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 June 30, 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 1-10390
Berlitz International, Inc.
(Exact name of registrant as specified in its charter)
New York 13-355-0016
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Research Park, 293 Wall Street, Princeton, New Jersey 08540
(Address of principal executive offices)
(609) 924-8500
Registrant's telephone number, including area code
No Change
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 such filing requirements for the past 90 days.
Yes X No
The number of shares outstanding of the registrant's common stock, at the
close of business on August 15, 1994, is 10,032,903.
Page 1
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Form 10-Q
Part I - Item 1.
PART I. FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS
<TABLE>
BERLITZ INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)
FOR THE THREE MONTHS ENDED JUNE 30,
(Dollars in thousands, except per share amounts)
<CAPTION>
Post-Merger
--------------------------
1994 1993
---------- -----------
<S> <C> <C>
Sales of services and products $ 74,414 $ 73,485
---------- -----------
Costs and expenses:
Cost of services and products sold 44,233 45,850
Selling, general and administrative 22,271 22,017
Amortization of publishing rights and
excess of cost over net assets acquired 3,151 3,089
Interest expense on long-term debt 2,549 2,584
Other income, net (583) (79)
---------- -----------
Total costs and expenses 71,621 73,461
---------- -----------
Income before income taxes 2,793 24
Income tax expense (benefit) 3,153 (507)
---------- -----------
Net income (loss) available to
common shareholders $ (360) $ 531
========== ===========
Earnings (loss) per common share $ (0.04) $ 0.05
========== ===========
Average number of common shares (000's) 10,033 10,031
========== ===========
See accompanying notes to the Consolidated Financial Statements.
</TABLE>
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Form 10-Q
Part I - Item 1.
<TABLE>
BERLITZ INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND THE PERIODS FROM
JANUARY 1, 1993 TO JANUARY 31, 1993 AND
FROM FEBRUARY 1, 1993 TO JUNE 30, 1993
(Dollars in thousands, except per share amounts)
<CAPTION>
Post-Merger (Unaudited) Pre-Merger
------------------------------------------ ------------------
Six Period From Period From
Months Ended February 1, 1993 to January 1, 1993 to
June 30, 1994 June 30, 1993 January 31, 1993
------------- ------------------- ------------------
<S> <C> <C> <C>
Sales of services and products $ 143,435 $ 122,889 $ 19,608
---------- ----------- ----------
Costs and expenses:
Cost of services and products sold 86,245 75,123 13,479
Selling, general and administrative 44,133 37,155 6,719
Amortization of publishing rights and
excess of cost over net assets acquired 6,302 5,147 872
Interest expense on long-term debt 4,926 4,055 89
Other income, net (709) (6,819) (552)
---------- ----------- ----------
Total costs and expenses 140,897 114,661 20,607
---------- ----------- ----------
Income (loss) before income taxes and cumulative
effect of change in accounting principle 2,538 8,228 (999)
Income tax expense 4,677 6,651 635
Income (loss) before cumulative effect of change ---------- ----------- ----------
in accounting principle (2,139) 1,577 (1,634)
Cumulative effect of change in accounting
principle - - 3,172
Net income (loss) available to ---------- ----------- ----------
common shareholders $ (2,139) $ 1,577 $ 1,538
========== =========== ==========
Earnings (loss) per common share:
Income (loss) before cumulative effect of change
in accounting principle $ (0.21) $ 0.16 $ (0.09)
Cumulative effect of change in accounting
principle - - 0.17
----------- ----------- ----------
Earnings (loss) per common share $ (0.21) $ 0.16 $ 0.08
=========== =========== ==========
Average number of common shares (000's) 10,033 10,031 19,024
=========== =========== ==========
See accompanying notes to the Consolidated Financial Statements.
</TABLE>
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<TABLE>
BERLITZ INTERNATIONAL, INC. Form 10-Q
CONSOLIDATED BALANCE SHEETS Part I - Item 1.
(Dollars in thousands)
<CAPTION>
(Unaudited)
June 30, December 31,
1994 1993
--------- ------------
ASSETS
<S> <C> <C>
Current assets:
Cash and temporary investments $ 14,793 $ 11,738
Accounts receivable, less allowance for
doubtful accounts of $2,093 and $2,566 26,032 22,999
Inventories 10,077 10,684
Prepaid expenses and other current assets 7,954 6,054
--------- --------
Total current assets 58,856 51,475
Property and equipment, net of accumulated
depreciation of $7,520 and $2,666 27,015 25,791
Publishing rights, net of accumulated amorti-
zation of $1,218 and $788 20,282 20,712
Excess of cost over net assets acquired, net of
accumulated amortization of $16,635 and $10,763 453,093 458,964
Other assets 13,995 13,530
--------- --------
Total assets $ 573,241 $570,472
========= ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Short-term borrowings $ 7,000 $ 3,000
Current portion of long-term debt 7,375 5,525
Accounts payable 5,244 5,278
Deferred revenues 36,692 33,187
Payrolls and commissions 11,180 9,468
Income taxes payable 4,466 1,971
Accrued Merger-related restructuring costs 5,219 7,978
Accrued expenses and other current liabilities 12,382 11,607
--------- --------
Total current liabilities 89,558 78,014
Long-term debt 101,163 105,775
Deferred taxes and other liabilities 15,175 15,169
Minority interest 6,382 6,561
--------- --------
Total liabilities 212,278 205,519
--------- --------
Commitments and Contingencies (Note 6)
Shareholders' equity:
Common stock 1,003 1,003
Additional paid-in capital 368,658 368,658
Accumulated deficit (5,695) (3,556)
Cumulative translation adjustment (3,003) (1,152)
--------- --------
Total shareholders' equity 360,963 364,953
Total liabilities and shareholders' --------- --------
equity $ 573,241 $570,472
========= ========
See accompanying notes to the Consolidated Financial Statements.
</TABLE>
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<TABLE>
Form 10-Q
Part I - Item 1.
BERLITZ INTERNATIONAL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND
THE PERIODS FROM JANUARY 1, 1993 TO JANUARY 31, 1993 AND FROM
FEBRUARY 1, 1993 TO JUNE 30, 1993
(Dollars in thousands)
<CAPTION>
Post-Merger (Unaudited) Pre-Merger
-------------------------------------- ------------------
Six Months Period From Period From
Ended February 1, 1993 to January 1, 1993 to
June 30, 1994 June 30, 1993 January 31, 1993
-------------- ------------------- ------------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (2,139) $ 1,577 $ 1,538
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Cumulative effect of change in accounting principle - - (3,172)
Gain on sale of interest in subsidiary - (4,924) -
Depreciation and amortization 9,387 7,737 1,396
Foreign exchange (gains) losses, net
and minority interest 335 (3,066) (130)
Equity in losses of joint ventures - 1,613 -
Payment of deferred financing costs - (6,623) -
Changes in operating assets and liabilities (1,156) (4,302) 10,002
-------------- ------------------- ------------------
Net cash provided by (used in) operating activities 6,427 (7,988) 9,634
-------------- ------------------- ------------------
Cash flows from investing activities:
Capital expenditures (2,992) (3,545) (560)
Investment in joint ventures (1,032) (1,045) (37)
-------------- ------------------- ------------------
Net cash used in investing activities (4,024) (4,590) (597)
Cash flows from financing activities: -------------- ------------------- ------------------
Proceeds from issuance of long-term debt - 115,000 -
Repayment of long-term debt (2,762) (26,850) -
Net borrowings under revolving credit agreement 4,000 4,000 -
Payment of Merger-related expenses - (13,996) -
Proceeds from equity capital contribution - 293,067 -
Payment of cash portion of Merger consideration
to shareholders - (374,541) -
Proceeds from sale of Notes - 30,833 -
Distribution of Notes proceeds to shareholders - (29,701) -
Other net financing activity - - 99
-------------- ------------------- ------------------
Net cash provided by (used in) financing activities 1,238 (2,188) 99
Effect of exchange rate changes on cash and -------------- ------------------- ------------------
temporary investments (586) (742) (204)
-------------- ------------------- ------------------
Net increase (decrease) in cash and temporary investments 3,055 (15,508) 8,932
Cash and temporary investments, beginning of period 11,738 28,113 19,181
-------------- ------------------- ------------------
Cash and temporary investments, end of period $ 14,793 $ 12,605 $ 28,113
Supplemental disclosures of cash flow information: ============== =================== ==================
Cash payments for interest $ 4,592 $ 3,733 $ 109
============== =================== ==================
Cash payments for income taxes $ 3,170 $ 2,792 $ 192
============== =================== ==================
See accompanying notes to the Consolidated Financial Statements.
</TABLE>
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Form 10-Q
Part I - Item 1.
BERLITZ INTERNATIONAL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, except per share amounts)
1. General
The Consolidated Financial Statements of Berlitz International, Inc. (the
"Company") have been prepared in accordance with the instructions to Form
10-Q and are unaudited. The information reflects all adjustments which are
of a normal recurring nature which are, in the opinion of management,
necessary for a fair presentation of such financial statements. The
financial statements should be read in conjunction with the financial
statements and related notes to the Company's 1993 Annual Report on Form
10-K, as filed with the Securities and Exchange Commission.
Reclassifications
Certain reclassifications have been made to the prior period financial
statements to conform to the 1994 presentation.
2. Long-Term Debt
The Company has outstanding indebtedness through borrowing under a bank
term facility (the "Bank Term Facility") and the issuance of Senior Notes
(the "Senior Notes") (collectively the "Acquisition Debt Facilities"), as
follows:
June 30, December 31,
1994 1993
---------- ------------
Term Loan $ 52,538 $ 55,300
Senior Notes 56,000 56,000
---------- ------------
Total debt 108,538 111,300
Less current maturities 7,375 5,525
---------- ------------
Long-term debt $ 101,163 $ 105,775
========== ============
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3. Financial Instruments
Pursuant to a covenant under the Acquisition Debt Facilities, the Company
is party to currency coupon swap agreements with a financial institution to
hedge the Company's net investments in certain foreign subsidiaries and to
help manage the effect of foreign currency fluctuations on the Company's
ability to repay its U.S. dollar debt. Credit loss from counterparty
nonperformance is not anticipated. No unrealized gains or losses have been
reflected in the Company's Consolidated Statements of Operations for these
agreements. The fair market value of these swap agreements at June 30, 1994,
representing the amount that could be settled based on estimates obtained
from a dealer, was a liability of approximately $2,000.
4. Other Income, net
Post-Merger
------------------------------
Three Months Three Months
Ended Ended
June 30, 1994 June 30, 1993
------------- -------------
Interest income on temporary investments $ (915) $ (542)
Equity in losses of joint ventures - 82
Foreign exchange losses, net 281 91
Other expense, net 51 290
------------ ------------
Total other income, net $ (583) $ (79)
============ ============
<TABLE>
<CAPTION>
Post-Merger Pre-Merger
------------------------------------ ------------------
Six Months Period From Period From
Ended February 1, 1993 to January 1, 1993 to
June 30, 1994 June 30, 1993 January 31, 1993
------------- ------------------- ------------------
<S> <C> <C> <C>
Gain on sale of interest in subsidiary $ - $ (4,924) $ -
Interest income on temporary investments (1,182) (968) (143)
Equity in losses of joint ventures - 1,613 -
Foreign exchange losses, net 513 16 38
Interest income from affiliates - - (99)
Other income, net (40) (2,556) (348)
------------- ------------------ ------------------
Total other income, net $ (709) $ (6,819) $ (552)
============= ================== ==================
</TABLE>
5. Earnings Per Share
Earnings per share of common stock are computed by dividing net income (loss)
available to common shareholders by the weighted average number of common
shares outstanding during the period. Primary and fully diluted earnings per
share of common stock are the same since common stock equivalents (e.g. stock
options, restricted stock and other stock equivalents) are immaterial in both
calculations. The Company had no such common stock equivalents outstanding
as of June 30, 1994.
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6. Contingencies
The Company was included in the consolidated tax returns of the affiliated
group of which Macmillan Inc. ("Macmillan") was the parent (the "Macmillan
Group") prior to the Company's initial public offering in December 1989 and
consequently is severally liable for any Federal tax liabilities for the
Macmillan Group arising prior to that date. Pursuant to the Disengagement
Agreements, Macmillan and a new obligor which owns 100% of Macmillan School
Publishing, Inc. agreed to pay all such Federal tax liabilities pursuant to
an amended and restated tax allocation agreement (the "Tax Allocation
Agreement"), and Maxwell Communication Corporation plc ("MCC") put into
escrow $39,500 to secure Macmillan's obligations.
On November 10, 1993, Macmillan commenced a voluntary Chapter 11 case in the
United States Bankruptcy Court for the Southern District of New York and
filed a prepackaged plan of reorganization (the "Reorganization Plan"). The
Reorganization Plan provides that the Tax Allocation Agreement, along with
many other contracts between Macmillan and other parties, is to be assumed by
Macmillan and assigned to a trust intended to have sufficient assets to
satisfy the obligations being assumed and assigned. The Reorganization Plan
also provides a cash reserve to pay tax claims that are entitled to priority,
which may include tax liabilities covered by the Tax Allocation Agreement.
On February 19, 1994, the Bankruptcy Court confirmed the Reorganization Plan.
Any tax liability assessed against the Company that would otherwise be
payable by Macmillan under the Tax Allocation Agreement is likely to be
paid either by the trust or from the cash reserve described above. Management
believes that any such liability will not result in a material effect on the
financial condition of the Company.
As part of the Merger, Fukutake Publishing Company, Ltd. ("Fukutake")
established a $50,000 irrevocable letter of credit to be used in the event
that income tax liabilities are imposed on the Company that relate to the
Macmillan Group. The Company is obligated to pay fees as may be charged in
connection with such letter of credit and to reimburse Fukutake for amounts
paid by Fukutake to the issuer of the letter of credit to the extent that it
is drawn upon.
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Form 10-Q
Part I - Item 2.
BERLITZ INTERNATIONAL, INC.
PART I. FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the attached
Consolidated Financial Statements and notes thereto and with the Company's
audited Consolidated Financial Statements and notes thereto for the fiscal
year ended December 31, 1993.
Results of Operations - Three Months Ended June 30, 1994 vs.
Three Months Ended June 30, 1993
In connection with the Merger, certain restructuring charges were accrued in
the third and fourth quarters of 1993, including those for the reorganization
of the Translations and certain Language Instruction divisions and the targeted
closing of language centers (of which 12 were closed in 1993, 6 were closed
in the first quarter of 1994, and 2 were closed in the second quarter of 1994).
The following selected financial data compares the results of language centers
and Translations facilities not affected by these Merger-related restructuring
activities:
Three Months Ended June 30,
---------------------------
Pro Forma
1994 1993
-------- --------
Sales of services and products $ 74,414 $ 69,003
Cost of services and products sold and
selling, general and administrative $ 66,504 $ 61,520
Lessons given (000's) 1,219 1,162
Sales for the quarter ended June 30, 1994 were $74.4 million, 1.3% above
the same period in the prior year, reflecting increases in the Language
Instruction, Translations and Publishing segments. In comparing the
facilities not affected by Merger-related restructuring activities, sales
increased by $5.4 million, or 7.8%, from pro forma 1993 sales.
Language Instruction sales were $61.4 million, flat with the same period in
1993. However, when comparing language centers not affected by Merger-related
restructuring activities, Instruction sales increased by $3.5 million, or 6.1%,
from pro forma 1993, reflecting increases in all divisions,
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particularly East Asia ($1.8 million, or 10.6%) and Latin America
($1.3 million, or 16.3%). The improvement in East Asian sales from pro
forma 1993 largely resulted from the favorable impact of exchange rate
fluctuations ($1.2 million) and increased activity in Hong Kong and Thailand
($0.4 million). The increase in Latin American revenues was primarily due
to activity in Brazil and Mexico.
During the three-month period ended June 30, 1994, the number of lessons
given was approximately 1.2 million, slightly below prior year but 4.9%
above the same period in the prior year when comparing language centers not
affected by the Merger-related restructuring activities. Lesson volume in
East Asia increased 7.2% from pro forma 1993, favorably impacted by the first
full year of operation of certain centers in Hong Kong and Thailand and by a
2.1% improvement in Japan. Lesson volume in Latin America increased by 7.0%
from prior year, primarily due to growth in Mexico. Lesson volume in
Central/Eastern Europe increased by 12.4% over pro forma 1993 primarily due
to the results of the new language centers in the Czech Republic, Poland and
Hungary. Lesson volume in Western Europe increased slightly over pro forma
1993, reflecting increases in all countries except Belgium and Spain.
Translations sales were $9.2 million for the three-month period ended June
30, 1994, an increase of $1.3 million, or 17.1%, from the same period in
1993 when comparing facilities not affected by the Merger-related restructuring
activities. This increase was primarily attributable to strong performances
in Canada and Norway.
Publishing segment sales were $3.8 million for the three months ended June 30,
1994, 16.5% above pro forma 1993, reflecting improvements in both the United
States and Europe.
Total costs and expenses were $71.6 million for the quarter ended June 30,
1994, a decrease of $1.8 million from the prior year's quarter, due largely
to reductions in cost of services and products sold and selling general and
administrative expenses, which totalled $66.5 million, or 89.4% of sales, for
the 1994 second quarter, compared to $67.9 million, or 92.4% of sales, in the
prior year. This improvement as a percentage of sales resulted primarily from
the closing of unprofitable facilities under the Merger-related restructuring
and was favorably impacted by certain cost reduction measures.
Net loss to common shareholders for the quarter ended June 30, 1994 was $0.4
million, or $0.04 per common share, compared to net income of $0.5 million,
or $0.05 per share, in the prior year's quarter. The Company recorded an
income tax expense of $3.2 million, or an effective rate of 112.9%, during
the current period due to its inability to utilize net operating losses in
certain countries, and to nondeductible amortization charges. This compared
to the recognition of a tax benefit of $0.5 million in the prior year's
quarter for certain foreign tax credits expected to be realized within the
carryforward period.
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Results of Operations - Six Months Ended June 30, 1994 vs.
Six Months Ended June 30, 1993
The following selected financial data compares the results of language
centers and Translations facilities not affected by the Merger-related
restructuring activities:
Six Months Ended June 30,
-------------------------
1994 1993
-------- --------
Sales of services and products $143,435 $135,566
Cost of services and products sold and
selling, general and administrative $130,378 $122,906
Lessons given (000's) 2,398 2,312
Sales for the six months ended June 30, 1994 were $143.4 million, 0.7%
higher than the same period in the prior year, as increases in the Language
Instruction and Publishing segments offset declines in Translations. However,
comparing the facilities not affected by Merger-related restructuring
activities, sales increased by $7.9 million, or 5.8%, from pro forma
1993 sales, reflecting increases in all three segments.
Language Instruction sales for the six-month period ended June 30, 1994 were
$118.4 million, an increase of $1.0 million, or 0.9%, from the same period in
1993. However, when comparing language centers not affected by Merger-related
restructuring activities, Instruction sales increased by $6.5 million, or 5.8%,
from pro forma 1993, as a decrease in Western Europe was offset by increases
in the other divisions. This decrease from pro forma 1993 in Western Europe,
amounting to $0.9 million, resulted from unfavorable exchange rate fluctuations
($1.2 million) combined with operating shortfalls in Belgium, France and Spain.
The decline was primarily offset by increases over pro forma 1993 of $2.2
million in the Latin America division, particularly Brazil and Mexico, and in
the East Asian division, where sales improved by $4.6 million, or 15.4%, due
to favorable exchange rate fluctuations ($2.9 million), increased activity in
Hong Kong and Thailand ($0.7 million), and volume and price improvements in
Japan.
During the six-month period ended June 30, 1994, the number of lessons given
was approximately 2.4 million, less than 1.0% below the prior year but 3.7%
above the same period in the prior year when comparing language centers not
affected by the Merger-related restructuring activities. Lesson volume in
East Asia increased 8.4% from pro forma 1993, primarily reflecting increased
activity in Hong Kong and Thailand. Lesson volume in Latin America increased
by 6.4% from prior year, reflecting increases in all countries except
Venezuela, in which lesson volume declined 12.5% due to a local economic
crisis. Lesson volume in Central/Eastern Europe increased by 9.6% over pro
forma 1993 as shortfalls in Germany of 3.6% were offset by results of the
new language centers in the Czech Republic, Poland and Hungary. Lesson
volume in Western Europe declined 1.5% from pro forma 1993, due to shortfalls
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in Belgium, France and Spain.
Translations sales were $17.7 million for the six-month period ended June
30, 1994, an increase of $0.8 million, or 4.8%, from 1993 when comparing
facilities not affected by the Merger-related restructuring activities.
This increase was favorably impacted by strong performances in Canada and
Norway, and negatively affected by shortfalls in the United States and by
unfavorable exchange rate fluctuations.
Publishing segment sales were $7.3 million for the six months ended June 30,
1994, 6.9% above prior year, primarily due to growth in the United States.
For the six months ended June 30, 1994, the Company reported a net loss to
common shareholders of $2.1 million compared to net income of $3.1 million
in the prior-year first half. This decline of $5.2 million resulted primarily
from non-recurring income items and the cumulative effect of a change in
accounting principle in 1993, partially offset by declines in cost of services
and products sold, selling, general and administrative expenses, and income
tax expense in 1994.
Cost of services and products sold, and selling, general and administrative
expenses totalled $130.4 million, or 90.9% of sales, for the first half of
1994, compared to $132.5 million, or 93.0% of sales, in the prior year. This
improvement as a percentage of sales resulted primarily from the closing of
unprofitable facilities under the Merger-related restructuring and from
certain cost reduction measures, which more than offset the impacts in
1993 of the settlement of a lease negotiation (income of $1.5 million) and
certain other Merger-related adjustments (expense of $0.9 million).
Other income, net for the six months ended June 30, 1994 decreased by $6.7
million from the same prior-year period, primarily due to non-recurring
income items, net, of $5.9 million in 1993 which were triggered by the terms
of the Merger and related restructuring activities.
Income tax expense for the six months ended June 30, 1994 was $4.7 million,
a decrease of $2.6 million from the same period in the prior year. The
Company's effective income tax rate for the first half of 1994 was higher
than that for the first half of 1993 due to the Company's inability to
utilize net operating losses in certain countries and to nondeductible
amortization charges.
Financial Condition
The primary source of the Company's liquidity is the cash provided by
operations. The Company's business is not capital intensive and,
historically, capital expenditures, working capital requirements and
acquisitions have been funded from internally generated cash. Although
each geographic area exhibits different patterns of lesson volume over
the course of the year, the Company's sales are generally not seasonal
in the aggregate; as a result, there is no need for significant amounts
of cash at any point in time during the year. Generally, the Company
collects cash from customers in the form of prepayment of fees for
instruction that gives rise to deferred revenues.
Capital expenditures for the opening of 7 new language centers and the
refurbishing of existing centers during the six-month period ended June
30, 1994 were $2.9 million, a decrease of 27% from the prior year due to
cost control measures. Eight language centers, all of which were targeted
for closing as part of the Merger-related restructuring activities, were
closed during the six-month period.
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Pursuant to a covenant under the Acquisition Debt Facilities, the Company is
party to six currency coupon swap agreements with a financial institution.
These agreements require the Company, in exchange for U.S. dollar receipts,
to periodically make foreign currency payments, denominated in the Japanese
yen, the Swiss franc, the Canadian dollar, the British pound, and the German
mark. The first exchange was made in June 1994. Credit loss from counterparty
nonperformance is not anticipated. The fair market value of these swap
agreements at June 30, 1994, representing the amount that could be settled
based on estimates obtained from a dealer, was a liability of approximately
$2.0 million.
At June 30, 1994, the Company's liquid assets of $14.8 million consisted of
cash and temporary investments. During 1994, the Company anticipates that
capital expenditures will not exceed historical requirements. The Company
believes that the strategic restructuring undertaken in 1993 has strengthened
the core business and positioned the Company for future growth. Thus, the
Company plans to meet its increased debt service requirements and future
working capital needs through funds generated from operations, and through
the increase in available cash as the result of the discontinuation of
dividends resulting from restrictions imposed by the Acquisition Debt
Facilities.
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Form 10-Q
Part II - Item 6
BERLITZ INTERNATIONAL, INC.
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K.
No reports on Form 8-K have been filed during the quarter ended
June 30, 1994.
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BERLITZ INTERNATIONAL, INC.
SIGNATURES
Pursuant to the requirements of the Exchange Act the registrant has duly
caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
BERLITZ INTERNATIONAL, INC.
(Registrant)
Date: August 15, 1994 By: /s/ Robert Minsky
--------------------------------
Robert Minsky
Executive Vice President and
Chief Financial Officer
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