Attached files
| file | filename |
|---|---|
| EX-21 - EXHIBIT 21 - BUREAU OF NATIONAL AFFAIRS INC | exhibit21.htm |
| EX-31.1 - EXHIBIT 31.1 - BUREAU OF NATIONAL AFFAIRS INC | exhibit31_1.htm |
| EX-32.1 - EXHIBIT 32.1 - BUREAU OF NATIONAL AFFAIRS INC | exhibit32_1.htm |
| EX-31.2 - EXHIBIT 31.2 - BUREAU OF NATIONAL AFFAIRS INC | exhibit31_2.htm |
| EX-32.2 - EXHIBIT 32.2 - BUREAU OF NATIONAL AFFAIRS INC | exhibit32_2.htm |
| EX-23.1 - EXHIBIT 23.1 - BUREAU OF NATIONAL AFFAIRS INC | exhibit23_1.htm |
UNITED
STATES
SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM
10-K
(Mark
One)
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(X)
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ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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OR
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(
)
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TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
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For
the fiscal year ended December 31, 2009
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Commission
file number 2-28286
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The
Bureau of National Affairs, Inc.
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 |
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A
Delaware Corporation
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53-0040540
(I.R.S.
Employer Identification No.)
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1801
South Bell Street
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(703)
341-3000
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Arlington,
Virginia 22202
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(telephone
number)
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Securities
Registered pursuant to Section 12(b) of the Act:
None
Securities
registered pursuant to Section 12(g) of the Act: Class A common stock,
$1.00 par value.
Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act.Yes oNo x
Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d) of
the Act. Yes o No x
Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months, and (2)
has been subject to such filing requirements for the past 90 days. Yes x Noo
Indicate by check
mark whether the registrant has submitted electronically and posted on its
corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months
(or for such shorter period that the registrant was required to submit and post
such files). Yes o No o.
Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K x
Indicate by check
mark whether the registrant is a large accelerated filer, an accelerated filer,
a non-accelerated filer, or a smaller reporting company. See the
definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check
One):
| Large accelerated filer o |
Accelerated filer o
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Non-accelerated filer x
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Smaller reporting company
o
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Indicate by check mark whether the
registrant is a shell company (as defined by Rule 12b-2 of the Act).
Yes o No x
As of June 20, 2009, the last
business day of the Registrant’s most recently completed second fiscal quarter,
the Company’s common stock was not listed on any exchange or
over-the-counter market. The number of shares outstanding of each of the
registrant's classes of common stock, as of February 27, 2010 was 10,651,053
Class A common shares, 15,466,598 Class B common shares, and 6,450 Class C
common shares.
FORWARD
-LOOKING STATEMENTS
This Annual Report
contains and incorporates by reference certain statements that are not
statements of historical fact but are forward-looking statements. The
use of such words as “believes,” “expects,” “estimates,” “could,” “should,” and
“will,” and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ from those
projected. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof.
DOCUMENTS
INCORPORATED BY REFERENCE
Portions of the
Company's definitive Proxy Statement, to be filed with the SEC on or
about March 26, 2010, are incorporated by reference into Part III of
this Form 10-K.
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TABLE OF
CONTENTS
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Page
No.
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PART
I.
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3
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| Item 1A. | Risk Factors |
9
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| Item 1B. | Unresolved Staff Comments |
10
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10
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10
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10
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PART
II.
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11
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13
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14
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22
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23
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54
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54
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54
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PART
III.
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55
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56
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| and Related Stockholder Matters |
56
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| and Director Independence |
56
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56
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PART IV.
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57
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59
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60
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2
PART
I
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Item
1.
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Business
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Business
of BNA and Subsidiary Companies
The Bureau of
National Affairs, Inc. (BNA or "the Company"), is a leading publisher of legal
and regulatory information. BNA was founded in 1929, and was incorporated in its
present form as an employee-owned company in 1946. BNA is
independent, for profit, and is the oldest fully employee-owned company in the
United States.
BNA operates in the
publishing, printing, and software industries. Publishing operations consist of
the production and marketing of information products in print and electronic
form. Printing operations consist of printing services to internal and
commercial customers. Software operations consist of the production and
marketing of software programs and interactive electronic forms.
BNA and its
publishing subsidiary companies, Tax Management Inc. and BNA Subsidiaries, LLC,
provide legal, regulatory, and general business advisory information in labor,
economic, tax, health care, environment and safety, consulting, and other
markets to business, professional, and academic users. They prepare, publish,
and market subscription information products in print, compact disc, and online
formats, books, magazines, and research and advisory reports, and hold
conferences and conduct professional training.
Sales are made
principally in the United States through field sales representatives who are
supported by direct mail, space advertising, and telemarketing. Customers
include lawyers, accountants, business executives, human resource professionals,
health care administrative professionals, consultants, labor unions, trade
associations, educational institutions, government agencies, and
libraries.
The Company
delivers its electronic products via the web, e-mail, and through online
services such as LexisNexis and Westlaw.
BNA International
Inc. publishes international tax and legal information in print and electronic
formats, holds conferences, conducts professional training, and is BNA's sales
agent outside of North America for its U.S. products.
BNA Software, a
division of Tax Management Inc., develops and markets tax, financial planning,
and fixed asset management software. Sales are made to accountants,
lawyers, tax and financial planners, corporations, government agencies, and
others. The products are marketed through numerous channels including
direct mail, e-mail, the web, and space advertising. Products are
sold through the division’s dedicated sales representatives, field
representatives of BNA, and approved resellers. STF Services
Corporation, a subsidiary company, converts government-approved forms into
interactive electronic forms that are marketed directly to end users through BNA
Software and licensed to publishers, including BNA and Tax Management, for
resale.
The McArdle
Printing Co., Inc. (McArdle), provides printing services to mid-Atlantic area
customers. Its customers include publishers, trade associations, professional
societies, other non-profit organizations, financial institutions, and
governmental organizations. Approximately 31 percent of its business is derived
from the BNA publishing companies.
Continued
Publishing of
legal, regulatory, and business advisory information is very competitive. Some
of the Company’s publishing competitors are much larger and have greater
resources. The internet provides ready access to business information made
available by direct and indirect commercial competitors and government agencies.
The Company produces value-added information and competes on the basis of
quality, comprehensiveness, timeliness, product line breadth, brand reputation,
variety of format offerings, price, and customer service.
BNA Software
competes with a number of tax compliance, financial planning, and fixed asset
management software providers. STF competes with the leading tax
research publishers, tax compliance software vendors, and government
agencies. Both software entities compete on the basis of product
features and functions, quality and reliability, timeliness of product updates,
ease of use, brand recognition, customer support, and price.
McArdle competes
with a number of commercial and financial printers for 69 percent of its
business. McArdle competes on the basis of the breadth of its print capabilities
and related services, price, and customer service.
The Company’s
financial reporting is based on thirteen four-week periods. Operating results
are not overly influenced by seasonality, but quarterly results are typically
much stronger in the fourth quarter because three periods are in each of the
first three fiscal quarters and four periods are in the fourth fiscal
quarter.
The number of
employees of BNA and its subsidiary companies was 1,638 on December 31, 2009.
Approximately 927 of our employees are subject to collective bargaining
agreements. We believe our relations with our employees are
good. As of December 31, 2009, 798 of the Company’s employees were
covered by collective bargaining agreements that expired in February
2010. Subsequently, a new agreement was reached that expires in
2013. Bargaining agreements covering approximately 129 employees of
The McArdle Printing Co., Inc. will expire in 2011.
BNA stock may be
purchased only by active employees and may be held only by employees and former
employees or by their heirs. Form 10-K annual reports and proxy
statements filed with the Securities and Exchange Commission (SEC) are available
to the general public on BNA’s corporate website, www.bna.com. The
Company provides paper copies of filings to stockholders upon request, free of
charge.
Descriptions
of the parent and subsidiary companies’ operations follow.
Publishing
segment
Parent
Company
The Legal and
Business Publishing Group launched three new services in 2009.
Infrastructure Investment & Policy Report began publishing in March,
just two weeks after President Obama signed into law an economic stimulus
package that contained $150 billion in new federal infrastructure spending, and
at just the right time to offer critical information to help attorneys and their
clients take advantage of the program's new contracting opportunities. Health
IT Law & Industry Report, launched
in October,
reports on federal and state actions related to implementing and
maintaining electronic health care and medical records that can be shared
securely throughout the U.S. health care system, and on their business impact
and legal implications. Both publications are web-only dailies with a weekly pdf
issue. International
Trade Library integrates into one web collection three established and
well-respected BNA publications on U.S. trade law and import and export
procedures—International
Trade Reporter Decisions, Import Reference Guide, and Export
Reference Guide—bringing together full text of judicial decisions
affecting U.S. trade law and policy, legal analysis and guidance on the U.S.
import process and customs regulations, and market-specific data on exporting to
more than 200 countries to create one essential source of international trade
and business information.
4
For the Human
Resources & Payroll Publishing Group, the market acceptance of International
HR Decision Support Network, which was launched in late December 2008,
was the highlight of 2009. It experienced the best-selling start of
our Decision Support Network (DSN) line of products. It is also the
first to offer “vertical search,” which allows subscribers to search content
produced by BNA and from vetted, approved outside sources. Since the search
focuses solely on international human resources, it yields vastly superior
results than are found on popular search engines such as Google and
Yahoo.
Given this success,
and based on market feedback from customers, prospects, and the field sales
force, the group is researching the development of additional DSN products in
2010.
In an effort to
bring to market more workflow solution tools, which are integrated into an HR
manager’s daily routine, the group identified and entered into strategic
partnerships with two outside firms, and is working on developing two more such
tools internally. One agreement would provide our customers with access to
competitive salary data on a transactional basis, filling a gap in content
coverage and providing a new revenue stream. The second agreement is
a joint venture to provide online training courses sold individually or bundled
into larger, corporate-wide purchases.
The Environment,
Health & Safety Publishing Group (EHS) posted new sales in 2009 that were
virtually identical to the prior year, despite weakness in the corporate market.
The group has markedly stepped up development work, and has focused on the
formation of strategic alliances with outside partners, on new products and
product enhancements. Further, there has been a recent surge of
market activity due to increased enforcement action, both domestically and
internationally, which should yield a fertile environment for these
efforts.
The migration of
the entire EHS product line to BWD was completed in 2009, with Environment
& Safety Library becoming available on the platform in October. The
potential and flexibility made possible by this move was quickly exploited, with
Green
Incentives Navigator Library, a new offering from Tax Management, being
added to this product, along with a state & federal custom Chart Builder.
Both of these represent upsell opportunities for existing subscribers, and will
help to attract new customers. Further, the safety guide, safety cases, and
other OSHR reference files were added to the Labor
and Employment Law Library; this ability to readily share content amongst
BNA products was not possible prior to migration.
EHS
Decision Support Network, based on the line of successful HR
Decision Support Network products, is scheduled to launch in the second
quarter of 2010. The audioconference program, which commenced in the
third quarter of 2009, with two live events per month, will provide a sizeable
library of conferences available on demand at launch. Other components will
include the 2010
EHS Benchmarks Report, special reports and white papers, quarterly
reviews, and custom research answers.
One of the highlights of 2009 was
the recognition of World
Climate Change Report by the United Nations as one of the top three media
outlets, along with AP and Reuters, in connection with its Climate Change
Conference in Copenhagen in December 2009. Selection was based on
objective criteria, including breadth and depth of coverage of negotiations and
climate-related news. BNA produced a video which was shown in the
United Nations booth during the conference; it features various BNA employees
and explains how BNA is using information and communications technology to cover
climate change issues.
BNA
Books
The division published 66 titles in
2009. Some major titles were pushed into 2010 because of delays
getting manuscripts in from authors due to tough economic times for law
firms. New titles included American
Factoring Law, Anatomy of a Patent Case, Copyright Deskbook, Drafting and
Enforcing Covenants Not to Compete, Global Employee Privacy and Data Security
Law, and Uniformed
Services Employment and Reemployment Rights Act
(USERRA). Best- selling titles included new editions of Patents
and the Federal Circuit, Privacy in Employment Law, Employee Duty of
Loyalty: A State-by-State Survey, Patent Prosecution: Law and
Practice, and
ERISA: The Law and the Code.
Tax
Management Services (TM)
2009 was another successful year for
the Tax Management publishing services. The continued strength of the
flagship portfolio products, combined with new activities, drove an increase in
revenue. And, while investing in the business to drive future growth,
careful cost control improved the already healthy profit margin for the fourth
year in a row.
Existing products
were enhanced in 2009, including expanded content for the State
Portfolios Library and a new collection of client development letters for
the federal tax services. Client explanatory letters have long been a
popular feature, providing subscribers with sample letters that can be used to
answer client questions. The new collection helps practitioners
generate additional revenue by reaching out to prospective
clients. Expertly written in an engaging style, the letters provide
recipients with valuable topical information and a call to action to contact the
sender for a consultation.
Tax Management launched an
innovative new service in the fourth quarter, Green
Incentives Navigator Library. The product helps corporations
and their advisors research, communicate and keep abreast of
federal and state incentives (both tax and non-tax incentives) aimed at
encouraging the use of renewable energy and promoting conservation. This Library
includes the Green Incentives Navigator (which provides a detailed explanation
of each incentive), a chart-builder tool (to create customized charts for
user-selected jurisdictions and incentive types), the Green Incentives Monitor
(which tracks developments and offers perspective), and instant access to
relevant source documents. It is available on both the BNA
Tax and Accounting Center and the Environment
& Safety Library.
Other notable developments in 2009
include:
|
·
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TM
significantly upgraded electronic marketing efforts, including a revamped
marketing site www.bnatax.com
to generate greater awareness and interest in the marketplace while
channeling qualified leads to the field sales
force.
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·
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The BNA
Tax and Accounting Center garnered a perfect five-star rating in
the annual review of tax research products by The CPA Technology
Advisor.
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|
·
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In the third quarter, BNA
acquired the training seminar and conference businesses of the Council for
International Tax Education (CITE), Atlas Information Group, and the
Structured Finance Institute (SFI). These groups, headquartered in
White Plains, NY, provide continuing professional education programs and
networking opportunities for tax and accounting professionals. These
acquisitions, which are being integrated into the BNA Tax & Accounting
product and service offerings, mark a continuation of the company’s move
into tax education and
training.
|
BNA
International Inc. (BNAI)
In the face of the
most difficult market conditions for many years, BNAI’s financial performance
remained stable. Revenues were ahead of the previous year and on
budget when reported in pounds, helped by strong subscription renewals and
currency exchange gains created by the stronger dollar.
In 2009, BNAI
focused on reorganizing editorial and sales resources for a major program of new
subscription product launches, which began with the publication of the new Tax
Treaties Analysis service in October. Three additional new tax
services will be launched in the first half of 2010, expanding and broadening
our tax product line and putting BNAI in a good position to grow its share
of the international tax market. Additional publishing opportunities have
already been identified and will be developed in 2010 for the international
legal market.
BNAI web products
will be moved to BNA’s web platform in April 2010. The creation of a
new International
Tax Center on BNA’s platform, featuring both Tax Management and BNAI tax
services, will provide an effective means to cross-sell services and will
provide users with a much more intuitive and seamless interface for navigating
between content. And, for the first time, all of BNA’s tax information will be
presented on a single, globalized platform.
BNA
Subsidiaries, LLC
The economic
downturn that began in the second half of 2008 had a disproportionately negative
effect on several IOMA and Kennedy brand product lines. Markets for information
and meetings for corporate recruiters, and publications of all types aimed at
functional departments in corporations, were particularly depressed. BNA
Subsidiaries management conducted a comprehensive review of strategic
alternatives. Near the end of 2009, a strategic restructuring plan was adopted,
and implementation began immediately.
The plan is
underway, and most aspects of it will be completed by the second quarter of
2010. As part of the restructuring, the assets of three business units were
transferred to the parent company at year end: the former IOMA Human Resources
and Payroll business unit, the Pike & Fischer Telecommunications unit, and
the Pike & Fischer Legal and Regulatory unit. These product lines fit well
with other products and services offered by the parent company. BNA
Subsidiaries, LLC will be providing transition services to the parent unit until
the product lines and operations can be integrated into existing editorial,
production, and distribution functions. Also, the former Kennedy Investor
Relations and Recruiting business assets were sold during 2009.
Numerous facility and employment
changes have occurred in New Hampshire and New Jersey, and most operating
functions will be consolidated in New Hampshire in 2010. The restructuring and
transition will be completed by year-end 2010. It will create a more focused and
more profitable company that serves vertical industry markets with high quality
information services. Those markets include consulting firms and other
professional services organizations, medical laboratories, and
agribusinesses.
BNA
Washington Inc. (BNAW)
2009 marked BNAW’s
second full year of ownership at the headquarters facility in Arlington,
Virginia. During the year, BNA’s real estate subsidiary continued to realize the
increased cost efficiencies of a modern, energy-efficient building.
Standardizing office and work station sizes has allowed the support and
publishing units the flexibility to reorganize staff quickly and with little
interruption to business, and the building’s proximity to public transit and
major highways has proved helpful to most employees.
The BNA Conference
Center has become an integral part of day-to-day business, with forums,
meetings, training sessions, and product demonstrations occurring
regularly. In 2009, use of the conference center expanded to include
several successful conferences for BNA customers.
During 2009, BNAW
began working with a team of BNA employees to identify segments of our operation
that could be modified to lessen our impact on the environment, and reduce
utility consumption. Close monitoring of the HVAC system has been
implemented to ensure that services are provided only when the building is
staffed.
At the Rockville
facility, BNAW completed an audit of all operations located there to determine
the best way to provide a facility that will best serve the needs of our
customer contact group. Analysis of the audit continued into the new
year, and recommendations will be presented in the spring of 2010.
BNAW remains
committed to providing BNA employees and our outside tenants with safe,
productive, comfortable, and environmentally sustainable
facilities.
Printing
segment
The
McArdle Printing Company, Inc
The economy took
its toll on the print industry in 2009. Facing uncertainty, many
customers put their marketing plans on hold until the business environment
improved and they had a better handle on how to effectively communicate with
their own customers in difficult times.
McArdle reacted
quickly to the weak market for printing services, and cut costs to balance lower
revenues. Despite the lower cost structure and increasingly
competitive market, McArdle’s custom solutions strategy enabled it to secure 64
new clients representing $1.6 million in new business during very turbulent
times. At the same time, McArdle’s traditional printing services and a
consistent emphasis on superior customer service kept its major clients
satisfied and loyal to McArdle in the face of determined
competitors.
Software
segment
BNA
Software
The tax market was
comparatively stable when compared to other markets in 2009, but the severe
economic downturn still had a significant negative effect on BNA Software’s CPA
market, particularly in the first half of the year. The corporate market segment
provided the balance and growth needed to allow BNAS, as a whole, to grow
modestly for the year. Growth was paced by strong contributions from those
products aimed at corporations, such as BNA
Corporate Tax Analyzer, BNA Fixed Asset, BNA Fixed Asset Web, and
BNA
Fixed Asset Services.
BNAS also invested
in the implementation of several new strategic growth initiatives. One of those
initiatives — better tracking and correction of license violations — strongly
contributed to new sales and revenue for the Income
Tax Planner product. The investment in these new initiatives,
along with greatly increased benefits expense, resulted in an operating profit
decline from 2008.
This year,
management will continue to implement the strategic growth initiatives and the
expansion of sales through lower cost channels and partnerships, while at the
same time leveraging operational efficiencies with STF Services.
STF
Services Corporation
Last year’s
economic downturn negatively impacted both retail and licensee sales of STF
flagship product, SuperForm, as small accounting firms deferred new purchases
and delayed product renewals. Despite this, STF was able to increase
revenue and operating profit over 2008 because of the relative stability of the
tax market and because of a large one-time sale to a leading CPA
firm.
Operating margin
for STF continued to be one of the highest among all of the BNA companies in
2009. The restructuring of the organization in 2008 contributed to
process improvements and lower costs of production and distribution in
2009. Additionally, STF continued to leverage resources and cost
containment strategies with BNA Software, allowing for additional reductions in
selling expense.
For 2010,
management expects slower revenue growth to continue and thus will focus on
implementing additional cost management strategies with BNA Software while
ensuring that all the benefits to be derived from STF’s restructuring are
achieved.
|
Item
1A.
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Risk
Factors
|
There are a wide range of risks and uncertainties that
could adversely affect the Company’s businesses and its overall financial
performance. In addition to other disclosures included in this Annual Report on
Form 10-K, the Company believes the more significant of such risks and
uncertainties include the following:
Negative
Economic Conditions
The current
economic downturn has negatively affected all of the Company's businesses to
some degree as customers and potential customers reduce their overall spending
levels. This environment has impacted the willingness of subscription customers
to add new expenditures or renew spending at increased or existing levels. It
appears as though negative economic trends are reversing, but if the downturn
continues or declines further, these trends may continue or accelerate. The weak
economic climate has also led several large law firms to close down. This,
combined with recent consolidations among law firms, results in fewer customers,
and if it continues could negatively impact revenues. Economic slowdowns have
historically affected printing companies by increasing competition and reducing
pricing power; if the current slowdown continues or intensifies, recent declines
in revenue in the Company's printing subsidiary will continue. Reductions in
advertising spending in the current economic environment have impacted the
Company's activities that are partially advertising or sponsor supported, such
as conferences, and recovery to prior levels is not expected until the
environment improves.
Competition
Nearly all of the
Company’s businesses have significant competition in the markets they serve. The
Company’s competitors could introduce new products and services that would
adversely affect the relative utility of the Company’s products and services. In
addition, competitors could take pricing actions that would adversely affect the
relative value prospect of the Company’s products and services. Continued
consolidation in our industry exacerbates our scale issues. In addition, as
these large competitors gain additional capabilities through mergers, this could
impact us in the marketplace or affect our value to our competitors as a
business partner.
Technological
Changes
Advances in
information technology affect the Company in both positive and negative ways.
With competitors that are much larger and more diverse companies, the Company
can be disadvantaged due to differences in the relative size and leverageability
of the Company’s technology investments. The Company continues to invest heavily
in upgrading its electronic distribution systems and its information databases.
There is no assurance that these investments can be made quickly enough so that
product offerings do not become obsolete relative to that of competitors who are
also upgrading their product offerings.
Limitations on our
ability to protect our digital content may lead to customers having greater
access to our content than warranted by their subscription terms.
In addition, the
relatively low barriers to entry inherent in an internet environment have
spawned non-traditional competition. These include governmental organizations
providing information on their websites, and small new competitors providing
basic information, either of which certain sectors of the Company’s markets may
consider to be good-enough information.
Legal
and Regulatory Changes
The value of the
Company’s publishing and software products depends on the existence of, and
changes in, certain legal and regulatory requirements for which the Company’s
customers must be informed. If the pace of change slowed a significant degree,
that could lessen the perceived need for the Company’s products. Additionally,
if certain requirements were significantly reduced, such as the elimination of
estate and gift taxes or the adoption of a federal flat tax, the perceived value
of the Company’s products could be substantially reduced.
Distribution
Arrangements
The Company
licenses some of its information databases to certain online vendors. While the
collective royalty revenues from these licenses are not significant, their
contribution to profit is. If all or most of these licenses were discontinued,
profits would be adversely affected.
Employment
Costs
Employment costs
are the majority of the Company’s costs. The Company employs highly skilled
people to achieve the high quality for which its product and service are known.
The Company provides competitive compensation and benefits to attract and retain
its employees. If general employment conditions tighten, the Company could have
difficulty in filling critical positions, or its employment costs could grow at
a faster rate than revenue growth thereby compressing profit
margins. In addition, the Company is employee-owned and has
experienced low turnover in recent years, with the result that a significant
number of employees are close to retirement age.
Outside
Authors
The Company
supplements internal editorial resources with outside authors to provide content
for certain publishing products and to provide updated programs for certain
software products. Delays or failures to deliver content and/or programs would
negatively affect revenues.
|
Item
1B.
|
Unresolved
Staff Comments
|
|
Item
2.
|
Properties
|
Publishing segment
operations’ facilities consist of the following: as of December 31, 2009, BNA
Washington Inc., a wholly owned
subsidiary, owns and manages two buildings used by BNA and Tax Management
Inc., an 11 story (277,000 square foot) publishing headquarters building, two
floors of which is leased to a tenant, and a 110,000 square foot subscriber
relations facility. In addition, facilities totaling approximately 44,000 square feet
are leased for the operations of BNA International and BNA Subsidiaries, LLC.
The Company leases facilities totaling approximately 29,000 square feet
for its software segment operations, and owns the 133,000 square foot office and
plant facilities for its printing segment.
|
Item
3.
|
Legal
Proceedings
|
The Company is
involved in certain legal actions arising in the ordinary course of
business. In the opinion of management the ultimate disposition of
these matters will not have a material adverse effect on the Company's
consolidated financial statements.
|
Item
4.
|
Reserved
|
PART
II
|
Item
5.
|
Market
for the Registrant's Common Equity, Related Stockholder Matters and
Issuers Purchases of Equity
Securities
|
The principal market for trading of voting shares of common stock
of The Bureau of National Affairs, Inc., is through the company-maintained Stock
Purchase and Transfer Plan.
There is no
established public trading market for any of BNA's three classes of stock.
However, employees may purchase the Company’s Class A stock through its Stock
Purchase and Transfer Plan and the BNA 401(k) Plan.
Semi-annually, the
Board of Directors establishes the price at which Class A shares can be bought
and declares cash dividends. In accordance with the corporation's
bylaws, the price and dividends on non-voting Class B and Class C stock are the
same as on Class A stock. Dividends have been paid continuously for
59 years, and they are expected to continue.
The Company’s
stockholders, when selling stock, are required to first tender it to the
Company. The Company has supported the continuance of employee ownership through
its practice of repurchasing, at the same price established for selling shares,
stock tendered by stockholders, but is not required to do so.
As of February 27,
2010, there were 1,070 Class A shareholders, 385 Class B shareholders, and 2
Class C shareholders.
Established stock
price and dividends declared during 2009 and 2008 were as follows:
Stock Price
| January 1, 2008 – March 15, 2008 | $ | 15.00 | |
| March 16, 2008 – September 20, 2008 | 15.50 | ||
| September 21, 2008 – March 21, 2009 | 15.75 | ||
| March 22, 2009 – September 19, 2009 | 15.75 | ||
| September 20, 2009 – December 31, 2009 | 15.75 |
Record Date and Dividend
Amount
| March 15, 2008 | $ | .20 | |
| September 20, 2008 | .20 | ||
| March 21, 2009 | .20 | ||
| September 19, 2009 | .21 |
During the sixteen
weeks ended December 31, 2009, the Company purchased shares of its common stock,
as noted in the table below. The Company is not engaged in share
repurchases related to a publicly announced plan or program.
|
Four-week
Period
|
Total Number
of Shares Purchased
|
Average Price
Paid per Share
|
|
September 13,
2009 – October 10, 2009
|
69,256
|
$
15.75
|
|
October 11,
2009 - November 7, 2009
|
161,014
|
$
15.75
|
|
November 8,
2009 – December 5, 2009
|
70,358
|
$
15.75
|
|
December 6,
2009 - December 31, 2009
|
171,875
|
$
15.75
|
The above graph
compares the performance of the company’s common stock to Standard and Poor’s
(S&P) 500 Composite Index and the Dow Jones Publishing Index for the last
five years, assuming $100 was invested in the company’s common stock and each
index at Dec. 31, 2004, and that all dividends were reinvested.
|
Item
6.
|
Selected
Financial Data
|
Consolidated
Operating and Financial Summary: 2009-2005
(Dollar amounts in
thousands, except per share data)
|
2009
|
2008
|
2007
|
2006
|
2005
|
||||||||||||||||
|
Operating
Revenues
|
$ | 331,253 | $ | 352,211 | $ | 352,224 | $ | 344,862 | $ | 329,036 | ||||||||||
|
Operating
Expenses (a)
|
307,627 | 303,316 | 303,669 | 313,747 | 287,960 | |||||||||||||||
|
Gain (Loss)
on Dispositions (b)
|
148 | (12 | ) | 92,133 | (19 | ) | (28 | ) | ||||||||||||
|
Operating
Profit
|
23,774 | 48,883 | 140,688 | 31,096 | 41,048 | |||||||||||||||
|
Investment
Income
|
4,270 | 4,579 | 5,566 | 5,883 | 4,132 | |||||||||||||||
|
Interest
Expense
|
(2,519 | ) | (3,277 | ) | (4,472 | ) | (5,604 | ) | (5,907 | ) | ||||||||||
|
Income Before
Income Taxes
|
25,525 | 50,185 | 141,782 | 31,375 | 39,273 | |||||||||||||||
|
Income
Taxes
|
8,030 | 18,744 | 53,744 | 11,922 | 15,696 | |||||||||||||||
|
Net
Income
|
$ | 17,495 | $ | 31,441 | $ | 88,038 | $ | 19,453 | $ | 23,577 | ||||||||||
|
Profit
Margins (% of revenues):
|
||||||||||||||||||||
|
Operating
Profit
|
7.2 | 13.9 | 39.9 | 9.0 | 12.5 | |||||||||||||||
|
Earnings
|
5.3 | 8.9 | 25.0 | 5.6 | 7.2 | |||||||||||||||
|
Earnings Per
Share
|
$ | .65 | $ | 1.11 | $ | 2.99 | $ | .65 | $ | .75 | ||||||||||
|
Dividends Per
Share
|
$ | .41 | $ | .40 | $ | .36 | $ | .34 | $ | .32 | ||||||||||
|
Balance Sheet
Data:
|
||||||||||||||||||||
|
Total
Assets
|
$ | 387,430 | $ | 412,686 | $ | 399,528 | $ | 334,426 | $ | 318,882 | ||||||||||
|
Long-Term
Debt—less current portion
|
13,000 | 23,500 | 34,000 | 44,500 | 55,000 | |||||||||||||||
|
Employee
Data:
|
||||||||||||||||||||
|
Number
of Employees
|
1,638 | 1,745 | 1,719 | 1,728 | 1,729 | |||||||||||||||
|
Total
Employment Costs
|
$ | 192,132 | $ | 180,931 | $ | 179,482 | $ | 182,008 | $ | 177,138 | ||||||||||
|
Stockholder
Data at Year-End:
|
||||||||||||||||||||
|
Number
of Stockholders
|
1,470 | 1,511 | 1,557 | 1,655 | 1,673 | |||||||||||||||
|
Common
Shares Outstanding (in
thousands)
|
26,253 | 27,619 | 28,734 | 30,155 | 30,204 | |||||||||||||||
|
(a)
|
Includes
goodwill impairment charges of $17,805 in 2009 and $11,576 in
2006.
|
|
(b)
|
Includes a
$92,524 gain ($56,433 net of tax) on the sale of the Company’s
headquarters buildings in 2007.
|
|
Item
7.
|
Management's
Discussion and Analysis of Financial Condition and Results of
Operations
|
FORWARD -LOOKING
STATEMENTS
This Annual Report
contains and incorporates by reference certain statements that are not
statements of historical fact but are forward-looking statements. The
use of such words as “believes,” “expects,” “estimates,” “could,” “should,” and
“will,” and similar expressions are intended to identify forward-looking
statements. Such statements are subject to certain risks and
uncertainties, which could cause actual results to differ from those
projected. Readers are cautioned not to place undue reliance on these
forward-looking statements which speak only as of the date hereof.
Overview
BNA operates in
three business segments: publishing, printing, and software. The publishing
segment, which generated 84 percent of consolidated 2009 revenues, provides
legal, regulatory, and general business advisory information in tax, labor,
economic, health care, environment and safety, consulting, and other markets to
business, professional, and academic users. Sales are made principally through
field sales representatives. The printing segment provides services to
mid-Atlantic area customers, including the BNA publishing segment, other
publishers, financial institutions, trade associations, professional societies,
other nonprofit organizations, and governmental organizations. The software
segment provides tax and financial planning software to accountants, lawyers,
tax and financial planners, government agencies, corporations, and others. BNA’s
ongoing success is dependent upon: the quality of its products and services; its
highly trained and experienced employees; its key relationships with suppliers;
and the customers’ need for ongoing information regarding changes and insights
in legal, regulatory, tax, and business practices and trends.
In addition to
ongoing efforts to improve and provide more product offerings and to operate
more efficiently, BNA has been engaged in several multi-year strategic
initiatives related to its major publishing activities.
Electronic products
now make up nearly 73 percent of the legal and regulatory subscription base.
Their migration to a next-generation web platform, BWD, is nearing
completion. Most products are now available on BWD, and the rest will be moved
off legacy platforms shortly. In addition, subsidiary company products will be
moved to BWD, improving corporate-wide efficiency and increasing our flexibility
to combine and customize product offerings for new or more specialized
markets.
BNA’s high quality,
proprietary content remains a competitive strength. But the continued expansion
and improvement of our web platform has enabled us to enhance the value of that
content and improve the sustainability of our products and services. By
concentrating on improving and exploiting our web platform, and on creating new
functionalities and tools to work with our respected content, BNA is moving
beyond content and positioning itself as a technologically adept provider of
information solutions to professional markets.
For example, in the
fall of 2008, BNA launched “BNA Convergence,” a new delivery platform designed
for the legal and corporate markets. This new platform, produced in
partnership with technology partner Llesiant, allows law firms to search all
their BNA content along with a large collection of third-party content,
utilizing Llesiant’s taxonomy-based search engine. Results can be
delivered in a variety of formats. This product is a further step in
moving beyond being a content provider to delivering information solutions and
tools for its key markets. The Company acquired Llesiant in early
2010.
To help facilitate
the integration of BNA’s quality content with technology, a new Product Research
and Development business unit, headed by a Chief Product Officer, was created in
2009. This unit is responsible for developing all new products and services,
focusing specifically on how best to integrate the latest technology, processes,
and applications with our unique content to provide better products and services
to our customers. This unit is also responsible for BNA’s electronic commerce
initiatives.
Earlier efforts
aimed at the Human Resources and Environment markets, which also combined
internal resources with technology partners, matured in recent years despite the
challenging environment. New products and more focused sales efforts
led to strong growth for our expanding line of HR Decision Support Networks and
our set of Environment, Health, and Safety Tools. The economic environment
affected the corporate market for these products last year, but information
solutions that enable businesses to meet increasingly stringent compliance needs
with fewer in-house resources should remain attractive to cost-conscious
customers.
BNA pursues a web
platform-neutral policy in its information content offerings, allowing customers
to choose their format preference. BNA's products have been available for
transactional access on the major legal online services -- Lexis and Westlaw --
for many years. BNA also sells subscriptions to subject libraries of BNA content
on these networks, and these have been very popular with major law firms and law
schools. In addition, BNA sells subscriptions to its tax products on Thomson
Reuters’ Checkpoint platform and Wolters Kluwer’s IntelliConnect platform. These
networks, in addition to BNA's own online platform and print, provide customers
with a variety of product delivery options.
In an effort to leverage BNA’s
strong tax brands, the Company is expanding into the tax training business. In
2008, BNA International (BNAI) acquired European American Tax Institute (EATI),
which provides professional training for international tax
professionals. This business was integrated into BNAI, where it
complements the Company’s growing portfolio of conferences, special reports, and
books for the international tax market. In mid-2009, BNA acquired the
assets of the Council for International Tax Education, Inc., (CITE) and the
Alliance for Tax, Legal, and Accounting Seminars (ATLAS), both based in White
Plains, New York. The firms are leaders in the creation and delivery
of international tax education for multinational companies, offering live
instruction courses for legal and tax professionals and financial
executives.
BNA Subsidiaries,
LLC is being restructured, with some products being transferred to the Parent
company and others being divested. Operations are being consolidated in New
Hampshire, and when the restructuring is complete, the subsidiary will be a
smaller company focused on its most profitable and fastest growing
businesses.
As we face the task
of continuing BNA’s success, external factors remain a major concern. The
economic environment has improved in general, but key markets, such as the large
law firms, will continue to restore spending at a slow pace. The corporate and
tax markets also remain cautious. In the second half of 2009, all those markets
stabilized, but there have not yet been signs of a strong recovery. Because of
BNA’s subscription-based business model, market improvements will not be
immediately reflected in revenue.
A second
significant factor is the rapidly expanding expense related to BNA’s
postretirement benefits obligations. Management took a number of steps in 2009
and in early 2010 to address this issue in a way that would continue to provide
BNA’s current retirees with superior benefits without endangering BNA’s future
success. The beneficial effects of these changes may be reflected in 2010
financial performance.
|
Segment
Information
|
||||||||
| (as of December 31, in thousands of dollars) | ||||||||
|
2009
|
2008
|
2007
|
||||||
|
Revenues from
external customers:
|
||||||||
|
Publishing
|
$
|
278,773
|
$
|
290,537
|
$
|
289,539
|
||
|
Printing
|
23,437
|
33,125
|
35,673
|
|||||
|
Software
|
29,043
|
28,549
|
27,012
|
|||||
|
Total
|
$
|
331,253
|
$
|
352,211
|
$
|
352,224
|
||
|
Intersegment
printing revenues
|
$
|
10,773
|
$
|
10,536
|
$
|
10,059
|
||
|
Intersegment
software revenues
|
$
|
2,470
|
$
|
2,507
|
$
|
2,414
|
||
|
Operating
Profit
|
||||||||
|
Publishing
|
$
|
15,065
|
$
|
38,613
|
$
|
130,364
|
||
|
Printing
|
839
|
1,805
|
2,608
|
|||||
|
Software
|
7,870
|
8,465
|
7,716
|
|||||
|
Total
|
$
|
23,774
|
$
|
48,883
|
$
|
140,688
|
||
2009
vs. 2008
The economic
downturn continued to negatively affect BNA, especially those businesses relying
primarily on nonsubscription revenue. The resulting decline in
revenue outpaced cost control measures and led to lower profits. In addition, at
the end of the third quarter, the Company recorded a large goodwill impairment
expense. This, combined with higher post-retirement expenses, led to a 1.4
percent increase in operating expenses and a sharp decline in reported profits.
Net income was $17.5 million in 2009 compared to $31.4 million in 2008, and
earnings per share were $0.65 in 2009 versus $1.11 in 2008.
2009 Consolidated
revenues were $331.3 million, down 6.0 percent compared to 2008. Software
revenues were up, but publishing and printing segments’ revenues were both down.
Consolidated operating expenses were up 1.4 percent due to the impairment
expense and higher postretirement expenses for publishing and software,
mitigated by management’s cost containment efforts and a decrease in variable
printing expenses.
The goodwill that
was written down is related to the acquisition of Kennedy Information. At the
end of 2008, Kennedy was merged with another BNA subsidiary company, IOMA, to
form BNA Subsidiaries, LLC with the intent of combining the separate operations
to reduce costs and exploit strategic synergies. While progress was made towards
those goals this year, the continuing difficult business environment
particularly affected the markets and the nonsubscription product lines of the
Kennedy division of the new company. Kennedy’s revenue and profit results since
2007 and the expectations for the near future no longer supported the remaining
goodwill, resulting in the recording of a $17.8 million impairment expense
($10.7 million after-tax, or $.40 per share). Management is taking a number of
steps to accelerate the integration of the operations of BNA Subsidiaries, LLC
and to reevaluate all its business lines to create a more focused, more
strategic, more profitable, and faster growing company going
forward.
The publishing
segment—which aggregates the Parent (including BNA Books) with Tax Management
Inc. (excluding BNA Software), BNA Subsidiaries, LLC (the company
resulting from the merger of Kennedy Information and IOMA), and BNA
Washington Inc.—generated 84 percent of consolidated revenues. Publishing segment
revenues were down 4.0 percent compared to the prior year. BNA Parent
and Tax Management subscription and online revenues were down 1.3 percent
compared to 2008, reflecting lower new sales and weaker renewal sales. BNA
International revenues were up 4.0 percent in pounds sterling, but down 11.7
percent due to the stronger U.S. dollar, and BNA Books revenues were down $3.2
million because fewer titles were released. Revenues of BNA
Subsidiaries, LLC were down 17.9 percent due to a decline in conferences and
non-subscription product sales, and due to the timing of consulting contracts
and research report release dates. Publishing revenues are expected to be
slightly lower in 2010. Publishing
operating expenses were up 4.7 percent compared to 2008 because of a $17.8
million goodwill impairment expense and higher postretirement benefit plan
expenses. Five new products were launched in
2009. Identifiable development expenses for new products and
improvements on existing products were $9.5 million in 2009 and $9.7 million in
2008. The publishing segment’s operating profit was $15.1 million in
2009.
The printing
segment, which includes results of The McArdle Printing Company, Inc.,
experienced a revenue decline for the third consecutive year as sales declined
22 percent to $34.2 million. Commercial sales were down 29 percent due to lower
print volumes and continuing price competition in the printing industry.
Intersegment revenues were up 2.2 percent, but are nonetheless expected to
decline as publishing segment subscribers continue to migrate from print to
electronic products. Operating expenses were down 20.3 percent, reflecting
aggressive steps taken to adjust expenses to lower revenues. Despite these
efforts on the cost side, operating profit was $0.8 million in 2009 compared to
$1.8 million in 2008. Total printing revenues in 2010 are projected to be
higher by a low single-digit percentage.
Total revenues for
the software segment (which combines the operations of STF Services Corporation
and BNA Software, a division of Tax Management Inc.) increased 1.5 percent
compared to 2008 while expenses were up 4.7 percent. BNA Software
revenues increased 1.7 percent compared to 2008, but operating expenses were up
7.2 percent due to higher postretirement benefit expenses and investment in
strategic initiatives aimed at continued growth. BNA Software’s
operating profit was $5.1 million in 2009 compared to $6.0 million in 2008. STF
total revenues increased slightly (0.4 percent) compared to 2008, but
operational efficiencies lowered operating expenses by 8.7 percent, leading to a
14.2 percent increase in operating profit. The total software segment’s
operating profit was down 7.0 percent to $7.9 million. Software revenues are
expected to increase in 2010 by a low single-digit percentage.
Investment income
decreased slightly, reflecting higher gains on sales of securities but lower
yields. Interest expense was lower due to lower term debt
balances. Other comprehensive income reflected an unrealized holding
gain in 2009 compared to an unrealized holding loss in 2008, and a change in
unamortized postretirement obligations.
As described in
Note 8 to the consolidated financial statements, the consolidated federal,
state, and local effective income tax rate was 31.5 percent in 2009 and 37.4
percent in 2008, due to a higher
proportion of pre-tax income represented by tax-exempt interest and lower
effective state and local taxes.
2008
vs. 2007
BNA’s 2008
consolidated revenues were even and operating expenses were slightly lower when
compared to 2007 results. Revenues for the publishing and software segments
increased and profit was up for the software segment, while the printing segment
had lower revenue and profit. Last year’s gain on the sale of the headquarters
buildings led to a decrease in the year-to-year comparison of consolidated
profits.
2008 consolidated
revenue was $352.2 million, operating profit was $48.9 million, net income was
$31.4 million, and earnings per share were $1.11. In 2007, revenues were $352.2
million, operating profit was $140.7 million, net income was $88.0 million, and
earnings per share were $2.99. 2007 results included a gain on the sale of the
headquarters buildings. Net of the related moving costs of $2.0 million, this
gain contributed $90.5 million to operating profit, $55.2 million to net income,
and $1.88 to earnings per share.
In August 2007, BNA
completed a Section 1031 tax-deferred “like kind” exchange to simultaneously
sell its three Washington, D.C. headquarters buildings and acquire a new
headquarters building in Arlington, VA. Net of closing and related costs, BNA
received proceeds of $106 million and paid $104 million for the building it
acquired.
The publishing
segment generated 82 percent of consolidated revenues. Publishing revenues were
up 0.3 percent in 2008, to $290.5 million. BNA Parent and Tax Management
subscription and online revenues were negatively impacted by lower new sales and
lower print copyright royalties (reflecting the shift to electronic format
products), but were still up 1.4 percent when compared to 2007. BNA
International revenues were up 9.2 percent, including additional revenues
generated by the newly acquired European American Tax Institute (EATI), a
membership organization specializing in tax-related training and conferences.
BNA Books revenues were even with 2007, and BNA Subsidiaries, LLC revenues were
down; Kennedy Information’s revenues were down 15.3 percent compared to a strong
performance in 2007, due in part to the timing of the completion of consulting
contracts and to fewer research report releases, and IOMA revenues were down
slightly. Publishing revenues are expected to grow by a low single-digit percent
in 2009. Publishing operating expenses were up just 0.2 percent compared to 2007
(which included $2.0 million in non-recurring moving costs), as higher
employment costs were offset by lower facility costs. Four new products were
launched in 2008. Identifiable development expenses for new products
and improvements on existing products were $9.7 million in 2008 and $9.6 million
in 2007. The publishing segment’s operating profit was $38.6 million in 2008.
Publishing segment operating profit in 2007, which included the gain on the sale
of the buildings, was $130.4 million.
The printing
segment experienced a revenue decline for the second consecutive year.
Commercial sales were down 7.1 percent, reflecting continuing price competition
in the printing industry and shorter print run sales to existing customers.
Intersegment revenues were up 4.7 percent, but are nonetheless expected to
decline as publishing segment subscribers continue to migrate from print to
electronic products. Sales declined 4.5 percent in 2008 to $43.7 million.
Operating expenses were down 2.9 percent, reflecting lower variable production
and selling expenses. The segment operating profit was $1.8 million in 2008
compared to $2.6 million in 2007.
Total revenues for
the software segment increased 5.5 percent compared to 2008 while expenses were
up 4.1 percent. BNA Software revenues increased 6.5 percent compared
to 2007 due to improved renewals and the completion of a year-long IRS project.
Operating expenses were up 5.4 percent. BNA Software’s operating profit was $6.0
million in 2008 compared to $5.5 million in 2007. STF total revenues increased
slightly (1.7 percent) compared to 2007, but operational efficiencies lowered
operating expenses by 2.6 percent, leading to a 9.2 percent increase in
operating profit. The total software segment’s operating profit was up 9.7
percent to $8.5 million. Software revenues are expected to increase in 2009 by a
low single-digit percentage.
Investment income
decreased $1.0 million due to lower gains on sales of securities and lower
investment yields. Interest expense decreased $1.2 million due to lower term
debt balances. Other comprehensive (loss) income reflected an unrealized holding
loss in 2008 compared to a gain in 2007 and the postretirement benefits
adjustment.
As described in
Note 8 to the consolidated financial statements, the consolidated federal,
state, and local effective income tax rate was 37.4 percent in 2008 and 37.9
percent in 2007.
Cash
Flows, Liquidity, and Financial Resources
Cash operating
expenditures were down 5.6 percent, but customer cash receipts were down 8.0
percent, leading cash provided from operating activities to decrease 23 percent
in 2009 to $35.9 million.
Cash provided by
investing activities netted to $5.9 million. Net cash provided from securities
investments totaled $13.7 million. Net capital expenditures amounted to a $3.5
million outlay, reflecting $2.6 million for property and equipment additions and
capitalized software and $0.9 million for purchased publishing assets. The
investment in an affiliated company amounted $4.3 million. Capital expenditures
for 2010 are expected to be approximately $7.3 million.
Cash used for
financing activities netted to $43.2 million. Receipts for sales of Class A
capital stock to employees totaled $9.7 million. Capital stock repurchases were
$31.2 million. Debt principal repayments amounted to $10.5 million
and the Company paid cash dividends of $11.1 million in 2009.
The Company's
stockholders, when selling stock, are required to first tender it to the
Company. The Company has supported the continuance of employee ownership through
its practice of repurchasing stock tendered by stockholders, but is not required
to do so. Capital stock with a market value of $5.2 million as of December 31,
2009, is known or expected to be tendered in 2010. The actual value of shares
tendered will likely be higher.
Contractual cash
obligations as of December 31, 2009, were as follows (in thousands of
dollars):
|
Payments Due
by Period
|
|||||||||||||||
|
Contractual
Obligations:
|
Total
|
Less
than
1
Year
|
1-3
Years
|
3-5
Years
|
After
5
Years
|
||||||||||
|
Term Debt (includes
interest)
|
$ | 25,579 | $ | 12,125 | $ | 13,454 | $ | --- | $ | --- | |||||
|
Operating
Leases
|
10,178 | 2,879 | 3,394 | 1,501 | 2,404 | ||||||||||
|
Planned
Pension Contributions
|
2,000 | 2,000 | --- | --- | --- | ||||||||||
|
Total
|
$ | 37,757 | $ | 17,004 | $ | 16,848 | $ | 1,501 | $ | 2,404 | |||||
With over $119
million in cash and investment portfolios, the financial position and liquidity
of the Company remains very strong. The cash flows from operations,
along with existing financial reserves and proceeds from the sales of capital
stock, have been sufficient in past years to meet all operational needs, new
product introductions, debt repayments, pension contributions, most capital
expenditures, and, in addition, provide funds for dividend payments and the
repurchase of stock tendered by shareholders. Should more funding become
necessary or desirable in the future, the Company believes that it has
additional debt capacity based on its operating cash flows and real estate
equity.
Critical
Accounting Estimates
The preparation of
financial statements in conformity with generally accepted accounting principles
requires management to make estimates and assumptions that affect the reported
amounts of assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. The
Company evaluates its estimates and assumptions on an ongoing basis using a
combination of historical information and other information that is believed to
be relevant. Actual results may differ from these estimates based on
different assumptions or conditions. The Company believes the critical
accounting policies that most impact the consolidated financial statements are
described below.
The Company has
$45.0 million of goodwill assigned to five reporting units at year-end 2009 as
described in Note 7 to the consolidated financial statements. The
carrying amount of goodwill is subject to annual impairment testing or on an
interim basis if events or circumstances indicate that an impairment is more
likely than not to have occurred. Goodwill that is not supported by
measures of fair value must be written down, resulting in an impairment
expense. Fair value is estimated using a combination of the market
approach, which uses comparable sales multiples, and the income, or discounted
cash flows approach. Due to the current economic downturn, the Company prepared
an interim analysis of goodwill as of September 12, 2009, and recorded an
impairment expense as described in Note 7 to the consolidated financial
statements. At year-end, the Company updated its analysis of goodwill as of
December 31, 2009, and determined that there was no further impairment and that
none of the reporting units were close to failing step one of the impairment
analysis.
The Company has
$7.0 million of intangible assets at year-end 2009, as summarized in Note 9 to
the Company’s financial statements. Most of this is software that is used
internally. In addition, intangible assets include identified assets
of Kennedy at the time of its acquisition. These assets are amortized over their
estimated useful lives, typically five to seven years. The Company evaluates the
recoverability of the intangible assets when events and circumstances indicate
an impairment may have occurred, using estimates and assumptions including
future revenues, cash flows, and discount rates. If an impairment in
value occurs, an impairment expense must be recorded and amortization periods
may be reduced. Amortization expense was $3.3 million in 2009, $3.3
million in 2008, and $3.7 million in 2007.
The Company has
recorded $57.3 million of net deferred income tax assets as of year-end 2009, as
described in Note 8 to the consolidated financial statements. The ultimate
realization of deferred tax assets is dependent upon future taxable income
during the periods in which those temporary differences become
deductible. The Company has consistently achieved profitability and
taxable income. In the opinion of management, this trend will
continue, and it is more likely than not that the recorded deferred income tax
assets will be fully realized.
As described in
Note 4 to the Company’s financial statements, the Company has pension and other
postretirement benefit liabilities totaling $210.6 million at year-end 2009. A
number of actuarial assumptions are used to compute these liabilities, the
projected benefit obligations, and the related benefit expenses. The assumed
discount rates are based on the Citigroup Pension Yield Curve. Other assumptions
include life expectancies, retirement ages, health care cost trends,
compensation increases, and returns on plan assets. Changes in these assumptions
can and do change the amounts of postretirement benefit liabilities and related
expenses. The Company, in consultation with its actuaries, periodically reviews
the assumptions and revises them when appropriate. Total expenses for
the postretirement benefits that were subject to estimates and assumptions were
$33.0 million in 2009, $20.2 million in 2008, and $18.8 million in
2007.
The Company has
recorded customer receivables of $31.0 million as of year-end 2009, as described
in Note 9 to the Company’s financial statements. Accounts receivable are
presented net of an allowance for doubtful accounts of $1.6 million, based on
historical collection experience and a review of the current status of accounts
receivable. It is reasonably possible that the estimate will
change.
Off
Balance Sheet Arrangements and Effects of Inflation and Changing
Prices
The Company has no
off balance sheet arrangements as defined by the Securities Exchange Commission
in Regulation S-K, Item 303(a)(4)(ii).
The Company’s
results of operations and financial condition have not been significantly
affected by inflation, and the company’s principal operating costs have not
generally been subject to significant inflationary pressures.
Accounting
Pronouncements
The FASB Accounting
Standards Codification (ASC) became the source of authoritative generally
accepted accounting principles (GAAP) for nongovernmental entities effective on
a prospective basis for financial statements issued for interim and annual
periods ending after September 15, 2009. Rules and interpretative
guidance issued by the Securities and Exchange Commission (SEC) also remain
sources of GAAP for SEC registrants. The Codification does not change
current GAAP, but organizes pre-existing guidance by topic. Updates
to the ASC will be made using Accounting Standards Updates (ASU). The
Company adopted the Codification as of December 31, 2009. As such,
references to non-SEC GAAP guidance will now refer to Accounting Standards
Updates (or to the ASC itself).
Accounting
Standards Codification 715, Compensation—Retirement
Benefits (ASC 715, formerly FASB Statement of Financial Accounting
Standards No. 132(R)-1, Employers’
Disclosures about Postretirement Benefit Plan Assets), expands the
disclosure requirements about fair value measurements for defined benefit
pension and other postretirement plans. The Company adopted these
requirements as of December 31, 2009.
Accounting
Standards Update 2009-13, Revenue
Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements—a Consensus
of the FASB Emerging Issues Task Force (ASU 2009-13), amends the ASC to
require new accounting and reporting requirements for vendors with
multiple-deliverable revenue arrangements with their customers. The
amendments in ASU 2009-13 are effective prospectively for revenue arrangements
entered into or materially modified in fiscal years beginning on or after June
15, 2010. Early adoption is permitted. The Company does
not expect ASU 2009-13 to have a material effect on its financial
statements.
Accounting
Standards Update 2009-14, Software
(Topic 985): Certain Revenue Arrangements That Include Software
Elements—a
Consensus of the FASB Emerging Issues Task Force (ASU 2009-14), amends
the ASC to clarify the guidance for vendors that sell or lease tangible products
containing software. The amendments in ASU 2009-14 are effective
prospectively for revenue arrangements entered into or materially modified in
fiscal years beginning on or after June 15, 2010. Early adoption is
permitted, but a vendor must adopt the amendments in the same period and using
the same transition method as it uses to adopt the amendments in ASU
2009-13. The Company does not expect ASU 2009-14 to have a material
effect on its financial statements.
|
Item
7A.
|
Quantitative
and Qualitative Disclosures about Market
Risk
|
The Company is exposed to interest rate risks in its
investment portfolio. An increase in market interest rates would
result in a decline in the market value of the Company’s fixed-income
securities.
The maturity dates
and average interest yields for fixed-income securities debt held in the
Company’s investment portfolio as of December 31, 2009 were as follows (in
thousands of dollars):
|
Expected
Maturity Date
|
2010
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
|
Municipal
Bonds
|
$14,446
|
$15,673
|
$ 3,581
|
$ 6,794
|
$ 3,945
|
$46,847
|
|
Average
Interest Yield
|
5.2%
|
5.0%
|
5.0%
|
5.0%
|
5.2%
|
4.1%
|
|
Corporate
Bonds
|
$ 279
|
---
|
$ 506
|
---
|
---
|
---
|
|
Average
Interest Yield
|
4.1%
|
---
|
4.1%
|
---
|
---
|
---
|
|
Total
|
$14,725
|
$15,673
|
$ 4,087
|
$ 6,794
|
$ 3,945
|
$46,847
|
|
Average
Interest Yield
|
5.2%
|
5.0%
|
4.9%
|
5.0%
|
5.2%
|
4.1%
|
The Company manages
interest rate risk in its investment portfolio by diversifying the maturities of
its fixed-income investments. Approximately 49 percent of these
instruments at year-end 2009 mature within five years. Shorter-term
maturity investments reduce the risk that an increase in market interest rates
will have a permanent adverse effect on the Company's financial
position. The Company has no foreign exchange contracts, does not
hold securities for trading purposes, and does not use derivative financial
instruments.
At
December 31, 2009, the Company’s investment portfolio included equity
securities with a market value of $17.1 million. With all other
factors remaining constant, a hypothetical broad-based decline in equity market
prices of 10 percent would reduce the investment portfolio held in equity
investments by $1.7 million as of December 31, 2009.
|
Item
8.
|
Financial
Statements and Supplementary
Data
|
THE BUREAU OF
NATIONAL AFFAIRS, INC.
December 31, 2009
and 2008
(With Independent
Registered Public
Accounting Firm’s
Report Thereon)
Report
of Independent Registered Public Accounting Firm
Board of Directors
and Stockholders
The Bureau of
National Affairs, Inc.
Arlington,
Virginia
We have audited the
accompanying consolidated balance sheets of The Bureau of National Affairs, Inc.
and subsidiaries (the “Company”) as of December 31, 2009 and 2008 and the
related consolidated statements of income, stockholders’ (deficit) equity and
comprehensive income (loss), and cash flows for each of the years in the
three-year period ended December 31, 2009. In connection with our
audits of the financial statements, we have also audited the financial statement
schedule listed in Item 15(a)(2) of the accompanying index. These
financial statements and schedule are the responsibility of the Company’s
management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our
audits in accordance with the standards of the Public Company Accounting
Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The Company is not
required to have, nor were we engaged to perform, an audit of its internal
control over financial reporting. Our audits included consideration
of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Company’s internal control
over financial reporting. Accordingly, we express no such
opinion. An audit also includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall presentation of the financial statements and
schedule. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of The Bureau of National Affairs,
Inc. at December 31, 2009 and 2008, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
2009, in conformity with accounting principles generally accepted in the United
States of America.
Also, in our
opinion, the financial statement schedule, when considered in relation to the
basic consolidated financial statements taken as a whole, presents fairly, in
all material respects, the information set forth therein.
As discussed in Note 4 to the
consolidated financial statements, the Company adopted Accounting Standards
Codification 715, Compensation—Retirement
Benefits (ASC 715, formerly FASB Statement of Financial Accounting
Standards No. 158, Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans
(FAS 158)) in
2007.
/s/BDO
Seidman, LLP
Bethesda
Maryland
March 24,
2010
THE
BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED
STATEMENTS OF INCOME
YEARS
ENDED DECEMBER 31, 2009, 2008, AND 2007
(In thousands of
dollars, except per share amounts)
|
2009
|
2008
|
2007
|
||||||||
|
Operating
Revenues (Note
3)
|
$ | 331,253 | $ | 352,211 | $ | 352,224 | ||||
|
Operating
Expenses
|
||||||||||
|
(Notes 3, 4, 7, 9 and
11):
|
||||||||||
|
Editorial,
production, and distribution
|
177,870 | 188,114 | 184,301 | |||||||
|
Selling
|
54,264 | 55,286 | 57,478 | |||||||
|
General
and administrative
|
57,691 | 59,916 | 61,890 | |||||||
|
Goodwill
impairment
|
17,805 | --- | --- | |||||||
|
Total
Operating Expenses
|
307,627 | 303,316 | 303,669 | |||||||
|
(Loss)
Gain on Dispositions (Note
6)
|
148 | (12 | ) | 92,133 | ||||||
|
Operating
Profit
|
23,774 | 48,883 | 140,688 | |||||||
|
Investment
income (Note
5)
|
4,407 | 4,579 | 5,566 | |||||||
|
Interest
expense (Note
10)
|
(2,519 | ) | (3,277 | ) | (4,472 | ) | ||||
| Equity loss of affliated company (Note 2) | (137 | ) | --- | --- | ||||||
|
Income
Before Income Taxes
|
25,525 | 50,185 | 141,782 | |||||||
|
Provision
for income taxes (Note
8)
|
8,030 | 18,744 | 53,744 | |||||||
|
Net
Income
|
$ | 17,495 | $ | 31,441 | $ | 88,038 | ||||
| Earnings Per Share (Note 12) | $ | .65 | $ | 1.11 | $ | 2.99 | ||||
See accompanying notes to
consolidated financial statements.
THE
BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED
BALANCE SHEETS
DECEMBER
31, 2009 AND 2008
(In thousands of
dollars)
ASSETS
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Current
Assets:
|
||||||||
|
Cash
and cash equivalents (Note 5)
|
$ | 9,757 | $ | 11,139 | ||||
|
Short-term
investments (Note 5)
|
14,445 | 8,530 | ||||||
|
Receivables,
net (Note 9)
|
32,604 | 35,661 | ||||||
|
Inventories,
net (Note 9)
|
2,935 | 2,608 | ||||||
|
Prepaid
expenses
|
3,739 | 4,966 | ||||||
|
Deferred
income taxes (Note 8)
|
5,652 | 7,136 | ||||||
|
Total
Current Assets
|
69,132 | 70,040 | ||||||
|
Marketable
Securities (Note 5)
|
95,305 | 106,681 | ||||||
|
Property
and Equipment, net (Note
9)
|
115,036 | 120,426 | ||||||
|
Deferred
Income Taxes (Note 8)
|
51,601 | 45,286 | ||||||
|
Goodwill
(Note 7)
|
44,962 | 61,790 | ||||||
|
Intangible
and Other Assets, net (Note
9)
|
7,231 | 8,463 | ||||||
|
Investment
in Affiliated Company (Note 2)
|
4,163 | --- | ||||||
|
Total
Assets
|
$ | 387,430 | $ | 412,686 | ||||
See accompanying
notes to consolidated financial statements.
(Continued)
THE
BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED
BALANCE SHEETS
DECEMBER
31, 2009 AND 2008
(In thousands of
dollars)
LIABILITIES
AND STOCKHOLDERS’ DEFICIT
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Current
Liabilities:
|
||||||||
|
Current
portion of long-term debt (Note 10)
|
$ | 10,500 | $ | 10,500 | ||||
|
Payables
and accrued liabilities (Note 9)
|
38,606 | 40,497 | ||||||
|
Deferred
revenues (Note 3)
|
125,378 | 133,630 | ||||||
|
Total
Current Liabilities
|
174,484 | 184,627 | ||||||
|
Long-Term
Debt, less current portion (Note
10)
|
13,000 | 23,500 | ||||||
|
Postretirement
Benefits, less current portion (Note 4)
|
210,533 | 219,686 | ||||||
|
Other
Liabilities
|
1,381 | 1,337 | ||||||
|
Total
Liabilities
|
399,398 | 429,150 | ||||||
|
Commitments
and Contingencies (Notes 11, and 12)
|
||||||||
|
Stockholders’
Deficit (Note 12):
|
||||||||
|
Common
stock issued, $1.00 par value —
|
||||||||
|
Class
A – 30,000,000 shares
|
30,000 | 30,000 | ||||||
|
Class
B – 24,634,865 shares
|
24,635 | 24,635 | ||||||
|
Class
C – 2,531,680 shares
|
2,532 | 2,532 | ||||||
|
Additional
paid-in capital
|
47,511 | 42,181 | ||||||
|
Retained
earnings
|
224,406 | 218,026 | ||||||
|
Treasury
stock, at cost – 30,913,320 shares
|
||||||||
|
in
2009 and 29,547,221 in 2008
|
(277,749 | ) | (250,902 | ) | ||||
|
Accumulated
other comprehensive loss:
|
||||||||
|
Net
unrealized gain (loss) on marketable securities
|
1,366 | (3,701 | ) | |||||
|
Foreign
currency translation adjustment
|
(129 | ) | (104 | ) | ||||
|
Postretirement
benefits
|
(64,540 | ) | (79,131 | ) | ||||
|
Total
Stockholders’ Deficit
|
(11,968 | ) | (16,464 | ) | ||||
|
Total
Liabilities and Stockholders’ Deficit
|
$ | 387,430 | $ | 412,686 | ||||
See accompanying
notes to consolidated financial statements.
THE
BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
YEARS
ENDED DECEMBER 31, 2009, 2008, AND 2007
(In thousands of
dollars)
|
2009
|
2008
|
2007
|
||||||||||
|
Cash
Flows from Operating Activities:
|
||||||||||||
|
Net
income
|
$ | 17,495 | $ | 31,441 | $ | 88,038 | ||||||
|
Adjustments
to reconcile net income to net
|
||||||||||||
|
cash
provided by operating activities –
|
||||||||||||
|
Goodwill
impairment
|
17,805 | --- | --- | |||||||||
|
Depreciation
and amortization
|
10,012 | 9,935 | 8,319 | |||||||||
|
Deferred
income taxes
|
(15,599 | ) | 721 | 35,040 | ||||||||
|
(Gain)
loss on sales of securities
|
(464 | ) | 314 | (450 | ) | |||||||
|
Gain
on sale of buildings
|
--- | --- | (92,524 | ) | ||||||||
|
Equity
in loss of affiliated company
|
137 | --- | --- | |||||||||
|
Others
|
463 | 645 | 1,545 | |||||||||
|
Changes
in operating assets and liabilities –
|
||||||||||||
|
Receivables
|
3,151 | 7,182 | 1,918 | |||||||||
|
Inventories
|
(327 | ) | 535 | 556 | ||||||||
|
Payables
and accrued liabilities
|
(2,622 | ) | 1,219 | (6,284 | ) | |||||||
|
Deferred
revenues
|
(8,203 | ) | (6,414 | ) | 4,384 | |||||||
|
Postretirement
benefits
|
13,493 | 1,634 | 1,090 | |||||||||
|
Other
assets and liabilities – net
|
587 | (482 | ) | 650 | ||||||||
|
Net cash
provided by operating activities
|
35,928 | 46,730 | 42,282 | |||||||||
|
Cash
Flows from Investing Activities:
|
||||||||||||
|
Proceeds
from sale of buildings
|
--- | --- | 106,090 | |||||||||
|
Purchase
of building and improvements
|
--- | --- | (103,955 | ) | ||||||||
|
Investment
in affiliated company
|
(4,300 | ) | --- | --- | ||||||||
|
Purchase
of property and equipment
|
(1,319 | ) | (1,482 | ) | (10,209 | ) | ||||||
|
Capitalized
software
|
(1,371 | ) | (1,007 | ) | (343 | ) | ||||||
|
Acquisition
of publishing assets
|
(914 | ) | (831 | ) | (155 | ) | ||||||
|
Proceeds
from sale of property and equipment
|
31 | --- | --- | |||||||||
|
Investment
security sales and maturities
|
55,399 | 67,765 | 89,303 | |||||||||
|
Investment
security purchases
|
(41,672 | ) | (72,633 | ) | (93,651 | ) | ||||||
|
Net cash
provided by (used in) investing activities
|
5,854 | (8,188 | ) | (12,920 | ) | |||||||
See accompanying
notes to consolidated financial statements.
(Continued)
THE
BUREAU OF NATIONAL AFFAIRS, INC.
CONSOLIDATED
STATEMENTS OF CASH FLOWS
YEARS
ENDED DECEMBER 31, 2009, 2008, AND 2007
(In thousands of
dollars)
|
2009
|
2008
|
2007
|
||||||||||
|
Cash
Flows from Financing Activities:
|
||||||||||||
|
Receipts
for capital stock sales to employees
|
9,690 | 11,175 | 9,626 | |||||||||
|
Purchases
of treasury stock
|
(31,239 | ) | (28,449 | ) | (29,980 | ) | ||||||
|
Payment
of long-term debt
|
(10,500 | ) | (10,500 | ) | (10,500 | ) | ||||||
|
Dividends
paid
|
(11,115 | ) | (11,418 | ) | (10,720 | ) | ||||||
|
Net cash used
for financing activities
|
(43,164 | ) | (39,192 | ) | (41,574 | ) | ||||||
|
Net
Decrease in Cash
and
Cash Equivalents
|
(1,382 | ) | (650 | ) | (12,212 | ) | ||||||
|
Cash
and Cash Equivalents, beginning of year
|
11,139 | 11,789 | 24,001 | |||||||||
|
Cash
and Cash Equivalents, end of year
|
$ | 9,757 | $ | 11,139 | $ | 11,789 | ||||||
|
Supplemental
Cash Flow Information:
|
||||||||||||
|
Interest
paid
|
$ | 2,651 | $ | 3,430 | $ | 4,146 | ||||||
|
Income
taxes paid
|
21,236 | 19,893 | 17,230 | |||||||||
See accompanying
notes to consolidated financial statements.
THE BUREAU OF NATIONAL
AFFAIRS, INC.
CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY AND
COMPREHENSIVE INCOME (LOSS)
YEARS
ENDED DECEMBER 31, 2009, 2008, AND 2007
(In thousands of
dollars, except per share amounts)
|
Comprehensive
|
Capital
|
Additional
|
Accum.
Other
|
|||||||||||||||||||
|
Income
(Loss)
|
Stock
|
Paid-In
|
Retained
|
Treasury
|
Comprehensive
|
|||||||||||||||||
|
(Note
13)
|
Issued
|
Capital
|
Earnings
|
Stock
|
Loss
|
|||||||||||||||||
|
Balance,
January 1, 2007
|
$ | 57,167 | $ | 23,876 | $ | 120,685 | $ | (201,034 | ) | $ | 1,155 | |||||||||||
|
Net
Income
|
$ | 88,038 | --- | --- | 88,038 | --- | --- | |||||||||||||||
|
Other
Comprehensive Income, net of tax:
|
||||||||||||||||||||||
|
Unrealized
gain on marketable securities
|
330 | --- | --- | --- | --- | 330 | ||||||||||||||||
|
Currency
translation adjustment
|
(46 | ) | --- | --- | --- | --- | (46 | ) | ||||||||||||||
|
Minimum
pension liability adjustment
|
96 | --- | --- | --- | --- | 96 | ||||||||||||||||
|
Comprehensive
Income
|
$ | 88,418 | ||||||||||||||||||||
|
Adoption
of ASC 715 (formerly FAS 158), net of
|
||||||||||||||||||||||
|
$22,049
tax benefit*
|
--- | --- | --- | --- | (31,895 | ) | ||||||||||||||||
|
Sales
of Class A treasury shares to employees
|
--- | 5,328 | --- | 3,812 | --- | |||||||||||||||||
|
Repurchases
of shares
|
--- | --- | --- | (29,980 | ) | --- | ||||||||||||||||
|
Share-based
liabilities
|
--- | 6,310 | --- | --- | --- | |||||||||||||||||
|
Stock-based
compensation expense
|
--- | 258 | --- | --- | --- | |||||||||||||||||
|
Cash
dividends--$.36 per share, class A, B, and C
|
--- | --- | (10,720 | ) | --- | --- | ||||||||||||||||
|
Balance,
December 31, 2007,
|
57,167 | 35,772 | 198,003 | (227,202 | ) | (30,360 | ) | |||||||||||||||
|
Net
Income
|
$ | 31,441 | --- | --- | 31,441 | --- | --- | |||||||||||||||
|
Other
Comprehensive Income, net of tax:
|
||||||||||||||||||||||
|
Unrealized
loss on marketable securities
|
(5,523 | ) | --- | --- | --- | --- | (5,523 | ) | ||||||||||||||
|
Currency
translation adjustment
|
183 | --- | --- | --- | --- | 183 | ||||||||||||||||
|
Post Retirement Benefit adjustment
|
(47,236 | ) | --- | --- | --- | --- | (47,236 | ) | ||||||||||||||
|
Comprehensive
Loss
|
$ | (21,135 | ) | |||||||||||||||||||
|
Sales
of Class A treasury shares to employees
|
--- | 6,409 | --- | 4,749 | --- | |||||||||||||||||
|
Repurchases
of shares
|
--- | --- | --- | (28,449 | ) | --- | ||||||||||||||||
|
Cash
dividends--$.40 per share, class A, B, and C
|
--- | --- | (11,418 | ) | --- | --- | ||||||||||||||||
|
Balance,
December 31, 2008
|
57,167 | 42,181 | 218,026 | (250,902 | ) | (82,936 | ) | |||||||||||||||
|
Net
Income
|
$ | 17,495 | --- | --- | 17,495 | --- | --- | |||||||||||||||
|
Other
Comprehensive Income, net of tax:
|
||||||||||||||||||||||
|
Unrealized
gain on marketable securities
|
5,067 | --- | --- | --- | --- | 5,067 | ||||||||||||||||
|
Currency
translation adjustment
|
(25 | ) | --- | --- | --- | --- | (25 | ) | ||||||||||||||
|
Post
Retirement Benefit adjustment
|
14,591 | --- | --- | --- | --- | 14,591 | ||||||||||||||||
|
Comprehensive
Income
|
$ | 37,128 | ||||||||||||||||||||
|
Sales
of Class A treasury shares to employees
|
--- | 5,330 | --- | 4,392 | --- | |||||||||||||||||
|
Repurchases
of shares
|
--- | --- | --- | (31,239 | ) | --- | ||||||||||||||||
|
Cash
dividends--$.41 per share, class A, B, and C
|
--- | --- | (11,115 | ) | --- | --- | ||||||||||||||||
|
Balance,
December 31, 2009
|
$ | 57,167 | $ | 47,511 | $ | 224,406 | $ | (277,749 | ) | $ | (63,303 | ) | ||||||||||
*See Note
17.
See accompanying
notes to consolidated financial statements.
THE BUREAU OF
NATIONAL AFFAIRS, INC.
NOTES TO
CONSOLIDATED FINANCIAL STATEMENTS
FOR YEARS ENDED
DECEMBER 31, 2009, 2008, AND 2007
|
(1)
|
PRINCIPLES OF
CONSOLIDATION AND BASIS OF
PRESENTATION
|
The accompanying
consolidated financial statements include the accounts of The Bureau of National
Affairs, Inc. (the “Parent”) and its subsidiary companies (consolidated, the
“Company”). The Company’s primary business is the publishing of
legal, regulatory, and general business advisory information. Its printing
subsidiary provides printing services, and its software businesses develop,
produce, and market tax and financial planning software. Material
intercompany transactions and balances have been eliminated. Certain
prior year balances have been reclassified to conform to the current year
presentation. Accounting changes are described in Note
17.
The reported
amounts of some assets and liabilities and the disclosures of contingent assets
and liabilities result from management estimates and assumptions, which are
required to prepare financial statements in conformity with accounting
principles generally accepted in the United States of
America. Estimates and assumptions are used for measuring such items
as postretirement benefits, deferred tax assets, and the allowance for doubtful
accounts, and for evaluating the possible impairment of intangible assets and
goodwill. Estimates and assumptions may also affect the reported
amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
The Company has
evaluated subsequent events after the balance sheet date through the date the
financial statements were issued and did not note any events that would require
disclosure or adjustment to the consolidated financial statements other than the
acquisition of Llesiant referred to in Note 2 .
|
(2)
|
ACQUISITION
|
In December 2009,
the Company acquired 42 percent of the common stock of Llesiant, Inc., a
technology partner. Llesiant is developing the taxonomy-based search
engine used by “BNA Convergence,” a delivery platform designed for the legal and
corporate markets that allows searching of all BNA content along with a large
collection of third-party content. The investment is recorded using
the equity method of accounting, which requires the Company’s percentage
interest in Llesiant’s loss ($137,000 for 2009) to be recorded in the
Consolidated Statements of Income, and the investment to be recorded in the
Consolidated Balance Sheets. The Company acquired the remainder of
Llesiant in February 2010.
|
(3)
|
RECOGNITION
OF REVENUES, DEFERRED REVENUES, AND SELLING
EXPENSES
|
The Company derives
revenues from publishing and software product sales and from printing and other
services. Revenues are recognized when all of the following criteria are met:
there is persuasive evidence that an arrangement exists; delivery has occurred
or services have been rendered; the price to the customer is fixed and
determinable; and collectibility is reasonably assured.
The majority of
publishing sales are by subscription, primarily for one
year. Subscription revenues are deferred and amortized over the
subscription terms. The Company licenses information content to certain online
service providers for access by their customers. Revenues from these licenses
are recognized on either a transactional or subscription basis. Revenues from
other publishing products, such as books, research reports, and special reports,
are recognized when the products are shipped, net of a reserve for returns when
the right of return exists.
Revenues from
printing services are recognized when the materials are
shipped. Revenues from consulting, software data conversion, and
training are recognized when the services have been
completed. Revenues from event-related activities, such as
conferences, are recognized when the event has been completed.
Software revenues
are recognized in accordance with Accounting Standards Codification 985-605,
Software—Revenue
Recognition (ASC 985-605, formerly AICPA Statement of Position 97-2,
Software
Revenue Recognition). The majority of software sales are
bundled arrangements which include a one-year software program license term and
post-sale support, including telephone support and program updates (when and if
available) during the license term. Revenues are deferred and
recognized ratably over the license and post-sale support
term. However, when the sale includes a specified upgrade (a specific
future program enhancement promised to customers) revenue is deferred until that
specified upgrade is delivered. Revenues from sales of software
products with updates provided periodically over a license term, typically one
year, are recognized ratably over the license terms.
Deferred revenues
at year-end consisted of $109.1 million of deferred subscription revenues and
$16.3 million of deferred software revenues in 2009, and $117.4 million of
deferred subscription revenues and $16.2 million of deferred software revenues
in 2008.
Sales tax
collections are presented on a net basis (excluded from
revenues). Shipping charges are included in distribution
expense.
Advertising costs
are expensed as incurred and were $6,815,000, $8,185,000, and $8,594,000 in
2009, 2008 and 2007, respectively.
|
(4)
|
EMPLOYEE
BENEFIT PLANS
|
The Company has two
noncontributory defined benefit pension plans covering employees of the
Parent. Benefits are based on years of service and average annual
compensation. One plan is ERISA-qualified, the other is a
supplemental plan for certain employees whose benefits are limited under the
qualified plan. The Company also provides other postretirement
benefits, consisting of health care and life insurance benefits, to retired
employees of the Parent.
As of December 31, 2007, the Company
adopted Accounting Standards Codification 715, Compensation—Retirement
Benefits [ASC 715, formerly FASB Statement of Financial Accounting
Standards No. 158, Employers’
Accounting for Defined Benefit Pension and Other Postretirement Plans
(FAS 158)]. ASC 715 requires the recognition of the
overfunded or underfunded status of defined benefit pension and other
postretirement benefit plans as an asset or liability in the consolidated
balance sheets and the recognition of changes in that funded status in the year
in which the changes occur through comprehensive
income.
The following table
sets out summarized financial information about the plans as of December 31 (in
thousands of dollars):
|
Pension
Benefits
|
Other
Postretirement Benefits
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Change in
projected benefit obligation:
|
||||||||||||||||
|
Benefit
obligation - January 1
|
$ | 212,204 | $ | 196,621 | $ | 177,325 | $ | 155,078 | ||||||||
|
Service
cost
|
8,034 | 7,568 | 6,470 | 5,748 | ||||||||||||
|
Interest
cost
|
13,086 | 12,267 | 10,983 | 9,795 | ||||||||||||
|
Actuarial
loss (gain)
|
10,900 | 4,256 | (5,973 | ) | 11,143 | |||||||||||
|
Benefits
paid
|
(9,359 | ) | (8,508 | ) | (5,071 | ) | (4,439 | ) | ||||||||
|
Benefit
obligation - December 31
|
234,865 | 212,204 | 183,734 | 177,325 | ||||||||||||
|
Change in
plan assets:
|
||||||||||||||||
|
Fair value of
plan assets - January 1
|
153,304 | 184,966 | 16,442 | 25,996 | ||||||||||||
|
Actual return
on plan assets
|
31,819 | (37,275 | ) | 1,311 | (9,554 | ) | ||||||||||
|
Employer
contribution
|
15,000 | 14,000 | --- | --- | ||||||||||||
|
Benefits
paid
|
(9,262 | ) | (8,387 | ) | (633 | ) | --- | |||||||||
|
Fair value of
plan assets - December 31
|
190,861 | 153,304 | 17,120 | 16,442 | ||||||||||||
|
Funded
status
|
$ | (44,004 | ) | $ | (58,900 | ) | $ | (166,614 | ) | $ | (160,883 | ) | ||||
|
Amounts
recognized in the balance sheet
|
||||||||||||||||
|
Payables
and accrued liabilities
|
(85 | ) | (97 | ) | --- | --- | ||||||||||
|
Postretirement
benefits
|
(43,919 | ) | (58,803 | ) | (166,614 | ) | (160,883 | ) | ||||||||
|
Net amount
recognized
|
$ | (44,004 | ) | $ | (58,900 | ) | $ | (166,614 | ) | $ | (160,883 | ) | ||||
|
Amounts
included in accumulated other
comprehensive
loss (pre-tax)
|
||||||||||||||||
|
Net
actuarial loss
|
(57,459 | ) | (70,090 | ) | (50,858 | ) | (60,811 | ) | ||||||||
|
Prior
service cost
|
(371 | ) | (433 | ) | --- | --- | ||||||||||
|
Total
|
$ | (57,830 | ) | $ | (70,523 | ) | $ | (50,858 | ) | $ | (60,811 | ) | ||||
|
Assumed
discount rate
|
6.00 | % | 6.25 | % | 6.00 | % | 6.25 | % | ||||||||
|
Assumed rate
of compensation increase
|
4.75 | % | 4.75 | % | --- | --- | ||||||||||
The estimated
amounts to be amortized from accumulated other comprehensive income (loss) into
net periodic benefit cost during 2010 are a $3,320,000 net actuarial loss and
$62,000 for prior service cost for the pension benefit plan and a $3,166,000 net
actuarial loss for the other postretirement benefit plan.
The Company’s
funding practice for the qualified pension plan is to contribute amounts which,
at a minimum, satisfy ERISA requirements. The Company contributed
$15,000,000 in 2009, $14,000,000 in 2008, and $14,000,000 in
2007. The supplemental plan’s benefits are paid from the Company’s
general assets. The Company’s policy with respect to other
postretirement benefits is to fund these benefits as claims and premiums are
paid or through a Voluntary Employees’ Beneficiary Association (VEBA)
trust. The Company expects to contribute $2 million to its pension
plan and none to its other postretirement benefit plan in 2010.
The following
benefit payments, which reflect expected future service, as appropriate, are
expected to be paid (in thousands of dollars):
|
Other
|
|||||
|
Pension
|
Postretirement
|
||||
|
Benefits
|
Benefits
|
||||
|
2010
|
$
|
11,664
|
$
|
5,357
|
|
|
2011
|
12,885
|
6,130
|
|||
|
2012
|
13,977
|
6,982
|
|||
|
2013
|
14,934
|
7,840
|
|||
|
2014
|
15,932
|
8,675
|
|||
|
Years 2015 –
2019
|
93,380
|
54,517
|
|||
Pension accounting
requires the calculation of two benefit obligation amounts. The
projected benefit obligation is the present value cost of future benefits,
calculated by using years of service as of the measurement date and assuming
future compensation increases. The accumulated benefit obligation is
similar, but it is calculated using current compensation levels. The
following shows pension benefit obligations, as calculated by an independent
actuary, and plan assets (in thousands of dollars):
|
Pension
Benefits
|
|||||
|
2009
|
2008
|
||||
|
Projected
benefit obligation
|
$
|
234,865
|
$
|
212,204
|
|
|
Accumulated
benefit obligation
|
|||||
|
Qualified
plan
|
195,410
|
175,456
|
|||
|
Supplemental
plan
|
2,349
|
2,155
|
|||
|
Fair value of
plan assets–qualified plan
|
190,861
|
153,304
|
|||
|
|
|||||
Components of
pension expense for each year were as follows (in thousands of
dollars):
|
2009
|
2008
|
2007
|
|||||||||
|
Service cost
– benefits earned during the year
|
$ | 8,034 | $ | 7,568 | $ | 7,997 | |||||
|
Interest
cost
|
13,086 | 12,267 | 11,250 | ||||||||
|
Expected
return on plan assets
|
(13,270 | ) | (15,513 | ) | (14,467 | ) | |||||
|
Amortization
of net actuarial loss
|
4,982 | 108 | 317 | ||||||||
|
Amortization
of prior service cost
|
62 | 62 | 62 | ||||||||
|
|
|||||||||||
|
Pension
expense
|
$ | 12,894 | $ | 4,492 | $ | 5,159 | |||||
| Assumed discount rate | 6.25 | % | 6.35 | % | 5.8 | % | |||||
| Assumed rate of compensation increase | 4.75 | % | 4.75 | % | 4.75 | % | |||||
| Expected long-term return on plan assets | 8.5 | % | 8.5 | % | 8.5 | % | |||||
Amounts recognized
in other comprehensive income (loss) related to pensions after the adoption of
ASC 715 (formerly FAS 158) were as follows (in thousands of
dollars):
|
2009
|
2008
|
|||||||
|
Net gain
(loss)
|
$ | 7,649 | $ | (57,045 | ) | |||
|
Amortization
of net actuarial loss
|
4,982 | 108 | ||||||
|
Amortization
of prior service cost
|
62 | 62 | ||||||
|
Total
recognized in other comprehensive income
|
$ | 12,693 | $ | (56,875 | ) | |||
In addition, some
subsidiary companies have defined contribution pension plans and union-sponsored
multi-employer pension plans. Contributions under some of these plans
are at the discretion of the Boards of Directors of the respective subsidiary
companies. Pension expense for these plans was $767,000 in 2009, $917,000 in
2008, and $1,053,000 in 2007.
Components of other
postretirement benefit expense for each year were as follows (in
thousands of dollars):
|
2009
|
2008
|
2007
|
||||||||
|
Service cost
– benefits earned during the year
|
$ | 6,470 | $ | 5,748 | $ | 5,672 | ||||
|
Interest
cost
|
10,983 | 9,795 | 8,203 | |||||||
|
Expected
return on plan assets
|
(1,398 | ) | (2,210 | ) | (2,254 | ) | ||||
|
Amortization
of net actuarial loss
|
4,067 | 2,369 | 2,068 | |||||||
|
Amortization
of prior service cost
|
--- | --- | (17 | ) | ||||||
|
Other
postretirement benefits expense
|
$ | 20,122 | $ | 15,702 | $ | 13,672 | ||||
| Assumed discount rate | 6.25 | % | 6.35 | % | 5.8 | % | ||||
| Expected long-term return on plan assets | 8.5 | % | 8.5 | % | 8.5 | % | ||||
Amounts recognized
in other comprehensive income (loss) related to other postretirement benefits
after the adoption of ASC 715 (formerly FAS 158) were as follows (in thousands
of dollars):
|
2009
|
2008
|
|||||||
|
Net gain
(loss)
|
$ | 5,886 | $ | (22,884 | ) | |||
|
Amortization
of net actuarial loss
|
4,067 | 2,369 | ||||||
|
|
||||||||
|
Total
recognized in other comprehensive income (loss)
|
$ | 9,953 | $ | (20,515 | ) | |||
The Company
received a federal subsidy of $108,000 in 2009 related to the Medicare
Prescription Drug, Improvement, and Modernization Act of 2003 (Medicare D
Subsidy). As of December 31, 2009, the gross amount of federal
subsidies expected to be received are as follows: 2010 – $194,000; 2011 –
$230,000; 2012 – $270,000; 2013 - $314,000; 2014 - $361,000; 2015-2019 –
$2,681,000.
The postretirement
benefit obligation as of year-end 2009 was determined using an assumed health
care cost trend rate of 10 percent for 2010, gradually declining to 5 percent in
2015 and thereafter. A one percentage point increase in the assumed
health care cost trend rate for each year would increase the 2009 year-end
postretirement benefit obligation by $31.0 million and the 2009 postretirement
benefit service and interest expense by $3.3 million. A one percent
decrease in the assumed health care cost trend rate would decrease the
postretirement benefit obligation by $25.1 million and the postretirement
benefit service and interest cost by $2.7 million.
In developing the
long-term rate of return assumptions for pension and other postretirement plan
assets, the Company considers the historical average long-term rate of earnings
and the expected future long-term performance of individual asset
categories. The Company assumes an average annual long-term return of
8.5 percent based on an asset allocation of 60 percent in equity assets with an
expected long-term return of 10 percent, and 40 percent in fixed income assets
with an expected long-term return of 6.5 percent.
Both the pension
plan and postretirement benefits plan assets are actively managed, emphasizing a
long-term horizon, by equity and fixed income investment professionals under the
advice of an investment committee appointed by the Board of Directors. Risk is
managed by maintaining broadly diversified portfolios as well as by reallocating
assets between the equity and fixed income portfolios. For the pension plan, the
authorized allocation range for the equity portfolio is 35-70 percent of plan
assets, although the typical range is 50-70 percent, with the balance of assets
allocated to the fixed income portfolio. Up to 15 percent of the
assets may be invested in international equity funds.
For the
postretirement benefits plan, the authorized allocation range for the equity
portfolio is 40-75 percent of plan assets, although the typical range is 50-70
percent, with the balance of assets allocated to the fixed income
portfolio. At year-end 2008, equity assets were liquidated and
temporarily held in cash pending their reallocation by a new investment
manager.
The fair values of
pension plan assets as of December 31, 2009 were as follows (in thousands of
dollars):
|
Assets at
Fair Value as of December 31, 2009
|
|||||||||
|
Level
1
|
Level
2
|
Level
3
|
Total
|
||||||
|
Common
stock
|
$
|
95,294
|
---
|
---
|
$
|
95,294
|
|||
|
Preferred
stock
|
481
|
---
|
---
|
481
|
|||||
|
Corporate and
other debt
instruments
|
33,727
|
---
|
---
|
33,727
|
|||||
|
U.S.
government securities
|
26,933
|
---
|
---
|
26,933
|
|||||
|
Mutual
funds
|
20,421
|
---
|
---
|
20,421
|
|||||
|
Money market
funds and cash
|
13,245
|
---
|
---
|
13,245
|
|||||
|
Total
|
$
|
190,101
|
---
|
---
|
$
|
190,101
|
|||
The fair values of
postretirement benefits plan assets as of December 31, 2009 were as follows (in
thousands of dollars):
|
Assets at
Fair Value as of December 31, 2009
|
|||||||||
|
Level
1
|
Level
2
|
Level
3
|
Total
|
||||||
|
Common
stock
|
$
|
1,984
|
---
|
---
|
$
|
1,984
|
|||
|
Corporate and
other debt
Instruments
|
4,346
|
---
|
---
|
4,346
|
|||||
|
U.S.
government securities
|
8,908
|
---
|
---
|
8,908
|
|||||
|
Mutual
funds
|
228
|
228
|
|||||||
|
Money market
funds
|
1,531
|
---
|
---
|
1,531
|
|||||
|
Total
|
$
|
16,997
|
---
|
---
|
$
|
16,997
|
|||
The above amounts
do not include accrued income of $760,000 and $123,000 for pension plan and
postretirement plan assets, respectively. For a description of the levels in the
fair value hierarchy, see Note 14.
|
(5)
|
INVESTMENTS
AND INVESTMENT INCOME
|
Cash and
investments consisted of the following (in thousands of dollars):
|
December
31,
|
|||||
|
2009
|
2008 | ||||
|
Cash and cash
equivalents
|
$ | 9,757 | $ | 11,139 | |
|
Short-term
investments
|
14,445 | 8,530 | |||
|
Marketable
securities
|
95,305 | 106,681 | |||
|
Total
|
$ | 119,507 | $ | 126,350 | |
Cash equivalents
consist of short-term investments with original maturities of three months or
less at the time of purchase. Short-term investments consist of other
fixed income investments maturing in one year or less. Marketable
securities consist of fixed income securities maturing in more than one year and
equity securities, predominantly mutual funds. Investment income consisted of
the following (in thousands of dollars):
|
2009
|
2008
|
2007
|
||||||||||
|
Interest
income
|
$ | 3,676 | $ | 4,591 | $ | 4,735 | ||||||
|
Dividend
income
|
267 | 302 | 381 | |||||||||
|
Net gain
(loss) on sales of securities
|
464 | (314 | ) | 450 | ||||||||
|
Total
|
$ | 4,407 | $ | 4,579 | $ | 5,566 | ||||||
Proceeds from the sales and
maturities of securities were $55,399,000, $67,765,000, and $89,303,000 in 2009,
2008, and 2007 respectively. Gross realized gains and (losses)
from these sales were $665,000 and $(201,000) in 2009, $517,000 and $(831,000)
in 2008, and $872,000 and $(422,000) in 2007. The specific
identification method is used in computing realized gains and
losses.
The Company's
investment securities are classified as available-for-sale and are reported at
their fair values (quoted market price), which were as follows (in thousands of
dollars):
|
Gross
|
Gross
|
||||||||||||
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||
|
|
Cost
|
Gains
|
Losses
|
Value
|
|||||||||
| December 31, 2009 | |||||||||||||
|
Equity
securities
|
$ | 18,122 | $ | 430 | $ | (1,498 | ) | $ | 17,054 | ||||
|
Municipal
bonds
|
88,150 | 3,237 | (102 | ) | 91,285 | ||||||||
|
Corporate
debt
|
1,376 | 35 | --- | 1,411 | |||||||||
|
|
|||||||||||||
|
Total
|
$ | 107,648 | $ | 3,702 | $ | (1,600 | ) | $ | 109,750 | ||||
|
Gross
|
Gross
|
||||||||||||
|
Amortized
|
Unrealized
|
Unrealized
|
Fair
|
||||||||||
|
|
Cost
|
Gains
|
Losses
|
Value
|
|||||||||
| December 31, 2008 | |||||||||||||
|
Equity
securities
|
$ | 16,859 | $ | 131 | $ | (5,390 | ) | $ | 11,600 | ||||
|
Municipal
bonds
|
101,960 | 1,736 | (1,975 | ) | 101,721 | ||||||||
|
Corporate
debt
|
2,085 | --- | (195 | ) | 1,890 | ||||||||
|
|
|||||||||||||
|
Total
|
$ | 120,904 | $ | 1,867 | $ | (7,560 | ) | $ | 115,211 | ||||
The following table
summarizes investments with gross unrealized losses by the length of time those
investments have been continuously in a loss position (in thousands of
dollars):
|
Gross
Unrealized Losses
|
||||||||||||
|
Fair
|
Less
than
|
More
than
|
||||||||||
|
Value
|
12
months
|
12
Months
|
||||||||||
| December 31, 2009 | ||||||||||||
|
Equity
securities
|
$ | 14,582 | $ | --- | $ | (1,498 | ) | |||||
|
Municipal
bonds
|
4,270 | (5 | ) | (97 | ) | |||||||
|
Corporate
debt
|
--- | --- | --- | |||||||||
|
|
||||||||||||
|
Total
|
$ | 18,852 | $ | (5 | ) | $ | (1,595 | ) | ||||
|
Gross
Unrealized Losses
|
||||||||||||
|
Fair
|
Less
than
|
More
than
|
||||||||||
|
Value
|
12
months
|
12
Months
|
||||||||||
| December 31, 2008 | ||||||||||||
|
Equity
securities
|
$ | 10,504 | $ | (5,390 | ) | $ | --- | |||||
|
Municipal
bonds
|
33,162 | (1,279 | ) | (696 | ) | |||||||
|
Corporate
debt
|
1,890 | (195 | ) | --- | ||||||||
|
|
||||||||||||
|
Total
|
$ | 45,556 | $ | (6,864 | ) | $ | (696 | ) | ||||
Each quarter, the
Company reviews investment securities that have unrealized losses to determine
if those losses are other than temporary. Consideration is given to the
credit quality and maturities of the fixed income securities, the financial
condition and near-term prospects of the issuers of the equity securities,
general market conditions, the length of time and extent to which fair values
have been below amortized cost, and the Company’s ability and intent to hold the
security to allow for anticipated recovery. If a decline in fair value is
determined to be other than temporary, an impairment charge is recorded and a
new cost basis in the security is established. Accordingly, the
Company wrote down to fair market value equity security investments that were
determined to be other than temporarily impaired. The write downs amounted to
$50,000 for 2009 and $435,000 for 2008 and are included in investment income in
the consolidated statements of income. At December 31, 2009, 17
securities had an aggregated unrealized loss of 7.8 percent from their amortized
cost. At December 31, 2008, 59 securities had an aggregated unrealized
loss of 16.6 percent from their amortized cost. These securities
were reviewed in accordance with the criteria noted above, and their declines in
fair value were determined to be not other than temporary.
Fair values of the
Company's fixed-income securities are inversely affected by changes in market
interest rates. Generally, the longer the maturity of fixed income
securities, the larger the exposure to the risks and rewards resulting from
changes in market interest rates. Contractual maturities of the fixed
income securities as of December 31, 2009, were as follows (in thousands of
dollars):
|
Amortized
|
Fair
|
||||
|
Cost
|
Value
|
||||
|
|
|||||
|
Within one
year
|
$
|
14,490
|
$
|
14,725
|
|
|
One through
five years
|
29,211
|
30,499
|
|||
|
Five through
ten years
|
14,873
|
15,619
|
|||
|
Over ten
years
|
30,333
|
31,228
|
|||
|
No fixed
maturity date
|
619
|
625
|
|||
|
|
|||||
|
Total
|
$
|
89,526
|
$
|
92,696
|
|
|
(6)
|
GAIN (LOSS)
ON DISPOSITIONS
|
Gain (Loss) on
Dispositions consisted of the following (in thousands of dollars):
|
2009
|
2008
|
2007
|
||||||
|
Gain on sale
of buildings
|
$
|
---
|
$
|
---
|
$
|
92,524
|
||
|
Gain (loss)
on disposals of assets
|
148
|
(12)
|
(391)
|
|||||
|
|
||||||||
|
Total
|
$
|
148
|
$
|
(12)
|
$
|
92,133
|
On August 8, 2007,
the Company completed the simultaneous sale of its three Washington, D.C.,
headquarters buildings and land to affiliates of Vornado Realty Trust, Inc.
(Vornado), and the purchase from Vornado of a newly renovated building and land
in Arlington, Virginia, that serves as its new headquarters. The
property sales and purchase transactions were accomplished through a
tax-deferred “like-kind” exchange pursuant to Section 1031 of the Internal
Revenue Code.
The carrying value
of the buildings and land sold was $12.0 million. A pre-tax gain of
$92.5 million was recognized in the operations of the publishing segment on the
transaction. After taxes of $36.1 million (of which $35.2 million was
deferred), the net gain amounted to $56.4 million, or $1.92 per
share. After closing and related costs of $4.9 million, BNA received
proceeds from the sale of $106.1 million and paid $104.0 million for the
acquired building.
|
(7)
|
GOODWILL
|
The carrying amount
of goodwill is subject to testing on an annual basis or, if events or
circumstances indicate that an impairment is more likely than not to have
occurred, on an interim basis. Impairment testing is done at the reporting
unit level. The fair value of each reporting unit is determined using
a multiple of earnings before interest, taxes, depreciation and amortization
(EBITDA). Any excess in the carrying value of the reporting units
over their fair value is an indication of a potential goodwill impairment, which
would require further analysis to measure the amount of the impairment expense,
if any. The Company performed year-end impairment tests and
determined that no impairment had occurred at year-end 2008, and
2007.
Due to the current
economic downturn, the Company performed an interim test as of September 12,
2009. The carrying value of a publishing segment reporting unit, the
Kennedy Information (Kennedy) division of BNA Subsidiaries, LLC was found to be
less than its fair value. As a result, a goodwill impairment expense
of $17,805,000, representing the entire remaining balance of goodwill related to
the acquisition of Kennedy in 2000, was recorded for the third quarter of 2009.
Subsequently, the Company performed year-end impairment tests for each of the
Company’s five reporting units with goodwill and determined that no further
impairment had occurred at year-end 2009.
Goodwill assigned
to the reportable segments and the changes in the carrying amount of goodwill
for the three years ended December 31, 2009, are as follows:
|
Publishing
|
Printing
|
Software
|
Total
|
|||||||||||||
|
|
||||||||||||||||
|
Balance,
January 1, 2007
|
$ | 38,422 | $ | 917 | $ | 22,451 | $ | 61,790 | ||||||||
|
Balance,
December 31, 2007
|
38,422 | 917 | 22,451 | 61,790 | ||||||||||||
|
Balance,
December 31, 2008
|
38,422 | 917 | 22,451 | 61,790 | ||||||||||||
|
Goodwill
acquired during the year
|
977 | --- | --- | 977 | ||||||||||||
|
Impairment
loss
|
(17,805 | ) | --- | --- | (17,805 | ) | ||||||||||
|
Balance,
December 31, 2009
|
$ | 21,594 | $ | 917 | $ | 22,451 | $ | 44,962 | ||||||||
|
(8)
|
INCOME
TAXES
|
The provision for
income taxes consisted of the following (in thousands of dollars):
|
2009
|
2008
|
2007
|
||||||||||
|
Taxes
currently payable:
|
||||||||||||
|
Federal
|
$ | 19,422 | $ | 14,868 | $ | 14,363 | ||||||
|
State
and local
|
4,207 | 3,155 | 4,341 | |||||||||
|
|
||||||||||||
| 23,629 | 18,023 | 18,704 | ||||||||||
|
Deferred tax
provision:
|
||||||||||||
|
Federal
|
(12,189 | ) | (619 | ) | 30,580 | |||||||
|
State
and local
|
(3,410 | ) | 1,340 | 4,460 | ||||||||
|
|
||||||||||||
| (15,599 | ) | 721 | 35,040 | |||||||||
|
|
||||||||||||
|
Total
|
$ | 8,030 | $ | 18,744 | $ | 53,744 | ||||||
Reconciliation of
the U.S. statutory rate to the Company’s consolidated effective income tax rate
was as follows:
|
Percent of
Pretax Income
|
||||||||||||
|
2009
|
2008
|
2007
|
||||||||||
|
|
||||||||||||
|
Federal
statutory rate
|
35.0 | % | 35.0 | % | 35.0 | % | ||||||
|
State and
local income taxes, net of
|
||||||||||||
|
federal
income tax benefit
|
2.0 | 5.8 | 4.0 | |||||||||
|
Tax exempt
interest exclusion
|
(4.8 | ) | (2.7 | ) | (0.9 | ) | ||||||
|
Dividends
received exclusion
|
(0.2 | ) | (0.1 | ) | (0.1 | ) | ||||||
|
Others
|
(0.5 | ) | (0.6 | ) | (0.1 | ) | ||||||
|
|
||||||||||||
|
Total
|
31.5 | % | 37.4 | % | 37.9 | % | ||||||
Deferred tax assets
and liabilities are the future tax effects of temporary differences between
assets and liabilities as reported in the financial statements and as reported
on tax returns. They are estimated by using enacted tax rates
expected to apply in the years in which those temporary differences are expected
to be recovered or settled. Changes in tax rates are recognized in
income in the period that includes the enactment date. The tax
effects of temporary differences that gave rise to the deferred tax assets and
liabilities were as follows (in thousands of dollars):
|
December
31,
|
||||||||
|
2009
|
2008
|
|||||||
|
Deferred tax
assets:
|
||||||||
|
Postretirement
benefits liability
|
$ | 84,466 | $ | 81,303 | ||||
|
Inventories
|
1,299 | 1,562 | ||||||
|
Annual
leave
|
2,064 | 2,125 | ||||||
|
Accounts
receivable allowances
|
537 | 535 | ||||||
|
Medical
claims
|
900 | 1,446 | ||||||
|
Amortization
of acquired intangible assets
|
4,642 | (881 | ) | |||||
|
Others
|
1,578 | 2,550 | ||||||
|
|
||||||||
|
Total
deferred tax assets
|
95,486 | 88,640 | ||||||
|
|
||||||||
|
Deferred tax
(liabilities):
|
||||||||
|
Capitalized
software
|
(1,497 | ) | (1,577 | ) | ||||
|
Deferred
gain on real estate transactions
|
(35,080 | ) | (35,942 | ) | ||||
|
Depreciation
|
(531 | ) | (384 | ) | ||||
|
Unrealized
(gain) loss on marketable securities
|
(737 | ) | 1,991 | |||||
|
Others
|
(388 | ) | (306 | ) | ||||
|
|
||||||||
|
Total
deferred tax (liabilities)
|
(38,233 | ) | (36,218 | ) | ||||
|
|
||||||||
|
Net deferred
tax assets
|
$ | 57,253 | $ | 52,422 | ||||
The ultimate
realization of deferred tax assets is dependent upon future taxable income
during the periods in which those temporary differences become deductible.
Uncertainties surrounding income tax law changes, shifts in operations between
state taxing jurisdictions, and future operating income levels may affect the
ultimate realization of all or some of these deferred tax assets. The
Company has consistently achieved profitability and taxable
income. In the opinion of management, based on expected future
taxable income and available tax planning strategies, it is more likely than not
that the deferred tax assets will be fully utilized.
The Company expects
its unrecognized tax benefits to decrease by approximately $440,000 over the
next 12 months for tax positions related to prior years and by expiration of the
statute of limitations and audit settlements. All federal income tax
returns are closed for years prior to 2007. State tax returns that
remain subject to examination range from 2003 to present. Various
state and local income tax returns have been examined and closed by the
respective taxing authorities. The Company recognizes interest
accrued on unrecognized tax benefits in interest expense and penalties as a
general and administrative expense.
The following is a
tabular reconciliation of the total beginning and ending amounts of unrecognized
tax benefits (in thousands of dollars):
|
2009
|
2008
|
2007
|
||||||
|
Unrecognized
tax benefits, January 1
|
$
|
2,443
|
$
|
2,993
|
$
|
1,724
|
||
|
Increases
resulting from tax positions
taken
during year
|
300
|
482
|
1,269
|
|||||
|
Decreases
related to settlements with
taxing
authorities
|
(509)
|
(1,032)
|
---
|
|||||
|
Unrecognized
tax benefits, December 31
|
$
|
2,234
|
$
|
2,443
|
$
|
2,993
|
||
|
Total
unrecognized tax benefits that, if
recognized,
would reduce the effective
tax
rate
|
$
|
1,452
|
$
|
1,588
|
$
|
1,945
|
||
|
Total
interest and penalties recognized in
the
Consolidated Statements of Income
|
8
|
54
|
374
|
|||||
|
Total
interest and penalties recognized in
the
Consolidated Balance Sheets
|
635
|
627
|
671
|
|||||
|
(9)
|
OTHER BALANCE
SHEET INFORMATION
|
Certain year-end
balances consisted of the following (in thousands of dollars):
|
2009
|
2008
|
|||||||
|
Receivables:
|
||||||||
|
Customers
|
$ | 30,950 | $ | 34,675 | ||||
|
Others
|
3,210 | 2,709 | ||||||
|
Allowance
for doubtful accounts
|
(1,556 | ) | (1,723 | ) | ||||
|
|
||||||||
|
Total
|
$ | 32,604 | $ | 35,661 | ||||
Customer
receivables represent current billings, the collectibility of which is regularly
evaluated and adjusted for an allowance for doubtful accounts, as determined by
historical experience. Customer receivables determined to be uncollectible are
written off to the allowance account. Bad debt expense was $661,000
in 2009, $390,000 in 2008, and $660,000 in 2007.
|
2009
|
2008
|
||||
|
Inventories:
|
|||||
|
Materials and
supplies
|
$
|
1,511
|
$
|
1,272
|
|
|
Work in
process
|
476
|
266
|
|||
|
Finished
goods
|
948
|
1,070
|
|||
|
|
|||||
|
Total
|
$
|
2,935
|
$
|
2,608
|
|
Inventories are
valued at the lower of cost (using the average cost or last-in first-out
methods) or market, net of an allowance for excess inventory of $586,000 at
year-end 2009 and $724,000 at year-end 2008.
|
2009
|
2008
|
|||||||
|
Property and
equipment, at cost:
|
||||||||
|
Land
|
$ | 23,642 | $ | 23,642 | ||||
|
Buildings and
improvements
|
95,939 | 95,857 | ||||||
|
Furniture and
equipment
|
46,734 | 46,469 | ||||||
|
Accumulated
depreciation
|
(51,279 | ) | (45,542 | ) | ||||
|
Total
|
$ | 115,036 | $ | 120,426 | ||||
The Company uses
the straight-line method of depreciation based on estimated useful lives ranging
from five to 45 years for buildings and improvements and three to 10 years for
furniture and equipment. Depreciation expenses were $6,691,000 in
2009, $6,664,000 in 2008, and $4,596,000 in 2007. Expenditures for maintenance
and repairs are expensed, while major replacements and improvements are
capitalized.
|
|
2009
|
2008
|
||||||
|
Intangible
and other assets:
|
||||||||
|
Intangible
and other amortizable assets:
|
||||||||
|
Gross
carrying amount—
|
||||||||
|
Software
|
$ | 26,319 | $ | 25,693 | ||||
|
Customer
lists
|
6,182 | 5,582 | ||||||
|
Copyrights
|
9,145 | 9,145 | ||||||
|
Other
amortizable assets
|
214 | 130 | ||||||
| 41,860 | 40,550 | |||||||
|
Accumulated
amortization—
|
||||||||
|
Software
|
(21,247 | ) | (19,963 | ) | ||||
|
Customer
lists
|
(5,017 | ) | (4,644 | ) | ||||
|
Copyrights
|
(8,374 | ) | (7,459 | ) | ||||
|
Other
amortizable assets
|
(123 | ) | (107 | ) | ||||
|
|
(34,761 | ) | (32,173 | ) | ||||
|
Net
intangible and other amortizable assets
|
7,099 | 8,377 | ||||||
|
Other
assets
|
132 | 86 | ||||||
|
Total
|
$ | 7,231 | $ | 8,463 | ||||
Amortization
expenses for intangible assets are mainly included in general and administrative
expenses. Amortization expenses were $3,321,000 in 2009, $3,271,000
in 2008, and $3,723,000 in 2007. Amortizable assets are expensed
evenly over their estimated useful lives, ranging from five to seven years for
software and customer lists, 10 years for copyrights, and three to 10 years for
other amortizable assets. As of December 31, 2009, future estimated
amortization expenseswere as follows:
2010 – $3,171,000; 2011 – $2,052,000; 2012 – $727,000; 2013 – $613,000; 2014 -
$439,000. During 2009, gross assets of $2,009,000
were added and $733,000 were
written off.
|
2009
|
2008
|
||||
|
Payables and
accrued liabilities:
|
|||||
|
Accounts
payable and accrued liabilities
|
$
|
16,906
|
$
|
18,928
|
|
|
Employee
compensation and benefits
|
17,909
|
20,159
|
|||
|
Postretirement
benefits, current portion
|
85
|
97
|
|||
|
Income
taxes
|
3,706
|
1,313
|
|||
|
Total
|
$
|
38,606
|
$
|
40,497
|
|
|
(10)
|
TERM
DEBT
|
Term debt at year
end consisted of the following (in thousands of dollars):
|
2009
|
2008
|
||||
|
Notes
payable, unsecured, 8.15%, due 2010
|
$
|
7,500
|
$
|
15,000
|
|
|
Notes
payable, unsecured, 6.99%, due 2010-2011
|
16,000
|
19,000
|
|||
|
Total term
debt
|
23,500
|
34,000
|
|||
|
Current
portion
|
10,500
|
10,500
|
|||
|
Long-term
debt
|
$
|
13,000
|
$
|
23,500
|
|
Interest expense
for the term debt was $2,308,000 in 2009, $3,136,000 in 2008, and $3,940,000 in
2007. Other interest expense was $211,000 in 2009, $141,000 in 2008,
and $532,000 in 2007.
Maturities of term debt are as
follows: 2010, $10,500,000; 2011, $13,000,000. Notes payable are
subject to certain financial covenants and other customary restrictions,
including indebtedness and business combinations. As of December 31,
2009, the Company is in compliance with all financial
covenants. Based on the borrowing rates available to the Company for
loans with similar terms and average maturities, the fair value of total term
debt was $24,953,000 in 2009 and $34,985,000 in 2008.
The Company also
has a $10 million revolving credit note, under which the Company may borrow on
an unsecured basis at LIBOR plus 1.5 percent. $618,000 under the note
is being used for letters of credit. The note is subject to certain
financial covenants and expires May 31, 2011.
|
(11)
|
COMMITMENTS,
CONTINGENCIES, AND RELATED-PARTY
TRANSACTIONS
|
The Company has
non-cancelable operating leases for office space, equipment, and
vehicles. Total rent expense was $3,717,000 in 2009, $3,774,000 in
2008, and $6,037,000 in 2007. As of December 31, 2009, future minimum
lease payments under non-cancelable operating leases were as follows: 2010 –
$2,879,000; 2011 – $2,047,000; 2012 – $1,347,000; 2013 – $902,000; 2014 –
$599,000; thereafter – $2,404,000.
The Company is involved in certain
legal actions arising in the ordinary course of business. In the
opinion of management, the ultimate disposition of these matters will not have a
material adverse effect on the consolidated financial statements. The
Company indemnifies certain of its customers for potential copyright
infringement lawsuits related to the use of its products. Any exposure related
to these indemnifications is believed to be remote.
A director of one
of the Company's subsidiaries is a shareholder of a law firm that provides the
subsidiary with editorial services. Fees incurred for these services
were $5,752,000, $6,320,000, and $6,077,000 in 2009, 2008, and 2007,
respectively, and are recorded as an editorial expense.
As of December 31,
2009, approximately 48 percent of the Company’s employees were covered by a
collective bargaining agreement that expired in February
2010. Subsequently, a new agreement was reached that expires in
2013.
|
(12)
|
STOCKHOLDERS'
DEFICIT
|
Ownership and
transferability of Class A, Class B, and Class C stock are substantially
restricted to current and former employees by the Company’s articles of
incorporation. Ownership of ClassA stock, which is
voting, is restricted to active employees. Class B stock and Class C
stock are nonvoting. No class of stock has preference over another
upon declaration of dividends or liquidation. As of December 31,
2009, authorized shares of Class A, Class B, and Class C were 30,000,000,
30,000,000, and 5,000,000 respectively and outstanding shares of Class A, Class
B, and Class C were 10,729,959, 15,516,816, and 6,450,
respectively.
There is no
established public trading market for any of BNA's three classes of
stock. However, employees may purchase the Company’s Class A stock
through its Stock Purchase and Transfer Plan and the BNA 401(k) Plan (the
“Plans”). Semiannually,
the Board of Directors declares dividends and establishes the price at which
shares can be bought or sold.
The Company's
stockholders, when selling stock, are required to first tender shares to the
Company. The Company has supported the continuance of employee
ownership through its practice of repurchasing stock tendered by stockholders,
but is not required to do so. Capital stock with a market value of
$5.2 million as of December 31, 2009, is known or expected to be tendered in
2010. The actual value of the shares tendered will likely be
higher.
Treasury share transactions were as follows:
|
|
Treasury
Stock Shares
|
|||||||||||
|
Class
A
|
Class
B
|
Class
C
|
||||||||||
|
Balance,
January 1, 2007
|
17,135,345 | 7,356,651 | 2,519,240 | |||||||||
|
Sales to
employees
|
(613,571 | ) | --- | --- | ||||||||
|
Repurchases
|
812,430 | 1,222,785 | --- | |||||||||
|
Conversions
of Class A to Class B
|
771,655 | (771,655 | ) | --- | ||||||||
|
Balance,
December 31, 2007
|
18,105,859 | 7,807,781 | 2,519,240 | |||||||||
|
Sales to
employees
|
(714,011 | ) | --- | --- | ||||||||
|
Repurchases
|
682,658 | 1,145,694 | --- | |||||||||
|
Conversions
of Class A to Class B
|
547,389 | (547,389 | ) | --- | ||||||||
|
Balance,
December 31, 2008
|
18,621,895 | 8,406,086 | 2,519,240 | |||||||||
|
Sales to
employees
|
(617,280 | ) | --- | --- | ||||||||
|
Repurchases
|
607,173 | 1,370,216 | 5,990 | |||||||||
|
Conversions
of Class A to Class B
|
658,253 | (658,253 | ) | --- | ||||||||
|
Balance,
December 31, 2009
|
19,270,041 | 9,118,049 | 2,525,230 | |||||||||
Earnings per share
have been computed based on the weighted average of all outstanding shares of
stock, which was 26,841,332 in 2009, 28,217,644 in 2008, and 29,447,490 in
2007.
The differences
between amortized cost and fair value of the Company’s investment securities
result in unrealized gains or losses, which are reported, net of tax, as a
component of Stockholders' Equity. Revenues and expenses of the
Company's United Kingdom subsidiary are denominated in British pounds and
translated into U.S. dollars at the weight average exchange rate for the period.
Assets and liabilities are translated at year-end exchange rates. Any resulting
gain or loss is reported, net of taxes, as a component of Stockholders'
Deficit. The amount of the postretirement benefit plan’s obligations
in excess of plan assets, that has not been recorded by postretirement benefit
expense accounting, is reported, net of taxes, as a component of Stockholders’
Deficit.
|
(13)
|
COMPREHENSIVE
INCOME (LOSS)
|
Comprehensive
income encompasses all changes in Stockholders’ Equity, except those arising
from transactions with shareholders, and includes net income and other
comprehensive income (loss).
Elements of
comprehensive income (loss) are shown below (in thousands of
dollars):
|
2009
|
2008
|
2007
|
|||||||||||
|
Net
Income
|
$ | 17,495 | $ | 31,441 | $ | 88,038 | |||||||
|
Other
comprehensive income (loss):
|
|||||||||||||
|
Holding
gains (losses) on securities arising
during
the year
|
8,259 | (8,810 | ) | 958 | |||||||||
|
Less
net gain (loss) included in net income
|
464 | (314 | ) | 450 | |||||||||
|
Changes
in unrealized gains (losses)
|
7,795 | (8,496 | ) | 508 | |||||||||
|
Less
income taxes
|
2,728 | (2,973 | ) | 178 | |||||||||
|
Net
unrealized gains (losses)
|
5,067 | (5,523 | ) | 330 | |||||||||
|
Currency
translation (losses) gains
|
(39 | ) | 282 | (71 | ) | ||||||||
|
Less
income taxes
|
(14 | ) | 99 | (25 | ) | ||||||||
|
Net
currency translation (losses) gains
|
(25 | ) | 183 | (46 | ) | ||||||||
|
Minimum
pension liability adjustment
|
--- | --- | 157 | ||||||||||
|
Less
income taxes
|
--- | --- | 61 | ||||||||||
|
Net
minimum pension liability adjustment
|
--- | --- | 96 | ||||||||||
|
Post
retirement benefit adjustment
|
22,646 | (77,390 | ) | --- | |||||||||
|
Less
income taxes
|
8,055 | (30,154 | ) | --- | |||||||||
|
Net
post retirement benefit adjustment
|
14,591 | (47,236 | ) | --- | |||||||||
|
Total other
comprehensive income (loss)
|
19,633 | (52,576 | ) | 380 | |||||||||
| Comprehensive income (loss) | $ | 37,128 | $ | (21,135 | ) | $ | 88,418 | ||||||
|
(14)
|
FAIR VALUE
MEASUREMENTS
|
In the
first quarter of 2008, the Company adopted Accounting Standards Codification
820, Fair Value Measurements
and Disclosures (ASC 820, formerly FASB Statement of Financial Accounting
Standards No. 157, Fair Value
Measurements). In February 2008, the FASB deferred the
effective date of ASC 820 until January 1, 2009 for nonfinancial assets and
liabilities that are recognized or disclosed at fair value on a nonrecurring
basis. The Company adopted ASC 820 as it pertains to such
nonfinancial assets and liabilities in the first quarter of
2009. There was no material effect on the financial statements upon
adoption of this new accounting pronouncement.
ASC 820
discusses valuation techniques, such as the market approach (comparable market
prices), the income approach (present value of future income or cash flow), and
the cost approach (cost to replace the service capacity of an asset or
replacement cost). The statement utilizes a fair value hierarchy that
prioritizes the inputs to valuation techniques used to measure fair value into
three broad levels:
|
|
Level
1:
|
Unadjusted
quoted prices in active markets that are accessible at the measurement
date for identical, unrestricted assets or
liabilities.
|
|
|
Level
2:
|
Inputs, other
than quoted prices, that are observable for the asset or liability, either
directly or indirectly. These include quoted prices for similar
assets or liabilities in active markets and quoted prices for identical or
similar assets or liabilities in markets that are not
active.
|
|
Level
3:
|
Unobservable inputs that reflect the reporting entity’s own assumptions. |
Financial assets
and liabilities carried at fair value measured on a recurring basis as of
December 31, 2009 and the necessary disclosures are as follows (in thousands of
dollars):
|
Balance
as
of
|
Fair Value
Measures at 12/31/09
Using Fair
Value Hierarchy
|
Fair
Value
as
of
|
||||||||||||
|
12/31/09
|
Level
1
|
Level
2
|
Level
3
|
12/31/09
|
||||||||||
|
Cash and cash
equivalents
|
$
|
9,757
|
$
|
9,757
|
$
|
---
|
$
|
---
|
$
|
9,757
|
||||
|
Short-term
investments
|
14,445
|
14,445
|
---
|
---
|
14,445
|
|||||||||
|
Marketable
securities
|
95,305
|
95,305
|
---
|
---
|
95,305
|
|||||||||
|
Total
|
$
|
119,507
|
$
|
119,507
|
$
|
---
|
$
|
---
|
$
|
119,507
|
||||
The fair values of
short-term investments and marketable securities are based on quoted market
prices from various stock and bond exchanges. The Company chose not
to elect the fair value option as prescribed by ASC 820 (formerly FASB Statement
of Financial Accounting Standards No. 159, The
Fair Value Option For Financial Assets and Financial Liabilities—Including an
Amendment of FASB Statement No. 115) for its financial assets and
liabilities that had not been previously carried at fair
value. Therefore, material financial assets and liabilities not
carried at fair value, such as long-term debt, accounts payable, and customer
receivables, are reported at their carrying values.
Assets carried at
fair value measured on a nonrecurring basis as of December 31, 2009 and the
necessary disclosures are as follows (in thousands of dollars):
|
Balance
as
of
|
Fair Value
Measures at 12/31/09
Using Fair
Value Hierarchy
|
Losses
as
of
|
||||||||||||
|
12/31/09
|
Level
1
|
Level
2
|
Level
3
|
12/31/09
|
||||||||||
|
Goodwill
|
$
|
0
|
$
|
---
|
$
|
---
|
$
|
0
|
$
|
(17,805)
|
||||
|
Total
|
$
|
0
|
$
|
---
|
$
|
---
|
$
|
0
|
$
|
(17,805)
|
||||
In accordance with
Accounting Standards Codification 350-20, Goodwill
(ASC 350-20, formerly FASB Statement of Financial Accounting Standards
No. 142, Goodwill
and Other Intangible Assets), goodwill with a carrying value of
$17,805,000 was written down to its implied fair value of $0, resulting in an
impairment charge of $17,805,000, which was included in earnings for the
period. See Note 7.
|
(15)
|
SEGMENTS
|
Operating segments
are components of an enterprise whose separate financial information is reviewed
regularly by the chief operating decision-maker in deciding how to allocate
resources and in assessing performance. Operating segments may be
aggregated for presentation purposes if they have similar economic
characteristics, products, and customers.
The Company has
ten operating segments that are aggregated into three reportable segments:
Publishing, Printing, and Software. Publishing operations consist
primarily of the creation, production, and marketing of legal and regulatory and
general business advisory information in print and electronic
formats. Publishing aggregates the operations of the Parent with Tax
Management Inc. (excluding its BNA Software division) and also includes the
Parent’s other publishing subsidiary companies. Customers are primarily lawyers,
accountants, human resource professionals, business executives, health care
administrative professionals, trade associations, educational institutions,
government agencies, and libraries.
The Printing
segment is the operations of The McArdle Printing Co., Inc., which provides
printing and related services to mid-Atlantic customers. The Software
segment aggregates the operations of BNA Software, which develops, produces, and
markets tax and financial planning software, with STF Services Corporation,
which develops, produces, and markets interactive, government- approved forms
software.
Intersegment
revenues approximate current market prices and are eliminated upon
consolidation. The Company did not derive 10 percent or more of its
revenues from any one customer or government agency or from foreign sales, nor
did it have 10 percent or more of its assets in foreign locations.
Operating segment
information is presented below (in thousands of dollars):
|
Year Ended
December 31, 2009
|
Publishing
|
Printing
|
Software
|
Total |
|
|||||||||||||
|
Revenues from
external customers
|
$ | 278,773 | $ | 23,437 | $ | 29,043 | $ | 331,253 | ||||||||||
|
Intersegment
revenues
|
--- | 10,773 | 2,470 | 13,243 | ||||||||||||||
|
Operating
profit
|
15,065 | 839 | 7,870 | 23,774 | ||||||||||||||
|
Equity loss
of affiliated company
|
(137 | ) | --- | --- | (137 | ) | ||||||||||||
|
Interest
expense
|
2,519 | 68 | --- | 2,587 | ||||||||||||||
|
Identifiable
assets
|
385,084 | 18,967 | 38,059 | 442,110 | ||||||||||||||
|
Depreciation
and amortization
|
8,889 | 1,077 | 46 | 10,012 | ||||||||||||||
|
Goodwill
impairment
|
17,805 | --- | --- | 17,805 | ||||||||||||||
|
Investment in
affiliated company
|
4,300 | --- | --- | 4,300 | ||||||||||||||
|
Capital
expenditures
|
3,335 | 269 | --- | 3,604 | ||||||||||||||
|
Year Ended
December 31, 2008
|
Publishing
|
Printing
|
Software
|
Total |
|
|||||||||||||
|
Revenues from
external customers
|
$ | 290,537 | $ | 33,125 | $ | 28,549 | $ | 352,211 | ||||||||||
|
Intersegment
revenues
|
--- | 10,536 | 2,507 | 13,043 | ||||||||||||||
|
Operating
profit
|
38,613 | 1,805 | 8,465 | 48,883 | ||||||||||||||
|
Interest
expense
|
3,274 | 79 | --- | 3,353 | ||||||||||||||
|
Identifiable
assets
|
410,000 | 20,698 | 28,517 | 459,215 | ||||||||||||||
|
Depreciation
and amortization
|
8,798 | 1,101 | 36 | 9,935 | ||||||||||||||
|
Capital
expenditures
|
3,144 | 164 | 12 | 3,320 | ||||||||||||||
|
Year Ended
December 31, 2007
|
Publishing
|
Printing
|
Software
|
Total
|
||||||||||||
|
Revenues from
external customers
|
$ | 289,539 | $ | 35,673 | $ | 27,012 | $ | 352,224 | ||||||||
|
Intersegment
revenues
|
--- | 10,059 | 2,414 | 12,473 | ||||||||||||
|
Gain on sale
of buildings
|
92,524 | --- | --- | 92,524 | ||||||||||||
|
Operating
profit
|
130,364 | 2,608 | 7,716 | 140,688 | ||||||||||||
|
Interest
expense
|
4,467 | 204 | --- | 4,671 | ||||||||||||
|
Identifiable
assets
|
389,839 | 21,224 | 32,181 | 443,244 | ||||||||||||
|
Depreciation
and amortization
|
7,227 | 1,058 | 34 | 8,319 | ||||||||||||
|
Capital
expenditures
|
112,774 | 1,710 | 23 | 114,507 | ||||||||||||
The reconciliation
of items differing from consolidated totals are shown below(in thousands of
dollars):
|
2009
|
2008
|
2007
|
||||||||||
|
Total
interest expense for reportable segments
|
$ | 2,587 | $ | 3,353 | $ | 4,671 | ||||||
|
Elimination
of intersegment interest expense
|
(68 | ) | (76 | ) | (199 | ) | ||||||
|
Consolidated
interest expense
|
$ | 2,519 | $ | 3,277 | $ | 4,472 | ||||||
|
Total assets
for reportable segments
|
$ | 442,110 | $ | 459,215 | $ | 443,244 | ||||||
|
Elimination
of intersegment assets
|
(54,680 | ) | (46,529 | ) | (43,716 | ) | ||||||
|
Consolidated
assets
|
$ | 387,430 | $ | 412,686 | $ | 399,528 | ||||||
|
(16)
|
SELECTED
QUARTERLY DATA
|
The Company’s
financial reporting is based on thirteen four-week periods. Quarterly
results are typically much stronger in the fourth quarter because three periods
are in each of the first three fiscal quarters and four periods are in the
fourth fiscal quarter. Earnings per share amounts for each quarter
are required to be computed independently and may not total to the amount
computed for the full year.
The following
unaudited summary of quarterly financial information includes all adjustments
necessary for a fair presentation for each period presented (in thousands of
dollars, except per share amounts):
|
Quarter Ended
2009
|
||||||||||||||||
| March 28 | June 20 | September 12 | December 31 | |||||||||||||
|
Revenues
|
$ | 75,856 | $ | 75,345 | $ | 72,904 | $ | 107,148 | ||||||||
|
Gross
Profit
|
34,889 | 34,562 | 33,049 | 50,883 | ||||||||||||
|
Net Income
(Loss)
|
5,992 | 6,685 | (5,921 | ) | 10,739 | |||||||||||
|
Earnings
(Loss) Per Share
|
$ | .22 | $ | .25 | $ | ( .22 | ) | $ | .41 | |||||||
|
Quarter Ended
2008
|
||||||||||||||||
| March 22 | June 14 | September 6 | December 31 | |||||||||||||
|
Revenues
|
$ | 75,261 | $ | 79,716 | $ | 78,189 | $ | 119,045 | ||||||||
|
Gross
Profit
|
36,001 | 37,799 | 36,941 | 53,356 | ||||||||||||
|
Net
Income
|
7,365 | 8,092 | 6,754 | 9,230 | ||||||||||||
|
Earnings Per
Share
|
$ | .26 | $ | .29 | $ | .24 | $ | .33 | ||||||||
As described in
Note 7, the Company recorded a goodwill impairment expense of $17,805 in the
third quarter of 2009, reducing net income by $10.7 million and earnings per
share by $0.40.
|
(17)
|
ACCOUNTING
CHANGES
|
As described in Note 4, in 2007 the
Company adopted the provisions of ASC 715 (formerly FAS 158), which requires the
recognition
of the underfunded status of defined benefit pension and other postretirement
benefit plans as a liability in the consolidated balance sheets and the
recognition of changes in that funded status in the year in which the changes
occur through comprehensive income.
SCHEDULE II -
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
THE BUREAU OF
NATIONAL AFFAIRS, INC.
YEARS ENDED
DECEMBER 31, 2009, 2008, AND 2007
(In Thousands
of Dollars)
|
Column
A
|
Column
B
|
Column
C
|
Column
D
|
Column
E
|
||||||||||||||||
|
Additions
|
||||||||||||||||||||
| (1) | (2) | |||||||||||||||||||
|
Charged
to
|
||||||||||||||||||||
|
Balance
at
|
Charged
to
|
Other
|
Balance
at
|
|||||||||||||||||
|
Beginning
|
Costs
and
|
Accounts—
|
Deductions—
|
End
of
|
||||||||||||||||
|
Description
|
of
Period
|
Expenses
|
Describe
|
Describe
|
Period
|
|||||||||||||||
|
VALUATION
ACCOUNTS DEDUCTED
|
||||||||||||||||||||
|
FROM
ASSETS TO WHICH THEY APPLY:
|
||||||||||||||||||||
|
Allowance for
Doubtful Accounts Receivable:
|
||||||||||||||||||||
|
Year
ended December 31, 2009
|
$ | 1,723 | $ | 661 | $ | (154 | )(a) | $ | (674 | )(b) | $ | 1,556 | ||||||||
|
Year
ended December 31, 2008
|
2,034 | 390 | (158 | )(a) | (543 | )(b) | 1,723 | |||||||||||||
|
Year
ended December 31, 2007
|
2,102 | 660 | 83 | (a) | 811 | (b) | 2,034 | |||||||||||||
|
Allowance for
Excess Inventory:
|
||||||||||||||||||||
|
Year
ended December 31, 2009
|
$ | 724 | $ | (138 | ) | $ | 586 | |||||||||||||
|
Year
ended December 31, 2008
|
680 | 44 | 724 | |||||||||||||||||
|
Year
ended December 31, 2007
|
680 | --- | 680 | |||||||||||||||||
|
Allowance for
Deferred Tax Assets:
|
||||||||||||||||||||
|
Year
ended December 31, 2009
|
$ | --- | $ | --- | $ | --- | ||||||||||||||
|
Year
ended December 31, 2008
|
601 | (601 | ) | --- | ||||||||||||||||
|
Year
ended December 31, 2007
|
658 | (57 | ) | 601 | ||||||||||||||||
Notes:
|
(a)
|
Charged to deferred
subscription revenue; portion of allowance for doubtful accounts
receivable not included
in
revenues
|
|
(b)
|
Net accounts
written off.
|
|
Item
9.
|
Changes
in and Disagreements with Accountants on Accounting and Financial
Disclosures
|
|
Item
9A(T).
|
Controls
and Procedures
|
Evaluation of
Disclosure Controls and Procedures
The Company has
evaluated, under the supervision of the Company’s Chief Executive Officer (CEO)
and the Chief Financial Officer (CFO), the effectiveness of its disclosure
controls and procedures as of December 31, 2009. Based on that evaluation, the
CEO and CFO have concluded that our disclosure control policies and procedures
are effective to provide that the information required to be disclosed in
reports we file or submit under the Securities and Exchange Act of 1934 is
recorded, processed, summarized, and reported within the time periods specified
in the SEC’s rules and forms, and that such information is accumulated and
communicated to our management, including the CEO and CFO, as appropriate, to
allow timely decisions regarding required disclosure.
|
Management’s
Report on Internal Control over Financial Reporting
|
|
Section 404 of the
Sarbanes-Oxley Act of 2002 requires that management document and test the
Company’s internal control over financial reporting and include in this Annual
Report on Form 10-K a report on management’s assessment of the effectiveness of
our internal control over financial reporting.
Our management is
responsible for establishing and maintaining adequate internal control over
financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange
Act. Under the supervision and with the participation of our management,
including our CEO and CFO, we conducted an evaluation of the effectiveness of
our internal control over financial reporting based upon the framework in
Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on that
evaluation, our management concluded that our internal control over financial
reporting is effective, as of December 31, 2009.
This annual report
does not include an attestation report of our independent registered public
accounting firm regarding internal control over financial
reporting. Management’s report was not subject to attestation by our
registered public accounting firm pursuant to temporary rules of the Securities
and Exchange Commission that permit us to provide only management’s report in
this annual report.
Changes
in Internal Control Over Financial Reporting.
There were no
changes in the Company’s internal control over financial reporting
during the quarter ended December 31, 2009 that have materially
affected, or are likely to materially affect, its internal control over
financial reporting.
|
Item
9B.
|
Other
Information
|
None.
PART
III
Except as set forth
in this Form 10-K under Part I, Item X, "EXECUTIVE OFFICERS OF THE REGISTRANT,"
the information required by Items 10, 11, 12, 13, and 14, is contained in the
Company's definitive Proxy Statement (the "Proxy Statement") filed pursuant to
Regulation 14A under the Securities Exchange Act of 1934, to be filed with the
SEC within 120 days of December 31, 2009. Such information is
incorporated herein by reference.
|
Item
10.
|
Directors,
Executive Officers and Corporate
Governance
|
The information required under this Item 10 is
contained in the Proxy Statement under the headings "I.
Election of Directors", II. Corporate Governance, and "Biographical
Sketches of Nominees," and is incorporated herein by
reference. The information below related to Executive Officers is
omitted from the Proxy Statement in reliance on Instruction 3 to Regulation S-K,
Item 401(b).
The following
persons were executive officers of The Bureau of National Affairs, Inc., at
December 31, 2009. Executive officers are elected annually by the
Board of Directors and serve until their successors are
elected.
|
Name
|
Age
|
Present
position and prior experience
|
|
|
Cynthia J.
Bolbach
|
62
|
Executive Vice President and | |
|
Corporate
Secretary
|
|||
|
Corporate
secretary since 1995
|
|||
| and executive vice president since 2009. | |||
|
Joined BNA in
1972
|
|||
|
Eunice L.
Bumgardner
|
49
|
Executive
Vice President and
|
|
|
General
Counsel
|
|||
|
Executive
vice president since 2009
|
|||
|
and general
counsel since 1995. Joined
|
|||
| BNA in 1994. | |||
|
Carol A.
Clark
|
53
|
Executive
Vice President
and
|
|
| Chief Technology Officer | |||
|
Executive
vice president and chief
|
|||
|
technology
officer since 2009.
|
|||
|
Previously
served as technology director.
|
|||
| since 1997. Joined BNA in 1983. | |||
| Robert P. Ambrosini |
53
|
Executive Vice President and | |
| Chief Financial Officer | |||
|
Joined BNA in
2007 as Chief financial
|
|||
|
officer;
executive vice president since
|
|||
|
2009.
Served as Senior Vice President of
|
|||
|
Finance and
Accounting for the National
|
|||
|
Geographic
Channel 2004 - 2006.
|
|||
| Gilbert S. Lavine |
58
|
Treasurer | |
|
Treasurer
since 1998. Joined BNA in 1985.
|
| Name |
Age
|
Present position and prior experience | |
| Gregory C. McCaffery |
49
|
President and Chief Operating Officer | |
|
President
since 2007 and chief operating
|
|||
|
officer since
2003. Joined BNA in 1986
|
|
James R.
Schneble
|
55
|
Corporate
Controller
|
|
|
Controller
since 1990. Joined BNA in 1985.
|
|||
|
Paul N.
Wojcik
|
61
|
Chairman and
Chief Executive Officer
|
|
|
Chairman
since 2007 and CEO since
|
|||
|
1997,
president 1995-2007. Joined BNA in
|
|||
|
1972.
|
The Company has
adopted a code of ethics, as defined in Regulation S-K, that applies to the
Company’s Chief Executive Officer, its senior financial officers, and any
persons who perform similar functions for the Company and any of its subsidiary
companies. The code of ethics is posted on the Company’s website, the address of
which is www.bna.com.
The Company intends to satisfy the disclosure requirements with respect
to any amendments to, and/or waivers of, the provisions of the code of ethics by
posting the required information on its Internet website.
|
Item
11.
|
Executive
Compensation
|
|
Item
12.
|
Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters
|
The information
required under this Item 12 is contained in the Proxy Statement under the
heading "I. Election
of Directors" and is incorporated herein by reference.
|
Item
13.
|
Certain
Relationships and Related Transactions, and Director
Independence
|
The information
required under this Item 13 is contained in the Proxy Statement under the
heading "II.
Corporate Governance" and "III. Executive Compensation" and is
incorporated herein by reference.
|
Item
14.
|
Principal
Accountant Fees and Services
|
PART
IV
|
|
The following
documents are filed as part of this
report.
|
|
(a)(1)
|
Financial
Statements
|
Page
|
|
Reports of
Independent Registered Public Accounting Firms
|
24
|
|
|
Consolidated
Statements of Income for the years
|
25
|
|
|
ended
December 31, 2009, 2008, and 2007
|
|
|
|
Balance
Sheets as of December 31, 2009 and 2008
|
26
|
|
|
Consolidated
Statements of Cash Flows for each of the
|
|
|
|
years ended
December 31, 2009, 2008, and 2007
|
28
|
|
| Consolidated Statements of Changes in Stockholders' | ||
|
Equity and
Comprehensive Income for each of the
|
|
|
|
years ended
December 31, 2009, 2008, and 2007
|
30
|
|
|
Notes to
Consolidated Financial Statements
|
31
|
|
|
(a)(2)
|
Financial
Statement Schedule:
|
|
|
II
Valuation and Qualifying Accounts and Reserves
|
||
|
for
the years ended December 31, 2009, 2008, and 2007
|
53
|
|
(a)(3)
|
Exhibits
|
|
3.1
|
Certificate
of Incorporation, as amended*
|
|
3.2
|
Bylaws, as
amended.**
|
|
11
|
Statement re:
Computation of Per Share Earnings is contained in the
2009
|
|
Consolidated
Financial Statements in the Notes to Consolidated Financial
Statements,
|
|
| Note 12, "Stockholders' (Deficit) Equity" |
|
21
|
Subsidiaries
of Registrant.***
|
| 23.1 | Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm |
|
31.1
|
Certification
of the Chief Executive Officer pursuant to Section 302
|
|
of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. section 1350.
|
|
|
31.2
|
Certification
of the Chief Financial Officer pursuant to Section 302
|
|
of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. section 1350.
|
|
|
32.1
|
Certification
of the Chief Executive Officer pursuant to Section 906
|
|
of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. section 1350.
|
|
|
32.2
|
Certification
of the Chief Financial Officer pursuant to Section 906
|
|
of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. section 1350.
|
|
|
99.1
|
Proxy
Statement for the Annual Meeting of security holders to be held on
April 17,
2010****
|
|
*
|
Incorporated by reference to
the Company’s 2001 Form 10-K
|
|
Commission
File Number 2-28286, filed on March 29, 2002.
|
|
|
The
exhibit number indicated above corresponds to the
|
|
|
exhibit
number in that filing.
|
|
|
**
|
Incorporated by reference to
the 8K filed by the Company on
|
|
February
18, 2009. The exhibit number indicated above
corresponds
|
|
|
to the
exhibit number in that filing.
|
|
|
***
|
Filed
herewith.
|
|
****
|
Incorporated by reference to
the Company’s Definitive Proxy Statement, to be
filed
|
|
with the
SEC within 120 days of December 31, 2009.
|
|
|
Upon
written or oral request to the Company’s General Counsel, a
copy
|
|
|
of any of
the above exhibits will be furnished at
cost.
|
SIGNATURES
Pursuant to the
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE BUREAU OF NATIONAL AFFAIRS,
INC.
|
By: /s/Paul
N. Wojcik
|
By: /s/Robert P. Ambrosini |
|
Paul
N. Wojcik
|
Robert P. Ambrosini, |
| Chief Executive Officer | Executive Vice President and Chief Financial Officer |
| (Chief Accounting Officer) | |
| Date: March 24, 2010 | Date: March 24, 2010 |
Pursuant to the
requirements of the Securities Exchange Act of 1934, this report has been signed
below by the following persons on behalf of the registrant and in the capacities
on the dates indicated.
|
By: /s/Paul
N. Wojcik
|
March 24, 2010 |
|
Paul
N. Wojcik
|
Date |
| Chairman of the Board of Directors | |
| Director |
| By: /s/Paul A. Blakely |
March
24,
2010
|
By: /s/George J. Korphage |
March
24,
2010
|
|
Paul
A. Blakely
|
Date | George J. Korphage | Date |
| Director | Director | ||
| By: /s/Cynthia J. Bolbach | March 24, 2010 |
By: /s/Gregory
C.
McCaffrey
|
March 24, 2010 |
| Cynthia J. Bolbach | Date | Gregory C. McCaffrey | Date |
| Director | Director | ||
| By: /s/Eunice Lin Bumgardner | March 24, 2010 | By: /s/Darren P. McKewen | March 24, 2010 |
| Eunice Lin Bumgardner | Date |
Daren
P. McKewen
|
Date |
| Director | Director | ||
| By: /s/Neil R. Froemming | March 24, 2010 | By: /s/Jonathan Newcomb | March 24, 2010 |
| Neil R. Froemming | Date | Jonathan Newcomb | Date |
| Director | Director | ||
| By: /s/Gerald S.Hobbs | March 24, 2010 | By: _________________ | March 24, 2010 |
| Gerald S. Hobbs | Date | Ellen Taus | Date |
| Director | Director | ||
| By: /s/Marcia P. Kaplan | March 24, 2010 | By: /s/Daniel W. Toohey | March 24, 2010 |
| Marcia P. Kaplan | Date | Daniel W. Toohey | Date |
| Director | Director |
| EXHIBIT INDEX | ||||
|
|
|
Sequential
Page
|
||
| Number | Exhibit Description |
Number
|
||
|
3
|
.1 |
Certificate
of Incorporation, as amended
|
*
|
|
|
3
|
.2 |
Bylaws, as
amended
|
*
|
|
|
11
|
Statement re: Computation of Per Share Earnings is contained in the 2009 | |||
|
Consolidated
financial Statements in the Notes to Consolidated Financial
|
||||
| Statements, Note 12 "Stockholders' Deficit" |
46
|
|||
|
21
|
61
|
|||
|
23
|
.1 | Consent of BDO Seidman, LLP, Independent Registered Public Accounting Firm |
62
|
|
|
31
|
.1 | |||
|
63
|
||||
|
31
|
.2 | |||
|
64
|
||||
|
32
|
.1 | |||
|
65
|
||||
|
32
|
.2 | |||
|
66
|
||||
|
99
|
.1 |
Proxy
Statement for the Annual Meeting of Stockholders to be held on April
18, 2009
|
**
|
|
|
*
|
Incorporated by reference to the Company’s 2001 Form 10-K | |||
|
Commission
File Number 2-28286, filed on March 29, 2002.
|
||||
|
The exhibit
number indicated above corresponds to the
|
||||
|
exhibit
number in that filing.
|
||||
|
**
|
The Definitive Proxy Statement is expected to be filed with | |||
| the SEC within 120 days of December 31, 2009. |
60