-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LVJ7MFHeuliTDTj3IwFv1pASM1fe7NRwGklDkqt+go/8oUuEdcuOpoJKfVhEk7Vq UIYhVVJk3xiPLNXKaQmqkw== 0000015310-95-000012.txt : 19951119 0000015310-95-000012.hdr.sgml : 19951119 ACCESSION NUMBER: 0000015310-95-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: NONE 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: 95591860 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 September 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 November 3, 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- September 30, 1995 and December 31, 1994 ................... 3 Consolidated Condensed Statements of Operations- Three and nine months ended September 30, 1995 and 1994 .... 4 Consolidated Condensed Statements of Cash Flows- Nine months ended September 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 nine months ended September 30, 1995 ........................................ 13 Page 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements --------------------
Bulova Corporation and Subsidiaries Consolidated Condensed Balance Sheets (Amounts in thousands) September 30, December 31, 1995 1994 --------------------------- Assets ------ Current assets: Cash ......................................................... $ 2,548 $ 3,857 Investment in U.S. Government securities ..................... 4,880 Accounts and notes receivable-net ............................ 44,432 51,254 Inventories .................................................. 42,624 35,750 Prepaid expenses ............................................. 2,304 329 Deferred income taxes ........................................ 9,225 10,004 Net assets of discontinued operations ........................ 20,082 ----------------------- Total current assets .......................................... 106,013 121,276 ----------------------- Property, plant and equipment-net .............................. 12,390 12,750 ----------------------- Other assets: Deferred income taxes ........................................ 13,750 16,744 Other ........................................................ 363 265 ----------------------- Total other assets ....................................... 14,113 17,009 ----------------------- Total assets ............................................. $132,516 $151,035 ======================= Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Current installments of long-term debt ....................... $ 400 $ 400 Accounts payable ............................................. 3,689 5,569 Accrued expenses ............................................. 12,012 11,753 Accrued federal and foreign income taxes ..................... 1,677 2,333 ----------------------- Total current liabilities ................................ 17,778 20,055 ----------------------- Long-term debt, less current installments ...................... 200 ----------------------- Other liabilities and credits: Postretirement benefits payable .............................. 44,456 43,183 Pension benefits payable ..................................... 2,870 2,581 Other ........................................................ 2,055 3,086 ----------------------- Total other liabilities and credits ...................... 49,381 48,850 ----------------------- Debt to affiliate .............................................. 19,000 ----------------------- Shareholders' equity ........................................... 65,357 62,930 ----------------------- Total liabilities and shareholders' equity ............... $132,516 $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 Nine Months Ended September 30, September 30, 1995 1994 1995 1994 ----------------------------------------- Revenues: Net sales ...................................... $25,857 $25,429 $68,903 $65,134 Interest, royalties and other .................. 1,257 1,791 7,680 4,185 ----------------------------------------- Total revenues ............................. 27,114 27,220 76,583 69,319 ----------------------------------------- Expenses: Cost of sales .................................. 15,805 16,219 43,862 41,714 Selling, general and administrative ............ 9,898 10,672 27,316 27,572 Interest: Affiliate .................................... 170 75 310 Others ....................................... 38 16 71 50 ----------------------------------------- Total expenses ............................. 25,741 27,077 71,324 69,646 ----------------------------------------- Income (loss) from continuing operations before income tax (expense) benefit .................... 1,373 143 5,259 (327) Income tax (expense) benefit ..................... (508) (62) (3,642) 127 ----------------------------------------- Income (loss) from continuing operations ......... 865 81 1,617 (200) Discontinued operations of BTI: Gain on disposal (net of tax of $195) .......... 363 (Loss) income from operations (net of tax benefit (expense) of $22 and $(156)) .......... (30) 226 ----------------------------------------- Net income ....................................... $ 865 $ 51 $ 1,980 $ 26 ========================================= Net income per share: Income (loss) from continuing operations ....... $ .19 $ .02 $ .35 $ (.04) Discontinued operations of BTI ................. (.01) .08 .05 ----------------------------------------- Net income ..................................... $ .19 $ .01 $ .43 $ .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) Nine Months Ended September 30, 1995 1994 ---------------------- Operating Activities: Net income ................................................... $ 1,980 $ 26 Adjustments to reconcile net income to net cash provided by (used for) operating activities .......................... 5,663 2,087 Gain on sale of BTI .......................................... (558) Changes in assets and liabilities-net: Receivables ................................................ 5,446 (2,170) Inventories ................................................ (6,874) (133) Prepaid expenses ........................................... (1,975) 348 Net assets of discontinued operations ...................... (2,435) Other assets ............................................... (98) 1 Accounts payable and accrued expenses ...................... (1,791) (5,057) Accrued federal and foreign income taxes ................... (656) (269) Other liabilities and credits .............................. 978 4,777 --------------------- 2,115 (2,825) --------------------- Investing Activities: Proceeds from disposal of BTI ................................ 20,810 Purchases of U.S. Government securities ...................... (5,655) Proceeds from sale of U.S. Government securities ............. 775 Purchases of property, plant and equipment ................... (154) (306) --------------------- 15,776 (306) --------------------- Financing Activities: Principal payments on debt to affiliate ...................... (19,000) (14,000) Principal payments on long-term debt ......................... (200) (200) Proceeds from debt to affiliate .............................. 16,000 --------------------- (19,200) 1,800 --------------------- Net change in cash ............................................. (1,309) (1,331) Cash, beginning of period ...................................... 3,857 5,639 --------------------- Cash, end of period ............................................ $ 2,548 $ 4,308 ===================== 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 nine months ended September 30, 1994, net sales were $11,236,000 and $37,276,000, 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 nine months ended September 30, 1995 and 1994 include federal tax (benefit) expense to the Company of $(336,000), $325,000, $2,906,000 and $209,000, 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, respectively, for the nine months ended September 30, 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 $525,000 for the three and nine months ended September 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 $525,000 and $750,000 for the nine months ended. Page 6 6. The Company's inventories, in thousands of dollars, are comprised of the following:
September 30, December 31, 1995 1994 -------------------------- Watches and clocks ........................... $39,904 $32,924 Jewelry ...................................... 288 430 Precious metals .............................. 340 450 Other ........................................ 2,092 1,946 ---------------------- Total .................................... $42,624 $35,750 ======================
7. Shareholders' equity:
September 30, December 31, 1995 1994 -------------------------- (In thousands) Common stock ................................. $22,999 $22,999 Additional paid-in capital ................... 23,197 23,197 Retained earnings ............................ 20,125 18,145 Cumulative translation adjustment ............ (959) (1,406) ---------------------- Total .................................... 65,362 62,935 Less treasury stock, at cost ................. 5 5 ---------------------- Total shareholders' equity ............... $65,357 $62,930 ======================
8. During the third quarter of 1995, the Company provided for a liability of $150,000 in relation to an environmental condition at its former Woodside, N.Y. watch manufacturing facility which the Company agreed to remediate in October 1995. Additionally, during the second quarter of 1994 the Company provided for a liability of $250,000 in relation to an environmental condition at its former Valley Stream, N.Y. defense manufacturing facility. Finally, in the third quarter of 1994 the Company received revised cost estimates associated with the environmental clean-up of a former Sag Harbor, N.Y. watch manufacturing facility which the Company sold on March 12, 1981. Based on the cost estimates currently available, the Company provided an additional $484,000 liability to record the minimal level of estimated clean-up costs at this facility. The environmental liability recognized in the Company's financial statements to date of $2,484,000 represents the minimum of the Company's estimated range of equally likely outcomes, the upper limit of that range is approximately $3,100,000. Page 7 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 September 30, 1995 and December 31, 1994 and the results of operations for the three and nine months and changes in cash flows for the nine months ended September 30, 1995 and 1994, respectively. Results of operations for the third quarter and first nine 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 continues to be adversely impacted by difficult business conditions. Competition and the oversupply of watch and clock products places significant pressure on price points which negatively impact gross profit, net income and cash flow. The Company is continuing its efforts to reduce costs and closely monitor inventory purchasing to ensure inventory carrying costs are at appropriate levels. 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. Increased inventory purchasing, necessary to meet the seasonal inventory buildup requirements in the fourth quarter of 1995, will reduce working capital and may result in borrowings from Loews under the Credit Agreement. Cash Flow From Operations The Company generated net cash flow from operations of approximately $2,115,000 for the nine months ended September 30, 1995 compared to cash utilization of $2,825,000 for the corresponding period of the prior year. The increase in cash flow is primarily due to the tax settlement as noted above and the change in quarter levels of accounts payable and accrued expenses, other liabilities and credits and accounts receivable, resulting from timing of transactions. An increase in inventory purchasing, necessary to meet the seasonal inventory build up requirements, partially offset the cash flow increase noted above. Also contributing to the cash flow increase is the improved results of operations for the nine months ended September 30, 1995. 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 purchases of U.S. Government securities. Page 9 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. Results of Operations For the three months ended September 30, 1995, total revenues were relatively unchanged and for the nine months ended September 30, 1995, increased $7,264,000, or 10.5%, as compared to the corresponding period of the prior year. Net sales for the three and nine months ended September 30, 1995 increased by $428,000 and $3,769,000, or 1.7% and 5.8%, respectively, as compared to the corresponding periods of the prior year. This increase is primarily due to unit sales volume and price increases for the three and nine months ended September 30, 1995 of 8.7% and 2.9%, respectively, and a favorable change in the product sales mix. The Bulova brand, a higher priced product, comprised 51.2% of total watch sales through the nine months ended September 30, 1995, compared to 50.0% for the prior year. In addition, the Bulova brand unit price has increased 6.6% over 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 decreased by $534,000 and $705,000 for the three and nine months ended September 30, 1995, as compared to the corresponding periods of the prior year. These decreases are primarily due to lower royalty income. The Company recognized $882,000, $1,389,000, $2,502,000 and $3,094,000 in royalty income for the three and nine months ended September 30, 1995 and 1994, respectively, which included $7,000, $779,000, $107,000 and $1,407,000 of proceeds under the "Benetton by Bulova" license agreement that expired September 30, 1994. The remaining royalty income represents payments by a distributor and licensees in Europe, the Far East and South America. Income from continuing operations before income taxes for the three and nine months ended September 30, 1995 increased $1,230,000 and $5,586,000, respectively, as compared to the corresponding periods of the prior year. The primary reason for the increase during the nine month period is the recognition of $4,200,000 of interest income as discussed above. In addition, for the three and nine months ended September 30, 1995 and 1994, environmental costs of $150,000, $484,000, $150,000 and $734,000 were included in selling, general and administrative expenses, respectively. Exclusive of these items, income from continuing operations before income taxes increased due to a decline in selling, general and administrative expenses as a percentage of sales from 40.1% to 37.7% and from 41.2% to 39.5%, for the three and nine month periods ended September 30, 1995, respectively. The decrease in selling, general and administrative costs represents management's continued efforts to control discretionary costs. Income taxes for the nine months ended September 30, 1995 include a $1,772,000 expense caused by the limitation on the utilization of certain tax attributes in connection with the tax audit adjustment. Page 10 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 nine months ended September 30, 1995. Future fluctuations however, could negatively impact gross profit, income and cash flow. Contingencies - During the third quarter of 1995, the Company provided for a liability of $150,000 in relation to an environmental condition at its former Woodside, N.Y. watch manufacturing facility which the Company agreed to remediate in October 1995. Additionally, during the second quarter of 1994 the Company provided for a liability of $250,000 in relation to an environmental condition at its former Valley Stream, N.Y. defense manufacturing facility. Finally, in the third quarter of 1994 the Company received revised cost estimates associated with the environmental clean-up of a former Sag Harbor, N.Y. watch manufacturing facility which the Company sold on March 12, 1981. Based on the cost estimates currently available, the Company provided an additional $484,000 liability to record the minimal level of estimated clean-up costs at this facility. The impact of the environmental clean-up will directly affect cash flow and net income, and it is expected that the utilization of cash will be funded by the Credit Agreement with Loews. Related parties - Loews provided administrative services for which the Company paid $175,000 and $525,000 for the three and nine months ended September 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 $525,000 and $750,000 for the nine months ended. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits -- (27) Financial Data Schedule for the nine months ended September 30, 1995. (b) Current reports on Form 8-K -- There were no reports on Form 8-K filed for the three months ended September 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: November 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 SEPTEMBER 30, 1995 FORM 10-Q
5 1,000 9-MOS DEC-31-1995 SEP-30-1995 2,548 4,880 47,816 3,384 42,624 106,013 20,235 7,845 132,516 17,778 0 22,999 0 0 42,358 132,516 68,903 76,583 43,862 43,862 26,814 502 146 5,259 3,642 1,617 363 0 0 1,980 .43 0
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