<PAGE> 1
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 JUNE 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
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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
Rye, New York 10580
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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 -- 17,631,092 Shares as of August 11, 1997
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Page 1 of 12.
Exhibit Index Appears at page 11.
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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>
June 30, December 31,
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1997 1996
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<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,613 $ 2,475
Trade receivables, net 13,068 12,175
Inventories 16,844 17,705
Other current assets 5,831 4,476
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Total current assets 37,356 36,831
Property and equipment, net 13,630 13,648
Goodwill, net 11,904 11,372
Intangible assets, net 1,896 1,942
Equity in and notes receivable from affiliated
companies 10,047 11,435
Other assets 4,422 4,303
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Total assets $ 79,255 $ 79,531
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Liabilities and Stockholders' equity
Current liabilities:
Short term debt and current portion of long term debt $ 18,645 $ 17,645
Accounts payable 5,402 6,346
Accrued compensation 1,285 2,278
Other accrued expenses 8,042 9,385
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Total current liabilities 33,374 35,654
Long-term debt 3,482 3,597
Convertible subordinated notes 22,941 21,922
Other 9,656 10,754
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Total liabilities 69,453 71,927
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Stockholders' equity:
Preferred stock - par value $1;
500 shares authorized; none outstanding -- --
Common stock - par value $.01; 50,000 shares
authorized; 17,631 and 17,631 shares issued 176 176
Additional paid-in capital 28,659 28,703
Treasury stock - 78 and 116 shares, at cost (364) (557)
Retained deficit (18,669) (20,718)
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Total stockholders' equity 9,802 7,604
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Total liabilities and stockholders' equity $ 79,255 $ 79,531
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</TABLE>
2
See accompanying notes to condensed financial statements
<PAGE> 3
BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
1997 1996 1997 1996
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<S> <C> <C> <C> <C>
REVENUES:
Net sales $17,620 $18,559 $33,642 $35,548
COSTS AND EXPENSES
Cost of sales 9,839 10,218 19,124 19,675
Selling, general and administrative 5,137 5,264 10,619 11,099
Interest expense 904 515 1,712 1,100
Other income (357) (808) (826) (1,272)
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Total costs and expenses 15,523 15,189 30,629 30,602
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Income from continuing operations before taxes 2,097 3,370 3,013 4,946
Provision for income taxes 671 1,146 964 1,682
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Income from continuing operations 1,426 2,224 2,049 3,264
Income from discontinued operations - 961 - 103,395
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Net income $ 1,426 $ 3,185 $ 2,049 $106,659
======== ======== ======== ========
Weighted average shares outstanding 17,671 17,718 17,613 17,659
Primary earnings per share:
Income from continuing operations $0.08 $0.13 $0.12 $0.18
Income from discontinued operations -- .05 -- 5.86
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Net income $0.08 $0.18 $0.12 $6.04
======= ======= ======= ========
</TABLE>
3
See accompanying notes to condensed financial statements
<PAGE> 4
BEC GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
For the six months ended June 30,
1997 1996
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<S> <C> <C>
Cash flows from operating activities:
Net cash used by operating activities
of continuing operations $ (713) $ (3,087)
Net cash provided by operating activities
of discontinued operations -- 6,338
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Net cash provided (used) by operating activities (713) 3,251
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Cash flows from investing activities:
Cash expended on acquisitions (2,241) --
Capital expenditures (426) (545)
Intangible asset expenditures (50) --
Proceeds from sale of assets 6 157
Net cash provided by investing activities
of discontinued operations -- 247,007
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Net cash provided (used) by investing activities (2,711) 246,619
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Cash flows from financing activities:
Proceeds from revolving credit line 2,000 669
Proceeds from (payments on) long term obligations 341 (26)
Proceeds from issuances of common stock 425 2,464
Purchases of treasury stock (204) --
Cash dividends to shareholders -- (230,071)
Net cash used by financing activities
of discontinued operations -- (19,750)
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Net cash provided (used) by financing activities 2,562 (246,714)
Net increase (decrease ) in cash (862) 3,156
Cash and cash equivalents at beginning of period 2,475 4,404
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Cash and cash equivalents at end of period $ 1,613 $ 7,560
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</TABLE>
4
See accompanying notes to condensed financial statements
<PAGE> 5
BEC GROUP, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The accompanying condensed 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 June 30, 1997, its results of operations for the three and
six months ended June 30, 1997 and 1996 and its cash flows for the six months
ended June 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. 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 - ACQUISITIONS
On July 10, 1997, the Company completed its acquisition of Holding B.F. ("Bolle
France"), the French holding company which owns Bolle(R) design, manufacturing
and certain distribution interests, including worldwide rights to the Bolle(R)
brand. The acquisition was completed through the Company's wholly owned
subsidiary Bolle Inc. The acquisition price totaled approximately $53 million,
consisting of approximately $31 million in cash, approximately $29 million in
BEC Group, Inc. preferred stock and approximately $13 million in Bolle Inc.
preferred and common stock. In addition, the selling shareholders of Bolle
France received warrants equivalent to acquiring approximately 10% of Bolle Inc.
common stock at $3.10 per Bolle Inc. share.
5
<PAGE> 6
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Acquisition of Bolle France
On July 10, 1997, the Company completed its acquisition of Holding B.F. ("Bolle
France"), the French holding company which owns Bolle(R) design, manufacturing
and certain distribution interests, including worldwide rights to the Bolle(R)
brand. The acquisition was completed through the Company's wholly owned
subsidiary Bolle Inc. The acquisition price totaled approximately $53 million,
consisting of approximately $31 million in cash, approximately $29 million in
BEC Group, Inc. preferred stock and approximately $13 million in Bolle Inc.
preferred and common stock. In addition, the selling shareholders of Bolle
France received warrants equivalent to acquiring approximately 10% of Bolle Inc.
common stock at $3.10 per Bolle Inc. share.
Results of operations
QUARTER ENDED JUNE 30, 1997 COMPARED TO QUARTER ENDED JUNE 30, 1996
Net sales for the three months ended June 30, 1997 were $17.6 million compared
to $18.6 million for the same period last year. Sales at ORC Technologies
increased 8.9% or $1 million. This increase was offset by a significant
decrease in sales at Bolle America due to softness in the premium sunglass
market, particularly at one major customer.
Gross margin decreased marginally from 45% for the quarter ended June 30, 1996
to 44% for the quarter ended June 30, 1997 due to the continued growth at ORC
Technologies relative to Bolle America causing the sales mix to be more heavily
weighted to the lower gross margin manufacturing businesses.
Selling, general and administrative expenses decreased in accordance with sales
to $5.1 million for the three months ended June 30, 1997 from $5.3 million for
the same period last year.
Interest expense of $0.9 million for the quarter ended June 30, 1997 represents
non-cash interest on the Company's convertible debt of $0.4 million and $0.5
million of interest on the Company's Credit Facility. The increase in interest
expense to $0.9 million compared to $0.5 million for the quarter ended June 30,
1996 is due to the higher average debt balance in the current quarter.
The provision for income taxes of approximately $0.7 million or 32% of income
before income taxes for the quarter ended June 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 $1.1 million for the quarter ended June 30, 1996 represented the
Company's 34% effective tax rate for 1996.
6
<PAGE> 7
SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO SIX MONTHS ENDED JUNE 30, 1996
Net sales of $33.6 for the six months ended June 30, 1997 compared to $35.5
million for the same period last year reflect sales growth at ORC Technologies
offset by sales decreases at Bolle America.
Gross margin decreased from 45% for the six months ended June 30, 1996 to 43%
for the six months ended June 30, 1997 reflecting the growth in the lower
margin manufacturing businesses of ORC Technologies.
Selling, general and administrative expenses decreased in accordance with sales
to $10.6 million for the six months ended June 30, 1997 from $11.1 million for
the same period last year.
Interest expense of $1.7 million for the six months ended June 30, 1997
increased from $1.1 million for the same period last year due to the higher
average debt balances during 1997.
The provision for income taxes of approximately $1.0 million or 32% of income
before income taxes for the six months ended June 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 $1.7 million for the six months ended June 30, 1996 represented
the Company's 34% effective tax rate for 1996.
Liquidity and capital resources
Net cash used by operating activities during the six months ended June 30, 1997
of $0.7 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.
Depreciation and amortization for the six months ended June 30, 1997 was $0.9
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 asset purchases and extensions
of current product lines. Cash paid for acquisitions also includes a $1
million good faith deposit for the purchase of Bolle France. Capital
expenditures of $0.4 million were consistent with the prior year. These
operating and investing activities were primarily financed through the $2.0
million borrowing on the revolving credit facility during the period.
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.
7
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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.
8
<PAGE> 9
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K
(a) EXHIBITS:
The following exhibits are filed herewith or are incorporated by
reference.
27 Financial Data Schedule (for electronic filing only).
(b) REPORTS ON FORM 8-K:
No Current Reports on Form 8-K were filed during the quarter ended
June 30, 1997.
9
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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: August 11, 1997 By: /s/ Martin E. Franklin
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Martin E. Franklin
Chairman and Chief Executive Officer
By: /s/ Ian G.H. Ashken
Date: August 11, 1997 -------------------------------------
Ian G.H. Ashken
Chief Financial Officer
10
<PAGE> 11
EXHIBIT INDEX
The following Exhibits are filed herewith or incorporated by reference:
<TABLE>
<CAPTION>
Number Exhibit Page No.
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<S> <C> <C>
27 Financial Data Schedule (for Filed electronically herewith,
electronic filing only). at page 12.
</TABLE>
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 1,614
<SECURITIES> 0
<RECEIVABLES> 13,068
<ALLOWANCES> 0
<INVENTORY> 16,844
<CURRENT-ASSETS> 5,831
<PP&E> 13,630
<DEPRECIATION> 0
<TOTAL-ASSETS> 79,255
<CURRENT-LIABILITIES> 33,374
<BONDS> 3,482
0
0
<COMMON> 176
<OTHER-SE> 9,625
<TOTAL-LIABILITY-AND-EQUITY> 79,255
<SALES> 33,642
<TOTAL-REVENUES> 33,642
<CGS> 19,124
<TOTAL-COSTS> 19,124
<OTHER-EXPENSES> 9,793
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,712
<INCOME-PRETAX> 3,013
<INCOME-TAX> 964
<INCOME-CONTINUING> 2,049
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,049
<EPS-PRIMARY> 12
<EPS-DILUTED> 0
</TABLE>
