-----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, Q0oGyaRpQSjZpGou7SHbc+j4uZN3fI4YJWZ1RSBvVhBaE8lvV1dvVj56MyB4gQrk w16IgSgEsR/pUbXiuQW++Q== 0000950136-99-000702.txt : 19990517 0000950136-99-000702.hdr.sgml : 19990517 ACCESSION NUMBER: 0000950136-99-000702 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990331 FILED AS OF DATE: 19990514 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: 99624633 BUSINESS ADDRESS: STREET 1: 555 THEODORE FREMD AVE STREET 2: STE B 302 CITY: RYE STATE: NY ZIP: 10580 BUSINESS PHONE: 9149679475 MAIL ADDRESS: STREET 1: 555 THEODORE FREMD AVE STREET 2: STE B 302 CITY: RYE STATE: NY ZIP: 10580 10-Q 1 QUARTERLY REPORT 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 MARCH 31, 1999 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 - 6,895,329 Shares as of May 13, 1999 Page 1 of 10. Exhibit Index Appears at page 10. PART I. FINANCIAL INFORMATION ITEM 1. CONDENSED FINANCIAL STATEMENTS BOLLE INC. CONSOLIDATED BALANCE SHEETS (In thousands, except per share data)
March 31, December 31, 1999 1998 ---- ---- ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 1,879 $ 1,194 Trade receivables, net 13,530 15,238 Inventories 11,810 11,210 Investment held for resale 4,922 Other current assets 3,739 3,676 -------------- -------------- Total current assets 30,958 36,240 Property and equipment, net 5,006 5,129 Trademarks, net 31,369 34,208 Goodwill and other intangibles, net 5,355 5,245 Other assets 1,414 1,424 ============== ============== Total assets $74,102 $ 82,246 ============== ============== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Short term debt and current portion of long term debt $13,763 $ 18,955 Accounts payable 6,612 5,851 Accrued expenses 6,990 7,455 -------------- -------------- Total current liabilities 27,365 32,261 Long-term debt, net of current portion 2,962 3,407 Zero coupon convertible subordinated notes 7,000 7,000 Deferred tax liabilities 11,123 13,028 Other 3,693 3,063 -------------- -------------- Total liabilities 52,143 58,759 -------------- -------------- Minority interests 67 70 Mandatorily redeemable Series A Preferred Stock--redemption value $11,055; par value $0.01; 64 11,055 11,055 shares authorized, issued and outstanding Mandatorily redeemable Series B Preferred Stock plus accrued interest--redemption value $9,625; par value 9,859 9,669 $0.01; 10 shares authorized, issued and outstanding Stockholders' equity: Common stock - par value $.01; 20,000 shares authorized; 6,895 and 6,893 shares issued and outstanding 69 69 Additional paid-in capital 38,355 38,539 Cumulative translation adjustment (61) 1,731 Prior years' accumulated deficit (37,646) (37,646) Current year earnings 261 -------------- -------------- Total stockholders' equity 978 2,693 -------------- -------------- Total liabilities and stockholders' equity $ 74,102 $ 82,246 ============== ==============
2 See accompanying notes to financial statements. BOLLE INC. CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share data) (Unaudited) For three months ended March 31, -------------------------- 1999 1998 ----------- ----------- REVENUES Net sales $ 14,664 $ 10,728 COSTS AND EXPENSES Cost of sales 6,778 5,288 Sales and marketing expenses 3,283 2,389 General and administrative expenses 3,807 2,348 Depreciation and amortization 600 693 Interest expense 451 484 Other income (677) (515) ----------- ----------- Total costs and expenses 14,242 10,687 ----------- ----------- Income before taxes 422 41 Provision for income taxes 164 16 Minority interests (3) ----------- ----------- Net income 261 25 Preferred dividends 192 29 ----------- ----------- Net income (loss) attributable to common stock $ 69 $ (4) =========== =========== Comprehensive income $ (1,024) $ (1,171) =========== =========== WEIGHTED AVERAGE SHARES OUTSTANDING Basic 6,894 6,150 Diluted 7,119 6,150 EARNINGS (LOSS) PER SHARE Basic $ 0.01 $(0.00) Diluted $ 0.01 $(0.00) 3 See accompanying notes to financial statements. BOLLE INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) For the three months ended March 31, --------------------------- 1999 1998 ----------- ------------ Net cash provided by operating activities $ 1,782 $ 2,018 ----------- ------------ Cash flows from investing activities: Non-compete agreement and intangible assets (25) (25) Capital expenditures (517) (78) Proceeds from sale of assets 4,928 ----------- ------------ Net cash used (provided) by investing activities 4,386 (103) ----------- ------------ Cash flows from financing activities: Payments on revolving credit line (2,250) (1,982) Payments on long term obligations (152) 102 Proceeds from short term debt 555 Payments on long term debt (3,105) Net proceeds from issuance of common stock 6 ----------- ------------ Net cash used by financing activities (4,946) (1,880) ----------- ------------ Effect of change in exchange rates on cash (536) (29) ----------- ------------ Net increase in cash and cash equivalents 686 6 Cash and cash equivalents at beginning of period 1,193 1,204 ----------- ------------ Cash and cash equivalents at end of period $ 1,879 $ 1,210 =========== ============ 4 See accompanying notes to financial statements. BOLLE INC. NOTES TO CONDENSED FINANCIAL STATEMENTS NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the three month periods ended March 31, 1999 and 1998 are not necessarily indicative of the results that may be expected for the year ending December 31, 1999. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1998. NOTE 2--SEGMENT INFORMATION The Company operates and manages its operation primarily based on geographic location. The Company has three reportable segments; North America, Europe and Australia. Each of the Company's segments sells Bolle branded sunglasses, goggles and safety and tactical eyewear. Products are manufactured by Bolle France in Oyonnax, France and through subcontractors. The Company's products are sold to outside distributors throughout the world and through its owned distributors in North America, Europe and Australia. The Company evaluates performance and allocates resources based on operating results of the reportable segments. The accounting policies for each segment is the same as described in the summary of significant accounting policies. Intersegment sales and transfers are recorded at cost. Information about the Company's reportable segments for the year ended March 31, 1999 is summarized in the following table. Three months ended March 31, 1999
Elimination North Australia of Consolidated America Europe & Hong Intersegment Total Kong Transactions ----------- ----------- ----------- --------------- ------------- Revenues from external $ 6,151 $ 6,290 $2,223 $ 14,664 customers Intersegment revenues 89 3,759 3 $ (3,851) Segment profit (loss) (87) 528 (19) 422 Segment assets 10,646 54,562 8,894 74,102
Three Months ended March 31, 1998 Elimination of North Intersegment Consolidated America Europe Transactions Total ----------- ----------- -------------------------------- Revenues from external $4,213 $6,515 $10,728 customers Intersegment revenues 1,315 $ (1,315) Segment profit (loss) 124 (83) 41 Segment assets 26,965 79,864 106,829
5 Net sales to unaffiliated customers are classified based on the location of the customers. Transfers between geographic areas are recorded at amounts generally above cost and in accordance with the rules and regulations of the respective governing tax authorities. Segment profit (loss) before income taxes consists of total net sales less operating expenses, interest, and other income. Identifiable assets of geographic areas are those assets used in the Company's operations in each area. For the three months ended March 31, 1999 and 1998, no single customer contributed more than 10% of the Company's net sales. 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 MARCH 31, 1999 COMPARED TO QUARTER ENDED MARCH 31, 1998 Net sales of $14.7 million for the quarter ended March 31, 1999 increased from $10.7 million for the comparable period in 1998. The results from prior year's quarterly period do not include the 1998 Australia acquisition; however, due to seasonality, Australia contributes less to sales during the first and second quarters. Including the results of Bolle Australia as if the acquisition had ocurred as of January 1, 1998, net sales increased 20% on a pro forma basis. The sales increase reflects more successful sales efforts and increased demand for Bolle(R) branded products. Gross profit of $7.9 million or 54% for the quarter ended March 31, 1999 increased from $5.4 million or 51% for the quarter ended March 31, 1998. This increase in gross margin reflects a higher mix of distributor sales and improved manufacturing margins this year. Sales and marketing expenses for the quarters ended March 31, 1999 and 1998 were $3.3 million and $2.4 million, respectively. General and administrative expenses of $3.8 million for the quarter ended March 31, 1999 increased from $2.3 million for the quarter ended March 31, 1998. Such expenses represent a decrease from the last two quarters of 1998 as a result of cost savings achieved. Interest expense of $.5 million for the quarters ended March 31, 1999 and 1998 reflects interest primarily on the Company's bank indebtedness. The Company's average borrowing interest rates have not changed significantly on a year-on-year basis. For the quarter ended March 31, 1999, other income consists primarily of foreign exchange gains realized as the French Franc exchange rate increased significantly against the U.S. Dollar during the quarter and continues to be quite volatile. For the quarter ended March 31, 1998, other income consisted primarily of equity income from the company's investment in Eyecare Products, plc., which was sold during the first quarter of this year. The company's effective tax rate for the first quarter of 1999 was 39% and the provision for income taxes consists of foreign taxes only. For the first quarter of 1998, the effective tax rate was also 39%. 6 LIQUIDITY AND CAPITAL RESOURCES Net cash provided by operations of $1.8 million represents net income in addition to decreases in accounts receivable and offset by increases in inventory. Depreciation and amortization for the three months ended March 31, 1999 was $600,000 compared to $693,000 for three months ended March 31, 1998, reflecting the acquisitions of Bolle Australia offset by the write-down of certain intangible assets in the fourth quarter of 1998. Proceeds from the sale of assets of $4.9 million consisted primarily of the proceeds from the sale of the company's investment in Eyecare Products, plc. Such proceeds were used to pay down $3.0 million of the short term portion of the outstanding term loan and a portion of the revolver of the Credit Agreement. Capital expenditures of $517,000 represent an increase of $439,000 from the same period of 1998. Management believes that the Credit Agreement along with cash from operations will be sufficient to fund the Company's cash operating and investing activities for the foreseeable future. IMPORTANT FACTORS RELATING TO FORWARD LOOKING STATEMENTS Statements contained herein that relate to the Company's future performance, including, without limitation, statements with respect to the Company's anticipated results for any portion of 1999, shall be deemed forward looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. A number of factors affecting the Company's business and operations could cause actual results to differ materially from those contemplated by the forward looking statements. Those factors include, but are not limited to, demand and competition for the Company's products, changes in consumer preferences on fashion trends, delays in anticipated store openings, and changes in the Company's relationship with its suppliers and other resources. The forward looking statements contained in this Quarterly Report on Form 10-Q were prepared by management and have not been audited by, examined by, compiled by or subject to agreed-upon procedures by independent accountants, and no third party has independently verified or reviewed such statements. Readers of this Quarterly Report on Form 10-Q should consider these facts in evaluating the information and are cautioned not to place undue reliance on the forward-looking statements contained herein. OTHER MATTERS The Company utilizes software and related technologies throughout its businesses that may 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. Specifically, critical information systems throughout the Company are Year 2000 compliant. No extra costs were incurred in obtaining this compliance. Bolle France is in the process of implementing its first integrated manufacturing software for which implementation is not yet complete. The system being implemented in France is Year 2000 compliant, and the Year 2000 issues will not affect the current processes in place. Through discussions with vendors and customers, the Company has determined that no critical business areas will be adversely affected by Year 2000 issues, but continues to work with its vendors and customers to ensure a smooth transition. Based on the above, no contingency plan is considered necessary and management believes that any costs and risks 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 fourth quarter having the highest sales due to the increased demand for goggles prior to the ski season. This seasonality is partially offset by safety eyewear sales and Australian sales of all Bolle(R) products. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Approximately $8.8 million of the Company's revenues for the quarter ended March 31, 1999 and $65.1 million of its total assets including trademarks, goodwill and other intangibles totaling $35.9 million as of March 31, 1999 were 7 denominated in foreign currencies. Approximately $8.1 million of indebtedness at March 31, 1999 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. The Company's earnings are affected by changes in short-term interest rates on its bank indebtedness. If market interest rates used for determining the interest rate under the facility averaged 2% more during the first quarter of 1999, the Company's interest expense, would have increased by approximately $422,000. These amounts are determined by considering the impact of the hypothetical interest rates on the Company's borrowing cost. These analyses do not consider the effects of the reduced level of overall economic activity that could exist in such an environment. Further, in the event of a change of such magnitude, management would likely take actions to further mitigate its exposure to the change. However, due to the uncertainty of the specific actions that would be taken and their possible effects, the sensitivity analysis assumes no changes in the Company's financial structure. The Company's earnings are affected by fluctuations in the value of the U.S. Dollar as compared to foreign currencies, predominately the French Franc, as a result of intercompany borrowings and French Franc borrowings under the Company's credit facility. At March 31, 1999, the result of a uniform 10% strengthening in the value of the dollar relative to the French Franc would have resulted in a decrease in gross profit of approximately $359,000 for the quarter ended March 31, 1999. In addition to the direct effects of changes in exchange rates, which are a changed dollar value of the resulting sales, changes in exchange rates also affect the volume of sales or the foreign currency sales price as competitors' products become more or less attractive. The Company's sensitivity analysis of the effects of changes in foreign currency exchange rates does not factor in a potential change in sales levels or local currency prices. 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) No current reports on Form 8-K were filed during the quarter for which this Form 10-Q is filed. 8 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 on the 13th day of May, 1999. BOLLE INC. By: /s/ Gary A. Kiedaisch ------------------------------- Gary A. Kiedaisch Chief Executive Officer /s/ Thomas Reed ------------------------------- Thomas Reed Chief Financial Officer 9 EXHIBIT INDEX The following Exhibits are filed herewith or incorporated by reference: NUMBER EXHIBIT PAGE NO. ------ ------- -------- 27 Financial Data Schedule (for Filed electronically herewith, electronic filing only). at page 12. 10 EX-27 2 FINANCIAL DATA SCHEDULE
5 0001049588 BOLLE INC 1,000 USD 3-MOS DEC-31-1999 MAR-31-1999 1 1,879 0 14,552 1,022 11,810 30,958 7,231 2,225 74,102 27,365 0 20,914 0 69 909 74,102 14,664 0 6,778 13,791 0 0 451 422 164 261 0 0 0 261 .01 0
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