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FORM 10-Q
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 MARCH 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _______ TO________
COMMISSION FILE NUMBER 1-14360
BEC GROUP, INC.
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(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 13-3868804
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(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
Suite B-302
555 Theodore Fremd Avenue 10580
Rye, New York
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(ADDRESS OF PRINCIPAL EXECUTIVE OFFICE) (ZIP CODE)
Registrant's telephone number, including area code: (914) 967-9400
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
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INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES
OF COMMON STOCK AS OF THE LATEST PRACTICABLE DATE.
Common Shares, par value $.01 -- 17,862,618 Shares as of May 9, 1997
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Page 1 of 10.
Exhibit Index Appears at page 10.
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PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED FINANCIAL STATEMENTS
BEC GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
March 31, December 31,
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1997 1996
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<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 2,132 $ 2,475
Trade receivables, net 11,985 12,175
Inventories 16,603 17,705
Other current assets 6,096 4,476
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Total current assets 36,816 36,831
Property and equipment, net 13,759 13,648
Goodwill, net 11,817 11,372
Intangible assets, net 1,906 1,942
Equity in affiliated companies 9,797 11,435
Other assets 4,368 4,303
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Total assets $ 78,463 $ 79,531
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Short-term debt and current portion of long term $ 20,145 $ 17,645
debt
Accounts payable 4,894 6,346
Accrued compensation 1,591 2,278
Other accrued expenses 8,257 9,385
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Total current liabilities 34,887 35,654
Long-term debt 3,541 3,597
Convertible subordinated notes 21,922 21,922
Other 9,749 10,754
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Total liabilities 70,099 71,927
Stockholders' equity:
Preferred stock - par value $1;
500 shares authorized; none outstanding -- --
Common stock - par value $.01; 50,000 shares
authorized; 17,722 and 17,631 shares issued 177 176
Additional paid-in capital 29,088 28,703
Treasury stock - 171 and 116 shares, at cost (806) (557)
Retained earnings (loss) (20,095) (20,718)
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Total stockholders' equity 8,364 7,604
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Total liabilities and stockholders' equity $ 78,463 $ 79,531
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</TABLE>
2
See accompanying notes to consolidated financial statements.
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BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
1997 1996
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<S> <C> <C>
REVENUES:
Net sales $ 16,022 $ 16,989
COSTS AND EXPENSES:
Cost of sales 9,285 9,457
Selling, general and administrative 5,482 5,835
Interest expense 808 585
Other income (469) (464)
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Total costs and expenses 15,106 15,413
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Income from continuing operations before taxes 916 1,576
Provision for income taxes 293 536
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Income from continuing operations 623 1,040
Income from discontinued operations -- 102,434
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Net income $ 623 $ 103,474
========= =========
Weighted average shares outstanding 17,561 17,600
PRIMARY EARNINGS PER SHARE:
Income from continuing operations $ 0.04 $ 0.06
Income from discontinued operations -- $ 5.82
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Net income $ 0.04 $ 5.88
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</TABLE>
3
See accompanying notes to consolidated financial statements.
<PAGE> 4
BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended March 31,
-----------------------------------
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net cash provided by operating activities
of continuing operations $ 275 $ 1,715
Net cash used by operating activities
of discontinued operations -- (2,441)
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Net cash used by operating activities 275 (726)
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Cash flows from investing activities:
Cash deposit for acquisition (1,000) --
Capital expenditures (1,272) (394)
Proceeds from sales of assets 7 --
Net cash provided by investing activities
of discontinued operations -- 251,588
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Net cash provided (used) by investing activities (2,265) 251,194
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Cash flows from financing activities:
Proceeds (payments) from revolving credit line 2,500 (875)
Payments for long term obligations (619) (11)
Proceeds from issuances of common stock -- 1,413
Purchases of treasury stock (234) --
Cash dividends to shareholders -- (230,071)
Net cash used by financing activities
of discontinued operations -- (14,146)
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Net cash provided (used) by financing activities 1,647 (243,690)
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Net increase (decrease) in cash (343) 6,778
Cash and cash equivalents at beginning of period 2,475 4,404
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Cash and cash equivalents at end of period $ 2,132 $ 11,182
========= =========
</TABLE>
4
See accompanying notes to consolidated financial statements.
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BEC GROUP, INC.
NOTES TO 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 and Regulation S-X. 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 March 31, 1997 and its results of
operations and cash flows for the three months ended March 31, 1996 and 1997.
The results of operations of the interim periods presented are not necessarily
indicative of the results to be expected for the full fiscal year. These
consolidated 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.
5
<PAGE> 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
QUARTER ENDED MARCH 31, 1997 COMPARED TO QUARTER ENDED MARCH 31, 1996
Net sales for the three months ended March 31, 1997 were $16.0 million compared
to $17.0 million for the same period last year. The decrease in sales was
primarily due to reduced sales to one large customer at Bolle America, offset
by increased sales at ORC Technologies.
Gross margin decreased from 44% for the quarter ended March 31, 1996 to 42% for
the quarter ended March 31, 1997, largely due to the sales mix being more
heavily weighted to the lower gross margin manufacturing businesses of ORC
Technologies and a lower margin mix of sales at Bolle America.
Selling, general and administrative expenses decreased in accordance with sales
to $5.4 million for the three months ended March 31, 1997 from $5.8 million for
the same period last year, however, it remained flat as a percentage of sales.
Interest expense of $0.8 million for the quarter ended March 31, 1997
represents non-cash interest on the Company's convertible debt of $0.4 million
and $0.4 million of interest on the Company's bank facilities. The increase in
interest expense compared to the quarter ended March 31, 1996 is due to the
higher average debt balance in the current quarter.
The provision for income taxes of approximately $0.3 million or 32% of income
before income taxes for the quarter ended March 31, 1997 compares to the tax
expense of approximately $0.5 million for the quarter ended March 31, 1996.
The 1997 provision represents the anticipated effective tax rate of the Company
in its present structure and by utilizing all tax benefits available to the
Company. The 1996 tax provision represents the effective tax rate of the
continuing operations of the Company for 1996.
Liquidity and Capital Resources
Net cash flows from operating activities during the three months ended March
31, 1997 of $0.3 million represents the use of cash by Bolle America as a
result of its decreased sales offset by normal operating cash generation by ORC
Technologies. Capital expenditures of $1.2 million include the purchases of
Byers Equipment and QSP Coating Technologies by ORC Technologies, both
accretive asset purchases and extensions of current product lines. Cash
deposit for acquisition represents a $1 million good faith deposit for the
planned purchase of Bolle France for which the Company has entered into a
letter of intent. These operating and investing activities were financed
through the $2.5 million borrowing on the revolving credit facility during the
quarter.
6
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The Company continues to expect cash flow from operations combined with
available borrowing capacity under the Company's existing 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. Bolle America's business is seasonal in
nature with second quarter historically having the highest sales due to the
increased demand for sunglasses during that period.
Proposed Acquisition of Bolle France
On February 24, 1997, the Company announced that it had signed a letter of
intent to acquire SNC Bolle and its affiliates (collectively, "Bolle France").
The Company intends to combine Bolle France and Bolle America operations in a
new entity, Bolle Inc. Bolle France designs and manufacturers premium
sunglasses, sports shields, ski goggles, safety eyewear and related optical
products. Bolle France holds investments in Bolle(R) distribution in Brazil,
Canada, France, Japan and the United Kingdom. Bolle France is a leading
manufacturer of nylon eyeglass frames and also manufactures its own
polycarbonate non-prescription lenses. The Bolle France manufacturing
operation has annual revenues of more than $50 million, excluding sales at the
distribution level. Pursuant to the parties' letter of intent, the purchase
price for Bolle France is approximately $60 million; in addition, members of
the Bolle family will receive warrants to acquire 2.13 million shares of common
stock of Bolle Inc., anticipated to constitute approximately 10% of Bolle Inc.'s
issued and outstanding shares subsequent to consummation of the transaction.
The acquisition and related transactions are contingent on a number of
conditions, including completion of the Company's due diligence investigation,
receipt of any required governmental approvals, negotiation and execution of a
definitive agreement and other customary closing conditions. The Company also
announced that, subject to consummation of the acquisition of Bolle France, it
intends to separate Bolle Inc. and the Company's ORC Technologies Group,
creating two discreet and independent entities.
7
<PAGE> 8
PART II.OTHER INFORMATION
ITEM 6. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
The following exhibits are filed herewith:
27 Financial Data Schedule (for electronic filing only).
(b) REPORTS ON FORM 8-K:
The Company did not file any reports on Form 8-K during the quarter ended
March 31, 1997.
8
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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: May 9, 1997 By: /s/ Martin E. Franklin
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Martin E. Franklin
Chairman and Chief Executive Officer
Date: May 9, 1997 By: /s/ Ian G.H. Ashken
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Ian G.H. Ashken
Chief Financial Officer
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EXHIBIT INDEX
The following Exhibits are filed herewith or incorporated by reference:
Number Exhibit Page No.
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Financial Data Schedule (for Filed electronically
27 electronic filing only) herewith, at page 11.
10
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 2,132
<SECURITIES> 0
<RECEIVABLES> 11,985
<ALLOWANCES> 0
<INVENTORY> 16,603
<CURRENT-ASSETS> 36,816
<PP&E> 13,759
<DEPRECIATION> 0
<TOTAL-ASSETS> 78,463
<CURRENT-LIABILITIES> 34,887
<BONDS> 3,541
0
0
<COMMON> 177
<OTHER-SE> 8,187
<TOTAL-LIABILITY-AND-EQUITY> 78,463
<SALES> 16,022
<TOTAL-REVENUES> 16,022
<CGS> 9,285
<TOTAL-COSTS> 9,285
<OTHER-EXPENSES> 5,013
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 808
<INCOME-PRETAX> 916
<INCOME-TAX> 293
<INCOME-CONTINUING> 623
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 623
<EPS-PRIMARY> .04
<EPS-DILUTED> 0
</TABLE>
