-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DbfykLd1c51oog0SkOGmWRcfp5yqt7kp01PfGmat8+S6/pnMto2lTvPg+w0Mkfyj OImGJjGqK02hGqIoBrHakg== 0000040542-95-000017.txt : 19951119 0000040542-95-000017.hdr.sgml : 19951119 ACCESSION NUMBER: 0000040542-95-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 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: 95591522 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 September 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 November 8, 1995 Common Stock 7,369,317 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 Six Months Ended September 30, Ended September 30, 1995 1994 1995 1994 Sales $ 63,449 $ 58,584 $123,230 $107,806 Operating costs and expenses: Cost of sales 35,314 33,654 71,186 63,500 Selling, general, and administrative 16,267 14,864 31,012 27,866 Income from operations 11,868 10,066 21,032 16,440 Interest income (expense), net 155 (216) 305 (457) Other income, net 418 184 786 360 Income before income taxes 12,441 10,034 22,123 16,343 Provision for income taxes 5,039 4,114 8,960 6,701 Net income $ 7,402 $ 5,920 $ 13,163 $ 9,642 Net income per common share $ 1.01 $ .81 $ 1.80 $ 1.32 Average common shares outstanding 7,317 7,293 7,303 7,279
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Condensed Consolidated Balance Sheets As of September 30, 1995 and March 31, 1995 (in thousands, except share and per share data)
September 30, March 31, Assets 1995 1995 (Unaudited) Current Assets: Cash and cash equivalents $ 12,570 $ 16,965 Receivables, less allowance for doubtful accounts of $2,233 at September 30, 1995 and $1,852 at March 31, 1995 44,818 32,272 Inventories, at lower of cost or market: Raw materials 2,815 2,390 Work-in-process 14,878 13,774 Finished goods 2,503 2,685 Total inventories 20,196 18,849 Deferred income tax benefit 3,385 3,385 Prepaid expenses and other current assets 4,748 4,781 Total current assets 85,717 76,252 Property, plant, and equipment, net 50,907 52,430 Deferred charges and other assets 1,179 1,179 Excess of cost over fair value of net assets acquired 6,799 3,575 $144,602 $133,436 Liabilities and Stockholders' Equity Current Liabilities: Current installments of long-term debt $ 310 $ 311 Accounts payable 7,685 8,920 Accrued expenses 11,794 11,406 Accrued compensation 8,917 8,907 Income taxes 2,859 3,518 Total current liabilities 31,565 33,062 Long-term debt, excluding current installments 2,051 2,091 Deferred and other compensation 5,364 5,205 Deferred income taxes 4,925 4,925 Stockholders' equity: Common Stock, $0.01 par value. Authorized 30,000,000 shares; issued 8,294,317 shares at September 30, 1995 and 8,203,817 shares at March 31, 1995 83 82 Additional paid-in capital 33,145 32,471 Retained earnings 80,138 66,975 113,366 99,528 Less: Shares of common stock held in treasury, at cost; 925,000 at September 30, 1995 and 875,000 at March 31, 1995 (12,669) (11,375) Total stockholders' equity 100,697 88,153 $144,602 $133,436
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Condensed Consolidated Statements of Cash Flows For the six months ended September 30, 1995 and 1994 (Unaudited) (in thousands)
1995 1994 Net cash provided by operating activities $ 3,848 $ 5,972 Cash flows from investing activities: Capital expenditures (3,691) (4,342) Payments for purchases of subsidiaries, net of cash acquired (3,892) (135) Net cash used in investing activities (7,583) (4,477) Cash flows from financing activities: Proceeds from long-term borrowings - 10,300 Payments of long-term debt (41) (13,022) Proceeds from the exercise of stock options and other 675 558 Purchase of treasury stock (1,294) - Net cash used in financing activities (660) (2,164) Net decrease in cash and cash equivalents (4,395) (669) Cash and cash equivalents, beginning of period 16,965 1,606 Cash and cash equivalents, end of period $12,570 $ 937
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Notes to Condensed Consolidated Financial Statements September 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- and six- month periods ended September 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 $74,750,000 and $69,586,000 at September 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. Effective July 31, 1995, the Company acquired Proof Positive/Farrowlyne Associates, Inc. ("PP/FA") for $4,000,000 in cash. Located in Evanston, Illinois, "PP/FA" is a provider of editorial and creative services to the publishing industry, primarily in the educational sector. The excess of the purchase price over the fair value of assets acquired was $3,370,000. (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 increased $4,865,000, or 8.3%, and $15,424,000, or 14.3% ,respectively, for the three- and six-month periods ended September 30, 1995 versus the comparable prior year periods with each of the Company's subsidiaries contributing to this growth. A significant portion of the increases came from the pre-press business where revenues increased $2,681,000 and $10,670,000, respectively, for the three- and six-month periods ended September 30, 1995 as increased creative, design, photographic, and composition services provided to retail advertising customers continued to positively affect comparisons with the prior year periods and offset a decline from last year's unusually high level of textbook revision work. At the publishing subsidiary, sales increased $1,577,000 and $3,277,000, respectively, versus the prior year periods. These increases were primarily due to increased sales of Portal Publications' card lines and matted product. An increase in poster and print sales both at Portal Publications and The Winn Devon Art Group more than offset a decline in sales of fine art and related framing at The Winn Devon Art Group. Sales at the Company's magazine printing business increased $607,000 and $1,477,000, respectively, for the three- and six-month periods ended September 30, 1995 primarily due to increased paper sales. Gross profit as a percentage of sales was 44.3% and 42.2%, respectively, for the three- and six-month periods ended September 30, 1995 as compared to 42.6% and 41.1% for the comparable prior year periods. In the pre-press subsidiary the impact of a reduction in the cost of supplies, particularly film, was partially offset by the impact of lower production levels at certain plants due to reduced levels of textbook work versus the prior year periods. Results at the publishing subsidiary reflect a reduction in inventory obsolescence charges and the positive effects of higher sales. During the quarter ended September 30, 1995, the printing subsidiary experienced reduced depreciation charges and a decrease in the cost of direct materials resulting from higher discounts from major suppliers. Selling, general, and administrative expenses (SG&A) as a percentage of sales were 25.6% and 25.2%, respectively, for the three- and six-month periods ended September 30, 1995 versus 25.4% and 25.8%, for the comparable prior year periods. For the quarter, SG&A expenses at each of the Company's subsidiaries were in line with the prior year period. For the six-month period ended September 30, 1995, the improvement reflects lower compensation-related expenses due to an increase in noncommissionable sales at the Company's pre-press and publishing subsidiaries. Interest income increased $197,000 and $402,000 respectively, for the three- and six-month periods ended September 30, 1995, while interest expense decreased $174,000 and $360,000 for the comparable prior year periods. The increases in interest income reflect earnings from short-term investments. The decreases in interest expense reflect the repayment of all borrowings under the Company's bank line of credit during the fourth quarter of fiscal 1995. Other income was $418,000 and $786,000, respectively, for the three- and six-month periods ended September 30, 1995, versus $184,000 and $360,000 for the prior year periods. The increases were primarily due to the advantageous sale of scrap paper at the printing subsidiary during a period when paper prices have been dramatically affected by shortages. The effective income tax rate was 40.5% for the three- and six-month periods ended September 30, 1995, versus 41.0% for the prior year periods. As a result of the foregoing, net income per share increased $.20, or 24.7%, and $.48, or 36.4%, respectively, versus the prior year quarter and six-month periods. Liquidity and Capital Resources During the six-month period ended September 30, 1995, the Company generated cash from operating activities of $3,848,000. The $5,972,000 generated during the prior year comparable period was positively impacted by collection of the high level of accounts receivable generated at fiscal year end 1994 at the pre-press subsidiary. For the six-month period ended September 30, 1995, cash provided by operating activities and existing short-term investments were used to fund capital expenditures and the acquisition of PP/FA in August of 1995. For the six-months ended September 30, 1994, cash provided by operating activities was used to fund capital expenditures and reduce long-term debt. 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. Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation", has recently been issued. The Company has not yet made a determination as to its impact. 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: November 13, 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 6-MOS MAR-31-1996 SEP-30-1995 12570 0 47051 2233 20196 85717 125657 74750 144602 31565 0 83 0 0 100614 144602 123230 123230 71186 71186 0 467 112 22123 8960 13163 0 0 0 13163 1.80 0
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