-----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, Wmly02zSPPrXGrFZbE5SrhEi2TWJSE9OnioJ2yYMFe0ylmlrkdSJebi5G14wcqt/ pETP4MzF9h5ioPPGWOhHpA== 0000015310-97-000006.txt : 19970514 0000015310-97-000006.hdr.sgml : 19970514 ACCESSION NUMBER: 0000015310-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970513 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: 97601733 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 March 31, 1997 -------------- 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 May 2, 1997 - --------------------------- ------------------------------- 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- March 31, 1997 and December 31, 1996 ....................... 3 Consolidated Condensed Statements of Income - Three months ended March 31, 1997 and 1996 ................. 4 Consolidated Condensed Statements of Cash Flows- Three months ended March 31, 1997 and 1996 ................. 5 Notes to Consolidated Condensed Financial Statements .......... 6 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations ........................... 8 Part II. Other Information Item 6. Exhibits and Reports on Form 8-K ....................... 9 Exhibit 27--Financial Data Schedule for the three months ended March 31, 1997 ............................................ 11 Page 2 PART I. FINANCIAL INFORMATION Item 1. Financial Statements --------------------
Bulova Corporation and Subsidiaries Consolidated Condensed Balance Sheets (Amounts in thousands) March 31, December 31, 1997 1996 ----------------------- Assets ------ Current assets: Cash ......................................................... $ 12,994 $ 10,665 Investment in U.S. government securities ..................... 14,755 4,978 Accounts and notes receivable-net ............................ 38,823 54,417 Inventories, principally watches and clocks .................. 38,336 37,130 Prepaid expenses ............................................. 2,749 3,174 Deferred income taxes ........................................ 7,585 8,232 ---------------------- Total current assets ..................................... 115,242 118,596 ---------------------- Property, plant and equipment-net .............................. 11,527 11,582 ---------------------- Other assets: Deferred income taxes ........................................ 17,305 17,437 Other ........................................................ 476 839 ---------------------- Total other assets ....................................... 17,781 18,276 ---------------------- Total assets ............................................. $144,550 $148,454 ====================== Liabilities and Shareholders' Equity ------------------------------------ Current liabilities: Accounts payable ............................................. $ 2,342 $ 3,442 Accrued expenses ............................................. 15,397 17,967 Accrued federal and foreign income taxes ..................... 787 1,663 ---------------------- Total current liabilities ................................ 18,526 23,072 ---------------------- Other liabilities and credits: Postretirement benefits payable .............................. 42,553 42,754 Pension benefits payable ..................................... 3,854 4,055 Other ........................................................ 5,721 6,192 ---------------------- Total other liabilities and credits ...................... 52,128 53,001 ---------------------- Shareholders' equity ........................................... 73,896 72,381 ---------------------- Total liabilities and shareholders' equity ............... $144,550 $148,454 ====================== See accompanying Notes to Consolidated Condensed Financial Statements.
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Bulova Corporation and Subsidiaries Consolidated Condensed Statements of Income (Amounts in thousands, except per share data) Three Months Ended March 31, 1997 1996 --------------------- Revenues: Net sales .................................................... $28,548 $24,346 Interest, royalties and other ................................ 1,524 1,198 --------------------- Total revenues ........................................... 30,072 25,544 --------------------- Expenses: Cost of sales ................................................ 16,449 15,045 Selling, general and administrative .......................... 10,712 9,298 --------------------- Total expenses ........................................... 27,161 24,343 --------------------- Income before income tax expense ............................... 2,911 1,201 Income tax expense ............................................. (1,317) (500) --------------------- Net income ..................................................... $ 1,594 $ 701 ===================== Net income per share ........................................... $ .35 $ .15 ===================== Weighted average number of shares outstanding .................. 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) Three Months Ended March 31, 1997 1996 ---------------------- Operating Activities: Net income ................................................... $ 1,594 $ 701 Adjustments to reconcile net income to net cash provided by operating activities ..................................... 1,475 997 Changes in assets and liabilities-net: Receivables ................................................ 14,900 13,436 Inventories ................................................ (1,206) (1,119) Prepaid expenses ........................................... 425 192 Other assets ............................................... 363 (21) Accounts payable and accrued expenses ...................... (3,670) (1,311) Accrued federal and foreign income taxes ................... (876) 11 Other liabilities and credits .............................. (952) 3,200 --------------------- 12,053 16,086 --------------------- Investing Activities: Purchases of U.S. government securities ...................... (14,628) (9,770) Proceeds from sales of U.S. government securities ............ 5,000 Purchases of property, plant and equipment ................... (108) (34) Proceeds from disposal of property, plant and equipment ...... 12 17 --------------------- (9,724) (9,787) --------------------- Net change in cash ............................................. 2,329 6,299 Cash, beginning of period ...................................... 10,665 5,963 --------------------- Cash, end of period ............................................ $ 12,994 $12,262 ===================== 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, 1996 filed with the Securities and Exchange Commission on March 26, 1997. 2. In 1991, the Company and a third party commenced an arbitration proceeding before the Netherlands Arbitration Institute contesting the attempt of Benetton International N.V. ("Benetton") to prematurely terminate the License Agreement for "Benetton by Bulova" timepieces and seeking damages in relation thereto. (The License Agreement subsequently terminated in 1994). The arbitral panel determined that Benetton was not entitled to terminate the License Agreement prior to the expiration of its term and awarded damages to the Company in relation thereto. Benetton has commenced proceedings in the Dutch courts seeking to overturn the arbitral award on a number of grounds and, pending the outcome of those proceedings, to suspend enforcement of the damage award. The Dutch courts have refused to suspend enforcement of the damage award and on February 12, 1996, the Company received approximately $3,857,000 which represented damages, costs and interest. The funds received are subject to return, with interest, if the Dutch courts ultimately uphold Benetton's petition to overturn the arbitral award. As a result, the Company has deferred recognition of the award and recorded a deferred credit. 3. Under the tax allocation agreement between the Company and its parent, Loews Corporation ("Loews"), the Company will pay Loews approximately $787,000 and has paid approximately $66,000 for the three months ended March 31, 1997 and 1996, respectively. See Note 4 of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 1996. 4. Loews provides administrative and managerial services for which the Company was charged $516,000 and $175,000 for the three months ended March 31, 1997 and 1996, respectively. 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. The increased charges reflect the re-evaluation by Loews of the services provided to the Company. See Note 2 of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 1996. Page 6 5. Shareholders' equity:
March 31, December 31, 1997 1996 ------------------------ (In thousands) Common stock ................................. $22,999 $22,999 Additional paid-in capital ................... 23,197 23,197 Retained earnings ............................ 29,372 27,778 Cumulative translation adjustment ............ (1,330) (1,251) Pension liability adjustment ................. (337) (337) ---------------------- Total .................................... 73,901 72,386 Less treasury stock, at cost ................. 5 5 ---------------------- Total shareholders' equity ............... $73,896 $72,381 ======================
6. The Company is responsible for the clean-up of certain environmental conditions at its current facility as well as certain former manufacturing facilities. The environmental liability recognized in the Company's financial statements to date of $536,000 represents the minimum of the Company's estimated range of equally likely outcomes, the upper limit of that range is approximately $1,136,000. See Note 9 of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 1996. 7. 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 March 31, 1997 and December 31, 1996 and the results of operations and changes in cash flows for the three months ended March 31, 1997 and 1996, respectively. Results of operations for the first quarter of each of the years is not necessary indicative of results of operations for that entire year. Page 7 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations --------------------------------------------------------------- Liquidity and Capital Resources: In the first quarter of 1996, the Company received approximately $3,857,000 in cash which represented damages, costs and interest, as a result of the arbitration proceedings with Benetton International, N.V. regarding premature termination of a licensing agreement, which is subject to return under certain circumstances. See Note 2 of the Notes to Consolidated Condensed Financial Statements. The Company generated cash flow from operations of $12,053,000 and $16,086,000 for the three months ended March 31, 1997 and 1996, respectively. The decrease in net cash flow is due primarily to the collection of the arbitral award discussed above, and an increase in inventory of approximately $1,206,000. In previous years, the Company relied on Loews, which owns approximately 97% of the Company's common stock, to meet working capital needs which the Company was not able to meet through internally generated funds. In 1979, the Company entered into a credit agreement with Loews (the "Credit Agreement") which provides 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, 1998. The Company expects to generate sufficient cash flow from operations in 1997. While Loews has no obligation to enter into or maintain arrangements for any further borrowing, it is anticipated that should the Company require working capital advances, they would be provided by Loews under the Credit Agreement. See Note 2 of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 1996. The Company plans to improve warehouse operation efficiency during 1997 by investing in property, plant and equipment. Capital expenditures for the current year are expected to be funded through operations, and are estimated to be approximately $1,000,000. The review and evaluation of operations and information systems are not complete, and actual expenditures may differ from current estimates. The Company's capital expenditures amounted to $108,000 for the three months ended March 31, 1997. In addition, as of March 31, 1997 the Company has outstanding purchase commitments related to capital expenditures amounting to approximately $830,000. The Company purchased U.S. Treasury bills for $14,628,000 in cash during the three months ended March 31, 1997. The securities mature in July 1997 and are classified as available for sale. Results of Operations: Total revenues increased $4,528,000, or 17.7%, for the three months ended March 31, 1997 as compared to the prior year. Watch and clock net sales increased $4,202,000, or 17.3%, for the three months ended March 31, 1997, as compared to 1996. The increase is due to overall high unit prices and sales volume. The watch and clock revenue increase is primarily attributable to the continued growth of our core Bulova watch brand, which posted increases of $3,041,000, or Page 8 21.2% for the three months ended March 31, 1997, as compared to the prior year. The increase is the result of the brand's 18.8% increase in unit volume over the prior year. Interest, royalties and other revenues increased $326,000, or 27.2%, for the three months ended March 31, 1997, as compared to 1996. The Company recognized $1,053,000 and $916,000 in royalty income for the first quarter of 1997 and 1996, respectively. Royalty income represents payments by a distributor and licensees principally in Europe, the Far East and South America. Interest income increased $107,000 or 51.0% for the three months ended March 31, 1997, as compared to the prior year due to the increased investment activity. Selling, general and administrative expenses as a percentage of net sales for the three months ended March 31, 1997 was 37.5% as compared to 38.2% for the prior year. This decrease is the result of higher sales and management's continued efforts to control discretionary costs. Income before income taxes increased $1,710,000 for the three months ended March 31, 1997, as compared to the prior year, resulting from the sales increase as discussed above and lower postretirement benefit costs, partially offset by higher costs allocated by Loews. The Company imports most of its watch and clock products. Foreign currency fluctuations therefore, can have a material impact on operations. Approximately 10% of the Company's purchases are denominated in Japanese yen. As a result of hedging practices adopted by the Company, foreign currency fluctuations have not had a material impact on the results of operations for the three months ended March 31, 1997. Future foreign currency fluctuations, however, could impact gross profit, income and cash flow. Corporate Related Parties - Loews has provided administrative services for which the Company was charged $516,000 and $175,000 for the three months ended March 31, 1997 and 1996, respectively. The cost allocated to the Company is estimated to be the incremental cost incurred by Loews in providing these services to the Company. The increased charges reflect the re-evaluation by Loews of the services provided to the Company. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. -------------------------------- (a) Exhibits -- (27) Financial Data Schedule for the three months ended March 31, 1997. (b) Current reports on Form 8-K -- There were no reports on Form 8-K filed for the three months ended March 31, 1997. Page 9 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: May 13, 1997 By: /s/ Paul S. Sayegh ----------------------- PAUL S. SAYEGH Chief Operating Officer (Duly authorized officer and principal financial officer) Page 10 EX-27 2 FINANCIAL DATA SCHEDULE FOR MARCH 31, 1997 FORM 10-Q
5 1,000 3-MOS DEC-31-1997 MAR-31-1997 12,994 14,755 42,929 4,106 38,336 115,242 20,414 8,887 144,550 18,526 0 22,999 0 0 50,897 144,550 28,548 30,072 16,449 16,449 0 694 7 2,911 1,317 1,594 0 0 0 1,594 0.35 0
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