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 6, 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 September 6, 1997 was 3,524,572 Class A common
shares, 4,912,035 Class B common shares, and 403,913 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 6, 1997 and SEPTEMBER 7, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
36 Weeks Ended
-------------------------------
Sept. 6, 1997 Sept. 7, 1996
------------- -------------
<S> <C> <C>
OPERATING REVENUES $ 160,443 $ 154,741
------------- -------------
OPERATING EXPENSES:
Editorial, production and distribution 90,159 88,979
Selling 34,391 34,710
General and administrative 25,010 23,899
Profit sharing 999 525
------------- -------------
150,559 148,113
------------- -------------
OPERATING PROFIT 9,884 6,628
------------- -------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 5,511 4,710
Other Income (Expense), Net 417 60
------------- -------------
TOTAL NON-OPERATING INCOME 5,928 4,770
------------- -------------
INCOME BEFORE INCOME TAXES 15,812 11,398
PROVISION FOR INCOME TAXES 4,913 3,504
------------- -------------
NET INCOME $ 10,899 $ 7,894
============= =============
EARNINGS PER SHARE $ 1.23 $ .89
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,831,031 8,864,429
============= =============
</TABLE>
<PAGE>3
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 36-WEEKS ENDED SEPTEMBER 6, 1997 and SEPTEMBER 7, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
12 Weeks Ended
-------------------------------
Sept. 6, 1997 Sept. 7, 1996
------------- -------------
<S> <C> <C>
OPERATING REVENUES $ 53,831 $ 51,372
------------- -------------
OPERATING EXPENSES:
Editorial, production and distribution 29,511 29,499
Selling 11,761 11,645
General and administrative 9,698 7,659
Profit sharing 247 218
------------- -------------
51,217 49,021
------------- -------------
OPERATING PROFIT 2,614 2,351
------------- -------------
NON-OPERATING INCOME (EXPENSE):
Investment Income 1,767 1,705
Other Income (Expense), Net ---- 54
------------- -------------
TOTAL NON-OPERATING INCOME 1,767 1,759
------------- -------------
INCOME BEFORE INCOME TAXES 4,381 4,110
PROVISION FOR INCOME TAXES 1,251 1,257
------------- -------------
NET INCOME $ 3,130 $ 2,853
============= =============
EARNINGS PER SHARE $ .35 $ .32
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,823,320 8,858,607
============= =============
</TABLE>
<PAGE>4
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 6, 1997 AND DECEMBER 31, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
September 6, December 31,
ASSETS 1997 1996
- ----------------------------------------- ------------ ------------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 24,606 $ 18,898
Short-term investments, at fair value 15,806 9,306
Accounts receivable (net of
allowance for doubtful accounts
of $1,782 in 1997 and $1,658 in 1996) 33,661 45,111
Inventories, at lower of average
cost or market 5,911 5,397
Prepaid expenses 2,814 4,240
Deferred selling expenses 22,732 23,841
------------ ------------
Total current assets 105,530 106,793
------------ ------------
MARKETABLE SECURITIES 103,234 108,020
------------ ------------
PROPERTY AND EQUIPMENT - at cost:
Land 4,250 4,250
Building and improvements 49,164 48,941
Furniture, fixtures and equipment 62,977 60,273
------------ ------------
116,391 113,464
Less-Accumulated depreciation 67,205 63,907
------------ ------------
Net property and equipment 49,186 49,557
------------ ------------
DEFERRED INCOME TAXES 23,638 22,341
------------ ------------
GOODWILL 9,021 9,237
------------ ------------
OTHER ASSETS 3,176 3,363
------------ ------------
Total assets $ 293,785 $ 299,311
============ ============
</TABLE>
<PAGE>5
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<TABLE>
THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 6, 1997 AND DECEMBER 31, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
September 6, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996
- --------------------------------------- ------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 12,860 $ 23,501
Employee compensation and benefits
payable 14,910 13,630
Income taxes payable 2,285 197
Deferred income taxes 3,208 3,635
Deferred subscription revenue 112,577 119,821
Dividends payable 4,836 ----
------------ ------------
Total current liabilities 150,676 160,784
------------ ------------
POSTRETIREMENT BENEFITS, less current portion 66,633 63,487
------------ ------------
OTHER LIABILITIES 3,028 2,915
------------ ------------
Total liabilities 220,337 227,186
------------ ------------
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 34,230 31,772
Retained earnings 51,581 50,369
Treasury stock at cost - 3,071,653 shares
in 1997 and 3,063,876 in 1996 (25,814) (23,178)
Net unrealized gain on marketable securities 1,632 1,348
Foreign currency translation adjustment (93) (98)
------------ ------------
Total stockholders' equity 73,448 72,125
------------ ------------
Total liabilities and stockholders' equity $ 293,785 $ 299,311
============ ============
</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 6, 1997 and SEPTEMBER 7, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
36 Weeks Ended
-----------------------------
Sept. 6, 1997 Sept. 7, 1996
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 10,899 $ 7,894
Items with different cash requirements
than reflected in net income--
Deferred subscription revenue (6,912) (10,166)
Depreciation and amortization 6,425 6,877
Accrued postretirement benefits expense 4,123 4,960
Provision for deferred income taxes (1,880) (2,968)
Deferred selling expenses 977 2,375
(Gain) on sales of securities (857) (393)
(Gain) on sales of businesses and publications (420) (57)
(Gain) loss on sales of fixed assets 3 (3)
Others 297 (79)
Changes in operating assets and liabilities--
Accounts receivable 11,393 10,865
Accounts payable and accrued liabilities (1,591) (4)
Inventory (518) 600
Film production costs (85) (61)
Other assets and liabilities--net 1,104 (905)
--------- ---------
Net cash provided from operating activities 22,958 18,935
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures--
Purchase of equipment and furnishings (4,455) (3,152)
Building improvements (223) (128)
Proceeds from sales of businesses & publications 178 17
Proceeds from sales of property 7 6
--------- ---------
Net cash (used for) capital expenditures (4,493) (3,257)
--------- ---------
Investment portfolio--
Proceeds from sales and maturities 38,099 49,846
Purchases (45,895) (65,615)
--------- ---------
Net cash (used for) investment portfolio (7,796) (15,769)
--------- ---------
Net cash (used for) investing activities (12,289) (19,026)
--------- ---------
</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 6, 1997 and SEPTEMBER 7, 1996
(Unaudited)
(In Thousands of Dollars)
<CAPTION>
36 Weeks Ended
-----------------------------
Sept. 6, 1997 Sept. 7, 1996
-----------------------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock to employees $ 3,324 $ 3,589
Purchase of treasury stock (3,434) (3,235)
Dividends paid (4,851) (4,457)
---------- ----------
Net cash (used for) financing activities (4,961) (4,103)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 5,708 (4,194)
---------- ----------
CASH AND CASH EQUIVALENTS, beginning of period 18,898 17,763
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $ 24,606 $ 13,569
========== ==========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid $ 51 $ 20
Income taxes paid 5,042 4,712
</TABLE>
<PAGE>8
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THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 6, 1997
(UNAUDITED)
NOTE 1: General
- ----------------
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.
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):
September 6, 1997 December 31, 1996
----------------- -----------------
Materials and supplies $3,464 $3,213
Work in process 878 466
Finished goods 1,569 1,718
-------- --------
$5,911 $5,397
======== ========
NOTE 3: Stockholders' Equity
- ------------------------------
Treasury stock as of September 6, 1997 and December 31, 1996,
respectively, consisted of: Class A, 2,954,292 and 2,887,760 shares;
Class B, 14,938 and 84,459 shares; and Class C, 102,423 and 91,657
shares.
<PAGE>9
-9-
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
- ---------------------
Thirty-six weeks 1997 compared to thirty-six weeks 1996.
- --------------------------------------------------------
BNA's 1997 operating profit and net income through the third
quarter are still well above those of 1996. Operating profit increased
49.1 percent due to a 3.7 percent increase in revenues and only a 1.7
percent increase in operating expenses. Net income increased 38.1
percent to $10.9 million, and earnings per share improved to $1.23, up
from 89 cents in 1996.
Service revenues (subscriptions and online products) which account
for over 86 percent of total revenues, increased 0.4 percent and related
expenses were down 0.7 percent. This comparison was affected by BNA's
fiscal 1997 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 comparability will reverse in the
fourth quarter. Third 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 fulfillment costs, equipment depreciation, payroll overheads, and
selling expenses. General and administrative expenses, however,
increased 3.5 percent, primarily due to the termination of an
information system development project. The Company had contracted with
an outside vendor to develop a new business system. During the third
quarter, it was determined that a satisfactory system could not be
developed within a reasonable time frame, and $1.2 million of
capitalized software development costs were written off to expense. The
Company has decided to manage the necessary system upgrading in-house.
Operating profit for the service businesses increased 21.5 percent.
<PAGE>10
-10-
Revenues from the non-service businesses rose 31.8 percent, with
sharp increases from the Books and Software divisions, and a 15.1
percent increase in printing sales to outside customers. Software
revenues benefited from sales of new estate tax, gift tax, and sales
and use tax products. Books revenues increased due to strong sales of
higher-priced renewable legal treatise titles. Non-service business
operating expenses increased 20.5 percent, reflecting costs associated
with the increased revenues. Collectively, the non-service businesses
contributed $1.6 million to operating profit, compared to a $193,000
loss in 1996.
Non-operating income was $1.2 million higher due to a 17 percent
increase in investment income and a $420,000 gain on the sale of a
publication in the first quarter.
Service revenue growth continues to be disappointing but is begin-
ning to show signs of improvement. The Company will continue to develop
new products to generate future revenue growth. During the third
quarter, one new CD product was launched, and more products will be
released before year-end.
Twelve weeks ended September 6, 1997 compared to twelve weeks ended
- -------------------------------------------------------------------
September 7, 1996.
- ------------------
Consolidated revenues increased 4.8 percent and operating profit
increased 11.2 percent. Net income increased by 9.7 percent. The
revenue and expense factors mentioned above also affected the third
quarter's comparison. The software write-off substantially reduced what
would have been a substantial improvement in third quarter profits.
FINANCIAL POSITION
- ------------------
Cash provided from operating activities was $23.0 million in the
first thirty-six weeks of 1997, compared to $18.9 million for the first
thirty-six weeks of 1996. Operating expenditures increased 3.2 percent
from 1996 and customer receipts increased 5.4 percent.
Cash used in investing activities was to $12.3 million, reflecting
a $7.8 million increase in the Company's investment portfolio and net
capital expenditures of $4.5 million.
The Company received $3.3 million in cash from the sale of Class A
capital stock to employees and repurchased $3.4 million of Class B and
Class C capital stock. Over $4.8 million was paid out to stockholders
as cash dividends.
With over $143 million in cash and investment portfolios, the
financial position and liquidity of the Company remains very strong.
<PAGE>11
-11-
PART II
-------
Item 1 Legal Proceedings
- ------ -----------------
There were no material legal proceedings during
the first thirty-six 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
- ------ -----------------------------------------------------
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 6, 1997.
<PAGE>12
-12-
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
10/15/97 s\ Paul N. Wojcik
- ----------- -------------------------------------------
Date Paul N. Wojcik
President and Chief Executive Officer
10/15/97 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 6, 1997, 10-Q filing and is qualified in its entirety by
reference to such financial statments.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-06-1997
<CASH> 24606
<SECURITIES> 15806
<RECEIVABLES> 35443
<ALLOWANCES> 1782
<INVENTORY> 5911
<CURRENT-ASSETS> 105530
<PP&E> 116391
<DEPRECIATION> 67205
<TOTAL-ASSETS> 293785
<CURRENT-LIABILITIES> 150676
<BONDS> 0
<COMMON> 11912
0
0
<OTHER-SE> 61536
<TOTAL-LIABILITY-AND-EQUITY> 293785
<SALES> 160443
<TOTAL-REVENUES> 160443
<CGS> 90159
<TOTAL-COSTS> 90159
<OTHER-EXPENSES> 60400
<LOSS-PROVISION> 665
<INTEREST-EXPENSE> 51
<INCOME-PRETAX> 15812
<INCOME-TAX> 4913
<INCOME-CONTINUING> 10899
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10899
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>
