-----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, IRmccHbKGQF5wK9W2w+3c2im3EHj3kbs2NeoGU+oPWg7ponAg5MM3gnO5As2x/Jh jHG4S95DnBcjhUo2FdCfqg== 0000040542-95-000013.txt : 19950807 0000040542-95-000013.hdr.sgml : 19950807 ACCESSION NUMBER: 0000040542-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950804 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DEVON GROUP INC CENTRAL INDEX KEY: 0000040542 STANDARD INDUSTRIAL CLASSIFICATION: SERVICE INDUSTRIES FOR THE PRINTING TRADE [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: 95558945 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 UNITED STATES 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 June 30, 1995 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 August 3, 1995 Common Stock 7,278,817 PART I Item 1 - Financial Statements DEVON GROUP, INC. Condensed Consolidated Statements of Income For the three months ended June 30, 1995 and 1994 (Unaudited) (in thousands, except per share data)
1995 1994 Sales $59,781 $49,222 Operating costs and expenses: Cost of sales 35,872 29,846 Selling, general, and administrative 14,745 13,002 Income from operations 9,164 6,374 Interest income (expense), net 150 (241) Other income, net 368 176 Income before income taxes 9,682 6,309 Provision for income taxes 3,921 2,587 Net income $ 5,761 $ 3,722 Net income per common share $ 0.79 $ 0.51 Average common shares outstanding 7,289 7,265
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Condensed Consolidated Balance Sheets As of June 30, 1995 and March 31, 1995 (in thousands, except share and per share data)
June 30, March 31, Assets 1995 1995 (unaudited) Current Assets: Cash and cash equivalents $ 19,405 $ 16,965 Receivables, less allowance for doubtful accounts of $1,993 at June 30, 1995 and $1,852 at March 31, 1995 34,097 32,272 Inventories, at lower of cost or market: Raw materials 2,406 2,390 Work-in-process 13,907 13,774 Finished goods 2,591 2,685 Total inventories 18,904 18,849 Deferred income tax benefit 3,385 3,385 Prepaid expenses and other current assets 5,036 4,781 Total current assets 80,827 76,252 Property, plant, and equipment, net 51,479 52,430 Deferred charges and other assets 1,289 1,179 Excess of cost over fair value of net assets acquired 3,522 3,575 $137,117 $133,436 Liabilities and Stockholders' Equity Current Liabilities: Current installments of long-term debt $ 310 $ 311 Accounts payable 8,375 8,920 Accrued expenses 10,759 11,406 Accrued compensation 7,058 8,907 Income taxes 5,688 3,518 Total current liabilities 32,190 33,062 Long-term debt, excluding current installments 2,070 2,091 Deferred and other compensation 5,304 5,205 Deferred income taxes 4,925 4,925 Stockholders' equity: Common Stock, $0.01 par value. Authorized 30,000,000 shares; issued 8,203,817 shares at June 30, 1995 and March 31, 1995 82 82 Additional paid-in capital 32,479 32,471 Retained earnings 72,736 66,975 105,297 99,528 Less: Shares of common stock held in treasury, at cost; 925,000 at June 30, 1995 and 875,000 at March 31, 1995 (12,669) (11,375) Total stockholders' equity 92,628 88,153 $137,117 $133,436
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Condensed Consolidated Statements of Cash Flows For the three months ended June 30, 1995 and 1994 (Unaudited) (in thousands)
1995 1994 Net cash provided by (used in) operating activities $ 5,464 $(4,004) Cash flows from investing activities: Capital expenditures (1,716) (1,908) Payments for purchases of subsidiaries, net of cash acquired - (135) Net cash used in investing activities (1,716) (2,043) Cash flows from financing activities: Proceeds from long-term borrowings - 6,800 Payments of long-term debt (22) (2,520) Proceeds from the exercise of stock options and other 8 197 Purchase of treasury stock (1,294) - Net cash provided by (used in) financing activities (1,308) 4,477 Net increase (decrease) in cash and cash equivalents 2,440 (1,570) Cash and cash equivalents, beginning of period 16,965 1,606 Cash and cash equivalents, end of period $19,405 $ 36
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Notes to Condensed Consolidated Financial Statements June 30, 1995 (Unaudited) (1) The condensed consolidated financial statements reflect the operations of the Company and its subsidiaries, all of which are wholly-owned except for Portal Aird Imports Pty, Ltd. ("Portal 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, 1995 (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-month periods ended June 30, 1995 and 1994. Options outstanding were not included in the 1995 or 1994 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 $72,254,000 and $69,586,000 at June 30, 1995 and March 31, 1995, respectively. (5) Effective April 1, 1994 the Company acquired a 50% interest in Portal Aird for $135,000 in cash. Located in Adelaide, South Australia, Portal Aird is a distributor of posters and related products. This investment is included in "Deferred charges and other assets" in the accompanying balance sheets. Effective January 13, 1995, the Company acquired the business of Ahrens Interactive, 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. (6) In March 1995, the Company's Board of Directors authorized the purchase of up to 700,000 shares of its outstanding common stock in the open market from time to time. During the first quarter of fiscal 1996, under this authorization, 50,000 shares were repurchased. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Consolidated sales for the quarter ended June 30, 1995 increased $10,559,000, or 21.5%, compared to the prior year's first quarter with each of the Company's subsidiaries contributing to this growth. Sales at the Company's pre-press subsidiary increased $7,989,000, or 36.3%, primarily due to the higher levels of creative, design, photographic, and composition services provided to retail advertising customers. In the publishing subsidiary, strong sales of Portal Publications' matted product and card lines as well as an increase in The Winn Devon Art Group's line of upscale posters, resulted in increased revenues of $1,700,000, or 11.9%, versus the prior year period. Sales at the Company's magazine printing business increased $870,000, or 6.7%, primarily due to increased paper sales. Gross profit increased by $4,533,000 for the quarter ended June 30, 1995 to $23,909,000 or 40.0% as a percentage of sales compared to 39.4% for the comparable prior year period. The increase in gross profit margins at both the pre-press and publishing subsidiaries was partially offset by a decrease in the magazine printing business. In the pre-press subsidiary, the improvement was primarily due to the distribution of relatively fixed overhead costs over an increased revenue base. This was partially offset by the impact of lower production levels at certain plants reflecting the nonrecurrence of high levels of textbook work during the first quarter of fiscal year 1995. Margins in the publishing subsidiary reflect the positive effects of the higher sales volume and a decrease in inventory obsolescence charges versus the prior year period. The decrease in the printing business margin was primarily due to an increase in the cost of materials related to the higher level of paper sales. Selling, general, and administrative expenses as a percentage of sales were 24.7% for the three months ended June 30, 1995 versus 26.4% for the comparable prior year period. The improvement was primarily due to the pre- press and publishing subsidiaries where a high percentage of their increased revenues came from noncommissionable sales. At each subsidiary, the distribution of relatively fixed general and administrative costs over an increased revenue base positively affected comparisons. These improvements were partially offset by increased incentive and other employment-related expenses in the pre-press business. Interest expense was $57,000 for the three-month period ended June 30, 1995 compared to $243,000 for the prior year period, while interest income increased to $207,000 versus $2,000. The decrease in interest expense reflects the repayment of all borrowings under the Company's bank line of credit during fiscal 1995. The increase in interest income reflects earnings from short-term investments. The effective income tax rate for the three-month period ended June 30, 1995 was 40.5% versus 41.0% for the prior year period. As a result of the foregoing, as well as the Company's purchase of 50,000 shares of treasury stock during the first quarter of fiscal 1996 (see note 6), net income per share increased $.28, or 54.9%, for the three months ended June 30, 1995. Liquidity and Capital Resources During the three-month period ended June 30, 1995 the Company generated cash from operating activities of $5,464,000 while cash used by operating activities for the prior year period was $4,004,000. This change is primarily the result of decreased working capital requirements and increased net income for the current three-month period. In the prior year period, the higher levels of accounts receivable, some attributable to increased sales volume and some to the timing of payments from several large customers, coupled with a significant 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, resulted in an unusually high level of working capital requirements. For the three-month period ended June 30, 1995, cash provided by operating activities was used to fund capital expenditures with the remainder conservatively invested. During the three months ended June 30, 1994 proceeds from long-term bank borrowings were used to fund the cash requirements of operating activities and capital expenditures. Recently Issued Financial Accounting Standards Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121") requires that long-lived assets and certain intangible assets to be held and used by the Company be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. SFAS No. 121 further requires that assets in this category to be disposed of be reported at the lower of carrying amount or fair value less cost to sell. The Company will be required to adopt SFAS No. 121 for its fiscal year ending March 31, 1997, however, it is not expected that such adoption will have a material impact on the Company's financial position or results of operations. 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. a. The Company's Annual Meeting of Stockholders was held on July 25, 1995. b. Not required. c. A proposal to approve the 1995 Non-Qualified Stock Option Plan as described in the Company's proxy statement dated June 19, 1995 was adopted by the following vote: For Against Abstain 6,381,152 82,099 29,496 A proposal to ratify the selection of the firm of KPMG Peat Marwick LLP as auditors for the Company for the fiscal year ending March 31, 1996 was adopted by the following vote: For Against Abstain 6,486,395 200 6,153 The following Directors were elected for the ensuing year and until their respective successors have been duly elected and qualified by the following vote: For Withhold Vote on Marne Obernauer, Jr. 6,486,876 5,871 Robert S. Blank 6,486,138 6,609 John W. Dinzole 6,486,812 5,935 William G. Gisel 6,486,126 6,621 Thomas J. Harrington 6,486,876 5,871 Marne Obernauer 6,486,526 6,221 Edward L. Palmer 6,486,526 6,221 d. Not applicable DEVON GROUP, INC. PART II - OTHER INFORMATION 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: August 3, 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 1,000 US DOLLAR 3-MOS MAR-31-1996 APR-01-1995 JUN-30-1995 1.0 19405 0 36090 1993 18904 80827 123733 72254 137117 32190 0 82 0 0 92546 137117 59781 59781 35872 35872 0 197 57 9682 3921 5761 0 0 0 5761 .79 0
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