10-K 1 10-K ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) Annual Report Pursuant to Section 13 or 15(d) of The X Securities Exchange Act of 1934 (Fee Required) -------- For the fiscal year ended January 1, 1995 Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 (No Fee Required) -------- For the transition period from _____ to _____ Commission File Number 1-6832 BIC CORPORATION (Exact name of registrant as specified in its charter) New York 06-0735597 (State or other jurisdiction (I.R.S. Employer Identification No.) of incorporation or organization) 500 BIC Drive, Milford, Connecticut 06460 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 783-2000 ----------------------------------------------------------------------- Securities registered pursuant to Section 12(b) of the Act: Name of each exchange Title of each class on which registered ----------------------- ------------------------- Common shares, New York Stock Exchange $1.00 par value Securities registered pursuant to Section 12(g) of the Act: None 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 by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K X . ------- At February 22, 1995, there were 23,559,244 common shares of the registrant outstanding, and the aggregate market value of the common shares held by non-affiliates of the registrant was $166,939,192. Documents Incorporated by Reference: Registrant incorporates by reference in Part III of this Annual Report the definitive proxy statement to be issued in connection with the 1995 Annual Meeting of Shareholders. BIC CORPORATION AND SUBSIDIARIES -------------------------------- PART I ------ Item 1 - Business ----------------- The term "Corporation" refers to BIC Corporation, a New York corporation which was incorporated in 1958, and its subsidiaries, unless the context indicates otherwise. The Corporation's primary focus is the manufacture and sale of high-quality, low-cost consumer products. These products include stationery products, lighters and shavers. The Corporation also distributes sailboards which are purchased from a foreign affiliate. While most of the Corporation's operations are conducted in the United States, operations are also conducted at other locations in North and Central America. Societe BIC, S.A. is the Corporation's majority shareholder. The following table sets forth the net sales and income (loss) before income taxes and cumulative effect of changes in accounting principles for each of the Corporation's principal products for the periods indicated: (In millions) 1994 1993 1992 ------------- ---- ---- ---- Net Sales --------- Stationery Products $256.8 $233.3 $216.2 Lighters 108.9 102.3 101.0 Shavers 105.4 98.6 94.6 Sport 4.0 5.1 5.6 ------ ------ ------ $475.1 $439.3 $417.4 ====== ====== ====== Income (Loss) Before Income Taxes and Cumulative Effect of Changes in Accounting Principles ------------------------------------- Stationery Products $ 46.9 $ 37.2 $ 34.4 Lighters 11.4 11.4 8.5 Shavers 29.8 23.8 24.2 Sport (0.9) 1.6 .2 ------ ------ ------ $ 87.2 $ 74.0 $ 67.3 ====== ====== ====== Products -------- The principal products of the Corporation are as follows: Stationery Products ------------------- The Corporation is the largest manufacturer and distributor of ball pen writing instruments in North America. These pens, which are marketed under trademarks owned by the Corporation, are available in both nonretractable, nonrefillable models and retractable, refillable models. The pens are available in various ink and barrel colors and point sizes. In addition to ball pens, the Corporation manufactures highlighting markers, roller pens and correction fluids and distributes mechanical pencils. Based on market research studies and other public information, the number of ball pens sold by the Corporation in 1994 represents approximately 40% of the office products market in the United States. In the over-the-counter market, the Corporation holds the number one position in ball pens, roller pens and mechanical pencils. Stationery Products (Continued) ------------------------------- In 1992, the Corporation acquired Wite-Out Products, Inc., the second largest manufacturer of correction fluid in the United States. During the fourth quarter of 1993, the Corporation introduced four performance-based correction fluids formulated to meet the specific needs of individual consumers: For Everything(R) Quick Dry, For Everything Extra Coverage, For Everything Super Smooth and Water Base. This line contains no chemicals known to deplete the ozone layer. The new Wite-Out line was enthusiastically received by the trade in 1994 and will continue to be supported with special consumer and trade promotions during 1995. During 1994, the Corporation successfully increased its sales and distribution of Soft Feel(R) pens. In the fourth quarter of 1994, the Corporation introduced two new Soft Feel pens, Soft Feel Clear and Soft Feel Fashion; and a new Citation(R) pen, a retractable, refillable pen with chrome trim. In BIC Wavelengths(R), a line of fashion pens and mechanical pencils featuring a variety of colorful designs, images and ink colors, several new designs were introduced. These designs include Play Sports(TM), pens with sports illustrations; Polar Blast(TM), retractable pens with frosty-clear barrels and Old World(TM), retractable pens with classic Old World map drawings. Lighters -------- The Corporation is the leading manufacturer and distributor of disposable lighters in North America. Based on market research studies and other public information, BIC lighters continue to maintain their market leadership position despite the importation of low-quality, inexpensive lighters from the Far East. During 1992, the Corporation introduced to the market its BIC Lighter with Child Guard(R). This model, now in its second version, makes it even more difficult for children to light and exceeds the United States Consumer Product Safety Commission standard that went into effect on July 12, 1994. During the second quarter of 1994, the Corporation introduced its latest design in its Limited Edition series, BIC Limited Edition Psychedelics. Like its predecessors (Marbles, Sports, Country Western, etc.), the Psychedelics line is designed to appeal to adult consumers' interest in unique and distinctive new lighter designs. Shavers ------- The Corporation continues to share the number one position in the one-piece shaver market, which consists of over 1.2 billion units annually. One-piece shavers, the only type sold by the Corporation, account for well over 50% of the total wet-shave market. These statistics are based on market research studies and other public information. During 1994, the Corporation continued to expand sales and distribution of its line of BIC twin blade shavers which features precise twin blade orientation for different skin types, a slimmer shaver head, a long, tapered handle and a reusable guard. Sport ----- The principal sport product distributed by the Corporation is the BIC Sailboard. These sailboards are purchased from a foreign affiliate. Sales/Marketing --------------- The Corporation's principal products are sold through the Corporation's sales force and manufacturer representative groups to approximately 18,000 accounts, which include food, drug, wholesale club, superstore, variety and retail outlets, as well as tobacco, drug and stationery wholesalers, who in turn distribute the products to retail outlets. Sales to commercial customers are generated both by the Corporation's own sales force and by selected manufacturer representative groups who sell to office supply distributors and retailers. Stationery products, lighters and shavers carrying the purchaser's name, trademark, corporate symbol or other imprint are sold to customers for advertising specialty or premium purposes by the Corporation's Special Markets Division. The Corporation relies upon advertising on national television networks, in national publications with broad circulation and in publications for specialized audiences. The Corporation also maintains a cooperative advertising program pursuant to which it shares the cost of certain advertising with retailers. In addition, the Corporation provides a wide variety of product displays, sales promotion materials and other advertising and merchandising aids to retail outlets. During 1994, BIC launched the first multiproduct television campaign in the Corporation's history. The campaign theme, "BIC. Worth Every Penny."(TM) collectively supports stationery products, lighters and shavers. This campaign features six BIC products: the BIC Classic Stic(R) pen, the BIC Wavelength(R) pen, BIC Lighter, BIC Shaver, BIC Twin Select(R) Normal Skin Shaver and BIC Twin Pastel(R) Shaver. International Operations ------------------------ The Corporation's international operations consist of the operations of its subsidiaries in Canada, Mexico, Guatemala and Puerto Rico. Sales by foreign subsidiaries were approximately 15% of consolidated net sales in 1994 and 1993, and 16% in 1992. International operations are subject to certain risks, including changes in currency exchange rates and imposition of foreign exchange controls. During 1994, the Corporation's Mexican subsidiary recorded a $9.5 million foreign currency translation loss as a separate component of shareholders' equity. This loss resulted from a devaluation of the Mexican peso of approximately 37%, as compared to the U.S. dollar in 1994. Competition ----------- Although the Corporation is the leading domestic manufacturer of ball pen writing instruments and disposable lighters, it is subject to intense competition in all areas of its business. Competitors include both smaller specialized firms and larger diversified companies, some of which have broader product lines and substantially greater financial resources than the Corporation. The Corporation's major competitor in stationery products is Gillette Company. Major competitors in lighters are Scripto Tokai Corporation, Swedish Match Corporation and importers of low-quality, inexpensive lighters from the Far East. In shavers, major competitors are Gillette Company and the Schick Division of Warner Lambert Company. Trademarks ---------- The Corporation owns a number of trademarks relating to its products which are the subject of intensive advertising and marketing programs. The principal registered trademarks, which the Corporation believes are important to its business, are BIC, (Logo of BIC), "Flick My BIC", (Logo of BIC Wavelength) and (Logo of BIC Wite-Out). Employee Relations ------------------ At January 1, 1995, the Corporation had approximately 2,600 employees, of whom approximately 560 were unionized personnel at the Corporation's facility in Milford, Connecticut. These unionized personnel are represented under a collective bargaining agreement which expires on November 29, 1997. The Corporation considers its employee relations to be good. Item 2 - Properties ------------------- At January 25, 1995, the Corporation owned and operated manufacturing plants in the United States, Mexico, Canada and Guatemala. Manufacturing areas, including related office and service areas of the Corporation, are as follows: Square Feet ------- Milford, Connecticut 800,000 Fountain Inn, South Carolina 157,000 Duncan, South Carolina 144,000 Gaffney, South Carolina 113,000 Clearwater, Florida 89,000 Cuautitlan, Mexico 151,000 Toronto, Ontario, Canada 81,000 Guatemala City, Guatemala 15,000 The Corporation leases sales offices and warehouse space at various other locations and owns or leases such machinery and equipment as is necessary for the operation of its business. In general, the machinery and plants are in good condition, adequately meet the Corporation's needs and operate at reasonable levels of production capacity. Item 3 - Legal Proceedings -------------------------- The Corporation has significant contingent liabilities with respect to pending litigation, claims and disputes, principally relating to its lighters, which arise in the ordinary course of its business. BIC has been named a Potentially Responsible Party at a superfund site. Refer to Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion. While the ultimate liability with respect to the above matters, including any additional liability not provided for, is not presently determinable, it is the opinion of management, after consultation with counsel to the Corporation, that any liabilities resulting therefrom will not have a material adverse effect on the Corporation's consolidated financial position or on its results of operations if such operations continue at the present level. In 1985, the United States District Court, Southern District of New York (the "District Court"), in connection with pending patent actions between BIC Sport U.S.A. Inc. and Windsurfing International, ruled that Windsurfing's sailboard patent was valid and was infringed by BIC boards. The patent in question expired in January 1987. Item 3 - Legal Proceedings (Continued) -------------------------------------- By decision dated April 8, 1991, the District Court awarded damages of lost profits to Windsurfing International based upon a market share theory. BIC appealed the decision and on August 4, 1993, the United States Court of Appeal for the Federal Circuit reversed the District Court's award based on lost profits and remanded the case to the District Court for a determination of damages based upon a reasonable royalty. On November 4, 1994, BIC and Windsurfing International entered into a settlement agreement whereby BIC paid $1.3 million to Windsurfing International in full and final settlement of this matter. In November 1992, a state court jury in Creek County, Oklahoma, in a 9 to 3 verdict, awarded $11 million in actual damages and $11 million in punitive damages against the Corporation in connection with a case involving a cigarette lighter. On May 3, 1994, the Court of Appeals of Oklahoma reduced the amount of punitive damages by $8 million. On May 23, 1994, BIC filed a petition for writ of certiorari with the Oklahoma Supreme Court and on July 13, 1994, the Oklahoma Supreme Court denied BIC's petition, thereby concluding this matter. This decision did not have a significant effect on the Corporation's consolidated financial position or on its results of operations. In May 1994, BIC filed a petition with the United States Department of Commerce ("DOC") and United States International Trade Commission for the imposition of antidumping duties against disposable lighters from Thailand and China. The petition charged that disposable lighters from Thailand and China are being "dumped" or sold in the United States at less than fair value. During October and December of 1994, the DOC ruled favorably on BIC's petition in preliminary decisions imposing antidumping duties on disposable lighters imported from Thailand and China, respectively. Final determinations are expected in 1995. Item 4 - Submission of Matters to a Vote of Security Holders ------------------------------------------------------------ No matters were submitted during the fourth quarter of fiscal year 1994 to a vote of security holders through solicitation of proxies or otherwise. PART II ------- Item 5 - Market for Registrant's Common Shares and Related Shareholder Matters ----------------------------------------------------------------- Set forth below is the range of sales prices of the Corporation's common shares on the New York Stock Exchange for each quarter during 1994 and 1993. 1994 1993 ---- ---- High Low High Low ---- --- ---- ---- First $31 7/8 $28 First $41 $30 7/8 Second 29 1/4 26 1/2 Second 33 7/8 26 Third 30 7/8 28 Third 31 3/8 27 Fourth 30 25 5/8 Fourth 33 5/8 27 The Corporation paid quarterly cash dividends which totaled $0.80 in 1994 and $0.72 in 1993. During the first quarter of 1995, the Board of Directors voted an increase in the regular quarterly dividend from $0.20 per share to $0.23 per share, effective with the dividend paid on February 1, 1995, to shareholders of record on January 18, 1995. In 1993, the Corporation amended its Certificate of Incorporation to increase the number of authorized common shares, $1 par value, from 25,000,000 to 50,000,000. Item 5 - Market for Registrant's Common Shares and Related Shareholder Matters (Continued) ----------------------------------------------------------------- As of January 25, 1995, there were approximately 1,400 shareholders of record of the Corporation's Common Shares. Item 6 - Selected Financial Data -------------------------------- The following selected consolidated financial data for the five fiscal years ended January 1, 1995, insofar as it relates to the 1994, 1993 and 1992 fiscal years, should be read in conjunction with the Corporation's consolidated financial statements included herein. FISCAL YEAR ----------- (In thousands, except for per share data) 1994 1993 1992 1991 1990 ---------------- ---- ---- ---- ---- ---- Net sales $475,118 $439,311 $417,377 $369,171 $329,246 Income before income taxes, extraordinary credit and cumulative effect of changes in accounting principles 87,207 73,986 67,278 46,616 41,067 Net income 51,021 34,964 39,935 28,059 24,055 Total assets 358,687 336,216 308,466 280,205 257,107 Per share: (1) Income before extraordinary credit and cumulative effect of changes in accounting principles $2.19 $1.90 $1.70 $1.12 $0.92 Net income 2.17 1.48 1.70 1.16 0.99 Cash dividends 0.80 0.72 1.06 0.56 1.06 ______________________________ (1) Per share amounts have been retroactively restated to reflect the 1992 share split effected in the form of a 100% share dividend. Cash dividends per share represent the total dividends paid each year. The 1992 and 1990 dividends included a special cash dividend of $0.50 per share. Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations ----------------------------------------------------------------- Liquidity and Capital Resources ------------------------------- The cash required by the Corporation for working capital, capital expenditures and dividend payments was generated primarily from operations. The Corporation expects to continue to satisfy most of its cash requirements through internally generated funds. The Corporation's current ratio was 2.24 in 1994 and 1.87 in 1993, reflecting the Corporation's highly liquid position and ability to finance its current operations without significant short-term borrowings. Trade and other receivables, net of allowance for doubtful accounts, were $62.9 million at January 1, 1995, as compared with $52.0 million at January 2, 1994. The increase is primarily due to a 16.7% increase in net sales for the fourth quarter of 1994, as compared to the same period in the prior year. As reflected in the Consolidated Balance Sheets, inventories decreased by $5.1 million in 1994. This decrease was largely attributable to a reduction in the inventory valuation of the Corporation's Mexican subsidiary due to the translation effect of the peso devaluation. Average inventory turnover was 4.3 times in 1994 and 4.0 times in 1993. Liquidity and Capital Resources (Continued) ------------------------------------------- At January 1, 1995, the Corporation had no bank borrowings, while at January 2, 1994, bank borrowings totaled $6.7 million. The 1993 bank borrowings primarily reflected borrowings by the Corporation's United States operations. Information concerning the Corporation's bank borrowings is contained in Note 5 of Notes to Consolidated Financial Statements. As reflected in the Consolidated Statements of Cash Flows, accounts payable and accrued expenses increased by $9.0 million in 1994 and decreased by $2.8 million in 1993. The 1994 increase is largely due to an increase in accrued advertising and promotion costs and accrued income taxes, in the United States. The increase also includes an increase in the Corporation's Mexican subsidiary's accounts payable balance. The 1993 decrease was primarily due to the timing of income tax payments by the Corporation's Canadian subsidiary. Capital spending decreased in 1994 and 1993. Purchases of property, plant and equipment were $21.7 million in 1994 and $41.2 million in 1993. Capital spending in 1994 included purchases of machinery and equipment for the new child-resistant lighter manufacturing process, a new ink dye manufacturing process in stationery products (the Corporation previously purchased ink dye from Societe BIC S.A., the Corporation's majority shareholder). 1994 spending was also for capacity, productivity and product quality improvements in stationery products, and productivity increases and improvements in shavers. Spending in 1993 included purchases of machinery and equipment for productivity increases and quality improvements in stationery products and lighters; capacity increases in stationery products and new stationery products; expansions of the Duncan, South Carolina; Fountain Inn, South Carolina; Clearwater, Florida and Cuautitlan, Mexico facilities and building improvements for the Gaffney, South Carolina facility. In July 1993, the U.S. Environmental Protection Agency ("EPA") issued its final volumetric ranking of Potentially Responsible Parties ("PRPs") for the Solvents Recovery Service of New England ("SRSNE") Superfund Site in Southington, Connecticut. The Corporation has been notified that it is a PRP at the Site and has been ranked, by the EPA, number 192 of a total of 1,659 PRPs. This ranking represents less than 1% of the total volume of waste disposed at the SRSNE Site, with the first 191 PRPs representing 90% of the total volume. The Corporation cannot predict with certainty the total costs of cleanup, the Corporation's share of the total costs, the extent to which contributions will be available from other parties, the amount of time necessary to complete the cleanup, or the availability of insurance coverage. Based on currently available information, the Corporation believes that its share of the ultimate cleanup costs at this Site will not have a material adverse impact on the Corporation's financial position or on its results of operations, if such operations continue at the present level. At January 1, 1995 and January 2, 1994, the Corporation carried no long-term debt. At January 1, 1995, unused lines of credit were $113.0 million and standby letters of credit were $29.6 million, which management believes is more than adequate to meet the Corporation's current or future requirements if operations continue at the present level. In January 1994, the Corporation concluded negotiations with its unionized employees, local utilities and local taxing authorities. Concessions received through these negotiations will result in a modest, but important, reduction in future operating costs at its Milford, Connecticut facility. In addition, the Corporation has accepted from the State of Connecticut a $9 million grant and financing package to offset capital spending for its Milford, Connecticut facility. Liquidity and Capital Resources (Continued) ------------------------------------------- Consistent with common practice, the Corporation self-insures to a degree against certain types of risk. The Corporation also has in place risk management programs other than insurance to minimize exposure to loss. The programs remained relatively unchanged from the prior year. Management believes its overall risk management and insurance programs are adequate to protect its assets and earnings against significant loss, provided that its results of operations continue at the present level. Results of Operations --------------------- In 1994, the Corporation's net sales increased by $35.8 million to $475.1 million due to increased sales of stationery products of $23.5 million, lighters of $6.6 million and shavers of $6.8 million, partially offset by a decline in sport products of $1.1 million. The increase in stationery products reflects an increase in the number of units sold and higher average selling prices of approximately 5% by its North American operations. The Corporation's Special Markets Division made significant contributions to these improvements. The improvement in lighters primarily represents an increase in units sold and higher average selling prices for the BIC fixed flame lighter in the United States. The shaver improvement is attributable to an increase in the number of BIC twin blade shaver units sold and higher average selling prices. In 1993, the Corporation's net sales increased by $21.9 million to $439.3 million due to increased sales of stationery products of $17.1 million, lighters of $1.3 million and shavers of $4.0 million, partially offset by a decline in sport products of $0.5 million. The increase in stationery products primarily represented an increase in average selling prices of approximately 9% by its North American operations. The increase in lighters primarily reflected an increase in units sold of approximately 3% by its United States operations. The shaver increase was attributable to higher average selling prices of approximately 10% in North America. This shaver increase was partially offset by a slight decline in units sold. Net sales of sport products decreased by $1.1 million in 1994 and by $0.5 million in 1993. These reductions primarily reflect decreases in the number of units sold. Income (loss) before income taxes and cumulative effect of changes in accounting principles for sport products was $(0.9) million in 1994 and $1.6 million in 1993. The $2.5 million decrease in income is primarily due to adjustments in the provision related to sailboard litigation. Foreign sales increased by approximately 4% in 1994, while remaining relatively flat in 1993. The increase in 1994 is primarily due to improvements in sales by the Corporation's Canadian subsidiary, and also to increased export sales by the United States operations. The Corporation's other foreign operations also contributed to the sales improvements. The Corporation's purchases from Societe BIC, S.A., the Corporation's majority shareholder, and from other affiliated companies were $41.1 million in 1994 and $42.2 million in 1993. The Corporation purchases from Societe BIC, S.A. and other affiliated companies, products that it does not presently manufacture, certain component parts and machinery and equipment. Information concerning the Corporation's transactions and balances with Societe BIC, S.A. and other related parties is contained in Note 13 of Notes to Consolidated Financial Statements. Results of Operations (Continued) --------------------------------- Gross profit as a percentage of net sales increased by 2.7 percentage points in 1994 and 0.4 percentage points in 1993. The 1994 increase primarily reflects improvements in the United States and Mexican operations. In the United States, higher average selling prices in each of the Corporation's core operations (stationery products, lighters and shavers) contributed to the gross profit increase. Lower unit costs in stationery products and shavers also contributed to this increase. These improvements were partially offset by slightly higher unit costs in lighters. The lower unit costs in stationery products were principally due to manufacturing efficiencies. In shavers, the reduction was the result of manufacturing efficiencies and favorable foreign exchange rates associated with imports. Higher unit costs in lighters were due to the conversion to BIC Lighter with Child Guard(R). The improvements in the Mexican operations were largely due to higher average selling prices and manufacturing efficiencies in stationery products. Advertising, selling, general and administrative, marketing and research and development expenses increased by $11.8 million to $145.5 million in 1994 and by $7.3 million to $133.7 million in 1993. The 1994 increase primarily reflects higher selling expenses, a 9% increase in marketing expenses and an increase in bad debt expense. The increase in selling expense is related to higher sales levels. The higher marketing costs are attributable to an increase in consumer promotions in the United States, and to the launch of the twin blade shaver in Mexico. The 1993 increase reflected higher selling expenses and an 18% increase in marketing expenses. These increases were partially offset by an 8% decrease in general and administrative expenses. The increase in selling expense was attributable to higher sales levels. The increase in marketing was related to the costs associated with the promotion of the Corporation's line of twin blade shavers. The decrease in general and administrative expenses reflected a decrease in the provision for general liability and workers' compensation insurance, relocation costs and bad debt expense. These decreases were partially offset by an increase in the amortization of intangibles associated with the purchase of Wite- Out Products, Inc. Other income - net decreased by $4.2 million in 1994 and increased by $2.1 million in 1993. The 1994 decrease is due to lower net foreign currency gains reported in 1994, and to a write down of certain obsolete manufacturing machinery which occurred in 1994. The 1993 increase was due to higher net foreign currency gains partially offset by lower interest income and higher interest expense in 1993. The effective tax rate has varied each year as follows: 40.8% in 1994, 39.5% in 1993 and 40.6% in 1992. Information concerning the Corporation's income tax expense is contained in Note 11 of Notes to Consolidated Financial Statements. Income before cumulative effect of changes in accounting principles increased by $6.9 million and by $4.8 million in 1994 and 1993, respectively. The 1994 increase primarily reflects improvements in stationery products and shavers in the United States. The Corporation's foreign operations also contributed to the 1994 profit increases. The 1993 increase was primarily due to improvements in core operations (stationery products, lighters and shavers) in the United States. In 1994, net income included a $0.6 million charge, representing the cumulative effect of a change in accounting principle which resulted from the adoption of Statement of Financial Accounting Standards ("SFAS") 112, "Employers' Accounting for Postemployment Benefits." Refer to New Accounting Standards below for further discussion. Results of Operations (Continued) --------------------------------- In 1993, net income included a $9.8 million charge, representing the cumulative effect of a change in accounting principle which resulted from the adoption of SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Refer to New Accounting Standards below for further discussion. New Accounting Standards ------------------------ Effective January 3, 1994, the Corporation adopted SFAS 112, "Employers' Accounting for Postemployment Benefits." This new standard requires that the cost of benefits provided to former or inactive employees be recognized on the accrual basis of accounting. Previously, the Corporation recognized postemployment benefits on a cash basis or at the date the event gave rise to the payment of these benefits. In accordance with the provisions of the Collective Bargaining Agreement between BIC Corporation and Local 134 United Rubber, Cork, Linoleum and Plastic Workers of America, the Corporation provides severance benefits to its unionized employees. The Corporation also provides medical and life insurance benefits to salaried employees receiving long-term disability benefits. The cumulative effect of adopting SFAS 112 was a one-time after-tax charge of $0.6 million, or $0.02 per share. The adoption of SFAS 112 had no effect on the Corporation's cash flow. Effective January 4, 1993, the Corporation adopted SFAS 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Corporation elected to recognize the cumulative effect of this obligation on the immediate recognition basis. The cumulative effect as of January 4, 1993 of adopting SFAS 106 was a one-time after tax charge of $9.8 million, or $0.42 per share. The adoption of SFAS 106 had no effect on the Corporation's cash flow. Effective January 4, 1993, the Corporation adopted SFAS 109, "Accounting for Income Taxes." Under SFAS 109, the deferred tax provision is determined under the asset/liability method. Under this method, deferred tax assets and liabilities are recognized based on differences between financial statement and tax bases of assets and liabilities using presently enacted tax rates. There was no material cumulative effect on the Corporation's financial position or on its results of operations by adopting SFAS 109. Item 8 - Financial Statements and Supplementary Data ---------------------------------------------------- The consolidated financial statements and supplementary data are set forth beginning on page 14 of this Annual Report. Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure ----------------------------------------------------------------- There were no changes in accountants, or disagreements with accountants on accounting principles or practices, or financial statement disclosure. PART III -------- Item 10 - Directors and Executive Officers of the Registrant* ------------------------------------------------------------- Item 11 - Executive Compensation* --------------------------------- Item 12 - Security Ownership of Certain Beneficial Owners and Management* ------------------------------------------------------------------ Item 13 - Certain Relationships and Related Transactions* --------------------------------------------------------- *Responses to Items 10 through 13 are omitted since the Corporation will, no later than 120 days after January 1, 1995, the close of its most recent fiscal year, file a definitive proxy statement pursuant to Regulation 14(a) of the General Rules and Regulations under the Securities Exchange Act of 1934. PART IV ------- Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K ------------------------------------------------------------------ (a) 1. Financial Statements: See the attached Index to Consolidated Financial Statements and Financial Statement Schedules. 2. Financial Statement Schedules: See the attached Index to Consolidated Financial Statements and Financial Statement Schedules. 3. Exhibits: 3. a. Restated Certificate of Incorporation, as filed May 5, 1993. (1) b. By-Laws, as amended. (2) 4. Instruments relating to long-term debt are not filed, but the Registrant agrees to file a copy of such instruments upon the request of the Securities and Exchange Commission. 9. a. Voting Trust Agreement, dated February 5, 1991, by and among Societe BIC, S.A., Marcel L. Bich, Neil A. Polio, Bruno Bich, Francois Bich and BIC Corporation, as amended February 3, 1992, for the purpose of naming Alexander Alexiades as successor voting trustee. (3) b. Amendment to Voting Trust Agreement, dated July 5, 1993. (1) 10. a. Selected Executive Retirement Plan, as amended. (1) b. Agreement, dated July 1, 1971, including amendments, between Societe BIC, S.A. and BIC Pen Corporation. (3) 21. Subsidiaries of the Registrant. 23. Consent of Independent Auditors. _________________________ (1) Incorporated by reference to the Corporation's Annual Report on Form 10-K for its fiscal year ended January 2, 1994. (2) Incorporated by reference to the Corporation's Annual Report on Form 10-K for its fiscal year ended January 3, 1993. (3) Incorporated by reference to the Corporation's Annual Report on Form 10-K for its fiscal year ended December 30, 1990. Shareholders may obtain a copy of any exhibit not contained herein by writing to the Secretary, BIC Corporation, 500 BIC Drive, Milford, CT 06460. A charge of 50 cents per page to cover the cost of copying and handling will be imposed. (b) No reports on Form 8-K were filed by the Corporation during the last quarter of its fiscal year ended January 1, 1995. SIGNATURES ---------- Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. BIC CORPORATION By: BRUNO BICH Bruno Bich, Chairman and Chief Executive Officer Date: March 9, 1995 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. SIGNATURE AND TITLE DATE ------------------- ---- BRUNO BICH March 9, 1995 ---------------------------------------- (Bruno Bich) Chairman and Chief Executive Officer and Director (Chief Executive Officer) RAYMOND WINTER March 9, 1995 ----------------------------------------- (Raymond Winter) President and Chief Operating Officer and Director (Chief Operating Officer) ROBERT L. MACDONALD March 9, 1995 ----------------------------------------- (Robert L. Macdonald) Vice President-Finance and Treasurer (Principal Financial and Accounting Officer) ALEXANDER ALEXIADES March 9, 1995 ----------------------------------------- (Alexander Alexiades) Director ROBERT E. ALLEN March 9, 1995 ----------------------------------------- (Robert E. Allen) Director DAVID W. HELENIAK March 9, 1995 ----------------------------------------- (David W. Heleniak) Director ANTOINE G. TREUILLE March 9, 1995 ----------------------------------------- (Antoine G. Treuille) Director BIC CORPORATION AND SUBSIDIARIES -------------------------------- INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES ------------------------------------------ PAGE Report of Independent Auditors 15 Consolidated Financial Statements: ---------------------------------- Consolidated Balance Sheets, January 1, 1995 and 16 January 2, 1994 Statements of Consolidated Income for the 1994, 17 1993 and 1992 Fiscal Years Statements of Consolidated Retained Earnings for 17 the 1994, 1993 and 1992 Fiscal Years Statements of Consolidated Cash Flows for the 18 1994, 1993 and 1992 Fiscal Years Notes to Consolidated Financial Statements 19 Consolidated Financial Statement Schedule for the Years Ended January 1, 1995, January 2, 1994 and January 3, 1993: ------------------------------------------------ II - Consolidated Valuation Accounts 32 All other financial statement schedules have been omitted because the conditions requiring the filing thereof do not exist or because the required information is shown in the consolidated financial statements or notes thereto. (LOGO OF DELOITTE & TOUCHE) REPORT OF INDEPENDENT AUDITORS To the Shareholders of BIC Corporation: We have audited the accompanying consolidated financial statements and related financial statement schedule of BIC Corporation and its subsidiaries (the "Corporation") listed in the preceding Index to Consolidated Financial Statements and Financial Statement Schedule of the Annual Report on Form 10-K of the Corporation for the year ended January 1, 1995. These consolidated financial statements and financial statement schedule are the responsibility of the Corporation's management. Our responsibility is to express an opinion on the consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of BIC Corporation and its subsidiaries at January 1, 1995 and January 2, 1994 and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended January 1, 1995 in conformity with generally accepted accounting principles. Also, in our opinion, such consolidated financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects, the information set forth therein. As described in Note 1 to the consolidated financial statements, the Corporation changed its method of accounting for postemployment benefits in 1994 and for postretirement benefits other than pensions in 1993. DELOITTE & TOUCHE LLP New Haven, Connecticut January 27, 1995 BIC CORPORATION AND SUBSIDIARIES -------------------------------- CONSOLIDATED BALANCE SHEETS JANUARY 1, 1995 and JANUARY 2, 1994 ----------------------------------- (Dollars in thousands, except January 1, January 2, for share data) 1995 1994 ----------------------------- ---------- ---------- ASSETS: ------- Current Assets: --------------- Cash and Cash Equivalents $ 48,091 $ 24,094 Receivables - Trade and Other (Net of Allowance for Doubtful Accounts 1994 - $4,530 and 1993 - $4,084) 62,867 52,019 Inventories 54,363 59,426 Deferred Income Taxes 18,549 16,809 Other 10,575 13,637 -------- -------- Total Current Assets 194,445 165,985 Property, Plant and Equipment - Net 132,553 140,317 Other Assets 31,689 29,914 -------- -------- Total $358,687 $336,216 ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY: ------------------------------------- Current Liabilities: -------------------- Bank Borrowings $ 6,731 Accounts Payable - Trade and Other $ 18,915 21,179 Accrued Expenses: ----------------- Federal and State Income Taxes 8,526 8,085 Insurance 23,261 22,739 Payroll and Payroll Taxes 7,200 6,108 Other 28,727 23,911 -------- -------- Total Current Liabilities 86,629 88,753 -------- -------- Noncurrent Liabilities: ----------------------- Postretirement Benefits Other Than Pensions 19,882 17,854 Other 4,259 2,921 -------- -------- Total Noncurrent Liabilities 24,141 20,775 -------- -------- Contingencies and Commitments (See Note 12) ------------------------------------------- Shareholders' Equity: --------------------- Preferred Shares ($1 Par Value; Authorized - 1,000,000; No Shares Issued or Outstanding) Common Shares ($1 Par Value; Authorized - 50,000,000; Outstanding - 23,559,244) 23,559 23,559 Retained Earnings 238,076 205,902 Foreign Currency Translation Adjustment (13,718) (2,773) -------- -------- Total Shareholders' Equity 247,917 226,688 -------- -------- Total $358,687 $336,216 ======== ======== See Notes to Consolidated Financial Statements. BIC CORPORATION AND SUBSIDIARIES -------------------------------- STATEMENTS OF CONSOLIDATED INCOME FOR THE 1994, 1993 AND 1992 FISCAL YEARS ---------------------------------------- (In thousands, except for per share data) 1994 1993 1992 ----------------------------------------- ---- ---- ---- Net Sales $475,118 $439,311 $417,377 Cost of Goods Sold 242,457 235,820 225,806 -------- -------- -------- Gross Profit 232,661 203,491 191,571 Advertising, Selling, General and Administrative, Marketing and Research and Development Expenses 145,495 133,732 126,445 -------- -------- -------- Income from Operations 87,166 69,759 65,126 Other Income - Net 41 4,227 2,152 -------- -------- -------- Income Before Income Taxes and Cumulative Effect of Changes in Accounting Principles 87,207 73,986 67,278 Provision for Income Taxes 35,563 29,206 27,343 -------- -------- -------- Income Before Cumulative Effect of Changes in Accounting Principles 51,644 44,780 39,935 Cumulative Effect of Changes in Accounting Principles for: ------------------------------- Postemployment Benefits, Net of Taxes of $410 (623) Postretirement Benefits Other Than Pensions, Net of Taxes of $6,384 (9,816) -------- -------- -------- Net Income $ 51,021 $ 34,964 $ 39,935 ======== ======== ======== Earnings Per Common Share: Income Before Cumulative Effect of Changes in Accounting Principles $2.19 $1.90 $1.70 Cumulative Effect of Changes in Accounting Principles (0.02) (0.42) -------- -------- -------- Net Income $2.17 $1.48 $1.70 ======== ======== ======== STATEMENTS OF CONSOLIDATED RETAINED EARNINGS FOR THE 1994, 1993 AND 1992 FISCAL YEARS -------------------------------------------- (In thousands) 1994 1993 1992 -------------- ---- ---- ---- Balance - Beginning of Year $205,902 $187,900 $183,416 Net Income 51,021 34,964 39,935 Dividends - Cash (18,847) (16,962) (24,973) - Common Share Split Effected in the Form of a 100% Share Dividend (10,478) -------- -------- -------- Balance - End of Year $238,076 $205,902 $187,900 ======== ======== ======== See Notes to Consolidated Financial Statements. BIC CORPORATION AND SUBSIDIARIES -------------------------------- STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE 1994, 1993 AND 1992 FISCAL YEARS ---------------------------------------- (In thousands) 1994 1993 1992 -------------- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: ------------------------------------- Net Income $51,021 $34,964 $39,935 Adjustments to Reconcile Net Income to Net Cash Provided by Operating Activities: ----------------------------------- Depreciation and Amortization 23,801 20,881 15,703 Provision for Losses on Receivables - Trade and Other 1,467 85 2,286 Effects of Foreign Currency Transactions (208) 753 (264) Deferred Income Taxes (2,680) (1,177) 369 Cumulative Effect of Changes in Accounting Principles 623 9,816 Other 2,771 2,063 (354) Changes in Operating Assets and Liabilities: -------------------------------------------- (Increase) in Receivables - Trade and Other (15,474) (1,915) (4,308) (Increase) Decrease in Inventories 1,538 (1,266) (10,945) (Increase) Decrease in Other Assets 2,566 (778) (477) Increase (Decrease) in Accounts Payable and Accrued Expenses 9,017 (2,790) 5,520 -------- -------- -------- Net Cash Provided by Operating Activities 74,442 60,636 47,465 -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: ------------------------------------- Purchases of Property, Plant and Equipment (21,674) (41,181) (44,908) Proceeds from Sale of Property, Plant and Equipment 1,248 672 965 Purchases of Trademarks and Patents (841) (724) (775) Purchase of Investment (2,000) Purchase of Wite-Out Products, Inc., Net of Cash Acquired (19,307) Deferred Charges, Deposits and Other 60 (2,114) (1,834) -------- -------- -------- Net Cash Used in Investing Activities (23,207) (43,347) (65,859) -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: ------------------------------------- Net Increase (Decrease) in Bank Borrowings (6,716) (878) 7,687 Dividends Paid (18,847) (16,962) (24,973) -------- -------- -------- Net Cash Used in Financing Activities (25,563) (17,840) (17,286) -------- -------- -------- Effect of Exchange Rate Changes on Cash (1,675) (589) (627) -------- -------- -------- Increase (Decrease) in Cash and Cash Equivalents 23,997 (1,140) (36,307) Cash and Cash Equivalents, Beginning of Year 24,094 25,234 61,541 -------- -------- -------- Cash and Cash Equivalents, End of Year $48,091 $24,094 $25,234 ======== ======== ======== SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: -------------------------------------------------- Cash Paid during the Year for: ------------------------------ Interest $ 907 $ 635 $ 443 ======== ======== ======== Income Taxes $35,678 $34,245 $26,339 ======== ======== ======== SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING ACTIVITIES: ------------------------------------------------------- In 1992, the Corporation purchased all the capital stock of Wite-Out Products, Inc. for $19,848. Fair Value of Assets Acquired $20,875 Cash Paid (19,848) -------- Liabilities Assumed $ 1,027 ======== See Notes to Consolidated Financial Statements. BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ------------------------------------------ 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: ------------------------------------------------ A summary of significant accounting policies for BIC Corporation and its subsidiaries (the "Corporation"), manufacturers and distributors of high-quality, low-cost consumer products, is as follows: Consolidation ------------- The consolidated financial statements include the accounts of BIC Corporation and its subsidiaries. An investment in an affiliated company is accounted for on the equity method. All significant intercompany balances and transactions have been eliminated. Cash and Cash Equivalents ------------------------- The Corporation's cash management policy is to invest in highly liquid, short-term financial instruments. Cash equivalents consist of U.S. Government obligations, time deposits, overnight securities and other short-term, highly liquid securities with original maturities of three months or less. Inventories ----------- Inventories are valued at the lower of cost (determined on the first-in, first-out basis) or market. Property, Plant and Equipment ----------------------------- Property, plant and equipment is recorded at cost. Depreciation, principally on the declining balance method, is provided over the estimated useful lives of the assets as follows: Buildings and improvements 10-50 years Machinery and equipment 3-12 years Expenditures for maintenance and repairs are charged to operations as incurred. Expenditures for betterments and major renewals are capitalized. Costs of assets sold or retired and the related amounts of accumulated depreciation are eliminated from the accounts in the year of disposal and any resulting gains or losses are included in income. Intangibles ----------- Costs pertaining to goodwill and patents are amortized on the straight-line method over five to seventeen years. Trademarks are amortized over five to forty years. Accrued Expenses - Insurance ---------------------------- Accrued expenses - insurance represents the estimated costs of known and anticipated claims under the Corporation's product liability (principally relating to its lighters) and workers' compensation insurance policies. For each claim, the Corporation maintains self-insurance up to the estimated amount of the probable claim or the amount of the deductible, whichever is lower. At each financial reporting date, probable claim amounts, individually or in the aggregate, were not expected to materially exceed the deductible. Claims are generally settled within five years of origination. BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ Employee Benefit Plans ---------------------- Substantially all employees in the United States and Canada are covered by defined benefit pension plans. The plans are noncontributory and provide for pension benefits based on average pay and years of service to the Corporation. Funding for the pension plans is based on a review of the specific requirements and an evaluation of the assets and liabilities of each plan. The Corporation has a share purchase plan for substantially all full-time United States unionized employees who elect to participate and a 401(k) Savings and Investment Plan for unionized and non-unionized United States employees. The Corporation's Canadian subsidiary has a Group Registered Retirement Plan for its employees. Some plans provide that the Corporation match a portion of participant contributions. The Corporation provides certain postretirement medical and life insurance benefits for qualifying retired and active unionized and non-unionized employees in the United States. Most retirees outside the United States are covered by government sponsored and administered programs. Effective January 3, 1994, the Corporation adopted SFAS 112, "Employers' Accounting for Postemployment Benefits." This new standard requires that the cost of benefits provided to former or inactive employees be recognized on the accrual basis of accounting. Previously, the Corporation recognized postemployment benefits on a cash basis or at the date the event gave rise to the payment of these benefits. In accordance with the provisions of the Collective Bargaining Agreement between BIC Corporation and Local 134 United Rubber, Cork, Linoleum and Plastic Workers of America, the Corporation provides severance benefits to its unionized employees. The Corporation also provides medical and life insurance benefits to salaried employees receiving long-term disability benefits. The cumulative effect of adopting SFAS 112 was a one-time after-tax charge of $0.6 million, or $0.02 per share. Aside from the one-time effect of the cumulative adjustment, adoption of SFAS 112 was not material to the Corporation's 1994 consolidated results of operations. In 1993, the Corporation adopted Statement of Financial Accounting Standards ("SFAS") 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Corporation elected to recognize the cumulative effect of this obligation on the immediate recognition basis. The cumulative effect as of January 4, 1993 of adopting SFAS 106 was a one-time after-tax charge of $9.8 million, or $0.42 per share. Aside from the one- time effect of the cumulative adjustment, adoption of SFAS 106 was not material to the Corporation's 1994 and 1993 consolidated results of operations. Foreign Currency ---------------- Assets and liabilities of certain foreign subsidiaries, whose local currency is the functional currency, are translated at exchange rates in effect at the balance sheet date. Translation gains and losses are not included in the Statements of Consolidated Income, but are accumulated in a separate component of shareholders' equity. Gains and losses from foreign currency transactions are included in the Statements of Consolidated Income. BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ Foreign Currency (Continued) ---------------------------- The Corporation enters into forward exchange contracts denominated in foreign currencies providing protection from currency fluctuations affecting certain inventory and equipment purchase commitments denominated in foreign currencies. Gains and losses associated with these transactions are deferred and included in the determination of the cost of the assets acquired. Income Taxes ------------ Effective January 4, 1993, the Corporation adopted SFAS 109, "Accounting for Income Taxes." Under SFAS 109, the deferred tax provision is determined under the asset/liability method. Under this method, deferred tax assets and liabilities are recognized based on differences between financial statement and tax bases of assets and liabilities using presently enacted tax rates. There was no material effect on the Corporation's financial position or results of operations by adopting SFAS 109. The Corporation does not provide for Federal or state income taxes on the accumulated earnings and profits of its foreign subsidiaries, to the extent that the current intention of the Corporation is to allow its foreign subsidiaries to reinvest these earnings, or to the extent that any Federal or state taxes attributable to the repatriation of such earnings would be substantially offset by foreign tax credits. Earnings Per Common Share ------------------------- Earnings per common share are based on the weighted average number of shares outstanding in each year. The weighted average number of shares outstanding was 23,559,244 during 1994, 1993 and 1992. Fiscal Year ----------- The Corporation's fiscal year is the 52 or 53 weeks ending on the Sunday closest to December 31. Reclassifications ----------------- The consolidated financial statements for years prior to 1994 have been reclassified to conform with the 1994 financial statement presentation. 2. INVENTORIES: ----------------- Inventories consist of the following: January 1, January 2, (In thousands) 1995 1994 -------------- ---------- --------- Work in process, finished stock and packaging materials $46,503 $49,363 Raw materials 7,860 10,063 ---------- --------- Total $54,363 $59,426 ========== ========= BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ 3. PROPERTY, PLANT AND EQUIPMENT - NET: ----------------------------------------- Property, plant and equipment - net consists of the following: January 1, January 2, (In thousands) 1995 1994 -------------- ---------- ---------- Land $ 2,706 $ 2,841 Buildings and improvements 57,722 57,428 Machinery and equipment 204,556 193,234 Construction in progress 18,934 24,742 ---------- ---------- Total 283,918 278,245 Less accumulated depreciation 151,365 137,928 ---------- ---------- Total $132,553 $140,317 ========== ========== 4. OTHER ASSETS: ------------------ Other assets consist of the following: January 1, January 2, (In thousands) 1995 1994 -------------- ---------- ---------- Intangibles (net of accumulated amortization 1994 - $7,090 and 1993 - $4,716) $15,658 $17,192 Other 16,031 12,722 ---------- ---------- Total $31,689 $29,914 ========== ========== 5. BANK BORROWINGS: --------------------- Information with respect to the Corporation's bank borrowings is as follows: January 1, January 2, (In thousands) 1995 1994 -------------- ---------- ---------- Weighted average interest rate at balance sheet date 6.1% Weighted average interest rate (actual interest expense on bank borrowings divided by average daily outstanding balance) 5.1% 4.3% Unused lines of credit $112,996 $99,711 Standby letters of credit 29,571 35,488 6. OTHER CURRENT LIABILITIES: ------------------------------- Other current liabilities consist of the following: January 1, January 2, (In thousands) 1995 1994 -------------- ---------- ---------- Accrued advertising and promotion $17,731 $14,242 Other 10,996 9,669 ---------- ---------- Total $28,727 $23,911 ========== ========== BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ 7. EMPLOYEE BENEFIT PLANS: ---------------------------- The Corporation's net periodic pension cost for 1994, 1993 and 1992 is summarized as follows: (In thousands) 1994 1993 1992 -------------- ------- ------- ------- Service cost - benefits earned during the period $(2,242) $(1,797) $(1,608) Interest cost on projected benefit obligation (4,316) (3,988) (3,641) Actual return on plan assets (2,545) 5,151 6,060 Net amortization and deferral 8,383 107 (1,152) ------- ------- ------- Net periodic pension cost $ (720) $ (527) $ (341) ======= ======= ======= The following table sets forth the funded status at January 1, 1995 and January 2, 1994 of the Corporation's defined benefit pension plans: January 1, January 2, 1995 1994 ---------- ---------- Over- Under- Over- Under- (In thousands) Funded Funded Funded Funded -------------- ------- ------- ------- ------- Fair value of plan assets $30,924 $24,923 $33,491 $27,425 Projected benefit obligation for services rendered to date (26,319) (31,593) (28,150) (32,173) ------- ------- ------- ------- Excess of plan assets over projected benefit obligation (excess of projected benefit obligation over plan assets) 4,605 (6,670) 5,341 (4,748) Unrecognized net (gain) loss 472 2,747 (252) 2,595 Prior service costs not yet recognized in net periodic pension costs 384 1,014 682 20 Unrecognized net asset (2,239) (533) (2,666) (666) ------- ------- ------- ------- Prepaid pension (pension liability) $ 3,222 $(3,442) $ 3,105 $(2,799) ======= ======= ======= ======= Actuarial present value of benefit obligations: -------------------------- Vested benefit obligation $20,832 $31,395 $21,822 $31,908 ======= ======= ======= ======= Accumulated benefit obligation $21,691 $31,476 $22,662 $31,993 ======= ======= ======= ======= Prior service costs primarily relate to plan amendments which retroactively increase benefits to plan participants. These costs are recognized in net periodic pension cost over appropriate periods. The following assumptions were used in developing the above benefit obligation amounts: January 1, January 2, 1995 1994 ---------- ---------- Assumed discount rate 8.0% 7.0% Assumed rate of compensation increase 4.0% 4.0% Expected rate of return on plan assets 10.0% 10.0% BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ 7. EMPLOYEE BENEFIT PLANS (Continued): ---------------------------------------- The plan assets were invested as follows: January 1, January 2, 1995 1994 ---------- ---------- Equity securities 63.9% 65.0% United States Government securities 12.7 13.7 Cash equivalents and debt securities 23.4 21.3 ---------- ---------- Total 100.0% 100.0% ========== ========== Contributions under the employees share purchase plans, the 401(k) Savings and Investment Plans and the Group Registered Retirement Plan were approximately $857,000, $728,000 and $406,000 in 1994, 1993 and 1992, respectively. 8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS: ------------------------------------------------- The Corporation provides certain postretirement medical and life insurance benefits for qualifying retired and active unionized and non-unionized employees in the United States. Most retirees outside the United States are covered by government sponsored and administered programs. Postretirement benefits are not pre-funded and are paid by the Corporation as incurred. The Corporation's net periodic postretirement benefit cost for 1994 and 1993 included the following components: (In thousands) 1994 1993 -------------- ---- ---- Service cost - benefits attributed to employee service during the period $1,487 $1,144 Interest cost on accumulated postretirement benefit obligation 1,329 1,338 Unrecognized net loss 63 ------ ------- Net periodic postretirement benefit cost $2,879 $2,482 ====== ====== The following table sets forth the status at January 1, 1995 and January 2, 1994 of postretirement benefits: January 1, January 2, (In thousands) 1995 1994 -------------- ---------- ---------- Accumulated postretirement benefit obligation: ---------------------------------------------- Retirees $ 9,088 $ 9,590 Fully eligible active plan participants 2,404 3,507 Other active plan participants 7,399 8,568 -------- -------- 18,891 21,665 Unamortized net gain (loss) 991 (3,811) -------- -------- Total $19,882 $17,854 ======== ======== BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ 8. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS (Continued): ------------------------------------------------------------- For measurement purposes, a 14.0% annual rate of increase in the per capita cost was assumed for 1994 and 1993. The rate was assumed to decrease gradually to 5.5% through the year 2009 and remain at that level thereafter. The discount rate used in determining the accumulated postretirement benefit obligation was 8.0% at January 1, 1995 and 7.0% at January 2, 1994. The unamortized net gain (loss) represents a change in actuarial assumptions (discount rate) that will be amortized over future periods. A 1% increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of January 1, 1995 by $2.6 million and the net periodic postretirement benefit cost by $523,000. 9. SHAREHOLDERS' EQUITY: -------------------------- The Corporation declared and paid cash dividends of $0.80 per share in 1994 and $0.72 per share in 1993. The Corporation increased its regular quarterly dividend from $0.20 per share to $0.23 per share, effective with the dividend payable on February 1, 1995, to shareholders of record on January 18, 1995. In 1993, the Corporation amended its Certificate of Incorporation to increase the number of authorized common shares, $1 par value, from 25,000,000 to 50,000,000 shares. Foreign currency translation adjustments included in shareholders' equity were $(10,945,000), $(680,000), and $(1,111,000) for the fiscal years 1994, 1993 and 1992, respectively. The 1994 translation adjustment was primarily due to the Corporation's Mexican subsidiary recording a $9,500,000 translation loss in shareholders' equity due to the translation effect of the Mexican peso devaluation. 10. OTHER INCOME - NET: ------------------------ Other income - net consists of the following: (In thousands) 1994 1993 1992 ---- ---- ---- Income (Expense): ----------------- Interest expense $ (353) $(1,185) $ (447) Interest income 1,202 810 1,480 Net foreign currency gains 222 1,431 689 Miscellaneous - net (1,030) 3,171 430 ------ ------- ------- Total $ 41 $ 4,227 $ 2,152 ====== ======= ======= BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ 11. INCOME TAXES: ------------------ The provision (credit) for income taxes consists of the following: (In thousands) 1994 1993 1992 -------------- ---- ---- ---- Federal: ------- Current $27,975 $20,896 $18,365 Deferred (2,448) 227 (1,198) ------- ------- ------- Total Federal 25,527 21,123 17,167 ------- ------- ------- Foreign: -------- Current 5,212 4,016 4,334 Deferred (770) (1,137) 1,567 ------- ------- ------- Total Foreign 4,442 2,879 5,901 ------- ------- ------- State 5,594 5,204 4,275 ------- ------- ------- Total $35,563 $29,206 $27,343 ======= ======= ======= The total income tax provision shown in the Statements of Consolidated Income differed from the total income tax expense as computed by applying the statutory United States Federal ("Federal") income tax rate to income before income taxes and cumulative effect of changes in accounting principles as follows: 1994 1993 1992 ---- ---- ---- Statutory Federal income tax rate 35.0% 35.0% 34.0% Increase due to: ---------------- Effect of foreign subsidiaries' income tax rates in excess of the statutory Federal tax rate 1.0 State income taxes, net of Federal tax benefit 4.2 4.6 4.2 Other - net 1.6 (0.1) 1.4 ----- ----- ----- Effective income tax rate 40.8% 39.5% 40.6% ===== ===== ===== Federal income taxes have not been provided for on cumulative unremitted earnings of foreign subsidiaries of approximately $5,358,000 at January 1, 1995, $16,076,000 at January 2, 1994 and $14,051,000 at January 3, 1993. The provision for deferred Federal income taxes consists of the following: (In thousands) 1994 1993 1992 -------------- ---- ---- ---- Tax effect of temporary differences arising from: --------------------------- Depreciation $ 605 $ (94) $ 387 Insurance (311) 16 (2,757) Accrued compensation (293) (50) 1,073 Postretirement benefits (1,049) (527) 15 Inventory valuation (612) (598) 1,071 Advertising and promotion (1,167) (512) 168 Provision for doubtful accounts (153) 405 (1,073) Other 532 1,587 (82) ------- ------- ------- Total $(2,448) $ 227 $(1,198) ======= ======= ======= The provision for deferred foreign income taxes consists primarily of temporary differences related to the Corporation's Mexican subsidiary's inventory. BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ Deferred income taxes at January 1, 1995 and January 2, 1994 consist of the following: January 1, January 2, (In thousands) 1995 1994 -------------- ---------- ---------- Deferred tax assets: -------------------- Insurance $ 9,653 $ 9,342 Accrued compensation 1,629 923 Postretirement benefits 8,471 7,445 Inventory valuation 1,225 Advertising and promotion 3,052 1,885 Provision for doubtful accounts 1,726 1,563 Other 331 830 ------- ------- Total 26,087 21,988 ------- ------- Deferred tax liabilities: ------------------------- Depreciation 6,382 5,720 Inventory valuation 194 ------- ------- Total 6,382 5,914 ------- ------- Net deferred tax asset $19,705 $16,074 ======= ======= At January 1, 1995, current deferred tax assets of $18.5 million and current deferred tax liabilities of $1.3 million were included in Deferred Income Taxes and Accrued Expenses - Other, respectively. In addition, noncurrent deferred tax assets of $2.5 million were included in Other Assets. 12. CONTINGENCIES AND COMMITMENTS: ----------------------------------- The Corporation has significant contingent liabilities with respect to pending litigation, claims and disputes, principally relating to its lighters, which arise in the ordinary course of its business. In July 1993, the U.S. Environmental Protection Agency ("EPA") issued its final volumetric ranking of Potentially Responsible Parties ("PRPs") for the Solvents Recovery Service of New England ("SRSNE") Superfund Site in Southington, Connecticut. The Corporation has been notified that it is a PRP at the Site and has been ranked, by the EPA, number 192 of a total of 1,659 PRPs. This ranking represents less than 1% of the total volume of waste disposed at the SRSNE Site, with the first 191 PRPs representing 90% of the total volume. The Corporation cannot predict with certainty the total costs of cleanup, the Corporation's share of the total costs, the extent to which contributions will be available from other parties, the amount of time necessary to complete the cleanup, or the availability of insurance coverage. Based on currently available information, the Corporation believes that its share of the ultimate cleanup costs at this Site will not have a material adverse impact on the Corporation's financial position or on its results of operations, if such operations continue at the present level. BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ 12. CONTINGENCIES AND COMMITMENTS (Continued): ---------------------------------------------- In November 1992, a state court jury in Creek County, Oklahoma, in a 9 to 3 verdict, awarded $11 million in actual damages and $11 million in punitive damages against the Corporation in connection with a case involving a cigarette lighter. On May 3, 1994, the Court of Appeals of Oklahoma reduced the amount of punitive damages by $8 million. On May 23, 1994, BIC filed a petition for writ of certiorari with the Oklahoma Supreme Court and on July 13, 1994, the Oklahoma Supreme Court denied BIC's petition, thereby concluding this matter. This decision did not have a significant effect on the Corporation's consolidated financial position or on its results of operations. While the ultimate liability with respect to the above matters, including any additional liability not provided for, is not presently determinable, it is the opinion of management, after consultation with counsel to the Corporation, that any liabilities resulting therefrom will not have a material adverse effect on the Corporation's consolidated financial position or on its results of operations if such operations continue at the present level. 13. RELATED PARTY TRANSACTIONS AND BALANCES: --------------------------------------------- Material transactions and balances with the Corporation's majority shareholder, Societe BIC, S.A. and with other related parties are as follows: (In thousands) 1994 1993 1992 -------------- ---- ---- ---- Transactions ------------ Sales to: --------- Societe BIC, S.A. $ 1,727 $ 1,389 $ 807 Other affiliated companies 10,654 10,017 9,717 Purchases from: -------------- Societe BIC, S.A. 24,712 25,237 27,151 Other affiliated companies 16,414 16,966 16,820 January 1, January 2, (In thousands) 1995 1994 -------------- ---------- ---------- Balances -------- Included in receivables: ------------------------ Societe BIC, S.A. $ 403 $ 233 Other affiliated companies 3,943 2,787 Employees 51 Included in payables: --------------------- Societe BIC, S.A. 4,479 6,153 Other affiliated companies 2,601 3,237 BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ 14. FINANCIAL INSTRUMENTS: --------------------------- The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of SFAS 107, "Disclosure about Fair Value of Financial Instruments." The estimated fair value amounts have been determined by the Corporation, using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Corporation could realize in a current market exchange. January 1, 1995 January 2, 1994 --------------- --------------- Carrying Estimated Carrying Estimated or Contract Fair or Contract Fair (In thousands) Amount Value Amount Value -------------- ----------- --------- ----------- --------- Assets: ------- Cash and cash equivalents $48,091 $48,091 $24,094 $24,094 Liabilities: ------------ Bank borrowings 6,731 6,731 Off-balance sheet financial instruments: ------------------------ Forward foreign currency contracts 23,165 23,384 Unused lines of credit 112,996 See Below 99,711 See Below Standby letters of credit 29,571 See Below 35,488 See Below Cash and Cash Equivalents ------------------------- The Corporation compared the interest rates of cash equivalents at the contract dates to the prevailing interest rates at January 1, 1995 and January 2, 1994 and determined that there were no significant differences. Therefore, the carrying amounts of these items are a reasonable estimate of their fair value. Bank Borrowings --------------- Due to the relatively short period of time between the origination of the bank borrowings and their repayments, the carrying amounts approximate their estimated fair value. Forward Foreign Currency Contracts ---------------------------------- The fair value of foreign currency contracts was the amount as of January 2, 1994 at which contracts with the same date of maturity as existing contracts could be purchased, based on estimates obtained from dealers. Unused Lines of Credit and Standby Letters of Credit ---------------------------------------------------- There is no annual cost of maintaining the unused lines of credit. The annual cost of maintaining standby letters of credit is estimated based on fees of 1/4% to 3/4% of the amount of the letter of credit, which would be currently charged for similar arrangements. BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ 15. FOREIGN OPERATIONS: ------------------------ A summary of information about the Corporation's operations in different geographic areas is as follows (see Note 13 for sales to affiliated companies):
United Other Adjustments & (In thousands) States Canada Mexico Areas Eliminations Consolidated -------------- -------- -------- -------- -------- ------------- ------------ 1994: ----- Net sales $405,968 $ 29,678 $ 33,086 $ 6,386 $475,118 Transfers between geographic areas 15,305 212 15,077 105 $(30,699) -------- -------- -------- -------- -------- -------- Total revenues $421,273 $ 29,890 $ 48,163 $ 6,491 $(30,699) $475,118 ======== ======== ======== ======== ======== ======== Income before income taxes and cumulative effect of change in accounting principle $ 74,382 $ 5,039 $ 6,742 $ 1,020 $ 24 $ 87,207 ======== ======== ======== ======== ======== ======== Identifiable assets $313,079 $ 13,932 $ 22,991 $ 8,685 $358,687 ======== ======== ======== ======== ======== ======== 1993: ----- Net sales $372,459 $ 28,625 $ 32,677 $ 5,550 $439,311 Transfers between geographic areas 16,234 61 11,493 21 $(27,809) -------- -------- -------- -------- -------- -------- Total revenues $388,693 $ 28,686 $ 44,170 $ 5,571 $(27,809) $439,311 ======== ======== ======== ======== ======== ======== Income before income taxes and cumulative effect of change in accounting principle $ 64,716 $ 4,643 $ 4,438 $ 508 $ (319) $ 73,986 ======== ======== ======== ======== ======== ======== Identifiable assets $285,661 $ 10,172 $ 34,269 $ 6,114 $336,216 ======== ======== ======== ======== ======== ======== 1992: ----- Net sales $351,803 $ 28,947 $ 32,165 $ 4,462 $417,377 Transfers between geographic areas 16,742 3 13,888 225 $(30,858) -------- -------- -------- -------- -------- -------- Total revenues $368,545 $ 28,950 $ 46,053 $ 4,687 $(30,858) $417,377 ======== ======== ======== ======== ======== ======== Income before income taxes and cumulative effect of change in accounting principle $ 53,307 $ 6,742 $ 6,730 $ 929 $ (430) $ 67,278 ======== ======== ======== ======== ======== ======== Identifiable assets $261,605 $ 15,733 $ 25,807 $ 5,321 $308,466 ======== ======== ======== ======== ======== ======== Transfers between geographic areas are generally accounted for at a range of cost to cost plus 10%.
BIC CORPORATION AND SUBSIDIARIES -------------------------------- NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) ------------------------------------------------------ 16. SELECTED QUARTERLY FINANCIAL DATA (Unaudited): --------------------------------------------------- Net Income Net (Loss) (In thousands except Net Gross Income Per Common for per share data) Sales Profit (Loss)(1),(2) Share (1),(2) --------------------- ----- ------ ----- ---------- Quarter ended: -------------- April 3, 1994 $102,777 $49,665 $ 9,091 $ 0.39 July 3, 1994 138,839 68,532 16,266 0.69 October 2, 1994 127,720 64,295 14,794 0.63 January 1, 1995 105,782 50,169 10,870 0.46 --------------- -------- ------- ------- ------ Quarter ended: -------------- April 4, 1993 $101,199 $46,173 $ (730) $(0.03) July 4, 1993 124,437 56,356 13,518 0.57 October 3, 1993 123,056 56,999 13,228 0.56 January 2, 1994 90,619 43,963 8,948 0.38 --------------- -------- ------- ------- ------ ________________________ (1) The quarter ended April 3, 1994 includes a decrease in net earnings for the cumulative effect of a change in accounting for postemployment benefits of $623 or $0.02 per share. (2) The quarter ended April 4, 1993 includes a decrease in net earnings for the cumulative effect of a change in accounting for postretirement benefits other than pensions of $9,816 or $0.42 per share. SCHEDULE II ----------- BIC CORPORATION AND SUBSIDIARIES -------------------------------- CONSOLIDATED VALUATION ACCOUNTS FOR THE FISCAL YEARS ENDED JANUARY 1, 1995, JANUARY 2, 1994 AND JANUARY 3, 1993 ------------------------------------------- Classification Balance Additions (Additions) at Charged Deductions Balance Beginning to Profit from at End (In thousands) of Year and Loss Reserves (1) of Year -------------- --------- --------- ----------- ------- Allowance for Doubtful Accounts: -------------------------------- 1994 $4,084 $1,467 $1,021 $4,530 1993 5,076 85 1,077 4,084 1992 2,420 2,286 (370) 5,076 ______________________ (1) Principally accounts written off, less recoveries. EX-21 2 SUBSIDIARY LIST EXHIBIT 21 SUBSIDIARIES ------------ Set forth below are the names of BIC Corporation's subsidiaries as of March 1, 1995. NAME Place of Incorporation ---- ---------------------- BIC Sport U.S.A. Inc. Connecticut BIC Inc. Canada Industrial de Cuautitlan, S.A. de C.V. Mexico No Sabe Fallar, S.A. de C.V. Mexico BIC de Guatemala S.A. Guatemala BIC Puerto Rico Inc. Puerto Rico Xenia Insurance Company Ltd. Bermuda Wite-Out Products, Inc. Delaware EX-23 3 AUDITOR'S CONSENT Exhibit 23 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Post-Effective Amendment No. 1 to Registration Statement No. 2-83363 and in Registration Statements No. 33-57738 and No. 33-22204 of BIC Corporation on Form S-8 of our report dated January 27, 1995, appearing in this Annual Report on Form 10-K of BIC Corporation for the year ended January 1, 1995. Deloitte & Touche, L.L.P. New Haven, Connecticut March 27, 1995 EX-23 4 FINANCIAL DATA SCHEDULE [ARTICLE] 5 [CIK] 0000011975 [NAME] BIC CORPORATION [MULTIPLIER] 1000 [PERIOD-TYPE] YEAR [FISCAL-YEAR-END] JAN-01-1995 [PERIOD-END] JAN-01-1995 [CASH] 48,091 [SECURITIES] 0 [RECEIVABLES] 67,397 [ALLOWANCES] 4,530 [INVENTORY] 54,363 [CURRENT-ASSETS] 194,445 [PP&E] 283,918 [DEPRECIATION] 151,365 [TOTAL-ASSETS] 358,687 [CURRENT-LIABILITIES] 86,629 [BONDS] 0 [COMMON] 23,559 [PREFERRED-MANDATORY] 0 [PREFERRED] 0 [OTHER-SE] 224,358 [TOTAL-LIABILITY-AND-EQUITY] 358,687 [SALES] 475,118 [TOTAL-REVENUES] 475,118 [CGS] 242,457 [TOTAL-COSTS] 242,457 [OTHER-EXPENSES] 0 [LOSS-PROVISION] 1,467 [INTEREST-EXPENSE] 353 [INCOME-PRETAX] 87,207 [INCOME-TAX] 35,563 [INCOME-CONTINUING] 51,644 [DISCONTINUED] 0 [EXTRAORDINARY] 0 [CHANGES] (623) [NET-INCOME] 51,021 [EPS-PRIMARY] 2.17 [EPS-DILUTED] 2.17
EX-99 5 EXHIBIT INDEX Form 10-K For the fiscal year ended Commission File No. 1-6832 January 1, 1995 BIC CORPORATION EXHIBIT INDEX ------------- Exhibit No. ----------- 3. a. Restated Certificate of Incorporation, as filed May 5, 1993. (1) b. By-Laws, as amended. (2) 4. Instruments relating to long-term debt are not filed, but the Registrant agrees to file a copy of such instruments upon request of the Securities and Exchange Commission. 9. a. Voting Trust Agreement, dated February 5, 1991, by and among Societe BIC, S.A., Marcel L. Bich, Neil A. Pollio, Bruno Bich, Francois Bich and BIC Corporation, as amended February 3, 1992, for the purpose of naming Alexander Alexiades as successor voting trustee. (3) b. Amendment to Voting Trust Agreement, dated July 5, 1993. (1) 10. a. Selected Executive Retirement Plan, as amended. (1) b. Agreement, dated July 1, 1971, including amendments, between Societe BIC, S.A. and BIC Pen Corporation. (3) 21. Subsidiaries of the Registrant. 23. Consent of Independent Auditors. ___________________________________ (1) Incorporated by reference to the Corporation's Annual Report on Form 10-K for its fiscal year ended January 2, 1994. (2) Incorporated by reference to the Corporation's Annual Report on Form 10-K for its fiscal year ended January 3, 1993. (3) Incorporated by reference to the Corporation's Annual Report on Form 10-K for its fiscal year ended December 30, 1990.