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 9, 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
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The number of shares outstanding of each of the issuer's classes of common
stock, as of September 9, 2000 was 3,466,254 Class A common shares, 4,124,808
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 36-WEEKS ENDED SEPTEMBER 9, 2000 and SEPTEMBER 11, 1999
(Unaudited)
(In Thousands of Dollars)
36 Weeks Ended
-----------------------------
September 9, September 11,
2000 1999
----------------------------
OPERATING REVENUES ............................. $ 192,199 $ 186,775
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OPERATING EXPENSES:
Editorial, production, and distribution ..... 104,179 102,658
Selling ..................................... 42,496 41,423
General and administrative .................. 31,439 29,391
Profit sharing .............................. 1,163 1,184
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179,277 174,656
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OPERATING PROFIT ........................ 12,922 12,119
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NON-OPERATING INCOME:
Investment Income ........................... 6,619 6,460
Interest Expense ............................ (779) (592)
Other Expense ............................... (35) 305
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TOTAL NON-OPERATING INCOME ..................... 5,805 6,173
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INCOME BEFORE PROVISION FOR INCOME TAXES ....... 18,727 18,292
PROVISION FOR INCOME TAXES ..................... 5,862 5,865
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NET INCOME ..................................... 12,865 12,427
OTHER COMPREHENSIVE INCOME (EXPENSE) ........... 1,666 (3,525)
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COMPREHENSIVE INCOME ........................... $ 14,531 $ 8,902
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EARNINGS PER SHARE ............................. $ 1.62 $ 1.52
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WEIGHTED AVERAGE SHARES OUTSTANDING ............ 7,962,991 8,182,657
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 12-WEEKS ENDED SEPTEMBR 9, 2000 and SEPTEMBER 11, 1999
(Unaudited)
(In Thousands of Dollars)
12 Weeks Ended
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September 9, September 11,
2000 1999
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OPERATING REVENUES ............................. $ 63,598 $ 62,872
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OPERATING EXPENSES:
Editorial, production, and distribution ..... 33,958 33,820
Selling ..................................... 14,337 13,431
General and administrative .................. 10,580 10,076
Profit sharing .............................. 375 438
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59,250 57,765
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OPERATING PROFIT ........................ 4,348 5,107
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NON-OPERATING INCOME:
Investment Income ........................... 2,295 2,366
Interest Expense ............................ (266) (198)
Other Income (Expense) ...................... (8) (348)
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TOTAL NON-OPERATING INCOME ..................... 2,021 1,820
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INCOME BEFORE PROVISION FOR INCOME TAXES ....... 6,369 6,927
PROVISION FOR INCOME TAXES ..................... 1,969 2,261
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NET INCOME ..................................... 4,400 4,666
OTHER COMPREHENSIVE INCOME (EXPENSE) ........... 1,184 (1,373)
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COMPREHENSIVE INCOME ........................... $ 5,584 $ 3,293
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EARNINGS PER SHARE ............................. $ .56 $ .57
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WEIGHTED AVERAGE SHARES OUTSTANDING ............ 7,881,264 8,151,979
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 9, 2000 AND DECEMBER 31, 1999
(Unaudited)
(In Thousands of Dollars)
September 9, December 31,
ASSETS 2000 1999
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CURRENT ASSETS:
Cash and cash equivalents $ 24,188 $ 16,200
Short-term investments, at fair value 10,508 4,120
Receivables (net of allowance for
doubtful accounts of $1,384 in 2000
and $1,451 in 1999) 31,006 43,930
Inventories, at lower of average
cost or market 4,922 4,707
Prepaid expenses 2,947 4,372
Deferred selling expenses 19,931 20,668
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Total current assets 93,502 93,997
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MARKETABLE SECURITIES 121,875 121,670
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PROPERTY AND EQUIPMENT - at cost:
Land 4,250 4,250
Building and improvements 49,997 49,695
Furniture, fixtures and equipment 57,095 58,976
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111,342 112,921
Less-Accumulated depreciation 74,283 72,810
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Net property and equipment 37,059 40,111
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DEFERRED INCOME TAXES 27,078 26,548
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GOODWILL 27,175 27,800
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OTHER ASSETS 15,729 12,602
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Total assets $ 322,418 $ 322,728
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 9, 2000 AND DECEMBER 31, 1999
(Unaudited)
(In Thousands of Dollars)
September 9, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
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CURRENT LIABILITIES:
Accounts payable $ 15,090 $ 16,820
Dividends payable 5,520 ---
Employee compensation and
benefits payable 16,124 15,399
Income taxes payable 2,594 578
Deferred income taxes 1,464 1,774
Deferred subscription revenue 121,352 126,938
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Total current liabilities 162,144 161,509
LONG TERM DEBT 14,000 14,000
POSTRETIREMENT BENEFITS, less current portion 73,213 70,129
OTHER LIABILITIES 5,018 4,887
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Total liabilities 254,375 250,525
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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 47,536 44,421
Retained earnings 81,786 80,107
Treasury stock at cost - 4,026,284 shares
in 2000 and 3,851,207 in 1999 (72,000) (61,380)
Elements of comprehensive income:
Net unrealized (loss) on marketable securities (1,166) (2,802)
Foreign currency translation adjustment (25) (55)
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Total stockholders' equity 68,043 72,203
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Total liabilities and stockholders' equity $ 322,418 $ 322,728
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 36-WEEKS ENDED SEPTEMBER 9, 2000 and SEPTEMBER 11, 1999
(Unaudited)
(In Thousands of Dollars)
36 Weeks Ended
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September 9, September 11,
2000 1999
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income .............................................$ 12,865 $ 12,427
Items with different cash requirements
than reflected in net income--
Depreciation and amortization ........................ 8,488 7,405
(Gain) on sales of securities ........................ (744) (1,068)
(Gain) loss on sales of assets ....................... 39 (305)
Others ............................................... (180) (431)
Changes in operating assets and liabilities--
Receivables .......................................... 12,991 10,571
Deferred subscription revenue ........................ (6,586) (2,996)
Payables and accrued liabilities ..................... 1,174 447
Postretirement benefits .............................. 3,084 4,085
Deferred income taxes ................................ (1,751) (2,150)
Deferred selling expenses ............................ 737 741
Inventories .......................................... (215) 63
Other assets and liabilities--net .................... 1,560 (1,185)
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Net cash provided from operating activities ............ 31,462 27,604
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CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures--
Capitalized software ................................. (2,815) (4,492)
Purchase of publishing assets ........................ (2,255) (2,235)
Purchase of equipment and furnishings ................ (1,744) (1,664)
Building Improvements ................................ (309) (283)
Proceeds from sales of property ...................... 39 1,018
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Net cash used for capital expenditures ................. (7,084) (7,656)
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Securities investments
Proceeds from sales and maturities ................... 39,223 42,292
Purchases ............................................ (42,442) (27,737)
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Net cash provided from (used for) securities investments (3,219) 14,555
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Net cash provided from (used for) investing activities . (10,303) 6,899
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CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock to employees ................... 4,389 3,528
Purchases of treasury stock .......................... (11,894) (6,508)
Dividends paid ....................................... (5,666) (5,347)
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Net cash provided from (used for) financing activities . (13,171) (8,327)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ... 7,988 26,176
CASH AND CASH EQUIVALENTS, beginning of period ......... 16,200 15,259
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CASH AND CASH EQUIVALENTS, end of period ...............$ 24,188 $ 41,435
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SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid ........................................$ 837 $ 530
Income taxes paid .................................... 5,444 4,442
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THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER JUNE 17, 2000
(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 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
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Inventories consisted of the following (in thousands):
September 9, December 31,
2000 1999
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Materials and supplies $ 3,244 $ 3,178
Work in process 558 313
Finished goods 1,120 1,216
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Total $ 4,922 $ 4,707
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NOTE 3: Stockholders' Equity
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Treasury stock as of September 9, 2000 and December 31, 1999,
respectively, consisted of: Class A, 3,012,610 and 3,005,482 shares; Class B,
802,165 and 636,736 shares; and Class C, 211,509 and 208,989 shares.
NOTE 4: Segment Information
----------------------------- 12 Weeks Ended 36 Weeks Ended
9/9/00 9/11/99 9/9/00 9/11/99
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Revenues from External Customers:
Publishing $59,047 $58,262 $176,969 $171,707
Printing 4,551 3,944 15,230 12,806
All Other --- 666 --- 2,262
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Total $63,598 $62,872 $192,199 $186,775
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Intersegment Printing Revenues $ 3,327 $ 3,348 $ 10,419 $ 10,467
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-8-
NOTE 4: Segment Information, Continued
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12 Weeks Ended 36 Weeks Ended
9/9/00 9/11/99 9/9/00 9/11/99
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Operating Profit:
Publishing $ 3,819 $ 4,531 $10,796 $10,651
Printing 529 476 2,126 1,666
All Other --- 100 --- (198)
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Total $ 4,348 $ 5,107 $12,922 $12,119
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PART I
Item 2. Management's Discussion and Analysis of Results of Operations and
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Financial Position
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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
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Thirty-six weeks 2000 compared to thirty-six weeks 1999
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BNA's financial performance through the third quarter of 2000 continued to
show business growth and profit gains. Revenues, operating profit, net income,
and earnings per share were all higher than last year despite a timing
difference that temporarily reduced revenue and profit growth comparisons.
Consolidated revenues of $192.2 million were up 2.9 percent over the prior
year, reflecting growth in both of BNA's major operating segments. Operating
expenses increased 2.6 percent, resulting in a 6.6 percent increase in operating
profit. Net income was $12.9 million, a 3.5 percent increase compared to 1999.
Earnings per share were up 6.6 percent, to $1.62, reflecting higher net income
and fewer outstanding shares. Excluding the financial results of BNA
Communications, which was sold in 1999, revenues grew 4.2 percent and operating
expenses were up 4.1 percent.
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Publishing revenues were up 3.1 percent over the same period of 1999. BNA
and Tax Management's combined subscription and online revenues increased 2.4
percent, reflecting continued strong growth in Tax Management revenues and a
persistent contraction in environment and safety division revenues. BNA
International and IOMA both grew revenues over 15 percent due to new and
acquired products. Software revenues, which are recognized when the products are
shipped, were down $1.1 million. A portion of BNA Software's revenues were
earned earlier last year because certain updated programs were shipped in the
third quarter of 1999; this year, they will be shipped in the fourth quarter. By
year-end, revenues for this division are expected to exceed those of last year.
Publishing operating expenses were up 3.2 percent. Operating profit for the
Publishing segment increased only 1.4 percent, primarily due to the temporarily
lower software revenue.
Printing segment total revenues were up 10.2 percent over 1999, reflecting
an 18.9 percent increase in revenues from external customers, and a 0.5 percent
decline in intersegment revenues. Sales to external customers have increased due
to more business from existing customers and to 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 8.9 percent, including higher selling expenses related to increased external
sales. Operating profit increased to $2.1 million compared to $1.7 million
achieved last year.
Non-operating income was $368,000 lower this year due to a gain last year
from the sale of a publication. Higher investment income was offset by higher
interest expense. 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 September 9, 2000 compared to twelve weeks ended September
--------------------------------------------------------------------------------
11,1999
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The Software revenue timing difference described earlier had a
particularly significant impact on third quarter only results. Consolidated
revenues were up 1.2 percent, while operating expenses increased 2.6 percent. As
a result, operating profit was down 14.9 percent, net income declined 5.7
percent, and earnings per share were off 1.8 percent.
Outlook
-------
Revenue growth is the top priority for generating future profit growth.
Since the last report, BNA and Tax Management have launched Health Care Program
Compliance Guide in print, and the following electronic-only products: Corporate
Law Daily, International Trade Daily, Toxics Law Daily and Tax Practice Library
on the Web. The other publishing companies have also launched new products, and
have active product development efforts underway. McArdle's investments in new
equipment have increased capacity and led to its success in growing sales to
external customers.
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Progress continues on three primary systems projects for this year, as described
in an earlier report. These projects are ongoing efforts and a complete review
will be provided in the annual report to stockholders.
Prospects for achieving full-year profit goal, an 11 percent increase in
earnings per share, continue to look good. With better-than-budgeted revenue
growth and favorable cost containment trends, management believes that budgeted
earnings can be achieved, and perhaps exceeded.
FINANCIAL POSITION
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Cash provided from operating activities was $31.5 million in the first
thirty-six weeks of 2000, compared to $27.6 million for the first thirty-six
weeks of 1999. Excluding the results of BNA Communications, customer receipts
increased 4.0 percent and operating expenditures were up 2.6 percent compared to
1999.
Cash used for investing activities netted to $10.3 million, reflecting a
$3.2 additional investments in securities, $4.8 million in capital expenditures,
and $2.3 million for the purchase of publishing assets.
During the year, the Company received $4.4 million in cash from the sale
of stock to employees and repurchased $11.9 million of stock. Cash dividends
paid out to stockholders amounted to $5.7 million.
With over $156 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
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Item 1 Legal Proceedings.
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There were no material legal proceedings during the first thirty-six
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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There were no matters submitted to a vote of securities holders.
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 September 9,
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.
Registrant
10/16/2000 s/Paul N. Wojcik
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Date Paul N. Wojcik
President and Chief Executive Officer
10/12/2000 s/George J. Korphage
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Date George J. Korphage
Vice President and Chief Financial Officer
