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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, 2001 |
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 | 1-457 |
BULOVA CORPORATION | |||
(Exact name of registrant as specified in its charter) | |||
New York | 11-1719409 | ||
(State or other jurisdiction of | (I.R.S. Employer | ||
incorporation organization) | Identification No.) | ||
ONE BULOVA AVENUE, WOODSIDE, NY 11377-7874 |
Address of principal executive offices (Zip code) |
(718) 204-3300 |
(Registrant's telephone number, including area) |
NOT APPLICABLE |
(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 | ||||||
_________ | __________ | |||||||
Class | Outstanding at May 4, 2001 | |||||||
___________________________ | __________________________ | |||||||
Common stock, $5 par value | 4,599,857 shares | |||||||
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BULOVA CORPORATION
INDEX TO QUARTERLY REPORT ON
FORM 10-Q FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION
For the quarterly period ended March 31, 2001
Item | Part I. Financial Information | Page |
| No. | No. | |
______ | ______ | |
1. | Financial Statements | |
Consolidated Condensed Balance Sheets -- |
| |
Consolidated Condensed Statements of Income -- | ||
Three months ended March 31, 2001 and 2000 | 4 | |
Consolidated Condensed Statements of Cash Flows -- | ||
Three months ended March 31, 2001 and 2000 | 5 | |
Notes to Consolidated Condensed Financial Statements | 6 | |
2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
|
Part II. Other Information | ||
6. | Exhibits and Reports on Form 8-K | 10 |
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
BULOVA CORPORATION AND SUBSIDIARIES | ||
CONSOLIDATED CONDENSED BALANCE SHEETS | ||
(Amounts in thousands) | ||
March 31, | December 31, | |
Assets | 2001 | 2000 |
Current Assets: | ||
Cash and cash equivalents | $ 30,075 | $ 16,862 |
Accounts and notes receivable-net | 51,456 | 70,686 |
Inventories, principally watches and clocks | 54,703 | 56,072 |
Prepaid expenses | 1,834 | 2,969 |
Prepaid federal income tax | 630 | |
Deferred income taxes | 10,885 | 10,712 |
Total current assets | 148,953 | 157,931 |
Property, plant and equipment-net | 15,448 | 15,625 |
Other assets: | ||
Deferred income taxes | 13,872 | 14,057 |
Other | 221 | 172 |
Total other assets | 14,093 | 14,229 |
Total assets | $ 178,494 | $ 187,785 |
Liabilities and Shareholders' Equity | ||
Current liabilities: | ||
Accounts payable | $ 1,469 | $ 8,158 |
Accrued expenses | 17,395 | 23,015 |
Accrued federal and foreign income taxes | 1,334 | |
Total current liabilities | 20,198 | 31,173 |
Other liabilities and credits: | ||
Postretirement benefits payable | 33,321 | 33,716 |
Pension benefits payable | 1,364 | 1,364 |
Total other liabilities and credits | 34,685 | 35,080 |
Shareholders' equity | 123,611 | 121,532 |
Total liabilities and shareholders' equity | $ 178,494 | $ 187,785 |
See accompanying Notes to Consolidated Condensed Financial Statements.
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BULOVA CORPORATION AND SUBSIDIARIES |
CONSOLIDATED CONDENSED STATEMENTS OF INCOME |
(Amounts in thousands, except per share data) |
Three Months Ended | ||
March 31, | ||
2001 | 2000 | |
Net sales | $ 32,040 | $ 35,277 |
Cost of sales | 14,579 | 17,944 |
Gross profit | 17,461 | 17,333 |
Selling, general and administrative expenses | 14,022 | 13,562 |
Operating income | 3,439 | 3,771 |
Royalty income | 571 | 584 |
Interest -- net | 258 | 468 |
Other income | 4 | 37 |
Income before income taxes | 4,272 | 4,860 |
Income tax expense | 1,833 | 2,105 |
Net income | $ 2,439 | $ 2,755 |
Net income per share | $ .53 | $ .60 |
Weighted average number of shares outstanding (in thousands) | 4,599 | 4,599 |
See accompanying Notes to Consolidated Condensed Financial Statements.
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BULOVA CORPORATION AND SUBSIDIARIES | ||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS | ||
(Amounts in thousands) | ||
Three Months Ended | ||
March 31, | ||
2001 | 2000 | |
Operating Activities: | ||
Net income | $ 2,439 | $ 2,755 |
Adjustments to reconcile net income to net cash provided by | ||
operating activities | 1,172 | 951 |
Changes in assets and liabilities-net: | ||
Receivables | 18,254 | 14,111 |
Inventories | 1,369 | 2,321 |
Prepaid expenses | 1,135 | 236 |
Other assets | (49) | (3) |
Accounts payable and accrued expenses | (12,309) | (4,189) |
Accrued federal and foreign income taxes | 1,964 | (1,037) |
Other liabilities and credits | (755) | (743) |
13,220 | 14,402 | |
Investing Activities: | ||
Purchases of property, plant and equipment | (7) | (378) |
Proceeds from disposal of property, plant and equipment |
| 5 |
(7) | (373) | |
Net change in cash and cash equivalents | 13,213 | 14,029 |
Cash and cash equivalents, beginning of period | 16,862 | 22,027 |
Cash and cash equivalents, end of period | $ 30,075 | $ 36,056 |
See accompanying Notes to Consolidated Condensed Financial Statements.
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BULOVA CORPORATION AND SUBSIDIARIES |
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS |
(Dollars in thousands, except per share data) |
1. | See Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2000 filed with the Securities and Exchange Commission on March 28, 2001. |
There have been no changes in significant accounting policies since December 31, 2000. In addition, certain amounts applicable to prior periods have been reclassified to conform to classifications followed in 2001. | |
2. | Under the tax allocation agreement between the Company and its parent, Loews Corporation ("Loews"), the Company has paid Loews approximately $1,759 and $1,137 for the three months ended March 31, 2001 and 2000, respectively. |
See Note 3 of the Notes to Consolidated Financial Statements in the Annual Report on Form 10-K for the year ended December 31, 2000. | |
3. | Loews provides administrative and managerial services for which the Company was charged $750 in each of the three months ended March 31, 2001 and 2000, respectively. 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. |
4. | For the three months ended March 31, 2001 and 2000, comprehensive income totaled $2,079 and $2,719, respectively. Comprehensive income includes all changes to shareholders' equity, except those resulting from investments by owners and distributions to owners. Comprehensive income includes net income, foreign currency translation gains or losses, unrealized appreciation (depreciation) on marketable securities and pension liability adjustments. |
5. | Shareholders' equity: |
March 31, | December 31, | |
2001 | 2000 |
Common stock | $ 22,999 | $ 22,999 |
Additional paid-in capital | 23,197 | 23,197 |
Retained earnings | 81,209 | 78,770 |
Accumulated other comprehensive loss | (3,789) | (3,429) |
Total | 123,616 | 121,537 |
Less treasury stock, at cost | 5 | 5 |
Total shareholders' equity | $ 123,611 | $ 121,532 |
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6. | Geographic Information: | |
The Company operates in a single industry segment, the distribution and sale of watches and clocks under the brand names of Bulova, Caravelle and Accutron. Substantially all of the Company's sales are in the United States, Canada and Mexico. The Company commenced operations in Mexico in November 2000. The Company evaluates performance based on operating earnings of the respective geographic area and the geographic distribution of the Company's identifiable assets and operating results are summarized in the following tables: | ||
United | ||||
Three Months Ended March 31, 2001 | States | Canada | Mexico | Total |
| ||||
Sales | $ 29,526 | $ 2,656 | $ 856 | $ 33,038 |
Intercompany sales | (998) | (998) | ||
Total net sales | $ 28,528 | $ 2,656 | $ 856 | $ 32,040 |
Operating income | $ 3,079 | $ 200 | $ 160 | $ 3,439 |
Royalty income | 571 | 571 | ||
Interest-net | 205 | 53 | 258 | |
Other income (expense) | 7 | (3) | 4 | |
Income before income taxes | $ 3,862 | $ 250 | $ 160 | $ 4,272 |
Three Months Ended March 31, 2000 | ||||
Sales | $ 32,523 | $ 3,372 | $ 35,895 | |
Intercompany sales | (618) | (618) | ||
Total net sales | $ 31,905 | $ 3,372 | $ 35,277 | |
Operating income | $ 3,380 | $ 391 | $ 3,771 | |
Royalty income | 584 | 584 | ||
Interest-net | 449 | 19 | 468 | |
Other income | 32 | 5 | 37 | |
Income before income taxes | $ 4,445 | $ 415 | $ 4,860 | |
7. | In the opinion of Management, 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, 2001 and December 31, 2000 and the results of operations and changes in cash flows for the three months ended March 31, 2001 and 2000, respectively. |
Results of operations for the first quarter of each of the years is not necessarily indicative of results of operations for that entire year. | |
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Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. |
Liquidity and Capital Resources: |
The Company generated net cash flow from operations of $13,220,000 and $14,402,000 for the three months ended March 31, 2001 and 2000, respectively. The decrease in net cash flow compared to the corresponding period of the prior year is primarily the result of a decrease in accounts payable and accrued expenses, partially offset by a decrease in the level of accounts receivable and a change in the timing of payments related to income taxes. |
The Company expects that existing cash balances and cash flow from operations will be sufficient to fund anticipated working capital requirements. |
Results of Operations: |
Net sales and income before income taxes decreased $3,237,000 and $588,000, respectively, for the three months ended March 31, 2001, as compared to the prior year. The decrease in net sales is primarily attributable to the unit volume decrease of the Company's Caravelle and Accutron watch brands of 21.1% and 22.7%, respectively, as compared to 2000, as well as a decrease in clock unit volume of 10.5% as compared to the prior year. The unit volume decrease resulted in a combined decline in net sales of $3,160,000, as compared to 2000. |
The Company's overall gross margins are primarily affected by three major factors: sales mix, product pricing strategy and efficient procurement practices. Gross profit as a percentage of net sales for the three months ended March 31, 2001 was 54.5% as compared to 49.1% for the three months ended March 31, 2000. This increase is attributable to style/sales mix within the brands. |
The Company's operating expenses as a percentage of net sales for the three months ended March 31, 2001 was 43.8% as compared to 38.4% for the prior year, reflecting the decline in revenues while the Company's costs increased slightly. |
Royalty income has decreased $13,000 for the first quarter of 2001, as compared to 2000. Royalty income represents payments by licensees in Europe and the Far East. |
The Company's principal Far East license agreement expires on December 31, 2001 and the Company's principal European license agreement has been extended to December 31, 2002. These agreements generated $2,544,000 of royalty income in 2000 and are expected to generate $2,300,000 of royalty income in 2001. The royalty for 2002 under the European license agreement has been reduced from the royalty provided for 2000 and 2001, and the reduction could be substantial. In addition, the Company has not concluded negotiations for an extension or replacement of the principal Far East license agreement subsequent to December 31, 2001 and is unable to predict the outcome of these negotiations. Economic conditions may also reduce royalty income from Europe and Far East license agreements. These reductions will negatively impact revenues, results of operations and cash flow. |
Interest income decreased by $210,000 or 44.9%, for the three months ended March 31, 2001, as compared to 2000. The primary reason for the decrease is the result of a lower level of invested assets compared to the corresponding period of the prior year. |
Foreign Currency |
The Company imports most of its watch and clock products. During the first quarter of 2001, approximately 6% of the Company's purchases were denominated in Japanese yen. The remaining purchases were primarily denominated in U.S. dollars for product acquired from vendors located in Europe, Hong Kong and other Asian countries. The Hong Kong dollar is pegged to the U.S. dollar and has not been subject to the fluctuations that have affected other Asian currencies. In the event that the peg between the two currencies is removed, currency fluctuations could have a material impact on the cost of those imported products which ultimately could have a negative impact on the Company's gross profit, operating income and cash flow. Foreign currency fluctuations have not had a material impact on the results of operations for the quarters ended March 31, 2001 and 2000. Future foreign currency fluctuations, however, could impact gross profit, income and cash flow. |
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Accounting Standards |
As previously reported, the Company has adopted Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for Derivative Instruments and Hedging Activities, effective January 1, 2001. Adoption of SFAS No. 133 did not have a material impact on the Company's results of operations, equity or financial position. |
Forward-Looking Statements |
When included in this Report, the words "believes," "expects," "intends," "anticipates," "estimates" and analogous expressions are intended to identify forward-looking statements. Such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others, general economic and business conditions, changes in financial markets, significant changes in consumer spending patterns, competition in the Company's product areas, changes in foreign currency valuations in relation to the U.S. dollar, changes in foreign, political, social and economic conditions, the Company's ability to renew or find new licensees or distributors to replace those terminating in 2001, and various other matters, many of which are beyond the Company's control. These forward-looking statements speak only as of the date of this report. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based. |
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PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K. | |
(a) Exhibits -- |
None |
(b) Current reports on Form 8-K -- There were no reports on Form 8-K filed for the three months ended March 31, 2001. |
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 | |||
______________________ | |||
(Registrant) | |||
Dated: May 9, 2001 | By: | /s/ John T. O'Reilly | |
___________________________ | |||
JOHN T. O'REILLY | |||
Chief Financial Officer | |||
(Duly authorized officer) | |||
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