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 14, 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 June 14, 1997 was 3,505,211 Class A common shares,
4,898,135 Class B common shares, and 406,149 Class C 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 14, 1997 and JUNE 15, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION> 24 Weeks Ended
-------------------------------
June 14, 1997 June 15, 1996
------------- -------------
<S> <C> <C>
OPERATING REVENUES $ 106,612 $ 103,369
------------- -------------
OPERATING EXPENSES:
Editorial, production and distribution 60,648 59,480
Selling 22,630 23,065
General and administrative 15,312 16,240
Profit sharing 752 307
------------- -------------
99,342 99,092
------------- -------------
Operating Profit 7,270 4,277
------------- -------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 3,744 3,005
Other Income (Expense), Net 417 6
------------- -------------
TOTAL NON-OPERATING INCOME 4,161 3,011
------------- -------------
INCOME BEFORE INCOME TAXES 11,431 7,288
PROVISION FOR INCOME TAXES 3,662 2,247
------------- -------------
NET INCOME $ 7,769 $ 5,041
============= =============
EARNINGS PER SHARE $ .88 $ .57
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,832,360 8,865,142
============= =============
</TABLE>
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 12-WEEKS ENDED JUNE 14, 1997 and JUNE 15, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
-------------------------------
June 14, 1997 June 15, 1996
------------- -------------
<S> <C> <C>
OPERATING REVENUES $ 54,376 $ 52,355
------------- -------------
OPERATING EXPENSES:
Editorial, production and distribution 30,674 30,243
Selling 11,663 12,016
General and administrative 7,917 8,385
Profit sharing 344 47
------------- -------------
50,598 50,691
------------- -------------
Operating Profit 3,778 1,664
------------- -------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 2,146 1,405
Other Income (Expense), Net (4) 3
------------- -------------
TOTAL NON-OPERATING INCOME 2,142 1,408
------------- -------------
INCOME BEFORE INCOME TAXES 5,920 3,072
PROVISION FOR INCOME TAXES 1,860 896
------------- -------------
NET INCOME $ 4,060 $ 2,176
============= =============
EARNINGS PER SHARE $ .46 $ .25
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,816,872 8,867,381
============= =============
</TABLE>
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 14, 1997 AND DECEMBER 31, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
June 14, December 31,
ASSETS 1997 1996
------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 16,090 $ 18,898
Short-term investments, at fair value 14,835 9,306
Accounts receivable (net of
allowance for doubtful accounts
of $1,914 in 1997 and $1,658 in 1996) 37,758 45,111
Inventories, at lower of average
cost or market 5,661 5,397
Prepaid expenses 3,636 4,240
Deferred selling expenses 22,916 23,841
------------ ------------
Total current assets 100,896 106,793
------------ ------------
MARKETABLE SECURITIES 104,169 108,020
------------ ------------
PROPERTY AND EQUIPMENT - at cost:
Land 4,250 4,250
Building and improvements 49,153 48,941
Furniture, fixtures and equipment 62,856 60,273
------------ ------------
116,259 113,464
Less-Accumulated depreciation 66,292 63,907
------------ ------------
Net property and equipment 49,967 49,557
------------ ------------
DEFERRED INCOME TAXES 23,342 22,341
------------ ------------
GOODWILL 9,093 9,237
------------ ------------
OTHER ASSETS 2,950 3,363
------------ ------------
Total assets $ 290,417 $ 299,311
============ ============
</TABLE>
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 14, 1997 AND DECEMBER 31, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
June 14, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 12,244 $ 23,501
Employee compensation and benefits
payable 14,537 13,630
Income taxes payable 2,258 197
Deferred income taxes 3,283 3,635
Deferred subscription revenue 115,977 119,821
------------ ------------
Total current liabilities 148,299 160,784
------------ ------------
POSTRETIREMENT BENEFITS, less current portion 65,228 63,487
------------ ------------
OTHER LIABILITIES 2,984 2,915
------------ ------------
Total liabilities 216,511 227,186
------------ ------------
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 33,468 31,772
Retained earnings 53,287 50,369
Treasury stock at cost - 3,091,447 shares
in 1997 and 3,063,876 in 1996 (25,936) (23,178)
Net unrealized gain on marketable securities 1,263 1,348
Foreign currency translation adjustment (88) (98)
------------ ------------
Total stockholders' equity 73,906 72,125
------------ ------------
Total liabilities and stockholders'equity $ 290,417 $ 299,311
============ ============
</TABLE>
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 24-WEEKS ENDED JUNE 14, 1997 and JUNE 15, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
24 Weeks Ended
----------------------------
June 14, 1997 June 15, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 7,769 $ 5,041
Items with different cash requirements
than reflected in net income--
Deferred subscription revenue (3,512) (5,726)
Depreciation and amortization 4,301 4,961
Accrued postretirement benefits expense 2,718 3,306
Provision for deferred income taxes (1,313) (2,103)
Deferred selling expenses 793 1,905
(Gain) on sales of securities (720) (189)
(Gain) loss on sales of fixed assets 3 (3)
(Gain) on sales of businesses and publications (420) --
Others 482 (138)
Changes in operating assets and liabilities--
Accounts receivable 7,175 9,025
Accounts payable and accrued liabilities (3,476) (1,152)
Inventory (268) 439
Film production costs (9) (19)
Other assets and liabilities--net 604 (664)
------------ -----------
Net cash provided from operating activities 14,127 14,683
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures--
Purchase of equipment and furnishings (3,859) (2,212)
Building improvements (115) (91)
Proceeds from sales of businesses and
publications 167 --
Proceeds from sales of property 6 6
------------ ------------
Net cash (used for) capital expenditures (3,801) (2,297)
------------ ------------
Investment portfolio--
Proceeds from sales and maturities 20,064 36,006
Purchases (27,285) (46,147)
------------ ------------
Net cash (used for) investment portfolio (7,221) (10,141)
------------ ------------
Net cash (used for) investing activities (11,022) (12,438)
------------ ------------
</TABLE>
<PAGE>7
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 24-WEEKS ENDED JUNE 14, 1997 and JUNE 15, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
24 Weeks Ended
----------------------------
June 14, 1997 June 15, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock to employees $ 2,271 $ 2,596
Purchase of treasury stock (3,333) (2,964)
Dividends paid (4,851) (4,457)
------------ ------------
Net cash (used for) financing activities (5,913) (4,825)
------------ ------------
NET (DECREASE) IN CASH AND CASH EQUIVALENTS (2,808) (2,580)
CASH AND CASH EQUIVALENTS, beginning of period 18,898 17,763
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 16,090 $ 15,183
============ ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 17 $ 10
Income taxes paid 3,206 2,737
</TABLE>
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THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 14, 1997
(Unaudited)
NOTE 1: General
- ----------------
The information in this report has not been audited. Results
for the twenty-four 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):
June 14, 1997 December 31, 1996
------------- -----------------
Materials and supplies $3,075 $3,213
Work in process 949 466
Finished goods 1,637 1,718
-------- --------
$5,661 $5,397
======== ========
NOTE 3: Stockholders' Equity
- ------------------------------
Treasury stock as of June 14, 1997 and December 31, 1996
respectively, consisted of: Class A, 2,973,653 and 2,887,760 shares;
Class B, 28,838 and 84,459 shares; and Class C, 100,187 and 91,657
shares.
<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 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
- ---------------------
Twenty-four weeks 1997 compared to twenty-four weeks 1996.
- ----------------------------------------------------------
BNA's 1997 operating profit and net income through the second
quarter are still well above those of 1996. Revenues were up 3.1
percent to $106.6 million, and operating expenses increased only 0.3
percent, leading to a 70 percent increase in operating profit compared
to 1996. Net income increased 54 percent to $7.8 million, and earnings
per share improved to 88 cents, up from 57 cents.
Service revenues (subscriptions and online products) which
accounted for over 86 percent of consolidated revenues, decreased 0.6
percent and related expenses were down 2.3 percent. This comparison was
affected by BNA's fiscal calendar, which had two fewer days in the first
quarter. Subscription-based revenues and some publishing expenses were
lower due to the shorter period. The effect on year-to-date comparisons
will diminish as the year progresses, and will reverse in the fourth
quarter. Second quarter only comparisons are unaffected.
Revenues for CD-ROM and other electronic media products continued
to grow, while print products -- although still the dominant service
revenue source -- declined. Operating expenses of the service
businesses were also down due to lower printing and initial fulfillment
costs, equipment depreciation, and payroll overheads.
Revenues from non-service businesses rose 33.8 percent, with large
increases in the sales of books, software, and The McArdle Printing Co.,
Inc's printing sales to outside customers. Non-service business
operating expenses increased 21.3 percent, reflecting costs associated
with the increased revenues. Collectively, these businesses contributed
$1.9 million to operating profit, up substantially from $403,000 in
1996. Most of this improvement came from the Books division and the
Company's multimedia training subsidiary, BNA Communications.
<PAGE>10
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Non-operating income was higher due to a 24.6 percent increase in
investment income and a $420,000 gain on the sale of a publication in
the first quarter. Investment income increased due to larger portfolio
balances and higher capital gains.
Year-to-date financial results are not indicative of expected full-
year results. Net income is expected to increase, but at a lower rate.
Revenue growth has been modest and may remain so for the near term.
However, costs will continue to be carefully controlled by BNA employee-
shareholders.
Twelve weeks ended June 14, 1997 compared to twelve weeks ended June 15,
- ------------------------------------------------------------------------
1996.
- -----
Consolidated revenues increased by 3.9 percent in the latest twelve
weeks of 1997 compared to 1996, while operating expenses were
essentially unchanged. As a result, operating profit increased 127
percent, and consolidated net income increased 87 percent. The revenue
and expense factors mentioned above also affected the second quarter's
comparisons.
FINANCIAL POSITION
- ------------------
Cash provided from operating activities of $14.1 million in the
first twenty-four weeks of 1997 was 3.8 percent lower than the first
twenty-four weeks of 1996. Operating expenditures increased 4.9 percent
from 1996. Customer receipts increased 3.7 percent.
Cash used in investing activities netted to $11 million, reflecting
a $7.2 million addition to the Company's investment portfolio and
capital expenditures of $3.8 million.
The Company received $2.3 million in cash from the sale of Class A
capital stock to employees and repurchased $3.3 million of Class B and
Class C capital stock. Over $4.8 million was paid out to stockholders
as cash dividends.
With over $135 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 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
-------
See Form 10-Q for the quarter ended March 22,
1997, for the results of the election of
directors held at the annual meeting for
stockholders on April 19, 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 June 14, 1997.
<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 17, 1997 s\ Paul N. Wojcik
______________ ________________________________________________
Date Paul N. Wojcik
President and Chief Executive Officer
July 17, 1997 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 14, 1997, 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-31-1997
<PERIOD-END> JUN-14-1997
<CASH> 16090
<SECURITIES> 14835
<RECEIVABLES> 39672
<ALLOWANCES> 1914
<INVENTORY> 5661
<CURRENT-ASSETS> 100896
<PP&E> 116259
<DEPRECIATION> 66292
<TOTAL-ASSETS> 290417
<CURRENT-LIABILITIES> 148299
<BONDS> 0
<COMMON> 11912
0
0
<OTHER-SE> 61994
<TOTAL-LIABILITY-AND-EQUITY> 290417
<SALES> 106612
<TOTAL-REVENUES> 106612
<CGS> 60648
<TOTAL-COSTS> 60648
<OTHER-EXPENSES> 38694
<LOSS-PROVISION> 350
<INTEREST-EXPENSE> 17
<INCOME-PRETAX> 11431
<INCOME-TAX> 3662
<INCOME-CONTINUING> 7769
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7769
<EPS-PRIMARY> .88
<EPS-DILUTED> .88
</TABLE>
