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 7, 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.
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(Exact name of registrant as specified in its charter)
Delaware 53-0040540
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1231 25th St., N.W. Washington, D.C. 20037
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(Address of principal executive offices) (Zip Code)
(202) 452-4200
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(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 7, 1996 was 3,583,330 Class A common
shares, 4,871,649 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 36-WEEKS ENDED SEPTEMBER 7, 1996 and SEPTEMBER 9, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
36 Weeks Ended
-----------------------------
Sept. 7, 1996 Sept. 9, 1995
------------- -------------
<S> <C> <C>
OPERATING REVENUES $ 154,741 $ 150,590
OPERATING EXPENSES:
Editorial, production and distribution 88,979 85,599
Selling 34,710 38,374
Advertising adjustment -- 1,423
General and administrative 23,899 21,834
Profit sharing 525 399
------------- -------------
148,113 147,629
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Operating Profit 6,628 2,961
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NON-OPERATING INCOME (EXPENSE):
Investment Income 4,710 4,549
Other 60 3,118
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Total Non-Operating Income 4,770 7,667
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INCOME BEFORE INCOME TAXES 11,398 10,628
PROVISION FOR INCOME TAXES 3,504 3,204
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NET INCOME $ 7,894 $ 7,424
============= =============
EARNINGS PER SHARE $ .89 $ .85
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,864,429 8,722,415
============= =============
</TABLE>
<PAGE>3
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 12-WEEKS ENDED SEPTEMBER 7, 1996 and SEPTEMBER 9, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
-----------------------------
Sept. 7, 1996 Sept. 9, 1995
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<S> <C> <C>
OPERATING REVENUES $ 51,372 $ 50,595
OPERATING EXPENSES:
Editorial, production and distribution 29,499 28,865
Selling 11,645 13,182
Advertising adjustment -- 475
General and administrative 7,659 7,069
Profit sharing 218 80
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49,021 49,671
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Operating Profit 2,351 924
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NON-OPERATING INCOME (EXPENSE):
Investment Income 1,705 1,628
Other 54 (169)
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Total Non-Operating Income 1,759 1,459
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INCOME BEFORE INCOME TAXES 4,110 2,383
PROVISION FOR INCOME TAXES 1,257 623
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NET INCOME $ 2,853 $ 1,760
============= =============
EARNINGS PER SHARE $ .32 $ .20
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,858,607 8,759,141
============= =============
</TABLE>
<PAGE>4
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 7, 1996 AND DECEMBER 31, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
September 7, December 31,
ASSETS 1996 1995
- ------- ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and Cash Equivalents $ 13,569 $ 17,763
Short-term investments, at fair value 19,324 11,123
Accounts receivable (net of
allowance for doubtful accounts
of $1,451 in 1996 and $1,628 in 1995) 32,484 43,171
Inventories, at lower of average
cost or market 5,668 6,268
Prepaid expenses 3,565 3,378
Deferred selling expenses 22,851 25,226
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Total current assets 97,461 106,929
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MARKETABLE SECURITIES 95,427 85,884
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PROPERTY AND EQUIPMENT-- at cost:
Land 4,250 4,250
Building and improvements 48,937 48,809
Furniture, fixtures and equipment 60,195 59,190
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113,382 112,249
Less--Accumulated depreciation 63,021 58,984
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Net property and equipment 50,361 53,265
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DEFERRED INCOME TAXES 22,066 19,197
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GOODWILL 9,334 9,550
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OTHER ASSETS 3,667 3,927
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Total assets $ 278,316 $ 278,752
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</TABLE>
<PAGE>5
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 7, 1996 AND DECEMBER 31, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
September 7, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1996 1995
- ------------------------------------ ----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 18,351 $ 16,315
Employee compensation and benefits
payable 13,238 16,830
Income taxes payable 1,976 424
Deferred income taxes 3,820 4,788
Deferred subscription revenue 107,361 117,567
Dividends payable 4,428 --
----------- -----------
Total current liabilities 149,174 155,924
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POSTRETIREMENT BENEFITS, less current portion 61,269 52,418
OTHER LIABILITIES 2,924 3,212
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Total liabilities 213,367 211,554
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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 shares 506 506
Additional paid-in capital 30,467 27,695
Retained earnings 43,675 44,665
Treasury stock at cost -- 3,038,270 shares
in 1996 and 3,054,574 shares in 1995 (21,200) (18,782)
Net unrealized gain (loss) on marketable
securities 156 1,756
Foreign currency translation adjustment (61) (48)
----------- -----------
Total stockholders' equity 64,949 67,198
----------- -----------
Total liabilities and stockholders'
equity $ 278,316 $ 278,752
=========== ===========
</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 7, 1996 and SEPTEMBER 9, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
36 Weeks Ended
-----------------------------
Sept. 7, 1996 Sept. 9, 1995
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,894 $ 7,420
Items with different cash requirements
than that reflected in net income --
Deferred subscription revenue (10,166) (10,672)
Depreciation and amortization 6,877 6,964
Accrued postretirement benefits expense 4,960 4,149
Provision for deferred income taxes (2,968) (2,246)
Deferred selling expense 2,375 6,056
(Gain) on sales of securities (393) (571)
(Gain) on sales of businesses and publications (57) (824)
(Gain) loss on sales of fixed assets (3) (2,181)
Others (79) (324)
Changes in operating assets and liabilities --
Accounts receivable 10,865 17,775
Accounts payable and accrued liabilities (4) (4,643)
Inventories 600 (412)
Film production costs (61) (141)
Other assets and liabilities -- net (905) (948)
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Net cash provided from operating activities 18,935 19,402
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures --
Purchase of equipment and furnishings (3,152) (2,380)
Building improvements (128) (417)
Proceeds from sales of businesses
and publications 17 923
Proceeds from sales of property 6 3,361
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Net cash provided by (used for)
capital investment (3,257) 1,487
Securities investments--
Proceeds from sales and maturities 49,846 56,439
Purchases (65,615) (69,174)
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Net cash (used for) securities investments (15,769) (12,735)
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Net cash (used for) investing activities (19,026) (11,248)
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</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 7, 1996 and SEPTEMBER 9, 1995
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
36 Weeks Ended
-----------------------------
Sept. 7, 1996 Sept. 9, 1995
------------- -------------
<S> <C> <C>
CASH FLOWS OF FINANCING ACTIVITIES:
Sales of capital stock to employees $ 3,589 $ 3,850
Purchase of treasury stock (3,235) (1,140)
Dividends paid (4,457) (4,107)
Repayments of borrowings -- (107)
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Net cash (used for) financing activities (4,103) (1,504)
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NET INCREASE (DECREASE)
IN CASH AND CASH EQUIVALENTS (4,194) 6,650
CASH AND CASH EQUIVALENTS, beginning of period 17,763 12,428
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CASH AND CASH EQUIVALENTS, end of period $ 13,569 $ 19,078
============= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 20 $ 36
Income taxes paid 4,712 3,847
</TABLE>
<PAGE>8
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THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 7, 1996
(UNAUDITED)
NOTE 1: General
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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. 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):
September 7, 1996 December 31, 1995
----------------- -----------------
Materials and supplies $3,444 $4,055
Work in process 412 274
Finished goods 1,812 1,939
-------- --------
$5,668 $6,268
======== ========
NOTE 3: Stockholders' Equity
- ------------------------------
Treasury stock as of September 7, 1996 and December 31, 1995,
respectively, consisted of: Class A, 2,895,534 and 2,915,110 shares;
Class B, 55,324 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 $1,423,000 through the third 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
- ---------------------
Thirty-six weeks 1996 compared to thirty-six weeks 1995.
- --------------------------------------------------------
BNA's consolidated revenues of $155 million continue to reflect
modest business growth through the third quarter, increasing 2.8 percent
compared to the same period of last year. Operating profit more than
doubled as operating expenses increased only slightly. Non-operating
income was lower because 1995's results included large gains from asset
sales. BNA's consolidated net income increased 6.3 percent.
Service revenues (subscriptions and online products), which account
for over 89 percent of consolidated revenues, were up 2.8 percent.
Slightly lower renewal rates, federal government budget uncertainties
earlier this year, 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 2.6 percent.
Operating expenses increased 0.3 percent compared to the prior
year. Selling and initial fulfillment expenses decreased significantly
due to lower new sales. Also, last year's expenses included a $1.4
million charge for a change in accounting for advertising costs (as
discussed in Note 4).
<PAGE>10
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On a more comparable basis, excluding the advertising charge in
1995 required by SOP 93-7, operating profit through the third quarter
was 51.2 percent ahead of a year ago.
Non-operating income was $2.9 million less 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 3.5 percent due to larger portfolio balances.
Earnings per share for the first thirty-six weeks of 1996 were $.89
per share compared to $.85 per share for 1995.
Service revenue growth is expected to remain modest 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. Although revenue
growth has been less than planned, operating expenses have been well
managed resulting in the higher profits. We expect full-year operating
profit and net income to be higher in 1996 than in 1995.
Twelve weeks ended September 7, 1996 compared to twelve weeks ended
- -------------------------------------------------------------------
September 9, 1995.
- ------------------
Consolidated revenues increased by 1.5 percent in the latest twelve
weeks of 1996 compared to 1995 and consolidated net income increased 62
percent. Excluding the advertising charge, operating profit increased
68 percent. The revenue and expense factors mentioned above also
affected the second quarter's comparisons.
FINANCIAL POSITION
- ------------------
Cash provided from operating activities of $18.9 million in the
first thirty-six weeks of 1996 was 2.4 percent less than the first
thirty-six weeks of 1995. Operating expenditures decreased 0.1 percent
from 1995. Customer receipts decreased 0.4 percent.
Cash used in investing activities netted to $19 million, reflecting
a $15.8 million addition to the Company's investment portfolio and
capital expenditures of $3.2 million.
The Company received $3.6 million in cash from the sale of Class A
capital stock to employees and repurchased over $3.2 million of Class B
and Class C capital stock. Over $4.4 million was paid out to
stockholders as cash dividends.
With over $128 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
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There were no material legal proceedings during
the first thirty-six 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
-------
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
quarter ended September 7, 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
October 16, 1996 s\ William A. Beltz
- ---------------- -----------------------------------
Date William A. Beltz
Chairman and Chief Executive Officer
October 16, 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
September 7, 1996, 10-Q filing and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1000
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-07-1996
<CASH> 13569
<SECURITIES> 95427
<RECEIVABLES> 33935
<ALLOWANCES> 1451
<INVENTORY> 5668
<CURRENT-ASSETS> 97461
<PP&E> 113382
<DEPRECIATION> 63021
<TOTAL-ASSETS> 278316
<CURRENT-LIABILITIES> 149174
<BONDS> 0
<COMMON> 11912
0
0
<OTHER-SE> 53037
<TOTAL-LIABILITY-AND-EQUITY> 278316
<SALES> 154741
<TOTAL-REVENUES> 154741
<CGS> 88979
<TOTAL-COSTS> 88979
<OTHER-EXPENSES> 59134
<LOSS-PROVISION> 775
<INTEREST-EXPENSE> 20
<INCOME-PRETAX> 11398
<INCOME-TAX> 3504
<INCOME-CONTINUING> 7894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7894
<EPS-PRIMARY> .89
<EPS-DILUTED> .89
</TABLE>
