<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 23, 1996
---------------------------------------------
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 23, 1996 was 3,606,278 Class A common
shares, 4,885,690 Class B common shares, and 421,243 Class Common
shares.
<PAGE> 2
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 12-WEEKS ENDED MARCH 23, 1996 and MARCH 25, 1995
(Unaudited)
(In Thousands of Dollars)
12 Weeks Ended
--------------------------
March 23, March 25,
1996 1995
------------ ------------
OPERATING REVENUES $ 51,014 $ 49,516
------------ ------------
OPERATING EXPENSES:
Editorial, production and distribution 29,237 27,997
Selling 11,049 12,262
Advertising adjustment - 474
General and administrative 7,855 7,124
Profit sharing 260 248
------------ ------------
48,401 48,105
------------ ------------
Operating Profit 2,613 1,411
------------ ------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 1,600 1,342
Other Income (Expense), Net 3 3,234
------------ ------------
TOTAL NON-OPERATING INCOME 1,603 4,576
------------ ------------
INCOME BEFORE INCOME TAXES 4,216 5,987
PROVISION FOR INCOME TAXES 1,351 1,971
------------ ------------
NET INCOME $ 2,865 $ 4,016
============ ============
EARNINGS PER SHARE $ .32 $ .46
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,874,920 8,676,128
============ ============
<PAGE> 3
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 23, 1996 AND DECEMBER 31, 1995
(Unaudited)
(In Thousands of Dollars)
March 23, December 31,
ASSETS 1996 1995
------------------------------------ ------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 26,897 $ 17,763
Short-term investments, at fair value 10,929 11,123
Accounts receivable (net of
allowance for doubtful accounts
of $1,360 in 1996 and $1,628 in 1995) 32,038 43,171
Inventories, at lower of average
cost or market 5,555 6,268
Prepaid expenses 3,061 3,378
Deferred selling expenses 24,974 25,226
------------ ------------
Total current assets 103,454 106,929
------------ ------------
MARKETABLE SECURITIES 91,204 85,884
------------ ------------
PROPERTY AND EQUIPMENT - at cost:
Land 4,250 4,250
Building and improvements 48,840 48,809
Furniture, fixtures and equipment 60,374 59,190
------------ ------------
113,464 112,249
Less-Accumulated depreciation 60,920 58,984
------------ ------------
Net property and equipment 52,544 53,265
------------ ------------
DEFERRED INCOME TAXES 18,454 19,197
------------ ------------
GOODWILL 9,478 9,550
------------ ------------
OTHER ASSETS 3,659 3,927
------------ ------------
Total assets $ 278,793 $ 278,752
============ ============
<PAGE> 4
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 23, 1996 AND DECEMBER 31, 1995
(Unaudited)
(In Thousands of Dollars)
March 23 December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- ----------------------------------------- ------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 15,994 $ 16,315
Employee compensation and benefits
payable 15,887 16,830
Income taxes payable 1,056 424
Deferred income taxes 3,093 4,788
Deferred subscription revenue 115,028 117,567
Dividends payable 4,457 -
------------ ------------
Total current liabilities 155,515 155,924
------------ ------------
POSTRETIREMENT BENEFITS, less current portion 54,238 52,418
OTHER LIABILITIES 3,064 3,212
------------ ------------
Total liabilities 212,817 211,554
------------ ------------
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 28,844 27,695
Retained earnings 43,074 44,665
Treasury stock at cost - 2,998,962 shares
in 1996 and 3,054,574 in 1995 (18,555) (18,782)
Net unrealized gain on marketable securities 755 1,756
Foreign currency translation adjustment (54) (48)
------------ ------------
Total stockholders' equity 65,976 67,198
------------ ------------
Total liabilities and stockholders' equity $ 278,793 $ 278,752
============ ============
<PAGE> 5
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 12-WEEKS ENDED MARCH 23, 1996 and MARCH 25, 1995
(Unaudited)
(In Thousands of Dollars)
12 Weeks Ended
--------------------------
March 23, March 25,
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 2,865 $ 4,016
Items with different cash requirements
than reflected in net income--
Deferred subscription revenue (2,539) (2,549)
Depreciation and amortization 2,344 2,315
Accrued postretirement benefits expense 1,820 1,386
Provision for deferred income taxes (410) 205
Deferred selling expenses 252 732
(Gain) on sales of securities (189) (35)
(Gain) on disposals of property and equipment (3) (2,408)
(Gain) on sales of businesses and publications - (821)
Others (224) (263)
Changes in operating assets and liabilities--
Accounts receivable 11,401 11,980
Accounts payable and accrued liabilities (3,371) (1,833)
Inventory 713 (628)
Film production costs - (84)
Other assets and liabilities--net 124 392
------------ ------------
Net cash provided from operating activities 12,783 12,405
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures--
Purchase of equipment and furnishings (1,367) (1,188)
Building improvements (31) (165)
Proceeds from sale of businesses and publications - 900
Proceeds from sales of property 6 3,353
------------ ------------
Net cash provided by (used for) capital expenditures (1,392) 2,900
------------ ------------
Investment portfolio--
Proceeds from sales and maturities 26,222 8,809
Purchases (29,855) (17,343)
------------ ------------
Net cash provided by (used for) investment portfolio (3,633) (8,534)
------------ ------------
Net cash provided from (used in) investing activities (5,025) (5,634)
------------ ------------
<PAGE> 6
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 12-WEEKS ENDED MARCH 23, 1996 and MARCH 25, 1995
(Unaudited)
(In Thousands of Dollars)
12 Weeks Ended
--------------------------
March 23, March 25,
1996 1995
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock to employees $ 1,481 1,962
Purchase of treasury stock (105) (67)
------------ ------------
Net cash provided from (used in) financing activities 1,376 1,895
------------ ------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 9,134 8,666
CASH AND CASH EQUIVALENTS, beginning of period 17,763 12,428
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 26,897 $ 21,094
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 1 $ 5
Income taxes paid 715 24
<PAGE> 7
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THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 23, 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):
March 23, 1996 December 31, 1995
-------------- -----------------
Materials and supplies $3,497 $4,055
Work in process 210 274
Finished goods 1,848 1,939
-------- --------
$5,555 $6,268
======== ========
NOTE 3: Stockholders' Equity
- ------------------------------
Treasury stock as of March 23, 1996 and December 31, 1995,
respectively, consisted of: Class A, 2,872,586 and 2,915,110 shares;
Class B, 41,283 and 54,771 shares; and Class C, 85,093 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
$474,000 in the first quarter of 1995.
<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 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
- ---------------------
Twelve weeks 1996 compared to twelve weeks 1995
- -----------------------------------------------
Revenues of $51 million in the twelve weeks ended March 23, 1996
were up 3 percent from revenues recorded for the first twelve weeks of
1995. First quarter operating expenses were up only 0.6 percent, non-
operating income decreased $3 million due to asset sales in 1995, and
net income declined 28.7 percent.
Service revenues (subscriptions and online products) amounted to
88.9 percent of consolidated revenues for the quarter and were up 2
percent. New subscription service sales, supported by major new CD-ROM
products, were strong from mid-1993 to mid-1995 and led to good internal
growth in 1994 and 1995. As new sales have inevitably declined for
these major products, subscription revenue growth has slowed. In
addition, slightly lower renewal rates, the absence of revenues from
publications divested last year, and federal government budget
uncertainties have also been factors in slowing revenue growth. Non-
service revenues increased 12.5 percent.
Operating expenses increased only 0.6 percent compared to the prior
year. Selling and initial fulfillment expenses were lower due to the
reduction in new sales. Postage costs also were lower, reflecting bar-
coding of mailings and the transition of reference service customers
from print to CD products. Paper costs rates, which had increased
significantly in 1995, have trended down thus far in 1996. Last year's
first quarter expenses included a $474,000 charge for a change in
accounting for advertising costs (as discussed in Note 4).
<PAGE> 9
-9-
On a comparable basis, excluding the advertising charge in 1995
required by SOP 93-7, operating profit for the first quarter is 38.6
percent ahead of a year ago.
Non-operating income was $3 million lower in the first quarter of
1996 because 1995 results included $3.2 million in gains on the sale of
a former printing plant site, and the sale of California state-specific
publications. Investment income increased 18.9 percent due to higher
market yields and larger portfolio balances.
Earnings per share for the first twelve weeks of 1996 were $.32 per
share compared to $.46 per share for 1995.
The low growth rates for revenues and expenses experienced in the
first quarter 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. Overall, operating
profit and net income are expected to higher in 1996 than in 1995.
FINANCIAL POSITION
- ------------------
Cash provided from operating activities was $12.8 million in the
first twelve weeks of 1996, compared to $12.4 million for the first
twelve weeks of 1995. Operating expenditures decreased 4.3 percent from
1995. Customer receipts decreased 2.7 percent.
Cash used in investing activities netted to $5 million, reflecting
a $3.6 million increase in the Company's investment portfolio and
capital expenditures of $1.4 million.
The Company received $1.4 million in cash from the sale of Class A
capital stock to employees, net of repurchased capital stock.
With over $129 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 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
---------------------------------------------
The annual meeting for stockholders' was held
April 20, 1996. 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 23, 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 March 23, 1996.
<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
5/1/96 s/ William A. Beltz
- --------------- -------------------------------------------
Date William A. Beltz
Chairman and Chief Executive Officer
5/1/96 s/ George J. Korphage
- --------------- -------------------------------------------
Date George J. Korphage
Vice President and Chief Financial Officer
<PAGE> 1
April 23, 1996
Dear BNA Stockholder:
At the annual meeting of stockholders held April 20, 1996, the
following individuals were elected as members of the Corporation's Board
of Directors for the ensuing year: William A. Beltz, Jacqueline M.
Blanchard, Sandra C. Degler, Gerald Egan, Kathleen D. Gill, John E.
Jenc, Eileen Z. Joseph, George J. Korphage, John V. Schappi, Frederick
A. Schenck, Mary Patricia Swords, Daniel W. Toohey, Loene Trubkin,
Robert L. Velte, and Paul N. Wojcik.
The following table provides pertinent statistical data on the
election for directors. As of the record date of March 23, 1996, there
were 3,606,278 shares of Class A common stock outstanding. The total
number of shares voted was 3,051,677.
Stockholder Candidates
----------------------
Name Shares Voted For
------------------- ----------------
Paul N. Wojcik 2,073,832
Mary Patricia Swords 2,063,995
George J. Korphage 1,888,586
William A. Beltz 1,800,614
Sandra C. Degler 1,725,138
Kathleen D. Gill 1,690,584
John E. Jenc 1,668,905
Gerald Egan 1,596,508
Jacqueline M. Blanchard 1,502,629
Robert L. Velte 1,466,039
Eileen Z. Joseph 1,417,575
John V. Schappi 1,336,519
Cynthia J. Bolbach 1,237,933
John P. Boylan 1,096,767
Nonstockholder Candidates
-------------------------
Loene Trubkin 1,624,542
Daniel W. Toohey 1,533,150
Frederick A. Schenck 1,493,280
<PAGE> 2
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 the Corporation received two
inquiries regarding the availability of the Corporation for sale. One
was from a broker representing an unidentified principal, and one was
from the Information Handling Services Group, which is owned by a large
holding company headquartered in Monaco. In both cases, he was
instructed by the Board of Directors 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; Paul N. Wojcik, President and Chief Operating 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; Eunice L. Bumgardner, Vice President and General
Counsel; Kathleen D. Gill, Vice President and Executive Editor; George
J. Korphage, Vice President for Accounting and Finance and Chief
Financial Officer; Mary Patricia Swords, Vice President and Director of
Sales and Marketing; Robert L. Velte, Vice President for Strategic
Development; Cynthia J. Bolbach, Corporate Secretary; David A.
Froemming, Assistant Corporate Secretary; John E. Jenc, Treasurer; and
Gilbert S. Lavine, Assistant Treasurer.
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. Loene Trubkin, Chair, Frederick A. Schenck,
and Daniel W. Toohey.
BUDGET COMMITTEE. George J. Korphage, Chair, Sandra C. Degler,
Eileen Z. Joseph, John V. Schappi, and Robert L. Velte.
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, George C. Cosby, Anthony A. Harris, Bernard H.
Mower, and David A. Sayre.
DEFERRED STOCK PURCHASE PLAN ADMINISTRATIVE COMMITTEE. John E.
Jenc, Chair, Jacqueline M. Blanchard, and Kathleen D. Gill.
COMMITTEE ON MANAGEMENT DEVELOPMENT AND SUCCESSION. Daniel W.
Toohey, Chair, William A. Beltz, John V. Schappi, Frederick A.
Schenck, and Loene Trubkin.
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 1997 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 29, 1996.
Cordially,
s\ Cynthia J. Bolbach
----------------------
Cynthia J. Bolbach
<PAGE> 3
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>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the March
23, 1996 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-31-1996
<PERIOD-END> MAR-23-1996
<CASH> 26,897
<SECURITIES> 10,929
<RECEIVABLES> 33,398
<ALLOWANCES> 1,360
<INVENTORY> 5,555
<CURRENT-ASSETS> 103,454
<PP&E> 113,464
<DEPRECIATION> 60,920
<TOTAL-ASSETS> 278,793
<CURRENT-LIABILITIES> 155,513
<BONDS> 0
<COMMON> 11,912
0
0
<OTHER-SE> 54,064
<TOTAL-LIABILITY-AND-EQUITY> 278,793
<SALES> 51,014
<TOTAL-REVENUES> 51,014
<CGS> 29,237
<TOTAL-COSTS> 29,237
<OTHER-EXPENSES> 19,164
<LOSS-PROVISION> 162
<INTEREST-EXPENSE> 1
<INCOME-PRETAX> 4,216
<INCOME-TAX> 1,351
<INCOME-CONTINUING> 2,865
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,865
<EPS-PRIMARY> .32
<EPS-DILUTED> .32
</TABLE>
