES (Notes 1, 2, 3, 4 and 5):
Editorial, production, and distribution 114,648 106,103 99,472 57.1 55.0 54.9
Selling 42,733 43,400 42,455 21.3 22.5 23.4
General and administrative 32,914 32,302 28,346 16.4 16.7 15.6
Profit sharing 849 1,154 1,349 .4 .6 .7
-------- -------- -------- ------ ------ ------
191,144 182,959 171,622 95.2 94.8 94.6
-------- -------- -------- ------ ------ ------
OPERATING PROFIT 9,674 10,077 9,725 4.8 5.2 5.4
-------- -------- -------- ------ ------ ------
NON-OPERATING INCOME (EXPENSE):
Investment income (Note 6) 6,190 4,411 3,941 3.1 2.3 2.1
Interest expense (Note 12) (431) (503) (917) (0.2) (0.3) (0.5)
Other income (expense), net (Note 7) 303 (850) (55) .1 (0.4) --
-------- -------- -------- ------ ------ ------
TOTAL NON-OPERATING INCOME 6,062 3,058 2,969 3.0 1.6 1.6
-------- -------- -------- ------ ------ ------
INCOME BEFORE PROVISION FOR INCOME TAXES AND
CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 15,736 13,135 12,694 7.8 6.8 7.0
PROVISION FOR INCOME TAXES (Note 8) 4,482 3,718 4,092 2.2 1.9 2.3
-------- -------- -------- ------ ------ ------
INCOME BEFORE CUMULATIVE EFFECTS OF
ACCOUNTING CHANGES 11,254 9,417 8,602 5.6% 4.9% 4.7%
====== ====== ======
CUMULATIVE EFFECTS OF ACCOUNTING CHANGES:
Other postretirement benefits, net (Note 5) - (21,621) -
Income taxes (Note 8) - 2,139 -
-------- -------- --------
NET INCOME (LOSS) $ 11,254 $(10,065) $ 8,602
======== ======== ========
EARNINGS (LOSS) PER SHARE (Note 14):
Income before cumulative effects of
accounting changes $ 1.32 $ 1.11 $ 1.03
Cumulative effects of accounting changes-
Other postretirement benefits - (2.55) -
Income taxes - .25 -
-------- -------- --------
NET INCOME (LOSS) $ 1.32 $ (1.19) $ 1.03
======== ======== ========
See accompanying notes to consolidated financial statements.
</TABLE>
27
<PAGE>28
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
(In thousands of dollars)
A S S E T S
-----------
1993 1992
--------- ---------
CURRENT ASSETS:
Cash and cash equivalents (Note 6) $ 10,982 $ 10,553
Short-term investments (Note 6) 8,804 6,883
Accounts receivable (net of allowance
for doubtful accounts of $1,376 in
1993 and $984 in 1992) 41,181 34,794
Inventories (Note 9) 6,975 7,280
Prepaid expenses 2,289 2,608
Deferred selling expenses (Note 3) 24,234 18,083
--------- ---------
Total current assets 94,465 80,201
--------- ---------
MARKETABLE SECURITIES (Note 6) 65,265 57,651
--------- ---------
PROPERTY AND EQUIPMENT, at cost
(Notes 4 and 12):
Land 5,176 4,933
Buildings and improvements 47,864 48,405
Furniture, fixtures and equipment 53,832 46,768
--------- ---------
106,872 100,106
Less - accumulated depreciation 45,490 38,963
--------- ---------
Net property and equipment 61,382 61,143
--------- ---------
DEFERRED INCOME TAXES (NOTE 8) 16,562 15,354
--------- ---------
GOODWILL (Note 10) 10,175 10,488
--------- ---------
OTHER ASSETS (Note 11) 3,668 4,198
--------- ---------
Total assets $ 251,517 $ 229,035
========= =========
(Continued)
28
<PAGE>29
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND 1992
(In thousands of dollars)
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
1993 1992
--------- ---------
CURRENT LIABILITIES:
Accounts payable $ 15,569 $ 14,427
Employee compensation and benefits payable 13,423 11,115
Income taxes payable 38 143
Deferred income taxes (Note 8) 4,540 1,508
Current portion of long-term debt (Note 12) 4,186 7,172
Deferred subscription revenue (Note 3) 107,834 99,523
--------- ---------
Total current liabilities 145,590 133,888
POSTRETIREMENT BENEFITS, less current portion (Note 5) 49,162 43,991
LONG-TERM DEBT, less current portion (Note 12) 1,332 1,534
OTHER LIABILITIES 2,949 2,974
--------- ---------
Total liabilities 199,033 182,387
--------- ---------
COMMITMENTS AND CONTINGENCIES
(Notes 4, 13 and 14)
STOCKHOLDERS' EQUITY (Notes 6 and 14):
Capital stock, common, $1.00 par value -
Class A - Voting; Authorized 6,700,000
shares; issued 6,478,864 shares 6,479 6,479
Class B - Nonvoting; authorized 5,300,000
shares; issued 4,919,490 shares in 1993
and 4,594,845 shares in 1992 4,919 4,595
Class C - Nonvoting; authorized 1,000,000
shares; issued 506,336 shares 506 506
Additional paid-in capital 18,423 16,298
Retained earnings 36,933 33,372
Treasury stock, at cost - 3,351,887 shares in
1993 and 3,059,364 shares in 1992 (16,360) (14,496)
Net unrealized gain (loss) on marketable securities 1,614 (67)
Foreign currency translation adjustment (30) (39)
--------- ---------
Total stockholders' equity 52,484 46,648
--------- ---------
Total liabilities and
stockholders' equity $ 251,517 $ 229,035
========= =========
See accompanying notes to consolidated
financial statements.
29
<PAGE>30
<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(In thousands of dollars)
<CAPTION>
1993 1992 1991
--------- --------- --------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 11,254 $(10,065) $ 8,602
Items with different cash requirements
than that reflected in net income-
Cumulative effects of accounting changes - 19,482 -
Deferred subscription revenue 8,311 16,197 3,052
Depreciation and amortization 9,686 9,472 8,625
Accrued postretirement benefits expense 3,900 6,600 2,573
Provision for deferred income taxes 701 (3,526) (869)
Deferred selling expenses (6,151) (57) (1,608)
(Gain) on sales of securities (1,969) (698) (240)
Loss on disposals of property 8 476 55
(Gain) loss on sales of businesses and publications (311) 374 -
Others 385 216 (134)
Changes in operating assets and liabilities-
Accounts receivable (6,760) (5,444) 1,078
Accounts payable and accrued liabilities 4,896 1,390 499
Inventory 305 (758) 115
Film production costs (727) (518) (385)
Other assets and liabilities - net (29) 828 1,046
--------- --------- ---------
Net cash provided from operating activities 23,499 33,969 22,409
--------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -
Purchases of equipment and furnishings (7,871) (3,482) (9,639)
Building improvements (870) (893) (2,186)
Land costs (358) (115) (253)
Purchase of building - (705) -
Building construction - - (3,739)
Proceeds from sales of property 747 116 -
Proceeds from sales of businesses and
publications 257 757 165
Purchase of publications - - (1,575)
--------- --------- --------
Net cash used for capital expenditures (8,095) (4,322) (17,227)
--------- --------- --------
(Continued)
</TABLE>
30
<PAGE>31
<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(In thousands of dollars)
1993 1992 1991
---------- --------- ---------
<S> <C> <C> <C>
Investment portfolio-
Purchases of marketable securities $(141,350) $(81,941) $(19,004)
Proceeds from sales and maturities of
marketable securities 134,708 51,177 20,237
Purchases of short-term investments (19,613) (2,492) (11,939)
Proceeds from sales and maturities
of short-term investments 21,576 12,153 9,204
--------- --------- ---------
Net cash used for investment portfolio (4,679) (21,103) (1,502)
--------- --------- ---------
Net cash used in investing activities (12,774) (25,425) (18,729)
--------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of borrowings (3,188) (173) (2,289)
Sales of capital stock to employees 2,781 2,971 3,542
Purchases of treasury stock (2,196) (776) (1,893)
Dividends paid (7,693) (7,108) (6,850)
--------- --------- ---------
Net cash used in financing activities (10,296) (5,086) (7,490)
--------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 429 3,458 (3,810)
CASH AND CASH EQUIVALENTS, beginning of year 10,553 7,095 10,905
--------- --------- ---------
CASH AND CASH EQUIVALENTS, end of year $ 10,982 $ 10,553 $ 7,095
========= ========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 420 $ 504 $ 920
Income taxes paid 5,803 8,015 5,036
See accompanying notes to consolidated
financial statements.
</TABLE>
31
<PAGE>32
<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(In thousands of dollars)
<CAPTION>
Capital Stock Issued Additional
----------------------------- Paid-In Retained Treasury
Class A Class B Class C Capital Earnings Stock Other
------- ------- ------- ----------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, January 1, 1991 $6,479 $4,595 $ 506 $ 11,273 $ 48,793 $ (13,315) $ (160)
Sales of Class A treasury shares
(215,637) to employees - - - 2,761 - 781 -
Reissuance of Class B treasury
shares (93,814) in exchange for
Class A shares (93,814) - - - - - - -
Repurchase of Class B shares (96,960)
and Class C shares (18,146) - - - - - (1,893) -
Net income - - - - 8,602 - -
Cash dividends - $.82 per share - - - - (6,850) - -
Change in net unrealized loss on
marketable securities - - - - - - 99
Net foreign currency translation
adjustment - - - - - - (50)
------- ------- ------- ------- -------- --------- --------
BALANCE, December 31, 1991 6,479 4,595 506 14,034 50,545 (14,427) (111)
Sales of Class A treasury shares
(170,953) to employees - - - 2,264 - 707 -
Reissuance of Class B treasury
shares (136,806) in exchange for
Class A shares (136,806) - - - - - - -
Repurchase of Class A shares (3,255),
Class B shares (36,513), and Class
C shares (4,737) - - - - - (776) -
Net loss - - - - (10,065) - -
Cash dividends - $.84 per share - - - - (7,108) - -
Change in net unrealized loss on
marketable securities - - - - - - (67)
Net foreign currency translation
adjustment - - - - - - 72
------- ------- ------- -------- -------- --------- --------
BALANCE, December 31, 1992 6,479 4,595 506 16,298 33,372 (14,496) (106)
Sales of Class A treasury shares
(143,536) to employees - - - 2,125 - 656 -
Issuance of Class B shares (324,645)
and reissuance of Class B treasury
shares (110,243) in exchange for
Class A shares (434,888) - 324 - - - (324) -
Repurchase of Class A shares (17,502),
Class B shares (86,457), and Class
C shares (7,455) - - - - - (2,196) -
Net income - - - - 11,254 - -
Cash dividends - $.90 per share - - - - (7,693) - -
Change in net unrealized gain/loss on
marketable securities - - - - - - 1,681
Net foreign currency translation
adjustment - - - - - - 9
------- ------- ------- -------- -------- --------- --------
BALANCE, December 31, 1993 $6,479 $4,919 $ 506 $18,423 $36,933 $(16,360) $ 1,584
======= ======= ======= ======== ======== ========= ========
See accompanying notes to consolidated financial statements.
</TABLE>
32
<PAGE>33
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(1) PRINCIPLES OF CONSOLIDATION AND BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
The Bureau of National Affairs, Inc. (the "Parent"), and its subsidiaries
(consolidated, the "Company"). The Company operates primarily in the
business information publishing industry. Operations consist primarily of
the production and marketing of information products in print and electronic
form, and outside printing services. Activities in other industry segments
provide less than 10 percent of total revenue. The Company did not derive
10 percent or more of its revenues from any one customer or government agency
or from foreign sales, nor did it have 10 percent or more of its assets in
foreign locations. Material intercompany transactions and balances have been
eliminated. Certain prior year balances have been reclassified to conform
with current year presentation.
All subsidiaries are wholly-owned and fully consolidated. The net investment
under the equity method of accounting as of December 31, 1993, for each
operating subsidiary was as follows (in thousands of dollars):
Cumulative
Cost and Increase
Capital (Decrease) Net
Contributions in Equity Investment
--------------- ---------- ------------
BNA Communications Inc. $ 3,165 $ (1,388) $ 1,777
BNA International Inc. 1 (4,136) (4,135)
BNA Washington Inc. 6,436 5,220 11,656
Pike & Fischer, Inc. 1,575 1,352 2,927
Tax Management Inc. 12,139 5,982 18,121
The McArdle Printing Co.,
Inc. 5,800 3,473 9,273
--------- --------- ---------
Total $ 29,116 $ 10,503 $ 39,619
========= ========= =========
(2) ACQUISITIONS AND DISPOSITIONS
In December 1992, the Company sold the assets of its online human resource
information business division, Executive Telecom Systems International
(ETSI). The sales price was $1,340,000, and consisted of cash and the
transfer of ETSI's liabilities. The sale resulted in a recorded pre-tax loss
of $512,000, but an after-tax gain of $64,000. ETSI's revenues were
$2,681,000 in 1992, and $2,472,000 in 1991; operating expenses were
$4,435,000 in 1992, and $4,813,000 in 1991.
In August 1991, the Company purchased publications from McGraw-Hill, Inc.,
for $1,575,000 in cash and the assumption of $602,000 in subscription
fulfillment obligations. The acquisition cost was assigned to assets,
(Continued)
33
<PAGE>34
THE BUREAU OF NATIONAL AFFAIRS,INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
primarily to customer lists and a non-compete agreement, based on their
respective appraised values at the date of acquisition, and to goodwill.
(3) RECOGNITION OF SUBSCRIPTION REVENUES AND SELLING EXPENSES
Subscription revenues and related field selling and direct promotion expenses
are deferred and amortized over the subscription terms, which are primarily
one year.
Deferred subscription revenue is classified on the balance sheet as a current
item; however the fulfillment of the Company's subscription liability will
use substantially less current assets than the liability amount shown.
(4) DEPRECIATION AND LEASES
The Company uses straight-line and accelerated methods of depreciation based
on estimated useful lives ranging from 5 to 45 years for buildings and
improvements and 5 to 11 years for furniture, fixtures and equipment.
Depreciation expense was $8,605,000 in 1993, $7,702,000 in 1992, and
$6,846,000 in 1991. Expenditures for maintenance and repairs are expensed
while major replacements and improvements are capitalized.
The Company has non-cancelable operating leases for office space, data
processing equipment, and vehicles. Total rent expense was $3,673,000 in
1993, $3,971,000 in 1992, and $4,056,000 in 1991 (net of sublease income of
$195,000, $149,000, and $103,000, respectively).
As of December 31, 1993, future minimum lease commitments under non-
cancelable operating leases, net of sublease rentals, were as follows (in
thousands of dollars):
Rental Sublease
Payments Rentals Net
-------- -------- ------
1994 3,778 (228) 3,550
1995 3,378 - 3,378
1996 2,700 - 2,700
1997 2,626 - 2,626
1998 2,606 - 2,606
Thereafter 4,946 - 4,946
-------- -------- --------
Total $20,034 $ (228) $19,806
======== ======== ========
(Continued)
34
<PAGE>35
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) EMPLOYEE BENEFIT PLANS
The Company has noncontributory defined benefit pension plans covering
employees of the Parent and certain subsidiaries. Benefits are based on
years of service and average annual compensation for the highest paid five
years during the last ten years of service. The plans provide for five-year
cliff vesting.
The Company's funding practice is to contribute amounts, which at a minimum,
satisfy forty-year funding program requirements. The Company contributed
$2,914,000 to the Plan in 1993 and, because of Internal Revenue Service
funding limitations, none in 1992 or 1991.
Pension expense is computed on an accrual basis in accordance with financial
reporting standards. Components of the net pension expense, based on the
actuarial study as of January 1 for each year, were as follows (in thousands
of dollars):
1993 1992 1991
-------- -------- --------
Service cost - benefits earned
during the period $ 2,505 $ 2,388 $ 2,550
Interest cost 4,009 3,346 3,310
Actual return on plan assets
during the year (5,904) (3,825) (6,426)
Net asset gain deferred for
later recognition 2,255 305 3,276
Amortization of unrecognized plan assets (93) (208) (137)
Special benefits for early retirement - 275 -
-------- -------- --------
Net pension expense $ 2,772 $ 2,281 $ 2,573
======== ======== ========
(Continued)
35
<PAGE>36
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table sets forth the funded status of the Plan and the amounts
recognized in the Company's Consolidated Balance Sheets (in thousands of
dollars):
December 31,
-------------------
1993 1992
-------- --------
Actuarial present value of benefit obligations:
Vested benefits $ 40,283 $ 32,697
Nonvested benefits 4,778 3,187
-------- --------
Accumulated benefit obligation 45,061 35,884
Projected future compensation 18,288 13,126
-------- --------
Projected benefit obligation 63,349 49,010
Plan assets at fair value 52,906 46,761
-------- --------
Projected benefit obligation in excess of
plan assets 10,443 2,249
Unrecognized net asset 3,312 3,620
Unrecognized net (loss) gain (3,843) 4,659
Unrecognized prior service cost (2,442) (2,916)
-------- --------
Accrued pension liability 7,470 7,612
Less - current portion 1,562 2,914
-------- --------
Long-term portion $ 5,908 $ 4,698
======== ========
Assumed discount rate 7.0% 8.0%
Assumed rate of compensation increase 5.0% 5.0%
Expected long-term rate of return on assets 8.0% 8.0%
Plan assets included equity securities, fixed income securities, and
temporary investments. Calculations of benefit obligations as of December
31, 1993, have been estimated by an independent actuary and are subject to
revision upon completion of a detailed actuarial study.
In addition, some acquired subsidiaries have defined contribution pension
plans and union-sponsored multi-employer pension plans. Contributions under
some of these plans are at the discretion of the Board of Directors of the
respective subsidiaries. Total contributions under these plans were
$721,000 in 1993, $688,000 in 1992 and $636,000 in 1991.
The Company also has a cash profit sharing plan based on income before
taxes, as defined, covering employees of the Parent and certain
subsidiaries. Profit sharing expense was $849,000 in 1993, $1,154,000 in
1992, and $1,349,000 in 1991.
(Continued)
36
<PAGE>37
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition to providing pension benefits, the Company extends certain
health care and life insurance benefits ("other postretirement benefits")
to retired employees. Most of the Company's employees are eligible for
these benefits if they retire while working for the Company. The Company's
policy is to fund these benefits as claims and premiums are paid. Prior to
1992, the cost of postretirement benefits was charged to expense on a pay-
as-you-go (cash) basis. Cash payments made by the Company for these
benefits totaled $985,000 in 1993, $771,000 in 1992, and $666,000 in 1991.
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) 106 - Employers' Accounting for Postretirement
Benefits Other Than Pensions, and changed its method of accounting for
postretirement benefits from a cash basis to an accrual basis. The
accounting change for the benefits resulted in a one-time, non-cash expense
in 1992 of $21,621,000, net of taxes of $14,079,000, for the transition
obligation. The transition obligation is the actuarially determined
accumulated postretirement benefit obligation as of the date of adoption of
SFAS 106. In addition, the pre-tax expense for postretirement benefits for
1992 was $4,313,000 higher as a result of having adopted this method of
accounting.
Components of the postretirement benefit expense, based on the actuarial
study as of January 1 for each year, were as follows (in thousands of
dollars):
1993 1992
-------- -------
Service cost-benefits earned during the period $ 1,993 $ 2,230
Interest cost 3,073 2,854
Amortization of net gain (39) -
------- -------
Postretirement benefit expense $ 5,027 $ 5,084
======= =======
The following table sets forth the amounts recognized in the Company's
Consolidated Balance Sheets (in thousands of dollars):
December 31,
------------------
1993 1992
------- -------
Actuarial present value of benefit obligation:
Retirees $12,934 $11,043
Fully eligible active plan participants 761 1,162
Other active plan participants 22,701 24,861
------- -------
Accumulated benefit obligation 36,396 37,066
Unrecognized net gain 7,924 3,212
------- -------
Accrued other postretirement benefits liability 44,320 40,278
Less - current portion 1,066 985
------- -------
Long-term portion 43,254 39,293
======= =======
Assumed discount rate 7.0% 8.0%
Assumed rate of compensation increase 5.0% 5.0%
(Continued)
37
<PAGE>38
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The December 31, 1993 accumulated benefit obligation was determined using
an assumed health care cost trend rate of 10.0 percent in 1994, gradually
declining to 5.0 percent per year in the year 2001 and thereafter over the
projected payout period of the benefits.
The effect of a one percent increase in the health care cost trend rate at
December 31, 1993 would have resulted in a $6,834,000 increase in the
accumulated benefit obligation and a $1,141,000 increase in the 1993
postretirement benefit expense.
(6) INVESTMENTS AND INVESTMENT INCOME
Cash and investments were reported as follows (in thousands of dollars):
December 31,
--------------------
1993 1992
------- -------
Cash and cash equivalents $10,982 $10,553
Short-term investments 8,804 6,883
Marketable securities 65,265 57,651
-------- --------
Total $85,051 $75,087
======== ========
Cash equivalents consist of short-term investments, with a maturity of three
months or less at the time of purchase. Short-term investments consisted
of other fixed-income investments, maturing in one year or less. Marketable
securities consisted of equity securities and fixed-income securities
maturing in more than one year.
Investment income consisted of the following (in thousands of dollars):
1993 1992 1991
------ ------ ------
Interest income $3,581 $3,344 $3,645
Dividend income 640 369 56
Gain on sales of securities 1,969 698 240
-------- -------- --------
Total $6,190 $4,411 $3,941
======== ======== =======
Proceeds from the sales of securities in 1993 were $156,284,000 and the
gross realized gains and losses on these sales were $2,179,000 and
$(210,000), respectively. Net realized gains after taxes on sales of
securities included in net income amounted to $1,299,000 in 1993, $461,000
in 1992, and $158,000 in 1991. The specific identification method is used
in computing realized gains and losses.
(Continued)
38
<PAGE>39
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Effective December 31, 1993, the Company adopted Statement of Financial
Accounting Standards (SFAS) 115 - Accounting for Certain Investments in Debt
and Equity Securities. SFAS 115 requires that debt and equity securities
be classified into one of three categories: held-to-maturity, available-
for-sale, or trading. Held-to-maturity securities are measured at amortized
cost in the Consolidated Balance Sheet and would include those securities
the Company had positive intent and ability to hold until maturity. Trading
securities are measured at their fair values, and include securities bought
and held principally for the purpose of selling them in the near term.
Available-for-sale securities are also measured at their fair values, and
include investments not classified as held-to-maturity or trading. All of
the Company's investments portfolio have been classified as available-for-
sale and are reported at their fair values (quoted market price).
Retroactive application of SFAS 115 is not permitted.
Investments in fixed-income and equity securities were as follows at
December 31, 1993 (in thousands of dollars):
Gross Gross
Amortized Unrealized Unrealized Aggregate
Cost Gains Losses Fair Value
--------- ---------- ---------- -----------
Equity securities $ 15,305 $ 80 $ (110) $ 15,275
U.S. Government securities 2,271 - - 2,271
Municipal bonds 50,567 2,562 ( 51) 53,078
Corporate debt 3,444 1 - 3,445
---------- ---------- ---------- ----------
Total $ 71,587 $ 2,643 $ (161) $ 74,069
========= ========== ========== ==========
The differences between amortized cost and aggregate fair value result in
unrealized gains or losses. Under SFAS 115, the net unrealized gain or loss
is reported, net of tax, as a separate component of Stockholders' Equity.
Prior to adopting SFAS 115, only a net unrealized loss was reported therein.
The aggregate unrealized gain or loss, net of tax, was a gain of $1,614,000
and a loss of $67,000 on December 31, 1993 and 1992, respectively.
(Continued)
39
<PAGE>40
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Contractual maturities of the fixed-income securities as
1993 were as follows (in thousands of dollars):
Amortized
Cost Fair Value
-------- ----------
Within one year $ 8,778 $ 8,804
One through five years 16,634 17,345
Five through ten years 13,859 14,366
Over ten years 17,011 18,279
--------- ---------
Total $ 56,282 $ 58,794
========= =========
Prior to adopting SFAS 115, the Company's equity securities were carried at
the lower of cost or market and fixed-income securities were carried at
amortized cost. Marketable securities consisted of the following at
December 31, 1992 (in thousands of dollars):
Amortized Carrying
Cost Market Amount
--------- --------- ---------
Equity securities $ 10,775 $ 10,674 $ 10,674
Fixed-income
securities 46,977 48,300 46,977
--------- --------- ---------
Total $ 57,752 $ 58,974 $ 57,651
========= ========= =========
(7) OTHER INCOME (EXPENSE), NET
Other income (expense), net was comprised of the following (in thousands
of dollars):
1993 1992 1991
------- -------- --------
Gain (loss) on sales of businesses
and publications $ 311 $ (374) $ -
Gain (loss) on disposals of
property and equipment (8) (476) (55)
-------- -------- --------
Total $ 303 $ (850) $ (55)
======== ======== ========
(8) INCOME TAXES
Effective January 1, 1992, the Company adopted Statement of Financial
Accounting Standards (SFAS) 109 - Accounting for Income Taxes, and changed
its method of accounting for income taxes from the deferred method to the
asset and liability method. Under the deferred method, deferred income taxes
were recognized for income and expense items that were reported in different
(Continued)
40
<PAGE>41
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
years for financial reporting and income tax purposes using the tax rate
applicable for the year of the calculation. Deferred tax assets and
liabilities were not affected by changes in income tax rates under the
deferred method.
Under the asset and liability method, deferred tax assets and liabilities are
recognized for future tax consequences attributable to temporary differences
between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases. Deferred assets and liabilities
are measured using enacted tax rates which apply to taxable income in future
years when those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities for changes in
tax rates will be recognized in the period that includes the enactment date.
The cumulative effect of adopting SFAS 109 amounted to a one-time, non-cash
tax benefit of $2,139,000 and is reported separately in the Consolidated
Statements of Income for the year ended December 31, 1992. Prior years'
financial statements have not been restated to apply the provisions of SFAS
109.
As discussed in Note 5, the Company adopted SFAS 106 and recorded the
transition obligation for other postretirement benefits. A deferred tax
benefit of $14,079,000 was provided effective January 1, 1992, in conjunction
with this accounting change.
The total income tax expense (benefit) was allocated as follows (in thousands
of dollars):
1993 1992
------- -------
Income before taxes and cumulative effects
of accounting changes $ 4,482 $ 3,718
Stockholders' Equity -- Change in:
Unrealized gain/loss on marketable securities 902 34
Foreign currency translation adjustment 4 (36)
-------- --------
Total $ 5,388 $ 3,716
======== ========
(Continued)
41
<PAGE>42
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The provision for income taxes, excluding those effects of accounting
changes, consisted of the following (in thousands of dollars):
1993 1992 1991
------- ------- -------
Taxes currently payable
Federal $ 3,398 $ 6,198 $ 4,358
State and local 383 1,046 603
-------- -------- --------
3,781 7,244 4,961
-------- -------- --------
Deferred tax provision
Federal 571 (2,840) (768)
State and local 130 (686) (101)
-------- -------- --------
701 (3,526) (869)
-------- -------- --------
Total $ 4,482 $ 3,718 $ 4,092
======== ======== ========
Reconciliation of the U.S. statutory rate to the Company's consolidated
effective income tax rate was as follows:
Percent of
Pretax Income
-------------------------------
1993 1992 1991
------- ------- -------
Federal statutory rate 35.0% 34.0% 34.0%
Rate difference due to level
of taxable income (1.0) - -
State and local income taxes,
net of Federal income tax benefit 2.0 1.8 2.6
Goodwill amortization and other
nondeductible expenses 1.2 1.4 1.4
Tax-exempt interest exclusion (6.5) (5.9) (5.8)
Adjustment to deferred taxes for
enacted changes in tax rates (2.0) - -
Dividends received exclusion (.9) (.7) (.1)
Tax benefit from sale of business - (2.4) -
Others, net .7 .1 .1
--------- --------- ---------
Total 28.5% 28.3% 32.2%
========= ========= =========
(Continued)
42
<PAGE>43
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The significant components of deferred income tax expense were as follows
(in thousands of dollars):
1993 1992
-------- ---------
Deferred tax expense (exclusive of
the effects listed below) $ 1,011 $ (3,526)
Adjustment to deferred taxes for
enacted changes in tax rates (310) -
--------- ---------
Total $ 701 $ (3,526)
========= =========
For the year ended December 31, 1991, deferred income tax expense resulted
from timing differences in the recognition of transactions for financial and
tax reporting purposes as computed under the deferred method of accounting
for income taxes. The tax effects of those timing differences totalled
$(869,000) and were due to: inventory costs, $(177,000); depreciation,
$191,000; deferred selling expense, $517,000; pension expense, $(828,000);
annual leave, $(313,000); and other items, $(259,000).
The tax effects of temporary differences that gave rise to the deferred tax
assets and liabilities were as follows (in thousands of dollars):
December 31,
-------------------------
1993 1992
-------- ----------
Deferred tax assets:
Other postretirement benefits $ 17,870 $ 15,885
Pension expense 3,037 3,021
Annual leave 1,566 1,412
Inventories 1,443 1,898
Others 1,808 1,841
--------- ---------
Total deferred tax assets 25,724 24,057
--------- ---------
Deferred tax liabilities:
Deferred selling expenses (9,778) (7,158)
Depreciation (2,780) (2,971)
Others (1,144) (82)
--------- ---------
Total deferred tax liabilities (13,702) (10,211)
--------- ---------
Net deferred tax assets $ 12,022 $ 13,846
========= =========
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that the deferred tax assets will be
realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those
(Continued)
43
<PAGE>44
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
temporary differences become deductible. The Company has a consistent
history of profitability and taxable income, and management believes that
this trend will continue. Factors supporting this conclusion include
consistent profitable operations, a quality reputation in the markets served
by the Company, a high renewal rate for subscription products, a growing de-
ferred revenue liability (representing payments and orders for future ful-
fillment), and the recent successful introduction of products using new CD-
ROM and electronic delivery methods.
In the opinion of management, it is more likely than not that the existing
deferred tax assets will be realized in future years, and no valuation allow-
ance is necessary.
(9) INVENTORIES
Inventories, valued at the lower of cost (principally average cost method) or
market, were as follows (in thousands of dollars):
December 31,
---------------------
1993 1992
------- --------
Materials and supplies $ 4,579 $ 3,888
Work in process 94 173
Finished goods 2,302 3,219
-------- --------
Total $ 6,975 $ 7,280
======== ========
(10) GOODWILL
Goodwill represents the excess of the cost of purchased publications and the
capital stock of subsidiaries over the fair value of net assets at the dates
of their respective acquisitions, net of accumulated amortization of
$2,958,000 in 1993 and $2,645,000 in 1992.
Goodwill acquired prior to November 1, 1970, in the amount of $634,000, is
not being amortized because, in management's opinion, it has continuing
value. Other goodwill is amortized on a straight-line basis, using forty
years for the publishing acquisitions and ten years for the electronic infor-
mation acquisitions. During 1992, unamortized goodwill of $37,000 was
written off with the sale of ETSI's assets. Amortization expense was
$313,000 for 1993, $334,000 for 1992, and $324,000 for 1991.
(Continued)
44
<PAGE>45
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(11) OTHER ASSETS
Other assets were as follows (in thousands of dollars):
December 31,
--------------------
1993 1992
------- -------
Amortizable assets-
Customer lists $ 605 $ 1,123
Film production costs 1,599 1,218
Lease commissions 533 628
Software 7 60
Editorial service agreement 48 121
Non-compete agreements 139 358
Others - 1
-------- --------
2,931 3,509
Notes and other receivables 737 689
-------- --------
Total $ 3,668 $ 4,198
======== ========
Film production costs are amortized using the revenue forecast method. Other
amortizable assets are expensed evenly over their respective estimated lives,
ranging from 3 to 10 years. Amortization expense for these assets was as
follows (in thousands of dollars):
1993 1992 1991
------ ------ ------
Customer lists $ 518 $ 665 $ 613
Film production costs 346 297 343
Lease commissions 95 71 65
Software 56 103 163
Editorial service agreement 73 73 73
Non-compete agreements 219 220 193
Others 1 7 5
------- ------- -------
Total $1,308 $1,436 $1,455
======= ======= =======
Accumulated amortization for customer lists, the editorial service agreement,
non-compete agreements, and other intangible assets was $4,322,000 in 1993,
$3,511,000 in 1992, and $3,004,000 in 1991.
(Continued)
45
<PAGE>46
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(12) LONG-TERM DEBT
Long-term debt was as follows (in thousands of dollars):
December 31,
--------------------
1993 1992
-------- --------
Note payable, at 3-month secondary
market CD rate plus 1/2% (3.66% at
December 20, 1993), due in 1994,
interest payable monthly $ 4,000 $ 7,000
Note payable, 8-1/4%, due in 1999;
secured by real estate; principal
and interest payable $26,045 monthly 1,411 1,599
Other notes payable 107 107
--------- ---------
5,518 8,706
Less - current portion 4,186 7,172
--------- ---------
Long-term portion $ 1,332 $ 1,534
========= =========
The aggregate long-term portion at December 31, 1993, is payable as follows:
1995 - $220,000; 1996 - $239,000; 1997 - $259,000; 1998 - $281,000; and 1999
- $333,000. As of December 31, 1993, property with a cost of $4,033,000 had
been pledged as collateral for the real estate debt.
(13) COMMITMENTS AND CONTINGENCIES
The Company has ongoing service agreements with software authors and a multi-
year agreement with a key employee of one of its subsidiaries. The Company's
total financial commitment related to these agreements is $1,008,000 for the
year 1994.
The Company is involved in certain legal actions arising in the ordinary
course of business. In the opinion of management the ultimate disposition of
these matters will not have a material adverse effect on the consolidated fi-
nancial statements.
(14) STOCKHOLDERS' EQUITY
Ownership and transferability of Class A, Class B, and Class C stock are
substantially restricted to employees and former employees by provisions of
the Parent's certificate of incorporation and bylaws. Ownership of Class A
stock, which is voting, is restricted to active employees. Class B stock and
Class C stock are nonvoting. No class of stock has preference over another
upon declaration of dividends or liquidation.
(Continued)
46
<PAGE>47
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
During 1993, the Company's Certificate of Incorporation was amended to in-
crease the authorized Class B stock shares by 500,000 shares and decrease the
authorized Class A stock shares by 500,000 shares, so as to ensure that
future retirees will have the option of exchanging their Class A stock for
Class B stock upon retirement.
The Company's commitment to employee ownership is supported by its policy to
repurchase all Class B and Class C stock tendered by shareholders. As of
December 31, 1993, Class B and Class C stock having a total market value of
$1,132,000 are known or expected to be tendered during 1994. The Company, as
a matter of policy, is also committed to repurchase any Class A stock ten-
dered by shareholders to the Stock Purchase & Transfer Plan Trustee which the
Trustee is unable to purchase with proceeds from the sale of Class A stock to
employees.
Treasury stock as of December 31, 1993 and 1992, respectively, consisted of:
Class A, 3,289,445 and 2,980,591 shares; Class B, none and 23,786 shares; and
Class C, 62,442 and 54,987 shares.
Earnings per share have been computed based on the aggregate weighted average
number of all outstanding shares of stock, which was 8,549,522 in 1993,
8,458,109 in 1992, and 8,334,816 in 1991.
Financial statements of the Company's United Kingdom operations denominated
in British pounds are translated into U.S. dollars at year-end exchange
rates, and related gains and losses are reflected, net of taxes, directly in
Stockholders' Equity in the accompanying Consolidated Balance Sheets.
47
<PAGE>48
<TABLE>
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
THE BUREAU OF NATIONAL AFFAIRS, INC.
YEAR ENDED DECEMBER 31, 1993
(In Thousands of Dollars)
<CAPTION>
Amount at
Number of Which Carried
Shares or Fair in this
Issuer Principal Cost Value Balance Sheet
- ----------------------------------------------- --------- ------- ------- ----------------
<S> <C> <C> <C> <C>
SHORT TERM INVESTMENTS
- -----------------------------------------------
Corporate Debt:
C/P Asset Secur 3.230% due 1/10/94 1,750 $ 1,748 $ 1,748 $ FAIR
C/P General Electric 3.200% due 1/28/94 1,500 1,496 1,496
Municipal Bonds:
Main State Housing Auth 4.600% due 5/15/94 1,500 1,500 1,507
Mass State Water Res Auth 4.900% due 7/15/94 1,330 1,328 1,346
Wisconsin Housing 4.750% due 3/1/94 235 235 236
U.S. Government Obligations:
Federal National Mtg 3.270% due 06/13/94 1,500 1,477 1,477
U.S. Treasury Notes 3.030% due 04/07/94 300 298 298
U.S. Treasury Notes 3.050% due 03/24/94 500 496 496 VALUE
Certificates of Deposit 200 200 200
-------- -------- --------
Total Short Term Investments 8,778 8,804 8,804
-------- -------- --------
MARKETABLE SECURITIES
- -----------------------------------------------
Equity Securities:
Preferred Stock
Aon Corp 8.000% 60,000 sh 1,568 1,590 FAIR
Bankamerica Corp - Series L 8.160% 24,500 sh 630 643
Bankamerica Corp Series 8.3750% 40,000 sh 1,054 1,065
Bank New York 8.60% 10,000 sh 270 268
Chase Manhattan Series M 8.400% 25,000 sh 669 663
First Maryland Bancorp Series A 7.875% 75,000 sh 1,864 1,884
Intercapital Series A 28 sh 1,400 1,401
McDonalds Corp Series E 40,000 sh 1,068 1,075
Muniyield Series E 20 sh 997 998
New York State Elec & Gas Series B 20,000 sh 500 497
PSI Energy 6.875% 15,000 sh 1,500 1,440
Putnam Municipal 3.950% 24 sh 1,200 1,204
Republic NY 55,700 sh 1,473 1,441
Republic NY - Series C 4,300 sh 112 111 VALUE
Rhone Poulenc Rorer 4.700% 10 sh 1,000 995
-------- -------- --------
Total Equity Securities 15,305 15,275 15,275
-------- -------- --------
Fixed-Income Securities:
Municipal Bonds:
Alleg Co 5.600% due 1/1/06 1,000 992 1,058 FAIR
Babylon NY Solid Waste 4.400% due 8/1/03 500 498 493
Baltimore County 4.700% due 4/1/02 2,000 1,989 2,066
Broward County, Fl. 7.950% due 12/1/08 360 360 411
Broward County Fla Arpt 4.700% 10/01/02 1,200 1,190 1,212
Carlisle PA Municipal Auth. 9.500% due 11/1/95 500 500 566
Colorado Housing Fin. 6.300% due 5/1/02 415 415 417
Conn State 4.500% due 5/15/99 2,000 1,993 2,036
Dade County, Fl. 9.700% due 4/1/10 485 484 583
(Continued)
</TABLE>
48
<PAGE>49
<TABLE>
SCHEDULE I - MARKETABLE SECURITIES - OTHER INVESTMENTS
THE BUREAU OF NATIONAL AFFAIRS, INC.
YEAR ENDED DECEMBER 31, 1993
(In Thousands of Dollars)
<CAPTION>
Amount at
Number of Which Carried
Shares or Fair in this
Issuer Principal Cost Value Balance Sheet
- ----------------------------------------------- --------- ------- -------- --------------
<S> <C> <C> <C> <C>
Dade County, Fl. 7.650% due 4/1/10 265 264 303
Delaware Cnty PA Auth 4.625% due 11/15/96 600 596 623
Georgia St. Res. Fin. Auth Series A due 12/16/16 500 104 83
Georgia St. Series B 6.750% due 3/1/97 1,000 1,037 1,100
Grand River 5.500% due 6/1/09 750 710 775
Harris Cty. Texas Hospital 7.900% due 4/1/95 1,150 1,156 1,212
Hawaii State 6.700% due 7/1/05 1,805 1,914 2,037
Illinois Health Fac. Auth. 6.300% due 2/15/00 500 492 543
Indiana Housing Single Family 10.500% due 1/1/16 90 92 92
Iowa Student Loan 5.350% due 12/1/02 1,000 1,000 1,005
Jefferson Cty. Ky. Poll. Cont. Bd. 9.250% due 7/1/15 400 396 441
Louisiana Offshore 7.600% due 9/1/10 700 700 802
Louisiana Public Fac 6.500% due 3/1/02 750 750 816
Maricopa, AZ due 1/1/96 1,550 1,427 1,443
Matagorda, Tx. 7.500% due 12/15/14 1,000 1,003 1,147
Maryland State CDA Housing 6.800% due 4/1/24 500 513 529
Michigan ST Hsg 3.550% due 12/01/18 1,000 1,000 1,000
Mississippi River Bridge Auth. 6.750% due 11/1/02 700 699 769
Montgomery Co., Pa. Higher Ed. 9.750% due 11/1/95 500 500 564
MS Hi Ed Stud Ln 5.600% due 9/1/04 1,000 1,000 1,028
Municipal Assistance 6.900% due 7/1/96 1,375 1,388 1,484
Nevada Housing Div. Single Fam. 8.000% due 4/1/09 605 602 627
New York, N.Y. Series B 5.750% due 10/1/98 945 943 1,013
New York State Power 3.400% due 1/1/96 1,875 1,873 1,869
New York State Highway 5.200% due 4/1/04 1,000 1,000 1,013
N.Y. State Loc. Govt. Assist. Corp. 6.500% due 4/1/02 750 745 845
New York City Go 5.200% due 8/15/01 700 698 704
New York City Go 5.400% due 8/15/03 1,000 996 1,007
New Jersey Education Pub 3.950% due 8/15/97 1,575 1,571 1,594
North Carolina HSG 10.125% due 1/1/02 400 418 400
Northeast Maryland Waste 6.000% due 7/1/06 1,000 983 1,048
Omaha Public Power 6.200% due 2/1/17 1,000 995 1,150
PR Hsg Bk & Fin 4.125% due 12/1/96 1,000 991 1,008
Puerto Rico 4.900% due 7/1/01 2,000 1,976 2,053
Schuykill Co 6.500% due 1/1/10 500 500 497
Snohomish County 8.000% due 1/1/97 855 965 978
South Carolina Piedmont Pwr. Agy. 9.700% due 1/1/96 1,000 1,070 1,153
Texas GO Veterans Bonds 8.000% due 12/1/04 390 402 423
Texas GO Veterans Bonds 8.000% due 12/1/95 610 627 730
Texas Housing Agency Sin. Fam. 10.500% due 9/1/09 120 120 123
Texas Housing Agency Mortgage Bd. 9.375% due 9/1/16 330 325 340
Triborough 6.000% due 1/1/12 1,000 985 1,102
Univ. Houston, Tx. Series A 7.400% due 2/15/05 1,425 1,568 1,666 VALUE
Washington State 3.700% due 8/1/96 2,000 1,989 2,009
-------- -------- --------
Total Municipal Bonds 47,504 49,990 49,990
-------- -------- --------
Total Long Term Investments 62,809 65,265 65,265
-------- -------- --------
TOTAL INVESTMENTS $71,587 $74,069 $74,069
======== ======== ========
49
<PAGE>50
</TABLE>
<TABLE>
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
THE BUREAU OF NATIONAL AFFAIRS, INC.
------------------------------------
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
-----------------------------------------
(In Thousands of Dollars)
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
- -----------------------------------------------------------------------------------------------------------------
Balance at Other Changes -- Balance
Classification beginning Additions Retirements add (deduct) - end of
of period at cost describe period
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Land
- ----
For the year ended December 31:
1993 $ 4,933 $ 358 $ 115 - $ 5,176
1992 4,818 115 - - 4,933
1991 4,565 253 - - 4,818
Buildings and Improvements
- --------------------------
For the year ended December 31:
1993 48,405 823 1,364 - 47,864
1992 47,308 1,434 - $ (337) (a) 48,405
1991 37,197 2,411 89 7,789 (b) 47,308
Furniture, Fixtures and Equipment
- ---------------------------------
For the year ended December 31:
1993 46,768 7,878 814 - 53,832
1992 45,758 3,244 2,883 649 (c) 46,768
1991 36,302 10,059 603 - 45,758
Equipment Leased to Others
- --------------------------
For the year ended December 31:
1993 none
1992 649 - - (649) (c) -
1991 649 - - - 649
Notes:
- ------
<FN>a
(a) Writedown property held for sale to market value.
<FN>b
(b) Transfer from Construction in Progress.
<FN>c
(c) Reclassification of eqiuipment.
</TABLE>
50
<PAGE>51
<TABLE>
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
THE BUREAU OF NATIONAL AFFAIRS, INC.
------------------------------------
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
-----------------------------------------
(In Thousands of Dollars)
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E Column F
- -------------------------------------------------------------------------------------------------------------------
Balance at Other Changes -- Balance
Classification beginning Additions Retirements add (deduct) - end of
of period at cost describe period
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Buildings and Improvements
- --------------------------
For the year ended December 31:
1993 $ 10,546 $ 2,251 $ 756 - $ 12,041
1992 8,403 2,143 - - 10,546
1991 6,464 1,976 37 - 8,403
Furniture, Fixtures and Equipment
- ---------------------------------
For the year ended December 31:
1993 28,417 5,814 782 - 33,449
1992 24,106 5,558 1,896 $ 649 (a) 28,417
1991 19,836 4,870 600 - 24,106
Equipment Leased to Others
- --------------------------
For the year ended December 31:
1993 none
1992 649 - - (649) (a) -
1991 649 - - - 649
Notes:
- ------
<FN>a
(a) Reclassification of accumulated depreciation of equipment.
</TABLE>
51
<PAGE>52
<TABLE>
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
THE BUREAU OF NATIONAL AFFAIRS, INC.
------------------------------------
YEARS ENDED DECEMBER 31, 1993, 1992, 1991
-----------------------------------------
(In Thousands of Dollars)
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column F
- ----------------------------------------------------------------------------------------------------------------------------------
Additions
-----------------------
(1) (2)
Charged to
Balance at Charged to other Balance at
Description beginning costs and accounts -- Deductions end of
of period expenses describe describe period
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
VALUATION ACCOUNTS DEDUCTED FROM
ASSETS TO WHICH THEY APPLY:
- --------------------------------
Allowance for Doubtful Accounts Receivable:
Year ended December 31, 1993 $ 984 $ 685 $ 277(a) $ 570(b) $1,376
Year ended December 31, 1992 970 709 - 695(b) 984
Year ended December 31, 1991 1,050 638 (32)(a) 686(b) 970
Allowance for Inventory Obsolescence:
Year ended December 31, 1993 none
Year ended December 31, 1992 none
Year ended December 31, 1991 59 - - 59(c) -
Allowance for Note Receivable:
Year ended December 31, 1993 607 - - 114(d) 493
Year ended December 31, 1992 623 - - 16(d) 607
Year ended December 31, 1991 675 - - 52(d) 623
Notes:
- ------
<FN>a
(a) Charged to deferred subscription revenue; portion of allowance for doubtful accounts receivable
not included in revenues.
<FN>b
(b) Net accounts written off.
<FN>c
(c) Reduction in reserve equal to reduction in inventory.
<FN>d
(d) Change in estimate.
</TABLE>
52
<PAGE>53
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION
THE BUREAU OF NATIONAL AFFAIRS, INC.
------------------------------------
(In Thousands of Dollars)
Year Ended December 31
------------------------------
Item 1993 1992 1991
---- ------- ------- -------
Maintenance and repairs $2,768 $2,784 $2,911
Depreciation and amortization of
intangible assets, preoperating
costs and similar deferrals 1,621 1,770 1,779
Taxes, other than payroll and
income taxes 2,626 2,364 2,090
Royalties 3,380 3,297 2,946
Advertising costs 897 618 601
53
<PAGE>54
PART II
-------
Item 9. Changes in and Disagreements with Accountants on Accounting and
---------------------------------------------------------------
Financial Disclosure
--------------------
There were no changes in or disagreements with accountants on accounting and
financial disclosures during the two years ended December 31, 1993 or through
the date of this Form 10-K.
PART III
--------
Except as set forth in this Form 10-K under Part I, Item X, "EXECUTIVE OFFICERS
OF THE REGISTRANT," the information required by Items 10, 11, 12, and 13, is
contained in the Company's definitive Proxy Statement (the "Proxy Statement")
filed pursuant to Regulation 14A under the Securities Exchange Act of 1934, to
be filed with the SEC within 120 days of December 31, 1993. Such information is
incorporated herein by reference.
Item 10. Directors and Executive Officers of the Registrant
--------------------------------------------------
The information required under this Item 10 is contained in the Proxy Statement
under the headings "I. ELECTION OF DIRECTORS" and "BIOGRAPHICAL SKETCHES OF
NOMINEES," and is incorporated herein by reference. Information related to
Executive Officers is omitted from the Proxy Statement in reliance on
Instruction 3 to Regulation S-K, Item 401(b), and included as Item X of Part I
of this report.
Item 11. Executive Compensation
----------------------
The information required under this Item 11 is contained in the Proxy Statement
under the headings "III. EXECUTIVE COMPENSATION" and "IV. EMPLOYEE BENEFIT
PLANS" and is incorporated herein by reference.
Item 12. Security Ownership of Beneficial Owners and Management
------------------------------------------------------
The information required under this Item 12 is contained in the Proxy Statement
under the heading "I. ELECTION OF DIRECTORS" and is incorporated herein by
reference.
Item 13. Certain Relationships and Related Transactions
----------------------------------------------
The information required under this Item 13 is contained in the Proxy Statement
under the heading "III. EXECUTIVE COMPENSATION" and is incorporated herein by
reference.
54
<PAGE>55
PART IV
-------
Item 14. Exhibits, Financial Statement Schedules, and Report on Form 8-K
---------------------------------------------------------------
The following documents are filed as part of this report.
(a)(1) Financial Statements: Page
--------------------- -----
Report of Independent Auditors 26
Consolidated Balance Sheets as of December 31, 1993
and 1992. 28-29
Consolidated Statements of Income, Consolidated
Statements of Cash Flows, and Consolidated
Statements of Changes in Stockholders' Equity
for each of the years ended December 31, 1993,
1992, and 1991 27,30-32
Notes to Consolidated Financial Statements 33-47
(2) Financial Statement Schedules:
------------------------------
Report of Independent Auditors as to the
financial statement schedules 26
I Marketable Securities - Other Investments 48-49
V Property, Plant and Equipment 50
VI Accumulated Depreciation, Depletion and Amortization
of Property, Plant and Equipment 51
VIII Valuation and Qualifying Accounts and Reserves 52
X Supplementary Income Statement Information 53
All other schedules are omitted because they are not
applicable or the required information is shown in the
financial statements or notes thereto.
55
<PAGE>56
(a)(3) Exhibits:
---------
3.1 Certificate of Incorporation, as amended*
3.2 By laws, as amended**
11 Statement re: Computation of Per Share Earnings is contained
in the 1993 Consolidated Financial Statements in the Notes to
Consolidated Financial Statements, Note 14, "Stockholders'
Equity," at page 46 of this Form 10-K.
22 Subsidiaries of the Registrant.*
24.1 Consent of Independent Auditors for 1993, 1992, and 1991
financial statements.
28.1 Proxy Statement for the Annual Meeting of security holders to
be held on April 16, 1994.3***
28.2 Annual Report on Form 11-K related to the Company's Deferred
Stock Purchase Plan for the fiscal year ended December 31,
1993*.
* Filed herewith.
** Incorporated by reference to the Company's 1988 Form 10-K,
Commission File Number 2-28286, filed on March 30, 1989. The
exhibit numbers indicated above correspond to the exhibit
numbers in that filing.
*** Previously filed with the Securities and Exchange Commission.
Upon written or oral request to the Company's General Counsel,
a copy of any of the above exhibits will be furnished at cost.
(b) Reports on Form 8-K:
--------------------
No reports on Form 8-K were filed during the fourth quarter of
the year ended December 31, 1993.
56
<PAGE>57
SIGNATURE
---------
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
THE BUREAU OF NATIONAL AFFAIRS, INC.
By: s\ William A. Beltz
______________________________
William A. Beltz, President
Date: 3/10/94
______________________________
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on dates indicated.
By: s\ William A. Beltz By: s\ George J. Korphage
--------------------------- -----------------------------------
William A. Beltz, George J. Korphage,
President and Vice President and Chief Financial
Chief Executive Officer Officer (Chief Accounting Officer)
Director Director
Date: 3/10/94 Date: 3/10/94
-------- --------
By: s\ Jacqueline M. Blanchard 3/10/94 By: s\ Frederick A. Schenck 3/10/94
--------------------------- ------- -------------------------- -------
Jacqueline M. Blanchard Date Frederick A. Schenck Date
By: s\ Christopher R. Curtis 3/10/94 By: s\ Mary P. Swords 3/10/94
--------------------------- ------- -------------------------- -------
Christopher R. Curtis Date Mary P. Swords Date
By: s\ Sandra C. Degler 3/10/94 By: s\ Daniel W. Toohey 3/10/94
--------------------------- ------- -------------------------- -------
Sandra C. Degler Date Daniel W. Toohey Date
By: s\ Kathleen D. Gill 3/10/94 By: s\ Loene Trubkin 3/10/94
--------------------------- ------- -------------------------- -------
Kathleen D. Gill Date Loene Trubkin Date
By: s\ John A. Jenkins 3/10/94 By: s\ Paul N. Wojcik 3/10/94
--------------------------- ------- -------------------------- -------
John A. Jenkins Date Paul N. Wojcik Date
By: s\ John V. Schappi 3/10/94
--------------------------- -------
John V. Schappi Date
57
<PAGE>58
EXHIBIT INDEX
-------------
Exhibit Sequential Page
Number Description Number
- -------- ----------------------------- ---------------
3.1 Certificate of Incorporation 59-77
3.2 By laws, as amended *
11 Statement re: Computation of Per Share Earnings
is contained in the 1993 Consolidated Financial
Statements in the Notes to Consolidated Financial
Statements, Note 14, "Stockholders' Equity,"
22 Subsidiaries of the Registrant 78
24.1 Consent of Independent Auditors for 1993, 1992,
and 1991 financial statements and schedules 79
28.1 Proxy Statement for the Annual Meeting of
Stockholders to be held on April 16, 1994 **
28.2 Annual Report on Form 11-K related to the
Company's Deferred Stock Purchase Plan for
the fiscal year ended December 31, 1993 80
*Incorporated by reference to the Company's
1988 Form 10-K, Commission File Number 2-28286,
filed on March 30, 1989. The exhibit numbers
indicated above correspond to the exhibit numbers
in that filing.
** Previously filed with the Securities and
Exchange Commission
58
<PAGE>59
Exhibit 3.1
CERTIFICATE OF INCORPORATION
OF
THE BUREAU OF NATIONAL AFFAIRS, INC.
------------------
ARTICLE I
Name
The name of this Corporation is THE BUREAU OF NATIONAL AFFAIRS, INC.
ARTICLE II
Principal Office; Resident Agent
The principal office of the Corporation in the State of Delaware
is located at 100 West Tenth Street, in the city of Wilmington, County of New
Castle. Its resident agent is the CORPORATION TRUST COMPANY, 100 West Tenth
Street, Wilmington, Delaware.<F12>
ARTICLE III
Nature of Business; Objects and Purposes
The nature of the business of the Corporation, and the objects
and purposes to be transacted, promoted and carried on, are to do any or all
of the things hereinafter mentioned, as principal, agent, contractor, trustee
or otherwise, within or without the State of Delaware, as fully and to the
same extent as natural persons might or could do, and in any part of the
world, viz:
Section 1. To purchase and otherwise acquire, own, print,
publish, circulate, manage, control and operate newspapers, news bulletins,
magazines, trade, business and professional journals, and other publications
and periodicals.
Section 2. To gather, assemble, prepare, edit, and disseminate
(by publication, telegraph, telephone, radio, mail, messenger, or otherwise)
news, editorials, news editorials, special and feature articles, cartoons,
illustrations, newspaper correspondence, reports, opinions, special written
material of interest to industry, labor and the legal profession, and other
reading matter.
Section 3. To purchase, lease and otherwise acquire, to own,
hold, deal in, mortgage or otherwise lien, and to sell, let, exchange,
convey, or in any manner whatever dispose of any real and personal property,
franchises and other rights and property of every class and description; to
pay for any property, rights or privileges acquired by the Corporation in
cash, services, stock, bonds, debentures or notes of the Corporation or
otherwise.
Section 4. To acquire the good will, rights, business and real
and personal property, and to undertake the whole or any part of the assets
and liabilities, of any person, firm, association or corporation; to pay for
the same in cash, services, stock, bonds, debentures, or notes of this
Corporation, or otherwise; to hold, use and in any matter dispose of the
whole or any part of the property so purchased; to conduct in any lawful
manner the whole or any part of any business or businesses so acquired; and
to exercise all powers necessary or convenient in and about the conduct and
management of such business.
Section 5. To guarantee, purchase or otherwise acquire, hold,
sell, assign, mortgage, pledge or otherwise dispose of, shares of the capital
- ----------------------------------
* Footnotes appear at end of Certificate in chronological order of
changes in the original certificate.
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<PAGE>60
stock, bonds or other evidences of indebtedness, and other securities of
other corporations, and while the holder of such securities to exercise all
the rights and privileges of ownership, including the right to vote thereon,
to the same extent as a natural person might or could do.
Section 6. To purchase, hold, cancel, sell, reissue, transfer,
and otherwise acquire and dispose of, and, in general, trade and deal in and
with, the capital stock of this Corporation from time to time, to such
extent, in such manner and upon such terms as the Board of Directors may
determine.
Section 7. To apply for, obtain register, purchase, lease or
otherwise acquire, and to own, use, sell or in any manner dispose of, any and
all trade-marks, distinctive marks, patents, inventions, improvements,
processes, formulas, copyrights, know-how, and other rights; and to grant,
acquire, use, exercise and otherwise turn to account licenses under any of
the foregoing.
Section 8. To enter into, make and perform contracts of every
kind for any lawful purpose, with any person, firm, association or
corporation, body politic or governmental agency; and with any officer,
director or employee of this Corporation.
Section 9. To borrow money for any of the purposes of the
Corporation, and to draw, make, accept, endorse, discount, execute, issue,
negotiate, sell, pledge or otherwise dispose of promissory notes, drafts,
bills of exchange, warrants, bonds, debentures and other negotiable or non-
negotiable, transferable or non-transferable instruments and evidences of
indebtedness; and to secure the payment thereof and the interest thereon by
mortgage or pledge, conveyance or assignment in trust, of the whole or any
part of the income, profits, tangible or intangible property, or other assets
of the Corporation at the time owned or thereafter acquired.
Section 10. To have one or more offices, to conduct any or all of its
operations and business, and to promote its objects, within or without the
State of Delaware, without restrictions as to place or amount.
Section 11. To merge, amalgamate and consolidate with any other
corporation having objects in whole or in part similar to the objects of this
Corporation; and to organize, promote, manage, control, maintain and to
dissolve, merge, or consolidate one or more subsidiary corporations.
Section 12. In general to have and exercise all of the powers
and privileges conferred by the laws of the State of Delaware upon
corporations formed under the General Corporation Law of Delaware, and to
exercise such incidental powers as shall be necessary to the exercise of any
of the powers conferred upon this Corporation herein or by any provision of
law.
The objects and purposes specified herein shall be regarded as
independent objects and purposes and, except where otherwise expressed, shall
be in no way limited or restricted by reference to or inference from the
terms of any other clause or paragraph of this Certificate of Incorporation.
The provisions of this Article shall be construed both as objects and
powers; and the foregoing enumeration thereof shall not be held to limit or
restrict in any manner the general powers conferred on this Corporation by
the laws of the State of Delaware.
ARTICLE IV
Capital Stock
Section 1. The total number of shares of stock which the
Corporation is authorized to issue is thirteen million (13,000,000) divided
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into three classes: One class designated as Class A common shares shall
consist of six million seven hundred thousand (6,700,000) shares, $1.00 par
value per share and with voting rights, another class designated as Class B
common shares shall consist of five million three hundred thousand
(5,300,000) shares, $1.00 par value per share and without voting rights, and
a third class designated as Class C common shares shall consist of one
million (1,000,000) shares, $1.00 par value per share and without voting
rights.<F39>
Each share of issued Class A common stock of the Corporation,
including treasury stock, as of September 27, 1987, shall be and hereby is,
as of that date, changed into and reclassified as four (4) shares of such
Class A common stock, and each share of issued Class B common stock of the
Corporation, including treasury stock, as of September 27, 1987, shall be and
hereby is, as of that date, changed into and reclassified as four (4) shares
of such Class B common stock, and each share of issued Class C common stock
of the Corporation, including treasury stock, as of September 27, 1987, shall
be and hereby is, as of that date, changed into and reclassified as four (4)
shares of Class C common stock. The aggregate amount of capital represented
by the issued shares of stock of the Corporation after this change and
reclassification shall be the aggregate par value of all issued shares of the
stock of the Corporation. In order to effectuate this change and
reclassification, holders of issued shares of Class A common stock shall be
entitled to receive three (3) additional shares of such Class A common stock
for every one (1) share of such Class A common stock held by them, and
holders of issued shares of Class B common stock shall be entitled to receive
three (3) additional shares of such Class B common stock for every one (1)
share of such Class B common stock held by them, and holder of issued shares
of Class C common stock shall be entitled to receive three (3) additional
shares of such Class C common stock for every one (1) of such Class C common
stock held by them.<F38>
Section 1A.14 The capital stock of the Corporation shall have the
powers, preferences and rights and be subject to the qualifications,
limitations, and restrictions set forth below:
1. The Class A stock of the Corporation shall be issued, at such
price as the Board of Directors shall from time to time prescribe by
resolution, only to persons who are officers or employees of the Corporation
and possess such other qualifications as the Board of Directors shall from
time to time prescribe by resolution or to trustees designated or appointed
under a stock bonus plan of the Corporation: Provided, however, that said
shares shall be issued for money only, except as issued pursuant to the
provisions of a stock bonus plan of the Corporation.
2. The Class B common stock of the Corporation shall be issued
only in exchange for Class A stock: (a) to officers or employees of the
Corporation upon retirement because of age or disability, or (b) upon the
death of officers or employees of the Corporation, to the estates of such
officers or employees, to the dependents of such officers or employees:
Provided that death occurs (i) while the officers or employees are in the
service of the Corporation or on military or disability leave, or (ii) within
90 days after retirement because of age or disability.
The exchange of Class A stock for Class B stock shall be on a
share for share basis.
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An election to exercise such right of exchange shall be made by
so notifying the Secretary of the Corporation in writing at the following
times:
(a) In the case of an officer or employee of the
Corporation entitled to exchange Class A stock for Class B stock
upon retirement, within ninety (90) days after retirement, and
in the case of anyone entitled to exchange Class A stock for
Class B stock upon the death of a retired officer or employee,
within one hundred eighty (180) days after death of such officer
or employee.
(b) In the case of anyone entitled to exchange Class A
stock for Class B stock upon the death of an officer or employee
of the Corporation while in the service of the Corporation or on
military or disability leave, within one hundred eighty (180)
days after such death.
Where the exchange involves stock distributed to a qualified person under a
stock bonus plan of the Corporation, the aforesaid 90-day and 180-day periods
for notification shall begin to run upon distribution.
In the event that a holder of Class A stock elects to
exercise a right to exchange such stock for Class B stock and that at such
time the Corporation does not have available authorized Class B stock with
which to effectuate such exchange, said holder of Class A stock shall be so
informed by the Corporation and such Class A stock may be retained by the
holder thereof until receipt of notification for the Corporation that Class
B stock is so available. Upon receipt of such notification from the
Corporation, the exchange shall be promptly effected; Provided that nothing
contained herein shall preclude such holder of Class A stock prior to receipt
of such notification from the Corporation from tendering any or all of such
shares of Class A stock (a) to the Corporation for purchase by it in
accordance with Paragraph 4 of this Article or (b) for purchase in accordance
with the provisions of the Stock Purchase and Transfer Plan of the
Corporation.<F16>
3. No fractional shares of stock may be subscribed for, issued
or exchanged, except as the Board of Directors may by resolution determine
to be necessary or advisable in the effectuation of a stock bonus plan of the
Corporation. The Board of Directors may, in its discretion, provide for the
payment of a sum of money to cover fractional interest arising from an
exchange, redemption, or acquisition of stock by the Corporation.
4. Any holder of Class A stock may at any time, by written
notice to the Secretary of the Corporation, tender any or all his shares of
such stock to the Corporation for purchase by it. The Board of Directors may
accept or reject such tender, in whole or in part; and if it accepts the
tender or any part thereof, the Corporation shall purchase the shares of
stock so accepted at a price per share determined in accordance with the
provisions of Paragraph 10 hereof, as of the date of tender. Where shares
are tendered by several stockholders, the Board of Directors may accept all
or any part thereof, as it deems proper, either in the chronological order
of tender, or according to a percentage of all shares tendered, or by any
combination of these methods, at its discretion. If the Board of Directors
rejects such tender in whole or in part, the shares may be transferred to any
person whatsoever, subject, however, to the provision of Paragraph 6 hereof.
5. In the event of (i) the resignation, retirement, dismissal
or death of any officer or employee of the Corporation who owns any shares
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of Class A stock or (ii) the distribution of shares of Class A stock of the
Corporation by a trustee under any stock bonus plan of the Corporation, the
Corporation shall have the exclusive right (subject to the provisions of
Paragraph 2 hereof, the Stock Purchase and Transfer Plan of the Corporation,
and any applicable Optional Agreement executed pursuant to the By-Laws of the
Corporation) for a period of ninety (90) days from the occurrence of such
event to purchase any or all such stock so owned or distributed. If the
Board of Directors elects to exercise such right of purchase, it shall so
notify the stockholder or his representative or the said distributee under
a stock bonus plan of the Corporation within said period of ninety (90) days
by written notice sent to the stockholder or his representative at the
address of the stockholder as it appears on the records of the Administrative
Committee established under the stock bonus plan,<F17> and within not more than
one (1) year after such exercise of its right to purchase, the Corporation
shall pay the said stockholder or his representative or the said distributee
a price per share determined in accordance with the provisions of Paragraph
10 hereof, as of the date of such separation or such distribution and with
interest at the rate of six percentum (6%) per annum from the date of such
purchase until the date of payment. Upon the exercise by the Corporation of
its right to purchase any such shares of common stock, the said stockholder
or his representative or the said distributee shall have no further rights,
privileges, or powers in respect of such stock. If payment of the purchase
price for such shares is not made by the Corporation at the time of such
purchase, the Corporation shall within a reasonable time thereafter issue to
the stockholder or his representative or the distributee a note or other
evidence of indebtedness fixing the amount to be paid by the Corporation
pursuant to Paragraph 10 hereof and bearing interest at the rate of six
percentum (6%) per annum from the date of purchase to the date of payment.
If the Board of Directors elects not to exercise such right of purchase
within the said period of ninety (90) days, the shares may be retained or
transferred to any person whatsoever, subject, however, to the provisions of
Paragraph 6 hereof.
6. The transfer of shares of Class A stock to any person shall
be subject to a continuing right of the Corporation to purchase any or all
of said shares in the event that, and at such times as, any or all of such
shares are presented for transfer, and the price payable by the Corporation
shall be determined in accordance with the provisions of Paragraph 10 hereof,
as of the date of presentation for transfer.
7. Any holder of Class B stock may at any time, by written
notice to the Secretary of the Corporation, tender any or all his shares of
such stock to the Corporation for purchase by it. The Board of Directors may
accept or reject such tender, in whole or in part; and if it accepts the
tender or any part thereof, the Corporation shall purchase the shares of
stock so accepted at a price per share determined in accordance with the
provisions of Paragraph 11 hereof, as of the date of tender. Where shares are
tendered by several stockholders, the Board of Directors may accept all or
any part thereof, as it deems proper, either in the chronological order of
tender, or according to a percentage of all shares tendered, or by any
combination of these methods, at its discretion. If the Board of Directors
rejects such tender in whole or in part, the shares may be transferred to any
person whatsoever, subject, however, to the provisions of Paragraph 8 hereof.
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8. Except in the case of a transfer upon death of shares of
Class B stock to the estate, dependents or persons that are the natural
objects of the bounty of a retired officer or employee who exchanged his
Class A stock for Class B stock,<F18> the transfer of shares of Class B stock to
any person shall be subject to a continuing right of the Corporation to
purchase any or all of said shares in the event that, and at such times as,
any or all of such shares are presented for transfer, and the price payable
by the Corporation shall be a price per share determined in accordance with
the provisions of Paragraph 12 hereof, as of the date of presentation for
transfer.
9. The Corporation shall have the right at any time (a) after
the expiration of eight (8) years from the date of retirement of an officer
or employee or one (1) year after the death of such retired officer or
employee, whichever of the two periods is longer, to redeem from the holder
thereof all or any part of the outstanding shares of Class B stock issued to
such retired officer or employee, and (b) after the expiration of eight (8)
years from the date of death of an officer or employee (i) while in the
service of the Corporation or on military or disability leave or (ii) who
died within ninety (90) days after retirement, to redeem from the holder
thereof all or any part of the outstanding shares of Class B stock issued in
exchange for Class A stock to the estate, dependents, or persons who are the
natural objects of the bounty of such employee or officer. If the
Corporation elects to exercise such right of redemption, it shall so notify
the holder of the Class B stock by written notice sent to the address of such
holder as it appears on the stock books of the Corporation and, upon such
exercise by the Corporation of its right to redeem any of such shares of
Class B stock, the said holder shall have no further rights, privileges, or
powers in respect of such stock. The Corporation shall make payment for the
shares redeemed at a price per share determined in accordance with the
provisions of Paragraph 13 hereof, as of the date of redemption.<F19>
10. The price to be paid by the Corporation for any shares of
Class A stock acquired by it under Paragraphs 4, 5 or 6 hereof shall be the
book value per outstanding share at the close of the next preceding calendar
year, as determined by independent auditors: Provided that if the book value
per outstanding share, as so determined, exceeds ten times the average annual
net earnings per outstanding share, if any, of the Corporation (after taxes,
including income taxes), for the next preceding three calendar years, as
determined by independent auditors, then the price shall be the average of
such two figures (book value and ten times average net earnings) per
outstanding share.
11. The price to be paid by the Corporation for any shares of
Class B stock acquired by it pursuant to tender under Paragraph 7 hereof
shall be:
(a) the price in effect for purchase and sale of
shares of Class A stock of the Corporation under the Stock
Purchase and Transfer Plan of the Corporation, if tender is made
prior to the time that the Corporation shall first have the
right under Paragraph 9 hereof to redeem such Class B stock from
the holder thereof; or
(b) the price determined for the purchase of Class
A stock in accordance with the provisions of Paragraph 10
hereof, if tender is made at a time when the Corporation shall
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have the right under Paragraph 9 hereof to redeem such Class B
stock from the holder thereof.<F20>
12. Except as provided for in Paragraph 14 hereof, the price to
be paid by the Corporation for any share of Class B stock acquired by it
under Paragraph 8 hereof shall be:
(a) the price in effect for the purchase and sale of
shares of Class A stock of the Corporation under the Stock
Purchase and Transfer Plan of the Corporation, if the stock is
presented for transfer at a time when the Corporation shall have
the right under Paragraph 9 hereof to redeem such Class B stock
from the holder thereof; or
(b) the price determined for the purchase of Class
A stock in accordance with the provisions of Paragraph 10
hereof, if the stock is presented for transfer at a time when
the Corporation shall have the right under Paragraph 9 hereof to
redeem such Class B stock from the holder thereof.<F21>
13. Except as provided for in Paragraph 14 hereof, the price
to be paid by the Corporation for any share of Class B stock acquired by it
under Paragraph 9 hereof shall be a price determined for the purchase of
Class A stock in accordance with the provisions of Paragraph 10 hereof.
14. If the Corporation shall refuse a tender of Class B stock
made pursuant to the provisions of Paragraph 7 hereof within six months prior
to the time at which the Corporation shall first have the right under
Paragraph 9 hereof to redeem such Class B stock from the holder thereof, the
price to be paid by the Corporation upon acquisition thereafter of such Class
B stock either under the provisions of Paragraph 8 or Paragraph 9 hereof
shall be the price in effect at the time of acquisition for the purchase and
sale of Class A stock under the Stock Purchase and Transfer Plan of the
Corporation.<F22>
15. Except as provided in this Article IV,23 in the Stock
Purchase and Transfer Plan of the Corporation, or in any applicable Optional
Agreement executed pursuant to the By-Laws of the Corporation, no share of
stock may be transferred or pledged without the written consent or
authorization of the Board of Directors or of such officer as may be
designated by it to grant such consent or authorization.
16. All transfers of stock of the Corporation shall be made upon
its books by the person named in the certificate or by his lawfully
constituted representative, and upon surrender of the certificate for
cancellation.
17. The Corporation shall be entitled to treat the holder of
record of any share or shares of stock as the holder in fact thereof, and
shall not be bound to recognize any equitable or other claims to or interest
in such shares on the part of any other person, whether or not it shall have
express or other notice thereof, save as expressly provided by the laws of
Delaware.
18. At each meeting of stockholders, each stockholder entitled
to a vote thereat shall have one vote for each share of Class A stock
registered in his name on the books of the Corporation.
19. The registered owner of each share of stock shall be
entitled to dividends as declared by the Board of Directors. The holders of
Class A stock and Class B stock shall be entitled to participate ratably,
share for share, without preference of either class over the other in all
dividends when and as declared by the Corporation.
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20. The holders of Class A stock and Class B stock shall be
entitled to participate ratably, share for share, and without preference of
either class over the other in the event of dissolution of, or any
distribution of the assets of, the Corporation.
21. The authorized stock of the Corporation shall be offered,
subscribed for, issued, sold or exchanged in the District of Columbia and may
be offered, subscribed for, issued, sold or exchanged in such State or States
as Counsel for the Corporation, by written opinion to the Board of Directors,
shall declare to be legally open to such offering, subscription, issuance,
sale or exchange.<F14>
22. The words "officers or employees of the Corporation" as used
in this Section 1A shall mean officers or employees of this Corporation and
officers or employees of any subsidiary corporation eighty (80) percent or
more of whose stock is owned by this Corporation.<F25>
23. The Class C common stock of the Corporation may be issued
only in exchange for Class A stock to officers or employees of any subsidiary
corporation, eighty (80) percent or more of whose stock is owned by the
Corporation, or to the officers or employees of the Corporation assigned to
such a subsidiary corporation, upon the disposition of that subsidiary or
upon reduction of the Corporation's stock ownership to less than eighty (80)
percent. The exchange of Class A stock for Class C stock shall be at the
option of such officer and employee and shall be on a share for share basis.
An election to exercise such right of exchange shall be made by so notifying
the Secretary of the Corporation in writing by the later of July 19, 1986,
or ninety (90) days after the disposition or reduction.
Any holder of Class C stock may at any time, by written notice to the
Secretary of the Corporation, tender any or all shares of such stock to the
Corporation for purchase by it. The Board of Directors may accept or reject
such tender, in whole or in part; and if it accepts the tender or any part
thereof, the Corporation shall purchase the shares of Class A stock of the
Corporation under the Stock Purchase and Transfer Plan of the Corporation.
If the Board of Directors rejects such tender in whole or in part, the shares
may be transferred to any person whomsoever, subject, however, to a
continuing right of the Corporation to purchase any and all of said shares
in the event that, and at such times as any or all of such shares are
presented for transfer, and the price payable by the Corporation shall be the
price in effect for the purchase and sale of Class A stock of the Corporation
under the Stock Purchase and Transfer Plan of the Corporation.
The Corporation shall have the right to redeem from the holder thereof
all or any part of the outstanding shares of Class C stock (a) one (1) year
after the death of the officer or employee, or (b) ninety (90) days after the
officer or employee has held the Class C stock for the number of years equal
to his or her years of service as an officer or employee of the Corporation
or the subsidiary company while the subsidiary was owned at least eighty (80)
percent by the Corporation, whichever shall first occur. Prior to exercising
such right of redemption, the Corporation shall notify the holder of the
Class C stock by written notice to the address of such holder as it appears
on the stock books of the Corporation in accordance with the previous
paragraph. If the holder fails to tender the shares, the Corporation may
exercise the right to redeem the outstanding shares of Class C stock at a
price per share equal to the book value per outstanding share at the close
of the next preceding calendar year, as determined by independent auditors,
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and the said holder shall have no further rights, privileges, or powers in
respect of such stock.
Notwithstanding any other provision in this Certificate of
Incorporation, the holders of Class C stock shall be entitled to participate
ratably, share for share, and without preference of one class over the
others, in all dividends when and as declared by the Corporation. Holders
of Class C stock shall be entitled to participate ratably with the holders
of Class A and Class B stock, share for share, and without preference of one
class over the others, in the event of dissolution of, or any distribution
of the assets of, the Corporation.<F37>
Section 2. No stockholder of the Corporation shall have any pre-
emptive, preferential or other special right of subscription to any shares
of its capital stock now or hereafter authorized, nor to any shares acquired
and reissued by the Corporation.
Section 3. The Board of Directors is hereby authorized to fix
by resolution or resolutions the designations and powers, preferences and the
rights of the stock of the Corporation, and the qualifications, limitations,
or restrictions in respect thereof, to the extent that the same are not fixed
in the Certificate of Incorporation.<F9>
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ARTICLE V<F1>
Initial Capital
The minimum amount of capital with which the Corporation shall
begin business is One Thousand Dollars ($1,000.00).
ARTICLE VI<F2>
Incorporation
The name and place of residence of each of the Incorporators are as follows:
NAME RESIDENCE
Charles B. Bishop .... Wilmington, Delaware
E. G. Boyle .... Wilmington, Delaware
E. P. Clark .... Wilmington, Delaware
ARTICLE VII<F3>
Duration
The Corporation is to have perpetual existence.
ARTICLE VIII<F4>
Liability of Stockholders
The private property of the stockholders shall not be subject to
the payment of corporate debts to any extent whatever.
ARTICLE IX<F5>
Powers of Board of Directors
In furtherance and not in limitation of powers conferred by
statute, the Board of Directors is expressly authorized and empowered:
Section 1. To make, alter, amend and repeal the By-Laws.
Section 2. To fix the amount to be reserved as working capital;
to set apart out of any of the funds available for dividends a reserve or
reserves for any proper purpose, and to alter or abolish any such reserve;
to authorize and cause to be executed mortgages and liens upon the property
and franchises of this Corporation.
Section 3. From time to time, to fix the consideration for which
the stock of the Corporation may be issued, repurchased by the Corporation,
and reissued.
Section 4. From time to time, to determine whether and to what
extent and at what times and places and under what conditions and regulations
the accounts and books of this Corporation (other than the stock ledger) or
any of them, shall be open to the inspection of the stockholders; and no
stockholder shall have any right to inspect any account, book or document of
this Corporation except as conferred by law or authorized by resolution of
the stockholders or the Board of Directors.
Section 5. To designate, by resolution passed by a majority of
the whole Board of Directors, an Executive Committee and other committees,
each consisting of two or more directors, which to the extent provided in
such resolution or in the By-Laws, shall have and may exercise any or all of
the powers of the Board of Directors in the management of the business and
affairs of this Corporation, and shall have power to authorize the seal of
this Corporation to be affixed to all papers which may require it.
Section 6. To designate two or more officers or employees of the
Corporation to constitute an Executive Board to serve in an advisory capacity
to the Board of Directors or the Executive Committee, and to do such things
as the Board of Directors may by resolution authorize, subject to approval
by the Board of Directors or the Executive Committee.
Section 7. With the consent or approval of the holders of at
least a majority of the stock issued and outstanding, to sell, lease or
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exchange all of the property and assets of the Corporation, including its
good will and its corporate franchise.
Section 8. In addition to the powers and authorities expressly
conferred upon them herein or by law, to exercise such powers as may be
granted to them in the By-Laws.
Section 9. If the By-Laws so provide, to hold their meetings,
to have one or more offices, and to keep the books of the Corporation
(subject to the provisions of the statutes) outside of the State of Delaware
at such places as may from time to time be designated by the By-Laws or by
resolution of the Board of Directors.
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ARTICLE X<F6>
Reorganization; Compromises and Arrangements
Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a
summary way of this Corporation or of any creditor or stockholder thereof,
or on the application of any receiver or receivers appointed for this
Corporation under the provisions of Section 3883 of the Revised Code of 1915
of said State, or on the application of trustees in dissolution or of any
receiver or receivers appointed for this Corporation under the provisions of
Section 43 of the General Corporation Law of the State of Delaware, order a
meeting of the creditors or class of creditors, and/or of the stockholders
or class of stockholders of this Corporation, as the case may be, to be
summoned in such manner as the said Court directs. If a majority in number
representing three-fourths in value of the creditors or class of creditors,
and/or of the stockholders or class of stockholders of this Corporation, as
the case may be, agree to any compromise or arrangement and to any
reorganization of this Corporation as consequence of such compromise or
arrangement, the said compromise or arrangement and the said reorganization
shall, if sanctioned by the Court to which the said application has been
made, be binding on all the creditors or class of creditors, and/or on all
the stockholders or class of stockholders, of this Corporation, as the case
may be, and also on this Corporation.
ARTICLE XI<F7>
Amendments
Section 1.34 This Corporation reserves the right to amend, change
or repeal any provision contained in this Certificate of Incorporation, in
the manner now or hereafter prescribed by law, and all rights conferred upon
officers, directors and stockholders herein are granted subject to this
reservation.
Section 2. 1. No amendment to this Certificate of Incorporation
or the Corporation's By-Laws, nor any other action taken by, or on behalf of
the Corporation, that would permit the purchase of voting stock, or that
would remove any restriction against the purchase of voting stock by any
nonemployee entity shall be of any effect, except upon an affirmative vote
of at least 90 percent of the Corporation's issued and outstanding voting
stock.
2. The preceding subsection 1. shall not apply in the case of
an amendment or other action taken pursuant to a contractually binding offer
to purchase, for cash, all the Corporation's issued and outstanding common
stock, at an equal price per share, made by a nonemployee entity that further
contractually binds itself for a period of not less than two years next
following its acquisition of a majority of the Corporation's voting stock,
also to purchase, for cash, any remaining issued and outstanding common
stock, regardless of class, at the same price per share it paid to acquire
the majority of the Corporation's voting stock.
3. This section may be altered, repealed, or amended, only by
an affirmative vote of not less than 90 percent of the issued and outstanding
shares of each class of the Corporation's common stock.<F35>
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FOOTNOTES
FOR
CERTIFICATE OF INCORPORATION
OF
THE BUREAU OF NATIONAL AFFAIRS, INC.
<F1>
1. Article V, entitled "Cumulative Voting", deleted by
stockholders' resolution of 3/27/48 and Article VI renumbered as Article V.
Article V originally read as follows: "At all elections of directors by
stockholders of the Corporation, each stockholder shall be entitled to as
many votes as shall equal the number of his shares of stock multiplied by the
number of directors to be elected, and he may cast all of such votes for a
single director or may distribute them among the number to be voted for, or
any two or more of them as he may see fit."
<F2>
2. Renumbered as shown by stockholders' resolution of 3/27/48.
Originally numbered VII.
<F3>
3. Renumbered as shown by stockholders' resolution of 3/27/48.
Originally numbered VIII.
<F4>
4. Renumbered as shown by stockholders' resolution of 3/27/48.
Originally numbered IX.
<F5>
5. Renumbered as shown by stockholders' resolution of 3/27/48.
Originally numbered X.
<F6>
6. Renumbered as shown by stockholders' resolution of 3/27/48.
Originally numbered XI.
<F7>
7. Renumbered as shown by stockholders' resolution of 3/27/48.
Originally numbered XII.
<F8>
8. Section 1A inserted by stockholders' resolution of 5/13/50.
<F9>
9. Section 3 as amended by stockholders' resolution of 5/13/50.
Originally read as follows: "The Board of Directors is hereby authorized to
fix by resolution or resolutions the designations and powers, preferences and
rights of the stock of the Corporation, and the qualifications, limitations,
or restrictions in respect thereof."
<F10>
10. Section 1 as amended by stockholders' resolution of
10/25/58. Originally read as follows: "The total number of shares of stock
which the Corporation is authorized to issue is thirty thousand (30,000)
shares without par value."
<F11>
11. Section 1A deleted by stockholders' resolution of 10/25/58.
It read as follows: "The Corporation is further authorized to issue fifteen
thousand (15,000) shares of preferred stock with par value of $10.00 per
share and without voting rights.8"
<F12>
12. By separate filing, as permitted by statute, amended 1/3/48
to make Corporation Guarantee and Trust Company, 927 Market Street,
Wilmington, Delaware, resident agent in place of Delaware Charter Company,
900 Market Street, Wilmington, Delaware; and 1/3/59 to make the Corporation
Trust Company, 100 West Tenth Street, Wilmington, Delaware, resident agent.
<F13>
13. Section 1 as amended by stockholders' resolution of 3/4/59.
Previously read as follow:
"Section 1. The total number of shares of stock which the
Corporation is authorized to issue is thirty-five thousand (35,000) shares
divided into two classes: one class designated as Class A common shares shall
consist of thirty thousand (30,000) shares without par value and with voting
rights, and the other class designated as Class B common shares shall consist
71
<PAGE>72
of five thousand (5,000) shares without par value and without voting rights.
The holders of Class A common stock and Class B common stock shall be
entitled to participate ratably, share for share, and without preference of
either class over the other (a) in all dividends when and as declared by the
Corporation and (b) in the event of dissolution of, or any distribution of
the assets of, the Corporation.
"Each of the shares of capital stock of the Corporation now
issued having no par value shall be equal to and is hereby changed into one
full paid and non-assessable Class A common share of this Corporation having
no par value authorized to be issued under the Certificate of Incorporation
as hereby amended. Certificates for Class A common shares having no par
value shall be issued in place and upon surrender of certificates for shares
having no par value now issued, on the aforesaid basis; provided, however,
that upon this amendment becoming effective, the holders of said shares now
issued shall thereupon cease to be holders of said shares and shall be and
become holders of the herein authorized Class A common shares upon the basis
herein above specified, whether or not certificates representing said herein
authorized Class A common shares are then issued and delivered.10 11"
<F14>
14. Section 1A re-inserted by stockholders' resolution of 3/4/59. See
footnotes 8 and 11.
<F15>
15. Second paragraph of Section 1 deleted by stockholders' resolution
of 10/21/67. It read as follows:
"Each share of issued Class A common stock of the Corporation,
including treasury stock, as of April 6, 1959, shall be and hereby is, as of
that date, changed into and reclassified as four (4) shares of such Class A
common stock, and each share of issued Class B common stock of the
Corporation, including treasury stock, as of April 6, 1959, shall be and
hereby is, as of that date, changed into and reclassified as four (4) shares
of such Class B common stock. The aggregate amount of capital represented
by the issued shares of the stock of the Corporation after this change and
reclassification shall be the same as the aggregate amount of capital
represented by the issued shares of the stock of the Corporation before this
change and reclassification. In order to effectuate this change and
reclassification, holders of issued shares of Class A common stock shall be
entitled to receive three (3) shares of such Class A common stock for every
one (1) share of such Class A common stock held by them, and holders of
issued shares of Class B common stock shall be entitled to receive three (3)
shares of such Class B common stock for every one (1) share of such Class B
common stock held by them.13"
<F16>
16. Paragraph 2 as amended by stockholders' resolution of 10/21/67.
Originally read as follows:
"2. The Class B common stock of the Corporation shall be issued only
in exchange for Class A stock: (a) to officers or employees of the
Corporation upon retirement because of age or disability, or (b) upon the
death of officers or employees of the Corporation, to the estates of such
officers or employees, to the dependents of such officers or employees, or
to persons who are the natural objects of the bounty of such officers or
employees: Provided that death occurs (i) while the officers or employees
are in the service of the Corporation or on military or disability leave, or
(ii) within three years less 30 days after retirement because of age or
disability of officers or employees who executed an Optional Agreement
pursuant to the By-Laws of the Corporation for the transfer of stock upon
72
<PAGE>73
termination of employment, or (iii) within 60 days after retirement because
of age or disability of officers or employees who did not execute such an
Optional Agreement.
"The exchange of Class B stock for Class A stock shall be on a share
for share basis: Provided, however, that after 800 shares of Class B stock
have been exchanged for a like number of shares of Class A stock by (a) any
or all persons who received the Class A stock from any one deceased officer
or employee, such person or persons may there after exchange Class B stock
only in an amount equal to one-third of the remaining Class A stock held by
such person or persons; and Provided, further, that no more than 2,000 shares
of Class B stock shall be issued in exchange for Class A stock to any one
officer or employee of the Corporation or to any or all persons who have
received Class A stock from any one deceased officer or employee.
"An election to exercise such right of exchange shall be made by so
notifying the Secretary of the Corporation in writing at the following times:
"(a) In the case of an officer or employee of the
Corporation entitled to exchange Class A stock for Class B stock upon
retirement, and in the case of anyone entitled to exchange Class A
stock for Class B stock upon the death of a retired officer or
employee, within sixty (60) days after retirement of the officer or
employee, or, in the event such officer or employee has executed an
Optional Agreement pursuant to the By-Laws of the Corporation for the
transfer of stock upon termination of employment, within three (3)
years less thirty (30) days after retirement of the officer or
employee;
"(b) In the case of anyone entitled to exchange Class A
stock for Class B stock upon the death of an officer or employee of
the Corporation while in the service of the Corporation or on military
or disability leave, within sixty (60) days after such death, or, in
the event such officer or employee has executed an Optional Agreement
pursuant to the By-Laws of the Corporation for the transfer of stock
upon termination of employment, within three (3) years less thirty (30)
days after the death of such officer or employee.
"Where the exchange involves stock distributed to a qualified person under
a stock bonus plan of the Corporation, the 60-day periods for notification
shall begin to run upon distribution."
<F17>
17. Words "by written notice sent to the stockholders or his
representative at the address of the stockholder as it appears on the stock
books of the Corporation and by written notice to the distributee at his
address as it appears on the records of the Administrative Committee
established under the stock bonus plan" inserted by stockholders' resolution
of 10/21/67.
<F18>
18. Words "Except in the case of a transfer upon death of shares
of Class B stock to the estate, dependents or persons that are the natural
objects of the bounty of a retired officer or employee who exchanged his
Class A stock for Class B stock," inserted by stockholders' resolution of
10/21/67.
<F19>
19. Paragraph 9 as amended by stockholders' resolution of
10/21/67. Originally read as follows:
"9. The Corporation shall have the right at any time after the
expiration of eight (8) years from the date of (a) retirement of an officer
or employee or (b) death of an officer or employee while in the service of
73
<PAGE>74
the Corporation or on military or disability leave, to redeem from the
holder thereof all or any part of the outstanding shares of Class B stock
issued in exchange for Class A stock to the estate, dependents, or persons
who are the natural objects of the bounty of such employee or officer. The
Corporation shall make payment for the shares redeemed at a price per share
determined in accordance with the provisions of Paragraph 13 hereof, as of
the date of redemption."
<F20>
20. Paragraph 11 as amended by stockholders' resolution of
10/21/67. Originally read as follows:
"11. The price to be paid by the Corporation for any shares of
Class B stock acquired by it pursuant to tender under Paragraph 7 hereof
shall be:
"(a) the price in effect for purchase and sale of
shares of Class A stock of the Corporation under the Stock
Purchase and Transfer Plan of the Corporation, if tender is made
within eight (8) years after the date of the retirement or death
which gave rise to the right to obtain Class B stock; or
"(b) the price determined for the purchase of Class
A stock in accordance with the provisions of Paragraph 10
hereof, if tender is made eight (8) or more years after the
retirement or death which gave rise to the right to obtain Class
B stock."
<F21>
21. Paragraph 12 as amended by stockholders' resolution of
10/21/67. Originally read as follows:
"12. Except as provided for in Paragraph 14 hereof, the price
to be paid by the Corporation for any share of Class B stock acquired by it
under Paragraph 8 hereof shall be:
"(a) the price in effect for the purchase and sale
of shares of Class A stock of the Corporation under the Stock
Purchase and Transfer Plan of the Corporation, if the stock is
presented for transfer within eight (8) years after retirement
or death which gave rise to the right to obtain Class B stock;
or
"(b) the price determined for the purchase of Class
A stock in accordance with the provisions of Paragraph 10
hereof, if the stock is presented for transfer eight (8) or more
years after the date of the retirement or death which gave rise
to the right to obtain Class B stock."
<F22>
22. Paragraph 14 as amended by stockholders' resolution of
10/21/67. Originally read as follows:
"14. If the Corporation shall refuse a tender of Class B stock
made pursuant to the provisions of Paragraph 7 hereof within six months prior
to the expiration of the eight-year period after the date of the retirement
or death which gave rise to the right to obtain Class B stock, the price to
be paid by the Corporation upon acquisition thereafter of such Class B stock
either under the provisions of Paragraph 8 or Paragraph 9 hereof shall be the
price in effect at the time of acquisition for the purchase and sale of a
Class A stock under the Stock Purchase and Transfer Plan of the Corporation."
<F23>
23. Words "Article IV" substituted for word "Resolution" by
stockholders' resolution of 10/21/67.
<F24>
24. Section 1 as amended by stockholders' resolution of 12/27/67.
Previously read as follows:
74
<PAGE>75
"Section 1. The total number of shares of stock which the
Corporation is authorized to issue is one hundred forty thousand (140,000)
shares divided into two classes: One class designated as Class A common
shares shall consist of one hundred twenty thousand (120,000) shares without
par value and with voting rights, and the other class designated as Class B
common shares shall consist of twenty thousand (20,000) shares without par
value and without voting rights.15"
<F25>
25. Paragraph 22 inserted by stockholders' resolution of 12/27/67.
<F26>
26. Words and figure "five hundred fifty thousand (550,000)"
substituted for words and figure "six hundred thousand (600,000)" by
stockholders' resolution of 4/18/70.
<F27>
27. Words and figure "one hundred fifty thousand (150,000)"
substituted for words and figure "one hundred thousand (100,000)" by
stockholders' resolution of 4/18/70.
<F28>
28. Words and figure "five hundred thousand (500,000)" substituted
for words and figure "five hundred fifty thousand (550,000)"26 by
stockholders' resolution of 4/21/73.
<F29>
29. Words and figure "two hundred thousand (200,000)" substituted
for words and figure "one hundred fifty thousand (150,000)"27 by stockholders'
resolution of 4/21/73.
<F30>
30. Section 1 as amended by stockholders' resolution of 4/19/75.
Previously read as follows:
"Section 1. The total number of shares of stock which the
Corporation is authorized to issue is seven hundred thousand (700,000)
divided into two classes: One class designated as Class A common shares shall
consist of five hundred thousand (500,000)28 shares without par value and with
voting rights, and the other class designated as Class B common shares shall
consist of two hundred thousand (200,000)29 shares without par value and
without voting rights.
"Each share of issued Class A common stock of the Corporation,
including treasury stock, as of April 7, 1968, shall be and hereby is, as of
that date, changed into and reclassified as three (3) shares of such Class
A common stock, and each share of issued Class B common stock of the
Corporation, including treasury stock, as of April 7, 1968, shall be and
hereby is, as of that date, changed into and reclassified as three (3) shares
of such Class B common stock. The aggregate amount of capital represented
by the issued shares of stock of the Corporation after this change and
reclassification shall be same as the aggregate amount of capital represented
by the issued shares of the stock of the Corporation before this change and
reclassification. In order to effectuate this change and reclassification,
holders of issued shares of Class A common stock shall be entitled to receive
two (2) additional shares of such Class A common stock for every one (1)
share of such Class A common stock held by them, and holders of issued shares
of Class B common stock shall be entitled to receive two (2) additional
shares of such Class B common stock for every one (1) share of such Class B
common stock held by them.
<F31>
31. Words and figures "one million eight hundred thousand
(1,800,000)" substituted for words and figures "two million (2,000,000)" by
stockholders' resolution of 4/16/77.
<F32>
32. Words and figures "one million (1,000,000)" substituted for
words and figure "eight hundred thousand (800,000)" by stockholders'
resolution of 4/16/77.
75
<PAGE>76
<F33>
33. First paragraph of Article IV, Section 1 amended by
stockholders' resolution of 4/21/84. Previously read as follows:
"Section 1. The total number of shares of stock which the
Corporation is authorized to issue is two million eight hundred thousand
(2,800,000) divided into two classes: One class designated as Class A common
shares shall consist of one million eight hundred thousand (1,800,000)31
shares without par value and with voting rights, and the other class
designated as Class B common shares shall consist of one million (1,000,000)32
shares without par value and without voting rights."
<F34>
34. Words and figures "Section 1." added to first paragraph by
stockholders' resolution of 4/21/84.
<F35>
35. Section 2 added by stockholders' resolution of 4/21/84.
<F36>
36. First paragraph of Article IV, Section 1 amended by
stockholders' consent of 6/9/86. Previously read as follows:
"Section 1. The total number of shares of stock which the
Corporation is authorized to issue is three million (3,000,000) divided into
two classes: One class designated as Class A common shares shall consist of
one million eight hundred thousand (1,800,000)31 shares without par value and
with voting rights, and the other class designated as Class B common shares
shall consist of one million two hundred thousand (1,200,000) shares without
par value and without voting rights.33"
<F37>
37. Paragraph 23, Article IV, Section 1A added by stockholders'
consent of 6/9/86.
<F38>
38. Section 1 of Article IV amended by stockholders' consent of
4/18/87. Previously read as follows:
"Section 1. The total number of shares of stock which the
Corporation is authorized to issue is three million two hundred fifty
thousand (3,250,000) divided into three classes: One class designated as
Class A common shares shall consist of one million eight hundred thousand
(1,800,000) shares without par value and with voting rights, another class
designated as Class B common shares shall consist of one million two hundred
thousand (1,200,000) shares without par value and without voting rights, and
a third class designated as Class C common shares shall consist of two
hundred fifty thousand (250,000) shares without par value and without voting
rights.36
"Each share of issued Class A common stock of the Corporation,
including treasury stock, as of September 21, 1975, shall be and hereby is,
as of that date, changed into and reclassified as four (4) shares of such
Class A common stock, and each share of issued Class B common stock of the
Corporation, including treasury stock, as of September 21, 1975, shall be and
hereby is, as of that date, changed into and reclassified as four (4) shared
of such Class B common stock. The aggregate amount of capital represented
by the issued shares of stock of the Corporation after this change and
reclassification shall be same as the aggregate amount of capital represented
by the issued shares of the stock of the Corporation before this change and
reclassification. In order to effectuate this change and reclassification,
holders of issued shares of Class A common stock shall be entitled to receive
three (3) additional shares of such Class A common stock for every one (1)
share of such Class A common stock held by them, and holders of issued shares
of Class B common stock shall be entitled to receive three (3) additional
shares of such Class B common stock for every one (1) share of such Class B
common stock held by them.30
76
<PAGE>77
<F39>
39. Section 1, paragraph 1, of Article IV amended by stockholders'
written consent of 10/29/93. Previously read as follows:
Section 1. The total number of shares of stock which the
Corporation is authorized to issue is thirteen million (13,000,000) divided
into three classes: One class designated as Class A common shares shall
consist of seven million two hundred thousand (7,200,000) shares, $1.00 par
value per share and with voting rights, another class designated as Class B
common shares shall consist of four million eight hundred thousand
(4,800,000) shares, $1.00 par value per share and without voting rights, and
a third class designated as Class C common shares shall consist of one
million (1,000,000) shares, $1.00 par value per share and without voting
rights.
77
<PAGE>78
EXHIBIT 22
SUBSIDIARIES OF REGISTRANT
STATE OF
INCORPORATION RELATIONSHIP
------------- ------------
BNA Communications Inc. Delaware 100% owned by Registrant
BNA International Inc. Delaware 100% owned by Registrant
BNA Washington Inc. Delaware 100% owned by Registrant
The McArdle Printing Co., Inc. Delaware 100% owned by Registrant
Pike & Fischer, Inc. Delaware 100% owned by Registrant
Tax Management Inc. (a) Delaware 100% owned by Registrant
BNA Holdings Inc. Delaware 100% owned by Registrant
(a) Tax Management Inc. owns 100% of TM Holding Company Inc.,
a Delaware corporation.
<PAGE>79
EXHIBIT 24.1
CONSENT OF INDEPENDENT AUDITORS
The Board Of Directors and Stockholders
The Bureau of National Affairs, Inc.
We consent to the incorporation by reference in the registration statement (No.
33-52671) on Form S-8 of The Bureau of National Affairs, Inc., filed on March
15, 1994, of our report dated February 22, 1994, relating to the consolidated
balance sheets of The Bureau of National Affairs, Inc. and subsidiaries as of
December 31, 1993 and 1992, and the related consolidated statements of income,
changes in stockholders' equity, and cash flows and related consolidated fi-
nancial statement schedules for each of the years in the three-year period ended
December 31, 1993, which report appears in the December 31, 1993, annual report
on Form 10-K of The Bureau of National Affairs, Inc.
s\ KPMG Peat Marwick
-------------------
KPMG Peat Marwick
Washington, D.C.
March 29, 1994
79
<PAGE>80
EXHIBIT 28.2
Securities and Exchange Commission
Washington, D.C. 20549
FORM 11-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended December 31, 1993___________________________________
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________________
Commission file number 2-28286, as exhibit 28.2
A. Full title of the plan and the address of the plan, if
different from that of the issuer named below:
THE BNA DEFERRED STOCK PURCHASE PLAN
B. Name of issuer of the securities held pursuant to the plan and
the address of its principal executive office:
The Bureau of National Affairs, Inc.
1231 25th Street, N. W.
Washington, D. C. 20037
Index to form 11-K:
Financial Statements -
Report of Independent Auditors 81
Statements of Net Assets Available for Benefits
December 31, 1993 and 1992 83
Statements of Changes in Net Assets Available for Benefits
Years Ended December 31, 1993, 1992, and 1991 84
Notes to Financial Statements - December 31, 1993, 1992,
and 1991 86-88
Exhibits -
24.1 Consent of Independent Auditors' for 1993, 1992 and 1991
financial statements 89
80
<PAGE>81
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Deferred Stock Purchase Plan Administrative Committee has duly
caused this annual report to be signed by the undersigned thereunto
duly authorized.
THE BNA DEFERRED STOCK PURCHASE PLAN
Date March 10, 1994
By s\ Paul N. Wojcik
-------------------
Paul N. Wojcik,
Chairman of the Administrative Committee
of The BNA Deferred Stock Purchase Plan<PAGE>
81
<PAGE>82
THE BNA DEFERRED STOCK PURCHASE PLAN
FINANCIAL STATEMENTS AS OF DECEMBER 31, 1993
AND 1992, TOGETHER WITH INDEPENDENT AUDITORS' REPORT
82
<PAGE>83
Independent Auditors' Report
----------------------------
To the Administrative Committee of
The BNA Deferred Stock Purchase Plan:
We have audited the accompanying statement of net assets available for
benefits of The BNA Deferred Stock Purchase Plan as of December 31, 1993
and 1992, and the related statements of changes in net assets available
for benefits for each of the years in the three-year period ended December
31, 1993. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Deferred Stock
Purchase Plan as of December 31, 1993 and 1992, and the results of its
operations for each of the years in the three-year period ended December
31, 1993 in conformity with generally accepted accounting principles.
s\ KPMG Peat Marwick
---------------------
Washington, D.C.
March 11, 1994
83
<PAGE>84
THE BNA DEFERRED STOCK PURCHASE PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1993 AND 1992
1993 1992
----------- -----------
Investments, at fair value (Note 2)
(Cost of $14,375,338 in 1993
and $12,414,363 in 1992) $21,586,562 $17,037,178
Cash 86,613 95,845
----------- -----------
Net assets available for benefits $21,673,175 $17,133,023
=========== ===========
See accompanying notes to financial statements.
84
<PAGE>85
<TABLE>
THE BNA DEFERRED STOCK PURCHASE PLAN
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
<CAPTION>
1993 1992 1991
----------- ---------- ------------
<S> <C> <C> <C>
Additions to net assets attributed to:
Investment income
Dividends (Note 1) $ 903,129 $ 761,970 $ 673,662
Interest 2,487 3,644 7,045
Unrealized appreciation of
investments (Note 2) 2,982,268 441,686 1,008,889
------------ ------------ ------------
3,887,884 1,207,300 1,689,596
Contributions by participants (Note 1) 1,942,839 2,056,977 1,794,624
------------ ------------ ------------
Total additions 5,830,723 3,264,277 3,484,220
------------ ------------ ------------
Deductions from net assets attributed to:
Distributions to participants (Note 1) 1,290,181 1,110,470 922,372
Administrative costs (Note 3) 390 1,204 6,257
------------ ------------ ------------
Total deductions 1,290,571 1,111,674 928,629
------------ ------------ ------------
Net increase 4,540,152 2,152,603 2,555,591
Net assets available for benefits:
Beginning of year 17,133,023 14,980,420 12,424,829
------------ ------------ ------------
End of year $21,673,175 $17,133,023 $14,980,420
============ ============ ============
See accompanying notes to financial statements.
</TABLE>
85
<PAGE>86
THE BNA DEFERRED STOCK PURCHASE PLAN
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
(1) SUMMARY DESCRIPTION OF PLAN
The BNA Deferred Stock Purchase Plan (the "Plan") is a contributory
benefit plan sponsored by The Bureau of National Affairs, Inc. (the
"Company"), for the benefit of employees of the Company and certain of its
subsidiaries. The Plan was established in 1982 with an effective date of
January 1, 1983, and is subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA"). The Plan is designed to
provide benefits to participants or their beneficiaries, and encourages
savings through investments in the Company's Common Stock.
Employees are eligible to participate in the Plan upon completion of one
full year of service. To participate, eligible employees authorize the
Company to contribute, on their behalf, a salary reduction contribution to
a Trust (the "Trust") established by the Plan. Such contributions may be
between 1% and 15% of the participant's compensation for each Plan year,
subject to certain ceiling limitations provided in the Plan, by tax laws,
and by ERISA.
The Trust maintains separate accounts for each participant in the Plan.
These accounts are credited with the participants' salary reduction
contributions and dividend income. These cash balances are used to
purchase shares of Company Class A Common Stock, which are credited to the
accounts of the individual participants. Share and cash balances in the
participants' accounts are fully vested. Distributions of participants'
equity can be made in the event of retirement, death, qualifying
hardships, total and permanent disability, or other severance of service.
If upon terminating employment, a participant's account value exceeds
$3,500, the participant may opt to delay distribution until reaching age
59 1/2.
The Company's Class A Common Stock may only be purchased by employees.
Former employees and, in some cases, their beneficiaries may hold Class A
Common Stock for up to three years. The Company's Class B Common Stock is
issued to employees in exchange for Class A Common Stock upon their
retirement. The Company's Class C Common Stock is issued in exchange for
(Continued)
86
<PAGE>87
THE BNA DEFERRED STOCK PURCHAS PLAN
NOTES TO THE FINANCIAL STATEMENTS
Class A Common Stock to employees of any subsidiary, upon disposition of
the subsidiary. The Trust may redeem or exchange Class A Common Stock for
cash, Class B, or Class C Common Stock, if necessary to comply with the
above ownership restrictions. Proceeds from such exchanges are held for
the Plan participants in their accounts. Dividends received from Class B
and Class C Common Stock are not reinvested in Company stock, but earn
interest in a money market account.
An administrative committee appointed by the Company's Board of Directors
acts as administrator of the Plan. An officer of the Company serves as
the Trustee.
(2) INVESTMENTS
At December 31, 1993, the Trust held 973,207 shares of the Company's Class
A Common Stock, 77,580 shares of the Company's Class B Common Stock, and
2,216 shares of the Company's Class C Common Stock, each valued at $20.50
per share, for 954 plan participants. At December 31, 1992, the Trust
held 955,743 shares of the Company's Class A Common Stock, 15,594 shares
of the Company's Class B Common Stock and 2,216 shares of the Company's
Class C Common Stock, each valued at $17.50 per share, for 932 plan
participants.
The fair value of the stock is set by the Company's Board of Directors
semiannually. The only limitation on the Board's discretion with respect
to pricing of Class A shares is that the price cannot be below the book
value per share as determined from the most recent financial statements
available to the Board at the time the price determination is made. The
Company's Stock Purchase and Transfer Plan provides the primary market for
the repurchase of the Company's Class A Common Stock. Class B and Class C
Common Stock are repurchased directly by the Company.
(Continued)
87
<PAGE>88
THE BNA DEFERRED STOCK PURCHASE PLAN
NOTES TO THE FINANCIAL STATEMENTS
The following information summarizes the Plan's investment and
distribution transactions during 1992 and 1993 involving the Company's
Common Stock.
Number Fair
of Shares Value
Balance, January 1, 1992 879,499 $14,951,483
Acquired 161,461 2,809,488
Distributed to participants (64,139) (1,109,923)
Shares converted to cash ( 3,268) ( 55,556)
Appreciation during the year in the
market value of shares of Company
stock held at year end - 441,686
--------- ------------
Balance, December 31, 1992 973,553 17,037,178
Acquired 143,536 2,781,133
Distributed to participants (64,086) (1,214,017)
Appreciation during the year in the
market value of shares of Company
stock held at year end - 2,982,268
--------- -----------
Balance, December 31, 1993 1,053,003 $21,586,562
========= ===========
The Company's Board of Directors have fixed the fair value of the stock at
$21.50 per share, effective March 28, 1994.
(3) ADMINISTRATIVE COSTS
The Company pays most of the administrative costs of the Plan. Such costs
are not reflected in the accompanying financial statements.
(4) INCOME TAXES
The Internal Revenue Service issued a determination letter for the Plan on
April 2, 1986, which stated that the Plan and its underlying trust qualify
under the applicable provisions of the Internal Revenue Code and therefore
are exempt from federal income taxes. The Plan has since been amended to
conform with current tax law changes. It is the intent of the Plan's
management that the Plan remain qualified and its underlying trust remain
tax exempt under the applicable provisions of the Internal Revenue Code.<PAGE>
88
<PAGE>89
EXHIBIT 24.1
CONSENT OF INDEPENDENT AUDITORS
The Administrative Committee of
The Bureau of National Affairs, Inc.
We consent to the incorporation by reference in the registration statement (No.
33-52671) on Form S-8 of The Bureau of National Affairs, Inc., filed on March
15, 1994, of our report dated March 11, 1994 relating to the statement of net
assets available for benefits of the BNA Deferred Stock Purchase Plan as of De-
cember 31, 1993 and 1992, and the related statements of changes in net assets
available for benefits for each of the years in the three-year period ended De-
cember 31, 1993, which report appears in the December 31, 1993 annual report on
Form 11-K of the BNA Deferred Stock Purchase Plan.
s\ KPMG Peat Marwick
-------------------
KPMG Peat Marwick
Washington, D.C.
March 29, 1994
89
