FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
DANIEL M. JUNIUS AT (978) 449-3416
NEW ENGLAND BUSINESS SERVICE, INC.
ANNOUNCES FOURTH QUARTER AND FISCAL YEAR 2003 RESULTS
GROTON, MA -July 28, 2003- New England Business Service, Inc. (NYSE: NEB)
today announced results for its fourth quarter and fiscal year ended June 28,
2003.
Revenues for the fourth quarter of fiscal 2003 were $142.5 million, versus
$133.6 million in the prior year. The 6.6% increase in sales was driven by the
results of Safeguard Business Systems, Inc., which was acquired on June 2,
2003. Excluding the effect of the acquisition, net sales were $130.1 million,
a 2.6% decline from the prior year.
The Company incurred a net loss in the quarter of $5.7 million, or $.42 per
share, compared to $6.6 million of net income, or $.49 per share, in the year
ago period. Excluding the items discussed in the paragraph below, net income
in the quarter was $6.8 million, or $.51 per share, versus $7.1 million, or
$.53 per share, in the prior year's fourth quarter. The impact of the
acquisition on earnings in the quarter was negligible.
The Company recorded an impairment charge during the quarter related to
goodwill and other intangible assets in its PremiumWear subsidiary amounting
to $13.2 million before tax, or $.89 per share. Results in the current period
also include $1.0 million of pretax costs, or approximately $.04 per share,
from restructuring actions and adjustments that took place in the fourth
quarter, versus $788,000 of restructuring-related pretax costs, equivalent to
approximately $.04 per share, in the period a year ago.
Mr. Robert J. Murray, Chairman and CEO, commented, "Comparing the quarters on
the adjusted basis, both sales and earnings per share declined slightly year
to year. We consider this to be a solid performance in the context of the
current economic environment. The write-off of the intangibles in our
PremiumWear business reflects the sustained weakness in the promotional
apparel industry and its effect on PremiumWear's sales and profits."
Mr. Murray continued, "Our acquisition of Safeguard Business Systems, Inc.,
completed during the quarter, presents significant opportunities to improve
the operating efficiencies of the now-combined companies. To realize these
synergies, the Company expects to incur pretax costs of approximately $5.0
million in fiscal 2004, principally from eliminating redundant manufacturing
capacity."
Revenues for the full year of fiscal 2003 were $551.2 million, versus $557.5
million in the prior year. Adjusting for the impact of the Safeguard Business
Systems acquisition, this represents a year-to-year decline of approximately
3%. Net income of $20.1 million, or $1.51 per share, compares with $22.5
million, or $1.73 per share, last year. Earnings in the current year include
the effects of the impairment and restructuring charges described above that
occurred during the fourth quarter totaling $.93 per share. Additionally
during fiscal year 2003, the Company recognized an $11.4 million pretax gain,
or $.52 per share, from the sale of the Company's equity interests in Advantage
Payroll Services, Inc., as a result of their merger with Paychex, Inc. and a
related loss on settlement of interest rate swaps of $3.3 million before tax,
or $.15 per share.
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Earnings in the previous year include $1.8 million of pretax costs related to
restructuring actions, or $.08 per share and a goodwill impairment charge in
the amount of $2.8 million before tax, or $.21 per share. Excluding the impact
of all of these items, net income was $27.6 million for fiscal year 2003 and
$26.3 million for fiscal year 2002, equivalent to $2.07 and $2.03 per share,
respectively.
Mr. Murray added, "Looking forward, we expect sales for fiscal year 2004 to
grow to $690-$715 million or, between 25-30%, primarily as a result of the
Safeguard acquisition. We expect earnings per share to increase from the
$1.51 recorded in fiscal 2003 to $2.12-$2.17, or approximately 40-45% in 2004.
Excluding the fiscal 2003 impairment charges, the gain from the Advantage
transaction, the loss from swap terminations and restructuring-related actions,
and the anticipated impact of planned integration actions in fiscal 2004,
earnings per share are expected to increase in 2004 to $2.35-$2.40, or
approximately 14-16%, from the comparable $2.07 level last year."
The Company did not repurchase any shares of its stock during the fourth
quarter, leaving approximately 975,000 shares remaining under the current
authorization. During fiscal 2003, the Company repurchased 220,000 shares.
The Board of Directors of the Company declared a dividend of $.20 per share
with a record date of August 8, 2003 and a payment date of August 22, 2003.
The conference call to review the Company's fourth quarter results will be
broadcast live via the investor relations section of the Company's web site,
nebs.com, at 3:00 PM ET on Tuesday, July 29, 2003. A replay will be available
at the same location for one week after the broadcast.
The Company's consolidated financial results, balance sheet and statement of
changes in financial position are attached, along with supplemental information
regarding revenues and profit from operations by reporting segment.
New England Business Service, Inc. is a leading business-to-business company
with approximately 3.1 million active small business customers in the United
States, Canada, the United Kingdom and France. The Company supplies a wide
variety of business products and services including checks, forms and other
printed material which are marketed through direct mail, telesales, a direct
sales force, dealers, independent distributors and the Internet. The Company
also designs, embroiders and sells specialty apparel products through
distributors and independent sales representatives to the promotional
products/advertising specialty industry, primarily in the United States.
More information about New England Business Service, Inc. is available at the
Company's web site, nebs.com
This press release contains forward-looking statements, including expectations
for future revenue and earnings performance arising from current trends in
referenced product lines and channels, the effect of acquiring Safeguard
Business Systems, Inc., and other initiatives. These forward-looking
statements reflect the Company's current expectations only, and the Company
expressly disclaims any current intention to update such statements. There
can be no assurance that the Company's actual results will not differ
materially from those expressed or implied by these statements due to various
risks and uncertainties, including the risks and uncertainties associated with
successfully integrating Safeguard Business Systems with the Company, changed
customer preferences or economic conditions affecting demand for the Company's
products, and other factors described in the Company's Quarterly Report on Form
10-Q for the fiscal quarter ended March 29, 2003, on file with the Securities
and Exchange Commission.
****
NEW ENGLAND BUSINESS SERVICE, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------------- -------------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
2003 2002 2003 2002
-------- -------- -------- --------
(unaudited)(unaudited) (unaudited)
NET SALES $142,471 $133,613 $551,188 $557,539
COST OF SALES 61,870 57,737 234,051 242,047
-------- -------- -------- --------
GROSS PROFIT 80,601 75,876 317,137 315,492
PERCENT OF SALES 56.6% 56.8% 57.5% 56.6%
OPERATING EXPENSES
SELLING AND ADVERTISING 48,471 43,512 188,587 189,151
GENERAL AND ADMINISTRATIVE 19,593 17,730 75,503 71,385
EXIT COSTS 998 700 998 700
GOODWILL AND OTHER INTANGIBLE
ASSET IMPAIRMENT 13,249 - 13,249 -
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 82,311 61,942 278,337 261,236
-------- -------- -------- --------
(LOSS)/INCOME FROM OPERATIONS (1,710) 13,934 38,800 54,256
PERCENT OF SALES -1.2% 10.4% 7.0% 9.7%
OTHER (EXPENSE)/INCOME
INTEREST INCOME 64 50 174 185
INTEREST EXPENSE (1,501) (3,251) (8,178) (13,447)
LOSS ON SETTLEMENT OF INTEREST RATE SWAPS - - (3,277) -
GAIN ON SALE OF LONG-TERM INVESTMENT - - 11,424 -
-------- -------- -------- --------
TOTAL OTHER (EXPENSE)/INCOME (1,437) (3,201) 143 (13,262)
-------- -------- -------- --------
(LOSS)/INCOME BEFORE TAXES (3,147) 10,733 38,943 40,994
PROVISION FOR INCOME TAXES 2,510 4,122 18,819 15,742
-------- -------- -------- --------
(LOSS)/INCOME BEFORE THE EFFECT OF A CHANGE
IN ACCOUNTING PRINCIPLE (5,657) 6,611 20,124 25,252
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE-
NET OF TAX - - - (2,792)
-------- -------- -------- --------
NET (LOSS)/INCOME $ (5,657) $ 6,611 $ 20,124 $ 22,460
======== ======== ======== ========
PER SHARE AMOUNTS:
- ------------------
DILUTED EARNINGS PER SHARE BEFORE THE EFFECT
OF A CHANGE IN ACCOUNTING PRINCIPLE $ (0.42) $ 0.49 $ 1.51 $ 1.94
======== ======== ======== =======
EFFECT OF A CHANGE IN ACCOUNTING PRINCIPLE $ - $ - $ - $ (0.21)
-------- -------- -------- --------
DILUTED EARNINGS PER SHARE $ (0.42) $ 0.49 $ 1.51 $ 1.73
======== ======== ======== ========
DIVIDENDS $ .20 $ .20 $ .80 $ .80
======== ======== ======== ========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 13,363 13,429 13,340 13,006
======== ======== ======== ========
The items identified below relate to restructuring actions, goodwill and other intangible
asset impairment, the gain related to the sale of our investment in Advantage Payroll
Services, Inc. and charges related to the settlement of interest rate swaps due to the
sale of Advantage. These items are being separately identified as we believe these
restructuring actions and other events are unusual or infrequent in nature and are not
directly tied to the operations and results of our core business activities. Therefore,
it makes it easier to understand the trends in the base business without the effects of
these identified items. Management performance targets are also set on and measured
against a basis that excludes these items.
Net Income for the three months ended June 28, 2003 includes a net after-tax charge of
$611, or $0.04 per diluted share, and $11,844 or $0.89 per diluted share, related to
restructuring actions, and goodwill and other intangible asset impairment, respectively.
On a pretax basis, total costs were $14,247, reported in the following categories: Exit
Costs $998 and Goodwill and Other Intangible Asset Impairment $13,249.
Net Income for the three months ended June 29, 2002 included a net after-tax charge of
$485, or $0.04 per diluted share, related to previously announced restructuring actions.
On a pretax basis, the total costs were $788, reported in the following categories: Exit
Costs $700, Cost of Sales $71, and General and Administrative $17.
Net Income for the twelve months ended June 28, 2003 includes a net after-tax gain of
$6,997, or $0.52 per diluted share, related to the sale of equity interests in Advantage
Payroll, Inc. and a net after-tax charge of $14,462 or $1.08 per diluted share, related to
the loss on settlement of interest rate swaps, restructuring actions and goodwill and
other intangible asset impairment. On a pretax basis, the total costs were $17,524,
reported in the following categories: Exit Costs $998, Goodwill and Other Intangible
Asset Impairment $13,249, and Loss on Settlement of Interest Rate Swaps $3,277.
Net Income for the twelve months ended June 29, 2002 included a net after-tax charge of
$1,089, or $0.08 per diluted share, related to previously announced restructuring actions.
On a pre-tax basis, the total costs were $1,767, reported in the following categories:
Exit Costs $700, Cost of Sales $796, and General and Administrative $271.
Certain reclassifications have been made to the 2002 financial statements to conform to
the 2003 presentation.
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
June 28, June 29,
2003 2002
-------- --------
(unaudited)
ASSETS
- ------
CASH AND CASH EQUIVALENTS $ 4,743 $ 6,112
ACCOUNTS RECEIVABLE, NET 71,049 55,738
INVENTORIES, NET 39,792 34,095
DIRECT MAIL ADVERTISING MATERIALS, NET
AND PREPAID EXPENSES 18,710 13,374
DEFERRED INCOME TAX BENEFIT 14,041 13,240
-------- --------
TOTAL CURRENT ASSETS 148,335 122,559
PROPERTY AND EQUIPMENT, NET 80,110 73,602
NET PROPERTY HELD FOR SALE 328 328
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 164,293 119,848
LONG-TERM INVESTMENT - 30,521
DEFERRED INCOME TAXES AND OTHER ASSETS 25,400 22,064
-------- --------
TOTAL $418,466 $368,922
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
ACCOUNTS PAYABLE $ 22,937 $ 16,858
ACCRUED EXPENSES 65,192 48,126
CURRENT PORTION OF LONG-TERM DEBT 764 1,102
-------- --------
TOTAL CURRENT LIABILITIES 88,893 66,086
LONG-TERM DEBT 157,025 148,358
DEFERRED INCOME TAXES 21,377 17,758
STOCKHOLDERS' EQUITY 151,171 136,720
-------- --------
TOTAL $418,466 $368,922
======== ========
Certain reclassifications have been made to the 2002 financial statements to conform to
the 2003 presentation.
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
TWELVE MONTHS ENDED
Jun. 28, Jun. 29,
2003 2002
-------- --------
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
NET INCOME $ 20,124 $ 22,460
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH:
DEPRECIATION 19,398 18,333
AMORTIZATION 7,397 8,542
DEFERRED INCOME TAXES 106 3,846
EXIT COSTS 998 700
LOSS ON DISPOSAL OF EQUIPMENT 448 361
GAIN ON SALE OF LONG-TERM INVESTMENT (11,424) -
CHANGE IN ACCOUNTING PRINCIPLE - 2,792
GOODWILL AND OTHER INTANGIBLE ASSET IMPAIRMENT 13,249 -
PROVISION FOR LOSSES ON ACCOUNTS RECEIVABLE 5,406 4,865
DEFERRED GRANTS (8) (6)
EMPLOYEE BENEFIT CHARGES 857 3,885
CHANGES IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE (2,547) (971)
INVENTORIES AND ADVERTISING MATERIAL (1,740) 8,782
PREPAID EXPENSES AND OTHER ASSETS 1,006 62
ACCOUNTS PAYABLE (382) (1,509)
INCOME TAXES PAYABLE (244) 972
OTHER ACCRUED EXPENSES 314 (2,297)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 52,958 70,817
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
- --------------------------------------
ADDITIONS TO PROPERTY AND EQUIPMENT (16,120) (15,365)
PURCHASE OF LONG-TERM INVESTMENT (5,421) (17,652)
PROCEEDS FROM SALE OF LONG-TERM INVESTMENT 47,366 -
PROCEEDS FROM SALE OF EQUIPMENT 72 32
ACQUISITION OF BUSINESS (75,845) -
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (49,948) (32,985)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
REPAYMENT OF DEBT (114,048) (124,084)
PROCEEDS FROM BORROWINGS - NET OF ISSUANCE COSTS 120,712 89,508
PROCEEDS FROM ISSUANCE OF COMMON STOCK 3,346 5,800
ACQUISITION OF TREASURY STOCK (4,894) -
DIVIDENDS PAID (10,395) (10,183)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (5,279) (38,959)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 900 85
- --------------------------------------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,369) (1,042)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,112 7,154
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 4,743 $ 6,112
======== ========
Certain reclassifications have been made to the 2002 financial statements to conform to
the 2003 presentation.
NEW ENGLAND BUSINESS SERVICE, INC.
SEGMENT FINANCIAL INFORMATION
(IN THOUSANDS)
THREE MONTHS ENDED TWELVE MONTHS ENDED
------------------- -------------------
Jun. 28, Jun. 29, Jun. 28, Jun. 29,
2003 2002 2003 2002
-------- -------- -------- --------
(unaudited) (unaudited) (unaudited)
NET SALES
- ---------
DIRECT MARKETING-U.S. $ 61,613 $ 64,921 $269,019 $282,595
DIRECT AND DISTRIBUTOR SALES 39,268 26,000 121,618 105,958
PACKAGING & DISPLAY PRODUCTS 19,360 19,030 80,251 78,907
INTERNATIONAL 10,769 10,021 39,915 39,487
APPAREL 11,461 13,641 40,385 50,592
-------- -------- --------- ---------
TOTAL $142,471 $133,613 $551,188 $557,539
-------- -------- --------- ---------
-------- -------- --------- ---------
PROFIT(LOSS) FROM OPERATIONS
- -----------------------------
DIRECT MARKETING-U.S. $ 13,871 $ 15,158 $ 60,931 $ 63,009
DIRECT AND DISTRIBUTOR SALES 3,165 2,441 11,989 9,210
PACKAGING & DISPLAY PRODUCTS 686 1,072 2,549 2,441
INTERNATIONAL 668 1,037 2,426 3,095
APPAREL 83 143 (2,357) (1,205)
-------- -------- --------- ---------
TOTAL $ 18,473 $ 19,851 $ 75,538 $ 76,550
-------- -------- --------- ---------
-------- -------- --------- ---------
Profit (loss) from operations is similar to income from operations as reported on the
consolidated statements of income in that it excludes interest and other income and
expense. This measure, however, also excludes certain items that are reported within
income from operations. These include management incentive compensation, amortization,
integration charges, restructuring charges, impairment charges and corporate expenses. The
chief operating decision-maker, in assessing segment results, does not consider these
items. In order to reconcile the segment numbers above to the Company's (loss)/income
before income taxes, adjustments representing the items listed above totaling $21,620 and
$9,118 for the three months and $36,595 and $35,556 for the twelve months ended June 28,
2003 and June 29, 2002, respectively, need to be made to the reported segment results.
Certain reclassifications have been made to the 2002 financial statements to conform to
the 2003 presentation.
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