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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
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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 1-457
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BULOVA CORPORATION
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(Exact name of registrant as specified in its charter)
New York 11-1719409
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(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
ONE BULOVA AVENUE, WOODSIDE, N.Y. 11377-7874
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(Address of principal executive offices) (Zip Code)
(718) 204-3300
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(Registrant's telephone number, including area code)
NOT APPLICABLE
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(Former name, former address and former fiscal year,
if changed since last report)
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
to such filing requirements for the past 90 days.
Yes X No
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Class Outstanding at May 5, 1995
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Common stock, $5 par value 4,599,249 shares
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Page 1
INDEX
Page No.
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Part I. Financial Information
Item 1. Financial Statements
Consolidated Condensed Balance Sheets-
March 31, 1995 and December 31, 1994 ....................... 3
Consolidated Condensed Statements of Operations-
Three months ended March 31, 1995 and 1994 ................. 4
Consolidated Condensed Statements of Cash Flows-
Three months ended March 31, 1995 and 1994 ................. 5
Notes to Consolidated Condensed Financial Statements .......... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations ........................... 8
Part II. Other Information
Item 6. Exhibits and Reports on Form 8-K ....................... 10
Exhibit 27--Financial Data Schedule for the three months ended
March 31, 1995 ............................................ 12
Page 2
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
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<TABLE>
<CAPTION>
Bulova Corporation and Subsidiaries
Consolidated Condensed Balance Sheets
(Amounts in thousands)
March 31, December 31,
1995 1994
---------------------------
<S> <C> <C>
Assets
------
Current assets:
Cash ......................................................... $ 14,416 $ 3,857
Accounts and notes receivable-net ............................ 42,375 51,254
Inventories .................................................. 36,494 35,750
Prepaid expenses ............................................. 191 329
Deferred income taxes ........................................ 9,308 10,004
Net assets of discontinued operations ........................ 20,082
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Total current assets ..................................... 102,784 121,276
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Property, plant and equipment-net .............................. 12,627 12,750
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Other assets:
Deferred income taxes ........................................ 14,042 16,744
Other ........................................................ 354 265
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Total other assets ....................................... 14,396 17,009
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Total assets ............................................. $129,807 $151,035
===========================
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Current installments of long-term debt ....................... $ 400 $ 400
Accounts payable ............................................. 4,652 5,569
Accrued expenses ............................................. 10,870 11,753
Accrued federal and foreign income taxes ..................... 565 2,333
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Total current liabilities ................................ 16,487 20,055
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Long-term debt, less current installments ...................... 200 200
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Other liabilities and credits:
Postretirement benefits payable .............................. 44,800 43,183
Pension benefits payable ..................................... 2,871 2,581
Other ........................................................ 2,077 3,086
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Total other liabilities and credits ...................... 49,748 48,850
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Debt to affiliate .............................................. 19,000
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Shareholders' equity ........................................... 63,372 62,930
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Total liabilities and shareholders' equity ............... $129,807 $151,035
===========================
See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
Page 3
Bulova Corporation and Subsidiaries
Consolidated Condensed Statements of Operations
(Amounts in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
-------------------------
<S> <C> <C>
Revenues:
Net Sales .................................................... $22,855 $19,736
Interest, royalties and other ................................ 1,102 1,351
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Total revenues ........................................... 23,957 21,087
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Expenses:
Cost of sales ................................................ 14,354 12,458
Selling, general and administrative .......................... 9,396 8,220
Interest:
Affiliates ................................................. 85 11
Others ..................................................... 78
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Total expenses ........................................... 23,835 20,767
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Income from continuing operations before income taxes .......... 122 320
Income tax expense ............................................. (57) (132)
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Income from continuing operations .............................. 65 188
Discontinued operations:
Gain on disposal of BTI (net of tax expense of $195) ......... 363
Loss from operations of BTI (net of tax benefit of $214) ..... (309)
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Net income (loss) .............................................. $ 428 $ (121)
=========================
Income (loss) per share:
Income from continuing operations ............................ $ .01 $ .04
Discontinued operations of BTI ............................... .08 (.07)
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Net income (loss) ........................................... $ .09 $ (.03)
=========================
Weighted average shares outstanding ............................ 4,599 4,599
=========================
See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
Page 4
<TABLE>
<CAPTION>
Bulova Corporation and Subsidiaries
Consolidated Condensed Statements of Cash Flows
(Amounts in thousands)
Three Months ended
March 31,
1995 1994
-----------------------
<S> <C> <C>
Operating Activities:
Net income (loss) ............................................ $ 428 $ (121)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities ............................ 4,065 840
Gain on sale of BTI .......................................... (558)
Changes in assets and liabilities-net:
Receivables ................................................ 8,203 7,162
Inventories ................................................ (744) 2,630
Prepaid expenses ........................................... 138 228
Net assets of discontinued operations ...................... 17
Other assets ............................................... (89) 98
Accounts payable and accrued expenses ...................... (1,800) (4,551)
Accrued federal and foreign income taxes ................... (1,768) (1,211)
Other liabilities and credits .............................. 914 (118)
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8,789 4,974
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Investing Activities:
Proceeds from disposal of BTI ................................ 20,810
Purchases of property, plant and equipment ................... (40) (121)
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20,770 (121)
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Financing Activities:
Principal payments on debt to affiliate ...................... (19,000) (7,000)
Proceeds from debt to affiliate .............................. 1,000
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(19,000) (6,000)
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Net change in cash ............................................. 10,559 (1,147)
Cash, beginning of period ...................................... 3,857 5,639
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Cash, end of period ............................................ $ 14,416 $ 4,492
======================
See accompanying Notes to Consolidated Condensed Financial Statements.
</TABLE>
Page 5
Bulova Corporation and Subsidiaries
Notes to Consolidated Condensed Financial Statements
1. See Notes to Consolidated Financial Statements in the Annual Report on Form
10-K for the year ended December 31, 1994 filed with the Securities and
Exchange Commission on March 27, 1995.
2. There have been no changes in significant accounting policies since December
31, 1994. In addition, certain amounts applicable to prior periods have been
reclassified to conform to classifications followed in 1995.
3. On January 17, 1995 the Company sold its industrial and defense
manufacturing business, Bulova Technologies, Inc. ("BTI") for $20,810,000 in
cash. The sale resulted in a pre-tax and after-tax gain of $558,000 and
$363,000, respectively, which was recorded in the first quarter of 1995. The
Company applied $18,000,000 of the consideration received to the repayment
of the debt to affiliate.
The prior year operating results of BTI have been reported separately as
discontinued operations in the consolidated condensed financial statements.
For the three months ended March 31, 1994, net sales were $11,520,000. See
Note 2 of the Notes to Consolidated Financial Statements in the Annual
Report on Form 10-K for the year ended December 31, 1994.
4. Income taxes for the three months ended March 31, 1995 and 1994 include
federal tax (expense) benefit to the Company of $(243,000) and $48,000,
respectively, related to the tax allocation agreement between the Company
and its parent, Loews Corporation ("Loews").
See Note 7 of the Notes to Consolidated Financial Statements in the Annual
Report on Form 10-K for the year ended December 31, 1994.
5. Loews provides administrative and managerial services for which the Company
was charged $175,000 for each of the three months ended March 31, 1995 and
1994. This expense is included in selling, general and administrative
expenses. The cost allocated to the Company is estimated to be the
incremental cost incurred by Loews in providing these services to the
Company. If the Company incurred these costs on a stand alone basis, it
believes the costs incurred could aggregate between $175,000 and $250,000.
Page 6
6. The Company's inventories, in thousands of dollars, are comprised of the
following:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------------------
<S> <C> <C>
Watches and clocks ............................ $33,954 $32,924
Jewelry ....................................... 347 430
Precious metals ............................... 394 450
Other ......................................... 1,799 1,946
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Total ...................................... $36,494 $35,750
======================
</TABLE>
7. Shareholders' equity:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------------------
<S> <C> <C>
Common stock .................................. $22,999 $22,999
Additional paid-in capital .................... 23,197 23,197
Retained earnings ............................. 18,573 18,145
Cumulative translation adjustment ............. (1,392) (1,406)
----------------------
Total ...................................... 63,377 62,935
Less treasury stock, at cost .................. 5 5
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Total shareholders' equity ................. $63,372 $62,930
======================
</TABLE>
8. In the opinion of the Company, the accompanying consolidated condensed
financial statements reflect all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position as of
March 31, 1995 and December 31, 1994 and the results of operations and
changes in cash flows for the three months ended March 31, 1995 and 1994,
respectively.
Results of operations during the first quarter of each of the years is not
necessary indicative of results of operations for that entire year.
Page 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
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Liquidity and Capital Resources:
Cash Flow
In January 1995 the Company sold its industrial and defense products segment,
Bulova Technologies, Inc. ("BTI") for $20,810,000 in cash. The Company applied
$18,000,000 of the consideration received to the repayment of the entire debt
owed to its parent, Loews Corporation ("Loews"), and the balance of the
consideration was added to working capital. Additionally, the Company assumed
BTI's liabilities with respect to postretirement health care benefits for
employees of BTI who had retired prior to the consummation of the sale.
The sale of BTI will allow the Company to concentrate its resources on its
core watch and clock business. Proceeds received from the sale as well as the
decrease in interest expense resulting from the repayment of the debt owed to
Loews will initially improve cash flow.
The Company continues to be adversely affected by competition and the
oversupply of watch and clock products. The Company has reduced costs to improve
gross profit, and continues its effort to closely monitor inventory purchasing
to ensure appropriate levels of inventory are maintained.
For a number of years the Company has relied on Loews, which owns
approximately 97% of the Company's common stock, to meet working capital needs,
which the Company has not been able to meet through internally generated funds.
In 1979, the Company entered into a credit agreement with Loews ("the Credit
Agreement") which provided for unsecured loans, from time to time, in amounts
aggregating up to $50,000,000. The Credit Agreement initially expired in 1980,
but the expiration date has been periodically extended by the Company and Loews.
The Credit Agreement currently expires June 30, 1996.
In 1995 the Company expects to collect its $8,126,000 receivable from Loews
related to the audited adjustments of the examination of Loews tax returns for
1984 through 1988, including accrued interest. The interest to be collected,
subject to final calculation, is estimated to amount to $4,000,000. These funds,
together with the proceeds from the sale of BTI which were added to working
capital, should provide the Company with sufficient funds to meet its working
capital needs.
Cash Flow From Operations
The Company generated net cash flow from operations of approximately
$8,789,000 for the quarter ended March 31, 1995 compared to $4,974,000 for the
corresponding period of the prior year.
The increase in cash flow is primarily due to the change in quarter end levels
of accounts payable and accrued expenses, other liabilities and credits and
accounts receivable, partially offset by an increase in inventory. These changes
are a result of the timing of the transactions. Also contributing to the cash
flow increase is the improved results of operations for the quarter ended
Page 8
March 31, 1995.
Cash Flow From Investing Activities
The increase in cash flow is primarily due to the cash received from the sale
of BTI as discussed above.
Cash Flow From Financing Activities
Cash flow from financing activities primarily represent changes in the amounts
due to Loews under the Credit Agreement discussed above.
Results of Operations
Watch, clock and jewelry revenue increased by $3,119,00, or 15.8%, as compared
to the quarter ended March 31, 1994. The revenue increase is primarily due to a
unit sales volume increase of 10.8% compared to the corresponding period of the
prior year. In the first quarter of 1994 the Company experienced a temporary
shipment backlog of $2,000,000 resulting from the implementation of a new
inventory system. The backlog was eliminated in the second quarter of 1994. A
favorable change in the product sales mix also contributed to the increase in
revenues. The Bulova brand, a higher priced product, comprised 54.7% of total
watch sales in the 1995 first quarter, compared to 51.8% for the prior year. The
revenue increase was partially offset by a $224,000 decrease in royalty income,
which includes a $382,000 decrease in royalties associated with the expiration
of the "Benetton by Bulova" license agreement.
Income from continuing operations before income taxes decreased $198,000, or
61.9%, compared to the corresponding period of the prior year. The primary
reason for the decrease in income from continuing operations is an increase of
$579,000 in advertising expenses and a $224,000 decline in royalty income,
partially offset by the increased revenues discussed above.
Cost of sales as a percentage of sales were flat compared to the quarter ended
March 31, 1994. Selling, general and administrative expenses as a percentage of
sales decreased approximately .5%. This decrease represents management's
continued efforts to control discretionary costs.
The Company imports most of its watch and clock products. Foreign currency
fluctuations therefore, can have a material impact on the Company's operations.
Approximately 25% of the Company's purchases are denominated in Japanese yen.
Current levels of inventory are sufficient enough that currency rate
fluctuations did not have a material impact on the results of operations during
the quarter ended March 31, 1995. Future fluctuations however, could negatively
impact gross profit, income, and cash flow.
Related parties - Loews provided administrative services for which the Company
paid $175,000 in each of the three months ended March 31, 1995 and 1994. The
cost allocated to the Company is estimated to be the incremental cost incurred
by Loews in providing these services to the Company. If the Company incurred
these costs on a stand-alone basis, it believes the costs would aggregate
between $175,000 and $250,000.
Page 9
Royalties - The Company recognized $692,000 and $916,000 in royalty income in
the first quarter of 1995 and 1994, respectively, which included $86,000 and
$468,000 of proceeds under the "Benetton by Bulova" license agreement that
expired June 30, 1994. The impact of losing the Benetton agreement will directly
impact the Company's revenues, income and cash flow. The remaining royalty
income represents payments by two licensees in Europe and the Far East.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits -- (27) Financial Data Schedule for the three months ended March
31, 1995.
(b) Current reports on Form 8-K -- On January 31, 1995, the Company filed a
current report on Form 8-K, dated January 17, 1995, as amended on April 10,
1995, reporting under Item 2, Acquisition or Disposition of Assets, stating that
on January 17, 1995 the Registrant disposed of its wholly owned subsidiary
Bulova Technologies, Inc. A copy of the Merger Agreement was attached as Exhibit
2.
Page 10
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BULOVA CORPORATION
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(Registrant)
Dated: May 12, 1995 By: Paul S. Sayegh
-----------------------
PAUL S. SAYEGH
Chief Operating Officer
(Duly authorized
officer and principal
financial officer)
Page 11
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 14,416
<SECURITIES> 0
<RECEIVABLES> 45,426
<ALLOWANCES> 3,051
<INVENTORY> 36,494
<CURRENT-ASSETS> 102,784
<PP&E> 20,138
<DEPRECIATION> 7,511
<TOTAL-ASSETS> 129,807
<CURRENT-LIABILITIES> 16,487
<BONDS> 200
<COMMON> 22,999
0
0
<OTHER-SE> 40,373
<TOTAL-LIABILITY-AND-EQUITY> 129,807
<SALES> 22,855
<TOTAL-REVENUES> 23,957
<CGS> 14,354
<TOTAL-COSTS> 14,354
<OTHER-EXPENSES> 9,115
<LOSS-PROVISION> 281
<INTEREST-EXPENSE> 85
<INCOME-PRETAX> 122
<INCOME-TAX> 57
<INCOME-CONTINUING> 65
<DISCONTINUED> 363
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 428
<EPS-PRIMARY> 0.09
<EPS-DILUTED> 0
Page 12
</TABLE>
