<PAGE> 1
FORM 10-Q/A
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO________
COMMISSION FILE NUMBER 1-14360
BEC GROUP, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 13-3868804
- ------------------------ ------------------------------------
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
Suite B-302
555 Theodore Fremd Avenue
Rye, New York 10580
- --------------------------------------- ----------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
Registrant's telephone number, including area code: (914) 967-9400
THE REGISTRANT'S QUARTERLY REPORT FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30,
1997 IS AMENDED IN ITS ENTIRETY AS SET FORTH IN THIS FORM 10-Q/A.
Page 1 of 14.
Exhibit Index Appears at page 13.
<PAGE> 2
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
BEC GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
(Unaudited)
September 30, December 31,
1997 1996
--------- ---------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,873 $ 2,164
Trade receivables, net 7,758 7,280
Inventories 9,788 9,317
Receivable from discontinued operations 34,408 937
Investment in discontinued operations 21,030 10,227
Other current assets 2,968 3,654
--------- ---------
Total current assets 77,825 33,579
Property and equipment, net 13,048 13,114
Goodwill, net 11,826 11,372
Intangible assets, net 1,242 1,296
Equity in and notes receivable from affiliated companies 10,185 11,435
Other assets 4,421 4,275
--------- ---------
Total assets $ 118,547 $ 75,071
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities:
Short term debt and current portion of long term debt $ 20,179 $ 17,645
Accounts payable 2,946 2,858
Accrued compensation 1,505 2,134
Other accrued expenses 8,260 8,557
--------- ---------
Total current liabilities 32,890 31,194
Long-term debt 32,938 3,597
Convertible subordinated notes 22,941 21,922
Other 9,376 10,754
--------- ---------
Total liabilities 98,145 67,467
--------- ---------
Stockholders' equity:
Preferred stock - par value $1;
10 shares authorized and outstanding 9,294 --
Common stock - par value $.01; 50,000 shares
authorized; 17,631 and 17,631 shares issued 176 176
Additional paid-in capital 28,654 28,703
Treasury stock - 22 and 116 shares, at cost (106) (557)
Retained deficit (17,616) (20,718)
--------- ---------
Total stockholders' equity 20,402 7,604
--------- ---------
Total liabilities and stockholders' equity $ 118,547 $ 75,071
--------- ---------
</TABLE>
2
See accompanying notes to financial statements
<PAGE> 3
BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Net sales $ 12,058 $ 10,008 $ 35,221 $ 31,984
COSTS AND EXPENSES
Cost of sales 7,599 5,982 21,785 19,348
Selling, general and administrative 2,691 2,289 7,746 7,929
Interest expense 862 871 2,567 2,117
Other income (138) (477) (878) (1,740)
--------- --------- --------- ---------
Total costs and expenses 11,014 8,665 31,220 27,654
--------- --------- --------- ---------
Income from continuing operations before taxes 1,044 1,343 4,001 4,330
Provision for income taxes 345 298 1,271 1,295
--------- --------- --------- ---------
Income from continuing operations 699 1,045 2,730 3,035
Income (loss) from discontinued operations 354 (25,567) 371 79,102
--------- --------- --------- ---------
Net income (loss) $ 1,053 $ (24,522) $ 3,101 $ 82,137
========= ========= ========= =========
Weighted average shares outstanding 17,745 17,697 17,659 17,671
PRIMARY EARNINGS PER SHARE:
Income from continuing operations $ 0.04 $ 0.06 $ 0.16 $ 0.17
Income (loss) from discontinued operations 0.02 (1.45) 0.02 4.48
--------- --------- --------- ---------
Net income (loss) $ 0.06 $ (1.39) $ 0.18 $ 4.65
========= ========= ========= =========
</TABLE>
3
See accompanying notes to financial statements
<PAGE> 4
BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended September 30,
1997 1996
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities
of continuing operations $ 2,946 $ 3,579
Net cash provided (used) by operating activities
of discontinued operations (1,883) 7,797
---------- ----------
Net cash provided by operating activities 1,063 11,376
---------- ----------
Cash flows from investing activities:
Cash expended on acquisitions, net (1,686) --
Capital expenditures (792) (540)
Proceeds from sale of assets -- 157
Net cash provided (used ) by investing activities
of discontinued operations (34,810) 246,784
---------- ----------
Net cash provided (used) by investing activities (37,288) 246,401
---------- ----------
Cash flows from financing activities:
Proceeds from revolving credit line 35,471 2,946
Proceeds from (payments for) long term obligations 100 (394)
Proceeds from issuances of common stock 584 2,503
Purchases of treasury stock (204) --
Cash dividends to shareholders -- (230,071)
Net cash used by financing activities
of discontinued operations (17) (32,221)
---------- ----------
Net cash provided (used) by financing activities 35,934 (257,237)
Net increase (decrease ) in cash (291) 540
Cash and cash equivalents at beginning of period 2,164 4,055
---------- ----------
Cash and cash equivalents at end of period $ 1,873 $ 4,595
========== ==========
</TABLE>
4
See accompanying notes to financial statements
<PAGE> 5
BEC GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 - Basis of Presentation
The accompanying unaudited consolidated financial statements have been prepared
in accordance with generally accepted accounting principles, Regulation S-X and
the instructions for Form 10-Q. These statements contain all adjustments,
consisting of only normal recurring adjustments, which in the opinion of
management are necessary to fairly present the consolidated financial position
of the Company as of September 30, 1997 and its results of operations for the
three and nine months ended September 30, 1997 and 1996 and its cash flows for
the nine months ended September 30, 1997 and 1996. The results of operations of
the interim periods presented are not necessarily indicative of the results to
be expected for the full fiscal year. The consolidated balance sheet at
September 30,1997 and December 31, 1996 reflects the investment in discontinued
operations. These condensed financial statements should be read in conjunction
with the financial statements and notes thereto included in the Company's Annual
Report on Form 10-K for the year ended December 31, 1996.
Note 2 - Discontinued Operations
As of October 30, 1997, the Company entered into a definitive agreement to
acquire (through its wholly-owned subsidiary, BILC Acquisition Corp.) ILC
Technology, Inc. ("ILC"). Under the terms of the agreement and assuming the
conversion of the principal amount of the Company's convertible notes, ILC
shareholders will receive 4.36 shares of the Company's common stock (or 2.18
shares, after giving effect to a proposed one-for-two reverse split of the
Company's common stock) for each share of ILC common stock outstanding. At
September 30, 1997, ILC had 4,879,811 shares of common stock outstanding and the
Company had 17,631,082 shares of common stock issued (or, if the full face
value of the Company's 8% convertible notes were to be converted, 21,286,484
shares). The completion of the transaction is subject to approval by both the
Company's and ILC's shareholders, obtaining required regulatory approvals, and
other customary closing conditions. Mr. Martin E. Franklin and Mr. Henry C.
Baumgartner, the chairmen, respectively, of the Company and ILC have executed
voting agreements in favor of the transaction.
On October 31, 1997, the Company also announced its intent to spin off its Bolle
Inc. ("Bolle") subsidiary to the Company's shareholders. It is anticipated that
the Company's shareholders will receive one share of Bolle common stock for
every three shares of the Company's common stock held at the time of the spin
off. It is also anticipated that Bolle will be listed on the NASDAQ National
Market System.
5
<PAGE> 6
The Company's 1996 discontinued operations included Foster Grant Group and the
Prescription Eyewear Business. The Company's 1996 and 1997 discontinued
operations include the planned spin off of Bolle Inc.
Summarized information on the combined discontinued operations follows:
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1997 1996 1997 1996
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Net Sales $ 10,192 $ 6,244 $ 20,670 $ 19,816
Income before taxes $ 529 $ 365 $ 584 $ 2,325
Income tax expense 158 282 196 967
Minority interests 17 -- 17 --
---------- ---------- ---------- ----------
Earnings from 1997 discontinued
operations net of tax $ 354 $ 83 $ 371 $ 1,358
========== ========== ========== ==========
Earnings (loss) from 1996 discontinued
operations net of tax -- (25,650) -- 77,744
---------- ---------- ---------- ----------
Earnings (loss) from discontinued operations $ 354 $ (25,567) $ 371 $ 79,102
========== ========== ========== ==========
</TABLE>
6
<PAGE> 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Merger and Spin-Off
As of October 30, 1997, the Company entered into a definitive agreement to
acquire (through its wholly-owned subsidiary, BILC Acquisition Corp.) ILC
Technology, Inc. ("ILC"). Under the terms of the agreement and assuming the
conversion of the principal amount of the Company's convertible notes, ILC
shareholders will receive 4.36 shares of the Company's common stock (or 2.18
shares, after giving effect to a proposed one-for-two reverse split of the
Company's common stock) for each share of ILC common stock outstanding. At
September 30, 1997, ILC had 4,879,811 shares of common stock outstanding and the
Company had 17,631,082 shares of common stock issued (or, if the full face value
of the Company's 8% convertible notes were to be converted, 21,286,484 shares).
The completion of the transaction is subject to approval by both the Company's
and ILC's shareholders, obtaining required regulatory approvals, and other
customary closing conditions. Mr. Martin E. Franklin and Mr. Henry C.
Baumgartner, the chairmen, respectively, of the Company and ILC have executed
voting agreements in favor of the transaction.
On October 31, 1997, the Company also announced its intent to spin off its Bolle
Inc. ("Bolle") subsidiary to the Company's shareholders. It is anticipated that
the Company's shareholders will receive one share of Bolle common stock for
every three shares of the Company's common stock held at the time of the spin
off. It is anticipated that Bolle will be listed on the NASDAQ National Market
System.
Results of Operations
QUARTER ENDED SEPTEMBER 30, 1997 COMPARED TO QUARTER ENDED SEPTEMBER 30, 1996
Net sales for the three months ended September 30, 1997 were $12.1 million
compared to $10.0 million for the same period last year, an increase of more
than 20%, reflecting continued strong internal sales growth at ORC Technologies,
the only business included in continuing operations.
Gross margin decreased from 40% for the quarter ended September 30, 1996 to 37%
for the quarter ended September 30, 1997 due primarily to the sale mix being
more heavily weighted to the relatively lower gross margin product lines at ORC
Electronic Products and pressure on average selling prices in certain other
product lines manufactured by ORC.
Selling, general and administrative increased at a slightly lower rate than
sales from $2.3 million for the 1996 quarter to $2.7 million this year
reflecting efficiency in managing costs.
Interest expense of $0.9 million for the quarters ended September 30, 1997 and
1996 represents non-cash interest on the Company's convertible debt of $0.5
million and $0.4 million of interest on the Company's credit facility.
7
<PAGE> 8
The provision for income taxes of approximately $.3 million or 33% of income
before income taxes for the quarter ended September 30, 1997 represents the
anticipated effective tax rate of the Company in its present structure and
reflects the utilization of all tax benefits available to the Company. The tax
provision of $0.3 million for the quarter ended September 30, 1996 represented
the provision which provides an effective tax rate of 22%, for the nine months
ended September 30, 1996, as a result of divestitures.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30,
1996
Net sales of $35.2 million for the nine months ended September 30, 1997
increased from $32.0 million for the nine months ended September 30, 1996
reflecting strong internal sales growth as mentioned above.
Gross margin decreased from 40% for the nine months ended September 30, 1996 to
38% for the nine months ended September 30, 1997 reflecting the same factors
described in the quarter's analysis above.
For the nine months ended September 30, 1997, selling, general and
administrative expenses of $7.7 million were decreased from $7.9 million despite
the strong sales growth.
Interest expense of $2.6 million for the nine months ended September 30, 1997
increased from $2.1 million for the same period last year due to the higher
amounts outstanding under the revolving credit facility.
The provision for income taxes of approximately $1.3 million or 32% of income
before income taxes for the nine months ended September 30, 1997 represents the
anticipated effective tax rate of the Company in its present structure and
reflects the utilization of all tax benefits available to the Company. The tax
provision of $1.3 million for the nine months ended September 30, 1996
represented the Company's 30% effective tax rate for 1996.
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities of continuing operations during the
nine months ended September 30, 1997 of $2.9 million represents the net income
and the positive effect of increased accounts payable and decreased other
current assets. These cash sources were offset by decreased accrued expenses and
increased accounts receivables and inventory. Depreciation and amortization for
the nine months ended September 30, 1997 was $1.1 million compared to $0.7
million for the same period last year. Cash paid for acquisitions in 1997
represents the purchases of Byers Equipment and QSP Coating Technologies by ORC
Technologies, both accretive asset purchases and extensions of current product
lines. Capital expenditures of $0.8 million were slightly higher than prior
year's of $0.5 million. These operating and investing activities were primarily
financed through proceeds from issuance of common stock and revolving credit
facility borrowings.
8
<PAGE> 9
The Company continues to expect cash flow from operations combined with
available borrowing capacity under the Company's revolving credit facility to be
sufficient to fund the Company's operating needs.
SEASONALITY AND CYCLICAL RESULTS
ORC Technologies is subject to cyclical capital spending trends by certain of
its customers. As a result, operating results may be subject to considerable
fluctuation from quarter to quarter.
9
<PAGE> 10
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
As of October 30, 1997, the Company entered into a definitive agreement to
acquire (through its wholly-owned subsidiary, BILC Acquisition Corp.) ILC
Technology, Inc. ("ILC"). Under the terms of the agreement and assuming the
conversion of the principal amount of the Company's convertible notes, ILC
shareholders will receive 4.36 shares of the Company's common stock (or 2.18
shares, after giving effect to a proposed one-for-two reverse split of the
Company's common stock) for each share of ILC common stock outstanding. At
September 30, 1997, ILC had 4,879,811 shares of common stock outstanding and the
Company had 17,631,082 shares of common stock issued (or, if the full face value
of the Company's 8% convertible notes were to be converted, 21,286,484 shares).
The completion of the transaction is subject to approval by both the Company's
and ILC's shareholders, obtaining required regulatory approvals, and other
customary closing conditions. Mr. Martin E. Franklin and Mr. Henry C.
Baumgartner, the chairmen, respectively, of the Company and ILC have executed
voting agreements in favor of the transaction.
ILC is based in Sunnyvale, California and is a developer, manufacturer and
distributor of high-performance light source products for a broad range of
medical, communication, aerospace, military, entertainment and consumer
applications. ILC's products include flashlamps, Cermax(R) short arc xenon
lamps, mercury short arc lamps, mercury capillary lamps, metal halide lamps and
other advanced light source products for aerospace and military applications.
In connection with the transaction, BEC will be renamed Lumen Technologies, Inc.
("Lumen"). It is anticipated that Lumen will have combined annualized revenues
of approximately $140 million and will continue to be listed on the New York
Stock Exchange. In connection with the closing of the transaction, Martin E.
Franklin will remain Chairman of Lumen and Mr. Richard D. Capra will assume
responsibilities of Chief Executive Officer. Mr. Ian G.H. Ashken, the Company's
Chief Financial Officer, will continue as Lumen's Chief Financial Officer. It is
anticipated that, in conjunction with the closing of the transaction, the Board
of Directors of Lumen will comprise four current BEC directors, four current ILC
directors and one additional board member to be named at a later date.
On October 31, 1997, the Company also announced its intent to spin off its Bolle
Inc. ("Bolle") subsidiary to the Company's shareholders. It is anticipated that
the Company's shareholders will receive one share of Bolle common stock for
every three shares of the Company's common stock held at the time of the spin
off. It is anticipated that Bolle will be listed on the NASDAQ National Market
System.
On October 2, 1997, the Company reported the acquisition (through its
wholly-owned subsidiary ORC Technologies, Inc. ("ORC")) of a 40% equity interest
in Voltarc Technologies, Inc. ("Voltarc"), a privately held niche light source
manufacturer located in Waterbury, Connecticut.
10
<PAGE> 11
The Company received an option to acquire the remaining issued and outstanding
shares of Voltarc common stock under certain conditions and the Voltarc
shareholders were granted the right to require the Company to purchase such
remaining shares under certain conditions.
Voltarc had 1996 revenues of approximately $37 million. Voltarc is recognized as
a technological leader in specialty lamp markets, including ultra-violet (UV)
lamps for water purification, illuminated outdoor signs and neon components,
reprographic, atinic (aquarium) and transportation lighting, including
commercial and private aircraft.
ITEM 6. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
The following exhibits have been filed previously as exhibits to the
Company's Form 10-Q for the period ended September 30, 1997, which has been
amended hereby, or are filed herewith:
10.1 Agreement and Plan of Merger, dated as of October 30, 1997, by and
among the Company, BILC Acquisition Corp., and ILC Technologies,
Inc.
99.1 Press Release, dated October 2, 1997, regarding the acquisition of
interest in Voltarc Technologies, Inc.
99.2 Press Release, dated October 31, 1997, regarding the execution of a
definitive agreement to acquire ILC Technology, Inc.
27 Financial Data Schedule (for electronic filing only).
(b) REPORTS ON FORM 8-K:
The following Current Report on Forms 8-K were filed during the quarter
ended September 30, 1997:
<TABLE>
<CAPTION>
Description Date of Report
----------- --------------
<S> <C>
Form 8-K, reporting under Item 2 Registrant's July 10, 1997
acquisition of all of the issued and outstanding
share capital of Holding B.F.
Form 8-K/A, reporting certain financial July 10, 1997
information required under Regulation S-X
in connection with the Company's Form 8-K
reporting the acquisition of the issued and
outstanding share capital of Holding B.F.
</TABLE>
11
<PAGE> 12
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BEC GROUP, INC.
Date: November 20, 1997 By: /s/ Martin E. Franklin
---------------------------------
Martin E. Franklin
Chairman and Chief Executive Officer
Date: November 20, 1997 By: /s/ Ian G.H. Ashken
---------------------------------
Ian G.H. Ashken
Chief Financial Officer
12
<PAGE> 13
EXHIBIT INDEX
The following Exhibits are filed herewith or incorporated by reference:
<TABLE>
<CAPTION>
Number Exhibit Page No.
------ ------- --------
<S> <C> <C>
10.1 Agreement and Plan of Merger, *
dated as of October 30, 1997,
by and among the Company,
BILC Acquisition Corp., and
ILC Technologies, Inc.
99.1 Press Release, dated October 2, *
regarding the acquisition of
interest in Voltarc Technologies,
Inc.
99.2 Press Release, dated October 31, *
1997, regarding the execution
of a definitive agreement to
acquire ILC Technology, Inc.
27 Financial Data Schedule (for Filed electronically herewith,
electronic filing only). at page 14.
</TABLE>
*Previously filed.
13
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JUL-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 1,873
<SECURITIES> 0
<RECEIVABLES> 7,758
<ALLOWANCES> 0
<INVENTORY> 9,788
<CURRENT-ASSETS> 77,825
<PP&E> 13,048
<DEPRECIATION> 0
<TOTAL-ASSETS> 118,547
<CURRENT-LIABILITIES> 32,890
<BONDS> 22,941
0
9,294
<COMMON> 28,724
<OTHER-SE> (17,616)
<TOTAL-LIABILITY-AND-EQUITY> 118,547
<SALES> 12,058
<TOTAL-REVENUES> 12,058
<CGS> 7,599
<TOTAL-COSTS> 11,014
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 862
<INCOME-PRETAX> 1,044
<INCOME-TAX> 345
<INCOME-CONTINUING> 699
<DISCONTINUED> 354
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,053
<EPS-PRIMARY> 0.06
<EPS-DILUTED> 0
</TABLE>
