EXHIBIT 99
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
DANIEL M. JUNIUS AT (978) 449-3416
NEW ENGLAND BUSINESS SERVICE, INC.
ANNOUNCES FIRST QUARTER RESULTS
GROTON, MA - October 22, 2003 - New England Business Service, Inc. (NYSE:
NEB) today announced results for its first quarter ended September 27, 2003.
Revenues for the first quarter of fiscal 2004 were a record $167.3 million,
versus $128.9 million in the prior year. The 30% increase in sales was
driven by the inclusion of Safeguard Business Systems, Inc., which was
acquired on June 2, 2003. Excluding the effect of the acquisition, net sales
were approximately equal to the prior year's level.
Net income of $5.8 million, or $.43 per share, compares with $7.0 million, or
$.52 per share, in the year ago period. Excluding the effect of the unusual
items shown in the attached financial reconciliation worksheet, net income in
the quarter was $6.3 million, or $.46 per share, versus $5.1 million, or $.38
per share, in the prior year's first quarter, a nearly 25% increase in net
income and a 21% increase in earnings per share.
Mr. Robert J. Murray, Chairman and CEO, commented, "Significantly higher
operating income and lower interest expense drove net income up almost 25%
over the prior year on an adjusted basis, with Safeguard contributing
meaningfully to this improvement. The early performance of Safeguard Business
Systems has been somewhat higher than our expectations, reinforcing our
confidence in the potential of this combination."
Mr. Murray added, "Based on the encouraging results in the first quarter, we
continue to expect sales for fiscal year 2004 to reach $690-$715 million, an
increase of 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 between $2.12-$2.17, or approximately 40-45% in
2004. Excluding the impact of unusual items, including the anticipated $5.0
million pretax impact of Safeguard-related planned exit and integration
actions in fiscal 2004, earnings per share are expected to increase in 2004
to the range of $2.35-$2.40, or approximately 14-16%, from the comparable
$2.07 level last year. With the strong first quarter, our bias would be to
the upper end of these ranges."
The Company repurchased approximately 89,000 shares of its stock during the
first quarter under the existing program. The authorization for the current
program expires October 31, 2003
The Board of Directors of the Company declared a dividend of $.20 per share
with a record date of November 7, 2003 and a payment date of November 21,
2003.
The conference call to review the Company's first quarter results will be
broadcast live via the investor relations section of the Company's web site,
nebs.com, at 11:00 AM ET on Thursday, October 23, 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, earnings 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 Annual
Report on Form 10-K for the fiscal year ended June 28, 2003, on file with the
Securities and Exchange Commission.
****
NEW ENGLAND BUSINESS SERVICE, INC. . 500 MAIN STREET, GROTON, MA 01471 .
978.448.6111 . 978.449.3419
NEW ENGLAND BUSINESS SERVICE, INC.
STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
(unaudited)
THREE MONTHS ENDED
-------------------
Sept. 27, Sept. 28,
2003 2002
-------- --------
NET SALES $167,288 $128,851
COST OF SALES 69,142 54,279
-------- --------
GROSS PROFIT 98,146 74,572
PERCENT OF SALES 58.7% 57.9%
OPERATING EXPENSES
SELLING AND ADVERTISING 61,894 43,999
GENERAL AND ADMINISTRATIVE 24,108 19,317
EXIT COSTS 791 -
-------- --------
TOTAL OPERATING EXPENSES 86,793 63,316
-------- --------
INCOME FROM OPERATIONS 11,353 11,256
PERCENT OF SALES 6.8% 8.7%
OTHER (EXPENSE)/INCOME
INTEREST INCOME 83 32
INTEREST EXPENSE (1,750) (3,077)
LOSS ON SETTLEMENT OF INTEREST RATE SWAPS - (3,211)
GAIN ON SALE OF LONG-TERM INVESTMENT - 6,322
-------- --------
TOTAL OTHER (EXPENSE)/INCOME (1,667) 66
-------- --------
INCOME BEFORE INCOME TAXES 9,686 11,322
PROVISION FOR INCOME TAXES 3,874 4,348
-------- --------
NET INCOME $ 5,812 $ 6,974
======== ========
PER SHARE AMOUNTS:
- ------------------
DILUTED EARNINGS PER SHARE $ 0.43 $ 0.52
======== ========
DIVIDENDS PAID $ 0.20 $ 0.20
======== ========
DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 13,623 13,385
======== ========
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,
the trends in the base business are clearer without the effects of these
identified items. Management performance targets are also set on and
measured against a basis that excludes these items. These items are also
detailed in the accompanying Financial Reconciliation worksheet.
Net Income for the three months ended September 27,2003 includes a net after-
tax charge of $502, or $0.03 per diluted share related to integration and
restructuring actions. On a pretax basis, total costs were $838, reported in
the following categories: Exit Costs $791 and Cost of Sales $47.
Net Income for the three months ended September 28, 2002 included a net after-
tax gain of $3,894, or $0.29 per diluted share, related to the sale of equity
interests in Advantage Payroll,Inc. and a net after-tax charge of $1,978, or
$0.15 per diluted share related to the loss on settlement of interest rate
swaps.
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
Sept. 27, June 28,
2003 2003
-------- --------
(unaudited)
ASSETS
- ------
CASH AND CASH EQUIVALENTS $ 3,226 $ 4,743
ACCOUNTS RECEIVABLE, NET 71,850 71,049
INVENTORIES, NET 45,420 39,792
DIRECT MAIL ADVERTISING MATERIALS, NET
AND PREPAID EXPENSES 24,817 18,710
DEFERRED INCOME TAX BENEFIT 13,922 14,041
-------- --------
TOTAL CURRENT ASSETS 159,235 148,335
PROPERTY AND EQUIPMENT 79,108 80,110
NET PROPERTY HELD FOR SALE - 328
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 165,961 164,293
DEFERRED INCOME TAXES AND OTHER ASSETS 26,304 25,400
-------- --------
TOTAL ASSETS $430,608 $418,466
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
ACCOUNTS PAYABLE $ 22,966 $ 22,937
ACCRUED EXPENSES 68,019 65,192
CURRENT PORTION OF LONG-TERM DEBT 643 764
-------- --------
TOTAL CURRENT LIABILITIES 91,628 88,893
LONG-TERM DEBT 162,379 157,025
DEFERRED INCOME TAXES 21,377 21,377
STOCKHOLDERS' EQUITY 155,224 151,171
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $430,608 $418,466
======== ========
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
THREE MONTHS ENDED
------------------
Sept 27, Sept 28,
2003 2002
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
NET INCOME $ 5,812 $ 6,974
ADJUSTMENTS TO RECONCILE NET INCOME TO CASH:
DEPRECIATION 5,885 5,017
AMORTIZATION 2,563 1,784
EXIT COSTS 791 -
LOSS/(GAIN)ON DISPOSAL OF EQUIPMENTT 11 (2)
GAIN ON SALE OF LONG-TERM INVESTMENT - (6,322)
PROVISION FOR LOSSES ON ACCOUNTS RECEIVABLE 1,148 1,507
DEFERRED GRANTS - (2)
EMPLOYEE BENEFIT CHARGES 448 214
CHANGES IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE (1,925) (1,186)
INVENTORIES AND ADVERTISING MATERIAL (10,327) (6,427)
PREPAID EXPENSES AND OTHER ASSETS (1,554) (555)
ACCOUNTS PAYABLE 26 (11)
INCOME TAXES PAYABLE (1,501) 2,100
OTHER ACCRUED EXPENSES (685) (2,039)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 692 1,052
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
- --------------------------------------
ADDITIONS TO PROPERTY AND EQUIPMENT (4,943) (4,124)
PURCHASE OF LONG-TERM INVESTMENT - (5,421)
PROCEEDS FROM SALE OF LONG-TERM INVESTMENT - 42,264
PROCEEDS FROM SALE OF BUILDING 370 -
PRCCEEDS FROM SALE OF EQUIPMENT - 11
ACQUISITION OF BUSINESS (101) -
-------- --------
NET CASH (USED)/PROVIDED BY INVESTING ACTIVITIES (4,674) 32,730
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
REPAYMENT OF DEBT (14,967) (52,734)
PROCEEDS FROM BORROWINGS - NET OF ISSUANCE COSTS 20,177 22,498
PROCEEDS FROM ISSUANCE OF COMMON STOCK 2,480 6
ACQUISITION OF TREASURY STOCK (2,608) -
DIVIDENDS PAID (2,618) (2,609)
-------- --------
NET CASH PROVIDED/(USED) BY FINANCING ACTIVITIES 2,464 (32,839)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 1 (271)
- --------------------------------------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,517) 672
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,743 6,112
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,226 $ 6,784
======== ========
NEW ENGLAND BUSINESS SERVICE, INC.
SEGMENT FINANCIAL INFORMATION
(IN THOUSANDS)
(unaudited)
THREE MONTHS ENDED
-------------------
Sept. 27, Sept. 28,
2003 2002
-------- --------
NET SALES
- ---------
DIRECT MARKETING - U.S. $ 61,613 $ 63,886
DIRECT AND DISTRIBUTOR SALES 66,587 26,546
PACKAGING & DISPLAY PRODUCTS 19,618 19,629
INTERNATIONAL 10,074 9,032
APPAREL 9,396 9,758
-------- --------
TOTAL $167,288 $128,851
-------- --------
-------- --------
PROFIT(LOSS) FROM OPERATIONS
- -----------------------------
DIRECT MARKETING - U.S. $ 14,680 $ 14,967
DIRECT AND DISTRIBUTOR SALES 5,794 2,356
PACKAGING & DISPLAY PRODUCTS 625 419
INTERNATIONAL 48 450
APPAREL (398) (708)
-------- --------
TOTAL $ 20,749 $ 17,484
-------- --------
-------- --------
Profit (loss) from operations is similar to income from operations as
reported on the statements of consolidated 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
income before income taxes, adjustments representing the items listed above
totaling $11,063 and $6,162 for the three months ended Sept. 27, 2003 and
Sept 28, 2002, respectively, need to be made to the reported segment results.
These items are also detailed in the accompanying Financial Reconciliation
worksheet.
</Table>
NEW ENGLAND BUSINESS SERVICE, INC.
FINANCIAL RECONCILIATIONS
(IN THOUSANDS)
(unaudited)
THREE MONTHS ENDED
-------------------
UNUSUAL ITEMS IN EARNINGS RESULTS Sept. 27, Sept. 28,
- ---------------------------------- 2003 2002
-------- --------
INCOME BEFORE INCOME TAXES AS REPORTED (GAAP) $ 9,686 $11,322
Unusual Items
Exit, integration,
restructuring charges $ 838 -
Gain on sale of long-term investment - $(6,322)
Loss on settlement of interest rate
swaps - $ 3,211
-------- ---------
Total of unusual items $ 838 $(3,111)
INCOME BEFORE INCOME TAXES ADJUSTED
FOR UNUSUAL ITEMS $10,524 $ 8,211
======== =========
- ------------------------------------------------------------------
NET INCOME AS REPORTED (GAAP) $ 5,812 $ 6,974
Impact of Unusual Items $ 502 $(1,916)
--------- --------
NET INCOME ADJUSTED FOR UNUSUAL ITEMS $ 6,314 $ 5,058
========= ========
- ------------------------------------------------------------------
DILUTED EARNINGS PER SHARE AS REPORTED (GAAP) $ 0.43 $ 0.52
Impact of Unusual Items $ 0.03 $ (0.14)
--------- --------
DILUTED EARNINGS PER SHARE ADJUSTED FOR
UNUSUAL ITEMS $ 0.46 $ 0.38
======== ========
==================================================================
THREE MONTHS ENDED
-------------------
SEGMENT INFORMATION RECONCILIATION Sept. 27, Sept. 28,
- ---------------------------------- 2003 2002
-------- --------
INCOME BEFORE INCOME TAXES AS REPORTED $ 9,686 $ 11,322
Corporate expenses and
Management Incentive Compensation $ 5,995 $ 4,444
Amortization $ 2,563 $ 1,784
Exit, integration, restructuring
charges $ 838 -
Total Other (Expense)/Income $ 1,667 $ (66)
-------- --------
Total reconciling items $ 11,063 $ 6,162
TOTAL PROFIT FROM OPERATIONS PER SEGMENT
INFORMATION $ 20,749 $17,484
======== =======
</Table>