<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended SEPTEMBER 30, 1996
------------------------------------------------
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 0-28040
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BACOU USA, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 05-0470688
- - -------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 THURBER BOULEVARD, SMITHFIELD, RHODE ISLAND 02917-1896
---------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(401) 233-0333
----------------------------------------------------
(Registrant's telephone number, including area code)
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
--- ---
The number of shares outstanding of the issuer's Common Stock, $.001 par
value, as of November 14, 1996 was 17,312,200.
1
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BACOU USA, INC.
INDEX
Page No.
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Part I. Financial Information
---------------------
Item 1. Financial Statements
--------------------
Consolidated Condensed Balance Sheets
September 30, 1996 and December 31, 1995 3
Consolidated Condensed Statements of Income
Three Months and Nine Months ended
September 30, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows
Nine Months Ended September 30, 1996 and 1995 5
Notes to Consolidated Condensed Financial Statements 6 - 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8 - 12
Part II. Other Information
-----------------
Item 6. Exhibits and Reports on Form 8-K 12
Signatures 13
2
<PAGE> 3
<TABLE>
BACOU USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
<CAPTION>
September 30, 1996 December 31, 1995
------------------ -----------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 15,264,151 $ 1,210,247
Trade accounts receivable, net 14,220,884 10,803,126
Inventories 16,012,775 18,205,258
Prepaid expenses 1,413,353 1,383,206
Recoverable income taxes - 442,873
Deferred income taxes 134,000 762,193
------------ ------------
Total current assets 47,045,163 32,806,903
------------ ------------
Property and equipment, net 24,910,438 20,792,562
Intangible assets, net 48,295,406 50,869,949
------------ ------------
Total assets $120,251,007 $104,469,414
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt $ - $ 20,000,000
Accounts payable 3,104,168 2,936,939
Accrued compensation and benefits 2,477,335 1,934,794
Other accrued expenses 2,958,681 3,528,986
Income taxes payable 1,975,061 -
------------ ------------
Total current liabilities 10,515,245 28,400,719
------------ ------------
Long-term debt, excluding current installments - 29,000,000
Deferred income taxes 1,295,000 1,370,494
------------ ------------
Total liabilities 11,810,245 58,771,213
------------ ------------
Stockholders' equity:
Preferred stock, $.001 par value, 5,000,000 shares
authorized, no shares issued and outstanding - -
Common stock, $.001 par value, 25,000,000 shares
authorized, 17,312,200 shares in 1996 and 13,860,000
shares in 1995 issued and outstanding 17,312 13,860
Additional paid-in capital 66,514,906 19,186,140
Retained earnings 41,908,544 26,498,201
------------ ------------
Total stockholders' equity 108,440,762 45,698,201
------------ ------------
Total liabilities and stockholders' equity $120,251,007 $104,469,414
============ ============
</TABLE>
See accompanying notes to consolidated condensed financial statements.
3
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<TABLE>
BACOU USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
<CAPTION>
(Unaudited) (Unaudited)
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $29,319,047 $20,191,269 $84,413,341 $58,409,534
Cost of sales 12,435,657 7,739,207 36,385,779 23,615,742
----------- ----------- ----------- -----------
Gross profit 16,883,390 12,452,062 48,027,562 34,793,792
Operating expenses:
Selling 4,521,233 2,726,254 13,080,641 7,774,672
General and administrative 2,335,241 988,874 6,325,456 2,999,757
Amortization of intangible assets 1,041,039 746,771 3,143,249 2,188,799
----------- ----------- ----------- -----------
Total operating expenses 7,897,513 4,461,899 22,549,346 12,963,228
----------- ----------- ----------- -----------
Operating income 8,985,877 7,990,163 25,478,216 21,830,564
Other expenses (income):
Interest expense:
Bacou, S.A - 336,077 - 870,666
Other 6,476 157,080 818,072 679,796
----------- ----------- ----------- -----------
6,476 493,157 818,072 1,550,462
Interest income (155,282) (51,168) (257,539) (138,872)
Other (54,370) (1,850) (216,579) (43,036)
----------- ----------- ----------- -----------
Total other expenses (income) (203,176) 440,139 343,954 1,368,554
----------- ----------- ----------- -----------
Income before income taxes 9,189,053 7,550,024 25,134,262 20,462,010
Income taxes 3,533,520 2,945,160 9,723,920 7,980,166
----------- ----------- ----------- -----------
Net income $ 5,655,533 $ 4,604,864 $15,410,342 $12,481,844
=========== =========== =========== ===========
Net income per common and common
equivalent share $ 0.33 $ 0.33 $ 0.96 $ 0.90
=========== =========== =========== ===========
Weighted average common and common
equivalent shares 17,354,265 13,860,000 16,134,837 13,860,000
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
4
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<TABLE>
BACOU USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
<CAPTION>
(Unaudited)
Nine months ended September 30,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $15,410,342 $12,481,844
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 5,850,406 3,797,623
Deferred income taxes 552,699 260,269
Change in assets and liabilities, net of effects
of acquired companies:
Trade accounts receivable (3,417,758) (395,969)
Inventories 2,192,483 (748,077)
Prepaid expenses (30,147) (565,017)
Accounts payable 167,229 (133,911)
Accrued expenses (27,764) (164,183)
Income taxes 2,419,220 1,792,898
----------- -----------
Net cash provided by operating activities 23,116,710 16,325,477
----------- -----------
Cash flows from investing activities:
Capital expenditures (7,360,650) (2,235,926)
Acquisition of businesses, including direct costs
of acquisition, net of cash acquired (33,089) (6,600,852)
----------- -----------
Net cash used in investing activities (7,393,739) (8,836,778)
----------- -----------
Cash flows from financing activities:
Repayment of long-term debt (49,000,000) (4,000,000)
Proceeds from long-term debt - 25,800,000
Proceeds from issuance of common stock,
net of expenses 47,330,933 -
----------- -----------
Net cash provided by (used in)
financing activities (1,669,067) 21,800,000
----------- -----------
Net increase in cash and cash equivalents 14,053,904 29,288,699
Cash and cash equivalents at beginning of period 1,210,247 453,138
----------- -----------
Cash and cash equivalents at end of period $15,264,151 $29,741,837
=========== ===========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest $ 839,381 $ 1,575,843
=========== ===========
Cash paid during the period for income taxes $ 6,769,280 $ 5,936,000
=========== ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
5
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BACOU USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SEPTEMBER 30, 1996
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying consolidated condensed financial statements ("financial
statements") include the accounts of Bacou USA, Inc. and its wholly-owned
subsidiaries (together the "Company"). The Company designs, manufactures and
sells personal protective equipment, including non-prescription protective
eyewear, frames for prescription eyewear, respirators, vision screening
equipment and laser protective eyewear.
The financial statements have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission for interim financial
information, including the instructions to Form 10-Q and Rule 10-01 of
Regulation S-X. Accordingly, certain information and footnote disclosures
normally required in complete financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted.
Effective August 1, 1995, the Company elected to change its fiscal year end from
July 31 to December 31. Operating results for 1995 have been presented for
interim periods that coincide with the new fiscal year. In the opinion of
management these financial statements include all adjustments necessary for a
fair presentation of the results of operations for the interim periods
presented. The results of operations for interim periods, however, may not be
indicative of the results that may be expected for a full year. Certain 1995
balances have been reclassified to conform to the 1996 presentation.
2. SALE OF COMMON STOCK
In April 1996 the Company completed a public offering of its common stock.
Proceeds from the sale of 3,450,000 shares, net of underwriters discount and
expenses of issuance, totaled $47.3 million. Proceeds were used to repay all
outstanding bank indebtedness ($45.0 million at March 31, 1996).
3. TRADE ACCOUNTS RECEIVABLE
An allowance for doubtful accounts is deducted from trade accounts receivable in
the accompanying Financial Statements. The allowance for doubtful accounts was
$1,089,118 at September 30, 1996 and $656,745 at December 31, 1995.
<TABLE>
4. INVENTORIES
Inventories consist of the following:
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1996 1995
---- ----
<S> <C> <C>
Raw material and supplies............ $ 6,910,281 $ 7,655,184
Work-in-process ..................... 2,459,568 2,824,696
Finished goods ...................... 6,642,926 7,725,378
----------- -----------
$16,012,775 $18,205,258
=========== ===========
</TABLE>
6
<PAGE> 7
5. PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS
Property and equipment are stated at cost, except for property and equipment
acquired in connection with purchase business combinations, which are recorded
at fair value on the acquisition date. Depreciation is provided over the
estimated useful lives of the respective assets using the straight-line method.
Leasehold improvements are amortized over the shorter of the lease term or
estimated useful life of the asset. Accumulated depreciation and amortization
totaled $6,432,583 at September 30, 1996 and $3,725,424 at December 31, 1995.
Intangible assets consist principally of customer relationships, acquired
technology, and goodwill. Goodwill represents the excess of purchase price over
fair value of net assets acquired in connection with purchase business
combinations. Intangible assets are amortized using the straight-line method
over the estimated periods benefited. Accumulated amortization totaled
$8,304,350 at September 30, 1996 and $5,161,103 at December 31, 1995.
6. STOCK OPTIONS
Effective February 26, 1996 the Company adopted the Bacou USA, Inc. 1996 Stock
Incentive Plan (the "Plan"). The Plan provides for stock-based incentive awards
to be granted to key employees, including incentive stock options, non-qualified
stock options, restricted stock, stock appreciation rights and stock unit
awards. In the aggregate, 900,000 shares of Common Stock have been reserved for
issuance under the Plan.
On March 28, 1996 (subject to the initial closing on April 2, 1996 of the public
offering of common stock) incentive and non-qualified stock options were granted
to certain employees for the purchase of up to 377,000 shares of common stock at
an exercise price of $15.00 per share. Options vest 20% on July 31, 1996, and
20% on each of the first, second, third and fourth anniversary dates from the
date of grant.
On May 23, 1996 the Board of Directors approved and adopted the Bacou USA, Inc.
1996 Non-Employee Director Stock Option Plan (the "Director Plan"). The
Director Plan provides for stock options to be granted automatically to each
non-employee director of the Company on July 1 of each year at a per share
exercise price equal to its then fair market value. In the aggregate, 100,000
shares of common stock have been reserved for issuance under the Director Plan.
Pursuant to the Director Plan, on July 1, 1996 each of four non-employee
directors of the Company automatically was granted an option to purchase 2,000
shares of the Company's common stock at an exercise price of $16.88 per share.
The options vested 100 percent on July 31, 1996.
The Company is required to adopt Statement of Financial Accounting Standards No.
123, "Accounting for Stock-Based Compensation," (Statement 123) effective
December 31, 1996. Statement 123 requires financial statement disclosure about
stock-based employee compensation arrangements. As allowed by Statement 123, the
Company intends to account for employee stock-based compensation using the
"Intrinsic Value Based Method." The Company does not believe the adoption of
Statement 123 will have a material impact on its operating results.
7. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Net income per common and common equivalent share is calculated using the
weighted average number of common shares outstanding during the period, and the
net additional number of shares which would be issuable upon the exercise of
stock options, assuming the Company used the proceeds received upon exercise of
the options to purchase shares at market value (treasury stock method). Stock
options are assumed to be exercised at the beginning of the period or, if later,
the date of grant. Accounting Principles Board Opinion No. 15 requires
presentation of supplementary net income per common and common equivalent share
in the event shares of common stock are sold for cash and a portion or all of
the proceeds are used to retire debt. Assuming the sale of common stock and
repayment of debt, as described in note 2, occurred effective January 1, 1996
supplementary per share data for the nine months ended September 30, 1996 would
have been as follows:
<TABLE>
<S> <C>
Supplementary net income per common and common equivalent share $0.93
=====
Supplementary weighted average common and common equivalent shares 17,340,874
==========
</TABLE>
No dividends were declared or paid during the nine months ended September 30,
1996 and 1995.
7
<PAGE> 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FACTORS THAT MAY AFFECT FUTURE PERFORMANCE
Statements contained in this Form 10-Q that are not historical facts are
forward-looking statements that are made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. The Company cautions
that a number of important factors could cause the Company's actual results for
1996 and beyond to differ materially from those expressed in any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements
involve a number of risks and uncertainties including, but not limited to,
continued demand for current product lines, the success of new product
introductions, the success of the Company's acquisition strategy, competitive
pressures, general economic conditions, and regulatory matters. The Company
cannot assure that it will be able to anticipate or respond timely to changes in
any of the factors listed above, which could adversely affect the operating
results in one or more fiscal quarters. Results of operations in any past period
should not be considered indicative of the results to be expected for future
periods. Fluctuations in operating results may also result in fluctuations in
the price of the Company's common stock.
BACKGROUND
The Company acquired the business of Pro-Tech Respirators, Inc. ("Pro-Tech")
effective March 31, 1995 for approximately $6.8 million, and the Company
acquired all of the outstanding capital stock of Titmus Optical, Inc. ("Titmus")
effective September 29, 1995 for approximately $27.3 million (collectively, the
"Acquisitions"). Operating results of Pro-Tech and Titmus have been included in
the consolidated condensed financial statements of the Company for periods
subsequent to their respective acquisition dates.
<TABLE>
QUARTER ENDED SEPTEMBER 30, 1996 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1995
The following table presents certain items from the Company's consolidated
condensed statements of income, and such amounts as percentages of net sales,
for the periods indicated (in thousands, except percentages).
<CAPTION>
Three Months Ended September 30
-------------------------------
1996 1995
---- ----
<S> <C> <C> <C> <C>
Net sales $29,319 100.0% $20,191 100.0%
Cost of sales 12,436 42.4% 7,739 38.3%
------- ---- ------- ----
Gross profit 16,883 57.6% 12,452 61.7%
------- ---- ------- ----
Operating expenses:
Selling 4,521 15.4% 2,726 13.5%
General and administrative 2,335 8.0% 989 4.9%
Amortization of intangibles 1,041 3.5% 747 3.7%
------- ---- ------- ----
Total operating expenses 7,897 26.9% 4,462 22.1%
------- ---- ------- ----
Operating income 8,986 30.7% 7,990 39.6%
Other expense (income), net (203) (0.7%) 440 2.2%
------- ---- ------- ----
Income before income taxes 9,189 31.4% 7,550 37.4%
Income taxes 3,533 12.1% 2,945 14.6%
------- ---- ------- ----
Net income $ 5,656 19.3% $ 4,605 22.8%
======= ==== ======= ====
</TABLE>
NET SALES. Net sales increased 45.2% from $20.2 million for the three
months ended September 30, 1995 to $29.3 million for the three months ended
September 30, 1996. This increase was primarily the result of inclusion of the
operations of Titmus, reduced by the effect of the discontinuation of original
equipment manufacture (OEM) sales of ski goggles and sales of a certain
respiratory product line. Sales of non-prescription eyewear, including sales of
products introduced late in the second quarter of 1996, also contributed to
increased sales in the third quarter of 1996.
8
<PAGE> 9
During the nine months ended September 30, 1996, the Company's net sales
included sales of completed prescription eyewear (frames and corrective lenses)
totaling approximately $3.0 million. To the extent that the Company sells
completed prescription eyewear, it competes with its principal customers,
optical laboratories and optical retailers. In connection with the acquisition
of Titmus from Carl Zeiss, Inc., the Company agreed to utilize the seller's
laboratory services for the continued production of completed prescription
eyewear for end users, including corrective lenses, for approximately one year
following the closing. Concurrently with the expiration of the agreement, the
Company has withdrawn from the business of selling completed prescription
eyewear so that it may cease competing with its principal customers and
concentrate on the more profitable business of selling frames for prescription
eyewear. In connection with this decision, certain end users have been
terminated as direct customers of the Company and their accounts have been sold
to optical laboratory customers of the Company for an amount equal to the
outstanding receivables from those accounts. Whenever the optical laboratories
make new sales to the transferred end users, the laboratories are required to
utilize the Company's frames, thus replacing a portion of the discontinued sales
volume with revenues from increased frame sales.
COST OF SALES. Cost of sales increased 60.7% from $7.7 million for the
three months ended September 30, 1995 to $12.4 million for the three months
ended September 30, 1996. The increase was primarily attributable to increased
sales volume resulting from the acquisition of Titmus.
GROSS PROFIT. Gross profit increased 35.6% from $12.5 million for the three
months ended September 30, 1995 to $16.9 million for the three months ended
September 30, 1996. As a percentage of net sales, gross profit was 57.6% and
61.7% for the 1996 and 1995 periods, respectively. The Company's consolidated
gross margin declined from the 1995 period to the 1996 period as a result of
including the operations of Titmus in the 1996 period, which have lower gross
margins than the combined gross margin of the Company's other subsidiaries. The
decrease in consolidated gross margin resulting from the acquisition of Titmus
was offset in part by labor reductions at other subsidiaries.
SELLING EXPENSES. Selling expenses increased 65.8% from $2.7 million for
the three months ended September 30, 1995 to $4.5 million for the three months
ended September 30, 1996. The increase resulted primarily from the acquisition
of Titmus.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased from $1.0 million for the three months ended September 30, 1995 to
$2.3 million for the three months ended September 30, 1996. The increase
resulted primarily from the acquisition of Titmus, including relocation expenses
associated with the move of Titmus to a new facility, and to a lesser extent
from additional administrative costs which became necessary as a result of Bacou
USA, Inc. becoming a public reporting company. Additional relocation expenses
are expected to be incurred by Titmus during the fourth quarter of 1996.
AMORTIZATION OF INTANGIBLES. Amortization of intangibles increased 39.4%
from $0.7 million for the three months ended September 30, 1995 to $1.0 million
for the three months ended September 30, 1996. This increase was due to
amortization of intangible assets recorded in connection with the acquisition of
Titmus.
OPERATING INCOME. As a result of the foregoing, the Company's operating
income increased 12.5% from $8.0 million for the three months ended September
30, 1995 to $9.0 million for the three months ended September 30, 1996.
OTHER EXPENSE (INCOME), NET. Other expense (income), net was ($0.2) million
and $0.4 million for the three months ended September 30, 1996 and 1995,
respectively. The 1995 period included interest expense which totaled $0.5
million. Indebtedness of the Company was repaid in full during April 1996 and
therefore interest expense during the 1996 period was not significant.
INCOME TAXES. The Company's effective income tax rate was 39.0% during both
periods. The effective rate was higher than the federal statutory rate due
primarily to state and local income taxes.
NET INCOME. As a result of the foregoing, the Company's net income
increased by 22.8% from $4.6 million for the three months ended September 30,
1995 to $5.7 million for the three months ended September 30, 1996.
9
<PAGE> 10
NINE MONTHS ENDED SEPTEMBER 30, 1996 COMPARED TO NINE MONTHS ENDED SEPTEMBER
30, 1995
<TABLE>
The following table presents certain items from the Company's consolidated
condensed statements of income, and such amounts as percentages of net sales,
for the periods indicated (in thousands, except percentages).
<CAPTION>
Nine Months Ended September 30
------------------------------
1996 1995
---- ----
<S> <C> <C> <C> <C>
Net sales $84,413 100.0% $58,410 100.0%
Cost of sales 36,386 43.1% 23,616 40.4%
------- ---- ------- ----
Gross profit 48,027 56.9% 34,794 59.6%
------- ---- ------- ----
Operating expenses:
Selling 13,081 15.5% 7,774 13.3%
General and administrative 6,325 7.5% 3,000 5.1%
Amortization of intangibles 3,143 3.7% 2,189 3.8%
------- ---- ------- ----
Total operating expenses 22,549 26.7% 12,963 22.2%
------- ---- ------- ----
Operating income 25,478 30.2% 21,831 37.4%
Other expense , net 344 0.4% 1,369 2.4%
------- ---- ------- ----
Income before income taxes 25,134 29.8% 20,462 35.0%
Income taxes 9,724 11.5% 7,980 13.6%
------- ---- ------- ----
Net income $15,410 18.3% $12,482 21.4%
======= ==== ======= ====
</TABLE>
NET SALES. Net sales increased 44.5% from $58.4 million for the nine months
ended September 30, 1995 to $84.4 million for the nine months ended September
30, 1996. This increase was primarily the result of inclusion of the operations
of Pro-Tech and Titmus, reduced by the effect of the discontinuation of
OEM sales of ski goggles and sales of a certain respiratory product line.
Export sales of all products represented 7.0% and 6.8% of net sales in the
1996 and 1995 periods, respectively. Export sales (including export sales of
Titmus and Pro-Tech) for the nine months ended September 30, 1996 and for the
quarter ended September 30, 1996 increased by 49.5% and 30.2% over the
comparable 1995 periods.
COST OF SALES. Cost of sales increased 54.1% from $23.6 million for the
nine months ended September 30, 1995 to $36.4 million for the nine months ended
September 30, 1996. The increase was primarily attributable to increased sales
volume resulting from the Acquisitions.
GROSS PROFIT. Gross profit increased 38.0% from $34.8 million for the nine
months ended September 30, 1995 to $48.0 million for the nine months ended
September 30, 1996. As a percentage of net sales, gross profit was 56.9% and
59.6% for the 1996 and 1995 periods, respectively. The Company's consolidated
gross margin declined from the 1995 period to the 1996 period as a result of
lower gross margins at the acquired companies. Decreases in gross margin
resulting from the Acquisitions were offset in part by labor reductions at
another subsidiary and non-recurring purchase accounting adjustments recorded in
1995.
SELLING EXPENSES. Selling expenses increased 68.3% from $7.8 million for
the nine months ended September 30, 1995 to $13.1 million for the nine months
ended September 30, 1996. The increase resulted primarily from the Acquisitions.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
increased from $3.0 million for the nine months ended September 30, 1995
to $6.3 million for the nine months ended September 30, 1996. The increase
resulted primarily from the Acquisitions and to a lesser extent from additional
administrative costs which became necessary as a result of Bacou USA, Inc.
becoming a public reporting company.
10
<PAGE> 11
AMORTIZATION OF INTANGIBLES. Amortization of intangibles increased 43.6%
from $2.2 million for the nine months ended September 30, 1995 to $3.1 million
for the nine months ended September 30, 1996. This increase was due to
intangible assets recorded in connection with the Acquisitions.
OPERATING INCOME. As a result of the foregoing, the Company's operating
income increased 16.7% from $21.8 million for the nine months ended September
30, 1995 to $25.5 million for the nine months ended September 30, 1996.
OTHER EXPENSE. Other expense was $0.3 million and $1.4 million for the nine
months ended September 30, 1996 and 1995, respectively. These amounts included
interest expense which totaled $0.8 million and $1.6 million, respectively.
Interest expense declined in the 1996 period due to the repayment of all
outstanding indebtedness in April 1996.
INCOME TAXES. The Company's effective income tax rate was 39.0% during both
periods. The effective rate was higher than the federal statutory rate due
primarily to state and local taxes.
NET INCOME. As a result of the foregoing, the Company's net income
increased by 23.5% from $12.5 million for the nine months ended September 30,
1995 to $15.4 million for the nine months ended September 30, 1996.
LIQUIDITY AND CAPITAL RESOURCES
Gross cash flow (net income plus non-cash items) increased $5.3 million
from $16.5 million during the nine months ended September 30, 1995 to $21.8
million during the nine months ended September 30, 1996. As of September 30,
1996, the Company had approximately $14.0 million invested in high grade
municipal securities.
Trade accounts receivable increased from $10.8 million at December 31, 1995
to $14.2 million at September 30, 1996. This increase resulted primarily from
higher sales volume during the second and third quarters of 1996. Inventories
declined from $18.2 million at December 31, 1995 to $16.0 million at September
30, 1996 due to higher sales volume as well as a planned reduction in certain
raw materials.
Cash used in investing activities decreased from $8.8 million for the nine
months ended September 30, 1995 to $7.4 million for the nine months ended
September 30, 1996. The 1995 period includes payments for the acquisition of
Pro-Tech, including direct costs of acquisition but net of cash acquired,
totaling approximately $6.3 million. Capital expenditures totaled $2.2 million
in the 1995 period and $7.4 million in the 1996 period. As discussed below,
increased capital spending in the 1996 period is a result of the construction of
a new manufacturing facility for Titmus.
The Company has substantially completed construction of a new manufacturing
facility for Titmus. Relocation of the operations of Titmus has commenced and is
expected to be completed by November 30, 1996. The cost to construct this
facility was approximately $6.0 million, with additional capital requirements of
approximately $2.5 million to $3.0 million for machinery, equipment,
furnishings, fixtures and relocation expenses.
At September 30, 1996 the Company had commitments outstanding for the
purchase of machinery and equipment, together with any remaining commitments on
the construction of the Titmus facility, totaling approximately $1.7 million.
The Company is pursuing a business strategy which includes acquisitions as
an important element. At November 14, 1996 the Company had one non-binding offer
outstanding in connection with a potential acquisition. Any transaction
considered by the Company would most likely require additional capital to fund
the purchase price paid for each acquisition.
11
<PAGE> 12
The Company had aggregate indebtedness of $49.0 million at December 31,
1995, of which $45.0 million was indebtedness to a foreign commercial bank and
$4.0 million was indebtedness to a domestic commercial bank. Of this
indebtedness approximately $21.8 million resulted from borrowings in connection
with the Titmus acquisition. Proceeds of borrowings for the Titmus acquisition
were received on September 29, 1995 and were disbursed on October 2, 1995 in
connection with the closing of this acquisition. During the first quarter of
1996, indebtedness to the domestic commercial bank was repaid from cash provided
by operations. During April 1996 the Company completed a public offering of its
common stock. Proceeds from the sale of 3,450,000 shares, net of underwriters
discount and expenses of issuance, totaled $47.3 million and were used to repay
total indebtedness to the foreign commercial bank.
To supplement cash flow provided by operating activities, the Company
maintains a $3.0 million revolving credit facility which is available for use by
a wholly-owned subsidiary for its general working capital purposes. The
revolving credit facility is subject to annual renewal and presently expires
December 31, 1996. No amounts were outstanding under this facility as of
September 30, 1996. The Company also has $8.0 million available under a term
credit facility with a domestic commercial bank which can be used for general
corporate and other working capital requirements of a wholly-owned subsidiary.
Both credit facilities require the Company to maintain a ratio of tangible net
worth to total liabilities of not less than 1.0 to 1.0. The Company believes
that its cash flow provided by operating activities and unused borrowing
capacity will be sufficient to fund capital expenditures, including those to be
incurred in connection with the construction of the new Titmus facility, and to
fund the Company's operating needs during the remainder of 1996 and during 1997.
However, the Company may be required to negotiate additional borrowing
facilities and additional indebtedness may be incurred in order to fund new
investments, if any, resulting from the Company's acquisition strategy.
SEASONALITY
The Company's business has been subject to slight seasonal variations which
the Company has attributed to fluctuations in industrial activity associated
with annual weather patterns. Historically, net sales from October through
December have been somewhat lower than other periods due to anticipated lower
demand in the more inclement winter months, resulting in planned inventory
reductions by major distributors.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit Index
Exhibit Number Description of Exhibit
-------------- ----------------------
10(f) Bonus Plan for Executives of Titmus Optical,
Inc. and Uvex Safety, Inc. for 1996 and 1997
11 Statement Re: Computation of Per Share Earnings
27 Financial Data Schedule
(b) The registrant filed no reports on Form 8-K during the quarterly
period ended September 30, 1996.
12
<PAGE> 13
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.
Dated: November 14, 1996
BACOU USA, INC.
(Registrant)
/s/ Philip B. Barr, Jr. /s/ Jeffrey T. Brown
--------------------------------------- ------------------------
Philip B. Barr, Jr., Vice President and Jeffrey T. Brown
Chief Financial Officer Corporate Controller and
Chief Accounting Officer
13
<PAGE> 1
EXHIBIT 10(f)
-------------
BONUS PLAN FOR EXECUTIVES OF TITMUS OPTICAL, INC.
AND UVEX SAFETY, INC. FOR 1996 AND 1997
August 19, 1996
The Board of Directors of Bacou USA, Inc. ("BACU") has approved and adopted a
Bonus Plan for certain executives at Titmus Optical, Inc. ("TOI") and Uvex
Safety, Inc. ("USI") for 1996 and 1997. The Bonus Plan applies to the President
and all Vice Presidents at TOI and to all Vice Presidents at USI and will be
administered by the Compensation Committee of the Board of Directors of BACU.
The Bonus Plan would apply to executives at or above the Vice President level
at any subsequently acquired companies.
The annual bonus for each covered executive will be determined based upon the
following criteria:
1. The operating profit of the subsidiary, before interest on intercompany
debt. At USI it would be the operating profit shown; and at TOI the
operating profit would be reduced by an annual rent assumption minus
building depreciation. The rent assumption for TOI should be the square
footage of the building multiplied by the USI base rent per square foot.
If the operating profit is:
- up to 5% = no bonus is being paid under this criteria
- above 5%, up to 10% = 5% of base salary will be paid
- above 10%, up to 15% = 7% of base salary will be paid
- above 15%, up to 20% = 10% of base salary will be paid
- above 20%, up to 25% = 13% of base salary will be paid
- above 25%, up to 30% = 17% of base salary will be paid
- above 30%, up to 35% = 20% of base salary will be paid
- above 35% = 25% of base salary will be paid
2. The growth of the subsidiary's sales, determined by comparing the sales
for the bonus year against the prior fiscal year, with an additional bonus
equal to one of the following amounts:
- up to 5.0 = no bonus is being paid under this criteria
- above 5%, up to 10% = 5% of base salary will be paid
- above 10%, up to 15% = 7% of base salary will be paid
- above 15% = 10% of base salary will be paid
3. The growth of the subsidiary's operating profit, determined by comparing
the operating profit for the bonus year against the prior fiscal year, with
an additional bonus equal to one of the following amounts:
- growth up to 5% = no bonus is being paid under this
criteria
- growth above 5%, up to 10% = 5% of base salary will be paid
- growth above 10%, up to 15% = 10% of base salary will be paid
- growth above 15% = 15% of base salary will be paid
4. Discretionary special bonus for engagements in addition to an executive's
main job, as per the recommendation of the CEO of BACU.
5. Discretionary adjustment (up and down) of the amounts determined under
paragraphs 1-3 as per the recommendation of the CEO of BACU.
<PAGE> 1
EXHIBIT 11
----------
<TABLE>
Bacou USA, Inc.
Statement Re: Computation of Per Share Earnings
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
September 30 September 30
------------ ------------
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Primary:
Weighted average shares
outstanding 17,310,897 13,860,000 16,103,963 13,860,000
Net effect of dilutive stock
options based on the treasury
stock method using the
average market price 43,368 - 30,874 -
----------- ----------- ----------- -----------
Total 17,354,265 13,860,000 16,134,837 13,860,000
=========== =========== =========== ===========
Net income $ 5,655,533 $ 4,604,864 $15,410,342 $12,481,844
=========== =========== =========== ===========
Per share amount $ 0.33 $ 0.33 $ 0.96 $ 0.90
=========== =========== =========== ===========
Fully Diluted:
Weighted average shares
outstanding 17,312,200 13,860,000 16,105,106 13,860,000
Net effect of dilutive stock
options based on the treasury
stock method using the
period end market price 43,535 - 30,848 -
----------- ----------- ----------- -----------
Total 17,355,735 13,860,000 16,135,954 13,860,000
=========== =========== =========== ===========
Net income $ 5,655,533 $ 4,604,864 $15,410,342 $12,481,844
=========== =========== =========== ===========
Per share amount $ 0.33 $ 0.33 $ 0.96 $ 0.90
=========== =========== =========== ===========
</TABLE>
15
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0001006027
<NAME> BACOU USA, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 15,264,151
<SECURITIES> 0
<RECEIVABLES> 14,220,884
<ALLOWANCES> 0
<INVENTORY> 16,012,775
<CURRENT-ASSETS> 47,045,163
<PP&E> 24,910,438
<DEPRECIATION> 0
<TOTAL-ASSETS> 120,251,007
<CURRENT-LIABILITIES> 10,515,245
<BONDS> 0
<COMMON> 17,312
0
0
<OTHER-SE> 108,423,450
<TOTAL-LIABILITY-AND-EQUITY> 120,251,007
<SALES> 84,413,341
<TOTAL-REVENUES> 84,413,341
<CGS> 48,027,562
<TOTAL-COSTS> 48,027,562
<OTHER-EXPENSES> 22,549,346
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 818,072
<INCOME-PRETAX> 25,134,262
<INCOME-TAX> 9,723,920
<INCOME-CONTINUING> 15,410,342
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,410,342
<EPS-PRIMARY> 0.96
<EPS-DILUTED> 0.96
</TABLE>
