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 17, 2000
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or
[ ] Transition Report Pursuant to Section 13 of 15(d) of the Securities Exchange
Act of 1934
For the transition period 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 June 17, 2000 was 3,454,408 Class A common shares, 4,134,013 Class
B common shares, and 294,827 Class C common shares.
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 24-WEEKS ENDED JUNE 17, 2000 and JUNE 19, 1999
(Unaudited)
(In Thousands of Dollars)
24 Weeks Ended
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June 17, 2000 June 19, 1999
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OPERATING REVENUES $ 128,601 $ 123,903
OPERATING EXPENSES:
Editorial, production, and distribution 70,221 68,838
Selling 28,159 27,992
General and administrative 20,859 19,315
Profit sharing 788 746
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120,027 116,891
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OPERATING PROFIT 8,574 7,012
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NON-OPERATING INCOME:
Investment Income 4,324 4,094
Interest Expense (513) (394)
Other Income (Expense) (27) 653
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TOTAL NON-OPERATING INCOME 3,784 4,353
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INCOME BEFORE PROVISION FOR INCOME TAXES 12,358 11,365
PROVISION FOR INCOME TAXES 3,893 3,604
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NET INCOME 8,465 7,761
OTHER COMPREHENSIVE INCOME (EXPENSE) 482 (2,152)
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COMPREHENSIVE INCOME $ 8,947 $ 5,609
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EARNINGS PER SHARE $ 1.06 $ .95
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WEIGHTED AVERAGE SHARES OUTSTANDING 7,998,300 8,196,114
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 12-WEEKS ENDED JUNE 17, 2000 and JUNE 19, 1999
(Unaudited)
(In Thousands of Dollars)
12 Weeks Ended
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June 17, 2000 June 19, 1999
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OPERATING REVENUES $ 65,802 $ 62,701
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OPERATING EXPENSES:
Editorial, production, and distribution 35,778 34,908
Selling 14,733 14,421
General and administrative 10,488 9,779
Profit sharing 394 344
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61,393 59,452
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OPERATING PROFIT 4,409 3,249
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NON-OPERATING INCOME:
Investment Income 2,055 2,289
Interest Expense (242) (196)
Other Income (Expense) (27) 654
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TOTAL NON-OPERATING INCOME 1,786 2,747
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INCOME BEFORE PROVISION FOR INCOME TAXES 6,195 5,996
PROVISION FOR INCOME TAXES 1,933 1,888
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NET INCOME 4,262 4,108
OTHER COMPREHENSIVE INCOME (EXPENSE) (101) (1,455)
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COMPREHENSIVE INCOME $ 4,161 $ 2,653
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EARNINGS PER SHARE $ .54 $ .51
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WEIGHTED AVERAGE SHARES OUTSTANDING 7,953,787 8,178,448
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
JUNE 17, 2000 AND DECEMBER 31, 1999
(Unaudited)
(In Thousands of Dollars)
June 17, December 31,
ASSETS 2000 1999
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CURRENT ASSETS:
Cash and cash equivalents $ 11,824 $ 16,200
Short-term investments, at fair value 9,102 4,120
Receivables (net of allowance for
doubtful accounts of $1,415 in 2000
and $1,451 in 1999) 36,735 43,930
Inventories, at lower of average
cost or market 4,892 4,707
Prepaid expenses 3,042 4,372
Deferred selling expenses 20,144 20,668
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Total current assets 85,739 93,997
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MARKETABLE SECURITIES 120,217 121,670
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PROPERTY AND EQUIPMENT - at cost:
Land 4,250 4,250
Building and improvements 49,764 49,695
Furniture, fixtures and equipment 59,767 58,976
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110,781 112,921
Less-Accumulated depreciation 72,947 72,810
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Net property and equipment 37,834 40,111
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DEFERRED INCOME TAXES 27,210 26,548
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GOODWILL 27,384 27,800
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OTHER ASSETS 15,767 12,602
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Total assets $ 314,151 $ 322,728
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
June 17, 2000 AND DECEMBER 31, 1999
(Unaudited)
(In Thousands of Dollars)
June 17, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
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CURRENT LIABILITIES:
Accounts payable $ 15,726 $ 16,820
Employee compensation and
benefits payable 15,800 15,399
Income taxes payable 268 578
Deferred income taxes 1,560 1,774
Deferred subscription revenue 121,921 126,938
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Total current liabilities 155,275 161,509
LONG TERM DEBT 14,000 14,000
POSTRETIREMENT BENEFITS, less current portion 72,042 70,129
OTHER LIABILITIES 4,967 4,887
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Total liabilities 246,284 250,525
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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 46,892 44,421
Retained earnings 82,906 80,107
Treasury stock at cost - 4,028,925 shares
in 2000 and 3,851,207 in 1999 (71,468) (61,380)
Elements of comprehensive income:
Net unrealized (loss) on
marketable securities (2,349) (2,802)
Foreign currency translation adjustment (26) (55)
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Total stockholders' equity 67,867 72,203
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Total liabilities and stockholders' equity $ 314,151 $ 322,728
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 24-WEEKS ENDED JUNE 17, 2000 and JUNE 19, 1999
(Unaudited)
(In Thousands of Dollars)
24 Weeks Ended
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June 17, 2000 June 15, 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 8,465 $ 7,761
Items with different cash requirements
than reflected in net income--
Depreciation and amortization 5,646 4,705
(Gain) on sales of securities (402) (622)
(Gain) loss on sales of assets 31 (653)
Others (110) (373)
Changes in operating assets and liabilities--
Receivables 8,711 11,082
Deferred subscription revenue (6,017) (3,499)
Payables and accrued liabilities (885) (3,904)
Postretirement benefits 1,913 2,848
Deferred income taxes (1,137) (1,704)
Deferred selling expenses 524 476
Inventories (185) 146
Other assets and liabilities--net 1,523 (992)
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Net cash provided from operating activities 18,077 15,271
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures--
Capitalized software (1,884) (3,610)
Purchase of publishing assets (2,255) (2,235)
Purchase of equipment and furnishings (1,094) (937)
Building Improvements (76) (97)
Proceeds from sales of property 36 477
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Net cash used for capital expenditures (5,273) (6,402)
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Securities investments
Proceeds from sales and maturities 13,837 34,180
Purchases (17,734) (18,560)
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Net cash provided from (used for)
securities investments (3,897) 15,620
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Net cash provided from (used for)
investing activities (9,170) 9,218
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CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock to employees 3,476 2,648
Purchases of treasury stock (11,093) (5,380)
Dividends paid (5,666) (5,347)
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Net cash provided from (used for)
financing activities (13,283) (8,079)
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NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (4,376) 16,410
CASH AND CASH EQUIVALENTS, beginning of period 16,200 15,259
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CASH AND CASH EQUIVALENTS, end of period $ 11,824 $ 31,669
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SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid $ 523 $ 386
Income taxes paid 5,251 4,261
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THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 17, 2000
(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 for 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 1999 Annual Report to security holders are
hereby incorporated by reference. Note disclosures which would substantially
duplicate those contained in the 1999 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 17, December 31,
2000 1999
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Materials and supplies $ 3,193 $ 3,178
Work in process 506 313
Finished goods 1,193 1,216
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$ 4,892 $ 4,707
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NOTE 3: Stockholders' Equity
Treasury stock as of June 17, 2000 and December 31, 1999, respectively,
consisted of: Class A, 3,024,456 and 3,005,482 shares; Class B, 792,960 and
636,736 shares; and Class C, 211,509 and 208,989 shares.
NOTE 4: Segment Information
12 Weeks Ended 24 Weeks Ended
6/17/00 6/19/99 6/17/00 6/19/99
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Revenues from External Customers:
Publishing $ 59,770 $ 56,849 $117,922 $113,445
Printing 6,032 5,088 10,679 8,862
All Other -- 764 -- 1,596
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Total $ 65,802 $ 62,701 $128,601 $123,903
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Intersegment Printing Revenues $ 3,397 $ 3,594 $ 7,092 $ 7,119
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NOTE 4: Segment Information, Continued
12 Weeks Ended 24 Weeks Ended
6/17/00 6/19/99 6/17/00 6/19/99
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Operating Profit:
Publishing $ 3,571 $ 2,592 $ 6,977 $ 6,120
Printing 838 827 1,597 1,190
All Other -- (170) -- (298)
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Total $ 4,409 $ 3,249 $ 8,574 $ 7,012
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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 1999 Annual Report to security holders, hereby
incorporated by reference. This interim report is intended to provide an update
of the disclosures contained in the 1999 Annual Report to security holders and,
accordingly, disclosures which would substantially duplicate those contained
therein have been omitted.
FORWARD-LOOKING STATEMENTS
This management discussion contains and incorporates by reference
certain statements that are not statements of historical fact but are
forward-looking statements. The use of such words as "believes" and "expects"
and similar expressions are intended to identify forward-looking statements.
Such statements are subject to certain risks and uncertainties, which could
cause actual results to differ from those projected. Readers are cautioned not
to place undue reliance on these forward-looking statements which speak only as
of the date hereof.
RESULTS OF OPERATIONS
Twenty-four weeks 2000 compared to twenty-four weeks 1999
BNA's financial performance in the first half of 2000 continued to show
business growth and strong profit gains. Revenues, operating profit, net income,
and earnings per share all registered solid increases over last year's
comparable figures.
Consolidated revenues of $128.6 million were up 3.8 percent over the
prior year, reflecting growth in both of BNA's operating segments. Operating
expenses increased just 2.7 percent, resulting in a 22.3 percent increase in
operating profit. Net income rose 9.1 percent to $8.5 million. Earnings per
share were up 11.6 percent due to higher net income and fewer outstanding
shares. Excluding the financial results of BNA Communications, which was sold in
1999, revenues grew 5.1 percent and operating expenses were up 4.4 percent.
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Publishing revenues rose 3.9 percent to $117.9 million. BNA and Tax
Management's combined subscription and online revenues, which constituted 83
percent of total publishing revenues, increased 2.6 percent, reflecting
continued strong growth in tax products and a persistent contraction in
environment and safety products' revenues. IOMA revenues grew over 16 percent
due to new and acquired products. Total revenues of the other publishing units
were up 7.7 percent. Publishing operating expenses increased 3.4 percent.
Operating profit for the Publishing segment increased 14 percent to $7.0
million.
Printing segment total revenues of $17.8 million were up 11.2 percent
over 1999, reflecting a 20.5 percent increase in revenues from external
customers, but a 0.4 percent decline in intersegment revenues. Sales to external
customers have increased due to more business from existing customers and the
addition of new customers. Intersegment revenues are expected to continue to
decline as Publishing segment subscribers migrate from print to electronic
products. Operating expenses were up 9.4 percent, reflecting the higher
revenues. Operating profit increased to $1.6 million compared to $1.2 million
achieved last year.
Non-operating income was $569,000 lower in 2000 due to a gain on the
sale of a publication in the second quarter of 1999, while investment income was
slightly higher than last year. Comprehensive income, which combines net income
with changes in unrealized gains and losses on investment securities, was higher
due to unrealized holding gains in 2000 compared to unrealized holding losses in
1999.
Twelve weeks ended June 17, 2000 compared to twelve weeks ended June 19, 1999.
Consolidated revenues grew 4.9 percent, while operating expenses were
up 3.3 percent. The revenue and expense factors mentioned above also affected
second quarter comparisons. Operating profit increased 35.7 percent, net income
was up 3.7 percent, and earnings per share were up 5.9 percent.
OUTLOOK
Revenue growth continues to be the top priority for generating future
profit growth. Since the last report, BNA and Tax Management have launched HR
Library-Lawyers' Edition on the Web, State Tax Library on the Web, Computer
Technology Law Report, E-Commerce Tax Report, Employment Law Week, and ChemCite.
Active product development efforts are underway at the other publishing
companies as well. McArdle's investments in new equipment have increased
capacity and led to its success in growing sales to external customers.
Significant progress has been made on the three primary systems
projects for this year, as described in the last report. These are ongoing
efforts and a more complete review will be provided in a future report.
The budget for this year projected an increase in earnings per share of
11 percent. After the first two quarters of the year, earnings per share are up
11.6 percent. With better-than-budgeted revenue growth and cost containment
trends, management believes that budgeted earnings can be achieved, and perhaps
exceeded.
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FINANCIAL POSITION
Cash provided from operating activities was $18.1 million in the first
twenty-four weeks of 2000, compared to $15.3 million for the first twenty-four
weeks of 1999. Excluding the results of BNA Communications, customer receipts
increased 2.4 percent and operating expenditures were essentially flat compared
to 1999.
Cash used for investing activities netted to $9.2 million, reflecting a
$3.9 additional investments in securities, $3.0 million in capital expenditures,
and $2.3 million for the purchase of publishing assets.
During the year, the Company received $3.5 million in cash from the
sale of stock to employees and repurchased $11.1 million of stock. Cash
dividends paid out to stockholders amounted to $5.7 million.
With over $141 million in cash and investment portfolios, the financial
position and liquidity of the Company remains very strong. Since subscription
monies are collected in advance, cash flows from operations, along with existing
financial reserves and proceeds from the sales of capital stock, have been
sufficient in past years to meet all operational needs, new product
introductions, debt repayments, most capital expenditures, and, in addition,
provide funds for dividend payments and the repurchase of stock tendered by
shareholders. Should more funding become necessary or desirable in the future,
the Company has substantial borrowing capacity based on its operating cash flows
and real estate equity.
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PART II
Item 1 Legal Proceedings
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There were no material legal proceedings during the first twenty four
weeks of 2000.
Item 2 Change in Securities
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There were no changes in securities.
Item 3 Defaults upon Senior Securities
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There were no defaults upon senior securities.
Item 4 Submission of Matters to a Vote of Securities Holders.
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See Form 10-Q for the quarter ended March 25, 2000 for the results of
voting on the stockholder proposal and the election of directors held
at the annual meeting for stockholders on April 15, 2000.
Item 5 Other Information
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No other information is presented herein.
Item 6 Exhibits and Reports on Form 8-K
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No reports were filed on Form 8-K during the quarter ended June 17,
2000.
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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.
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Registrant
July 27, 2000 s\ Paul N. Wojcik
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Date Paul N. Wojcik
President and Chief Executive Officer
July 27, 2000 s\ George J. Korphage
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Date George J. Korphage
Vice President and Chief Financial Officer
