-----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, StCpGfXsgyqcDOQZRPAgzCVBCeSetYi72H2VgakZNveCHMKvZBoo67BBAosDOteo u5rpRNzZLnQ4sAypUDd1XA== 0000950134-98-006976.txt : 19980817 0000950134-98-006976.hdr.sgml : 19980817 ACCESSION NUMBER: 0000950134-98-006976 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: BOLLE INC CENTRAL INDEX KEY: 0001049588 STANDARD INDUSTRIAL CLASSIFICATION: OPHTHALMIC GOODS [3851] IRS NUMBER: 133934135 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23899 FILM NUMBER: 98689181 BUSINESS ADDRESS: STREET 1: 555 THEODORE FREMD AVE STREET 2: STE B 302 CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 9149679400 MAIL ADDRESS: STREET 1: 555 THEODORE FREMD AVE STREET 2: STE B 302 CITY: RYE STATE: NY ZIP: 10580 10-Q 1 FORM 10-Q FOR QUARTER ENDED JUNE 30, 1998 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1998 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 000-23899 BOLLE INC. ------------------------------------------------------ (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) Delaware 13-3934135 - ------------------------ ------------------------------------ (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) Suite B-302 555 Theodore Fremd Avenue Rye, New York 10580 - --------------------------------------- ---------- (ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE) Registrant's telephone number, including area code: (914) 967-9475 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 REGISTRANT'S CLASSES OF COMMON STOCK AS OF THE LATEST PRACTICABLE DATE. Common Shares, par value $.01 - 6,891,826 Shares as of August 12, 1998 Page 1 of 12. Exhibit Index Appears at page 11. 2 PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED FINANCIAL STATEMENTS BOLLE INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data) (Unaudited)
June 30, December 31, 1998 1997 ----------- ----------- ASSETS Current assets Cash and cash equivalents $ 2,060 $ 1,204 Trade receivables from related parties 1,120 Trade receivables, net 12,191 11,332 Inventories 15,099 11,734 Other current assets 2,964 1,617 ----------- ----------- Total current assets 32,314 27,007 Property and equipment, net 4,469 4,687 Trademarks, net 38,081 39,029 Goodwill and other intangible assets, net 27,002 23,447 Equity in and notes receivable from affiliated companies 5,728 Other assets 5,991 527 ----------- ----------- Total assets $ 113,585 $ 94,697 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Short term debt and current portion of long term debt $ 9,036 $ Accounts payable 4,957 6,247 Indebtedness to related parties 35,782 Accrued compensation 890 1,111 Other accrued expenses 7,695 4,803 ----------- ----------- Total current liabilities 22,578 47,943 Long-term debt, net of current portion 6,677 Zero coupon convertible subordinated notes 7,000 Deferred tax liability 14,000 14,000 Other long-term liabilities 3,235 2,856 ----------- ----------- Total liabilities 53,490 64,799 ----------- ----------- Minority interest 10 Mandatorily redeemable preferred stock - redemption value $11,055; par value $.01; 64 shares authorized, issued and outstanding 11,055 11,055 Mandatorily redeemable cumulative preferred stock - redemption value $9,625; par value $0.01; 10 shares authorized, issued and outstanding 9,795 Stockholders' equity: Common stock - par value $.01; 25,000 shares authorized, 6,885 shares issued and outstanding 69 Additional paid-in capital 44,827 23,960 Cumulative translation adjustment (1,425) (462) Accumulated deficit (4,236) (4,655) ----------- ----------- Total stockholders' equity 39,235 18,843 ----------- ----------- Total liabilities, mandatorily redeemable preferred stock, minority interest and stockholders' equity $ 113,585 $ 94,697 =========== ===========
2 See accompanying notes to condensed financial statements. 3 BOLLE INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except share and per share data) (Unaudited)
Three months ended Six months ended June 30, June 30, 1998 1997 1998 1997 ----------- ----------- ----------- ----------- REVENUES: Net sales $ 13,748 $ 5,420 $ 24,476 $ 10,478 COSTS AND EXPENSES Cost of sales 5,931 2,160 11,218 4,938 Selling, general and administrative expense 6,986 2,905 12,416 5,938 Interest expense 311 47 794 68 Other (income) expense (405) (298) (919) (586) ----------- ----------- ----------- ----------- Total costs and expenses 12,823 4,814 23,509 10,358 ----------- ----------- ----------- ----------- Income before income taxes 925 606 967 120 Provision for income taxes 351 194 368 38 Minority interests 10 10 ----------- ----------- ----------- ----------- Net income 564 412 589 82 Preferred dividend 141 170 ----------- ----------- ----------- ----------- Net income attributable to common stock $ 423 $ 412 $ 419 $ 82 =========== =========== =========== =========== Comprehensive income $ 1,134 $ 412 $ 11 $ 82 =========== =========== =========== =========== Weighted average shares outstanding: Basic 6,746,069 100 4,111,210 100 Diluted 7,234,068 100 4,407,503 100 Earnings per share: Basic $ 0.06 $ 4,121.40 $ 0.10 $ 813.70 Diluted $ 0.06 $ 4,121.40 $ 0.10 $ 813.70
3 See accompanying notes to condensed financial statements. 4 BOLLE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
For the six months ended June 30, 1998 1997 Net cash provided by operating activities $ 1,760 $ 662 -------- -------- Cash flows from investing activities: Non compete agreement and intangible assets (350) (50) Capital expenditures (372) (29) Proceeds from sale of assets 5,567 6 Cash paid for acquisitions, net of cash acquired (3,620) (1,000) -------- -------- Net cash used (provided) by investing activities 1,225 (1,073) -------- -------- Cash flows from financing activities: Proceeds from (payment on) revolving credit line 121 233 Proceeds from (payment on) long term obligations and debt (6,781) Proceeds from issuance of zero coupon convertible subordinated notes 7,000 Payments of short term obligations (2,446) -------- -------- Net cash provided (used) by financing activities (2,106) 233 -------- -------- Effect of change in exchange rate on cash (23) -------- -------- Net increase (decrease ) in cash 856 (178) Cash and cash equivalents at beginning of period 1,204 311 -------- -------- Cash and cash equivalents at end of period $ 2,060 $ 133 ======== ========
SUPPLEMENTAL CASH FLOW INFORMATION: Non-cash investing and financing activities: In June 1998 the Company completed the acquisition of Bolle Australia for an aggregate purchase price of $5.2 million, comprised of cash and common stock. See Note 2. 4 See accompanying notes to condensed financial statements. 5 BOLLE INC. NOTES TO CONDENSED FINANCIAL STATEMENTS NOTE 1 - SPINOFF AND BASIS OF PRESENTATION At December 31, 1997 Bolle Inc. (the "Company") was a subsidiary of Lumen Technologies, Inc. (formerly known as BEC Group, Inc.) ("Lumen"). On March 11, 1998, Lumen distributed all of its shares of stock in Bolle Inc. to Lumen's stockholders (the "Spinoff") and the Company began trading on the NASDAQ National Market under the symbol "BEYE" on March 12, 1998. In connection with the Spinoff, pursuant to a Bill of Sale and Assignment Agreement entered into between Lumen and the Company immediately prior to the consummation of the Spinoff (the "Contribution Agreement"), (i) Lumen assigned to the Company all of Lumen's assets other than assets related to the ORC Business (as defined in the Contribution Agreement) and certain other specified assets retained by Lumen, and (ii) the Company assumed all of Lumen's liabilities prior to the Spinoff other than those related to the ORC Business. Pursuant to this agreement, approximately $17 million of the Company's indebtedness to related parties was contributed to the capital of the Company and the remaining balance was refinanced via a bank credit facility. In connection with the Spinoff, the Company assumed all obligations and liabilities of Lumen to each of Maurice Bolle, Robert Bolle, Franck Bolle, Patricia Bolle Passaquay, Brigitte Bolle and Christelle Roche (collectively, the "Sellers," and each a "Seller") incurred by Lumen in connection with the purchase of Bolle France, and Lumen was released from all such obligations or liabilities. In addition, each Seller conveyed to the Company all shares of Series A Preferred Stock of Lumen (the "Lumen Preferred Stock") held by such Seller and the Company issued in exchange to each Seller, shares of its Series B Preferred Stock (the "Bolle Series B Preferred Stock") in proportion to the number of shares of Lumen Preferred Stock conveyed by such Seller to the Company. No shares of Bolle Common Stock were issued to the holders of outstanding shares of Bolle Series B Preferred Stock pursuant to the Spinoff. Lumen canceled all warrants (the "Lumen Warrants") and the Company issued in exchange to each holder of canceled Lumen Warrants, warrants to purchase Bolle Common Stock (the "Bolle Warrants") in proportion to the number of Lumen Warrants held by such holder prior to the cancellation. No shares of Bolle Common Stock were issued to holders of outstanding Bolle Warrants pursuant to the Spinoff. The accompanying unaudited condensed financial statements have been prepared in accordance with generally accepted accounting principles, Regulation S-X and the instructions for Form 10-Q and Regulation S-X. These statements contain all adjustments, consisting of only normal recurring adjustments, other than those related to the Spinoff and Contribution Agreement, which in the opinion of management are necessary to fairly present the consolidated financial position of the Company as of June 30, 1998 and its results of operations for the three and six month periods ended June 30, 1998 and 1997 and its cash flows for the six months ended June 30, 1998 and 1997. The results of operations for the interim periods presented are not necessarily indicative of the results to be expected for the full fiscal year. These condensed financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K/A for the year ended December 31, 1997. Due to the acquisition of Bolle France on July 10, 1997, the results of operations of Bolle France are included only in the results of operations for the three and six month periods ended June 30, 1998. The Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 133, Accounting for Derivative Instruments and Hedging Activities, in July 1998. The Statement establishes accounting and reporting standards for derivative instruments and hedging activities. It requires that all derivatives be recognized as either assets or liabilities and that these instruments be measured at fair value. This standard, which is effective for fiscal quarters of fiscal years beginning after June 15, 1999, is not expected to have a material impact on the Company. 5 6 NOTE 2 - ACQUISITIONS Effective April 1, 1998, the Company completed the acquisition of 75% of Bill Bass Optical Pty Ltd., 100% of Bolle Asia Ltd. and the 49% of Bolle Sunglasses Ltd., (collectively "Bolle Australia") not already owned by the Company for an aggregate purchase price of $5.2 million, including 248,388 shares of Common Stock issued upon execution of the Share Sale Agreement and $3.9 million in cash. Pursuant to the terms of the Share Sale Agreement up to 191,312 additional shares may be issued no later than twelve months after the closing. A summary of the preliminary allocation of the purchase price is as follows: (in thousands) Current assets $ 4,363 Property and equipment 281 Goodwill 3,019 Other assets 22 Current liabilities (2,530) Long term liabilities 0 ------- $ 5,155 -------
The Company determined that net book value approximated fair value for current assets, property, plant and equipment, other assets and current liabilities. The excess of purchase price over book value of $3.7 million was allocated to goodwill which is being amortized over 40 years. NOTE 3 - INDEBTEDNESS TO RELATED PARTIES In connection with the Contribution Agreement between Lumen and the Company, approximately $17 million of indebtedness to related parties incurred to finance the acquisition of Bolle France was capitalized and the remaining debt was refinanced with bank debt. NOTE 4 - MANDATORILY REDEEMABLE CUMULATIVE PREFERRED STOCK In connection with the Spinoff described in Note 1, the Company issued 10,000 shares of Bolle Series B Preferred Stock (the "Series B Stock") with a redemption value of $9.6 million. Shares of the Series B Stock are redeemable on the third anniversary of their issuance, subject to the provisions of the Company's senior indebtedness. The Series B Stock bears dividends at 6% through June 30, 1998; 7% through December 31, 1998; and increases by 1% every six months thereafter through January 1, 2000 at which time the dividend is 10% until redemption. Dividends accumulate and bear interest at the applicable dividend rate. The Series B Stock does not participate in any other dividends declared by the Company. NOTE 5 - ZERO COUPON CONVERTIBLE SUBORDINATED NOTES On May 29, 1998 the Company issued $7,000,000 in zero coupon convertible subordinated notes (the "Convertible Notes") to Oz Master Fund, Ltd., under an exemption from registration under the Securities and Exchange Act of 1934. Pursuant to the terms of the Convertible Subordinated Note Purchase Agreement, the Convertible Notes are convertible at any time at the option of the holders and under certain circumstances of the Company into a maximum of 1,333,333 shares of Common Stock. Under certain circumstances, including if the Company fails to convert or redeem Convertible Notes when due, the Company becomes obligated to repay the principal amount (up to a maximum of $7,000,000) in cash and issue up to a maximum of 360,000 shares to the holder(s) of such Convertible Notes. 6 7 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL Bolle Inc. is a vertically integrated designer, manufacturer and marketer of Bolle(R) branded eyewear, including Bolle(R) premium sunglasses, goggles and tactical and safety eyewear. The Company became a publicly listed corporation upon the spinoff ("Spinoff") on March 11, 1998, by Lumen Technologies, Inc. ("Lumen") of the interest held by Lumen in the Company. In conjunction with the Spinoff, the Company executed certain agreements with Lumen, including the Contribution Agreement and the Indemnification Agreement (the "Agreements") which (i) transferred to the Company all of the business, assets and liabilities of Lumen other than those relating to the conduct of Lumen's retained operations, (ii) capitalized $17 million of the Company's indebtedness to Lumen and (iii) obligated the Company to assume and to pay when and as due all liabilities and taxes in respect of the assets and liabilities conveyed to it by Lumen, as well as in respect of certain assets and liabilities retained by Lumen. RESULTS OF OPERATIONS QUARTER ENDED JUNE 30, 1998 COMPARED TO QUARTER ENDED JUNE 30, 1997 Net sales of $13.7 million for the quarter ended June 30, 1998 increased from $5.4 million for the comparable period in 1997 as a result of the acquisition of Bolle France on July 10, 1997, and the 1998 acquisition of Bolle Australia. Gross profit of $7.8 million or 56.9% for the quarter ended June 30, 1998 increased from $3.3 million or 60.1% for the quarter ended June 30, 1997. The decrease in gross margin percentage reflects the change in the product mix of the Company resulting from the acquisitions of Bolle France and Bolle Australia. Selling, general and administrative expenses for the quarters ended June 30, 1998 and 1997 were $7.0 million and $2.9 million, or 50.8% and 53.6% of net sales, respectively. The reduction in selling, general and administrative expense as a percentage of net sales reflects the change in the Company's mix of business following the acquisitions of Bolle France and Bolle Australia. Interest expense of $0.3 million for the quarter ended June 30, 1998 reflects the cost of debt incurred to fund the Bolle France acquisition and reduced debt levels following the Spinoff after March 11, 1998. Interest expense for the quarter ended June 30, 1997 was immaterial. Other income consists primarily of allocated equity income from Eyecare Products of $0.6 million, offset by foreign exchange transaction losses of $0.2 million for the quarter ended June 30, 1998. Other income for the comparable period in 1997 primarily includes allocated equity income from Eyecare Products of $0.25 million. Income taxes represent 38% of pretax profit for the quarter ending June 30, 1998 compared to 32% against the pretax profit for the quarter ending June 30, 1997. The increase in the effective tax rate reflects the acquisition of Bolle France. 7 8 SIX MONTHS ENDED JUNE 30, 1998 COMPARED TO SIX MONTHS ENDED JUNE 30, 1997 Net sales of $24.5 million for the six months ended June 30, 1998 increased from $10.5 million for the comparable period in 1997 as a result of the acquisition of Bolle France on July 10, 1997 and the 1998 acquisition of Bolle Australia. Gross profit of $13.3 million or 54.2% for the six months ended June 30, 1998 increased from $5.5 million or 52.9% for the six months ended June 30, 1997. The increase in gross margin percentage reflects higher gross margins associated with the change in the product mix of the Company's integrated manufacturing and distribution operation from the acquisitions of Bolle France and Bolle Australia. Selling, general and administrative expenses for the quarters ended June 30, 1998 and 1997 were $12.4 million and $5.9 million, or 50.7% and 56.7% of net sales, respectively. The reduction in selling, general and administrative expense as a percentage of net sales reflects the change in the Company's mix of business following the acquisition of Bolle France and Bolle Australia. Interest expense of $0.8 million for the six months ended June 30, 1998 reflects the cost of debt incurred to fund the Bolle France acquisition and reduced debt levels due to the Spinoff after March 11, 1998. Interest expense for the six months ended June 30, 1997 was immaterial. Other income consists primarily of allocated equity income from Eyecare Products of $0.6 million and foreign exchange transaction gains of $0.2 million for the six months ended June 30, 1998. Other income for the comparable period in 1997 primarily includes allocated equity income from Eyecare Products of $0.5 million. Income taxes represent 38% of pretax profit for the quarter ending June 30, 1998 compared to 32% against the pretax profit for the quarter ending June 30, 1997. The increase in the effective tax rate reflects the acquisition of Bolle France. LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations of $1.2 million represents net income, as well as increases in accounts receivable and inventory and increases in accounts payable. Depreciation and amortization for the six months ended June 30, 1998 was $1.5 million compared to $0.18 million for the same period in 1997, reflecting the acquisitions of Bolle France and Bolle Australia. Cash paid for acquisitions was $4.0 million. Proceeds from the sale of assets of $5.6 million consisted primarily of the proceeds from the sale of the Texas property. Such proceeds were used to repay the $3.5 mortgage on the property and to pay down a portion of the outstanding balance of the Credit Agreement. The operating and investing activities were financed through the Credit Agreement, proceeds from issuance of $7 million zero coupon convertible subordinated notes and proceeds from indebtedness to related parties through March 10, 1998. On March 11, 1998 the Company executed a Credit Agreement with a banking syndicate. Proceeds from the Credit Agreement were used to repay a portion of indebtedness to related parties. The remaining indebtedness to related parties was capitalized in connection with the execution of the Contribution Agreement. There are currently no intercompany credit arrangements between Lumen and the Company. Management believes that availability under the Credit Agreement, along with cash provided from operations, will be sufficient to fund the Company's cash, operating, investing and debt servicing requirements for the foreseeable future. It is not expected that repatriation of foreign currency cash flows, if any, will have a significant impact on liquidity. 8 9 OTHER MATTERS The Company utilizes software and related technologies throughout its businesses that will be affected by the Year 2000 problem, which is common to most corporations. The Company is addressing the effect of the potential Year 2000 problem on all of its critical systems and with all of its critical vendors and customers. Management believes it will be able to modify or replace its affected systems in time to minimize any detrimental effects on its operations. Based on current plans, the Company expects that any costs related to Year 2000 compliance will not have a material adverse impact on the liquidity or financial position of the Company. SEASONALITY AND CYCLICAL RESULTS The Company's sunglass business is seasonal in nature with the second quarter typically having the highest sales due to the increased demand for sunglasses during that period. The Company's goggle business is seasonal in nature with the third quarter having the highest sales due to pre-season orders of goggles for the ski season. This seasonality is partially offset by safety eyewear sales worldwide. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Approximately $7.0 million and $13.5 million of the Company's revenues for the quarter and six months ended June 30, 1998, respectively and $90.3 million of its total assets including intangible assets of $63.5 million as of June 30, 1998 were denominated in foreign currencies. Approximately $9.6 million of indebtedness at June 30, 1998 was denominated in French Francs bearing interest at variable rates based upon the French Franc LIBOR rate. The Company may from time to time enter into forward or option contracts to hedge the related foreign exchange risks. The Company does not enter into market risk sensitive transactions for trading or speculative purposes. PART II. OTHER INFORMATION ITEM 6. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K (A) EXHIBITS: The following exhibits are filed herewith or are incorporated by reference. 27 Financial Data Schedule (for electronic filing only). (B) REPORTS ON FORM 8-K:
REPORT ITEMS REPORTED DATE OF REPORT ------ -------------- -------------- 8-K Reported under Item 5, the closing of the June 1, 1998 Company's private placement of $7,000,000 of subordinated debt. Also reported under Item 5, the execution of a definitive agreement to acquire certain shares of common stock of Bill Bass Optical Pty. Ltd. and its affiliated entities (collectively, "Bolle Australia").
9 10 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. BOLLE INC. Date: August 12, 1998 By: /s/ Martin E. Franklin -------------------------------- Martin E. Franklin Chairman Date: August 12, 1998 By: /s/ Ian G.H. Ashken -------------------------------- Ian G.H. Ashken Chief Financial Officer 10 11 EXHIBIT INDEX The following Exhibits are filed herewith or incorporated by reference:
NUMBER EXHIBIT PAGE NO. ------ ------- -------- 27 Financial Data Schedule (for electronic Filed electronically herewith, at page 12. filing only).
EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1998 JAN-01-1998 JAN-01-1999 1,204 0 12,191 (965) 15,099 32,314 4,469 (1,581) 113,585 22,578 7,000 20,850 0 69 39,166 113,585 24,476 24,476 11,218 11,218 12,416 0 794 967 368 589 0 0 0 419 0.10 0.10
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