Exhibit 99
FOR IMMEDIATE RELEASE FOR FURTHER INFORMATION CONTACT:
DANIEL M. JUNIUS AT (978) 449-3416
NEW ENGLAND BUSINESS SERVICE, INC.
ANNOUNCES HIGHER SECOND QUARTER RESULTS AND
DIVIDEND INCREASE
GROTON, MA -January 21, 2004 - New England Business Service,
Inc. (NYSE: NEB) today announced results for its second
quarter ended December 27, 2003.
Revenues for the second quarter of fiscal 2004 were a record
$197 million versus $153 million in the prior year. The 29%
increase in sales was driven by the addition of Safeguard
Business Systems, Inc., which was acquired on June 2, 2003.
Excluding the effect of the acquisition, net sales grew
approximately 3% over the prior year's level.
Net income of $9.7 million, or $.71 per share, compares with
$12.9 million, or $.97 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 $10.7 million, or $.79 per share, versus
$10.5 million, or $.78 per share, in the prior year's second
quarter, a 2.5% increase in net income and a 1.2% increase
in earnings per share.
Mr. Richard T. Riley, President and CEO, commented, "Higher
sales and profits in four of our five reporting segments
drove our performance in the quarter. While sales of
holiday cards rose 8% year to year, marketing spending was
geared to a greater increase, which adversely impacted
profits in the Direct Marketing - U.S. segment. Partially
offsetting higher segment profits were increased
amortization and incentive compensation expenses along with
a higher tax rate year to year."
Mr. Riley added, "We now expect sales for fiscal year 2004
to reach $700-$725 million, an increase of between 25-30%,
primarily as a result of the Safeguard acquisition and the
January, 2004 acquisition of Stephen Fossler Company. We
expect earnings per share to increase from the $1.51
recorded in fiscal 2003 to between $2.12-$2.17, or
approximately 40-44% in 2004. Excluding the impact of
unusual items consisting of the anticipated $.23 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."
The effect of the unusual items on fiscal year 2003 earnings
is detailed in the attached financial reconciliation
worksheet.
The Company repurchased approximately 45,300 shares of its
stock during the second quarter under its existing share
repurchase program.
The Board of Directors of the Company declared a dividend of
$.22 per share, an increase of 10%, with a record date of
February 6, 2004 and a payment date of February 20, 2004.
This is consistent with the earlier announcement of the
Board's intention to increase the dividend.
The conference call to review the Company's second 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, January 22, 2004. 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 and certain
financial reconciliations.
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,
packaging supplies, embossed anniversary seals and other
printed material which are marketed through direct mail,
telesales, a direct sales force, dealers, dedicated
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-
Q for the fiscal quarter ended September 27, 2003, on file
with the Securities and Exchange Commission.
****
NEW ENGLAND BUSINESS SERVICE, INC.
STATEMENTS OF CONSOLIDATED INCOME
(IN THOUSANDS EXCEPT PER SHARE DATA)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- ----------------
Dec. 27, Dec. 28, Dec. 27, Dec. 28
2003 2002 2003 2002
-------- -------- -------- --------
NET SALES $196,866 $152,599 $364,154 $281,450
COST OF SALES 81,718 63,138 150,860 117,417
-------- -------- -------- --------
GROSS PROFIT 115,148 89,461 213,294 164,033
PERCENT OF SALES 58.5% 58.6% 58.6% 58.3%
OPERATING EXPENSES
SELLING AND ADVERTISING 71,721 51,599 133,615 95,598
GENERAL AND ADMINISTRATIVE 24,557 19,198 48,665 38,515
EXIT COSTS 1,009 - 1,800 -
-------- -------- -------- --------
TOTAL OPERATING EXPENSES 97,287 70,797 184,080 134,113
-------- -------- -------- --------
INCOME FROM OPERATIONS 17,861 18,664 29,214 29,920
PERCENT OF SALES 9.1% 12.2% 8.0% 10.6%
OTHER (EXPENSE)/INCOME
INTEREST INCOME 69 43 152 75
INTEREST EXPENSE (1,792) (1,978) (3,542) (5,055)
LOSS ON SETTLEMENT
OF INTEREST RATE SWAPS - (66) - (3,277)
GAIN ON SALE OF LONG-TERM
INVESTMENT - 4,075 - 10,397
-------- -------- --------- --------
TOTAL OTHER (EXPENSE)/INCOME (1,723) 2,074 (3,390) 2,140
-------- -------- --------- --------
INCOME BEFORE INCOME TAXES 16,138 20,738 25,824 32,060
PROVISION FOR INCOME TAXES 6,456 7,817 10,330 12,165
-------- -------- --------- --------
NET INCOME $ 9,682 $ 12,921 $ 15,494 $19,895
======== ======== ========= ========
PER SHARE AMOUNTS:
- ------------------
DILUTED EARNINGS PER SHARE $ 0.71 $ 0.97 $ 1.14 $ 1.49
======== ======== ========= ========
DIVIDENDS PAID $ 0.20 $ 0.20 $ 0.40 $ 0.40
======== ======== ========= ========
DILUTED WEIGHTED AVERAGE
SHARES OUTSTANDING 13,590 13,348 13,601 13,361
======== ======== ========= ========
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 December 27, 2003 includes a net
after-tax charge of $1,036, or $0.08 per diluted share, related to
integration and restructuring actions. On a pretax basis, total costs
were $1,725 reported in the following categories: Exit Costs $1,009,
Cost of Sales $580, Selling and Advertising $9, and General and
Administrative $127.
Net Income for the three months ended December 28, 2002 included a
net after-tax gain of $2,510, or $0.19 per diluted share, related to
the sale of equity interests in Advantage Payroll, Inc. and a net
after-tax charge of $41 related to the loss on settlement of interest
rate swaps.
Net income for the six months ended December 27, 2003 includes a net after-tax
charge of $1,538, or $0.11 per diluted share, related to integration and
restructuring actions. On a pretax basis, the total costs were $2,563,
reported in the following categories: Exit Costs $1,800, Cost of Sales
$627, Selling and Advertising $9, and General and Administrative $127.
Net income for the six months ended December 28, 2002 included a net after-tax
gain of $6,404, or $0.48 per diluted share, related to the sale of equity
interests in Advantage Payroll, Inc. and a net after-tax charge of $2,019,
or $0.15 per diluted share, related to the loss on settlement of interest
rate swaps.
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
Dec. 27, June 28,
2003 2003
-------- --------
(unaudited)
ASSETS
- ------
CASH AND CASH EQUIVALENTS $ 3,703 $ 4,743
ACCOUNTS RECEIVABLE, NET 76,502 71,049
INVENTORIES, NET 41,653 39,792
DIRECT MAIL ADVERTISING MATERIALS, NET
AND PREPAID EXPENSES 19,670 18,710
DEFERRED INCOME TAX BENEFIT 13,779 14,041
-------- --------
TOTAL CURRENT ASSETS 155,307 148,335
PROPERTY AND EQUIPMENT 79,140 80,110
NET PROPERTY HELD FOR SALE - 328
GOODWILL AND OTHER INTANGIBLE ASSETS, NET 163,538 164,293
DEFERRED INCOME TAXES AND OTHER ASSETS 26,676 25,400
-------- --------
TOTAL ASSETS $424,661 $418,466
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
ACCOUNTS PAYABLE $ 21,788 $ 22,937
ACCRUED EXPENSES 69,341 65,192
CURRENT PORTION OF LONG-TERM DEBT 10,565 764
-------- --------
TOTAL CURRENT LIABILITIES 101,694 88,893
LONG-TERM DEBT 137,274 157,025
DEFERRED INCOME TAXES 21,397 21,377
STOCKHOLDERS' EQUITY 164,296 151,171
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $424,661 $418,466
======== ========
NEW ENGLAND BUSINESS SERVICE, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(unaudited)
SIX MONTHS ENDED
Dec.27, Dec. 28,
2003 2002
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
NET INCOME $ 15,494 $ 19,895
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION 11,848 9,957
AMORTIZATION 5,125 3,567
EXIT COSTS 1,800 -
LOSS ON DISPOSAL OF EQUIPMENT 23 50
GAIN ON SALE OF LONG-TERM INVESTMENT - (10,397)
PROVISION FOR LOSSES ON ACCOUNTS RECEIVABLE 2,453 2,925
DEFERRED GRANTS - (3)
EMPLOYEE BENEFIT CHARGES 975 543
CHANGES IN ASSETS AND LIABILITIES:
ACCOUNTS RECEIVABLE (7,561) (5,537)
INVENTORIES AND ADVERTISING MATERIAL (1,749) (2,561)
PREPAID EXPENSES AND OTHER ASSETS (1,060) 1,308
ACCOUNTS PAYABLE (1,402) (875)
INCOME TAXES PAYABLE 772 4,701
OTHER ACCRUED EXPENSES (363) (1,257)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 26,355 22,316
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
- --------------------------------------
ADDITIONS TO PROPERTY AND EQUIPMENT (10,543) (8,160)
PURCHASE OF LONG-TERM INVESTMENT - (5,421)
PROCEEDS FROM SALE OF LONG-TERM INVESTMENT - 46,339
PROCEEDS FROM SALE OF BUILDING 364 -
PRCCEEDS FROM SALE OF EQUIPMENT - 12
ACQUISITION OF BUSINESS (2,178) -
-------- --------
NET CASH (USED)/PROVIDED BY INVESTING ACTIVITIES (12,357) 32,770
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
REPAYMENT OF DEBT (37,450) (76,816)
PROCEEDS FROM BORROWINGS - NET OF ISSUANCE COSTS 27,477 26,498
PROCEEDS FROM ISSUANCE OF COMMON STOCK 3,828 323
ACQUISITION OF TREASURY STOCK (3,946) (1,553)
DIVIDENDS PAID (5,244) (5,218)
-------- --------
NET CASH USED BY FINANCING ACTIVITIES (15,335) (56,766)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 297 (139)
- --------------------------------------- -------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (1,040) (1,819)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 4,743 6,112
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,703 $ 4,293
======== ========
NEW ENGLAND BUSINESS SERVICE, INC.
SEGMENT FINANCIAL INFORMATION
(IN THOUSANDS)
(unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
------------------- -----------------
Dec. 27, Dec. 28, Dec. 27, Dec. 28,
2003 2002 2003 2002
-------- -------- -------- --------
NET SALES
- ---------
DIRECT MARKETING - U.S. $ 78,916 $ 80,894 $140,529 $144,780
DIRECT AND DISTRIBUTOR SALES 68,895 28,365 135,482 54,911
PACKAGING & DISPLAY PRODUCTS 23,311 22,685 42,929 42,314
INTERNATIONAL 13,100 10,808 23,174 19,840
APPAREL 12,644 9,847 22,040 19,605
-------- -------- -------- --------
TOTAL $196,866 $152,599 $364,154 $281,450
-------- -------- -------- --------
-------- -------- -------- --------
PROFIT(LOSS) FROM OPERATIONS
- -----------------------------
DIRECT MARKETING - U.S. $ 18,237 $ 18,967 $ 32,917 $ 33,934
DIRECT AND DISTRIBUTOR SALES 6,955 3,653 12,749 6,009
PACKAGING & DISPLAY PRODUCTS 1,568 1,166 2,193 1,585
INTERNATIONAL 1,265 1,156 1,313 1,606
APPAREL (53) (385) (451) (1,093)
-------- -------- -------- --------
TOTAL $ 27,972 $ 24,557 $ 48,721 $ 42,041
-------- -------- -------- --------
-------- -------- -------- --------
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 above totaling $11,834 and $3,819
for the three months ended Dec. 27, 2003 and Dec. 28, 2002, respectively, need
to be made to the reported segment results. For the six months ended Dec. 27, 2003
and Dec. 28, 2002, the adjustments representing the items listed above totaled
$22,897 and $9,981, respectively. These adjustments are detailed in the
accompanying Financial Reconciliation worksheet.
</Table>
NEW ENGLAND BUSINESS SERVICE, INC.
FINANCIAL RECONCILIATIONS
(IN THOUSANDS)
(unaudited)
YEAR
THREE MONTHS ENDED SIX MONTHS ENDED ENDED
------------------- --------------- -------
UNUSUAL ITEMS IN EARNINGS RESULTS Dec. 27, Dec. 28, Dec. 27, Dec. 28, Jun. 28,
- ---------------------------------- 2003 2002 2003 2002 2003
-------- -------- -------- -------- -------
INCOME BEFORE INCOME TAXES
AS REPORTED (GAAP) $16,138 $20,738 $25,824 $ 32,060 $38,943
Unusual Items
Exit, integration,
restructuring charges 1,725 - 2,563 - 998
Gain on sale of long-term
investment - (4,075) - (10,397) (11,424)
Loss on settlement of
interest rate swaps - 66 - 3,277 3,277
Goodwill and other intangible
asset impairment - - - - 13,249
-------- ---------- -------- -------- -------
Total of unusual items 1,725 (4,009) 2,563 (7,120) 6,100
INCOME BEFORE INCOME TAXES
ADJ. FOR UNUSUAL ITEMS $17,863 $16,729 $28,387 $ 24,940 $45,043
======== ========= ======== ======== ========
- ---------------------------------------------------------------------------------------
NET INCOME AS REPORTED (GAAP) $ 9,682 $12,921 $15,494 $19,895 $20,124
Impact of Unusual Items - Net 1,036 (2,469) 1,538 (4,385) 7,464
of Income Taxes --------- -------- -------- -------- -------
NET INCOME ADJ. FOR UNUSUAL
ITEMS $ 10,718 $10,452 $17,032 $15,510 $27,588
========= ======== ======== ======== ========
- ---------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE
AS REPORTED (GAAP) $ 0.71 $ 0.97 $ 1.14 $ 1.49 $ 1.51
Impact of Unusual Items - Net 0.08 (0.19) 0.11 (0.33) 0.56
of Income Taxes --------- -------- -------- -------- -------
DILUTED EARNINGS PER SHARE
ADJ. FOR UNUSUAL ITEMS $ 0.79 $ 0.78 $ 1.25 $ 1.16 $ 2.07
======== ======== ======== ======== ========
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ -----------------
SEGMENT INFORMATION RECONCILIATION Dec.27 Dec. 28 Dec. 27, Dec. 28,
- ---------------------------------- 2003 2002 2003 2002
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES
AS REPORTED $ 16,138 $ 20,738 $25,824 $32,060
Corporate expenses and
Management Incentive
Compensation 5,823 4,110 11,819 8,554
Amortization 2,563 1,783 5,125 3,567
Exit, integration,
restructuring charges 1,725 - 2,563 -
Total Other Expense/(Income) 1,723 (2,074) 3,390 (2,140)
-------- -------- ------- -------
Total reconciling items 11,834 3,819 22,897 9,981
TOTAL PROFIT FROM OPERATIONS
PER SEGMENT INFORMATION $ 27,972 $24,557 48,721 42,041
======== ======= ======== ========
</Table>