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 22, 1997
------------------------------------------------
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 22, 1997 was 3,570,415 Class A common shares,
4,837,315 Class B common shares, and 412,996 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 22, 1997 and MARCH 23, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
-------------------------------
March 22, 1997 March 23, 1996
-------------- --------------
<S> <C> <C>
OPERATING REVENUES $ 52,236 $ 51,014
OPERATING EXPENSES:
Editorial, production and distribution 29,974 29,237
Selling 10,967 11,049
General and administrative 7,395 7,855
Profit sharing 408 260
----------- -----------
48,744 48,401
----------- -----------
Operating Profit 3,492 2,613
NON-OPERATING INCOME (EXPENSE):
Investment Income 1,598 1,600
Other Income (Expense), Net 421 3
----------- -----------
TOTAL NON-OPERATING INCOME 2,019 1,603
----------- -----------
INCOME BEFORE INCOME TAXES 5,511 4,216
PROVISION FOR INCOME TAXES 1,802 1,351
----------- -----------
NET INCOME $ 3,709 $ 2,865
=========== ===========
EARNINGS PER SHARE $ .42 $ .32
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 8,844,940 8,874,920
=========== ===========
</TABLE>
<PAGE>3
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 22, 1997 AND DECEMBER 31, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
March 22, December 31,
ASSETS 1997 1996
- ----------------------------------------- ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 21,371 $ 18,898
Short-term investments, at fair value 16,491 9,306
Accounts receivable (net of
allowance for doubtful accounts
of $1,897 in 1997 and $1,658 in 1996) 36,528 45,111
Inventories, at lower of average
cost or market 5,204 5,397
Prepaid expenses 5,138 4,240
Deferred selling expenses 23,291 23,841
----------- -----------
Total current assets 108,023 106,793
----------- -----------
MARKETABLE SECURITIES 107,479 108,020
----------- -----------
PROPERTY AND EQUIPMENT - at cost:
Land 4,250 4,250
Building and improvements 48,952 48,941
Furniture, fixtures and equipment 60,992 60,273
----------- -----------
114,194 113,464
Less-Accumulated depreciation 65,702 63,907
----------- -----------
Net property and equipment 48,492 49,557
----------- -----------
DEFERRED INCOME TAXES 23,274 22,341
----------- -----------
GOODWILL 9,164 9,237
----------- -----------
OTHER ASSETS 3,132 3,363
----------- -----------
Total assets $ 299,564 $ 299,311
=========== ===========
</TABLE>
<PAGE>4
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 22, 1997 AND DECEMBER 31, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
March 22, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- ------------------------------------ ----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 20,081 $ 23,501
Employee compensation and benefits payable 12,560 13,630
Income taxes payable 2,583 197
Deferred income taxes 3,411 3,635
Deferred subscription revenue 118,294 119,821
Dividends payable 4,851 --
----------- -----------
Total current liabilities 161,780 160,784
POSTRETIREMENT BENEFITS, less current portion 65,050 63,487
OTHER LIABILITIES 2,974 2,915
----------- -----------
Total liabilities 229,804 227,186
----------- -----------
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 32,549 31,772
Retained earnings 49,227 50,369
Treasury stock at cost - 3,091,447 shares
in 1997 and 3,063,876 in 1996 (24,696) (23,178)
Net unrealized gain on marketable securities 834 1,348
Foreign currency translation adjustment (66) (98)
----------- -----------
Total stockholders' equity 69,760 72,125
----------- -----------
Total liabilities and stockholders' $ 299,564 $ 299,311
=========== ===========
</TABLE>
<PAGE>5
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 12-WEEKS ENDED MARCH 22, 1997 and MARCH 23, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
-------------------------
March 22, March 23,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 3,709 $ 2,865
Items with different cash requirements
than reflected in net income--
Deferred subscription revenue (1,195) (2,539)
Depreciation and amortization 2,104 2,344
Accrued postretirement benefits expense 2,640 1,820
Provision for deferred income taxes (896) (410)
Deferred selling expenses 418 252
(Gain) on sales of securities (215) (189)
(Gain) on sales of businesses and publications (420) --
Others 340 (227)
Changes in operating assets and liabilities--
Accounts receivable 8,429 11,401
Accounts payable and accrued liabilities (3,096) (3,371)
Inventory 189 713
Other assets and liabilities--net (169) 124
---------- ----------
Net cash provided from operating activities 11,838 12,783
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures--
Purchase of equipment and furnishings (2,300) (1,367)
Building improvements (11) (31)
Proceeds from sales of businesses and publications 160 --
Proceeds from sales of property 6 6
---------- ---------
Net cash (used for) capital expenditures (2,145) (1,392)
---------- ---------
Investment portfolio--
Proceeds from sales and maturities 7,440 26,222
Purchases (13,919) (29,855)
---------- ---------
Net cash (used for) investment portfolio (6,479) (3,633)
---------- ---------
Net cash (used in) investing activities (8,624) (5,025)
---------- ---------
</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 22, 1997 and MARCH 23, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
-------------------------
March 22, March 23,
1997 1996
----------- -----------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock to employees $ 1,035 $ 1,481
Purchase of treasury stock (1,776) (105)
----------- -----------
Net cash provided from (used in) financing activities (741) 1,376
----------- -----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 2,473 9,134
CASH AND CASH EQUIVALENTS, beginning of period 18,898 17,763
----------- -----------
CASH AND CASH EQUIVALENTS, end of period $ 21,371 $ 26,897
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 7 $ 1
Income taxes paid 230 715
</TABLE>
<PAGE>7
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THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 22, 1997
(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.
Notes contained in the 1996 Annual Report to security holders are
hereby incorporated by reference. Note disclosures which would
substantially duplicate those contained in the 1996 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 22, 1997 December 31, 1996
-------------- -----------------
Materials and supplies $ 3,057 $ 3,213
Work in process 487 466
Finished goods 1,660 1,718
---------- ----------
$ 5,204 $ 5,397
========== ==========
NOTE 3: Stockholders' Equity
- ------- --------------------
Treasury stock as of March 22, 1997 and December 31, 1996,
respectively, consisted of: Class A, 2,908,449 and 2,887,760 shares;
Class B, 89,658 and 84,459 shares; and Class C, 93,340 and 91,657
shares.
NOTE 4: Earnings per Share
- ------- ------------------
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standard (SFAS) No. 128,"Earnings per
Share." The statement, which further defines the method in which
earnings per share are computed, will not change the Company's
computation of earnings per share.
<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 1996 Annual Report to security holders,
hereby incorporated by reference. This interim report is intended to
provide an update of the disclosures contained in the 1996 Annual Report
to security holders and, accordingly, disclosures which would
substantially duplicate those contained therein have been omitted.
RESULTS OF OPERATIONS
- -----------------------
Twelve weeks 1997 compared to twelve weeks 1996
- -----------------------------------------------
Revenues of $52.2 million in the twelve weeks ended March 22,1997
were up 2.4 percent from revenues recorded for the first twelve weeks of
1996. First quarter operating expenses were up only 0.7 percent, non-
operating income increased 26 percent, and net income increased 29.5
percent.
Revenues and operating expenses of the service businesses
(subscription-based products and online products) were both reported to
be down 1.1 percent. However, comparisons with the prior year's quarter
were affected by the fiscal calendar, which had two fewer days in 1997
than in 1996. Subscription-based revenues, salaries, and some
publishing expenses were less due to the shorter quarter. The short-
quarter effect on year-to-year comparability will diminish as the year
progresses, and will reverse in the fourth quarter.
Service revenues amounted to 85.9 percent of total revenue.
Revenues for CD-ROM and other electronic media products continued to
grow, while print product revenues -- although still the dominant
service revenue source -- declined. Operating expenses of the service
businesses were also down due to lower equipment depreciation, office
rentals, and payroll overheads. Selling expenses were essentially
unchanged, reflecting flat new sales.
<PAGE>9
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Revenues from non-service businesses rose 30.2 percent, with large
increases in the sales of books, software, and The McArdle Printing Co.,
Inc.'s printing sales to outside customers. The Company's Book
division, in particular, had an outstanding quarter. Non-service
business operating expenses increased 15.4 percent, reflecting costs
associated with the increased revenues. Collectively, these businesses
contributed $1.1 million to BNA's first quarter operating profit, up
from $248,000 in 1996. Most of this improvement came from the Books
division and the Company's multimedia training subsidiary, BNA
Communications.
Non-operating income included a $420,000 gain on the sale of a
publication. Investment income was essentially unchanged, at $1.6
million.
Earnings per share for the first twelve weeks of 1997 were $.42 per
share compared to $.32 per share for 1996.
First quarter net income growth of nearly 30 percent is not
indicative of expected full-year results. Net income is expected to
increase, but not at that rate.
FINANCIAL POSITION
- ------------------
Cash provided from operating activities was $11.8 million in the
first twelve weeks of 1997, compared to $12.8 million for the first
twelve weeks of 1996. Operating expenditures increased 0.4 percent from
1996 and customer receipts decreased 1.3 percent, primarily due to fewer
days.
Cash used in investing activities netted to $8.6 million,
reflecting a $6.5 million increase in the Company's investment portfolio
and net capital expenditures of $2.1 million.
The Company spent $741,000 more to repurchase capital stock than it
received from sales of Class A capital stock to employees.
With over $145 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 1997
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 19, 1997. 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, 1997.
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 22, 1997.
<PAGE>11
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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
May 2, 1997 s/ Paul N. Wojcik
- ------------ -----------------------
Date Paul N. Wojcik
President and Chief Executive Officer
May 2, 1997 s/ George J. Korphage
- ------------ ------------------------
Date George J. Korphage
Vice President and Chief Financial Officer
<PAGE>12
April 23, 1997
Dear BNA Stockholder:
At the annual meeting of the stockholders held April 19, 1997, the
following individuals were elected as members of the Corporation's Board
of Directors for the ensuing year: William A. Beltz, Jacqueline M.
Blanchard, Christopher R. Curtis, Sandra C. Degler, Kathleen D. Gill,
Jack Jenc, Eileen Z. Joseph, George J. Korphage, Gregory C. McCaffery,
Frederick A. Schenck, Pat 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 22, 1997, there
were 3,570,415 shares of Class A common stock outstanding. The total
number of shares voted was 2,969,987.
Stockholder Candidates
----------------------
Name Shares Voted For
-------------- -----------------
Paul N. Wojcik 1,909,527
Sandra C. Degler 1,813,105
George J. Korphage 1,803,877
William A. Beltz 1,758,827
Pat Swords 1,500,426
Kathleen D. Gill 1,477,675
Jacqueline M. Blanchard 1,405,956
Jack Jenc 1,396,718
Robert L. Velte 1,186,108
Christopher R. Curtis 1,184,739
Gregory C. McCaffery 1,149,352
Eileen Z. Joseph 1,141,750
Cynthia J. Bolbach 1,137,498
G. Christopher Cosby 1,083,064
Jane F. Sanchez 933,561
Cary M. Greenberg 792,624
Jack Boylan 775,450
Kenneth May 739,428
Nonstockholder Candidates
-------------------------
Loene Trubkin 1,520,265
Frederick A. Schenck 1,336,730
Daniel W. Toohey 1,321,130
<PAGE>13
As is his custom at each annual meeting of stockholders, Mr.
William A. Beltz, Chairman of the Board 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 ZS Fund, which is a
diversified company headquartered in New York. 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. In addition, Mr. Beltz
received an inquiry from Haights Cross Communications expressing an
interest in acquiring Tax Management Inc. Mr. Beltz replied that the
subsidiary was 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; Paul N. Wojcik, President and
Chief Executive Officer; Sandra C. Degler, Vice Chairman of the Board;
Jacqueline M. Blanchard, Vice President for Human Resources; John P.
Boylan, Jr., Vice President for Operations; Eunice L. Bumgardner, Vice
President and General Counsel; Kathleen D. Gill, Vice President and
Editor in Chief; George J. Korphage, Vice President for Accounting and
Finance and Chief Financial Officer; Pat Swords, Vice President and
Direcotr of Sales and Marketing; Robert L. Velte, Vice President for
Strategic Development; Cynthia J. Bolbach, Corporate Secretary; David A.
Froemming, Assistant Corporate Secretary; Jack Jenc, Treasurer; and
Gilbert S. Lavine, Assistant Treasurer.
The following directors were elceted 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, William A. Beltz,
Sandra C. Degler, Eileen Z. Joseph, 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.
<PAGE>14
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.
Chair, Jacqueline M. Blanchard, and Kathleen D. Gill.
COMMITTEE ON MANAGEMETN DEVELOPMENT AND SUCCESSION. Daniel W.
Toohey, Chair, William A. Beltz, Jacqueline M. Blanchard,
Frederick A. Schenck, Daniel W. Toohey, and Loene Trubkin.
The Board also adopted the following resolution reaffirming the
commitment to employee ownership:
RESOLVED, That the Board of Direcotrs 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 Direcotrs for appropriate consideration and response in
light of that corporate objective.
Finally, any stockholder proposal intended to be presented at the
1998 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 26, 1997.
Cordially,
s\ Cynthia J. Bolbach
----------------------
Cynthia J. Bolbach
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the March
22, 1997 10-A filing and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-22-1997
<CASH> 21371
<SECURITIES> 16491
<RECEIVABLES> 38425
<ALLOWANCES> 1897
<INVENTORY> 5204
<CURRENT-ASSETS> 108023
<PP&E> 114194
<DEPRECIATION> 65702
<TOTAL-ASSETS> 299564
<CURRENT-LIABILITIES> 161780
<BONDS> 0
<COMMON> 11912
0
0
<OTHER-SE> 57848
<TOTAL-LIABILITY-AND-EQUITY> 299564
<SALES> 52236
<TOTAL-REVENUES> 52236
<CGS> 29974
<TOTAL-COSTS> 29974
<OTHER-EXPENSES> 18770
<LOSS-PROVISION> 161
<INTEREST-EXPENSE> 7
<INCOME-PRETAX> 5511
<INCOME-TAX> 1802
<INCOME-CONTINUING> 3709
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3709
<EPS-PRIMARY> .42
<EPS-DILUTED> .42
</TABLE>
