-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, tSaJFspf5QaNQe6hlECZPnfmZICXusOtL842beEMwJkqY6N1YzOoLyGg3S5u2zz0 2qyOZ8AmXl5htWkciQO8Sg== 0000205700-95-000005.txt : 19950512 0000205700-95-000005.hdr.sgml : 19950512 ACCESSION NUMBER: 0000205700-95-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950511 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: NEW ENGLAND BUSINESS SERVICE INC CENTRAL INDEX KEY: 0000205700 STANDARD INDUSTRIAL CLASSIFICATION: MANIFOLD BUSINESS FORMS [2761] IRS NUMBER: 042942374 STATE OF INCORPORATION: DE FISCAL YEAR END: 0627 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11427 FILM NUMBER: 95536538 BUSINESS ADDRESS: STREET 1: 500 MAIN ST CITY: GROTON STATE: MA ZIP: 01471 BUSINESS PHONE: 5084486111 10-Q 1 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 March 31, 1995. OR TRANSITION REPORT PURSUANT TO SECTION 13 OF 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ________ to ________ Commission file number 0-8564 NEW ENGLAND BUSINESS SERVICE, INC. (Exact name of the registrant as specified in its charter) Delaware 04-2942374 ------------------------------- ------------------ (State or other jurisdiction of (I. R. S. Employer incorporation or organization) Identification No.) 500 Main Street, Groton, Massachusetts 01471 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) (508) 448-6111 ------------------- (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 and 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 common shares of the Registrant outstanding on March 31, 1995 was 15,041,556.
NEW ENGLAND BUSINESS SERVICE, INC. CONSOLIDATED BALANCE SHEET (In Thousands Except Share Data) Mar. 31, June 24, 1995 1994 --------- -------- ASSETS Current Assets Cash and cash equivalents $ 6,405 $ 3,456 Short term investments 21,956 37,532 Accounts receivable 30,605 27,963 Inventories 9,136 7,740 Direct mail advertising materials 2,968 1,698 Prepaid expenses 2,751 1,439 Deferred income tax benefit 7,465 5,460 -------- -------- Total current assets 81,304 85,288 Property and Equipment Land and buildings 39,521 38,417 Less: accumulated depreciation 19,813 18,849 -------- -------- Net 19,708 19,568 Equipment 73,077 66,648 Less: accumulated depreciation 53,618 48,525 -------- -------- Net 19,459 18,123 Property and equipment - net 39,167 37,691 Other Assets - net 9,183 8,712 -------- -------- TOTAL ASSETS $129,654 $131,691 ======== ========
NEW ENGLAND BUSINESS SERVICE, INC. CONSOLIDATED BALANCE SHEET (Continued) (In Thousands Except Share Data) Mar. 31, June 24, 1995 1994 --------- -------- LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Accounts payable $ 8,790 $ 6,702 Accrued Federal and state income taxes 2,385 2,519 Accrued profit-sharing distribution 2,073 2,627 Accrued payroll expense 3,767 5,466 Accrued employee benefit expense 8,259 5,637 Accrued exit costs 1,947 0 Accrued restructuring charge 508 1,887 Other accrued expenses 5,881 5,254 -------- -------- Total current liabilities 33,610 30,092 Deferred Grants 340 326 Deferred Income Taxes 938 1,794 STOCKHOLDERS' EQUITY Preferred stock Common stock 15,651 15,572 Additional paid in capital 10,656 9,480 Cumulative foreign currency translation adjustment ( 1,809) ( 2,152) Retained earnings 81,573 78,306 -------- -------- Total 106,071 101,206 Less: treasury stock ( 11,305) ( 1,727) -------- -------- Stockholders' Equity 94,766 99,479 -------- -------- TOTAL LIABILITIES & STOCKHOLDERS' EQUITY $129,654 $131,691 ======== ========
See Notes to Consolidated Financial Statements
NEW ENGLAND BUSINESS SERVICE, INC. CONSOLIDATED STATEMENTS OF INCOME (Dollars in Thousands Except Per Share Data) Three Months Ended Nine Months Ended ------------------------- ------------------------- Mar. 31, Mar. 25, Mar. 31, Mar. 25, 1995 1994 1995 1994 --------- --------- --------- --------- NET SALES $ 68,832 $ 63,424 $ 200,390 $ 188,794 OPERATING EXPENSES: Cost of sales 24,620 23,312 71,151 69,228 Selling and advertising 20,102 17,016 54,461 52,643 General and administrative 18,073 14,813 51,964 43,005 Exit costs 1,964 0 1,964 0 Restructuring charge 0 0 0 6,000 --------- --------- --------- --------- Total operating expenses 64,759 55,141 179,540 170,876 --------- --------- --------- --------- INCOME FROM OPERATIONS 4,073 8,283 20,850 17,918 OTHER INCOME/(EXPENSE): Investment income 314 326 978 887 --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 4,387 8,609 21,828 18,805 --------- --------- --------- --------- PROVISION FOR INCOME TAXES: Federal 1,326 2,733 7,035 6,041 State 423 957 2,087 2,116 --------- --------- --------- --------- Total 1,749 3,690 9,122 8,157 --------- --------- --------- --------- NET INCOME BEFORE EQUITY IN LOSSES OF INVESTMENT 2,638 4,919 12,706 10,648 Equity in losses of investment ( 68) 0 ( 244) 0 --------- --------- --------- --------- NET INCOME $ 2,570 $ 4,919 $ 12,462 $ 10,648 ========= ========= ========= ========= PER SHARE AMOUNTS: Net Income $ . 17 $ .32 $ .81 $ .69 ========= ========= ========= ========= Dividends $ .20 $ .20 $ .60 $ .60 ========= ========= ========= ========= WEIGHTED AVERAGE SHARES OUTSTANDING 15,142 15,393 15,340 15,337 ========= ========= ========= =========
See Notes to Consolidated Financial Statements
NEW ENGLAND BUSINESS SERVICE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In Thousands) Nine Months Ended ------------------------- Mar. 31, Mar. 25, 1995 1994 --------- --------- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 12,462 $ 10,648 Adjustments to reconcile net income to cash: Depreciation and amortization 9,061 8,995 Deferred income taxes ( 2,785) ( 910) Other non-cash items 4,541 8,017 Changes in assets and liabilities: Accounts receivable ( 4,854) ( 3,972) Inventories and advertising material ( 2,687) ( 729) Prepaid expenses ( 1,319) 466 Accounts payable 2,128 817 Income taxes payable ( 137) 607 Other accrued expenses ( 408) ( 1,263) -------- -------- Net cash provided by operating activities 15,727 22,676 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property and equipment ( 8,958) ( 3,760) Purchase of investments ( 24,461) ( 33,364) Proceeds from sale of investments 39,981 16,059 Other assets ( 386) ( 208) Investment in unconsolidated subsidiary ( 1,800) 0 -------- -------- Net cash provided by (used in) investing activities 4,376 ( 21,273) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Payment of debt ( 36) ( 37) Proceeds from issuing common stock 1,516 2,045 Issuance (purchase) of treasury stock ( 9,578) ( 124) Dividends paid ( 9,195) ( 9,199) -------- -------- Net cash (used in) financing activities ( 17,293) ( 7,315) -------- -------- EFFECT OF EXCHANGE RATE ON CASH 139 ( 53) -------- --------
NEW ENGLAND BUSINESS SERVICE, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued) (In Thousands) Nine Months Ended ------------------------- Mar. 31, Mar. 25, 1995 1994 --------- --------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,949 ( 5,965) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 3,456 10,061 -------- -------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,405 $ 4,096 ======== ========
See Notes to Consolidated Financial Statements NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ 1. Basis of Presentation --------------------- The consolidated financial statements contained in this report are unaudited but reflect all adjustments, consisting only of normal recurring adjustments, which are, in the opinion of management, necessary for a fair statement of the results of the interim periods reflected. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to applicable rules and regulations of the Securities and Exchange Commission. The results of operations for the interim period reported herein are not necessarily indicative of results to be expected for the full year. 2. Accounting Policies ------------------- The consolidated financial statements included herein should be read in conjunction with the financial statements and notes thereto, and the Independent Auditors' Report incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended June 24, 1994 from the Company's 1994 Annual Report to Shareholders. Reference is made to the accounting policies of the Company described in the notes to consolidated financial statements incorporated by reference in the Company's Annual Report on Form 10-K for the fiscal year ended June 24, 1994 from the Company's 1994 Annual Report to Shareholders. The Company has consistently followed those policies in preparing this report. 3. Inventories ----------- Inventories are carried at the lower of first-in, first-out cost or market. Inventories at March 31, 1995 and June 24, 1994 consisted of: Mar. 31, June 24, 1995 1994 ----------- ----------- Raw paper $ 727,000 $ 721,000 Business forms and related office products 8,409,000 7,019,000 ----------- ----------- Total $ 9,136,000 $ 7,740,000 =========== ===========
4. Accounting for Income Taxes --------------------------- During the first quarter of fiscal year 1995, the Internal Revenue Service completed an examination of the Company's federal income tax returns for years 1989 through 1992 and proposed various adjustments to increase taxable income in these periods. The most significant adjustments involve disallowances of current deductions in favor of future deductions. Accordingly, because of the nature of these adjustments, there was no significant impact on the Company's current year effective tax rate. 5. Investment in Unconsolidated Subsidiary --------------------------------------- On July 8, 1994, the Company acquired a 19 percent equity interest in GST Software, plc (GST) for $1,800,000 together with an option to acquire the balance of GST shares. GST is a privately held company based in the United Kingdom which develops and markets desktop publishing graphic design software which the Company will market under an exclusive distribution agreement in North America. The Company has elected to treat its investment under the equity method of accounting due to the degree of control it can exercise over GST's operations. Accordingly, it is recording a share of GST's losses for the period. The difference between the Company's underlying equity in net tangible assets of GST and its investment has been recorded as goodwill. 6. Postemployment Benefits ----------------------- As of June 25, 1994, the Company adopted SFAS No. 112, entitled "Employers' Accounting for Postemployment Benefits." The adoption of this standard did not have a material effect on the accompanying consolidated financial statements. 7. Investments in Debt and Equity Securities ----------------------------------------- As of June 25, 1994, the Company adopted SFAS No. 115, entitled "Accounting for Certain Investments in Debt and Equity Securities." Adoption of this standard resulted in the Company classifying the investments held in its portfolio as "available-for-sale securities." The adoption of this standard did not have a material effect on the accompanying consolidated financial statements as the market value of the underlying investments approximated the amount carried on the balance sheet at March 31, 1995. 8. Exit Costs ---------- During the third quarter of fiscal year 1995, the Company made the decision to close its Wisconsin based SYCOM subsidiary and to integrate SYCOM's activities into other of the Company's operations. The accompanying consolidated statements of income include a $1,964,000 pretax charge for exit costs associated with the SYCOM closure recognized in the third quarter ended March 31, 1995. The charge for exit costs reduced third quarter net income by $1,119,000, or $.07 per share. 8. Exit Costs (Continued) ---------------------- The $1,964,000 pretax exit cost charge consisted of facilities and equipment write-offs of $792,000 and termination benefits of $1,172,000. Approximately 103 employees will be terminated as a result of the facility closing. As of March 31, 1995, approximately $17,000 has been expended related to termination benefits. The closure of the facility is expected to be substantially completed by the end of fiscal 1995. 9. Other Items ----------- On October 20, 1994, the Company announced a plan to repurchase up to $22,000,000 of its common stock in the open market. Unless renewed or completed earlier, the repurchase will terminate on June 30, 1995. As of March 31, 1995, the Company had purchased 563,050 shares at a cumulative cost of approximately $10,599,000. On October 20, 1994, the Company announced an amendment to the Company's Rights Agreement. The material changes in the agreement include the deletion of the Adverse person provision, the lowering of the threshold at which an acquiring person will trigger the rights from 20% to 15%, and the inclusion of a one common share per right exchange feature. On October 28, 1994, the stockholders approved The NEBS 1994 Key Employee and Eligible Director Stock Option and Stock Appreciation Rights Plan. Under the "1994 Plan," options or stock appreciation rights for up to 1,200,000 shares of common stock may be granted. On October 28, 1994 the stockholders approved the New England Business Service, Inc. Stock Compensation Plan (the "Plan"). The purpose of the Plan is to provide for the mandatory or voluntary receipt of shares of the Company's common stock in lieu of an equivalent amount of cash, in payment in whole or in part for certain types of regular, bonus or other special compensation. There are a total of 300,000 shares available for issuance under the Plan. MANAGEMENT DISCUSSION AND ANALYSIS Liquidity and Capital Resources - ------------------------------- Cash provided by operating activities during the nine months ended March 31, 1995 was $15.7 million and represented a $7.0 million decrease from the $22.7 million provided during the same period last year. The decrease was primarily the result of a payment of additional taxes resulting from the Company's most recent Federal audit, increased inventory investment and cash payments related to the restructuring charge taken during the first quarter of fiscal year 1994. Working capital at March 31, 1995 amounted to $47.7 million and included $28.4 million of cash and short term investments. The balances compare to working capital of $52.5 million and cash and short term investments of $38.9 million at March 25, 1994 and working capital of $55.2 million and cash and short term investments of $41.0 million at June 24, 1994. The decrease in cash and short term investments is due in part to the repurchase of $10.6 million of the Company's stock in accordance with the authorization to purchase up to $22.0 million of the Company's stock announced in October, 1994. In addition, the decrease is due in part to the Company's acquisition of a 19 percent equity interest in GST Software, plc (GST) for $1.8 million together with an option to purchase the balance of GST shares. Capital expenditures for the nine months totaled $9.0 million and represented a significant increase over the $3.8 million expended during the first nine months of fiscal year 1994 which were lower due to cost containment activities. The Company expects that capital outlays will continue at about the same pace for the remainder of fiscal year 1995. These outlays are designed to upgrade existing systems, increase capacity and meet the needs of strategic initiatives throughout the Company. In addition to its present cash and investment balances, the Company has consistently generated sufficient cash internally to fund its needs for working capital, dividends and capital expenditures. However, should the Company need additional funds, it has an unsecured line of credit with a major bank for $10.0 million. At present, there are no outstanding balances against this line. Results of Operations - --------------------- The quarter ended March 31, 1995 included fourteen weeks as compared to thirteen weeks in prior year's third quarter. Net sales for the quarter increased 8.5% to $68.8 million; an increase of $5.4 million over the same period last year. The sales increase was composed of the impact of the additional week of 4.2% or $2.7 million, volume growth of 2.4% or $1.5 million and price increases of approximately 1.9% or $1.2 million. On a year to date basis, net sales increased 6.1% to $200.4 million from $188.8 million. This increase was the result of increased volume of 2.7% or $5.1 million, price increases of 2.0% or $3.8 million and the impact of the additional week in fiscal year 1995 of 1.4% or $2.7 million. The primary source of growth during the quarter was from the computer forms and software product lines as well as the Company's Image product lines. Sales related to these product lines each accounted for approximately 35% of the growth in sales for the quarter. For the year, computer forms and software product lines have accounted for approximately 50% of the Company's growth. For the quarter, cost of sales decreased from 36.8 % to 35.8% of sales during last year's third quarter. This decrease was caused primarily by a shift in product mix as well as stable material costs. It is expected that the cost of paper will increase in the foreseeable future due to strong demand and limited capacity in the paper industry. The Company has taken steps necessary to mitigate the impact including the acceleration of paper purchases. Paper cost increases are expected to have little impact to the Company during the remainder of fiscal year 1995, and the Company anticipates being able to offset the impact of the cost increase with price increases and cost reduction initiatives during fiscal year 1996. Year to date, cost of sales improved from 36.7% to 35.5% of sales. This improvement was the result of price increases in several product lines as well as stable material costs and reduced spoilage. Selling and advertising expenses increased from 26.8% of net sales to 29.2% during the quarter. The increase was caused primarily by costs related to software development and by marketing channel development costs. On a year to date basis, selling and advertising expenses decreased from 27.9% to 27.2% of net sales. More effective promotional programs, better targeted mail to customers and the impact of last year's restructuring program were primarily responsible for the improvement. The United States Postal Service increased third class postage rates by approximately 14% in January, 1995. The Company has reduced the size and weight of some mail pieces and eliminated marginal mailings to compensate for the postage increase in the short term. The Company anticipates being able to raise prices to offset the cost increase in the longer term. General and administrative expenses increased from 23.4% of sales to 26.2% for the quarter and from 22.8% to 25.9% on a year to date basis. These increases were the result of costs associated with servicing the Company's expanded software product line, capital improvements to the Company's order processing system, and the impact of decreased profit sharing in the first quarter of last year. During the first quarter of last year the Company recorded a $6.0 million pretax charge related to a restructuring program. As of March 31, 1995 approximately $.5 million is remaining in the reserve; these amounts will be expended pursuant to severance and other agreements. During the third quarter, the Company recorded a $2.0 million pretax charge, or $.07 per share, related to exit costs associated with the closure of the Company's Wisconsin based SYCOM subsidiary. The Company also incurred additional pretax integration expense of approximately $.4 million, and expects to incur additional fourth quarter pretax integration expense of approximately $1.6 million. The additional integration expense includes systems conversion, personnel and equipment relocation and related transition expenditures. The objectives of the closure are to integrate the activities of the SYCOM subsidiary into several of the Company's other facilities to achieve operating efficiencies as well as improve service to SYCOM's customers. The $2.0 million pretax charge for exit costs consisted of (i) approximately $1.2 million of anticipated cash payments related to postemployment benefits in conjunction with the termination of approximately 103 employees, and (ii) approximately $.8 million related to the anticipated non-cash outflows associated with facilities and equipment write-offs. The integration program is expected to be completed over the next three months. When fully completed, the integration is expected to save the Company about $1.8 million annually. The provision for income taxes as a percentage of pretax income decreased from 1994 to 1995 due primarily to the completion of a series of tax audits as well as higher tax free interest yields on the Company's marketable securities portfolio for both the quarter and year to date. In fiscal year 1995, the Company's adoption of Statement of Financial Accounting Standards (SFAS) No. 112, "Employers' Accounting for Post Employment Benefits" and SFAS No. 115, "Accounting for Certain Investments in Debt and Equity Securities" were not significant to the financial statements. PART II - OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibit No. Description ----------- ----------- (11) Statement re computation of per share earnings. (27) Article 5 Financial Data Schedule b. Reports on Form 8-K None 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. NEW ENGLAND BUSINESS SERVICE, INC. ---------------------------------- (Registrant) May 11, 1995 /s/Russell V. Corsini, Jr. - ---------------- ---------------------------------- Date Russell V. Corsini, Jr., Principal Financial and Accounting Officer EX-11 2 New England Business Service, Inc. Statement Re Computation of Per Share Earnings (In Thousands Except Per Share Data) Exhibit 11 ---------- Three Months Ended Nine Months Ended March 31, 1995 March 31, 1995 ------------------ ------------------ Fully Fully Primary Diluted Primary Diluted ------- ------- ------- ------- Shares - ------ Weighted Average Shares of Common Stock 15,142 15,142 15,340 15,340 Add: Common Stock Equivalents in the form of Stock Options 123 (1) 119 (1) 128 (1) 118 (1) ------- ------- ------- ------- Weighted Average Common Stock and Common Stock Equivalents 15,265 15,261 15,468 15,458 ======= ======= ======= ======= Earnings - -------- Earnings per Consolidated Statement of Income $ 2,570 $ 2,570 $12,462 $12,462 ======= ======= ======= ======= Earnings per Share $ .17 $ .17 $ .81 $ .81 ======= ======= ======= ======= (1) Amount considered immaterial for inclusion in earnings per share calculation as defined in Accounting Principles Board Opinion No. 15. EX-27 3
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET OF NEW ENGLAND BUSINESS SERVICE, INC. AND ITS SUBSIDIARIES AS OF MARCH 31, 1995 AND THE RELATED STATEMENTS OF CONSOLIDATED INCOME AND CASH FLOWS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS 9-MOS JUN-30-1995 JUN-30-1995 MAR-31-1995 MAR-31-1995 6,405 6,405 21,956 21,956 33,872 33,872 (3,267) (3,267) 9,136 9,136 81,304 81,304 112,598 112,598 (73,431) (73,431) 129,654 129,654 33,610 33,610 0 0 15,651 15,651 0 0 0 0 79,115 79,115 129,654 129,654 68,832 200,390 68,832 200,390 24,620 71,151 40,139 108,389 (246) (734) 712 2,203 0 0 4,387 21,828 1,749 9,122 2,570 12,462 0 0 0 0 0 0 2,570 12,462 .17 .81 .17 .81
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