<PAGE>1
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 March 25, 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 March 25, 1995 was 3,487,896 Class A common
shares, 4,819,666 Class B common shares, and 430,312 Class Common
shares.
<PAGE>2
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 12-WEEKS ENDED MARCH 25, 1995 and MARCH 26, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
-------------------------------
March 25, 1995 March 26, 1994
<S> <C> <C>
OPERATING REVENUES $ 49,516 $ 46,323
-------------------------------
OPERATING EXPENSES:
Editorial, production and distribution 27,997 26,675
Selling 12,262 10,725
Advertising adjustment 474 --
General and administrative 7,124 7,207
Profit sharing 248 136
-------------- --------------
48,105 44,743
-------------- --------------
Operating Profit 1,411 1,580
-------------- --------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 1,347 1,162
Interest Expense (5) (57)
Other Income (Expense), Net 3,234 25
-------------- --------------
TOTAL NON-OPERATING INCOME 4,576 1,130
-------------- --------------
INCOME BEFORE INCOME TAXES 5,987 2,710
PROVISION FOR INCOME TAXES 1,971 744
-------------- --------------
NET INCOME $ 4,016 $ 1,966
============== ==============
EARNINGS PER SHARE $ .46 $ .23
============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,676,128 8,573,606
============== ==============
</TABLE>
<PAGE>3
- 3 -
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 25, 1995 AND DECEMBER 31, 1994
(Unaudited)
(In Thousands of Dollars)
March 25, December 31,
ASSETS 1995 1994
------ -------------------------
CURRENT ASSETS:
Cash and cash equivalents $ 21,094 $ 12,428
Short-term investments, at fair value 18,647 6,045
Accounts receivable (net of
allowance for doubtful accounts
of $1,236 in 1995 and $1,446 in 1994) 37,393 49,138
Inventories, at lower of average
cost or market 7,449 6,833
Prepaid expenses 2,111 2,600
Deferred selling expenses 32,195 33,129
----------- ----------
Total current assets 118,889 110,173
----------- ----------
MARKETABLE SECURITIES 67,682 67,180
----------- ----------
PROPERTY AND EQUIPMENT - at cost:
Land 4,250 5,176
Building and improvements 48,310 48,145
Furniture, fixtures and equipment 59,150 58,382
----------- ----------
111,710 111,703
Less-Accumulated depreciation 54,896 52,888
----------- ----------
Net property and equipment 56,814 58,815
----------- ----------
DEFERRED INCOME TAXES 19,506 20,853
----------- ----------
GOODWILL 9,790 9,863
----------- ----------
OTHER ASSETS 3,711 3,715
----------- ----------
Total assets $ 276,392 $ 270,599
=========== ==========
<PAGE>4
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 25, 1995 AND DECEMBER 31, 1994
(Unaudited)
(In Thousands of Dollars)
March 25, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
- ------------------------------------- ------------------------
CURRENT LIABILITIES:
Accounts payable $ 16,292 $ 16,179
Employee compensation and benefits
payable 12,543 13,033
Income taxes payable 820 8
Deferred income taxes 7,869 8,188
Deferred subscription revenue 117,495 120,579
Dividends payable 4,107 --
---------- ----------
Total current liabilities 159,126 157,987
POSTRETIREMENT BENEFITS, less current portion 55,588 54,202
LONG-TERM DEBT, less current portion 107 107
OTHER LIABILITIES 3,196 3,260
---------- ----------
Total liabilities 218,017 215,556
---------- ----------
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 shares 506 506
Additional paid-in capital 24,245 22,722
Retained earnings 40,737 40,828
Treasury stock at cost - 3,174,299 shares
in 1995 and 3,260,432 in 1994 (18,232) (18,604)
Net unrealized gain on marketable securities (224) (1,722)
Foreign currency translation adjustment (63) (93)
Total stockholders' equity 58,375 55,043
---------- ----------
Total liabilities and stockholders' equity $ 276,392 $ 270,599
========== ==========
<PAGE>5
<TABLE>
- 5 -
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 12-WEEKS ENDED MARCH 25, 1995 and MARCH 26, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
-------------------------------
March 25, 1994 March 26, 1994
-------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 4,016 $ 1,966
Items with different cash requirements
than reflected in net income--
Deferred subscription revenue (2,549) (173)
Depreciation and amortization 2,315 2,216
Accrued postretirement benefits expense 1,386 1,895
Provision for deferred income taxes 205 (420)
Deferred selling expenses 732 (1,001)
(Gain) on sales of securities (35) (200)
(Gain) on disposals of property and equip (2,408) --
(Gain) on sales of businesses and publica (821) (25)
Others (263) (196)
Changes in operating assets and liabilities--
Accounts receivable 11,980 10,041
Accounts payable and accrued liabilities (1,833) (5,754)
Inventory (628) (207)
Film production costs (84) (161)
Other assets and liabilities--net 392 896
-------------- --------------
Net cash provided from operating activities 12,405 8,877
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures--
Purchase of equipment and furnishings (1,188) (1,385)
Building improvements (165) (46)
Proceeds from sale of businesses and publ 900 65
Proceeds from sales of property 3,353 --
-------------- --------------
Net cash provided by (used for) capital expenditures 2,900 (1,366)
Investment portfolio--
Proceeds from sales and maturities 8,809 20,316
Purchases (17,343) (18,516)
-------------- --------------
Net cash provided by (used for) investment portfolio (8,534) 1,800
-------------- --------------
Net cash provided from (used in) investing activities (5,634) 434
-------------- --------------
</TABLE>
<PAGE>6
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 12-WEEKS ENDED MARCH 25, 1995 and MARCH 26, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
----------------------------------
March 25, 1995 March 26, 1994
----------------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock to employees $ 1,962 $ 1,715
Purchase of treasury stock (67) (90)
Repayments of borrowings -- (4,032)
-------------- --------------
Net cash provided from (used in) financing act 1,895 (2,407)
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 8,666 6,904
CASH AND CASH EQUIVALENTS, beginning of period 12,428 10,982
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 21,094 $ 17,886
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 5 $ 52
Income taxes paid 24 28
</TABLE>
<PAGE>7 -7-
THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 1995
(UNAUDITED)
NOTE 1: General
- -------------------
The information in this report has not been audited. Results for
the twelve 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):
March 25, 1995 December 31, 1994
-------------- -----------------
Materials and supplies $4,890 $4,273
Work in process 223 246
Finished goods 2,336 2,314
-------- --------
$7,449 $6,833
======== ========
NOTE 3: Stockholders' Equity
- ---------------------------------
Treasury stock as of March 25, 1995 and December 31, 1994,
respectively, consisted of: Class A, 2,990,968 and 3,077,433 shares;
Class B, 107,307 and 107,551 shares; and Class C, 76,024 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
$474,000 in the first quarter.
<PAGE>8
- 8 -
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
- ------------------------
Twelve weeks 1995 compared to twelve weeks 1994
- --------------------------------------------------
Consolidated net income of $4.0 million in the twelve weeks ended
March 25, 1995 was double the net income recorded for the first twelve
weeks of 1994. First quarter consolidated revenues of $49.5 million
increased $3.2 million, or 6.9 percent, operating expenses were up 7.5
percent, and non-operating income increased $3.4 million.
Service revenues (subscriptions and online products) amounted to
89.8 percent of consolidated revenues for the quarter and were up 7.2
percent due to growth in the combined subscription revenue base for
print and CD-ROM products. New sales were up 17.8 percent, mainly due
to high subscription sales of CD products. Not all of these sales will
translate directly into additional revenue for the Company, as some
print subscriptions are canceled in favor of a CD product.
Other revenues increased 4.0 percent. Training media sales
increased 19.2 percent and Software division revenues were up 12.2
percent. Printing sales increased marginally but Book division sales
declined.
Operating expenses increased 7.5 percent compared to the prior year
due to higher salaries, increased postage and paper rates, higher CD
production costs due to increasing 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.
<PAGE>9
- 9 -
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 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
$474,000 in the first quarter. Excluding the effect of SOP 93-7,
consolidated operating profit rose 19.3 percent.
First quarter 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 15.9 percent
due to higher market yields and larger portfolio balances.
Earnings per share for the first twelve weeks of 1995 were $.46 per
share compared to $.23 per share for 1994.
First quarter earnings are not indicative of expected full year
results. The large gains from asset sales are one-time events which, by
year-end, will largely be offset by the additional expense of the SOP
93-7 advertising adjustment described above.
FINANCIAL POSITION
- ---------------------
Cash provided from operating activities was $12.4 million in the
first twelve weeks of 1995, compared to $8.9 million for the first
twelve weeks of 1994. Operating expenditures decreased 1.6 percent from
1994. Customer receipts increased 4.9 percent.
Cash used in investing activities netted to $5.6 million,
reflecting an $8.5 million increase in Company's investment portfolio
and capital expenditures of $1.4 million, partially offset by $4.3
million in proceeds from sales of assets.
The Company received $1.9 million in cash from the sale of Class A
capital stock to employees, net of repurchased capital stock.
With over $107 million in cash and investment portfolios, the
financial position and liquidity of the Company remains very strong.
<PAGE>10
- 10 -
PART II
-------
Item 1 Legal Proceedings
- ---------
There were no material legal proceedings during
the first twelve 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
The annual meeting for stockholders' was held
April 15, 1995. A proxy statement pursuant to
Rule 14a was distributed to all stockholders in
connection with this meeting.
Results of the election of directors are
included in the attached letter to stockholders
dated April 18, 1995.
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
quarter ended March 25, 1995.
<PAGE>11
- 11 -
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
May 3, 1995 s\ William A. Beltz
- ----------- ---------------------------------------
Date William A. Beltz
President and Chief Executive Officer
May 3, 1995 s\ George J. Korphage
- ----------- ---------------------------------------
Date George J. Korphage
Vice President and Chief Financial Officer
<PAGE>12
THE BUREAU OF NATIONAL AFFAIRS, INC.
Cynthia J. Bolbach (202) 452-4580
Corporate Secretary Fax:(202) 452-4226
E-mail:[email protected]
April 18, 1995
Dear BNA Stockholder:
At the 49th annual meeting of stockholders held April 15, 1995,
the following individuals were elected as members of the Corporation's
Board of Directors for the ensuing year: William A. Beltz, Jacqueline
M. Blanchard, Jack Boylan, Robert B. Brooks, Sandra C. Degler, Kathleen
D. Gill, Jack Jenc, Eileen Z. Joseph, George J. Korphage, John V.
Schappi, Frederick A. Schenck, Mary Patricia Swords, Daniel W. Toohey,
Loene Trubkin, and Paul N. Wojcik.
The following table provides pertinent statistical data on the
election for directors. As of the record date of March 25, 1995, there
were 3,483,152 shares of Class A common stock outstanding. The total
number of shares voted was 3,072,812.
Stockholder Candidates
-----------------------
Name Shares Voted For
------------------ ----------------
Paul N. Wojcik 2,544,028
George J. Korphage 2,109,807
William A. Beltz 2,109,740
Sandra C. Degler 2,077,752
Kathleen D. Gill 1,907,598
Jacqueline M. Blanchard 1,848,433
Mary Patricia Swords 1,834,552
John V. Schappi 1,567,365
Jack Jenc 1,531,844
Eileen Z. Joseph 1,501,883
Robert B. Brooks 1,354,771
Jack Boylan 1,260,692
Christopher R. Curtis 1,174,719
Anthony A. Harris 1,089,902
Gary C. Seltzer 1,058,538
David P. McFarland 957,106
Nonstockholder Candidates
--------------------------
Frederick A. Schenck 1,509,074
Daniel W. Toohey 1,546,954
Loene Trubkin 1,581,054
<PAGE>13
As is his custom at each annual meeting of stockholders, Mr.
William A. Beltz, Chairman of the Board and Chief Executive Officer
of the Corporation, reported on acquisition inquiries from other
corporations. Mr. Beltz reported that during 1994 he had received
two inquiries concerning the acquisition of the Corporation. Both
were from brokers who said they were representing anonymous
clients. Mr. Beltz reported that he was instructed by the Board of
Directors in both cases to respond that the Corporation is wholly
owned by its employees and not for sale.
At the meeting of the Board of Directors held immediately
after the stockholders meeting, the following were elected to the
offices named. William A. Beltz, Chairman of the Board and Chief
Executive Officer; John V. Schappi, Vice Chairman of the Board;
Jacqueline M. Blanchard, Vice President for Human Resources; John
P. Boylan, Jr., Vice President for Administration; Robert B.
Brooks, Vice President and Director of Sales and Marketing;
Kathleen D. Gill, Vice President and Executive Editor; George J.
Korphage, Vice President for Accounting and Finance and Chief
Financial Officer; Robert L. Velte, Vice President for Strategic
Development; Paul N. Wojcik, President and Chief Operating Officer;
Cynthia J. Bolbach, Corporate Secretary; John E. Jenc, Treasurer;
and Gilbert S. Lavine, Assistant Treasurer.
The Class A shareholders approved the Board of Directors'
resolution to reaffirm their commitment to employee ownership.
Class A shareholders voted 2,329,486 shares "For" the resolution,
646,821 shares "Against", and 89,512 shares "Abstain".
The following directors were elected to serve on standing
committees of the Board of Directors for the ensuing term of the
Board, as indicated:
Audit Committee. Daniel W. Toohey, Chair, Frederick A.
Schenck, and Loene Trubkin.
Budget Committee. George J. Korphage, Chair, Sandra C.
Degler, Eileen Z. Joseph, John V. Schappi, and Mary Patricia
Swords.
Corporate Investment Committee. George J. Korphage, Chair,
William A. Beltz, Sandra C. Degler, Jack Jenc (ex officio),
and Paul N. Wojcik.
Executive Compensation Committee. Frederick A. Schenck,
Chair, Daniel W. Toohey, and Loene Trubkin.
Executive Committee. William A. Beltz, Chair, Sandra C.
Degler, Kathleen D. Gill, George J. Korphage, and Paul N.
Wojcik.
Retirement Plan Investment Committee. George J. Korphage,
Chair, William A. Beltz, Sandra C. Degler, Jack Jenc (ex
officio), and Paul N. Wojcik.
Retirement Plan Administrative Committee. Diane L. Harris,
Chair, Paul A. Blakely, Eunice L. Bumgardner, Anthony A.
Harris, Bernard H. Mower, and David A. Sayre.
Deferred Stock Purchase Plan Administrative Committee.
Jacqueline M. Blanchard, Chair, Kathleen D. Gill, and John E.
Jenc.
Committee on Management Development and Succession. Loene
Trubkin, Chair, William A. Beltz, Daniel W. Toohey, Frederick
A. Schenck, and John V. Schappi.
<PAGE>14
The Board also adopted a resolution reaffirming the commitment
to employee ownership. A copy of the resolution is attached.
Finally, any stockholder proposal intended to be presented at the
1996 annual meeting of stockholders, and to be included in BNA's
proxy statement relating to that meeting, must be received by the
Corporate Secretary on or before November 30, 1995.
Cordially,
s/ Cynthia J. Bolbach
-----------------------
<PAGE>15
RESOLUTION ON EMPLOYEE OWNERSHIP:
RESOLVED, That the Board of Directors fully endorses and
reaffirms the first corporate objective, which is "[t]o continue
ownership by employees only and to encourage the widest possible
participation because our experience demonstrates the success of
employee ownership in encouraging excellent team performance, in
providing a fair distribution of rewards for that performance, and
in supplying a brake on unhealthy forms of growth," and
FURTHER RESOLVED, That the Chairman of the Board and/or the
President of the Corporation is hereby directed to refer all
inquiries concerning the availability of the Corporation for
acquisition to the full Board of Directors for appropriate
consideration and response in light of that corporate objective.
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
March 25, 1995 10-q filing and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-25-1995
<CASH> 21094
<SECURITIES> 18647
<RECEIVABLES> 38629
<ALLOWANCES> 1236
<INVENTORY> 7449
<CURRENT-ASSETS> 118889
<PP&E> 111710
<DEPRECIATION> 54896
<TOTAL-ASSETS> 276392
<CURRENT-LIABILITIES> 159126
<BONDS> 107
<COMMON> 11912
0
0
<OTHER-SE> 46463
<TOTAL-LIABILITY-AND-EQUITY> 276392
<SALES> 49516
<TOTAL-REVENUES> 49516
<CGS> 27997
<TOTAL-COSTS> 27997
<OTHER-EXPENSES> 20108
<LOSS-PROVISION> 140
<INTEREST-EXPENSE> 5
<INCOME-PRETAX> 5987
<INCOME-TAX> 1971
<INCOME-CONTINUING> 4016
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4016
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
</TABLE>
