-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, swNbnJB9X8xmvY/YuMtycpXVEEMpqfx0a2YahrVq0oskf6f2+TrChL1AtAa44hrH t6LVg6P9bEPCIkdEiSXNQg== 0000040542-95-000003.txt : 19950517 0000040542-95-000003.hdr.sgml : 19950517 ACCESSION NUMBER: 0000040542-95-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19941231 FILED AS OF DATE: 19950210 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEVON GROUP INC CENTRAL INDEX KEY: 0000040542 STANDARD INDUSTRIAL CLASSIFICATION: 2790 IRS NUMBER: 030212800 STATE OF INCORPORATION: DE FISCAL YEAR END: 0331 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-14850 FILM NUMBER: 95508539 BUSINESS ADDRESS: STREET 1: 281 TRESSER BLVD STREET 2: STE 501 CITY: STAMFORD STATE: CT ZIP: 06901-3227 BUSINESS PHONE: 2039641444 MAIL ADDRESS: STREET 1: 281 TRESSER BLVD STREET 2: STE 501 CITY: STAMFORD STATE: CT ZIP: 06901-3227 FORMER COMPANY: FORMER CONFORMED NAME: GENERAL EDUCATIONAL SERVICES CORP DATE OF NAME CHANGE: 19760810 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1994 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 2-14850 DEVON GROUP, INC. (Exact name of registrant as specified in its charter) Delaware 03-0212800 (State of Incorporation) (I.R.S. Employer Identification No.) 281 Tresser Boulevard, Suite 501, Stamford, Connecticut 06901-3227 (Address of principal executive offices) Registrant's telephone number, including area code (203) 964-1444 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding as of February 7, 1995 Common Stock 7,328,817 PART I Item 1 - Financial Statements DEVON GROUP, INC. Condensed Consolidated Statements of Income (Unaudited) (in thousands, except per share data)
For the Three Months For the Nine Months Ended December 31, Ended December 31, 1994 1993 1994 1993 Sales $ 61,505 $ 49,343 $169,311 $140,547 Operating costs and expenses: Cost of sales 36,906 30,238 100,406 85,991 Selling, general, and administrative 14,612 13,065 42,478 37,741 Income from operations 9,987 6,040 26,427 16,815 Interest income 17 4 32 11 Interest expense (144) (218) (616) (698) Other income (expense) (130) 103 230 434 Income before income taxes 9,730 5,929 26,073 16,562 Provision for income taxes 3,989 2,430 10,690 6,759 Net income $ 5,741 $ 3,499 $ 15,383 $ 9,803 Net income per common share $ 0.78 $ 0.48 $ 2.11 $ 1.36 Average common shares outstanding 7,325 7,221 7,295 7,202
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Condensed Consolidated Balance Sheets As of December 31, 1994 and March 31, 1994 (in thousands, except share and per share data)
December 31, March 31, Assets 1994 1994 (Unaudited) Current Assets: Cash and cash equivalents $ 2,494 $ 1,606 Receivables, less allowance for doubtful accounts of $1,741 at December 31, 1994 and $1,342 at March 31, 1994 43,771 37,465 Inventories, at lower of cost or market: Raw materials 2,032 2,237 Work-in-process 13,584 10,857 Finished goods 2,757 3,040 Total inventories 18,373 16,134 Deferred income tax benefit 2,741 2,741 Prepaid expenses and other current assets 3,398 3,863 Total current assets 70,777 61,809 Property, plant, and equipment, net 53,044 55,727 Deferred charges and other assets 1,490 1,271 Excess of cost over fair value of net assets acquired 3,222 3,749 $128,533 $122,556 Liabilities and Stockholders' Equity Current Liabilities: Current installments of long-term debt $ 92 $ 25 Accounts payable 6,192 10,610 Accrued expenses 9,680 7,677 Accrued compensation 9,217 8,335 Income taxes 2,558 2,002 Reserve for discontinued operations 3,206 3,208 Total current liabilities 30,945 31,857 Long-term debt, excluding current installments 4,601 13,898 Deferred and other compensation 5,270 5,061 Deferred income taxes 6,153 6,153 Stockholders' equity: Common Stock, $0.01 par value. Authorized 30,000,000 shares; issued 8,203,817 shares at December 31, 1994 and 8,114,817 shares at March 31, 1994 82 81 Additional paid-in capital 32,006 31,413 Retained earnings 60,851 45,468 92,939 76,962 Less: 875,000 shares of common stock held in treasury, at cost (11,375) (11,375) Total stockholders' equity 81,564 65,587 $128,533 $122,556
See accompanying notes to condensed consolidated financial statements. DEVON GROUP INC. Condensed Consolidated Statements of Cash Flows For the Nine Months ended December 31, 1994 and 1993 (Unaudited) (in thousands)
1994 1993 Net cash provided by continuing operations $ 15,173 $ 14,878 Net cash used by discontinued operations (2) - Net cash provided by operating activities 15,171 14,878 Cash flows from investing activities: Capital expenditures (5,520) (12,314) Payments for purchases of subsidiaries, net of cash acquired (135) - Net cash used in investing activities (5,655) (12,314) Cash flows from financing activities: Proceeds from long-term borrowings 12,100 14,800 Payments of long-term debt (21,330) (18,413) Proceeds from the exercise of stock options 602 280 Net cash provided by (used in) financing activities (8,628) (3,333) Net increase (decrease) in cash and cash equivalents 888 (769) Cash and cash equivalents, beginning of period 1,606 3,169 Cash and cash equivalents, end of period $ 2,494 $ 2,400
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Notes to Condensed Consolidated Financial Statements December 31, 1994 (Unaudited) (1) The condensed consolidated financial statements reflect the operations of the Company and its subsidiaries, all of which are wholly-owned except for The Aztech Chas P. Young Company ("ACPY") and Aird Imports Pty. Ltd. ("Aird") (see note 5). All significant intercompany transactions have been eliminated in consolidation. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the results for the unaudited periods, have been included. Results of operations for the periods included in the report are not necessarily indicative of the results for the full year. Reference should be made to the "Annual Report of Corporation Form 10-K" for the fiscal year ended March 31, 1994 (including its notes to consolidated financial statements) filed with the Securities and Exchange Commission. (2) Net income per common share is computed on the basis of the weighted average number of common shares outstanding during the three- and nine-month periods ended December 31, 1994 and 1993. Options outstanding were not included in the 1994 or 1993 computations of net income per share as their effect was not material. (3) For purposes of the Statements of Cash Flows, the Company considers all short-term investments to be cash equivalents since the investments are highly liquid with maturities of three months or less. (4) Property, plant, and equipment is net of accumulated depreciation of $68,343,000 and $61,512,000 at December 31, 1994, and March 31, 1994, respectively. (5) Effective April 1, 1994, the Company acquired a 50% interest in Aird for $135,000 in cash. Located in Adelaide, South Australia, Aird is a distributor of cards, stationery, and related products. This investment is included in "Deferred charges and other assets" in the accompanying balance sheet. Effective January 13, 1995, the Company acquired the business of Ahrens Creative Group, Inc. ("Ahrens"). Located in Chicago, Illinois, Ahrens is a developer of interactive multimedia products and services for the corporate, retail, advertising, and publishing markets. The excess of the purchase price ($381,000 in cash and a $200,000 note payable) over the fair value of net assets acquired was $407,000. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Consolidated sales increased $12,162,000, or 24.6%, and $28,764,000, or 20.5%, for the three- and nine-month periods ended December 31, 1994 versus the comparable prior year periods with each of the Company's subsidiaries contributing to this growth. The increases are primarily the result of higher volume in the pre-press business where revenues increased $8,082,000 and $18,602,000, respectively, for the three- and nine-month periods ended December 31, 1994. Increased creative, design, photographic, and composition services provided to retail advertising customers continues to positively impact comparisons with prior year periods, reflecting increased volume with existing customers and the addition of Meridian Retail, Inc., in December 1993. Results for the current year periods have also been favorably affected by increased typography and color separation revenues relating to the textbook, magazine, and catalog sectors. At the publishing subsidiary, strong sales of Portal Publications' card, matted product, apparel, and calendar lines, as well as an increase in the higher-end fine art line at The Winn Devon Art Group, resulted in increased revenues of $2,883,000 and $6,823,000 versus the prior year periods. In the magazine printing business, despite continued pricing pressures and nominal growth in page count, the addition of new magazine titles, and nonrecurring work for both existing and new customers, resulted in increased sales of $1,197,000 and $3,339,000, for the three- and nine-month periods ended December 31, 1994. Gross profit as a percentage of sales was 40.0% and 40.7%, respectively, for the three- and nine-month periods ended December 31, 1994 as compared to 38.7% and 38.8% for the comparable prior year periods. These improvements are primarily attributable to the pre-press business, as its gross margins improved due to better operating leverage (i.e. the distribution of relatively fixed costs over an increased revenue base) and production efficiencies. The publishing subsidiary benefited from operating leverage while the printing subsidiary's gross margin was virtually unchanged. Selling, general, and administrative expenses as a percentage of sales were 23.8% and 25.1%, respectively, for the three- and nine- month periods ended December 31, 1994 versus 26.5% and 26.9% for the comparable prior year periods. For the quarter, the improvements are primarily due to the publishing and pre-press subsidiaries, where a high percentage of their increased volume came from noncommissionable sales, as well as the absence of costs incurred related to the start up of Meridian Retail, Inc. in December 1993. The year-to-date comparison also reflects the absence of the costs incurred in the prior year related to the renegotiation of the Company's revolving credit facility. Other income (expense) for the three-month period ended December 31, 1994 includes a charge of $415,000 related to the sale of the publishing subsidiary's contract art and framing operation. The effective income tax rate was 41.0% for the three- and nine- month periods ended December 31, 1994 versus 41.0% and 40.8%, respectively, for the prior year periods. As a result of the foregoing, net income per share increased $.30, or 62.5%, and $.75, or 55.1%, respectively, for the three- and nine-month periods ended December 31, 1994. Liquidity and Capital Resources At December 31, 1994, the Company's debt to equity ratio was .06 to 1 compared to .21 to 1 at March 31, 1994. During the nine months ended December 31, 1994, the Company generated cash from operating activities of $15,171,000 versus $14,878,000 for the prior year period. This change is primarily the result of an increase in net income for the nine-month period ended December 31, 1994, partially offset by an increase in working capital requirements. Higher levels of accounts receivable, attributable to increased sales volume, an increase in work-in- process at the Company's pre-press subsidiary, reflecting higher retail advertising, typography, and color separation volume, and a decline in accounts payable due primarily to the payment of service providers utilized by the pre-press subsidiary to help complete fiscal year-end textbook work, accounted for the majority of the working capital increase. For the nine-months ended December 31, 1994 and 1993, cash provided from operating activities was used to fund capital expenditures and reduce debt. Recently Issued Financial Accounting Standards Statement of Financial Accounting Standards No. 107, "Disclosures About Fair Value of Financial Instruments" ("SFAS No. 107"), extends existing fair value disclosure practices for some financial instruments. The Company will be required to adopt SFAS No. 107 for its fiscal year ending March 31, 1996, however, such adoption will have no impact on the Company's financial position or results of operations since it relates to disclosure matters only. The Company does not currently utilize derivative financial instruments. As a result, Statement of Financial Accounting Standards No. 119, "Disclosure About Derivative Financial Instruments and Fair Value of Financial Instruments" ("SFAS No. 119") will not impact the Company upon adoption. SFAS No. 119 requires additional disclosure about derivative financial instruments such as futures and forward, swap, and option contracts not previously required under existing standards such as SFAS No. 107 above. The Company will be required to adopt SFAS No. 119 for its fiscal year ending March 31, 1996. DEVON GROUP, INC. PART II - OTHER INFORMATION Item 1. Legal Proceedings. The Company, in the ordinary course of business, is contingently liable on pending lawsuits and claims. Based upon advice from legal counsel, these pending items are not expected to have a material effect on the Company's consolidated financial position or results of operations. Item 2. Changes in Securities. None Item 3. Defaults Upon Senior Securities. None Item 4. Submission of Matters to a Vote of Security Holders. None Item 5. Other Information. None Item 6. Exhibits and Reports on Form 8-K. a. Exhibits None b. Reports on Form 8-K None SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DEVON GROUP, INC. Date: February 8, 1995 s/Bruce K. Koch Bruce K. Koch Executive Vice President, Operations and Finance and Chief Financial Officer (Principal Financial Officer) s/Robert H.Donovan Robert H. Donovan Senior Vice President, Finance and Treasurer (Principal Accounting Officer) EX-27 2
5 This schedule contains summary financial information extracted from the Condensed Consolidated Statements of Income and the Condensed Consolidated Balance Sheets of Devon Group, Inc. and is qualified in its entirety by reference to such financial statements. 1,000 9-MOS MAR-31-1995 DEC-31-1994 2,494 0 45,512 1,741 18,373 70,777 121,387 68,343 128,533 30,945 0 82 0 0 81,482 128,533 169,311 169,311 100,406 100,406 0 0 616 26,073 10,690 15,383 0 0 0 15,383 2.11 0
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