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 25, 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.
- --------------------------------------------------------------------------------
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 25, 2000 was 3,510,780 Class A common shares, 4,286,668 Class
B common shares, and 296,847 Class C common shares.
<PAGE>2
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF INCOME
FOR THE 12-WEEKS ENDED MARCH 25, 2000 and MARCH 27, 1999
(Unaudited)
(In Thousands of Dollars)
12 Weeks Ended
----------------------------------
March 25, 2000 March 27, 1999
-------------- --------------
OPERATING REVENUES $ 62,799 $ 61,202
-------------- --------------
OPERATING EXPENSES:
Editorial, production, and distribution 34,443 33,930
Selling 13,426 13,571
General and administrative 10,371 9,536
Profit sharing 394 402
-------------- --------------
58,634 57,439
-------------- --------------
OPERATING PROFIT 4,165 3,763
-------------- --------------
NON-OPERATING INCOME:
Investment Income 2,269 1,805
Interest Expense (271) (198)
Other Expense -- (1)
-------------- --------------
TOTAL NON-OPERATING INCOME 1,998 1,606
-------------- --------------
INCOME BEFORE PROVISION FOR INCOME TAXES 6,163 5,369
PROVISION FOR INCOME TAXES 1,960 1,716
-------------- --------------
NET INCOME 4,203 3,653
OTHER COMPREHENSIVE INCOME (EXPENSE) 583 (697)
-------------- --------------
COMPREHENSIVE INCOME $ 4,786 $ 2,956
============== ==============
EARNINGS PER SHARE $ .52 $ .44
============== ==============
WEIGHTED AVERAGE SHARES OUTSTANDING 8,066,811 8,221,504
============== ==============
<PAGE>3
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 25, 2000 AND DECEMBER 31, 1999
(Unaudited)
(In Thousands of Dollars)
March 25, December 31,
ASSETS 2000 1999
- -------------------------------------- ------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 29,597 $ 16,200
Short-term investments, at fair value 9,122 4,120
Receivables (net of allowance for
doubtful accounts of $1,248 in 2000
and $1,451 in 1999) 32,583 43,930
Inventories, at lower of average
cost or market 4,608 4,707
Prepaid expenses 3,567 4,372
Deferred selling expenses 20,463 20,668
------------ ------------
Total current assets 99,940 93,997
------------ ------------
MARKETABLE SECURITIES 122,695 121,670
------------ ------------
PROPERTY AND EQUIPMENT - at cost:
Land 4,250 4,250
Building and improvements 49,695 49,695
Furniture, fixtures and equipment 59,329 58,976
------------ ------------
113,274 112,921
Less-Accumulated depreciation 74,466 72,810
------------ ------------
Net property and equipment 38,808 40,111
------------ ------------
DEFERRED INCOME TAXES 26,772 26,548
------------ ------------
GOODWILL 27,592 27,800
------------ ------------
OTHER ASSETS 15,677 12,602
------------ ------------
Total assets $ 331,484 $ 322,728
============ ============
<PAGE>4
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED BALANCE SHEETS
MARCH 25, 2000 AND DECEMBER 31, 1999
(Unaudited)
(In Thousands of Dollars)
March 25, December 31,
LIABILITIES AND STOCKHOLDERS' EQUITY 2000 1999
- -------------------------------------- ------------ ------------
CURRENT LIABILITIES:
Accounts payable $ 16,636 $ 16,820
Employee compensation and
benefits payable 15,191 15,399
Income taxes payable 2,748 578
Deferred income taxes 1,684 1,774
Deferred subscription revenue 126,777 126,938
Dividends payable 5,666 ---
------------ ------------
Total current liabilities 168,702 161,509
LONG TERM DEBT 14,000 14,000
POSTRETIREMENT BENEFITS, less current portion 71,277 70,129
OTHER LIABILITIES 4,882 4,887
------------ ------------
Total liabilities 258,861 250,525
------------ ------------
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 45,753 44,421
Retained earnings 78,644 80,107
Treasury stock at cost - 3,817,878 shares
in 2000 and 3,851,207 in 1999 (61,412) (61,380)
Elements of comprehensive income:
Net unrealized (loss) on
marketable securities (2,217) (2,802)
Foreign currency translation adjustment (57) (55)
------------ ------------
Total stockholders' equity 72,623 72,203
------------ ------------
Total liabilities and stockholders' equity $ 331,484 $ 322,728
============ ============
<PAGE>5
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THE BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE 12-WEEKS ENDED MARCH 25, 2000 and MARCH 27, 1999
(Unaudited)
(In Thousands of Dollars)
12 Weeks Ended
----------------------------------
March 25, 2000 March 27, 1999
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,203 $ 3,653
Items with different cash requirements
than reflected in net income--
Depreciation and amortization 2,799 2,537
(Gain) on sales of securities (295) (97)
Others (248) (145)
Changes in operating assets and liabilities--
Receivables 11,550 10,401
Deferred subscription revenue (1,161) (592)
Payables and accrued liabilities (1,518) (1,875)
Postretirement benefits 1,148 1,612
Deferred income taxes (629) (920)
Deferred selling expenses 205 200
Inventories 99 4
Other assets and liabilities--net 703 843
-------------- --------------
Net cash provided from operating activities 16,856 15,621
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures--
Capitalized software (837) (771)
Purchase of customer lists (2,200) --
Purchase of equipment and furnishings (458) (575)
-------------- --------------
Net cash used for capital expenditures (3,495) (1,346)
-------------- --------------
Securities investments
Proceeds from sales and maturities 10,897 13,400
Purchases (12,161) (9,603)
-------------- --------------
Net cash provided from (used for)
securities investments (1,264) 3,797
-------------- --------------
Net cash provided from (used for)
investing activities (4,759) 2,451
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Sale of capital stock to employees 1,895 1,043
Purchases of treasury stock (595) (1,079)
-------------- --------------
Net cash provided from (used for)
financing activities 1,300 (36)
-------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 13,397 18,036
CASH AND CASH EQUIVALENTS, beginning of period 16,200 15,259
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period $ 29,597 $ 33,295
============== ==============
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION:
Interest paid $ 388 $ 203
Income taxes paid 421 131
<PAGE>6
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THE BUREAU OF NATIONAL AFFAIRS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 25, 2000
(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 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):
March 25, December 31,
2000 1999
------------ ------------
Materials and supplies $ 3,020 $ 3,178
Work in process 359 313
Finished goods 1,229 1,216
------------ ------------
$ 4,608 $ 4,707
============ ============
NOTE 3: Stockholders' Equity
Treasury stock as of March 25, 2000 and December 31, 1999,
respectively, consisted of: Class A, 2,968,084 and 3,005,482 shares; Class B,
640,305 and 636,736 shares; and Class C, 209,489 and 208,989 shares.
NOTE 4: Segment Information
12 Weeks Ended
----------------------------------
3/25/00 3/27/99
------------ ------------
Revenues from External Customers:
Publishing $ 58,152 $ 56,596
Printing 4,647 3,774
All Other --- 832
------------ ------------
Total $ 62,799 $ 61,202
============ ============
Intersegment Printing Revenues $ 3,695 $ 3,525
============ ============
<PAGE>7
-7-
NOTE 4: Segment Information, Continued
12 Weeks Ended
----------------------------------
3/25/00 3/27/99
------------ ------------
Operating Profit:
Publishing $ 3,406 $ 3,528
Printing 759 363
All Other --- (128)
------------ ------------
Total $ 4,165 $ 3,763
============ ============
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
- ---------------------
Twelve weeks 2000 compared to twelve weeks 1999
- -----------------------------------------------
BNA's financial performance continued to improve in 2000's first
quarter. Revenues, operating profit, net income, and earnings per share all
registered solid growth compared to 1999's first quarter results.
Consolidated revenues were $62.8 million in the first quarter of 2000.
Operating expenses were up 2.1 percent, and the operating profit rose 10.7
percent due to improved printing segment results. Net income was $4.2 million
for the first quarter, a 15.1 percent increase over 1999. Earnings per share
were up 18.2 percent, to $.52, reflecting higher net income and fewer
outstanding shares. Excluding the financial results of BNA Communications, which
was sold in 1999, revenues grew 4.0 percent.
<PAGE>8
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Publishing revenues rose 2.7 percent over the prior year's first
quarter. Parent and Tax Management's combined subscription and online revenues
increased by just 2.0 percent, primarily because of revenue declines of
environment and safety products, but year-to-year comparisons were also
negatively affected by a large one-time receipt of online royalties in 1999.
IOMA grew its revenues 15.5 percent, mainly through recently launched or
acquired products. Total revenues of the other publishing units were up nearly 2
percent and are expected to improve throughout the year. Publishing operating
expenses were up 3.2 percent. Operating profit for the Publishing segment was
$3.4 million, compared to $3.5 million last year.
Printing segment total revenues were up 14.3 percent over 1999,
reflecting a 23.1 percent growth in commercial sales and a 4.8 percent increase
in intersegment revenues. Sales to external customers increased due to more
business from existing customers and the addition of new customers. Intersegment
revenues are expected to decline as Publishing segment subscribers continue to
migrate from print to electronic products. Operating expenses were up 9.3
percent, including higher selling expenses related to increased external sales.
Operating profit increased to $759,000 compared to $363,000 achieved in last
year's first quarter.
Non-operating income was $392,000 higher in 2000 due to higher
investment income. Other comprehensive income reflected an unrealized holding
gain on investment securities in 2000 and an unrealized holding loss in 1999.
Revenue growth by launching new products, by increasing and
strengthening our sales channels, and by making strategic acquisitions remains
the Company's primary strategy for increasing profitability. New products for
2000 include WTO REPORTER and CLASS ACTION LIABILITY REPORT. Tax products
continue to sell well and the new Web reference products launched last year are
among the top new sales products for this year. Sales of BNA's ENVIRONMENT
LIBRARY ON THE WEB, in particular, have been strong, and we expect the
environment and safety line to strengthen as a result. In addition, IOMA
recently acquired the assets of ProPub, a publisher of compensation newsletters
and guides, for $2.2 million in cash plus the assumption of related deferred
subscription liabilities.
Important system work continues to move forward, although never as
quickly as we would like. Major projects include the completion of the first
phases of the BNA Web Delivery system and an e-commerce hub system for BNA
products, and the conversion of the customer information system to a more
flexible database which will allow for the many enhancements needed to support
today's business.
<PAGE>9
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FINANCIAL POSITION
- ------------------
Cash provided from operating activities was $16.9 million in the first
twelve weeks of 2000, compared to $15.6 million for the first twelve weeks of
1999. Customer receipts increased 4.1 percent and operating expenditures
increased 3.0 percent from 1999. Cash used for investing activities totaled $4.8
million, reflecting $1.3 million in capital expenditures, a $2.2 million
purchase of publishing assets, and a $1.3 million increase in the non-cash
equivalent investments. During the quarter, sales of capital stock, net of
repurchases, amounted to $1.3 million.
With over $161 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.
<PAGE>10
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PART II
Item 1 Legal Proceedings
There were no material legal proceedings during the first twelve weeks
of 2000.
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 15, 2000. A proxy
statement pursuant to Rule 14a was distributed to all stockholders in
connection with this meeting.
Results of the election of directors and voting on the stockholder
proposal are included in the attached excerpts from a letter to
stockholders dated April 17, 2000.
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 25,
2000.
<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 5, 2000 s\ Paul N. Wojcik
- ---------------- -------------------------------------
Date Paul N. Wojcik
President and Chief Executive Officer
May 5, 2000 s\ George J. Korphage
- ---------------- ------------------------------------------
Date George J. Korphage
Vice President and Chief Financial Officer
<PAGE>12
THE BUREAU OF NATIONAL AFFAIRS, INC.
CYNTHIA J. BOLBACH 202-452-4580
CORPORATE SECRETARY Fax:202-452-4226
E-mail:[email protected]
April 17, 2000
Dear BNA Stockholder:
At the annual meeting of stockholders held April 15, 2000, the following
individuals were elected as members of the Corporation's Board of Directors for
the ensuing year: Thomas W. Ball, William A. Beltz, Eunice L. Bumgardner,
Richard H. Cornfield, Sandra C. Degler, Jack Jenc, Eileen Z. Joseph, George J.
Korphage, Gregory C. McCaffery, David P. McFarland, Frederick A. Schenck, Daniel
W. Toohey, Loene Trubkin, Robert L. Velte, and Paul N. Wojcik. The proposal
submitted by a shareholder, requesting the Board of Directors to retain a
qualified independent advisor for the purpose of soliciting offers to acquire
the company by sale or merger, and to promptly take action on the resulting
offers consistent with its responsibilities under applicable law, was defeated.
The following table provides pertinent statistical data on the election for
directors and on the voting on the proposal. As of the record date of March 25,
2000, there were 3,510,977 shares outstanding. The total number of shares voted
was 3,142,314.
ELECTION OF DIRECTORS
Stockholder Candidates
----------------------
Name Shares Voted For
- -------------------- ------------------
George J. Korphage 2,058,128
William A. Beltz 1,971,711
Sandra C. Degler 1,863,053
David P. McFarland 1,750,092
Gregory C. McCaffery 1,745,294
Richard H. Cornfield 1,592,122
Paul N. Wojcik 1,497,910
Eunice L. Bumgardner 1,415,955
Eileen Z. Joseph 1,375,705
Robert L. Velte 1,365,872
Thomas W. Ball 1,323,216
Jack Jenc 1,320,632
Dean M. Zadak 1,273,619
Pat Swords 1,263,251
Chet A. Benash 1,236,287
James R. Schneble 934,946
Nonstockholder Candidates
-------------------------
Loene Trubkin 1,462,314
Frederick A. Schenck 1,350,767
Daniel W. Toohey 1,311,994
<PAGE>13
PROPOSAL
--------
Shareholder Proposal: To request the Board of Directors to (1) promptly retain a
qualified independent advisor, such as a leading investment banking firm, for
the purpose of soliciting offers to acquire the company by sale or merger, and
(2) promptly take action on the resulting offers consistent with its
responsibilities under applicable law.
Shares Voted For 1,363,518
Shares Voted Against 1,758,996
Shares Abstaining 19,800
At the meeting of the Board of Directors held immediately after the
stockholders' meeting, the following officers were elected: William A. Beltz,
Chairman of the Board; Sandra C. Degler, Vice Chairman of the Board; Paul N.
Wojcik, President and Chief Executive Officer; Jacqueline M. Blanchard, Vice
President for Human Resources; Eunice L. Bumgardner, Vice President and General
Counsel; Daniel C. Horsey, Vice President and Chief Technology Officer; George
J. Korphage, Vice President for Accounting & Finance and Chief Financial
Officer; Gregory C. McCaffery, Vice President and Editor-in-Chief; Pat Swords,
Vice President for Sales and Marketing; Robert L. Velte, Vice President for
Strategic Development; Cynthia J. Bolbach, Corporate Secretary; Gilbert S.
Lavine, Treasurer; and Paul A. Blakely, Assistant Treasurer.
The Board unanimously adopted the following resolution reaffirming the
commitment to employee ownership:
RESOLVED, that the Board of Directors fully endorses and reaffirms
the first corporate objective, which is "to 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, and in providing a fair
distribution of rewards for that performance," 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 Directors for appropriate consideration and response in
light of that corporate objective.
Finally, any stockholder proposal intended to be presented at the 2000
annual meeting, and to be included in BNA's proxy statement relating to that
meeting, must be received by me on or before November 24, 2000.
Cordially,
s\ Cynthia J. Bolbach
---------------------
Cynthia J. Bolbach
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule conatins summary information extracted from the Buraue of National
Affairs, Inc. consolidated balance sheet and consolidated statement of income
for the period ended March 25, 2000 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-31-2000
<PERIOD-END> MAR-25-2000
<CASH> 29,597
<SECURITIES> 9,122
<RECEIVABLES> 30,484
<ALLOWANCES> 1,248
<INVENTORY> 4,608
<CURRENT-ASSETS> 99,940
<PP&E> 113,274
<DEPRECIATION> 74,466
<TOTAL-ASSETS> 331,484
<CURRENT-LIABILITIES> 168,702
<BONDS> 14,000
0
0
<COMMON> 11,912
<OTHER-SE> 60,711
<TOTAL-LIABILITY-AND-EQUITY> 331,484
<SALES> 62,799
<TOTAL-REVENUES> 62,799
<CGS> 34,443
<TOTAL-COSTS> 34,443
<OTHER-EXPENSES> 24,191
<LOSS-PROVISION> 232
<INTEREST-EXPENSE> 271
<INCOME-PRETAX> 6,163
<INCOME-TAX> 1,960
<INCOME-CONTINUING> 4,203
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,203
<EPS-BASIC> .52
<EPS-DILUTED> .52
</TABLE>
