UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter ended Commission file number
October 2, 1999 1-3246
BELL & HOWELL COMPANY
(Exact Name of Registrant as Specified in its Charter)
Delaware 36-3580106
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5215 Old Orchard Road, Skokie, Illinois 60077-1076
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (847) 470-7100
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
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
The number of shares of the Registrant's Common Stock, $.001
par value, outstanding as of November 4, 1999 was 23,613,225.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
- ------ --------------------- ----
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations for
the Thirteen and Thirty-Nine Weeks Ended
October 2, 1999 and October 3, 1998 ........... 1
Consolidated Balance Sheets - Assets at
October 2, 1999 and January 2, 1999 ........... 2
Consolidated Balance Sheets - Liabilities
and Shareholders' Equity at October 2, 1999 and
January 2, 1999 ............................... 3
Consolidated Statements of Cash Flows for
the Thirty-Nine Weeks Ended October 2, 1999 and
October 3, 1998 ............................... 4
Notes to the Consolidated Financial
Statements .................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ...................................... 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk ............................... 14
PART II. OTHER INFORMATION
- ------- -----------------
Item 1. Legal Proceedings ................................ 14
Item 6. Exhibits and Reports on Form 8-K ................. 14
SIGNATURE PAGE .............................................. 15
<PAGE>
<TABLE>
Bell & Howell Company and Subsidiaries
Consolidated Statements of Operations
(Dollars and shares in thousands, except per share data)
(Unaudited)
<CAPTION>
Thirteen Weeks Thirty-Nine Weeks
Ended Ended
---------------------- ---------------------
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales $ 233,791 $ 216,653 $ 690,688 $ 638,150
Operating costs and expenses:
Cost of sales 142,159 132,006 425,520 389,573
Research and development 10,052 9,756 28,551 28,354
Selling and administrative 55,788 50,150 171,714 161,752
-------- -------- -------- --------
Total operating costs and expenses 207,999 191,912 625,785 579,679
Operating income 25,792 24,741 64,903 58,471
Net interest expense:
Interest income (9,468) (5,251) (22,551) (17,596)
Interest expense 12,405 11,168 36,989 35,59
-------- -------- -------- --------
Net interest expense 2,937 5,917 14,438 17,997
Earnings from continuing operations
before income taxes 22,855 18,824 50,465 40,474
Income tax expense 9,142 7,530 20,186 16,190
-------- -------- -------- --------
Earnings from continuing operations 13,713 11,294 30,279 24,284
Earnings (loss) from discontinued operations (736) (45) (219) (1,490)
-------- -------- -------- --------
Net earnings $ 12,977 $ 11,249 $ 30,060 $ 22,794
======== ======== ======== ========
Net earnings per common share:
Basic:
Earnings from continuing operations $ 0.58 $ 0.48 $ 1.29 $ 1.04
Earnings (loss) from discontinued operations (0.03) -- (0.01) (0.07)
-------- -------- -------- --------
Net earnings per common share $ 0.55 $ 0.48 $ 1.28 $ 0.97
======== ======== ======== ========
Diluted:
Earnings from continuing operations $ 0.57 $ 0.48 $ 1.27 $ 1.03
Earnings (loss) from discontinued operations (0.03) -- (0.01) (0.06)
-------- -------- -------- --------
Net earnings per common share $ 0.54 $ 0.48 $ 1.26 $ 0.97
======== ======== ======== ========
Average number of common shares and equivalents outstanding:
Basic 23,669 23,431 23,548 23,433
Diluted 23,953 23,575 23,870 23,587
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements
</TABLE>
-1-
<PAGE>
<TABLE>
Bell & Howell Company and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands)
Assets
<CAPTION>
October 2, January 2,
1999 1999
---------- -----------
(Unaudited) (Audited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 8,245 $ 18,074
Accounts receivable 226,088 233,667
Inventory 122,287 98,930
Other current assets 14,189 11,803
-------- --------
Total current assets 370,809 362,474
Property, plant and equipment, at cost 459,291 423,482
Accumulated depreciation (305,460) (275,277)
-------- --------
Net property, plant and equipment 153,831 148,205
Long-term receivables 74,254 66,746
Goodwill, net of accumulated amortization 233,854 208,385
Net assets of discontinued operations 8,219 9,230
Other assets 55,298 41,253
-------- --------
Total assets $ 896,265 $ 836,293
======== ========
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
-2-
<PAGE>
<TABLE>
Bell & Howell Company and Subsidiaries
Consolidated Balance Sheets
(Dollars and shares in thousands)
Liabilities and Shareholders' Equity
<CAPTION>
October 2, January 2,
1999 1999
------------ -------------
(Unaudited) (Audited)
<S> <C> <C>
Current liabilities:
Notes payable $ 8,260 $ 3,776
Current maturities of long-term debt 2,322 3,365
Accounts payable 68,876 79,553
Accrued expenses 63,217 83,854
Deferred income 189,387 190,008
-------- --------
Total current liabilities 332,062 360,556
Long-term liabilities:
Long-term debt 476,872 445,240
Other liabilities 78,364 59,719
-------- --------
Total long-term liabilities 555,236 504,959
Shareholders' equity:
Common Stock, $.001 par value, 23,942 shares issued
and 23,686 shares outstanding at October 2, 1999,
and 23,516 shares issued and 23,277 shares outstanding
at January 2, 1999 24 24
Capital surplus 149,845 140,819
Notes receivable from executives (1,676) (2,523)
Retained earnings (deficit) (131,137) (161,197)
Cumulative foreign exchange translation adjustments (1,648) (500)
Treasury stock (6,441) (5,845)
-------- --------
Total shareholders' equity (deficit) 8,967 (29,222)
-------- --------
Total liabilities and shareholders' equity $ 896,265 $ 836,293
======== ========
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
-3-
<PAGE>
<TABLE>
Bell & Howell Company and Subsidiaries
Consolidated Statements of Cash Flows
(Dollars in thousands)
(Unaudited)
<CAPTION>
Thirty-Nine Weeks Ended
---------------------------
Oct. 2, Oct. 3,
1999 1998
-------- --------
<S> <C> <C>
Operating Activities:
Earnings from continuing operations $ 30,279 $ 24,284
Depreciation and amortization 42,226 39,294
Changes in operating assets and liabilities:
Accounts receivable 12,774 (10,926)
Inventory (20,506) (4,851)
Other current assets (2,061) (204)
Long-term receivables (7,508) 9,119
Income taxes 3,159 13,865
Accounts payable (13,182) (10,357)
Accrued expenses (7,993) 3,712
Deferred income and other long-term liabilities (3,156) 8,270
Other, net (21,047) (14,492)
------- -------
Net cash provided by continuing operations 12,985 57,714
Net cash provided (used) by discontinued operations 792 (3,092)
------- -------
Net cash provided by operating activities 13,777 54,622
Investing activities:
Expenditures for property, plant and equipment (33,399) (26,285)
Acquisitions (34,172) (7,384)
------- -------
Net cash used by investing activities (67,571) (33,669)
Financing activities:
Proceeds from short-term debt 12,508 11,781
Repayment of short-term debt (7,750) (9,484)
Proceeds from long-term debt 63,069 53,765
Repayment of long-term debt (32,480) (78,761)
Proceeds from (repurchases of) Common Stock, net 9,066 (3,005)
------- -------
Net cash provided (used) by financing activities 44,413 (25,704)
Effect of exchange rate changes on cash (448) 253
------- -------
Decrease in cash and cash equivalents (9,829) (4,498)
Cash and cash equivalents, beginning of period 18,074 13,339
------- -------
Cash and cash equivalents, end of period $ 8,245 $ 8,841
======= =======
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
</TABLE>
-4-
<PAGE>
Bell & Howell Company and Subsidiaries
Notes to the Consolidated Financial Statements
(Dollars and shares in thousands)
Note 1 - Basis of Presentation
The consolidated financial statements include the accounts
of Bell & Howell Company and its subsidiaries (collectively the
"Company") and have been prepared without independent audit,
except for the balance sheet data as of January 2, 1999.
In the opinion of the Company's management, the consolidated
financial statements include all adjustments necessary to present
fairly the information required to be set forth therein, and such
adjustments are of a normal and recurring nature. Certain
information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted.
The Company's management believes, however, that the disclosures
are adequate to make the information presented not misleading.
These consolidated financial statements should be read in
conjunction with the Consolidated Financial Statements and the
notes thereto included in the Company's annual report for the
fiscal year ended January 2, 1999.
Note 2 - Significant Accounting Policies
Inventory. The Company uses the last-in, first-out (LIFO)
method of valuing the majority of its domestic inventory. Use of
the LIFO method is predicated on a determination of inventory
quantities and costs at the end of each fiscal year, and
therefore interim determinations of LIFO inventory values and
results of operations are by necessity based on management's
estimates of expected year-end inventory quantities and costs.
The excess of replacement cost over the LIFO values of inventory
was $4,900 at October 2, 1999, and January 2, 1999. The
components of inventory are shown in the table below as of the
dates indicated:
<TABLE>
<CAPTION>
October 2, January 2,
1999 1999
---------- ----------
<S> <C> <C>
Finished products $ 70,940 $ 57,343
Products in process and materials 51,347 41,587
------- -------
Total inventory $122,287 $ 98,930
======= =======
</TABLE>
-5-
<PAGE>
Net Earnings per Common Share. Basic net earnings per
common share is computed by dividing net earnings by the weighted
average number of common shares outstanding during the period.
Diluted net earnings per common share is computed by dividing net
earnings by the weighted average number of common shares
outstanding during the period, and assumes the issuance of
additional common shares for all dilutive stock options
outstanding during the period. A reconciliation of the weighted
average number of common shares and equivalents outstanding in
the calculation of basic and diluted earnings per share is shown
in the table below for the periods indicated:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------- ------------------------
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic 23,699 23,431 23,548 23,433
Dilutive effect of stock options 254 144 322 154
------ ------ ------ ------
Diluted 23,953 23,575 23,870 23,587
====== ====== ====== =-====
</TABLE>
Note 3 - Business Segments
The Company, which is organized on the basis of products and
services, has three reportable business segments, Information
Access, Mail and Messaging Technologies and Imaging. The
accounting policies for each of the segments are described in the
Company's annual report for the fiscal year ended January 2,
1999.
Sales and earnings information for the Company's reportable
business segments are shown in the following tables for the
periods indicated:
<TABLE>
<CAPTION>
Net Sales
---------------------------------------------------------
Thirteen Weeks Ended Thirty-Nine Weeks Ended
------------------------- -------------------------
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
<S> <C> <C> <C> <C>
Business Segments 1999 1998 1999 1998
- ----------------- --------- --------- --------- ---------
Information Access .............. $ 86,305 $ 78,523 $ 256,811 $ 231,351
Mail and Messaging Technologies . 102,444 95,685 302,410 281,602
Imaging ......................... 45,042 42,445 131,467 125,197
-------- -------- -------- --------
Total ........................... $ 233,791 $ 216,653 $ 690,688 $ 638,150
======== ======== ======== ========
</TABLE>
-6-
<PAGE>
<TABLE>
<CAPTION>
Earnings From Continuing Operations Before Income Taxes
------------------------------------------------------------
Thirteen Weeks Ended Thirty-Nine Weeks Ended
--------------------------- ---------------------------
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
Business Segments 1999 1998 1999 1998
- ----------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
Information Access .............. $ 14,347 $ 14,755 $ 38,239 $ 37,069
Mail and Messaging Technologies . 7,861 8,656 25,383 24,048
Imaging ......................... 6,512 4,859 12,049 8,250
-------- -------- -------- --------
Total ......................... 28,720 28,270 75,671 69,367
Corporate expenses .............. (2,928) (3,529) (10,768) (10,896)
Interest expense, net ........... (2,937) (5,917) (14,438) (17,997)
-------- -------- -------- --------
Consolidated .................... $ 22,855 $ 18,824 $ 50,465 $ 40,474
======== ======== ======== ========
</TABLE>
Note 4 - Discontinued Operations
In December 1997, the Company adopted a plan to divest its
postal contracting business, and accordingly the operating
results and net assets of this business have been segregated from
continuing operations. The Consolidated Statements of Operations
separately reflect the earnings (loss) of the postal contracting
business, which includes an allocation of the Company's interest
expense. The Consolidated Balance Sheets separately reflect the
net assets of the postal contracting business as a non-current
asset.
Results from discontinued operations are shown in the table
below for the periods indicated:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
---------------------- -----------------------
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $ 4,526 $ 20,350 $ 19,517 $ 28,948
Earnings (loss) before income taxes (1,227) (75) (365) (2,483)
Income tax expense (benefit) (491) (30) (146) (993)
------- ------- ------- -------
Earnings (loss) from
discontinued operations $ (736) $ (45) $ (219) $ (1,490)
======= ======= ======= =======
</TABLE>
-7-
<PAGE>
Note 5 - Comprehensive Income
The components of comprehensive income for the Company
include net earnings and unrealized gains and losses relating to
the translation of foreign currency balance sheets.
Comprehensive income is shown in the table below for the periods
indicated:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-Nine Weeks Ended
-------------------- ----------------------
Oct. 2, Oct. 3, Oct. 2, Oct. 3,
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Earnings from continuing operations $13,713 $11,294 $30,279 $24,284
Earnings (loss) from discontinued operations (736) (45) (219) (1,490)
------ ------ ------ ------
Net earnings 12,977 11,249 30,060 22,794
Other comprehensive income (loss):
Foreign currency translation adjustments 2,209 2,467 (1,148) 2,298
------ ------ ------ ------
Comprehensive income $15,186 $13,716 $28,912 $25,092
====== ====== ====== ======
</TABLE>
The foreign currency translation adjustments do not impact
the Company's income tax expense.
-8-
<PAGE>
Item 2.
- ------
Management's Discussion and Analysis of
Financial Condition and Results of Operations
---------------------------------------------
This section should be read in conjunction with the
Consolidated Financial Statements of Bell & Howell Company and
Subsidiaries (collectively the "Company") and the notes thereto
included in the annual report for the year ended January 2, 1999.
Results of Operations
- ---------------------
Nine Months Year-to-Date 1999 Compared to Nine Months
- -----------------------------------------------------
Year-to-Date 1998
- -----------------
The Company's net sales increased $52.5 million, or 8%, to
$690.7 million in the first nine months of 1999. The increase
primarily resulted from strong sales growth in both the Mail and
Messaging Technologies segment as well as the Publishing Services
business within the Information Access segment.
Information Access net sales increased $25.5 million, or
11%, to $256.8 million in the first nine months of 1999. Within
the Information Access segment (comprised of the Information and
Learning business and the Publishing Services business), the
Company develops and markets information services and systems
that are focused on the needs of its customers in select vertical
niches, including libraries of all kinds (college and university,
elementary and secondary schools, as well as public) and
transportation and vehicle dealers. Net sales of the Information
and Learning business increased $1.9 million, or 1%, to $138.6
million as a growing electronic subscription base was partially
offset by lower sales of the more traditional microfilm and paper
products. Sales of electronic content increased 5%, with the
electronic subscription base continuing to reflect strong sales
of ProQuest DirectTM (the Company's internet-based product
offering), which was partially offset by lower CD-ROM/tape
subscriptions as customers migrate to on-line delivery of
information via the internet. Net sales of the Publishing
Services business increased $23.6 million, or 25%, to $118.2
million due to increased sales of electronic parts catalogs and
ancillary products to automotive dealerships, increased sales of
dealer management systems to powersports dealerships, as well as
the acquisition of Alison Associates, Inc., which provides
performance database products to automotive and powersports
manufacturers/dealers. In addition to new system placements, the
Company continued to experience strong sales of additional
software applications and high contract renewal rates related to
previously placed systems.
-9-
<PAGE>
Mail and Messaging Technologies net sales increased $20.8
million, or 7%, to $302.4 million in the first nine months of
1999. Within the Mail and Messaging Technology segment, the
Company develops and markets a complete range of high volume mail
processing systems and services which increasingly utilize
software to expand the capabilities and improve the efficiency
and effectiveness of customers' mailing operations. The higher
sales in 1999 resulted from increased shipments of high volume
sorting equipment as well as increased service and software
revenues. Service and software revenues (which are primarily
annuity-based and represent 52% of segment sales) increased $17.7
million, or 13%, to $157.5 million due to both an expanded
customer base and increased pricing.
Imaging net sales increased $6.2 million, or 5%, to $131.5
million in the first nine months of 1999. Within the Imaging
segment, the Company develops and markets imaging systems and
components that enable its customers to effectively file and
access their documents and records, with a focus on financial
institutions, governmental agencies, and other paper intensive
industries. The increased sales in 1999 resulted from increased
electronic service revenues and greater shipments of production
scanners which were partially offset by lower sales of
micrographic equipment/service. Service revenues (which are
primarily annuity-based and represent 48% of segment sales)
increased $10.9 million, or 21%, to $62.6 million due to an
expanded customer base and increased pricing, as well as the
acquisition of TAB Products Company in the second quarter of
1999.
The Company's cost of sales increased $35.9 million, or 9%,
to $425.5 million in the first nine months of 1999, with the
gross profit (net sales less cost of sales) percentage decreasing
by .6 percentage points to 38.4%. The lower gross profit
percentage in 1999 resulted from a less profitable product mix,
which was partially offset by increased pricing and improved
manufacturing/service productivity.
Research and development expense of $28.6 million in the
first nine months of 1999 is essentially constant with the prior
year as the Company continued to invest significantly in new
product offerings. The Company continually seeks to take
advantage of new product/technology opportunities (with an
increased emphasis on internet capabilities and software
solutions) in each of its businesses. The Company's research and
development expenditures include expenses primarily for database
and software development, information delivery systems,
production scanners and other electronic devices for the
Information Access and Imaging segments, as well as for new mail
-10-
<PAGE>
processing systems that are more electronic and software driven
and stand-alone software solutions for the Mail and Messaging
Technologies segment.
Selling and administrative expense increased $10.0 million,
or 6%, to $171.7 million in the first nine months of 1999
reflecting the Company's increased investment in sales and
marketing resources (which reflects an increase in the sales
force in the Information and Learning business to capitalize on
the sales growth opportunities of internet-based products) as
well as increased distribution costs associated with the higher
sales volumes.
Operating income increased $6.4 million, or 11%, to $64.9
million, while EBITDA (defined as operating income plus
depreciation and amortization) increased $9.4 million, or 10%, to
$106.8 million in the first nine months of 1999.
Information Access operating income increased $1.2 million,
or 3%, to $38.2 million in the first nine months of 1999, as the
benefit of the higher sales volume was partially offset by the
impact of significant investments related to ProQuest DirectTM
for new product development costs and to provide additional data
center capacity to accommodate future sales growth opportunities.
Information Access EBITDA increased $3.4 million, or 5%, to $69.8
million in the first nine months of 1999.
Mail and Messaging Technologies operating income increased
$1.3 million, or 6%, to $25.4 million in the first nine months of
1999, as the benefit of the increased sales was partially offset
by an additional charge of $3.0 million related to collection
issues associated with accounts receivable which originated in
prior years. Mail and Messaging Technologies EBITDA increased
$2.5 million, or 9%, to $31.1 million in the first nine months of
1999.
Imaging operating income increased $3.8 million, or 46%, to
$12.0 million in the first nine months of 1999, reflecting the
increased sales and leveraged operating costs and expenses.
Imaging EBITDA increased $3.3 million, or 26%, to $16.1 million
in the first nine months of 1999.
Corporate expenses decreased $.1 million, or 1%, to $10.8
million in the first nine months of 1999 as productivity
improvements more than offset inflationary cost increases.
Net interest expense decreased $3.6 million, or 20%, to
$14.4 million in the first nine months of 1999, primarily
reflecting interest income associated with a favorable settlement
with the Internal Revenue Service on a variety of issues, which
-11-
<PAGE>
resulted in an income tax refund with interest. Net interest
expense was further reduced versus the prior year resulting from
lower borrowings, as the excess of the Company's operating cash
flows over capital expenditure/acquisition costs have been used
to reduce debt outstanding. Net interest income of Bell & Howell
Financial Services Company, the Company's financing subsidiary
increased $.3 million, or 4%, to $7.6 million in the first nine
months of 1999.
Income tax expense increased in the first nine months of
1999 as a result of a higher level of pretax profit with the
income tax rate remaining constant with the prior year.
As a result of changing market and competitive dynamics
within global government postal markets, as well as a review of
its future strategic focus, in December 1997 the Company adopted
a plan to divest its postal contracting business. Accordingly,
the operating results of this business have been segregated from
the Company's continuing operations, and are separately reported
as a discontinued operation in the financial statements. Net
sales for this business decreased $9.4 million to $19.5 million
in the first nine months of 1999, with a loss of $.2 million in
the first nine months of 1999 versus a loss of $1.5 million in
the prior year.
Cash provided by operations was $13.8 million in the first
nine months of 1999, versus cash provided by operations of $54.6
million in the prior year. Although EBITDA increased $9.4
million over the prior year, such increase was more than offset
by increased working capital requirements and increased income
tax payments related to the Company's improved profitability. As
a result of the cash provided by operations, which was more than
offset by capital expenditures/acquisitions and seasonal working
capital requirements, debt (net of cash and cash equivalents)
increased by $44.9 million, to $479.2 million in the first nine
months of 1999.
Impact of the Year 2000
Over the past few years, the Company has been assessing the
impact on its products and computer systems of Year 2000 (Y2K)
related issues. The Company's Y2K compliance plans include:
inventorying affected technology and assessing the impact of
the Y2K issue; developing resultant solution plans;
modification/replacement and testing/certification of systems
and software; and developing contingency plans as appropriate.
-12-
<PAGE>
The Company relies on third party suppliers for systems,
products and services. The Company has a comprehensive supplier
compliance program in place, as the Company could be adversely
impacted if these suppliers do not make the necessary changes to
their own systems/products in a timely manner.
The Company has identified its products and services that
either are currently Y2K compliant or will be modified or
upgraded to become Y2K compliant. The Company has developed
plans to provide its customers with such modifications and
upgrades. The completion of these plans could be adversely
affected if these customers do not provide the Company with
sufficient timeframes in which to make such modifications and
upgrades.
The Company has also identified its products that are not
currently Y2K compliant, and will not be modified or upgraded to
become Y2K compliant. These products and services are at the end
of their natural product life cycle and for most of the affected
customers, newer Y2K compliant replacement products and services
have been offered. For those products and services that will not
be Y2K compliant, the Company provided notice to customers of its
intent not to provide ongoing support of such products or
services after 1999.
A substantial portion of the Company's Y2K initiatives have
been completed to date, with remaining project work expected to
be completed in the fourth quarter of 1999. Based on such
initiatives, and assuming that remaining issues can be addressed
as planned, management believes that future costs relating to Y2K
will not have a material adverse impact upon the consolidated
operations or financial condition of the Company. However,
preoccupation with Y2K initiatives in the market in general could
potentially impact customer purchase decisions, which could
adversely affect the Company's sales in the fourth quarter of
1999.
Recently Issued Financial Accounting Standards
In June 1998, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards (SFAS)
No. 133, Accounting for Derivative Instruments and Hedging
Activities. This statement provides a comprehensive standard for
the recognition and measurement of derivatives and hedging
activities. The Company is currently evaluating the impact of
this standard, the effective date of which was postponed until
2001 per SFAS No. 137.
-13-
<PAGE>
Item 3.
- ------
Quantitative and Qualitative Disclosures About Market Risk
---------------------------------------------------------
There have been no material changes in the Company's market
risk during the quarter ended October 2, 1999. For additional
information on market risk, refer to the "Quantitative and
Qualitative Disclosures About Market Risk" section of the
Company's annual report for the fiscal year ended January 2,
1999.
Part II. Other Information
- ------- -----------------
Item 1. Legal Proceedings.
- ------ -----------------
The Company is involved in various legal proceedings
incidental to its business. Management believes that the outcome
of such proceedings will not have a material adverse effect upon
the consolidated operations or financial condition of the
Company.
Item 6. Exhibits and Reports on Form 8-K.
- ------ --------------------------------
(a) Exhibits:
Index Number Description
------------ -----------
EX-27.1 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed for the thirteen weeks
ended October 2, 1999.
-14-
<PAGE>
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.
Date: November 15, 1999 BELL & HOWELL COMPANY
/s/ James P. Roemer
-------------------
James P. Roemer
Chairman of the Board
of Directors, President and
Chief Executive Officer
/s/ Nils A. Johansson
---------------------
Nils A. Johansson
Executive Vice President,
Chief Financial Officer
and Director
-15-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE COMPANY'S BALANCE SHEET AND STATEMENT
OF OPERATIONS AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-END> OCT-02-1999
<CASH> 8,245
<SECURITIES> 0
<RECEIVABLES> 233,935
<ALLOWANCES> 7,847
<INVENTORY> 122,287
<CURRENT-ASSETS> 370,809
<PP&E> 459,291
<DEPRECIATION> 305,460
<TOTAL-ASSETS> 896,265
<CURRENT-LIABILITIES> 332,062
<BONDS> 476,872
0
0
<COMMON> 24
<OTHER-SE> 8,943
<TOTAL-LIABILITY-AND-EQUITY> 896,265
<SALES> 690,688
<TOTAL-REVENUES> 690,688
<CGS> 425,520
<TOTAL-COSTS> 625,785
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,438
<INCOME-PRETAX> 50,465
<INCOME-TAX> 20,186
<INCOME-CONTINUING> 30,279
<DISCONTINUED> (219)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,060
<EPS-BASIC> 1.28
<EPS-DILUTED> 1.26
</TABLE>
