UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended September 30, 1996
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Commission file number 0-3037
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WILLIAM H. SADLIER, INC.
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(Exact name of registrant as specified in its charter)
New York 13-5363840
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
9 Pine Street, New York, New York 10005-1002
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(Address of principal executive office) (Zip Code)
Registrant's telephone number, including area code (212) 227-2120
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Not Applicable
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Former name, former address and former fiscal year, if changed since
last report.
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
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of October 31,1996.
Common stock, par value $0.25 per share: 888,058 shares outstanding.
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<TABLE>
<CAPTION>
Item 1. Financial Statements
WILLIAM H. SADLIER, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
September 30, December 31,
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1996 1995 1995
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(Unaudited) (Note)
<S> <C> <C> <C>
ASSETS:
Cash and cash equivalents $ 2,181,303 $ 1,905,960 $ 687,805
Accounts receivable 9,653,952 9,698,288 2,602,658
Inventories:
Bound books and merchandise 2,657,937 2,170,673 2,465,398
Sheet stock and work in process 3,598 10,560 20,239
Paper 203,718 175,232 230,050
------------ ------------ ------------
2,865,253 2,356,465 2,715,687
Prepaid expenses 370,730 376,971 277,007
Deferred income taxes 917,600 645,200 917,600
------------ ------------ ------------
Total current assets 15,988,838 14,982,884 7,200,757
Fixed assets--net 928,872 1,049,447 1,002,171
Deferred pre-publication costs 6,120,382 6,833,395 6,707,073
Other assets 953,834 762,414 827,128
------------ ------------ ------------
$ 23,991,926 $ 23,628,140 $ 15,737,129
============ ============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current portion of long-term debt $ 100,000 $ 100,000 $ 100,000
Notes payable--banks 4,900,000 5,800,000 --
Accounts payable 874,967 816,663 793,244
Accrued royalties 1,308,392 1,144,987 1,169,693
Other liabilities and
accrued expenses 3,137,921 2,606,514 1,664,621
------------ ------------ ------------
Total current liabilties 10,321,280 10,468,164 3,727,558
Long-term debt 125,000 225,000 200,000
Deferred income taxes 31,300 41,800 31,300
Shareholders' equity:
Common shares 225,000 225,000 225,000
Retained earnings 13,330,199 12,699,909 11,585,004
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13,555,199 12,924,909 11,810,004
Less treasury shares, at cost (40,853) (31,733) (31,733)
------------ ------------ ------------
13,514,346 12,893,176 11,778,271
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$ 23,991,926 $ 23,628,140 $ 15,737,129
============ ============ ============
Note: The balance sheet at December 31, 1995 has been taken from the audited financial statements
at that date and condensed.
</TABLE>
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<TABLE>
<CAPTION>
WILLIAM H. SADLIER, INC. AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS AND RETAINED EARNINGS
(Unaudited)
Nine months ended Three months ended
September 30, September 30,
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1996 1995 1996 1995
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<S> <C> <C> <C> <C>
Net sales $ 23,075,600 $ 20,882,112 $ 15,592,449 $ 13,899,951
Operating costs and expenses:
Manufacturing, royalty
and amortization 7,202,407 6,873,704 4,238,031 3,962,515
Editorial and distribution 2,495,406 2,675,031 551,303 669,252
Selling, general and
administrative 9,559,599 7,737,623 3,317,799 2,569,457
------------ ------------ ------------ ------------
19,257,412 17,286,358 8,107,133 7,201,224
------------ ------------ ------------ ------------
Operating income 3,818,188 3,595,754 7,485,316 6,698,727
Other income (expenses):
Interest income 180 685 33 163
Other income 33,509 21,169 8,377 880
Interest expense (416,070) (421,633) (211,392) (219,201)
------------ ------------ ------------ ------------
(382,381) (399,779) (202,982) (218,158)
------------ ------------ ------------ ------------
Income before income taxes 3,435,807 3,195,975 7,282,334 6,480,569
Provision for income taxes 1,512,000 1,374,000 3,204,000 2,786,000
------------ ------------ ------------ ------------
Net income 1,923,807 1,821,975 4,078,334 3,694,569
Retained earnings at beginning
of period 11,585,004 10,967,364 9,430,477 9,094,770
------------ ------------ ------------ ------------
Cash dividends, $.20 and $.10
per share in 1996 and 1995
repectively (178,612) (89,430) (178,612) (89,430)
------------ ------------ ------------ ------------
Retained earnings at end of
period $ 13,330,199 $ 12,699,909 $ 13,330,199 $ 12,699,909
============ ============ ============ ============
Income per common share
$ 2.15 $ 2.04 $ 4.57 $ 4.13
============ ============ ============ ============
Average common shares
outstanding 893,237 894,296 893,058 894,296
============ ============ ============ ============
</TABLE>
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<TABLE>
<CAPTION>
WILLIAM H. SADLIER, INC.
AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH
FLOWS
Nine months ended
September 30
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1996 1995
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<S> <C> <C>
CASH FLOW USED IN OPERATIONS:
Cash used in operations $(1,833,155) $(2,698,335)
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CASH FLOW USED IN INVESTING ACTIVITIES:
Capital expenditures (79,306) (41,227)
Prepublication cost expenditures (1,231,309) (1,861,563)
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Cash used in investing activities (1,310,615) (1,902,790)
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CASH FLOW FROM FINANCING ACTIVITIES:
Net borrowings under lines of credit 4,900,000 5,800,000
Dividends paid (178,612) (89,430)
Repayment of long-term debt (75,000) (75,000)
Purchase of treasury shares (9,120) --
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Cash provided by financing activities 4,637,268 5,635,570
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Increase in cash and cash equivalents 1,493,498 1,034,445
Cash and cash equivalents at beginning of period 687,805 871,515
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Cash and cash equivalents at end of period $ 2,181,303 $ 1,905,960
=========== ===========
OTHER CASH FLOW INFORMATION:
Depreciation and amortization $ 1,970,606 $ 2,003,384
=========== ===========
</TABLE>
<PAGE>
WILLIAM H. SADLIER, INC. AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Condensed Consolidated Financial Statements
The condensed consolidated balance sheets as of September 30, 1996 and 1995,
and both the condensed consolidated statements of operations and retained
earnings and the condensed consolidated statements of cash flows for the
nine-month and three-month periods then ended have been prepared by the Company
without audit. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and changes in cash flows for all periods
presented have been made.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. It is suggested that these condensed
consolidated financial statements be read in conjunction with the financial
statements and related notes included in the Company's Annual Report for the
year ended December 31, 1995.
2. Seasonality
Historically, educational publishing has been subject to the seasonality
associated with the educational year, resulting in a concentration of sales in
the third calendar quarter. Therefore, the results of operations for the nine
months ended September 30, 1996 should not necessarily be considered indicative
of the results for the year ending December 31, 1996.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Net sales in the nine months ended September 30, 1996 rose from $20,882,000 to
$23,076,000, or 10%, compared with the same period in 1995. Sales of religion
products increased by 4% and sales of non-religion products increased by 25%.
The Company's sales to public schools were up by 26%. Coming to Faith remained
strong and the new First Eucharist and First Reconciliation provided growth in
the sacrament program. Initial sales of Sadlier Phonics together with New
Progress in Mathematics and Vocabulary Workshop, accounted for the increase in
non-religion products.
Manufacturing costs decreased slightly as a percentage of net sales due to the
easing of paper prices in 1996. No significant fluctuation in paper prices is
anticipated at this time. Distribution expenses were reduced because more of the
Company's order fulfillment costs were charged to customers. Selling, general
and administrative expenses increased from 37% to 41%. Selling expenses rose in
1996, reflecting costs related to the new Sadlier Phonics series, the expanded
promotion of New Progress in Mathematics, Vocabulary Workshop and the Company's
other language art products, and a network of independent sales representatives
selling to public schools.
Operating income in the nine months ended September 30, 1996 increased from
$3,596,000 to $3,818,000, or 6%. Net income for the nine months was $1,924,000,
or $2.15 per share, in 1996 compared with $1,822,000, or $2.04 per share, in
1995. The Company's fourth quarter is historically a loss period since
educational publishing sales decline while operating expenses continue. Net
income and income per share for the full year will be lower than the nine month
amounts.
The provisions for income taxes in 1996 and 1995 were based on the
effective tax rates estimated for each full year.
Liquidity and Capital Resources
Cash and cash equivalents and working capital at September 30, 1996 increased by
$275,000 and $1,153,000, respectively, from the comparable date in 1995,
primarily due to reduced prepublication cost expenditures and an increase in
payments received from customers in 1996. The increase in inventories over 1995
levels, which had been $1,263,000 at June 30, 1996, declined to $509,000 at
September 30, 1996, and is expected to be reduced further by year end.
Cash flow provided by operations has generally been sufficient to finance
investment in new products, equipment and facilities, dividends paid to
shareholders and the repayment of short term bank borrowing. Management believes
this will continue to be true for the balance of 1996.
In October of 1996, the Company completed the increase in its bank lines of
credit, from $10,500,000 to $12,000,000. Each year, because of the seasonality
associated with educational publishing, the Company must draw on its lines of
credit. During the latter part of each year, such borrowing is repaid and excess
funds are available for investment in cash equivalents and short-term
securities. At September 30, 1996 and 1995, such short-term borrowing amounted
to $4,900,000 and $5,800,000, respectively. The Company's peak borrowing was
$10,700,000 in 1996 and $10,000,000 in 1995.
In 1994, the Company financed the acquisition of a textbook series from another
publisher with a $400,000 unsecured four year term loan, payable in equal
monthly installments with interest. $225,000 of the principal amount was
outstanding at September 30, 1996.
<PAGE>
PART II. OTHER INFORMATION
All items required hereunder have been omitted because they are inapplicable or
would result in negative answers.
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.
WILLIAM H. SADLIER, INC.
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(Registrant)
November 7, 1996 By: /s/ Frank S. Dinger
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(Date) Frank S. Dinger
Chairman of the Board
and Chief Operating Officer
November 7, 1996 By: /s/ Henry E. Christel
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(Date) Henry E. Christel
Vice President,Treasurer
Principal Financial Officer
November 7, 1996 By: /s/ Dasil C. Thomas
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(Date) Dasil C. Thomas
Controller
Principal Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains financial information extracted from the Condensed
Consolidated Balance Sheets and Condensed Consolidated Statements of
Operations and Retained Earnings in accordance with Article 5 of
Regulation S-X.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,181,303
<SECURITIES> 0
<RECEIVABLES> 10,309,084
<ALLOWANCES> 655,132
<INVENTORY> 2,865,253
<CURRENT-ASSETS> 15,988,838
<PP&E> 2,061,326
<DEPRECIATION> 1,132,454
<TOTAL-ASSETS> 23,991,926
<CURRENT-LIABILITIES> 10,321,280
<BONDS> 0
0
0
<COMMON> 225,000
<OTHER-SE> 13,289,346
<TOTAL-LIABILITY-AND-EQUITY> 23,991,926
<SALES> 23,075,600
<TOTAL-REVENUES> 23,075,600
<CGS> 7,202,407
<TOTAL-COSTS> 19,257,412
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 416,070
<INCOME-PRETAX> 3,435,807
<INCOME-TAX> 1,512,000
<INCOME-CONTINUING> 1,923,807
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,923,807
<EPS-PRIMARY> 2.15
<EPS-DILUTED> 2.15
</TABLE>
