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 September 9, 1995
--------------------------------------------
or
[ ] Transition Report Pursuant to Section 13 of 15(d) of the Securities
Exchange Act of 1934
For the transition period from to
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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 September 9, 1995 was 3,463,245 Class A common
shares, 4,885,772 Class B common shares, and 422,793 Class C Common
shares.
<PAGE>2
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 36-WEEKS ENDED SEPTEMBER 9, 1995 and SEPTEMBER 10, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
36 Weeks Ended
---------------------------------
Sept. 9, 1995 Sept. 10, 1994
--------------- ---------------
<S> <C> <C>
OPERATING REVENUES $ 150,590 $ 142,818
--------------- ---------------
OPERATING EXPENSES:
Editorial, production and distribution 85,599 82,104
Selling 38,374 33,888
Advertising adjustment 1,423 -
General and administrative 21,834 21,907
Profit sharing 399 361
--------------- ---------------
147,629 138,260
--------------- ---------------
Operating Profit 2,961 4,558
--------------- ---------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 4,585 3,464
Interest Expense (36) (126)
Other 3,118 479
--------------- ---------------
Total Non-Operating Income 7,667 3,817
--------------- ---------------
INCOME BEFORE INCOME TAXES 10,628 8,375
PROVISION FOR INCOME TAXES 3,204 2,378
--------------- ---------------
NET INCOME $ 7,424 $ 5,997
=============== ===============
EARNINGS PER SHARE $ .85 $ .70
=============== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,722,415 8,582,263
=============== ===============
</TABLE>
<PAGE>3
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 12-WEEKS ENDED SEPTEMBER 9, 1995 and SEPTEMBER 10, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
---------------------------------
Sept. 9, 1995 Sept. 10, 1994
--------------- ---------------
<S> <C> <C>
OPERATING REVENUES $ 50,595 $ 48,375
--------------- ---------------
OPERATING EXPENSES:
Editorial, production and distribution 28,865 26,920
Selling 13,182 11,727
Advertising adjustment 475 -
General and administrative 7,069 7,058
Profit sharing 80 235
--------------- ---------------
49,671 45,940
--------------- ---------------
Operating Profit 924 2,435
--------------- ---------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 1,651 1,043
Interest Expense (23) (30)
Other (169) 447
--------------- ---------------
Total Non-Operating Income 1,459 1,460
--------------- ---------------
INCOME BEFORE INCOME TAXES 2,383 3,895
PROVISION FOR INCOME TAXES 623 1,316
--------------- ---------------
NET INCOME $ 1,760 $ 2,579
=============== ===============
EARNINGS PER SHARE $ .20 $ .30
=============== ===============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,759,141 8,569,225
=============== ===============
</TABLE>
<PAGE>4
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 9, 1995 AND DECEMBER 31, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
September 9, December 31,
ASSETS 1995 1994
------------- --------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 19,078 $ 12,428
Short-term investments, at fair value 14,574 6,045
Accounts receivable (net of allowance
for doubtful accounts of $1,331 in 1995
and $1,446 in 1994) 31,483 49,138
Inventories, at lower of average cost
or market 7,233 6,833
Prepaid expenses 2,583 2,600
Deferred selling expenses 26,871 33,129
------------- --------------
Total current assets 101,822 110,173
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MARKETABLE SECURITIES 79,276 67,180
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PROPERTY AND EQUIPMENT - at cost:
Land 4,250 5,176
Building and improvements 48,562 48,145
Furniture, fixtures and equipment 59,710 58,382
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112,522 111,703
Less-Accumulated depreciation 58,921 52,888
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Net property and equipment 53,601 58,815
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DEFERRED INCOME TAXES 18,949 20,853
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GOODWILL 9,646 9,863
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OTHER ASSETS 4,242 3,715
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Total assets $ 267,536 $ 270,599
============= ==============
</TABLE>
<PAGE>5
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 9, 1995 AND DECEMBER 31, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
September 9, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1994 1994
------------- --------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 12,775 $ 16,179
Employee compensation and benefits payable 17,382 13,033
Income taxes payable 692 8
Deferred income taxes 5,667 8,188
Deferred subscription revenue 109,372 120,579
Dividends payable 4,147 -
------------- --------------
Total current liabilities 150,035 157,987
POSTRETIREMENT BENEFITS, less current portion 54,558 54,202
LONG-TERM DEBT, less current portion - 107
OTHER LIABILITIES 2,998 3,260
------------- --------------
Total liabilities 207,591 215,556
------------- --------------
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 25,732 22,722
Retained earnings 39,994 40,828
Treasury stock at cost - 3,140,363 shares in
1995 and 3,260,432 shares in 1994 (18,904) (18,604)
Net unrealized gain (loss) on marketable
securities 1,254 (1,722)
Foreign currency translation adjustment (43) (93)
------------- --------------
Total stockholders' equity 59,945 55,043
------------- --------------
Total liabilities and stockholders' equity $ 267,536 $ 270,599
============= ==============
</TABLE>
<PAGE>6
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 36-WEEKS ENDED SEPTEMBER 9, 1995 and SEPTEMBER 10, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
36 Weeks Ended
---------------------------------
Sept. 9, 1995 Sept. 10, 1994
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,420 $ 5,997
Items with different cash requirements
than that reflected in net income -
Deferred subscription revenue (10,672) 958
Depreciation and amortization 6,964 6,680
Accrued postretirement benefits expense 4,149 4,652
Provision for deferred income taxes (2,246) 850
Deferred selling expense 6,056 (4,718)
(Gain) on sales of securities (571) (405)
(Gain) on sales of businesses and
publications (824) (503)
(Gain) loss on disposals of equipment (2,181) 24
Others (324) (27)
Changes in operating assets and liabilities -
Accounts receivable 17,775 3,090
Accounts payable and accrued liabilities (4,643) (137)
Inventories (412) (80)
Film production costs (141) (402)
Other assets and liabilities - net (948) 78
--------------- ---------------
Net cash provided from operating activities 19,402 16,057
--------------- ---------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures -
Purchase of equipment and furnishings (2,380) (4,407)
Building improvements (417) (95)
Proceeds from sales of businesses and
publications 923 543
Proceeds from sales of property 3,361 3
--------------- ---------------
Cash from (used for) capital investments--net 1,487 (3,956)
--------------- ---------------
Securities investments--
Proceeds from sales and maturities 56,439 44,874
Purchases (69,174) (48,786)
--------------- ---------------
Net cash (used for) securities investments (12,735) (3,912)
--------------- ---------------
Net cash (used for) investing activities (11,248) (7,868)
--------------- ---------------
</TABLE>
<PAGE>7
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 36-WEEKS ENDED SEPTEMBER 9, 1995 and SEPTEMBER 10, 1994
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
36 Weeks Ended
---------------------------------
Sept. 9, 1995 Sept. 10, 1994
--------------- ---------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sales of capital stock to employees $ 3,850 $ 3,273
Purchase of treasury stock (1,140) (3,108)
Dividends paid (4,107) (3,884)
Repayments of borrowings (107) (4,134)
--------------- ---------------
Net cash (used for) financing activities (1,504) (7,853)
--------------- ---------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 6,650 336
CASH AND CASH EQUIVALENTS, beginning of period 12,428 10,982
--------------- ---------------
CASH AND CASH EQUIVALENTS, end of period $ 19,078 $ 11,318
=============== ===============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 36 $ 125
Income taxes paid 3,847 960
</TABLE>
<PAGE>8
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THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 9, 1995
(UNAUDITED)
NOTE 1: General
- ----------------
The information in this report has not been audited. Results for
the thirty-six 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):
September 9, 1995 December 31, 1994
----------------- -----------------
Materials and supplies $4,569 $4,273
Work in process 408 246
Finished goods 2,256 2,314
-------- --------
$7,233 $6,833
======== ========
NOTE 3: Stockholders' Equity
- ------------------------------
Treasury stock as of September 9, 1995 and December 31, 1994,
respectively, consisted of: Class A, 3,015,619 and 3,077,433 shares;
Class B, 41,201 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 that
advertising costs be expensed 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 $1,423,000 in the first thirty-six weeks.
<PAGE>9
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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
- ---------------------
Thirty-six weeks 1995 compared to thirty-six weeks 1994
- -------------------------------------------------------
Net income rose to $7.4 million for the thirty-six weeks ended
September 9, 1995, from $6 million in 1994. Revenues, at $150.6
million, increased 5.4 percent, operating expenses were up 6.8 percent,
and non-operating income increased $3.8 million.
Service revenues (subscriptions and online products) amounted to
89.6 percent of consolidated revenues for the period and were up 6.7
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 over half of
all new subscription sales dollars this year.
Other revenues were down 4.3 percent as most divisions recorded
declines over prior year results. Printing sales were essentially
unchanged, but sales of training media, books, and software products
were lower.
Operating expenses increased due to higher salaries, increased
postage and paper rates, higher CD production costs for growing
circulations and new products, increased product development costs,
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 $1,423,000 in the first thirty-six weeks. Excluding the
effect of SOP 93-7, consolidated operating profit declined 3.8 percent.
<PAGE>10
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Non-operating income includes $3.2 million of gains on the sale of
a former printing plant site, and the sale of California state-specific
publications. Investment income increased 32.4 percent due primarily to
larger portfolio balances.
Earnings per share for the first thirty-six weeks of 1995 were $.85
per share compared to $.70 per share for 1994.
The increase in earnings in the first thirty-six 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 September 9, 1995 compared to twelve weeks ended
September 10, 1994.
- ------------------
For the third quarter only, consolidated revenues increased 4.6
percent. Service revenues were up 6.9 percent, but other revenues
declined for the quarter. The revenue and expense factors mentioned
above also affected the third quarter's comparisons, as did a
significant favorable adjustment to post-retirement benefit expenses in
1994.
FINANCIAL POSITION
- ------------------
Cash provided from operating activities was $19.4 million in the
first thirty-six weeks of 1995, compared to $16 million for the first
thirty-six weeks of 1994. Customer receipts increased 6.3 percent.
Operating expenditures were up 4.5 percent from 1994.
Cash used for investing activities netted to $11.2 million,
reflecting $12.7 million transferred to the Company's investment
portfolio and capital expenditures of $2.8 million, partially offset by
$4.3 million in proceeds from sales of assets.
The Company netted $2.7 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 nearly $113 million in cash and investment portfolios and no
debt, the financial position and liquidity of the Company remains very
strong.
<PAGE>11
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PART II
-------
Item 1 Legal Proceedings
- ------
There were no material legal proceedings during the
first thirty-six 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
There were no matters submitted to a vote for security
holders.
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
thirty-six weeks of 1995.
<PAGE>12
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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
October 19, 1995 s\ William A. Beltz
- ---------------- ------------------------------------------
Date William A. Beltz
Chairman and Chief Executive Officer
October 19, 1995 s\ George J.Korphage
- ---------------- ------------------------------------------
Date George J. Korphage
Vice President and Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summay financial information extracted from the
September 9, 1995, 10-Q filing and is qualified in its entirety by reference
to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-09-1995
<CASH> 19078
<SECURITIES> 14574
<RECEIVABLES> 32814
<ALLOWANCES> 1331
<INVENTORY> 7233
<CURRENT-ASSETS> 101822
<PP&E> 112522
<DEPRECIATION> 58921
<TOTAL-ASSETS> 267536
<CURRENT-LIABILITIES> 150035
<BONDS> 0
<COMMON> 11912
0
0
<OTHER-SE> 48033
<TOTAL-LIABILITY-AND-EQUITY> 267536
<SALES> 150590
<TOTAL-REVENUES> 150590
<CGS> 85599
<TOTAL-COSTS> 85599
<OTHER-EXPENSES> 62030
<LOSS-PROVISION> 474
<INTEREST-EXPENSE> 36
<INCOME-PRETAX> 10628
<INCOME-TAX> 3204
<INCOME-CONTINUING> 7424
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7424
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
</TABLE>
