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 15, 1996
-------------------------------------------------
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
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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 15, 1996 was 3,582,363 Class A common shares,
4,844,840 Class B common shares, and 418,924 Class Common shares.
<PAGE>2
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 24-WEEKS ENDED JUNE 15, 1996 and JUNE 17, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
24 Weeks Ended
-----------------------------
June 15, 1996 June 17, 1995
-------------- -------------
<S> <C> <C>
OPERATING REVENUES $ 103,369 $ 99,995
-------------- -------------
OPERATING EXPENSES:
Editorial, production and distribution 59,480 56,734
Selling 23,065 25,192
Advertising adjustment - 948
General and administrative 16,240 14,765
Profit sharing 307 319
-------------- -------------
99,092 97,958
-------------- -------------
Operating Profit 4,277 2,037
-------------- -------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 3,005 2,921
Other Income, Net 6 3,287
-------------- -------------
Total Non-Operating Income 3,011 6,208
-------------- -------------
INCOME BEFORE INCOME TAXES 7,288 8,245
PROVISION FOR INCOME TAXES 2,247 2,581
-------------- -------------
NET INCOME $ 5,041 $ 5,664
============== =============
EARNINGS PER SHARE $ .57 $ .65
============== =============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,865,142 8,705,424
============== =============
</TABLE>
<PAGE>3
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 12-WEEKS ENDED JUNE 15, 1996 and JUNE 17, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
-----------------------------
June 15, 1996 June 17, 1995
-------------- -------------
<S> <C> <C>
OPERATING REVENUES $ 52,355 $ 50,479
-------------- -------------
OPERATING EXPENSES:
Editorial, production and distribution 30,243 28,737
Selling 12,016 12,930
Advertising Adjustment - 474
General and administrative 8,385 7,641
Profit sharing 47 71
-------------- -------------
50,691 49,853
-------------- -------------
Operating Profit 1,664 626
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NON-OPERATING INCOME (EXPENSE):
Investment Income 1,405 1,579
Other Income, Net 3 53
-------------- -------------
Total Non-Operating Income 1,408 1,632
-------------- -------------
INCOME BEFORE INCOME TAXES 3,072 2,258
PROVISION FOR INCOME TAXES 896 610
-------------- -------------
NET INCOME $ 2,176 $ 1,648
============== =============
EARNINGS PER SHARE $ .25 $ .19
============== =============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,867,381 8,742,832
============== =============
</TABLE>
<PAGE>4
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 15, 1996 AND DECEMBER 31, 1995
(Unaudited)
(In Thousands of Dollars)
June 15, December 31,
ASSETS 1996 1995
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<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 15,183 $ 17,763
Short-term investments, at fair value 13,054 11,123
Accounts receivable (net of allowance
for doubtful accounts of $1,423 in 1996
and $1,628 in 1995) 34,351 43,171
Inventories, at lower of average cost
or market 5,829 6,268
Prepaid expenses 3,156 3,378
Deferred selling expenses 23,321 25,226
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Total current assets 94,894 106,929
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MARKETABLE SECURITIES 89,362 85,884
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PROPERTY AND EQUIPMENT - at cost:
Land 4,250 4,250
Building and improvements 48,900 48,809
Furniture, fixtures and equipment 59,347 59,190
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112,497 112,249
Less-Accumulated depreciation 61,063 58,984
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Net property and equipment 51,434 53,265
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DEFERRED INCOME TAXES 21,563 19,197
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GOODWILL 9,407 9,550
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OTHER ASSETS 3,669 3,927
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Total assets $ 270,329 $ 278,752
========== ==========
</TABLE>
<PAGE>5
<TABLE>
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 15, 1996 AND DECEMBER 31, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
June 15, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
---------- ----------
<S> <C>
CURRENT LIABILITIES:
Accounts payable $ 12,289 $ 16,315
Employee compensation and benefits payable 12,565 16,830
Income taxes payable 1,575 424
Deferred income taxes 4,018 4,788
Deferred subscription revenue 111,841 117,567
---------- ----------
Total current liabilities 142,288 155,924
POSTRETIREMENT BENEFITS, less current portion 59,615 52,418
OTHER LIABILITIES 2,930 3,212
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Total liabilities 204,833 211,554
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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 29,712 27,695
Retained earnings 45,249 44,665
Treasury stock at cost-3,066,046 shares in
1996 & 3,054,574 shares in 1995 (21,167) (18,782)
Net unrealized gain (loss) on marketable securities (156) 1,756
Foreign currency translation adjustment (54) (48)
---------- ----------
Total stockholders' equity 65,496 67,198
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Total liabilities and stockholders' equity $ 270,329 $ 278,752
========== ==========
</TABLE>
<PAGE>6
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 24-WEEKS ENDED JUNE 15, 1996 and JUNE 17, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
24 Weeks Ended
-------------------------------
June 15, 1996 June 17, 1995
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,041 $ 5,664
Items with different cash requirements --------------- --------------
than that reflected in net income--
Deferred subscription revenue (5,726) (7,083)
Depreciation and amortization 4,961 4,642
Accrued postretirement benefits expense 3,306 2,780
Provision for deferred income taxes (2,103) (1,001)
Deferred selling expenses 1,905 3,244
(Gain) on sales of securities (189) (229)
(Gain) on sales of businesses and publications - (824)
(Gain) on sales of fixed assets (3) (2,408)
Others (138) (197)
Changes in operating assets and liabilities--
Accounts receivable 9,025 14,709
Accounts payable and accrued liabilities (1,152) (5,784)
Inventory 439 (762)
Film production costs (19) (119)
Other assets and liabilities--net (664) 196
-------------- -------------
Net cash provided from operating activities 14,683 12,828
-------------- -------------
CASH FLOWS OF INVESTING ACTIVITIES:
Capital investments--
Purchase of equipment and furnishings (2,212) (2,003)
Building improvements (91) (234)
Proceeds from sales of businesses and publications - 923
Proceeds from sales of property 6 3,353
-------------- -------------
Net cash provided by (used for)
capital expenditures (2,297) 2,039
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Investment portfolio--
Proceeds from sales and maturities 36,006 27,017
Purchases (46,147) (37,492)
-------------- -------------
Net cash (used for) investment portfolio (10,141) (10,475)
-------------- -------------
Net cash (used for) investing activities (12,438) (8,436)
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</TABLE>
<PAGE>7
<TABLE>
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 24-WEEKS ENDED JUNE 15, 1996 and JUNE 17, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
24 Weeks Ended
-----------------------------
June 15, 1996 June 17, 1995
-------------- -------------
<S> <C> <C>
CASH FLOWS OF FINANCING ACTIVITIES:
Sale of capital stock to employees $ 2,596 $ 3,092
Purchase of treasury stock (2,964) (897)
Dividends paid (4,457) (4,107)
Repayments of borrowings - (107)
-------------- -------------
Net cash (used for) financing activities (4,825) (2,019)
-------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (2,580) 2,373
CASH AND CASH EQUIVALENTS, beginning of period 17,763 12,428
-------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 15,183 $ 14,801
============== =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid 10 13
Income taxes paid 2,737 3,734
</TABLE>
<PAGE>8
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THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 15, 1996
(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. See Note 4.
Notes contained in the 1995 Annual Report to security holders are
hereby incorporated by reference. Note disclosures which would
substantially duplicate those contained in the 1995 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 15, 1996 December 31, 1995
------------- -----------------
Materials and supplies $3,679 $4,055
Work in process 355 274
Finished goods 1,795 1,939
-------- --------
$5,829 $6,268
======== ========
NOTE 3: Stockholders' Equity
- ------------------------------
Treasury stock as of June 15, 1996 and December 31, 1995,
respectively, consisted of: Class A, 2,896,501 and 2,915,110 shares;
Class B, 82,133 and 54,771 shares; and Class C, 87,412 and 84,693
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,
$2,055,000 of advertising costs deferred as of December 31, 1994, were
also expensed consistent with the previous amortization policy,
including $948,000 through the second quarter of 1995.<PAGE>
<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 1995 Annual Report to security holders,
hereby incorporated by reference. This interim report is intended to
provide an update of the disclosures contained in the 1995 Annual Report
to security holders and, accordingly, disclosures which would
substantially duplicate those contained therein have been omitted.
RESULTS OF OPERATIONS
- ---------------------
Twenty-four weeks 1996 compared to twenty-four weeks 1995.
- ----------------------------------------------------------
BNA's consolidated revenues continue to reflect modest business
growth through the second quarter, increasing 3.4 percent to $103
million compared to the same period of last year. Operating profit more
than doubled as operating expenses increased only 1.2 percent. However,
non-operating income was $3.2 million lower because 1995's results
included large gains from asset sales. As a result, BNA's consolidated
net income declined 11 percent.
Service revenues (subscriptions and online products) which account
for over 89 percent of consolidated revenues, were up 3.1 percent.
Slightly lower renewal rates, federal government budget uncertainties,
and lower new sales for the major new CD-ROM products launched from 1993
to 1995, have resulted in slower subscription revenue growth. Higher
online service revenues from renegotiated agreements mitigated the
decline in total subscription growth. Non-service revenues increased
5.7 percent due to increased sales of books and outside printing.
Operating expenses increased 1.2 percent compared to the prior
year. Selling and initial fulfillment expenses decreased due to lower
new sales. Also, last year's expenses included a $948,000 charge for a
change in accounting for advertising costs (as discussed in Note 4).
On a comparable basis, excluding the advertising charge in 1995
required by SOP 93-7, operating profit through the second quarter was
43.3 percent ahead of a year ago.
<PAGE>10
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Non-operating income was $3.2 million lower in 1996 because 1995
results included $3.2 million in gains on the sales of a former printing
plant site, and California state-specific publications. Investment
income increased 2.9 percent due to larger portfolio balances.
Earnings per share for the first twenty-four weeks of 1996 were
$.57 per share compared to $.65 per share for 1995.
The low growth rates for revenues and expenses experienced in the
first two quarters are expected to continue in the immediate future. As
mentioned above, new sales of existing products are lower and intense
competition for several major products have resulted in pressures on
renewal sales and pricing. However, several new subscription services
will be launched throughout the rest of the year. Full year operating
profit and net income are expected to be higher in 1996 than in 1995.
Twelve weeks ended June 15, 1996 compared to twelve weeks ended June 17, 1995
- -----------------------------------------------------------------------------
Consolidated revenues increased by 3.7 percent in the latest twelve
weeks of 1996 compared to 1995 and consolidated net income increased 32
percent. Excluding the advertising charge, operating profit increased
51.3 percent. The revenue and expense factors mentioned above also
affected the second quarter's comparisons.
FINANCIAL POSITION
- ------------------
Cash provided from operating activities of $14.7 million in the
first twenty-four weeks of 1996 was 14.5 percent higher than the first
twenty-four weeks of 1995. Operating expenditures decreased 2.3 percent
from 1995. Customer receipts decreased 0.3 percent.
Cash used in investing activities netted to $12.4 million,
reflecting a $10.1 million addition to the Company's investment
portfolio and capital expenditures of $2.3 million.
The Company received $2.6 million in cash from the sale of Class A
capital stock to employees and repurchased almost $3 million of Class B
and Class C capital stock. Over $4.4 million was paid out to
stockholders as cash dividends.
With over $117 million in cash and investment portfolios, 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 twenty-four weeks of 1996.
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 23,
1996, for the results of the election of
directors held at the annual meeting for
stockholders on April 20, 1996.
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 June 15, 1996.
<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
July 23, 1996 s\ William A. Beltz
- -------------- -------------------------------------------
Date William A. Beltz
Chairman and Chief Executive Officer
July 23, 1996 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 15,1996, 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-31-1996
<PERIOD-END> JUN-15-1996
<CASH> 15183
<SECURITIES> 89362
<RECEIVABLES> 35774
<ALLOWANCES> 1423
<INVENTORY> 5829
<CURRENT-ASSETS> 94894
<PP&E> 112497
<DEPRECIATION> 61063
<TOTAL-ASSETS> 270329
<CURRENT-LIABILITIES> 142288
<BONDS> 0
<COMMON> 11912
0
0
<OTHER-SE> 53584
<TOTAL-LIABILITY-AND-EQUITY> 270329
<SALES> 103369
<TOTAL-REVENUES> 103369
<CGS> 59480
<TOTAL-COSTS> 59480
<OTHER-EXPENSES> 39612
<LOSS-PROVISION> 545
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 7288
<INCOME-TAX> 2247
<INCOME-CONTINUING> 5041
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5041
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
</TABLE>
