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
April 1, 2000 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 May 4, 2000 was 23,714,580.
<PAGE>
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
- ------ --------------------- ----
Item 1. Consolidated Financial Statements
Consolidated Statements of Operations for
the Thirteen Weeks Ended April 1, 2000 and
April 3, 1999 ................................. 1
Consolidated Balance Sheets - Assets at
April 1, 2000 and January 1, 2000 ............. 2
Consolidated Balance Sheets - Liabilities
and Shareholders' Equity at April 1, 2000 and
January 1, 2000 ............................... 3
Consolidated Statements of Cash Flows for
the Thirteen Weeks Ended April 1, 2000 and
April 3, 1999 ................................. 4
Notes to the Consolidated Financial
Statements .................................... 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ..................................... 10
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
Ended
----------------------
Apr. 1, Apr. 3,
2000 1999
--------- ---------
<S> <C> <C>
Net sales ....................................................... $ 85,961 $ 80,019
Cost of sales ................................................... 47,326 42,518
Research and development expense ................................ 4,369 4,583
Selling and administrative expense .............................. 28,896 27,930
Gains on sales of assets ........................................ (1,356) --
-------- --------
Earnings from continuing operations before interest,
income taxes, equity in earnings (loss) of affiliate
and cumulative effect of a change in accounting principle ...... 6,726 4,988
Net interest expense:
Interest income ................................................. (322) (422)
Interest expense ................................................ 5,923 3,845
-------- --------
Net interest expense ............................................ 5,601 3,423
Earnings from continuing operations before income taxes,
equity in earnings (loss) of affiliate and cumulative
effect of a change in accounting principle ..................... 1,125 1,565
Income tax expense .............................................. 450 626
Equity in earnings (loss) of affiliate .......................... (3,721) --
-------- --------
Earnings (loss) from continuing operations before cumulative
effect of a change in accounting principle ..................... (3,046) 939
Earnings from discontinued operations ........................... 1,131 4,137
Cumulative effect of a change in accounting principle ........... (5,628) --
-------- --------
Net earnings (loss) ............................................. $ (7,543) $ 5,076
======== ========
Net earnings (loss) per common share:
Basic:
Earnings (loss) from continuing operations before cumulative
effect of a change in accounting principle ..................... $ (0.13) $ 0.04
Earnings from discontinued operations ........................... 0.05 0.18
Cumulative effect of a change in accounting principle ........... (0.24) --
-------- --------
Net earnings (loss) per common share ............................ $ (0.32) $ 0.22
======== ========
Diluted:
Earnings (loss) from continuing operations before cumulative
effect of a change in accounting principle ..................... $ (0.13) $ 0.04
Earnings from discontinued operations ........................... 0.05 0.17
Cumulative effect of a change in accounting principle ........... (0.24) --
-------- --------
Net earnings (loss) per common share ............................ $ (0.32) $ 0.21
======== ========
Average number of common shares and equivalents outstanding:
Basic ........................................................... 23,678 23,375
Diluted ......................................................... 23,928 23,716
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)
(Unaudited)
Assets
<CAPTION>
April 1, January 1,
2000 2000
---------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents ........................ $ 7,481 $ 4,773
Accounts receivable .............................. 68,476 72,118
Inventory ........................................ 9,011 9,302
Other current assets ............................. 11,094 8,898
-------- --------
Total current assets ............................. 96,062 95,091
Property, plant and equipment, at cost ........... 372,680 363,380
Accumulated depreciation ......................... (245,306) (237,061)
-------- --------
Net property, plant and equipment ................ 127,374 126,319
Long-term receivables ............................ 16,183 15,371
Goodwill, net of accumulated amortization ........ 222,750 224,809
Net assets of discontinued operations ............ 258,410 278,524
Other assets ..................................... 44,409 46,505
-------- --------
Total assets ..................................... $ 765,188 $ 786,619
======== ========
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)
(Unaudited)
Liabilities and Shareholders' Equity
<CAPTION>
April 1, January 1,
2000 2000
------------ -------------
<S> <C> <C>
Current liabilities:
Notes payable ........................................... $ 11,947 $ 25,646
Current maturities of long-term debt .................... 1,271 1,916
Accounts payable ........................................ 36,914 37,632
Accrued expenses ........................................ 25,578 34,295
Deferred income ......................................... 104,136 107,638
-------- --------
Total current liabilities ............................... 179,846 207,127
Long-term liabilities:
Long-term debt .......................................... 522,684 506,783
Other liabilities ....................................... 68,917 72,990
-------- --------
Total long-term liabilities ............................. 591,601 579,773
Shareholders' equity:
Common Stock, $.001 par value, 24,058 shares issued
and 23,712 shares outstanding at April 1, 2000,
and 23,969 shares issued and 23,632 shares outstanding
at January 1, 2000 ..................................... 24 24
Capital surplus ......................................... 156,089 153,654
Notes receivable from executives ........................ (2,148) (1,544)
Retained earnings (deficit) ............................. (150,752) (143,209)
Cumulative foreign exchange translation adjustments ..... (385) (414)
Treasury stock .......................................... (9,087) (8,792)
-------- --------
Total shareholders' equity (deficit) .................... (6,259) (281)
-------- --------
Total liabilities and shareholders' equity .............. $ 765,188 $ 786,619
======== ========
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>
Thirteen Weeks Ended
------------------------
Apr. 1, Apr. 3,
2000 1999
-------- --------
<S> <C> <C>
Operating Activities:
Earnings (loss) from continuing operations before cumulative
effect of a change in accounting principle ............. $ (3,046) $ 939
Depreciation and amortization ........................... 13,132 10,783
Changes in operating assets and liabilities:
Accounts receivable ..................................... 3,496 12,709
Inventory ............................................... 278 241
Other current assets .................................... (405) 1,651
Long-term receivables ................................... (812) (2,282)
Income taxes ............................................ (644) (2,963)
Accounts payable ........................................ (692) (3,712)
Accrued expenses ........................................ (8,196) (12,080)
Deferred income and other long-term liabilities ......... (14,640) (14,868)
Other, net .............................................. (1,762) (1,294)
------- -------
Net cash used by continuing operations .................. (13,291) (10,876)
Net cash provided by discontinued operations ............ 21,245 9,512
------- -------
Net cash provided by operating activities ............... 7,954 (1,364)
Investing activities:
Expenditures for property, plant and equipment .......... (10,161) (7,713)
Acquisitions ............................................ -- (17,558)
Proceeds from asset sales ............................... 1,156 --
------- -------
Net cash used by investing activities ................... (9,005) (25,271)
Financing activities:
Proceeds from short-term debt ........................... 2,138 5,877
Repayment of short-term debt ............................ (15,460) (272)
Proceeds from long-term debt ............................ 15,880 13,330
Repayment of long-term debt ............................. (624) (6,946)
Proceeds from Common Stock, net ......................... 1,536 6,267
------- -------
Net cash provided by financing activities ............... 3,470 18,256
Effect of exchange rate changes on cash ................. 289 (606)
------- -------
Increase (decrease) in cash and cash equivalents ........ 2,708 (8,985)
Cash and cash equivalents, beginning of period .......... 4,773 18,074
------- -------
Cash and cash equivalents, end of period ................ $ 7,481 $ 9,089
======= =======
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.
As a result of the Company's adoption of a plan in the first
quarter of fiscal 2000 to divest its Mail and Messaging
Technologies/Imaging businesses and its financing subsidiary (see
Note 3 to the Consolidated Financial Statements), the Company now
operates in one reportable business segment.
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 1, 2000.
-5-
<PAGE>
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 LIFO inventory values over replacement cost was
approximately $2,800 at April 1, 2000, and January 1, 2000. The
components of inventory are shown in the table below as of the
dates indicated:
<TABLE>
<CAPTION>
April 1, January 1,
2000 2000
---------- ----------
<S> <C> <C>
Finished products .................... $ 2,837 $ 3,400
Products in process and materials .... 6,174 5,902
------- -------
Total inventory ...................... $ 9,011 $ 9,302
======= =======
</TABLE>
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
---------------------
Apr. 1, Apr. 3,
2000 1999
------- -------
<S> <C> <C>
Basic ......................................... 23,678 23,375
Dilutive effect of stock options .............. 250 341
------ ------
Diluted ....................................... 23,928 23,716
====== ======
</TABLE>
Earnings per share in fiscal 1999 includes the impact of the
Company's equity investment in its affiliate (bigchalk.com):
<TABLE>
<CAPTION>
Diluted Earnings Per Common Share from Continuing Operations before
Cumulative Effect of a Change in Accounting Principle
- -------------------------------------------------------------------
<S> <C> <C>
Earnings before equity in earnings (loss)
of affiliate ...................................... $ 0.03 $ 0.04
Equity in earnings (loss) of affiliate ............. (0.16) --
------ ------
Earnings per common share .......................... $ (0.13) $ 0.04
====== ======
</TABLE>
-6-
<PAGE>
Note 3 - Discontinued Operations
In the first quarter of fiscal 2000, the Company adopted a
plan to divest its Mail and Messaging Technologies/Imaging
businesses and its financing subsidiary. Accordingly, the
operating results and net assets of these businesses have been
segregated from the Company's continuing operations. The
Consolidated Statements of Operations separately reflect the
earnings of these businesses, which includes an allocation of the
Company's interest expense. The Consolidated Balance Sheets
separately reflect the net assets of these businesses as a
non-current asset.
Results from discontinued operations are shown in the table
below for the periods indicated:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------
Apr. 1, Apr. 3,
2000 1999
-------- --------
<S> <C> <C>
Net sales ............................................ $137,823 $143,177
Earnings before restructuring charge, interest
and income taxes .................................... 8,207 9,485
Restructuring charge ................................. 3,576 --
Interest expense ..................................... 2,746 2,590
-------- --------
Earnings before income taxes ......................... 1,885 6,895
Income tax expense ................................... 754 2,758
------- -------
Earnings from discontinued operations ................ $ 1,131 $ 4,137
======= =======
</TABLE>
Note 4 - Sales of Assets
Gains on sales of assets in the first quarter of fiscal 2000
include the sale of:
- - a portion of the Company's investment in its
affiliate (bigchalk.com) resulting from the exercise of
stock options granted to employees (proceeds of $1,156
and gain on sale of $867), and
- - the Company's investment in an entity acquired by
bigchalk.com in exchange for additional common stock in
bigchalk.com with a value of $4,935 and a resulting
gain on sale of $489)
-7-
<PAGE>
Note 5 - Restructuring
In December 1999, the Company announced a plan to
restructure and consolidate certain of its operations, which
resulted in the Company recording a charge of $36,765 ($28,277
after-tax). In the first quarter of fiscal 2000, a further
restructuring charge of $3,675 ($2,205 after-tax) was recorded
primarily related to severance cost for employees of the
businesses to be divested (see Note 3 to the Consolidated
Financial Statements). The restructuring plan will be
substantially completed over the next twelve to eighteen months,
with the details of the restructuring charges as follows:
<TABLE>
<CAPTION>
Balance Thirteen Weeks Ended April 1, 2000 Balance
----------------------------------
January 1, 2000 Restruct. Utilized April 1, 2000
Charge Cash Noncash
--------------- -------- ------- -------- -------------
Continuing Operations
- ---------------------
<S> <C> <C> <C> <C> <C>
Severance ................ $ 5,905 $ -- $ 1,093 $ -- $ 4,812
Obligations under various
noncancellable leases ... 4,600 -- -- -- 4,600
------ ------ ------ ------ ------
Continuing Operations .... 10,505 -- 1,093 -- 9,412
Discontinued Operations
Severance ................ 4,411 3,426 1,480 -- 6,357
Asset impairment costs ... 18,742 -- -- 18,742 --
Obligations under various
noncancellable leases ... 3,107 150 134 -- 3,123
------ ------ ------ ------ ------
Continuing Operations .... 26,260 3,576 1,614 18,742 9,480
------ ------ ------ ------ ------
Total Company ............ $36,765 $ 3,576 $ 2,707 $18,742 $18,892
====== ====== ====== ====== ======
</TABLE>
The restructuring plan has been approved by the Company's
Board of Directors, with the related severance costs based on
preexisting severance agreements and the number, job
classification and location of affected employees to be
terminated. Accrued costs for obligations under various
noncancellable leases relate to contractual payments that were
committed to prior to approving the restructuring plan, for which
no economic benefit to the Company will be subsequently realized.
The restructuring plan identifies all significant actions to be
taken and significant changes to such plan are not likely.
-8-
<PAGE>
Note 6 - Cumulative Effect of a Change in Accounting Principle
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101, Revenue Recoginition
in Financial Statements. As a result of this pronouncement (which
became effective in the current fiscal year), the Company has
modified its accounting for new on-line subscriptions in the
Information and Learning business. Previously, revenue for new
on-line subscriptions was recognized during the initial
subscription period proportional to costs incurred, in order to
yield a constant gross profit percentage throughout the
subscription period. Consistent with the new SEC guidelines,
such revenues are now recognized equally throughout the initial
subscription period, with appropriate cost deferral. The
cumulative effect of adopting this change in accounting principle
of $5,628 was recognized as of the beginning of fiscal 2000.
Note 7 - 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
--------------------
Apr. 1, Apr. 3,
2000 1999
------- -------
<S> <C> <C>
Earnings (loss) from continuing operations before
cumulative effect of a change in accounting principle .. $ (3,046) $ 939
Earnings from discontinued operations ................... 1,131 4,137
Cumulative effect of a change in accounting principle ... (5,628) --
------ ------
Net earnings (loss) ..................................... (7,543) 5,076
Other comprehensive income (loss):
Foreign currency translation adjustments ................ (1,264) (2,045)
------ ------
Comprehensive income (loss) ............................. $ (8,807) $ 3,031
====== ======
</TABLE>
The foreign currency translation adjustments do not impact
the Company's income tax expense.
-9-
<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 1, 2000.
Results of Operations
- ---------------------
First Quarter of Fiscal 2000 Compared to First Quarter
- ------------------------------------------------------
of Fiscal 1999
- --------------
The Company's net sales from continuing operations increased
$5.9 million, or 7%, to $86.0 million in the first quarter of
2000, resulting from strong sales growth of the Information and
Learning business. Net sales of the Information and Learning
business increased $6.9 million, or 16%, to $50.4 million due to
a growing electronic subscription base, and reflects the
acquisition of Chadwyck-Healey (a leading provider of humanities
and social service reference and research publications for the
academic, professional and library markets) in the fourth quarter
of 1999. Sales of electronic content increased 50%, with the
electronic subscription base continuing to reflect strong sales
of ProQuest Direct (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 more traditional
microfilm and paper products (which represent 44% of Information
and Learning first quarter 2000 sales) decreased slightly versus
the prior year as lower unit volumes more than offset increased
pricing.
Net sales of the Publishing Services business decreased $1.0
million, or 3%, to $35.6 million in the first quarter of 2000 as
increased sales of dealer management systems to powersports
dealerships and increased sales of performance database products
were more than offset by lower sales of electronic parts catalogs
and ancillary products to automotive dealerships. The adverse
prior year comparison for automotive sales is impacted by a
strong first quarter of 1999, an initiative by Chrysler to
eventually produce their own electronic parts catalog (which has
slowed both sales and renewals with Chrysler dealerships), and
lower hardware sales in the current year (as the former
proprietary hardware systems have been previously replaced). As
the hardware products were at modest gross margins, the lower
hardware sales had minimal impact on profitability. Despite the
-10-
<PAGE>
modest sales decline in the current year, the installed base of
systems continues to grow in the mid-teens and now exceeds 30,000
sites worldwide.
The Company's cost of sales increased $4.8 million, or 11%
to $47.3 million in the first quarter of 2000, with the gross
profit (net sales less cost of sales) percentage decreasing by
2.0 percentage points to 44.9. The lower gross profit percentage
in 2000 primarily resulted from a less profitable product mix and
additional costs to provide increased data center capacity for
ProQuest to accommodate current/future sales growth
opportunities.
Research and development expense of $4.4 million in the
first quarter 2000 approximates the prior year level as the
Company continues to invest significantly in new product
offerings. The Company continually seeks to take advantage of
new product/technology opportunities (with an continued emphasis
on internet capabilities and software solutions) in each of its
businesses. The Company's research and development expenditures
include investments in a variety of e-commerce initiatives,
expenses for database and software development, information
delivery systems and other electronic devices for the Information
and Learning and Publishing Services businesses.
Selling and administrative expense increased $1.0 million,
or 3%, to $28.9 million in the first quarter of 2000, with the
respective percentage of sales improving by 1.3 percentage points
to 33.6% in the current year. Such costs reflect continued
investment in a variety of e-commerce initiatives,
sales/marketing resources to capitalize on the sales growth
opportunities from internet based products, as well as increased
distribution costs associated with the higher sales volumes.
Partially offsetting investments in e-commerce initiatives
in the first quarter of 2000 (which totaled $2.5 million in the
Information and Learning and Publishing Services businesses),
were gains on sales of assets of $1.4 million related to the sale
of:
- - a portion of the Company's investment in its affiliate
(bigchalk.com) resulting from the exercise of stock
options granted to employees (gain on sale of $.9
million), and
- - the Company's investment in an entity acquired by
bigchalk.com in exchange for additional common stock of
bigchalk.com (gain of $.5 million).
-11-
<PAGE>
Earnings from continuing operations before interest, income
taxes, equity in earnings of affiliate, and cumulative effect of
a change in accounting principle increased $1.7 million, or 35%,
to $6.7 million in the first quarter of 2000 resulting from the
increased sales and leveraged operating costs/expenses (despite
investing in e-commerce related initiatives). EBITDA (which adds
back depreciation and amortization - including $3.2 million in
acquisition amortization) increased $4.1 million, or 26%, to
$19.8 million in the first quarter of 2000.
Net interest expense increased $2.2 million, or 64%, to $5.6
million in the first quarter of 2000, primarily reflecting
increased debt levels associated with funding acquisitions in the
prior year.
Income tax expense decreased in the first quarter of 2000 as
a result of the lower level of pretax profit, with the income tax
rate remaining constant with the prior year.
In December 1999, the Company combined its kindergarten
through twelfth grade ("K-12") internet business with the K-12
internet business from Infonautics, Inc., to form bigcalk.com,
with the equity in bigchalk.com's loss equaling $3.7 million in
the first quarter of 2000. Subsequent to both venture capital
financing and the sale of the Company's investment in an entity
acquired by bigchalk.com (in exchange for additional common
stock) in the first quarter of 2000, the company owns
approximately 46% of bigchalk.com. bigchalk.com develops and
markets products and services for research, curriculum
integration, assessment, peer collaboration, professional
development, online community, and e-commerce for teachers,
students, parents, librarians and school administrators in the
K-12 educational community.
In the first quarter of 2000, the Company adopted a plan to
divest its Mail and Messaging Technologies/Imaging business and
its financing subsidiary. Accordingly, the operating results of
these businesses have been segregated from the Company's
continuing operations, and are separately reported as a
discontinued operation in the consolidated financial statements.
Net sales for these businesses decreased $5.4 million, or 4%, to
$137.8 million in the first quarter of 2000. Although service
revenues increased $6.2 million, or 9%, to $72.3 million (and
represent 52% of first quarter sales) due to both an expanded
customer base and increased pricing as well as the acquisition of
the service business of TAB Products Company in the second
quarter of 1999, such increase was more than offset by lower
equipment sales in the current year. Earnings before
restructuring charges, interest and income taxes decreased $1.3
million, or 13%, to $8.2 million resulting from the lower sales
-12-
<PAGE>
volumes. A further restructuring charge of $3.6 million was
recorded in the first quarter of 2000 primarily related to
further personnel reductions/space consolidation in Europe.
Such restructuring charge was the primary cause of earnings from
discontinued operations of $1.1 million in the first quarter of
2000 being $3.0 million below the prior year.
In December 1999, the Securities and Exchange Commission ("SEC")
issued Staff Accounting Bulletin No. 101, Revenue Recognition in
Financial Statements. As a result of this pronouncement (which
became effective in the current fiscal year), the Company has
modified its accounting for new on-line subscriptions in the
Information and Learning business. Previously, revenue for new
on-line subscriptions was recognized during the initial
subscription period proportional to costs incurred, in order to
yield a constant gross profit percentage throughout the
subscription period. Consistent with the new SEC guidelines,
such revenues are now recognized equally throughout the initial
subscription period, with appropriate cost deferral. The
cumulative effect of adopting this change in accounting principle
of $5.6 million was recognized as of the beginning of the current
fiscal year.
Cash provided by operations was $8.0 million in the first
quarter of 2000, versus cash used by operations of $1.4 million
in the prior year. As a result of the cash provided by
operations together with proceeds from asset sales/stock issuance
which were partially offset by capital expenditures, debt (net of
cash and cash equivalents) decreased by $1.2 million, to $528.4
million in the first quarter of 2000.
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 April 1, 2000. 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 1,
2000.
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
------------ -----------
(27.1) Financial Data Schedule for Q1 2000,
and restated for Q1 1999.
(b) Reports on Form 8-K.
No reports on Form 8-K were filed for the thirteen weeks
ended April 1, 2000.
-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: May 9, 2000 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-
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<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.
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<PERIOD-END> APR-01-2000 APR-03-1999
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0 0
0 0
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<OTHER-SE> (6283) (17377)
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<NET-INCOME> (7543) 5076
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