FORM 10-Q.--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the period ended June 17, 1995
--------------------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
-------------- -- ---------------------------
Commission File Number: 2-28286
The Bureau of National Affairs, Inc.
- -----------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 53-0040540
- -----------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1231 25th St., N.W. Washington, D.C. 20037
- -----------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(202) 452-4200
- -----------------------------------------------------------------------------
(Registrant's telephone number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months and (2) has been subject to the
filing requirements for the past 90 days. Yes ___X___ No ______
The number of shares outstanding of each of the issuer's classes of common
stock, as of June 17, 1995 was 3,478,859 Class A common shares,
4,848,734 Class B common shares, and 422,793 Class Common shares.
<PAGE>2
<TABLE>
-2-
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 24-WEEKS ENDED JUNE 17, 1995 and JUNE 18,1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
24 Weeks Ended
-----------------------------
June 17, 1995 June 18, 1994
-----------------------------
<S> <C> <C>
OPERATING REVENUES $ 99,995 $ 94,443
OPERATING EXPENSES:
Editorial, production and distribution 56,734 55,184
Selling 25,192 22,161
Advertising adjustment 948 -
General and administrative 14,765 14,849
Profit sharing 319 126
------------ -------------
97,958 92,320
------------ -------------
Operating Profit 2,037 2,123
------------ -------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 2,934 2,421
Interest Expense (13) (96)
Other 3,287 32
------------ -------------
Total Non-Operating Income 6,208 2,357
------------ -------------
INCOME BEFORE INCOME TAXES 8,245 4,480
PROVISION FOR INCOME TAXES 2,581 1,062
------------ -------------
NET INCOME $ 5,664 $ 3,418
============ =============
EARNINGS PER SHARE $ .65 $ .40
============ =============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,705,424 8,588,745
============ =============
</TABLE>
<PAGE>3
<TABLE>
-3-
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 12-WEEKS ENDED JUNE 17, 1995 and JUNE 18,1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
-----------------------------
June 17, 1995 June 18, 1994
-----------------------------
<S> <C> <C>
OPERATING REVENUES $ 50,479 $ 48,120
OPERATING EXPENSES:
Editorial, production and distribution 28,737 28,509
Selling 12,930 11,436
Advertising Adjustment 474 -
General and administrative 7,641 7,642
Profit sharing 71 (10)
------------ -------------
49,853 47,577
------------ -------------
Operating Profit 626 543
------------ -------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 1,587 1,259
Interest Expense (8) (39)
Other 53 7
------------ -------------
Total Non-Operating Income 1,632 1,227
------------ -------------
INCOME BEFORE INCOME TAXES 2,258 1,770
PROVISION FOR INCOME TAXES 610 318
------------ -------------
NET INCOME $ 1,648 $ 1,452
============ =============
EARNINGS PER SHARE $ .19 $ .17
============ =============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,742,832 8,614,699
============ =============
</TABLE>
<PAGE>4
<TABLE>
-4-
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 17, 1995 AND DECEMBER 31, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
June 17, December 31,
ASSETS 1995 1994
- ------- --------------------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 14,801 $ 12,428
Short-term investments, at fair value 20,997 6,045
Accounts receivable (net of
allowance for doubtful accounts
of $1,406 in 1995 and $1,446 in 1994) 34,474 49,138
Inventories, at lower of average
cost or market 7,583 6,833
Prepaid expenses 2,384 2,600
Deferred selling expenses 29,683 33,129
---------- -------------
Total current assets 109,922 110,173
---------- -------------
MARKETABLE SECURITIES 70,774 67,180
---------- -------------
PROPERTY AND EQUIPMENT - at cost:
Land 4,250 5,176
Building and improvements 48,432 48,145
Furniture, fixtures and equipment 59,996 58,382
---------- -------------
112,678 111,703
Less-Accumulated depreciation 57,050 52,888
---------- -------------
Net property and equipment 55,628 58,815
---------- -------------
DEFERRED INCOME TAXES 19,011 20,853
---------- -------------
GOODWILL 9,718 9,863
---------- -------------
OTHER ASSETS 3,485 3,715
---------- -------------
Total assets $ 268,538 $ 270,599
========== =============
</TABLE>
<PAGE>5
<TABLE>
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 17, 1995 AND DECEMBER 31, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
June 17, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ------------------------------------ --------------------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 14,654 $ 16,179
Employee compensation and benefits
payable 12,487 13,033
Income taxes payable 163 8
Deferred income taxes 6,761 8,188
Deferred subscription revenue 112,961 120,579
---------- -------------
Total current liabilities 147,026 157,987
---------- -------------
POSTRETIREMENT BENEFITS, less current portion 56,982 54,202
LONG-TERM DEBT, less current portion - 107
OTHER LIABILITIES 3,105 3,260
---------- -------------
Total liabilities 207,113 215,556
---------- -------------
STOCKHOLDERS' EQUITY:
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 4,926,973 shares 4,927 4,927
Class C - Nonvoting; authorized
1,000,000 shares; issued 506,336 506 506
Additional paid-in capital 25,142 22,722
Retained earnings 42,385 40,828
Treasury stock at cost -3,161,787 shares
in 1995 and 3,260,432 shares in 1994 (18,829) (18,604)
Net unrealized gain (loss) on marketable securities 873 (1,722)
Foreign currency translation adjustment (58) (93)
Total stockholders' equity 61,425 55,043
----------- -------------
Total liabilities and stockholders'
equity $ 268,538 $ 270,599
=========== =============
</TABLE>
<PAGE>6
<TABLE>
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 24-WEEKS ENDED JUNE 17, 1995 and JUNE 18,1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
24 Weeks Ended
-----------------------------
June 17, 1995 June 18, 1994
-----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,664 $ 3,418
Items with different cash requirements
than that reflected in net income--
Deferred subscription revenue (7,083) (537)
Depreciation and amortization 4,642 4,444
Accrued postretirement benefits expense 2,780 3,788
Provision for deferred income taxes (1,001) (320)
Deferred selling expenses 3,244 (2,778)
(Gain) on sales of securities (229) (366)
(Gain) on sales of businesses and publication (824) (29)
(Gain) on sales of fixed assets (2,408) -
Others (197) (91)
Changes in operating assets and liabilities--
Accounts receivable 14,709 8,193
Accounts payable and accrued liabilities (5,784) (3,905)
Inventory (762) (885)
Film production costs (119) (253)
Other assets and liabilities--net 196 375
----------- -------------
Net cash provided from operating activities 12,828 11,054
----------- -------------
CASH FLOWS OF INVESTING ACTIVITIES:
Capital investments--
Purchase of equipment and furnishings (2,003) (2,886)
Building improvements (234) (71)
Proceeds from sales of businesses and publications 923 69
Proceeds from sales of property 3,353 3
------------ -------------
Cash from (used for) capital investment 2,039 (2,885)
Securities investments--
Proceeds from sales and maturities 27,017 32,666
Purchases (37,492) (35,053)
------------ -------------
Net cash (used for) securities investments (10,475) (2,387)
------------ -------------
Net cash (used for) investing activities (8,436) (5,272)
------------ -------------
</TABLE>
<PAGE>7
<TABLE>
-7-
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 24-WEEKS ENDED JUNE 17, 1995 and JUNE 18,1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
24 Weeks Ended
-----------------------------
June 17, 1995 June 18, 1994
-----------------------------
<S> <C> <C>
CASH FLOWS OF FINANCING ACTIVITIES:
Sale of capital stock to employees $ 3,092 $ 2,658
Purchase of treasury stock (897) (1,054)
Dividends paid (4,107) (3,884)
Repayments of borrowings (107) (4,083)
------------ -------------
Net cash (used for) financing activities (2,019) (6,363)
------------ -------------
NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS 2,373 (581)
CASH AND CASH EQUIVALENTS, beginning of period 12,428 10,982
----------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 14,801 $ 10,401
============ =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid 13 94
Income taxes paid 3,734 885
</TABLE>
<PAGE>8
-8-
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 17, 1995
(UNAUDITED)
NOTE 1: General
- ----------------
The information in this report has not been audited. Results for the
twenty-four weeks are not necessarily representative of the year because of the
seasonal nature of activities. The financial information furnished herein
reflects all adjustments (consisting only of normal recurring adjustments)
which are, in the opinion of management, necessary to a fair statement of the
results reported for the periods shown and has been prepared in conformity
with generally accepted accounting principles applied on a consistent basis,
except as described in Note 4.
Notes contained in the 1994 Annual Report to security holders are hereby
incorporated by reference. Note disclosures which would substantially
duplicate those contained in the 1994 Annual Report to security holders have
been omitted. Certain prior year balances have been restated to conform to
current year presentation.
NOTE 2: Inventories
- --------------------
Inventories consisted of the following (in thousands):
June 17, 1995 December 31, 1994
------------- -----------------
Materials and supplies $4,840 $4,273
Work in process 490 246
Finished goods 2,253 2,314
-------- --------
$7,583 $6,833
======== ========
NOTE 3: Stockholders' Equity
- ------------------------------
Treasury stock as of June 17, 1995 and December 31, 1994, respectively,
consisted of: Class A, 3,000,005 and 3,077,433 shares; Class B, 78,239 and
107,551 shares; and Class C, 83,543 and 75,448 shares.
NOTE 4: Advertising Adjustment
- --------------------------------
On January 1, 1995, the Company adopted the provisions of the American
Institute of Certified Public Accountants' Statement of Position 93-7,
"Reporting on Advertising". SOP 93-7 requires expensing advertising costs as
they are incurred. Previously, these costs were deferred and expensed over
subscription terms, typically one year. During 1995, in addition to
expensing advertising costs as incurred, $2.1 million of advertising costs
deferred as of December 31, 1994, must also be expensed consistent with the
previous amortization policy. The expense adjustment for previously deferred
advertising costs amounted to $948,000 in the first twenty-four weeks.
<PAGE>9
-9-
PART I
------
Item 2. Management's Discussion and Analysis of Results of
- ------- Operations and Financial Position
It is presumed that users of this interim report have read or have access
to the audited financial statements and management's discussion and analysis
contained in the 1994 Annual Report to security holders, hereby incorporated
by reference. This interim report is intended to provide an update of the
disclosures contained in the 1994 Annual Report to security holders and,
accordingly, disclosures which would substantially duplicate those contained
therein have been omitted.
RESULTS OF OPERATIONS
- ---------------------
Twenty-four weeks 1995 compared to twenty-four weeks 1994
- ---------------------------------------------------------
Net income rose to $5.6 million for the twenty-four weeks ended June 17,
1995, from $3.4 million in 1994. Revenues, at just under $100 million,
increased 5.9 percent, operating expenses were up 6.1 percent, and
non-operating income increased $3.8 million.
Service revenues (subscriptions and online products) amounted to 89.5
percent of consolidated revenues for the period and were up 6.6 percent due
to continued growth in the combined subscription revenue base for print and
CD-ROM products. This growth has been fueled by the market acceptance of the
CD products, which have generated nearly two-thirds of all new subscription
sales dollars this year.
Other revenues were unchanged in total. Training media and book
sales increased, but sales of software products and printing services declined.
Operating expenses increased due to higher salaries, increased
postage and paper rates, higher CD production costs for growing circulations
and new products, higher selling expenses related to record new sales, and
an accounting adjustment for advertising expenses required by SOP 93-7.
The operating expense increase was mitigated by lower press runs for some
products and the discontinuance of a costly print product in June of 1994.
The accounting change required by SOP 93-7 is that all advertising costs
now be expensed as incurred. Previously, advertising costs were deferred and
expensed over subscription terms, typically one year. Implementing this
change will increase 1995 operating expenses because current advertising
costs must now be expensed, and in addition, $2.1 million of previously
deferred advertising costs also must be expensed. The expense adjustment for
previously deferred advertising costs amounted to $948,000 in the first
twenty-four weeks. Excluding the effect of SOP 93-7, consolidated operating
profit rose 40.6 percent.
<PAGE>10
-10-
Non-operating income includes $3.2 million in gains on the sale a former
printing plant site, and the sale of California state-specific publications.
Investment income increased 21.2 percent due to higher market yields and larger
portfolio balances.
Earnings per share for the first twenty-four weeks of 1995 were $.65 per
share compared to $.40 per share for 1994.
The large increase in earnings in the first twenty-four weeks is not
indicative of expected full year results. The gains from the asset sales are
one-time events which, by year-end, will be largely offset by the additional
expense of the SOP 93-7 advertising adjustment described above.
Twelve weeks ended June 17, 1995 compared to twelve weeks ended June 18, 1994.
- ------------------------------------------------------------------------------
Consolidated revenues increased by 4.9 percent in the latest twelve weeks
of 1995 compared to 1994; operating profit increased 15.3 percent; and
consolidated net income increased 13.5 percent. The revenue and expense
factors mentioned above also affected the second quarter's comparisons.
FINANCIAL POSITION
- ------------------
Cash provided from operating activities was $12.8 million in the first
twenty-four weeks of 1995, compared to $11.1 million for the first
twenty-four weeks of 1994. Customer receipts increased 4.8 percent.
Operating expenditures increased 3.7 percent from 1994.
Cash used in investing activities netted to $8.4 million, reflecting an
$10.5 million increase in Company's investment portfolio and capital
expenditures of $2.2 million, partially offset by $4.3 million in proceeds
from sales of assets.
The Company netted $2.2 million in cash from the sale of capital stock to
employees, less repurchases. Over $4.1 million was paid out to stockholders
as cash dividends.
With over $106 million in cash and investment portfolios, the financial
position and liquidity of the Company remains very strong.
<PAGE>11
-11-
PART II
-------
Item 1 Legal Proceedings
- ------
There were no material legal proceedings during the first
twenty-four weeks of 1995.
Item 2 Change in Securities
- ------
There were no changes in securities.
Item 3 Defaults upon Senior Securities
- ------
There were no defaults upon senior securities.
Item 4 Submission of Matters to a Vote of Securities Holders
- ------
See Form 10-Q for the quarter ended March 25, 1995, for the results
of the election of directors and the vote on the Board of Directors'
resolution to reaffirm employee ownership at the April 15, 1995
annual meeting of stockholders.
Item 5 Other Information
- ------
No other information is presented herein.
Item 6 Exhibits and Reports on Form 8-K
- ------
No reports were filed on Form 8-K during the first twenty-four weeks
of 1995.
<PAGE>12
-12-
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
The Bureau of National Affairs, Inc.
------------------------------------
Registrant
July 20, 1995 s\ William A. Beltz
------------- -----------------------------------
Date William A. Beltz
Chairman and Chief Executive Officer
July 20, 1995 s\ George J. Korphage
------------- ------------------------------------
Date George J. Korphage
Vice President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
June 17, 1995, 10-Q filing and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-17-1995
<CASH> 14801
<SECURITIES> 20997
<RECEIVABLES> 35880
<ALLOWANCES> 1406
<INVENTORY> 7583
<CURRENT-ASSETS> 109922
<PP&E> 112678
<DEPRECIATION> 57050
<TOTAL-ASSETS> 268538
<CURRENT-LIABILITIES> 147026
<BONDS> 0
<COMMON> 11912
0
0
<OTHER-SE> 49513
<TOTAL-LIABILITY-AND-EQUITY> 268538
<SALES> 99995
<TOTAL-REVENUES> 99995
<CGS> 56734
<TOTAL-COSTS> 56734
<OTHER-EXPENSES> 41224
<LOSS-PROVISION> 266
<INTEREST-EXPENSE> 13
<INCOME-PRETAX> 8245
<INCOME-TAX> 2581
<INCOME-CONTINUING> 5664
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5664
<EPS-PRIMARY> .65
<EPS-DILUTED> .65
</TABLE>
