0000015310-95-000010.txt : 19950815 0000015310-95-000010.hdr.sgml : 19950815 ACCESSION NUMBER: 0000015310-95-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: BULOVA CORP CENTRAL INDEX KEY: 0000015310 STANDARD INDUSTRIAL CLASSIFICATION: WATCHES, CLOCKS, CLOCKWORK OPERATED DEVICES/PARTS [3873] IRS NUMBER: 111719409 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-00457 FILM NUMBER: 95563380 BUSINESS ADDRESS: STREET 1: ONE BULOVA AVE CITY: WOODSIDE STATE: NY ZIP: 11377-7874 BUSINESS PHONE: 7182043300 MAIL ADDRESS: STREET 1: ONE BULOVA AVE CITY: WOODSIDE STATE: NY ZIP: 11377-7874 FORMER COMPANY: FORMER CONFORMED NAME: BULOVA WATCH CO INC DATE OF NAME CHANGE: 19880811 FORMER COMPANY: FORMER CONFORMED NAME: BULOVA J CO DATE OF NAME CHANGE: 19710627 10-Q 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1995 ------------- 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 1-457 ----- BULOVA CORPORATION ------------------------------------------------------ (Exact name of registrant as specified in its charter) New York 11-1719409 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) ONE BULOVA AVENUE, WOODSIDE, N.Y. 11377-7874 ---------------------------------------------------- (Address of principal executive offices) (Zip Code) (718) 204-3300 ---------------------------------------------------- (Registrant's telephone number, including area code) NOT APPLICABLE ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report) 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 --------- --------- Class Outstanding at August 4, 1995 --------------------------- ----------------------------- Common stock, $5 par value 4,599,249 shares ================================================================================ Page 1 INDEX Page No. -------- Part I. Financial Information Item 1. Financial Statements Consolidated Condensed Balance Sheets- June 30, 1995 and December 31, 1994 ........................ 3 Consolidated Condensed Statements of Operations- Three and six months ended June 30, 1995 and 1994 .......... 4 Consolidated Condensed Statements of Cash Flows- Six months ended June 30, 1995 and 1994 .................... 5 Notes to Consolidated Condensed Financial Statements .......... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........................... 9 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K ....................... 11 Exhibit 27--Financial Data Schedule for the six months ended June 30, 1995 ............................................. 13 Page 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements --------------------
Bulova Corporation and Subsidiaries Consolidated Condensed Balance Sheets (Amounts in thousands) June 30, December 31, 1995 1994 --------------------------- Assets ------ Current assets: Cash ......................................................... $ 3,768 $ 3,857 Investment in U.S. Government securities ..................... 4,793 Accounts and notes receivable-net ............................ 44,527 51,254 Inventories .................................................. 41,546 35,750 Prepaid expenses ............................................. 767 329 Deferred income taxes ........................................ 9,090 10,004 Net assets of discontinued operations ........................ 20,082 --------------------------- Total current assets ..................................... 104,491 121,276 --------------------------- Property, plant and equipment-net .............................. 12,530 12,750 --------------------------- Other assets: Deferred income taxes ........................................ 14,145 16,744 Other ........................................................ 383 265 --------------------------- Total other assets ....................................... 14,528 17,009 --------------------------- Total assets ............................................. $131,549 $151,035 =========================== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Current installments of long-term debt ....................... $ 400 $ 400 Accounts payable ............................................. 4,019 5,569 Accrued expenses ............................................. 10,322 11,753 Accrued federal and foreign income taxes ..................... 2,343 2,333 --------------------------- Total current liabilities ................................ 17,084 20,055 --------------------------- Long-term debt, less current installments ...................... 200 --------------------------- Other liabilities and credits: Postretirement benefits payable .............................. 45,278 43,183 Pension benefits payable ..................................... 2,870 2,581 Other ........................................................ 2,064 3,086 --------------------------- Total other liabilities and credits ...................... 50,212 48,850 --------------------------- Debt to affiliate .............................................. 19,000 --------------------------- Shareholders' equity ........................................... 64,253 62,930 --------------------------- Total liabilities and shareholders' equity ............... $131,549 $151,035 =========================== See accompanying Notes to Consolidated Condensed Financial Statements.
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Bulova Corporation and Subsidiaries Consolidated Condensed Statements of Operations (Amounts in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 ----------------------------------------- Revenues: Net sales ...................................... $20,191 $19,969 $43,046 $39,705 Interest, royalties and other .................. 5,321 1,043 6,423 2,394 ----------------------------------------- Total revenues ............................. 25,512 21,012 49,469 42,099 ----------------------------------------- Expenses: Cost of sales .................................. 13,703 13,037 28,057 25,495 Selling, general and administrative ............ 8,022 8,680 17,418 16,900 Interest: Affiliate .................................... 129 75 140 Others ....................................... 23 (44) 33 34 ----------------------------------------- Total expenses ............................. 21,748 21,802 45,583 42,569 ----------------------------------------- Income (loss) from continuing operations before income tax (expenses) benefits................... 3,764 (790) 3,886 (470) Income tax (expenses) benefits ................... (3,077) 321 (3,134) 189 ----------------------------------------- Income (loss) from continuing operations ......... 687 (469) 752 (281) Discontinued operations of BTI: Gain on disposal (net of tax of $195) .......... 363 Income from operations (net of tax of $391 and $177) ................................ 565 256 ----------------------------------------- Net income (loss) ................................ $ 687 $ 96 $ 1,115 $ (25) ========================================= Net income (loss) per share: Income (loss) from continuing operations ....... $ .15 $ (.10) $ .16 $ (.06) Discontinued operations of BTI ................. .12 .08 .05 ----------------------------------------- Net income (loss)............................... $ .15 $ .02 $ .24 $ (.01) ========================================= Weighted average number of shares outstanding .... 4,599 4,599 4,599 4,599 ========================================= See accompanying Notes to Consolidated Condensed Financial Statements.
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Bulova Corporation and Subsidiaries Consolidated Condensed Statements of Cash Flows (Amounts in thousands) Six Months Ended June 30, 1995 1994 ---------------------- Operating Activities: Net income (loss) ............................................ $ 1,115 $ (25) Adjustments to reconcile net income (loss) to net cash provided by operating activities ............................ 4,783 2,411 Gain on sale of BTI .......................................... (558) Changes in assets and liabilities-net: Receivables ................................................ 5,792 5,622 Inventories ................................................ (5,796) 947 Prepaid expenses ........................................... (438) 166 Net assets of discontinued operations ...................... (214) Other assets ............................................... (118) 1 Accounts payable and accrued expenses ...................... (3,151) (5,561) Accrued federal and foreign income taxes ................... 10 (1,369) Other liabilities and credits .............................. 1,570 1,393 --------------------- 3,209 3,371 --------------------- Investing Activities: Proceeds from disposal of BTI ................................ 20,810 Purchases of U.S. Government securities ...................... (4,793) Purchases of property, plant and equipment ................... (115) (192) --------------------- 15,902 (192) --------------------- Financing Activities: Principal payments on debt to affiliate ...................... (19,000) (12,000) Principal payments on long-term debt ......................... (200) (200) Proceeds from debt to affiliate .............................. 5,000 --------------------- (19,200) (7,200) --------------------- Net change in cash ............................................. (89) (4,021) Cash, beginning of period ...................................... 3,857 5,639 --------------------- Cash, end of period ............................................ $ 3,768 $ 1,618 ===================== See accompanying Notes to Consolidated Condensed Financial Statements.
Page 5 Bulova Corporation and Subsidiaries Notes to Consolidated Condensed Financial Statements 1. See Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 1994 filed with the Securities and Exchange Commission on March 27, 1995. 2. There have been no changes in significant accounting policies since December 31, 1994. In addition, certain amounts applicable to prior periods have been reclassified to conform to classifications followed in 1995. 3. On January 17, 1995 the Company sold its industrial and defense manufacturing business, Bulova Technologies, Inc. ("BTI") for $20,810,000 in cash. The sale resulted in a pre-tax and after-tax gain of $558,000 and $363,000, respectively, which was recorded in the first quarter of 1995. The Company applied $18,000,000 of the consideration received to the repayment of the debt to affiliate. The prior year operating results of BTI have been reported separately as discontinued operations in the consolidated condensed financial statements. For the three and six months ended June 30, 1994, net sales were $14,520,000 and $26,040,000, respectively. See Note 2 of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 1994. 4. Income taxes for the three and six months ended June 30, 1995 and 1994 include federal tax (expense) benefit to the Company of $(3,485,000), $164,000, $(3,242,000) and $116,000, respectively, related to the tax allocation agreement between the Company and its parent, Loews Corporation ("Loews"). Additionally, during the second quarter of 1995, the Company reached a tax settlement in connection with the examination of the Loews consolidated tax returns for the 1984 through 1990 tax years. As a result of the settlement, the Company received $4,200,000 of interest income and recorded $1,772,000 of tax expense caused by the limitation on the utilization of certain tax attributes. This transaction resulted in pre-tax and after-tax income of $4,200,000 and $958,000 for the three and six months ended June 30, 1995, respectively. All amounts due from Loews in connection with tax receivables through 1990 were received by the Company in August 1995. See Note 7 of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 1994. 5. Loews provides administrative and managerial services for which the Company was charged $175,000 and $350,000 for the three and six months ended June 30, 1995 and 1994. This expense is included in selling, general and administrative expenses. The cost allocated to the Company is estimated to be the incremental cost incurred by Loews in providing these services to the Company. If the Company incurred these costs on a stand alone basis, it believes the costs incurred could aggregate between $350,000 and $500,000. Page 6 6. The Company's inventories, in thousands of dollars, are comprised of the following:
June 30, December 31, 1995 1994 ---------------------- Watches and clocks ............................ $38,720 $32,924 Jewelry ....................................... 288 430 Precious metals ............................... 380 450 Other ......................................... 2,158 1,946 ---------------------- Total ...................................... $41,546 $35,750 ======================
7. Shareholders' equity:
June 30, December 31, 1995 1994 ---------------------- (In thousands) Common stock .................................. $22,999 $22,999 Additional paid-in capital .................... 23,197 23,197 Retained earnings ............................. 19,260 18,145 Cumulative translation adjustment ............. (1,198) (1,406) ---------------------- Total ...................................... 64,258 62,935 Less treasury stock, at cost .................. 5 5 ---------------------- Total shareholders' equity ................. $64,253 $62,930 ======================
8. As discussed in Note 13 in the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 1994, during the second quarter of 1994 the Company accrued an additional $250,000 in relation to an environmental contaminate which was discovered in the ground water of its former defense manufacturing facility. Additional testing and further evaluation are still required before a definitive cost of ultimate clean-up can be determined. Therefore, the liability accrued by the Company may require future revisions. The environmental liability recognized in the Company's financial statements to date of $2,334,000 represents the minimum of the Company's estimate range of equally likely outcomes, the upper limit of that range is approximately $2,834,000. 9. In the opinion of Management, the accompanying consolidated condensed financial statements reflect all adjustments (consisting of only normal recurring accruals) necessary to present fairly the financial position as of June 30, 1995 and December 31, 1994 and the results of operations for the three and six months and changes in cash flows for the six months ended June 30, 1995 and 1994, respectively. Page 7 Results of operations for the second quarter and first six months of each of the years is not necessary indicative of results of operations for that entire year. Page 8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. -------------------------------------------------------------------------------- Liquidity and Capital Resources: Cash Flow In January 1995 the Company sold its industrial and defense products segment, Bulova Technologies, Inc. ("BTI") for $20,810,000 in cash. The Company applied $18,000,000 of the consideration received to the repayment of the entire debt owed to its parent, Loews Corporation ("Loews") under the credit agreement described below, and the balance of the consideration was added to working capital. Additionally, the Company assumed BTI's liabilities with respect to postretirement health care benefits for employees of BTI who had retired prior to the consummation of the sale. On August 3, 1995, the Company collected $10,554,000, including $4,200,000 of interest, from Loews related to a tax audit adjustment from the examination of Loews's tax returns for 1984 through 1990. The Company anticipates its cash needs will be met from its available working capital. The Company is continuing its efforts to reduce costs and closely monitors inventory purchasing to ensure appropriate levels are maintained. For a number of years the Company has relied on Loews, which owns approximately 97% of the Company's common stock, to meet working capital needs which the Company has not been able to meet through internally generated funds. In 1979, the Company entered into a credit agreement with Loews ("the Credit Agreement") which provided for unsecured loans, from time to time, in amounts aggregating up to $50,000,000. The Credit Agreement initially expired in 1980, but the expiration date has been periodically extended by the Company and Loews. The Credit Agreement currently expires June 30, 1997. As noted above, the Company repaid all of its borrowings under the Credit Agreement in the first quarter of 1995. Cash Flow From Operations The Company generated net cash flow from operations of approximately $3,209,000 for the six months ended June 30, 1995 compared to $3,371,000 for the corresponding period of the prior year. The decrease in cash flow is primarily due to the increase in inventory levels associated with purchases necessary to meet the seasonal inventory buildup requirements. This decrease was partially offset by the change in the six month levels of accounts payable and accrued expenses, other liabilities and credits and accounts receivable. Cash Flow From Investing Activities The increase in cash flow is primarily due to the cash received from the sale of BTI as discussed above, partially offset by the purchases of U.S. Government securities. Cash Flow From Financing Activities Cash flow from financing activities primarily represents changes in the amounts due to Loews under the Credit Agreement discussed above. Page 9 Results of Operations For the three and six months ended June 30, 1995, total revenues increased $4,500,000 and $7,370,000, or 21.4% and 17.5%, respectively, as compared to the corresponding periods of the prior year. Net sales improved due to the increase in watch, clock and jewelry revenue of $222,000 and $3,341,000, or 1.1% and 8.4%, respectively, as compared to the corresponding periods of the prior year. This increase is primarily due to a unit sales volume increase for the three and six months ended June 30, 1995 of 1.0% and 3.7%, respectively, and a favorable change in the product sales mix. The Bulova brand, a higher priced product, comprised 57.8% of total watch sales through the six months ended June 30, 1995, compared to 51.1% for the prior year. Interest, royalties and other revenues were primarily affected by the $4,200,000 of interest income recognized during the second quarter of 1995, related to the tax audit adjustment discussed above. Exclusive of the $4,200,000 interest income recorded, interest, royalties and other revenues increased (decreased) by $78,000 and $(171,000) for the three and six months ended June 30, 1995, as compared to the corresponding periods of the prior year. For the three months ended June 30, 1995, the increase is due to higher operating interest income and royalty income. For the six months ended June 30, 1995, the decrease is primarily due to lower royalty income. The Company recognized $790,000, $669,000, $1,620,000 and $1,705,000 in royalty income for the three and six months ended June 30, 1995 and 1994, respectively, which included $14,000, $160,000, $100,000 and $628,000 of proceeds under the "Benetton by Bulova" license agreement that expired June 30, 1994. The remaining royalty income represents payments by three licensees in Europe, the Far East and South America. Income from continuing operations before income taxes for the three and six months ended June 30, 1995 increased $4,554,000 and $4,356,000, respectively, as compared to the corresponding periods of the prior year. The primary reason for the increase is the recognition of $4,200,000 of interest income during the second quarter of 1995, as discussed above. Exclusive of this transaction, for the three and six months ended June 30, 1995, the increase in income from continuing operations resulted from the decrease in selling, general and administrative expenses as a percentage of sales from 43.5% to 39.7% and from 42.6% to 40.5%, respectively. The decrease in selling, general and administrative costs represents management's continued efforts to control discretionary costs, partially offset by an increase in cost of sales. Income taxes for the three and six months ended June 30, 1995 include $1,772,000 expense caused by the limitation on the utilization of certain tax attributes in connection with the tax audit adjustment. The Company imports most of its watch and clock products. Foreign currency fluctuations therefore, can have a material impact on the Company's operations. Approximately 25% of the Company's purchases are denominated in Japanese yen. Currency rate fluctuations did not have a material impact on the results of operations during the three and six months ended June 30, 1995. Future fluctuations however, could negatively impact gross profit, income and cash flow. Page 10 Related parties - Loews provided administrative services for which the Company paid $175,000 and $350,000 for the three and six months ended June 30, 1995 and 1994. The cost allocated to the Company is estimated to be the incremental cost incurred by Loews in providing these services to the Company. If the Company incurred these costs on a stand-alone basis, it believes the costs would aggregate between $350,000 and $500,000. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits -- (27) Financial Data Schedule for the six months ended June 30, 1995. (b) Current reports on Form 8-K -- There were no reports on Form 8-K filed for the three months ended June 30, 1995. Page 11 SIGNATURES Pursuant to the requirements 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. BULOVA CORPORATION ------------------ (Registrant) Dated: August 14, 1995 By: Paul S. Sayegh ----------------------- PAUL S. SAYEGH Chief Operating Officer (Duly authorized officer and principal financial officer) Page 12 EX-27 2 FINANCIAL DATA SCHEDULE FOR JUNE 30, 1995 FORM 10-Q
5 1,000 6-MOS DEC-31-1995 JUN-30-1995 3,768 4,793 47,980 3,453 41,546 104,491 20,213 7,683 131,549 17,084 0 22,999 0 0 41,254 131,549 43,046 49,469 28,057 28,057 16,987 431 108 3,886 3,134 752 363 0 0 1,115 .24 0