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 October 2, 1994.
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: 1-6832
BIC CORPORATION
(Exact name of registrant as specified in its charter)
Incorporated in State of New York I.R.S. Employer Number: 06-0735597
Principal Executive Offices: 500 BIC Drive, Milford, Connecticut 06460
Telephone number, including area code: (203) 783-2000
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 report(s), and (2) has been subject to
such filing requirements for the past 90 days.
Yes _____X_____ No __________
At October 2, 1994, the close of the period covered by this report, registrant
had outstanding 23,559,244 common shares, $1.00 par value per share.
<PAGE>
PART 1. FINANCIAL INFORMATION
BIC CORPORATION AND SUBSIDIARIES
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
October 2, January 2,
1994 1994
---------- ---------
ASSETS (Thousands)
- - ------
CURRENT ASSETS:
Cash and cash equivalents $ 36,511 $ 24,094
Accounts and notes receivable:
Trade - net of allowance for doubtful
accounts of $5,781,000 at October 2 and
$4,084,000 at January 2 74,456 47,627
Affiliates 3,830 3,020
Other 4,058 1,372
Inventories:
Work in process, finished stock and
packaging materials 46,842 49,363
Raw materials 7,332 10,063
Other current assets 27,867 30,446
-------- --------
Total current assets 200,896 165,985
-------- --------
PROPERTY, PLANT AND EQUIPMENT - at cost less
accumulated depreciation of $150,010,000 at
October 2 and $137,928,000 at January 2 137,825 140,317
OTHER ASSETS 29,999 29,914
-------- --------
TOTAL $368,720 $336,216
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
CURRENT LIABILITIES:
Short term borrowings $ 8,123 $ 6,731
Accounts payable:
Trade 11,895 11,789
Affiliates 3,786 9,390
Accrued expenses 66,876 60,843
Other current liabilities 3,328 0
-------- --------
Total current liabilities 94,008 88,753
-------- --------
NON-CURRENT LIABILITIES 23,824 20,775
-------- --------
SHAREHOLDERS' EQUITY:
Preferred shares ($1 par value; authorized -
1,000,000; no shares issued or outstanding) 0 0
Common shares ($1 par value; authorized -
50,000,000; outstanding 23,559,244) 23,559 23,559
Retained earnings 231,917 205,902
Foreign currency translation adjustment (4,588) (2,773)
--------- ---------
Total shareholders' equity 250,888 226,688
--------- ---------
TOTAL $368,720 $336,216
========= =========
See Notes to Unaudited Condensed Consolidated Financial Statements.
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<PAGE>
BIC CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE NINE MONTHS ENDED OCTOBER 2, 1994 AND OCTOBER 3, 1993
1994 1993
---- ----
(Thousands Except Share Data)
NET SALES $369,336 $348,692
COST OF GOODS SOLD 186,844 189,164
--------- ---------
GROSS PROFIT 182,492 159,528
ADVERTISING, SELLING, GENERAL AND ADMINISTRATIVE,
MARKETING AND RESEARCH AND DEVELOPMENT EXPENSES 112,236 102,153
--------- ---------
INCOME FROM OPERATIONS 70,256 57,375
OTHER INCOME (EXPENSE) - NET (1,352) 2,588
--------- ---------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 68,904 59,963
PROVISION FOR INCOME TAXES 28,130 24,131
--------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 40,774 35,832
CUMULATIVE EFFECT OF CHANGES IN ACCOUNTING
PRINCIPLES FOR:
POSTEMPLOYMENT BENEFITS, NET OF TAXES OF
$410,000 (623) 0
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS,
NET OF TAXES OF $6,400,000 0 (9,816)
--------- ---------
NET INCOME 40,151 26,016
RETAINED EARNINGS - BEGINNING OF YEAR 205,902 187,900
DIVIDENDS PAID (PER COMMON SHARE: 1994 - $0.60,
1993 - $0.54) (14,136) (12,722)
--------- ---------
RETAINED EARNINGS - END OF PERIOD $231,917 $201,194
========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 23,559,244 23,559,244
EARNINGS (LOSS) PER COMMON SHARE:
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES $ 1.73 $ 1.52
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES (0.02) (0.42)
--------- ---------
NET INCOME $ 1.71 $ 1.10
========= =========
See Notes to Unaudited Condensed Consolidated Financial Statements.
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<PAGE>
BIC CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL QUARTERS ENDED OCTOBER 2, 1994 AND OCTOBER 3, 1993
1994 1993
---- ----
(Thousands Except Share Data)
NET SALES $127,720 $123,056
COST OF GOODS SOLD 63,425 66,057
-------- --------
GROSS PROFIT 64,295 56,999
ADVERTISING, SELLING, GENERAL AND ADMINISTRATIVE,
MARKETING AND RESEARCH AND DEVELOPMENT EXPENSES 38,773 36,217
-------- --------
INCOME FROM OPERATIONS 25,522 20,782
OTHER INCOME (EXPENSE) - NET (104) 2,128
--------- ---------
INCOME BEFORE INCOME TAXES 25,418 22,910
PROVISION FOR INCOME TAXES 10,624 9,682
--------- ---------
NET INCOME (PER COMMON SHARE: 1994 - $0.63,
1993 - $0.56) $ 14,794 $ 13,228
========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 23,559,244 23,559,244
See Notes to Unaudited Condensed Consolidated Financial Statements.
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<PAGE>
BIC CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED OCTOBER 2, 1994 AND OCTOBER 3, 1993
1994 1993
---- ----
(Thousands)
NET CASH PROVIDED BY OPERATING ACTIVITIES* $ 41,391 $ 33,679
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (16,271) (30,351)
Proceeds from sale of property, plant and
equipment 1,020 464
Deferred charges, deposits and other (163) (1,339)
Purchases of trademarks and patents (900) 0
--------- ---------
Net cash used in investing activities (16,314) (31,226)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in short term borrowings 1,440 4,403
Dividends paid (14,136) (12,722)
--------- ---------
Net cash used in financing activities (12,696) (8,319)
--------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH 36 (282)
--------- ---------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 12,417 (6,148)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 24,094 25,234
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 36,511 $ 19,086
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 818 $ 551
========= =========
Income taxes $ 23,108 $ 26,139
========= =========
*The 1994 Change in Employers' Accounting for Postemployment Benefits and the
1993 Change in Employers' Accounting for Postretirement Benefits Other Than
Pensions had no effect on cash and cash equivalents.
See Notes to Unaudited Condensed Consolidated Financial Statements.
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<PAGE>
BIC CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
---------------------
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do
not include all of the information and disclosures required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been included.
Operating results for the nine-month period ended October 2, 1994 are not
necessarily indicative of the results that may be expected for the fiscal
year ending January 1, 1995. Certain items in the 1993 unaudited
condensed consolidated financial statements have been reclassified to
conform to the 1994 presentation.
2. New Accounting Standards
------------------------
As of January 3, 1994, the Corporation adopted Statement of Financial
Accounting Standards No. 112 (SFAS 112), "Employers' Accounting for
Postemployment Benefits." This new standard requires that the cost of
benefits provided to former or inactive employees be recognized on the
accrual basis of accounting. Previously, the Corporation recognized
postemployment benefits on a cash basis or at the date the event gave rise
to the payment of these benefits. In accordance with the provisions of
the Collective Bargaining Agreement between BIC Corporation and Local 134
United Rubber, Cork, Linoleum and Plastic Workers of America, the
Corporation provides severance benefits to its unionized employees. The
Corporation also provides medical and life insurance benefits to salaried
employees receiving long-term disability benefits. The cumulative effect
of this change, net of deferred income tax benefit of $0.4 million,
reduced net income by $0.6 million or $0.02 per share, which has been
reflected in the Corporation's condensed consolidated statement of income
for the nine months ended October 2, 1994.
Also effective January 3, 1994, the Corporation adopted FASB
Interpretation No. 39, "Offsetting of Amounts Related to Certain
Contracts." This Interpretation defines the right of setoff and specifies
what conditions must be met to have that right. The Corporation enters
into forward exchange contracts denominated in foreign currencies
providing protection from foreign currency fluctuations. At October 2,
1994, the Corporation had outstanding $3.3 million of forward exchange
contracts, under which the Corporation is required to purchase French
francs at a contract rate of 6.01 French francs to the dollar during the
fourth quarter of 1994. These contracts do not meet the conditions for
setoff as set forth in FASB Interpretation No. 39 and accordingly, at
October 2, 1994, the Corporation has recorded a current asset and a
current liability for the $3.3 million.
-6-
<PAGE>
BIC CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. New Accounting Standards (Continued)
------------------------------------
Effective January 4, 1993, the Corporation adopted Statement of Financial
Accounting Standards No. 106 (SFAS 106), "Employers' Accounting for
Postretirement Benefits Other Than Pensions." This standard requires
accrual of the estimated cost of retiree health benefits during the years
an employee provides services rather than the Corporation's past practice
of recognizing these costs on a cash basis. SFAS 106 allows recognition
of the cumulative effect of the liability in the year of adoption or the
amortization of the obligation over a period up to twenty years. The
Corporation has elected to recognize the cumulative effect of this
obligation on the immediate recognition basis. The cumulative effects as
of January 4, 1993 of adopting SFAS 106 were an increase in accrued
postretirement health care costs of $16.2 million and a decrease in net
earnings of $9.8 million, or $0.42 per share, which have been reflected in
the Corporation's condensed consolidated statement of income for the nine
months ended October 3, 1993.
Also, effective January 4, 1993, the Corporation adopted Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes." Under SFAS 109, the deferred tax provision is determined under
the liability method. Under this method, deferred tax assets and
liabilities are recognized based on differences between financial
statement and tax bases of assets and liabilities using presently enacted
tax rates. There was no cumulative effect on prior years of this change in
accounting principle. Prior year financial statements have not been
restated.
3. Short Term Borrowings
---------------------
Short term borrowings totaled $8.1 million at October 2, 1994. The
weighted average interest rate on these borrowings is 5.0%.
-7-
<PAGE>
BIC CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Liquidity and Capital Resources
- - -------------------------------
The changes in the financial condition of the Corporation between January 2,
1994 and the end of the third fiscal quarter of 1994 reflect normal operations.
Accounts and notes receivable were higher at October 2, 1994 as compared to
January 2, 1994 due to higher sales levels. The Corporation's current ratio
was 2.14 at October 2, 1994 and 1.87 at January 2, 1994.
The increase in other current liabilities reflects the Corporation's adoption
of FASB Interpretation No. 39, "Offsetting of Amounts Related to Certain
Contracts." Refer to Note 2, New Accounting Standards, for further discussion.
Accounts payable - affiliates were $3.8 million at October 2, 1994 as compared
to $9.4 million at January 2, 1994. The decrease was primarily due to the
timing of inventory purchases.
Accrued expenses were $66.9 million at October 2, 1994 as compared to $60.8
million at January 2, 1994. The increase was due to the timing of payments for
advertising campaigns and marketing promotions, and an increase in payroll
liability attributable to the timing of payments for bonuses.
Purchases of property, plant and equipment were $16.3 million for the nine
months ended October 2, 1994 as compared with $30.4 million for the same period
last year. The difference was largely due to the 1993 spending for the
expansions of the Duncan, South Carolina facility, Clearwater, Florida facility
and Cuautitlan, Mexico facility; building improvements for the Gaffney, South
Carolina facility and purchases of machinery and equipment for capacity
increases in stationery products.
Income taxes paid for the nine-month period ended October 2, 1994 were $23.1
million as compared with $26.1 million for the same period last year. The
decrease was due to the timing of income tax payments by the Corporation's
Canadian subsidiary.
Results of Operations
- - ---------------------
Net sales for the fiscal quarter ended October 2, 1994 were $127.7 million, an
increase of 4% from $123.1 million for the same period in 1993. Gross profit
was $64.3 million in 1994 as compared with $57.0 million in 1993. Gross profit
as a percentage of net sales was 50% in 1994 as compared to 46% for the same
period last year. Net income was $14.8 million, or $0.63 per share, compared
with $13.2 million, or $0.56 per share, for the same period last year.
Net sales for the nine months ended October 2, 1994 were $369.3 million
compared with $348.7 million in 1993, for an increase of 6%. Gross profit was
$182.5 million in 1994 as compared with $159.5 million in 1993. Gross profit
as a percentage of net sales was 49% compared to 46% in 1993. Income before
cumulative effect of changes in accounting principles was $40.8 million, or
$1.73 per share, compared with $35.8 million, or $1.52 per share for the same
period last year.
-8-
<PAGE>
BIC CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations (Continued)
- - ---------------------------------
The improvement in net sales for the fiscal quarter ended October 2, 1994
reflects improvements in the United States core operations (stationery
products, lighters and shavers). The increase in stationery products was
attributable to higher average selling prices partially offset by a slight
decline in the number of units sold. This decline was due to several customers
taking delivery of back-to-school merchandise in the second quarter of 1994 as
compared with last year's third quarter. The improvement in lighters primarily
reflects an increase in units sold. The shaver improvement was primarily the
result of an increase in the number of BIC twin blade shavers sold, and higher
average selling prices. The Corporation's foreign operations showed slight
increases in net sales.
The higher gross profit percentage for the third fiscal quarter of 1994, as
compared to the same period last year, reflects the higher average selling
prices discussed above also and lower unit costs for stationery products and
shavers in the United States. These lower unit costs were primarily due to a
favorable mix of products sold, manufacturing efficiencies and favorable
foreign exchange rates associated with imports. The Corporation's Mexican
operations also contributed to the increase in gross profit.
The change in other income (expense) for the third quarter of 1994 as compared
to the same period last year was primarily due to a reduction in the provision
related to the sailboard litigation in 1993.
The $14.1 million increase in net income for the nine-month period ended
October 2, 1994 as compared to the same period last year was primarily
attributable to the adoption of SFAS 106 in 1993 and to the improvements in
gross profit margins in 1994.
-9-
<PAGE>
PART II. OTHER INFORMATION
BIC CORPORATION AND SUBSIDIARIES
Item 1. Legal Proceedings - None.
Item 2. Change in Securities - None.
Item 3. Defaults upon Senior Securities - Not Applicable.
Item 4. Submission of Matters to a Vote of Security Holders - None.
Item 5. Other Information - None.
Item 6. Exhibits and Reports on Form 8-K
a) Exhibits - None Required.
b) Reports on Form 8-K - None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, registrant
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
BIC CORPORATION
----------------------------------------------
(Registrant)
Date: November 15, 1994 Robert L. Macdonald
----------------------------------------------
(Signature)
Robert L. Macdonald, Vice President - Finance
(Principal Accounting Officer)
-10-
<PAGE>
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<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-01-1995
<PERIOD-END> OCT-02-1994
<CASH> 36,511
<SECURITIES> 0
<RECEIVABLES> 82,344
<ALLOWANCES> 5,781
<INVENTORY> 54,174
<CURRENT-ASSETS> 200,896
<PP&E> 137,825
<DEPRECIATION> 150,010
<TOTAL-ASSETS> 368,720
<CURRENT-LIABILITIES> 94,008
<BONDS> 0
<COMMON> 23,559
0
0
<OTHER-SE> 227,329
<TOTAL-LIABILITY-AND-EQUITY> 368,720
<SALES> 369,336
<TOTAL-REVENUES> 369,336
<CGS> 186,844
<TOTAL-COSTS> 186,844
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,729
<INTEREST-EXPENSE> 264
<INCOME-PRETAX> 68,904
<INCOME-TAX> 28,130
<INCOME-CONTINUING> 40,774
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (623)
<NET-INCOME> 40,151
<EPS-PRIMARY> 1.71
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