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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 July 3, 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
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At July 3, 1994, the close of the period covered by this report, registrant had
outstanding 23,559,244 common shares, $1.00 par value per share.
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PART 1. FINANCIAL INFORMATION
BIC CORPORATION AND SUBSIDIARIES
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
July 3, January 2,
1994 1994
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ASSETS (Thousands)
- - ------
CURRENT ASSETS:
Cash and cash equivalents $ 14,163 $ 24,094
Accounts and notes receivable:
Trade - net of allowance for doubtful
accounts of $4,983,000 at July 3 and
$4,084,000 at January 2 90,575 47,627
Affiliates 4,291 3,020
Other 1,538 1,372
Inventories:
Work in process, finished stock and
packaging materials 54,220 49,363
Raw materials 8,173 10,063
Other current assets 42,554 30,446
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Total current assets 215,514 165,985
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PROPERTY, PLANT AND EQUIPMENT - at cost less
accumulated depreciation of $145,934,000 at
July 3 and $137,928,000 at January 2 140,656 140,317
OTHER ASSETS 29,994 29,914
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TOTAL $386,164 $336,216
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LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
CURRENT LIABILITIES:
Bank borrowings $ 9,424 $ 6,731
Accounts payable:
Trade 16,207 11,789
Affiliates 10,933 9,390
Accrued expenses 70,854 60,843
Other current liabilities 14,939 0
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Total current liabilities 122,357 88,753
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NON-CURRENT LIABILITIES 23,169 20,775
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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 221,835 205,902
Foreign currency translation adjustment (4,756) (2,773)
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Total shareholders' equity 240,638 226,688
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TOTAL $386,164 $336,216
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See Notes to Unaudited Condensed Consolidated Financial Statements.
2
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BIC CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE SIX MONTHS ENDED JULY 3, 1994 AND JULY 4, 1993
1994 1993
---- ----
(Thousands Except Share Data)
NET SALES $241,616 $225,636
COST OF GOODS SOLD 123,419 123,107
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GROSS PROFIT 118,197 102,529
ADVERTISING, SELLING, GENERAL AND ADMINISTRATIVE,
MARKETING AND RESEARCH AND DEVELOPMENT EXPENSES 73,463 65,936
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INCOME FROM OPERATIONS 44,734 36,593
OTHER INCOME (EXPENSE) - NET (1,248) 460
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INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 43,486 37,053
PROVISION FOR INCOME TAXES 17,506 14,449
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INCOME BEFORE CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 25,980 22,604
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)
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NET INCOME 25,357 12,788
RETAINED EARNINGS - BEGINNING OF YEAR 205,902 187,900
DIVIDENDS PAID (PER COMMON SHARE: 1994 - $0.40,
1993 - $0.36) (9,424) (8,481)
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RETAINED EARNINGS - END OF PERIOD $221,835 $192,207
========= =========
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 $ 1.10 $ 0.96
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES (0.02) (0.42)
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NET INCOME $ 1.08 $ 0.54
========= =========
See Notes to Unaudited Condensed Consolidated Financial Statements.
3
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BIC CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE FISCAL QUARTERS ENDED JULY 3, 1994 AND JULY 4, 1993
1994 1993
---- ----
(Thousands Except Share Data)
NET SALES $138,839 $124,437
COST OF GOODS SOLD 70,307 68,081
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GROSS PROFIT 68,532 56,356
ADVERTISING, SELLING, GENERAL AND ADMINISTRATIVE,
MARKETING AND RESEARCH AND DEVELOPMENT EXPENSES 39,702 33,969
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INCOME FROM OPERATIONS 28,830 22,387
OTHER EXPENSE - NET (1,275) (160)
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INCOME BEFORE INCOME TAXES 27,555 22,227
PROVISION FOR INCOME TAXES 11,289 8,709
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NET INCOME (PER COMMON SHARE: 1994 - $0.69,
1993 - $0.57) $ 16,266 $ 13,518
========= =========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 23,559,244 23,559,244
See Notes to Unaudited Condensed Consolidated Financial Statements.
4
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BIC CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JULY 3, 1994 AND JULY 4, 1993
1994 1993
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(Thousands)
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES* $ 10,688 $ (5,415)
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CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (13,859) (20,471)
Proceeds from sale of property, plant and
equipment 697 355
Deferred charges, deposits and other (174) (1,374)
Purchases of trademarks and patents (523) 0
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Net cash used in investing activities (13,859) (21,490)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in notes payable - banks 2,746 24,761
Dividends paid (9,424) (8,481)
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Net cash provided by (used in)
financing activities (6,678) 16,280
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EFFECT OF EXCHANGE RATE CHANGES ON CASH (82) (690)
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DECREASE IN CASH AND CASH EQUIVALENTS (9,931) (11,315)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 24,094 25,234
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CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,163 $ 13,919
========= =========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid during the period for:
Interest $ 637 $ 165
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Income taxes $ 17,184 $ 17,204
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*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.
5
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BIC CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
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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 six-month period ended July 3, 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 six months ended July 3, 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 July 3, 1994,
the Corporation had outstanding $14.9 million of forward exchange
contracts, under which the Corporation is required to purchase French
francs at an average contract rate of approximately 6.02 French francs to
the dollar during 1994. These contracts do not meet the conditions for
setoff as set forth in FASB Interpretation No. 39 and accordingly, at July
3, 1994, the Corporation has recorded a current asset and a current
liability for the $14.9 million.
6
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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 six
months ended July 4, 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. Bank Borrowings
---------------
Bank borrowings totaled $9.4 million at July 3, 1994, and are payable
during the third and fourth quarters of 1994. The weighted average
interest rate on these borrowings is 4.8%.
7
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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 second fiscal quarter of 1994 reflect normal
operations. Accounts and notes receivable were higher at July 3, 1994 as
compared to January 2, 1994 due to higher sales levels. The Corporation's
current ratio was 1.76 at July 3, 1994 and 1.87 at January 2, 1994.
Cash and cash equivalents were $14.2 million at July 3, 1994 as compared to
$24.1 million at January 2, 1994. The decrease primarily relates to the timing
of accounts receivable collections.
The increase in other current assets and 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.
Accrued expenses were $70.9 million at July 3, 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 and vacation time.
Purchases of property, plant and equipment were $13.9 million for the six
months ended July 3, 1994 as compared with $20.5 million for the same period
last year. The difference was largely due to the expansions of the Duncan,
South Carolina facility and the Cuautitlan, Mexico facility in 1993.
Results of Operations
- - ---------------------
Net sales for the fiscal quarter ended July 3, 1994 were $138.8 million, an
increase of 12% from $124.4 million for the same period in 1993. Gross profit
as a percentage of net sales was 49% in 1994 as compared to 45% for the same
period last year. Net income was $16.3 million, or $0.69 per share, compared
with $13.5 million, or $0.57 per share, for the same period last year.
Net sales for the six months ended July 3, 1994 were $241.6 million compared
with $225.6 million in 1993, for an increase of 7%. Gross profit as a
percentage of net sales was 49% compared to 45% in 1993. Income before
cumulative effect of changes in accounting principles was $26.0 million, or
$1.10 per share, compared with $22.6 million, or $0.96 per share for the same
period last year.
8
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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 July 3, 1994 reflect
improvements in the United States core operations (stationery products,
lighters and shavers). The increase in stationery products was primarily
attributable to an increase in the number of ball pen units sold and higher
average selling prices for ball pens. The unit increase in ball pens was due
in part to certain customers scheduling back-to-school merchandise earlier than
last year. The improvements in lighters reflect an increase in units sold and
higher average selling prices for the BIC fixed flame lighter. The shaver
improvement was the result of an increase in the number of BIC twin blade
shavers sold and higher average selling prices. Improvements in foreign
operations, particularly Mexico, contributed to the overall net sales increase.
The higher gross profit percentage for the second fiscal quarter of 1994, as
compared to the same period last year, reflects the higher average selling
prices discussed in the preceding paragraph and also lower unit cost of goods
for ball pens and BIC fixed flame lighters in the United States. The lower
unit costs resulted from favorable manufacturing variances attributable to
higher levels of productivity.
Advertising, selling, general and administrative, marketing and research and
development expenses for the fiscal quarter ended July 3, 1994 were $39.7
million as compared to $34.0 million for the same period last year. The
increase was primarily attributable to higher selling expenses and an increase
in the provision for bad debt expense.
Other expense - net for the second fiscal quarter of 1994 was $1.3 million as
compared to $0.2 million for the same period last year. The increase was
primarily due to the write-down of certain obsolete manufacturing machinery in
1994.
The $12.6 million increase in net income for the six-month period ended July 3,
1994 was attributable to the adoption of SFAS 106 in 1993 and to the
improvements in gross profit margins in 1994.
9
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PART II. OTHER INFORMATION
BIC CORPORATION AND SUBSIDIARIES
Item 1. Legal Proceedings
In November 1992, a state court jury in Creek County, Oklahoma, in a
9 to 3 verdict, awarded $11 million in actual damages and $11 million
in punitive damages against the Corporation in connection with a case
involving a cigarette lighter suit. On May 3, 1994, the Court of
Appeals of Oklahoma reduced the amount of punitive damages by $8
million. On May 23, 1994, BIC filed a petition for writ of
certiorari with the Oklahoma Supreme Court and on July 13, 1994, the
Oklahoma Supreme Court denied BIC's petition. The original jury
verdict was contrary to more than 70 decisions rendered in BIC's
favor by judges and juries since January 1988. BIC is adequately
insured and reserved so that any liability will have no significant
effect on the Corporation's consolidated financial position or on its
results of operations.
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
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(Registrant)
Date: August 12, 1994 Robert L. Macdonald
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(Signature)
Robert L. Macdonald, Vice President - Finance
(Principal Accounting Officer)
