-----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, Ngu+PGRyw4FgT3CuKSqwPWeJ+NBn4BZT/s2ncalYD96SJPRIpGKV7EYJRT3x/KgI /FQAKgUMmUa7mFcS0mMN/A== 0000040542-96-000002.txt : 19960216 0000040542-96-000002.hdr.sgml : 19960216 ACCESSION NUMBER: 0000040542-96-000002 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960213 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: 96516478 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 December 31, 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 February 7, 1996 Common Stock 7,379,317 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 Nine Months Ended December 31, Ended December 31, 1995 1994 1995 1994 Sales $ 66,112 $ 61,505 $189,342 $169,311 Operating costs and expenses: Cost of sales 40,482 36,906 111,668 100,406 Selling, general, and administrative 15,477 14,612 46,489 42,478 Income from operations 10,153 9,987 31,185 26,427 Interest income (expense), net 169 (127) 474 (584) Other income (expense), net 347 (130) 1,133 230 Income before income taxes 10,669 9,730 32,792 26,073 Provision for income taxes 4,321 3,989 13,281 10,690 Net income $ 6,348 $ 5,741 $ 19,511 $ 15,383 Net income per common share $ .86 $ .78 $ 2.66 $ 2.11 Average common shares outstanding 7,375 7,325 7,327 7,295
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Condensed Consolidated Balance Sheets As of December 31, 1995 and March 31, 1995 (in thousands, except share and per share data)
December 31, March 31, Assets 1995 1995 (Unaudited) Current Assets: Cash and cash equivalents $ 20,695 $ 16,965 Receivables, less allowance for doubtful accounts of $2,440 at December 31, 1995 and $1,852 at March 31, 1995 45,909 32,272 Inventories, at lower of cost or market: Raw materials 2,855 2,390 Work-in-process 13,490 13,774 Finished goods 2,545 2,685 Total inventories 18,890 18,849 Deferred income tax benefit 3,385 3,385 Prepaid expenses and other current assets 5,743 4,781 Total current assets 94,622 76,252 Property, plant, and equipment, net 50,088 52,430 Deferred charges and other assets 1,162 1,179 Excess of cost over fair value of net 6,691 3,575 assets acquired $152,563 $133,436 Liabilities and Stockholders' Equity Current Liabilities: Current installments of long-term debt $ 111 $ 311 Accounts payable 7,496 8,920 Accrued expenses 12,934 11,406 Accrued compensation 9,580 8,907 Income taxes 2,883 3,518 Total current liabilities 33,004 33,062 Long-term debt, excluding current installments 2,031 2,091 Deferred and other compensation 5,439 5,205 Deferred income taxes 4,925 4,925 Stockholders' equity: Common Stock, $0.01 par value. Authorized 30,000,000 shares; issued 8,304,317 shares at December 31, 1995 and 8,203,817 shares at March 31, 1995 83 82 Additional paid-in capital 33,264 32,471 Retained earnings 86,486 66,975 119,833 99,528 Less: Shares of common stock held in treasury, at cost; 925,000 at December 31, 1995 and 875,000 at March 31, 1995 (12,669) (11,375) Total stockholders' equity 107,164 88,153 $152,563 $133,436
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Condensed Consolidated Statements of Cash Flows For the nine months ended December 31, 1995 and 1994 (Unaudited) (in thousands)
1995 1994 Net cash provided by operating activities $13,976 $15,165 Cash flows from investing activities: Capital expenditures (5,594) (5,514) Payments for purchases of subsidiaries, net of cash acquired (3,892) (135) Net cash used in investing activities (9,486) (5,649) Cash flows from financing activities: Proceeds from long-term borrowings - 12,100 Payments of long-term debt (260) (21,330) Proceeds from the exercise of stock options 794 602 and other Purchase of treasury stock (1,294) - Net cash used in financing activities (760) (8,628) Net increase in cash and cash equivalents 3,730 888 Cash and cash equivalents, beginning of period 16,965 1,606 Cash and cash equivalents, end of period $20,695 $ 2,494
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Notes to Condensed Consolidated Financial Statements December 31, 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 nine-month periods ended December 31, 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 $77,193,000 and $69,586,000 at December 31, 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 $4,607,000, or 7.5%, and $20,031,000, or 11.8%, respectively, for the three- and nine- month periods ended December 31, 1995 versus the comparable prior year periods. The increases are primarily the result of the pre- press business where revenues increased $4,495,000 and $15,165,000, respectively, for the three- and nine-month periods. Increased creative, design, photographic, and composition services provided to retail advertising customers continued to positively affect comparisons with the prior year periods. This was partially offset by a decrease in work for textbook publishers. At the publishing subsidiary sales for the three- month period decreased $148,000. At the outset of the quarter, Portal Publications experienced a temporary surge in holiday orders. However, as the quarter progressed and retailers became wary of a relatively weak holiday selling season, traditional pre- holiday restocking orders slowed significantly. Despite this, sales of Portal cards and calendars were up while posters and accessories such as gift totes and T-shirts were down. Sales for the nine-month period were $3,129,000 over the prior year period, reflecting strong sales of the Portal card and matted product lines. In the magazine printing business sales increased $260,000 and $1,737,000, respectively, for the three- and nine- month periods ended December 31, 1995, primarily due to increased paper sales. Gross profit as a percentage of sales was 38.8% and 41.0%, respectively, for the three- and nine-month periods ended December 31, 1995, as compared to 40.0% and 40.7% for the comparable prior year periods. For the current quarter, gross profit margins at both the publishing and magazine printing subsidiaries decreased versus the prior year period, while that of the pre-press business was virtually unchanged. At the magazine printing subsidiary the reduction reflects the increased cost of direct materials, primarily paper, partially offset by a reduction in overhead charges and direct labor. At the publishing subsidiary the decrease is primarily due to higher material costs, including packaging, and an increase in the cost of labor and acquiring imagery. For the nine-month period ended December 31, 1995, the gross profit margin improved at both the pre-press and publishing subsidiaries reflecting the benefit of operating leverage on relatively fixed overhead costs, while margins at the magazine printing business decreased primarily due to higher raw material costs partially offset by a reduction in direct labor and depreciation charges. Selling, general, and administrative expenses (SG&A) as a percentage of sales were 23.4% and 24.6%, respectively, for the three- and nine-month periods ended December 31, 1995 versus 23.8% and 25.1%, for the comparable prior year periods. For the quarter, improvements at the publishing and magazine printing subsidiaries, due mostly to the growth in noncommissionable sales, offset an increase at the pre-press subsidiary, due mostly to costs related to this quarter's release of DigiZINE, a retail magazine on CD-ROM. For the nine-month period ended December 31, 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 $207,000 and $609,000 respectively, for the three- and nine-month periods ended December 31, 1995, while interest expense decreased $89,000 and $449,000 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 (expense) for the three-month period ended December 31, 1994 included a charge of $415,000 related to the sale of the publishing subsidiary's contract art and framing operations. Excluding this charge, other income (expense) for the three- and nine-month periods ended December 31, 1995 increased versus the comparable prior year periods 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 nine- month periods ended December 31, 1995, versus 41.0% for the prior year periods. As a result of the foregoing, net income per share increased $.08, or 10.3%, and $.55, or 26.1%, respectively, versus the prior year quarter and nine-month periods. Liquidity and Capital Resources During the nine-month periods ended December 31, 1995 and 1994 the Company generated cash from operating activities of $13,976,000 and $15,165,000, respectively. Despite the increase in net income for the current period, the amount of cash generated this year declined versus the prior year comparable period as that period was positively affected by collection of an unusually high level of accounts receivable generated at fiscal year-end 1994 at the pre-press subsidiary. For the nine-month period ended December 31, 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 1995. For the nine-months ended December 31, 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. 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 13, 1996 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 1000 US DOLLARS 9-MOS MAR-31-1996 APR-01-1995 DEC-31-1995 1.0 20695 0 48349 2440 18890 94622 127281 77193 152563 33004 0 83 0 0 107081 152563 189342 189342 111668 111668 0 685 167 32792 13281 19511 0 0 0 19511 2.66 0
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