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 March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________________ to __________________
0-28040
-------------------------------
COMMISSION FILE NUMBER
-------------------------------
BACOU USA, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 05-0470688
- --------------------------- --------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
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 [ ]
As of May 12, 1999 there were 17,621,465 shares of Common Stock outstanding.
<PAGE>
BACOU USA, INC.
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Consolidated Condensed Balance Sheets,
December 31, 1998 and March 31, 1999 3
Consolidated Condensed Statements of Income,
Three Months Ended March 31, 1998 and 1999 4
Consolidated Condensed Statements of Cash Flows,
Three Months Ended March 31, 1998 and 1999 5
Notes to Consolidated Condensed Financial Statements 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-14
Item 3. Quantitative and Qualitative Disclosures About Market Risk 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 15
Signatures 16
<PAGE>
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BACOU USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(in thousands, except share data)
(unaudited)
December 31, March 31,
1998 1999
------------ -----------
ASSETS
Current assets:
<S> <C> <C>
Cash and cash equivalents................................ $ 1,090 $ 34,208
Trade accounts receivable, net........................... 27,110 32,647
Inventories.............................................. 38,246 37,823
Other current assets..................................... 1,251 2,680
Deferred income taxes.................................... 2,138 1,905
------------ -----------
Total current assets................................... 69,835 109,263
Property and equipment, net.............................. 53,998 55,084
Intangible assets, net................................... 169,937 167,829
------------ -----------
Total assets........................................... $ 293,770 $ 332,176
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current installments of long-term debt................... $ 15,714 $ 22,857
Accounts payable......................................... 8,959 6,452
Accrued expenses......................................... 12,242 8,215
Income taxes payable..................................... 1,828 4,227
------------ -----------
Total current liabilities.............................. 38,743 41,751
Long-term debt............................................. 92,050 121,428
Deferred income taxes...................................... 6,311 6,755
Other liabilities.......................................... 2,754 2,691
------------ -----------
Total liabilities...................................... 139,858 172,625
------------ -----------
Common stock subject to a put option....................... 9,450 9,450
------------ -----------
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, 17,610,465 shares in 1998 and 17,621,465
shares in 1999 issued and outstanding.................... 17 17
Additional paid-in capital................................. 63,258 63,423
Retained earnings.......................................... 81,187 86,661
------------ ----------
Total stockholders' equity............................. 144,462 150,101
------------ -----------
Total liabilities and stockholders' equity............. $ 293,770 $ 332,176
============ ==========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
BACOU USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(in thousands, except per share data)
(unaudited)
Three Months Ended
March 31,
------------------------------
1998 1999
------------- -----------
<S> <C> <C>
Net sales.......................................... $ 49,515 $ 54,575
Cost of sales...................................... 24,699 27,688
------------- -----------
Gross profit....................................... 24,816 26,887
Operating expenses:
Selling.......................................... 7,948 8,693
General and administrative....................... 4,966 4,784
Research and development......................... 804 1,209
Purchased in-process research and development.... 4,680 ---
Amortization of intangible assets................ 1,484 2,115
------------- -----------
Total operating expenses........................... 19,882 16,801
------------- -----------
Operating income................................... 4,934 10,086
Other expense (income):
Interest expense................................. 884 1,457
Interest income.................................. (40) (12)
Other............................................ (48) 105
------------- -----------
Total other expense................................ 796 1,550
------------- -----------
Income before income taxes......................... 4,138 8,536
Income taxes....................................... 1,402 3,062
------------- -----------
Net income......................................... $ 2,736 $ 5,474
============= ===========
Earnings per share:
Basic............................................ $ 0.15 $ 0.31
============= ===========
Diluted.......................................... $ 0.15 $ 0.31
============= ===========
Weighted average shares outstanding:
Basic............................................ 17,594 17,616
============= ===========
Diluted.......................................... 17,654 17,786
============= ===========
</TABLE>
See accompanying notes to consolidated condensed financial statements.
<PAGE>
<TABLE>
<CAPTION>
BACOU USA, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
Three Months Ended
March 31,
--------------------------------
1998 1999
--------- ----------
Cash flows from operating activities:
<S> <C> <C>
Net income............................................................ $ 2,736 $ 5,474
Adjustments to reconcile net income to net cash provided
by (used in) operating activities:
Depreciation and amortization......................................... 3,011 4,133
Purchased in-process research and development......................... 4,680 ---
Deferred income taxes................................................. (1,427) 677
Change in assets and liabilities, net of effects of acquired companies:
Trade accounts receivable........................................... (6,346) (5,537)
Inventories......................................................... 274 423
Prepaid expenses and other current assets........................... (2,929) (1,429)
Accounts payable.................................................... 416 (2,507)
Accrued expenses.................................................... 1,374 (4,090)
Income taxes........................................................ 2,635 2,399
-------- ----------
Net cash provided by (used in) operating activities................. 4,424 (457)
-------- ----------
Cash flows from investing activities:
Capital expenditures.................................................. (2,525) (3,111)
Acquisition of businesses, including direct costs of
acquisition, net of cash acquired................................... (119,334) ---
-------- ----------
Net cash used in investing activities............................... (121,859) (3,111)
-------- ----------
Cash flows from financing activities:
Proceeds from long-term debt.......................................... 124,300 50,000
Repayment of long-term debt........................................... (5,900) (3,929)
Repayments under note payable, net.................................... (1,539) (9,550)
Proceeds from exercise of stock options............................... --- 165
-------- ----------
Net cash provided by financing activities........................... 116,861 36,686
-------- ----------
Net increase (decrease) in cash and cash equivalents.................... (574) 33,118
Cash and cash equivalents at beginning of period........................ 1,277 1,090
======== ==========
Cash and cash equivalents at end of period.............................. $ 703 $ 34,208
======== ==========
Supplemental disclosures of cash flow information:
Cash paid during the period for interest.............................. $ 246 $ 1,472
======== ==========
Cash paid during the period for income taxes.......................... $ 488 $ 1,027
======== ==========
Fair value of stock options issued pursuant to a consulting
agreement........................................................... $ 387 $ ---
======== ==========
See accompanying notes to consolidated condensed financial statements.
</TABLE>
<PAGE>
BACOU USA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
MARCH 31, 1999
(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 leading brands of products that protect the sight, hearing, respiratory
systems and hands of workers against occupational hazards.
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. 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. Results of operations for interim periods may not be
indicative of results expected for a full year.
2. ACQUISITION OF PERFECT FIT GLOVE CO., INC.
Effective April 1, 1999, the Company acquired Perfect Fit Glove Co., Inc. and
certain affiliates and related assets ("Perfect Fit"), manufacturers and
distributors of protective gloves and other related products worldwide with
fiscal year 1998 combined net sales of $47.3 million. The Company acquired the
assets of Perfect Fit for $37.8 million in cash plus the assumption of certain
liabilities equal to approximately $16.0 million. The Company has agreed to pay
an additional earnout of up to $6.0 million to the extent actual combined cash
flow of the acquired business for 1999 exceeds certain specified targets.
The acquisition was financed by a $50.0 million term loan from Banque Nationale
de Paris ("BNP") made in March 1999. The term loan bears interest at a per annum
rate equal to three-month LIBOR plus 0.60% and provides for repayment over a
seven year term.
The acquisition will be accounted for under the purchase method of accounting
and, therefore, operating results of Perfect Fit will be included in the
consolidated results of the Company beginning on April 1, 1999. An allocation of
the purchase price for Perfect Fit and proforma operating information will be
disclosed in the Company's quarterly report on Form 10-Q for the period ending
June 30, 1999.
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
$1,150,000 at December 31, 1998 and $1,136,000 at March 31, 1999.
4. INVENTORIES
Inventories consist of the following:
December 31, March 31,
(in thousands) 1998 1999
------------------ ------------
Raw material and supplies................... $16,407 $18,114
Work-in-process............................. 5,165 6,584
Finished goods.............................. 16,674 13,125
================== ============
$38,246 $37,823
================== ============
5. PROPERTY, EQUIPMENT AND INTANGIBLE ASSETS
Accumulated depreciation and amortization on property and equipment totaled
$17,954,000 at December 31, 1998 and $19,972,000 at March 31, 1999. Accumulated
amortization on intangible assets totaled $20,501,000 at December 31, 1998 and
$22,616,000 at March 31, 1999.
6. SEGMENT DATA
The Company has two reportable segments -- the safety segment and the optical
frames and instruments segment. The safety segment includes consumable products
(protective eyewear and hearing protection) and technical products (respirators
and gas monitors), all of which are sold principally to industrial and fire
safety distributors. The optical frames and instruments segment includes
eyeglass frames and components, which are sold principally to optical
laboratories, and vision screening equipment. Eyeglass frames and components are
purchased by optical laboratory customers who fit complete frames with
prescription lenses.
The Company evaluates segment performance based upon a measure of profit
represented by operating income prior to non-recurring gains and losses,
intangible amortization expense, interest and taxes. Presented below is a
summary of financial data for the Company's reportable segments. Adjustments to
reconcile segment operating income to consolidated operating income include
amortization expense totaling $1,484,000 and $2,115,000 for the three months
ended March 31, 1998 and 1999, respectively, and also include non-recurring
charges totaling $5,964,000 in 1998.
<TABLE>
<CAPTION>
Optical Frames
Safety and Instruments Reconciling Consolidated
(in thousands) Segment Segment All Other Adjustments Total
--------- ----------------- ---------- ---------------------------
1998
<S> <C> <C> <C> <C> <C>
Net sales.................. $ 41,072 $ 8,443 $ --- $ --- $ 49,515
Operating income (loss).... 12,920 695 (1,233) (7,448) 4,934
Depreciation............... 1,215 303 9 --- 1,527
Total assets (December 31). 250,172 41,938 1,660 --- 293,770
Capital expenditures....... 1,761 409 355 --- 2,525
1999
Net sales.................. $ 45,924 $ 8,651 $ --- $ --- $ 54,575
Operating income (loss).... 12,847 862 (1,508) (2,115) 10,086
Depreciation............... 1,641 369 8 --- 2,018
Total assets............... 254,066 42,312 35,798 --- 332,176
Capital expenditures....... 2,084 978 49 --- 3,111
</TABLE>
ITEM 2. 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. In addition, when used
in this Form 10-Q, words such as "believes," "anticipates," "expects," and
similar expressions are intended to identify forward-looking statements. We
caution you that a number of important factors could cause actual outcomes to
differ materially from those expressed in any forward-looking statements made by
us, or on our behalf. Forward-looking statements involve a number of risks and
uncertainties including, but not limited to:
o continued demand for our current product lines;
o the success of our new product introductions;
o the success of our acquisition strategy;
o continued availability and favorable pricing of raw materials;
o our ability and the ability of our key vendors to successfully respond to
year 2000 issues;
o the effect of any work stoppages;
o competitive pressures;
o general economic conditions; and
o regulatory matters.
We cannot assure you that we will be able to anticipate or respond in a timely
fashion to changes in any of the factors listed above, which could adversely
affect our operating results in one or more fiscal quarters. Our operating
results in any past period should not be considered indicative of the results to
be expected for future periods. Fluctuations in our operating results may also
result in fluctuations in the price of our common stock.
ACQUISITIONS
Effective April 1, 1999, we acquired Perfect Fit, manufacturers and distributors
of protective gloves and other related products worldwide with fiscal year 1998
combined net sales of $47.3 million. We acquired the assets of Perfect Fit for
$37.8 million in cash plus the assumption of certain liabilities equal to
approximately $16.0 million. The acquisition will be accounted for under the
purchase method of accounting and, therefore, operating results of Perfect Fit
will be included in our consolidated results beginning on April 1, 1999.
For the year ended December 31, 1998, our gross margin was 52.3% and our
operating margin was 21.2% (excluding non-recurring acquisition-related items).
Although we expect our gross, operating and net profit to increase as a result
of our acquisition of Perfect Fit, we expect the acquisition of this business
will dilute our 1999 margins from percentages reported in 1998. We expect the
operating margin of Perfect Fit will be in a range of 10 - 12%, prior to
amortization of intangible assets, which we expect to be approximately $1.1
million annually for 30 years. We have also incurred additional indebtedness in
connection with our acquisition of Perfect Fit (see "Liquidity and Capital
Resources") and we expect to incur approximately $2.3 million of interest
expense in 1999 (based on current interest rate projections) in connection with
these borrowings.
Effective February 27, 1998, we acquired substantially all assets and assumed
substantially all liabilities of Howard S. Leight & Associates, Inc. (d/b/a
Howard Leight Industries, "Howard Leight"), a manufacturer of hearing protection
products (including disposable, reusable and banded ear plugs, and ear muffs)
for cash consideration of $125.9 million, $5.9 million of which represented the
refinancing of Howard Leight indebtedness (the "Leight Acquisition").
In connection with the Leight Acquisition, a portion of the acquisition price
totaling $4.7 million was allocated to the fair value of purchased in-process
research and development and charged immediately to operating expenses. A
portion of the acquisition price was also allocated to the fair value of
acquired inventories. The increase of acquired inventories from historical cost
to fair value is recorded as cost of sales when the related inventory is sold,
and reduced gross profit during the first quarter of 1998 by $0.7 million.
Finally, cash bonuses in the amount of $0.6 million were paid to certain senior
executives of Howard Leight in connection with the Leight Acquisition and have
been included with general and administrative expenses for the quarter ended
March 31, 1998. Collectively these items are referred to as the "1998
Acquisition-Related Adjustments" and totaled $6.0 million, or $3.7 million on an
after-tax basis, for the quarter ended March 31, 1998. The following discussion
provides an analysis of our actual operating results, and also analyzes our
operating results excluding the effect of these acquisition-related items.
RESULTS OF OPERATIONS
The following table presents selected operating data of Bacou and such amounts
as percentages of net sales for the periods indicated.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------
(in thousands, except percentages) 1998 1999
---------------------------------
<S> <C> <C> <C> <C>
Net sales ........................................ $49,515 100.0% $54,575 100.0%
Cost of sales (1) ................................ 24,699 49.9 27,688 50.7
------- ----- ------- ------
Gross profit ..................................... 24,816 50.1 26,887 49.3
Operating expenses:
Selling ........................................ 7,948 16.1 8,693 15.9
General and administrative (2) ................. 4,966 10.0 4,784 8.8
Research and development ....................... 804 1.6 1,209 2.2
Purchased in-process research and development(3) 4,680 9.5 -- 0.0
Amortization of intangible assets .............. 1,484 3.0 2,115 3.9
------- ----- ------- ------
Total operating expenses ......................... 19,882 40.2 16,801 30.8
------- ----- ------- ------
Operating income ................................. 4,934 9.9 10,086 18.5
Other expense .................................... 796 1.6 1,550 2.9
------- ----- ------- ------
Income before income taxes ....................... 4,138 8.3 8,536 15.6
Income taxes ..................................... 1,402 2.8 3,062 5.6
------- ----- ------- ------
Net income (4) ................................... $ 2,736 5.5 $ 5,474 10.0
======= ===== ======= ======
</TABLE>
(1) 1998 includes acquisition-related inventory adjustment totaling $0.7
million.
(2) 1998 includes acquisition-related bonuses totaling $0.6 million.
(3) 1998 includes acquisition-related charge for purchased research and
development totaling $4.7 million.
(4) On an after-tax basis, 1998 acquisition-related adjustments totaled $3.7
million.
Net Sales. Our net sales increased 10.2% from $49.5 million for the three months
ended March 31, 1998 to $54.6 million for the three months ended March 31, 1999.
Net sales in our safety segment increased 11.8% from $41.1 million in 1998 to
$45.9 million in 1999, while net sales in our optical frames and instruments
segment increased 2.5% from $8.4 million in 1998 to $8.7 million in 1999. Export
sales represented 13.6% of net sales in the 1998 period and 13.7% of net sales
in the 1999 period.
Sales for the 1999 quarter included sales by our Howard Leight business for
three full months, whereas the 1998 period only included sales for one month
from this acquired business. Assuming the Howard Leight business were owned for
the entire period in 1998, sales declined 4.0% from $56.9 million for the three
months ended March 31, 1998 to $54.6 million for the three months ended March
31, 1999. We believe that the decline in sales resulted from softened demand in
January and February of 1999, as well as changes to our promotional programs.
The 1998 quarter included a promotion that featured our uvex astrospec 3000(R)
safety eyewear, however in 1999, the promotion for this product line has been
scheduled for the second quarter rather than the first quarter. As a result of
changes in the timing of this promotional program we experienced lower sales of
uvex astrospec 3000(R) eyewear from the first quarter of 1998 to the first
quarter of 1999.
Cost of Sales. Our cost of sales increased 12.1% from $24.7 million for the
three months ended March 31, 1998 to $27.7 million for the three months ended
March 31, 1999, primarily due to inclusion of operating results of our Howard
Leight business for three full months in the 1999 quarter compared with only one
month in the 1998 quarter.
Gross Profit. Our gross profit increased 8.3% from $24.8 million for the three
months ended March 31, 1998 to $26.9 million for the three months ended March
31, 1999. Excluding acquisition-related inventory adjustments in the 1998
period, our gross margin declined from 51.5% in 1998 to 49.3% in 1999. Our gross
margin declined from 1998 to 1999 primarily as a result of lower sales volume in
the astrospec 3000(R) product line. The astrospec 3000(R) is one of our more
profitable product lines and, therefore, lower sales of this product during the
1999 quarter resulted in a reduction of our gross margin.
Operating Expenses. Our operating expenses declined 15.5% from $19.9 million for
the three months ended March 31, 1998 to $16.8 million for the three months
ended March 31, 1999. Excluding acquisition-related charges for purchased
research and development and excluding acquisition-related bonuses, both
associated with the Leight Acquisition, operating expenses increased 15.1% from
$14.6 million for the three months ended March 31, 1998 to $16.8 million for the
three months ended March 31, 1999. This increase resulted principally from
inclusion of operating results of the Howard Leight business for three full
months in the 1999 period, including amortization expense associated with this
acquisition.
Excluding amortization expense and non-recurring items, our operating expenses
were 26.9% of sales in 1999 and 26.7% of sales in 1998. Intangible amortization
expense increased from $1.5 million (or 3.0% of sales) in the 1998 quarter, to
$2.1 million (or 3.9% of sales) in the 1999 quarter. Increased amortization
expense is a result of only including one-month of amortization expense relating
to the Leight Acquisition in the first quarter of 1998, and including three full
months of amortization in the first quarter of 1999.
Operating Income. Principally as a result of the 1998 Acquisition-Related
Adjustments, our operating income of $10.1 million for the three months ended
March 31, 1999, was 104.4% higher than the reported $4.9 million for the three
months ended March 31, 1998. Excluding the 1998 Acquisition-Related Adjustments,
operating income declined 7.5% from $10.9 million in the 1998 period to $10.1
million in the 1999 period, and our operating margin declined from 22.0% in 1998
to 18.5% in 1999. Our lower operating margin resulted from a lower gross margin
and higher amortization expense.
Other Expense. Other expense increased 94.7% from $796,000 for the three months
ended March 31, 1998 to $1.6 million for the three months ended March 31, 1999.
Other expense consists principally of net interest expense totaling $844,000 in
the 1998 period and $1.4 million in the 1999 period. The increase in net
interest expense from 1998 to 1999 is due principally to borrowings made in
connection with the Leight Acquisition which were outstanding for only one month
in 1998 and three months in 1999.
Income Taxes. Our effective income tax rate was 33.9% in the 1998 period and
35.9% in the 1999 period. Excluding the 1998 Acquisition-Related Adjustments,
our effective income tax rate was 36.4% in the 1998 period compared with 35.9%
in the 1999 period. The adjusted effective rate in both periods was higher than
the federal statutory rate of 35.0% due to state and local income taxes.
Net Income. Principally as a result of the 1998 Acquisition-Related Adjustments,
our net income of $5.5 million for the three months ended March 31, 1999, was
100.0% higher than the reported $2.7 million for the three months ended March
31, 1998. Excluding the 1998 Acquisition-Related Adjustments, our net income
declined by 14.8% from $6.4 million in the 1998 period to $5.5 million in the
1999 period.
LIQUIDITY AND CAPITAL RESOURCES
Our liquidity historically has been derived from cash flow provided by
operations and, periodically, from bank borrowings utilized to finance
acquisitions of businesses. We utilize EBITDA (earnings before interest, taxes,
depreciation and amortization) as a measure of cash flow provided by our
operations. As used by Bacou, EBITDA represents operating income plus
depreciation and amortization, adjusted for non-recurring items. Our EBITDA
increased 2.2% from $13.9 million in the 1998 period to $14.2 million in the
1999 period. EBITDA should not be considered in isolation or as a substitute for
net earnings or cash provided by operating activities, each prepared in
accordance with generally accepted accounting principles.
We used cash equal to $10.7 million for working capital purposes during the
three months ended March 31, 1999, principally due to increases in accounts
receivable, and payments of accounts payable and accrued expenses. Our trade
accounts receivable increased from $27.1 million at December 31, 1998 to $32.6
million at March 31, 1999, primarily due to significant sales volume during
March 1999.
Cash used in investing activities totaled $3.1 million in the 1999 period
compared with $121.9 million in the 1998 period. The 1998 period included $120.0
million expended for the Leight Acquisition. Because the closing for the
acquisition of Perfect Fit did not occur until April 1, 1999, the use of these
proceeds will not be reported until the second quarter of 1999. Capital
expenditures totaled $3.1 million in the 1999 period and $2.5 million in the
1998 period.
In connection with our acquisition of Biosystems we provided former shareholders
of Biosystems put options covering 578,560 shares issued in connection with that
acquisition. The put options may be exercised at any time through September 30,
1999, at a price equal to approximately $16.38 per share. If the put options
were exercised in full we would be required to make cash payments totaling
approximately $9.5 million to repurchase these shares, and we expect that such
payment would be funded by bank borrowings.
In February 1998 we entered into an agreement with Banque Nationale de Paris
("BNP") pursuant to which the bank made a term loan (the "First BNP Loan") in
the principal amount of $110.0 million. The First BNP Loan requires quarterly
interest payments at an annual rate equal to three-month LIBOR plus 0.5% and
requires principal repayments in equal quarterly installments over seven years.
In March 1999 we entered into an agreement with BNP pursuant to which the bank
made a term loan (the "Second BNP Loan") in the principal amount of $50.0
million, for the purpose of funding the acquisition of Perfect Fit. The Second
BNP Loan requires quarterly interest payments at an annual rate equal to
three-month LIBOR plus 0.6% and requires principal repayments in equal quarterly
installments over seven years. We also maintain a $31.0 million revolving line
of credit facility (the "Revolving Facility") with Citizens Bank of Rhode
Island. The Revolving Facility is available to fund acquisitions and for other
general corporate purposes, bears interest at a rate per annum equal to
three-month LIBOR plus 0.7% and is due in full on May 31, 2000.
During the first quarter of 1998 we borrowed a total of $124.3 million in
connection with the Leight Acquisition, including $110.0 million on the First
BNP Loan and $14.3 million on the Revolving Facility. We repaid principal
totaling $13.5 million and $7.4 million during the three months ended March 31,
1999 and 1998, respectively.
We are pursuing a business strategy that includes acquisitions as an important
element. As a result, we may incur additional indebtedness, may be required to
negotiate additional credit facilities or may issue additional common or
preferred stock in order to fund potential future investments, if any, resulting
from our acquisition strategy. Except for cash requirements to fund potential
future acquisitions, we believe that our cash flow provided by operating
activities together with unused borrowing capacity will be sufficient to fund
working capital requirements, debt service requirements and capital expenditures
for the foreseeable future.
SEASONALITY
Our business has been subject to slight seasonal variations, which we have
attributed to fluctuations in industrial activity and annual weather patterns.
Historically, our sales from October through December have been somewhat lower
than other periods due to anticipated lower demand in the more inclement winter
months and planned inventory reductions by major distributors. In addition to
seasonality, our business has been variable period to period due to other
factors, including promotional activity undertaken by us in response to
competitive pressures, market demand, production capacity, inventory levels, and
other considerations.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year in the
date field. These programs were designed and developed without consideration of
the impact of the upcoming change in century. If not corrected, many computer
applications could fail or create erroneous results at or before the year 2000.
We initiated a comprehensive project in June 1997 to address our year 2000
compliance. The project consists of four phases including:
o assessment phase -- identification of areas of non-compliance (based
upon a combination of our own analysis and direct communication with
vendors that developed and support our software) and evaluation of
risk;
o planning phase -- development of specific steps to correct
non-compliance, including a timetable;
o implementation phase -- execution of steps developed during the
planning phase, and
o testing phase -- conducting tests to validate year 2000 compliance.
The project considers both our primary information systems (software for all
financial systems, network software and equipment, personal computers and
related software, etc.) and other applications dependent upon embedded software
(manufacturing equipment, telephone systems, security systems, etc.).
We have substantially completed the assessment, planning and implementation
phases of this project. Results of the assessment phase initially identified
applications, principally at our Survivair and Uvex Safety divisions, which were
not year 2000 compliant. During 1997, we initiated a project to install and
implement common software at all of our business units and we signed a license
agreement with J.D. Edwards & Company for such software in September 1997. Full
implementation of this software was completed at our Survivair division on
January 1, 1999, and at our Uvex Safety division on April 1, 1999. J.D. Edwards
& Company has represented that this software is year 2000 compliant and that its
processes used to achieve year 2000 readiness are certified by the Information
Technology Association of America. We believe that implementation of this
software at our Survivair and Uvex divisions has corrected our material year
2000 deficiencies, except any that may exist at Perfect Fit (see discussion
below).
We have incurred costs totaling approximately $3.0 million through March 31,
1999 for implementation of the software at our Survivair and Uvex Safety
business units, and we estimate the remaining costs necessary to complete full
implementation to be approximately $400,000. Except for the cost of training,
implementation costs have been capitalized and will be depreciated over the
estimated useful life of the software. The cost of training is substantially
complete and was expensed as incurred.
We have substantially completed the assessment and planning phases at Perfect
Fit and expect to be fully complete with such phases by the end of the second
quarter of 1999. Our assessment through May 12, 1999, has not revealed any areas
of non-compliance that we believe represent a material risk to our business.
The implementation phase for other applications with embedded software is
ongoing and expected to be completed by the end of the second quarter of 1999.
The cost of modifying or correcting deficiencies in these applications is
immaterial.
Our business is also dependent upon the systems of third parties. With the
exception of a few significant vendors, we believe that year 2000 deficiencies
in these systems would not represent a material financial or business risk to
us. With regard to these few vendors, we are assessing their year 2000 readiness
based upon direct communication with each such vendor.
We believe that the most reasonably likely worst case result relating to year
2000 would be the failure of certain applications with embedded software, or
failure of third party systems on which our systems rely. Failure of
applications with embedded software could result in temporary disruption to an
aspect of our operations, such as disruption in operation of certain
manufacturing equipment. Failure of the information systems of a vendor could
result in the temporary interruption of supply of material or services required
by us. Although there can be no assurance that these failures would not have an
adverse effect on our business, we believe the effect of such failure would not
be material to our business. We have developed informal contingency plans
relating to any such failure, which include reliance upon redundant systems,
reliance upon manual systems and reliance upon alternate vendors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk can result from fluctuations in interest rates, foreign currency
exchange rates, commodity prices or other market exposures. Uncertainties that
are either nonfinancial or nonquantifiable, such as political, economic, tax,
other regulatory or credit risks are not included in the following assessment of
our market risks.
We believe our only market risk exposure is the risk of adverse fluctuations in
interest rates. At April 30, 1999, we had debt outstanding totaling $162.0
million. Interest rates on principally all of this debt are variable based upon
three-month LIBOR. Three-month LIBOR approximated 5.0% at April 30, 1999. We
have prepared sensitivity analyses of our interest rate exposure for 1999 to
assess the impact of hypothetical changes in interest rates. Based upon the
results of these analyses, a 10% adverse change in interest rates from the April
30, 1999 rate would result in a reduction of our 1999 after-tax earnings of
approximately $347,000 or $0.02 per share.
<PAGE>
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
EXHIBIT NUMBER DESCRIPTION OF EXHIBIT
- -------------- ----------------------
Exhibit 10.1 Amended and Restated Employment Agreement dated April 1,
1999 between Thomas J. Goeltz and Titmus Optical, Inc.
Exhibit 11 Statement Re: Computation of Per Share Earnings
Exhibit 27 Financial Data Schedule
(b) The Company filed six reports on Form 8-K during the quarterly period ended
March 31, 1999, all for the purpose of disclosing the contents of Press Releases
issued by the Company.
The first report, filed January 19, 1999, reported the Company's appointment of
Alan H. Bennett as President of the Uvex Safety Division.
The second report, filed January 20, 1999, reported the sales of the Company for
the fourth quarter and full year of 1998.
The third report, filed February 9, 1999, reported the financial results of the
Company for the fourth quarter and full year 1998.
The fourth report, filed March 1, 1999, reported the election of Alfred J.
Verrecchia as a member of the Board of Directors of the Company.
The fifth report, filed March 1, 1999, reported the Company's planned
acquisition of Perfect Fit Glove Co., Inc.
The sixth report, filed March 16, 1999, reported cautionary statements of the
Company regarding financial results for the first quarter of 1999.
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: May 12, 1999
BACOU USA, INC.
(Registrant)
/s/ Philip B. Barr /s/Jeffrey T. Brown
- ------------------------------- ---------------------------
Philip B. Barr, Jeffrey T. Brown
Executive Vice President and Chief Accounting Officer
Chief Financial Officer
Exhibit 10.1
AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS AMENDED AND RESTATED EMPLOYMENT AGREEMENT made as of this 1st day of
April, 1999, by and between Thomas J. Goeltz ("Executive") and Titmus Optical,
Inc., a corporation organized under the laws of Delaware (the "Company"), with
its principal offices at 3811 Corporate Drive, Petersburg, Virginia 23805-9288.
W I T N E S S E T H :
WHEREAS, Executive and Company entered into an Employment Agreement dated
October 1, 1995, which was amended by a First Amendment dated December 18, 1996
and a Second Amendment dated March 15, 1999 (together the "Old Agreement")
pursuant to which Executive currently serves as Senior Vice President - Sales of
the Company; and
WHEREAS, Executive and Company wish to amend and restate the Old Agreement
by entering into this Agreement for the purpose of promoting Executive to serve
as the President of the Company; and
WHEREAS, Executive and Company are willing to enter into this Agreement for
such purpose, for the period provided herein and on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
Company and Executive hereby agree as follows:
1. Employment. During the period of employment set forth in Section 2 of
this Agreement, Company shall employ Executive, and Executive shall serve as the
President of the Company, reporting to the Chairman of the Company. Executive
agrees to faithfully perform the duties assigned to him to the best of his
ability and, except for vacations and periods of temporary illness, to devote
his full time and attention to the business of Company. Ancillary employment
such as writing, teaching or lecturing, as well as the acceptance of honorific
titles may be undertaken by the Executive only with the approval of the Chairman
of the Company, or in his absence the President and CEO ofBacou USA, Inc.
("Bacou") or his designee (hereinafter "Chairman"). Executive also agrees that
he will not engage in any other business activities without the prior approval
of the Chairman. Executive may only serve as an officer, director, trustee or
committee member, or in any similar position, of a reasonable number (maximum
two) of trade associations and religious, charitable, educational, civic or
other non-business organizations, subject to the approval of the Chairman. The
Executive represents and warrants to Company that he is now under no contract or
agreement nor will he execute any contract or agreement that will in any manner
interfere, conflict with or prevent him from performing his duties under the
terms and conditions of this Agreement, recognizing that his performance
hereunder will require the devotion of his full time and attention during and
beyond regular business hours during the Term (as hereinafter defined),
including extensive travel.
2. Period of Employment. The Executive's employment under this Agreement
shall initially cover the period beginning April 1, 1999 to December 31, 2000
(the "Initial Term"). On January 1, 2001, and at the end of each year
thereafter, the period of employment shall be automatically extended, without
further action by either party, for successive one-year periods (each a "Renewal
Term") unless, at least six months prior to the end of any Term, either party
shall have served written notice on the other of its election to allow this
Agreement to terminate at the end of such Term. The Initial Term and any Renewal
Terms are hereinafter sometimes collectively referred to as the "Term". If
either party notifies the other party that it shall not extend the period of
employment pursuant to the provisions of the preceding paragraph, Company may,
at its option, decide that the Executive shall take a leave-of-absence for part
or all of the remaining time of his employment, continuing to receive all
compensation as if actively working.
3. Termination. The period of employment shall be terminated upon the first
to occur of the following:
(i) The expiration of the period of employment pursuant to Section 2 of
this agreement.
(ii) The Executive's death.
(iii) The Executive becoming permanently disabled. Permanent disability
shall mean physical or mental incapacity of a nature which prevents
Executive from performing his duties under this Agreement for a
period of more than six months in any twelve month period.
(iv) The Executive's employment being terminated by Company for cause.
Termination for cause shall mean termination by action of the Board
of Directors of Company because of any of the following: (a) the
willful failure of Executive to perform his duties and obligations
under this Agreement; (b) the failure to abide by, or to execute in
a reasonable and responsible manner, the policies and procedures of
the Company as in effect from time to time; (c) gross negligence in
the performance of his duties under this Agreement; (d) the
commission by Executive of a felony; (e) engaging in any activity
that is competitive with the business of the Company; or (f)
engaging in fraudulent, unethical or dishonest activities.
4. Compensation and Benefits.
(a) The Executive shall receive regular compensation (the "Base
Salary") at the initial rate of One Hundred Sixty-Five Thousand Dollars
($165,000.00) per annum during the Initial Term. The Base Salary shall be
payable in arrears less the usual payroll deductions at the same times and in
the same manner as salaries paid to other employees of the Company. The
Executive shall participate in any wage increases applicable generally to
salaried employees of Company. The Base Salary prevailing at any time shall be
reviewed annually for a possible increase beginning in February 2000.
(b) In addition to the Base Salary, the Executive shall be entitled to
receive annual incentive compensation payments ("Incentive Compensation") at
such times and in such amounts as may be determined pursuant to the Bonus Plan
for Executives of subsidiaries of Bacou USA, Inc., as in effect for the
applicable year (the "Company Plan", a copy of which plan for 1998 and 1999 is
attached to this Agreement as Exhibit A). Notwithstanding the Company Plan, for
the year 1999 Executive shall receive Incentive Compensation equal to the
greater of (i) the amount payable pursuant to the Company Plan, or (ii) an
amount paid at the discretion of the Board of Directors of the Company based on
the Company's achievement of certain objectives set forth on Exhibit B hereto.
If the Company achieves all of the objectives set forth on Exhibit B, Executive
shall receive Incentive Compensation for 1999 of $35,000. If the Company
partially achieves the objectives set forth on Exhibit B, the Board of Directors
may award Executive Incentive Compensation for 1999 in an amount less than
$35,000 but that, in its discretion, fairly reflects the level of achievement of
these objectives. The Executive acknowledges that, by agreeing to the terms of
this Section 4(b), he thereby waives any rights to participate in any other
incentive compensation plan of the Company.
(c) Incentive Compensation shall be paid by Company for each fiscal
year within ten (10) days after a decision is made by the Board of Directors of
Company as to the amount of such Incentive Compensation, but in any event no
later than the earlier of the annual meeting of the Board of Directors of the
Company or February 28 following the fiscal year for which the Incentive
Compensation is paid.
(d) The Executive shall be entitled to participate in any stock option
plan which Bacou USA, Inc. may adopt for Company at levels to be determined by
the Board of Directors of Company in its sole discretion.
(e) The Executive shall be entitled to participate in all savings,
thrift, retirement or pension, short term and long term disability, health and
accident, Blue Cross/Blue Shield, Major Medical or other hospitalization,
holiday, vacation, and other fringe benefit programs generally available to
senior executives of Company in accordance with and subject to the terms and
conditions of such programs.
(f) In addition, the Executive shall be entitled to receive the
following benefits:
(i) The Executive shall have the use of a company car, subject to
the Automobile Policy of Bacou USA, Inc., a copy of which is attached to this
Agreement as Exhibit C. To the extent that you have a leased or owned vehicle in
place at the beginning of the Initial Term, we shall pay you the standard amount
payable pursuant to the Company's Automobile Policy until such time as the lease
expires on such vehicle or you are ready to purchase another vehicle.
(ii) The Executive shall be entitled to vacation pursuant to the
Bacou USA, Inc. Executive Vacation Policy. Vacation days will be taken at a time
convenient for both the Executive and Company. To the extent the Executive does
not take all vacation days the remaining days will be carried forward for an
unlimited period or be paid to the Executive at the level of his Base Salary
valid for the fiscal year in which vacation days are not taken.
(iii) When traveling on Company business, the Executive will be
provided coach-class airfare on domestic trips; business class airfare will be
provided on international trips.
(iv) The Executive is authorized to incur reasonable expenses in
connection with and for the promotion of the business of Company, including
expenses for meals and lodging (regular hotel room, no suites), entertainment,
and similar items as required from time to time by the Executive's duties.
Company shall reimburse the Executive for all such expenses upon the
presentation of an account therefor, together with appropriate supporting
documentation.
5. Limitations on Authority. Except as otherwise provided herein, approval
by the Chairman must be obtained prior to the Executive taking any of the
following actions on behalf of the Company:
(a) Acquisition or disposition of real property or any rights deriving
therefrom, or changing title in any such real property.
(b) Making unplanned capital expenditures or any commitment therefor in an
amount greater than $10,000 for any individual expenditure and $50,000
in the aggregate in any fiscal year;
(c) Borrowing or guaranteeing any borrowings from or on behalf of any
party, or altering the terms of any loan agreements for such
borrowings except for any such loans or borrowings as shall be agreed
upon by the Board of Directors of Company;
(d) Hiring, terminating, promoting or demoting executive personnel with
annual salary in excess of $50,000 or granting unbudgeted raises,
bonuses or other compensatory payments to any employee of the Company;
(e) Promoting or hiring anyone to a position above the Manager level (i.e.
to Director or above);
(f) Granting retirement benefits or other non-earned income to any person;
(g) Modification of any qualified plan or other benefit plan, e.g., health
insurance;
(h) Acquiring the assets or shares of any business;
(i) Acquiring or disposing of the assets or shares of the Company or
selling any fixed asset of the Company below book value or writing off
inventory of the Company with an aggregate book value exceeding
$50,000 in any fiscal year;
(j) Entering into or terminating agreements of any kind or nature with a
monthly financial obligation in excess of U.S. $5,000 for more than
six (6) months except purchase orders for materials required for the
manufacture of products for sale in the ordinary course of business;
(k) Making basic changes in the administration, organization, production,
and distribution of Company or any of its affiliates, as well as
closing or curtailing the functions of Company or any of its
affiliates;
(l) Filing any lawsuit;
(m) Making cash or non-cash corporate contributions above the annually
budgeted amount;
(n) When there is a large volume of sales, the making of decisions
requiring both extraordinary risks and extraordinary expenditures;
(o) Entering into any transaction on behalf of Company or its affiliates
which is not in the usual course of its business;
(p) Adoption or modification of the annual budget.
Notwithstanding the foregoing, approval is not required for any action
provided for in the approved and applicable annual budget or annual plan of
Company. In addition, should the Chairman be unavailable, if an emergency arises
which requires the Executive to take immediate action in which approval as set
forth in this Section would otherwise be required, the Executive is no longer
bound by the limitations described above and is authorized to make a decision in
the best interests of Company. The Executive will immediately inform the
Chairman of any such decisions made by him.
6. Non-Disclosure of Information. It is understood that the business of
Company and its affiliates is of a confidential nature. During the period of the
Executive's employment with Company, the Executive may have received and/or may
secure confidential information concerning Company or any of Company's
affiliates or subsidiaries which, if known to competitors thereof, would damage
Company or its said affiliates or subsidiaries. The Executive agrees that during
and after the term of this Agreement he will not (except as authorized by
Company or in the proper performance of his duties or except as ordered by a
court or other body of competent jurisdiction or as otherwise required by law),
directly or indirectly, divulge, disclose or appropriate to his own use, or to
the use of any third party, any secret, proprietary or confidential information
or knowledge obtained by him during the term hereof concerning such confidential
matters of Company or its subsidiaries or affiliates, including, but not limited
to, information pertaining to trade secrets, systems, manuals, confidential
reports, methods, processes, designs, equipment lists, operating procedures,
equipment and methods used and preferred by Company's customers. Upon
termination of this Agreement, the Executive shall promptly deliver to Company
all materials of a secret or confidential nature relating to the business of
Company or any of its subsidiaries or affiliates which are, directly or
indirectly, in the possession or under the control of the Executive. The
provisions of this paragraph shall continue to apply after the Executive ceases
to be employed by Company for a period of seven (7) years except in respect of
any information or knowledge disclosed to the public, other than through an
unauthorized disclosure by the Executive.
7. Trade Secrets. The Executive covenants that he shall, while employed by
Company, assign, transfer, and set over to Company or its designee all right,
title and interest in and to all trade secrets, secret processes, inventions,
improvements, patents, patent applications, trademarks, trademark applications,
copyrights, copyright registrations, discoveries and/or other developments
(hereinafter "Inventions") which he may, thereafter, alone or in conjunction
with others, during or outside normal working hours, conceive, make, acquire or
suggest at any time which relate to the products, processes, work, research, or
other activities of Company or any of its subsidiaries or affiliates. Any and
all Inventions which are of a proprietary nature and which the Executive may
conceive, may acquire or suggest, either alone or in conjunction with others,
during his employment with Company (whether during or outside normal working
hours) relating to or in any way pertaining to or connected with Company's
business, shall be the sole and exclusive property of Company or its designee
and the Executive, whenever requested to do so by Company, shall, without
further compensation or consideration properly execute any and all applications,
assignments or other documents which Company or its designee shall deem
necessary in order to apply for and obtain Letters Patent of the United States
and/or comparable rights afforded by foreign countries for the Inventions, or in
order to assign and convey to Company or its designee the sole and exclusive
right, title and interest in and to the Inventions. This obligation shall
continue beyond the termination of this Agreement with respect to Inventions
conceived or made by the Executive during the term of his employment by Company,
and shall be binding upon his assigns, executors, administrators, and other
legal representatives.
8. Non-Competition. (a) During the term of this Agreement or any renewal
thereof and, at Company's option for a period of up to two years thereafter,
should the Executive's contract be terminated or not be renewed, the Executive
agrees that he will not within the geographical area of the United States,
engage, either directly or indirectly, individually or as an owner, partner,
joint venturer, employee, officer, director, stockholder, consultant,
independent contractor or lender of or to any corporation, holding Company or
other business entity which is in a business similar to that of Company or any
of its affiliates. In the event that Company chooses to exercise its option to
prevent the Executive from competing with Company following termination or
non-renewal of his employment, Company shall notify the Executive in writing
within two (2) weeks following his last day of employment or within two (2)
weeks of notice by Company of its decision that the Executive shall take a
leave-of-absence, in either case specifying the period of up to two years
following termination, resignation, or non-renewal of employment during which
such competitive activity shall be prohibited. In the event Company exercises
its option, Company shall pay Executive an amount equal to his annual Base
Salary at the time of termination, resignation or non-renewal. Notwithstanding
the foregoing, the Executive (as hereinbefore described in Section 2(d)) may own
five (5%) percent of the securities of any business in competition with the
business of Company or any of its affiliates, which securities are regularly
traded on a public exchange, provided that any such ownership shall not result
in the Executive becoming a record or beneficial owner at any time of more than
five (5%) percent of equity securities of said business entity.
(b) The Executive shall not during the term of his Employment under
this Agreement or any renewal thereof, and for a period of two (2) years
thereafter, employ, retain or arrange to have any other person or entity employ
or retain any person who was employed by Company or any of its affiliated
companies having an annual compensation of at least U.S. $50,000 per annum
during the term of this Agreement or any renewal thereof.
(c) If any provision of this Section is held to be unenforceable
because of the scope, duration or area of its applicability or otherwise, the
legal entity making that determination will have the power to modify the scope,
duration or area, or all of them, and the provision will then apply in its
modified form.
9. Property. All letters, memoranda, documents, business notes (including
all copies thereof) and other information contained on any other computer media
including computer disks and hard drives of the Executive in any manner relating
to the duties of Executive under this agreement are the property of Company.
10. Notices. Any notices or other communications required to be given
pursuant to this Agreement shall be in writing and shall be deemed given: (i)
upon delivery, if by hand; (ii) three (3) business days after mailing, if sent
by registered or certified mail, postage prepaid, return receipt requested;
(iii) one (1) business day after mailing, if sent via overnight courier; or (iv)
upon transmission, if sent by telex or facsimile except that if such notice or
other communication is received by telex or facsimile after 5:00 p.m. on a
business day at the place of receipt, it shall be effective as of the following
business day. All notices and other communications hereunder shall be given as
follows:
(a) If to the Company, to it at:
c/o Bacou USA, Inc.
10 Thurber Boulevard
Smithfield, RI 02917
Attention: President
Telephone No.: 401-233-0333
Telecopier No.: 401-232-2230
(b) If to the Executive, to him at:
Telephone No.: ( )
Telecopier No.: ( )
Either party may change its address for receiving notice by written notice given
to the other names above in the manner provided above.
11. Full and Complete Agreement; Amendment. This Agreement (together with
the Exhibits attached hereto) constitutes the full and complete understanding
and agreement of the parties and supersedes all prior understandings and
agreements. This Agreement may be modified only by a written instrument executed
by both parties (except Exhibits B and C which are subject to modification from
time to time by Bacou USA, Inc.)
12. Construction. This Agreement shall be construed under the laws of the
State of Rhode Island.
13. Arbitration. Notwithstanding the fact that the parties shall be
entitled to equitable relief in order to enforce certain provisions hereunder
(e.g., temporary restraining orders or injunctive relief), any dispute,
controversy or claim arising out of or relating to this Agreement, or the breach
hereof, shall be settled by arbitration in accordance with the "Commercial
Arbitration Rules" of the American Arbitration Association in effect on the date
of this Agreement, except as varied below. The site of any such arbitration
shall be Providence, Rhode Island and any award shall be deemed to be a
Providence, Rhode Island award. There shall be a single arbitrator who shall be
admitted to practice law in Rhode Island, with no less than ten (10) years
experience in the handling of commercial or corporate matters or disputes. The
arbitrator shall render a written decision stating his reasons therefor, and
shall render an award within six (6) months of the request for arbitration, and
such award shall be final and binding upon both parties. Judgment upon the award
rendered by the arbitrator may be entered in any court of competent jurisdiction
in any state of the United States or country or application may be made to such
court for a judicial acceptance of the award and an enforcement, as the law of
such jurisdiction may require or allow. The substantive law to be applied to any
case determined pursuant to this Section 13 is that of Rhode Island. The expense
of arbitration shall be borne by the respective parties except to the extent
that the arbitrators shall determine that the entire expense shall be borne by a
single party.
14. Binding Nature. This Agreement shall be binding upon and shall inure to
the benefit of the parties and their respective heirs, personal representatives,
successors and assigns.
IN WITNESS WHEREOF, Company and the Executive have duly executed this
Agreement as of the day and year first written above.
TITMUS OPTICAL, INC. EXECUTIVE
By: /s/Walter Stepan /s/Thomas J. Goeltz
-------------------------- ------------------------
Name: Walter Stepan Thomas J. Goeltz
Title: Chairman
By: /s/Philip B. Barr
-------------------------
Name: Philip B. Barr
Title: Vice-Chairman
<PAGE>
EXHIBIT A
BACOU USA, INC.
BONUS PLAN FOR EXECUTIVES
See Copy of Plan Attached Hereto
<PAGE>
EXHIBIT B
1999 OBJECTIVES FOR TITMUS OPTICAL, INC.
1. Achieve an increase in net sales of at least 5% over 1998
2. Reduce inventory to $10,000,000 or less at December 31, 1999
3. Bring about a meaningful improvement in on-time delivery to customers
4. Achieve an operating profit that equals or exceeds 1997 operating
profit of $3,056,000 as shown in footnotes to the financial
statements of Bacou USA, Inc.
<PAGE>
EXHIBIT C
BACOU USA, INC.
AUTOMOBILE POLICY
See Copy of Policy Attached Hereto
EXHIBIT 11
BACOU USA, INC.
STATEMENT RE: COMPUTATION OF PER SHARE EARNINGS
-----------------------------------------------
(in thousands)
(unaudited)
Three Months Ended
March 31,
-----------------------------
1998 1999
----------- ---------
Basic:
Weighted average shares outstanding 17,594 17,616
=========== =========
Net income $2,736 $5,474
=========== =========
Per share amount $0.15 $0.31
=========== ==========
Diluted:
Weighted average shares outstanding 17,594 17,616
Net effect of dilutive stock options based on the
treasury stock method using the average market
price 60 170
----------- ---------
Total diluted shares 17,654 17,786
=========== =========
Net income $2,736 $5,474
=========== =========
Per share amount $ 0.15 $ 0.31
=========== =========
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001006027
<NAME> BACOU USA, INC.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 34,208
<SECURITIES> 0
<RECEIVABLES> 32,647
<ALLOWANCES> 1,136
<INVENTORY> 37,823
<CURRENT-ASSETS> 109,263
<PP&E> 55,084
<DEPRECIATION> 0
<TOTAL-ASSETS> 332,176
<CURRENT-LIABILITIES> 41,751
<BONDS> 121,428
0
0
<COMMON> 17
<OTHER-SE> 150,084
<TOTAL-LIABILITY-AND-EQUITY> 332,176
<SALES> 54,575
<TOTAL-REVENUES> 54,575
<CGS> 27,688
<TOTAL-COSTS> 27,688
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,457
<INCOME-PRETAX> 8,536
<INCOME-TAX> 3,062
<INCOME-CONTINUING> 5,474
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,474
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
