-----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, AaI7yM2IBxWAHegVIjefCEFNEDRl7tB3JqZo8t0nf7WHowWwLcsMTOtMhFO7cu4H nju/4gz4eHvmCPCo4LmJoA== 0000040542-96-000008.txt : 19960809 0000040542-96-000008.hdr.sgml : 19960809 ACCESSION NUMBER: 0000040542-96-000008 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960808 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: 96605977 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, 1996 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 2, 1996 Common Stock 7,383,317 PART I Item 1 - Financial Statements DEVON GROUP, INC. Condensed Consolidated Statements of Income For the three months ended June 30, 1996 and 1995 (Unaudited) (in thousands, except per share data)
1996 1995 Sales $62,554 $59,781 Operating costs and expenses: Cost of sales 39,223 35,872 Selling, general, and administrative 15,873 14,745 Income from operations 7,458 9,164 Interest income (expense), net 248 150 Other income, net 226 368 Income before income taxes 7,932 9,682 Provision for income taxes 3,173 3,921 Net income $ 4,759 $ 5,761 Net income per common share $ 0.64 $ 0.79 Average common shares outstanding 7,383 7,289
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Condensed Consolidated Balance Sheets As of June 30, 1996 and March 31, 1996 (in thousands, except share and per share data)
June 30, March 31, Assets 1996 1996 (Unaudited) Current Assets: Cash and cash equivalents $ 28,936 $ 27,749 Receivables, less allowance for doubtful accounts of $2,350 at June 30, 1996 and $2,477 at March 31, 1996 40,044 39,629 Inventories, at lower of cost or market: Raw materials 2,179 2,726 Work-in-process 17,532 15,115 Finished goods 2,298 2,486 Total inventories 22,009 20,327 Deferred income tax benefit 3,430 3,430 Prepaid expenses and other current assets 6,085 6,079 Total current assets 100,504 97,214 Property, plant, and equipment, net 51,273 51,522 Deferred charges and other assets 1,094 1,111 Excess of cost over fair value of net 6,867 6,579 assets acquired $159,738 $156,426 Liabilities and Stockholders' Equity Current Liabilities: Current installments of long-term debt $ 110 $ 110 Accounts payable 7,761 9,439 Accrued expenses 9,241 9,963 Accrued compensation 7,019 9,493 Income taxes 5,241 1,634 Total current liabilities 29,372 30,639 Long-term debt, excluding current installments 1,989 2,003 Deferred and other compensation 6,398 6,413 Deferred income taxes 4,413 4,413 Stockholders' equity: Common Stock, $0.01 par value. Authorized 30,000,000 shares; issued 8,315,317 shares at June 30, 1996 and 8,304,317 shares at March 31,1996 83 83 Additional paid-in capital 34,598 34,538 Retained earnings 95,765 91,006 130,446 125,627 Less: Shares of common stock held in treasury, at cost; 932,000 at June 30, 1996 and 925,000 at March 31, 1996 (12,880) (12,669) Total stockholders' equity 117,566 112,958 $159,738 $156,426
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Condensed Consolidated Statements of Cash Flows For the three months ended June 30, 1996 and 1995 (Unaudited) (in thousands) 1996 1995 Net cash provided by operating activities $ 4,338 $ 5,464 Cash flows from investing activities: Capital expenditures (2,586) (1,716) Payments for purchases of subsidiaries, net of cash acquired (400) - Net cash used in investing activities (2,986) (1,716) Cash flows from financing activities: Payments of long-term debt (14) (22) Proceeds from the exercise of stock options 60 8 and other Purchase of treasury stock (211) (1,294) Net cash used in financing activities (165) (1,308) Net increase in cash and cash equivalents 1,187 2,440 Cash and cash equivalents, beginning of period 27,749 16,965 Cash and cash equivalents, end of period $28,936 $19,405
See accompanying notes to condensed consolidated financial statements. DEVON GROUP, INC. Notes to Condensed Consolidated Financial Statements June 30, 1996 (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 Publications Pty. Ltd. ("Portal Aird"). 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, 1996 (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, 1996 and 1995. Options outstanding were not included in the 1996 or 1995 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 $79,814,000 and $77,175,000 at June 30, 1996 and March 31, 1996, respectively. (5) Effective July 31, 1995, the Company acquired Proof Positive/Farrowlyne Associates, Inc. (PP/FA) for $4,000,000 in cash and contingent consideration predicated on future earnings. 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 net assets acquired was $3,370,000. Nobart, Inc., acquired effective March 1, 1996, is a full-service design, art, photography, and production studio located in Chicago, Illinois. The purchase price of $1,217,000 was equal to the net book value of assets acquired. (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 and 1997, under this authorization, 50,000 and 7,000 shares, respectively, were repurchased. Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations Sales: Consolidated sales for the quarter ended June 30, 1996 increased $2,773,000, or 4.6%, compared to the prior year's first quarter with each of the Company's subsidiaries contributing to this growth. Pre-press Revenues for Black Dot Group increased $1,362,000, or 4.5%, versus the prior year period. The increase is primarily due to incremental revenues from Nobart and PP/FA, businesses acquired during fiscal 1996, sales from the company's developing multimedia business, and increased billing related to additional textbook volume and new retail advertising accounts. Partially offsetting these factors was the anticipated decrease in Sears and Kmart related revenues reflecting the price concessions included in the five-year contract extensions. Publishing Devon Publishing Group's sales increased $493,000, or 3.1%, versus the prior year period reflecting an increase at Portal Publications and modest growth at Portal U.K., partially offset by a decrease in revenues at The Winn Devon Art Group. At Portal a substantial increase in card sales, reflecting the continuing success of the Anne Geddes line and the May introduction of the Boynton line, and higher calendar revenues more than offset lower sales of the poster/print and matted product lines. At The Winn Devon Art Group an increase in revenues from the upscale Devon Editions poster line was offset by reductions in framing and fine art sales. Printing Graftek's sales increased $918,000, or 6.7%, versus the prior year period primarily due to increased work for catalog publishers and the addition of new magazines during the first quarter of fiscal 1997. Gross Profit: Gross profit decreased by $578,000 for the quarter ended June 30, 1996 to $23,331,000, or 37.3% as a percentage of sales, compared to 40.0% for the comparable prior year period. Decreases in gross profit margins at both the pre-press and publishing subsidiaries were partially offset by a modest improvement in the magazine printing business. In the pre-press subsidiary, the decrease was primarily due to higher labor costs related to Nobart, which were necessary to properly transition that business into the Black Dot Group, and higher levels of expenditures related to further development of the interactive multimedia business. Margins in the publishing subsidiary decreased primarily due to higher charges related to calendar, seasonal card, and poster returns. The increased charge for calendar and seasonal card returns reflects the slightly higher than anticipated returns from previous sales and more aggressive current sales programs while the charge for poster returns results from the issuance of credit vouchers for slow-moving product in an effort to re-energize this line. Material costs also increased slightly at the publishing subsidiary as a result of the shift in sales to cards, in particular, the boxed line. At the printing business, lower material costs contributed to its margin improvement. Selling, General, and Administrative Expenses: Selling, general, and administrative expenses as a percentage of sales were 25.4% for the three months ended June 30, 1996 versus 24.7% for the comparable prior year period. The increase is primarily attributable to the pre-press subsidiary and reflects higher costs due to the fiscal 1996 acquisitions of Nobart and PP/FA, as well as increased expenses resulting from new business development efforts. Interest Income (Expense): Net interest income increased $98,000 to $248,000 for the three- month period ended June 30, 1996 versus the comparable prior year period reflecting an increase in the level of average short-term investments over the prior year period. Income Taxes: The effective income tax rate for the three-month period ended June 30, 1996 was 40.0% versus 40.5% for the prior year period. Net Income: As a result of decreased operating income partially offset by an increase in net interest income and a decrease in the effective tax rate, net income per share decreased $.15, or 19.0%, per share for the three months ended June 30, 1996 versus the comparable prior year period. Liquidity and Capital Resources During the three-month period ended June 30, 1996, the Company generated cash from operating activities of $4,338,000 versus $5,464,000 for the comparable prior year period. This decrease was primarily due to the $1,002,000 reduction in net income. For the three-month periods ended June 30, 1996 and 1995, cash provided by operating activities was primarily used to fund capital expenditures with the remainder conservatively invested. 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. In October 1995, Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based Compensation", was issued. The Company currently does not plan to change its method of accounting for stock-based compensation; however, SFAS No. 123 will require additional footnote disclosure relating to the effect of using a fair value-based method of accounting for stock- based compensation costs for its fiscal year ending March 31, 1997. 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 30, 1996. b. Not required. c. 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, 1997 was adopted by the following vote: For Against Abstain 6,709,374 150 5,513 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. 6,713,110 1,927 Robert S. Blank 6,713,110 1,927 John W. Dinzole 6,713,139 1,898 William G. Gisel 6,711,297 3,740 Thomas J. Harrington 6,711,610 3,427 Marne Obernauer 6,712,997 2,040 Edward L. Palmer 6,712,997 2,040 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 6, 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 3-MOS MAR-31-1997 APR-01-1996 JUN-30-1996 1.0 28936 0 42394 2350 22009 100504 131087 79814 159738 29372 0 83 0 0 117483 159738 62554 62554 39223 39223 0 144 45 7932 3173 4759 0 0 0 4759 .64 0
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