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 April 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 reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
At April 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.
PART 1. FINANCIAL INFORMATION
BIC CORPORATION AND SUBSIDIARIES
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
April 3, January 2,
1994 1994
--------- ----------
ASSETS (Thousands)
- - -------
CURRENT ASSETS:
Cash and cash equivalents $ 17,830 $ 24,094
Accounts and notes receivable:
Trade - net of allowance for doubtful
accounts of $4,574,000 at April 3 and
$4,084,000 at January 2. 51,547 47,627
Affiliates 3,699 3,020
Other 1,328 1,372
Inventories:
Work in process, finished stock and
packaging materials 54,297 49,363
Raw materials 8,727 10,063
Other current assets 49,374 30,446
-------- --------
Total current assets 186,802 165,985
-------- --------
PROPERTY, PLANT AND EQUIPMENT - at cost less
accumulated depreciation of $141,824,000 at
April 3 and $137,928,000 at January 2. 140,903 140,317
OTHER ASSETS 30,094 29,914
-------- --------
TOTAL $357,799 $336,216
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ------------------------------------
CURRENT LIABILITIES:
Bank borrowings $ 1,508 $ 6,731
Accounts payable:
Trade 11,899 11,789
Affiliates 9,099 9,390
Accrued expenses 62,034 60,843
Other current liabilities 21,472 0
-------- --------
Total current liabilities 106,012 88,753
-------- --------
NON-CURRENT LIABILITIES 22,477 20,775
-------- --------
SHAREHOLDERS' EQUITY:
Preferred shares ($1 par value; authorized -
1,000,000; no shares issued or outstanding)
Common shares ($1 par value; authorized -
50,000,000; outstanding 23,559,244) 23,559 23,559
Retained earnings 210,281 205,902
Foreign currency translation adjustment (4,530) (2,773)
--------- ---------
Total shareholders' equity 229,310 226,688
--------- ---------
TOTAL $357,799 $336,216
========= =========
See Notes to Unaudited Condensed Consolidated Financial Statements.
2
BIC CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THREE MONTHS ENDED APRIL 3, 1994 AND APRIL 4, 1993
1994 1993
---- ----
(Thousands Except Share Data)
NET SALES $102,777 $101,199
COST OF GOODS SOLD 53,112 55,026
-------- ---------
GROSS PROFIT 49,665 46,173
ADVERTISING, SELLING, GENERAL AND
ADMINISTRATIVE AND RESEARCH AND DEVELOPMENT
EXPENSES 33,761 31,967
-------- ---------
INCOME FROM OPERATIONS 15,904 14,206
OTHER INCOME - NET 27 620
-------- ---------
INCOME BEFORE INCOME TAXES AND CUMULATIVE
EFFECT OF CHANGES IN ACCOUNTING PRINCIPLES 15,931 14,826
PROVISION FOR INCOME TAXES 6,217 5,740
-------- ---------
INCOME BEFORE CUMULATIVE EFFECT OF CHANGES
IN ACCOUNTING PRINCIPLES 9,714 9,086
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 (LOSS) 9,091 (730)
RETAINED EARNINGS - BEGINNING OF YEAR 205,902 187,900
DIVIDENDS PAID (PER COMMON SHARE: 1994 -
$0.20, 1993 - $0.18) (4,712) (4,241)
--------- ---------
RETAINED EARNINGS - END OF PERIOD $210,281 $182,929
========= =========
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 $ 0.41 $ 0.39
CUMULATIVE EFFECT OF CHANGES IN
ACCOUNTING PRINCIPLES (0.02) (0.42)
------- -------
NET INCOME (LOSS) $ 0.39 $(0.03)
======= =======
See Notes to Unaudited Condensed Consolidated Financial Statements.
3
BIC CORPORATION AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED APRIL 3, 1994 AND APRIL 4, 1993
1994 1993
---- ----
(Thousands)
*NET CASH PROVIDED BY OPERATING ACTIVITIES $10,588 $ 4,222
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property, plant and equipment (6,904) (9,876)
Proceeds from sale of property, plant and
equipment 439 242
Deferred charges, deposits and other (105) (1,726)
Purchases of trademarks and patents (282) 0
-------- --------
Net cash used in investing activities (6,852) (11,360)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in bank borrowings (5,212) 333
Dividends paid (4,712) (4,241)
-------- --------
Net cash used in financing activities (9,924) (3,908)
-------- --------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (76) (597)
-------- --------
DECREASE IN CASH AND CASH EQUIVALENTS (6,264) (11,643)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 24,094 25,234
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $17,830 $13,591
======== ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 599 $ 28
======= =======
Income taxes $ 3,789 $ 6,972
======= =======
*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.
4
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 three-month period ended
April 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 costs 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 was included
in the Corporation's condensed consolidated statement of income for the
three months ended April 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 the right of setoff. The
Corporation enters into foreign exchange contracts denominated in foreign
currencies providing protection from foreign currency fluctuations. At
April 3, 1994, the Corporation had outstanding $21.5 million of forward
exchange contracts, under which the Corporation is required to purchase
French francs at an average contract rate of approximately 6.05 French
francs to the dollar during 1994. These contracts do not meet the
conditions set forth in FASB Interpretation No. 39 and accordingly, at
April 3, 1994, the Corporation has recorded a current asset and current
liability for the $21.5 million.
5
BIC CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
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 new 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 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 were included in the Corporation's
condensed consolidated statement of income for the three months ended
April 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 as a result of
this change in accounting principle. Prior year financial statements
have not been restated.
3. Bank Borrowings
---------------
Bank borrowings totaled $1.5 million at April 3, 1994, which represents
borrowings by the Corporation's Mexican subsidiary. These bank
borrowings are due during the second quarter of 1994. The weighted
average interest rate on these borrowings is 6.25%.
6
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 first fiscal quarter of 1994 reflect normal
operations. Accounts and notes receivable were higher at April 3, 1994 as
compared to January 2, 1994 due to higher sales levels. The Corporation's
current ratio was 1.76 at April 3, 1994 and 1.87 at January 2, 1994.
Cash and cash equivalents were $17.8 million at April 3, 1994 as compared to
$24.1 million at January 2, 1994. These fluctuations primarily relate to the
timing of accounts receivable collections and to the timing of inventory
purchases.
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.
The $5.2 million decrease in bank borrowings was due to the repayment of the
United States operations' borrowings.
As shown in the statements of cash flows, income tax payments during the
first quarter of 1994 were $3.8 million as compared to $7.0 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 three months ended April 3, 1994 were $102.8 million, an
increase of 2% from $101.2 million for the same period last year. Gross
profit was $49.7 million for the 1994 first quarter as compared to $46.2
million in 1993, representing an 8% increase. Gross profit as a percentage
of net sales was 48% in 1994 compared to 46% for the same period last year.
Income before cumulative effect of changes in accounting principles for the
first three months in 1994 was $9.7 million, or $0.41 per share, compared
with $9.1 million, or $0.39 per share, in the same period last year. Net
income (loss) for the first three months of 1994 was $9.1 million, or $0.39
per share, compared with $(0.7) million, or $(0.03) per share, in the same
period last year.
The improvement in net sales was primarily due to higher average selling
prices in stationery products and shavers in the United States operations.
The net sales improvement achieved from these higher average selling prices
was partially offset by a decline in units sold for stationery products by
the Corporation's operations in Mexico, and also by a slight decrease in the
number of shaver units sold by its United States operations.
7
BIC CORPORATION AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Results of Operations (continued)
- - ---------------------------------
The higher gross profit percentage for the first quarter of 1994 as compared
to the same period last year reflects the higher average selling prices
discussed in the preceding paragraph.
The increase in income before cumulative effect of changes in accounting
principles reflects improvements in gross profits in the United States core
operations (stationery products, lighters and shavers). These improvements
were partially offset by increased operating expenses in Mexico, primarily
higher marketing expenses related to the launch of twin-blade shaver and
higher selling expenses.
In 1994, net income included the cumulative effect of change in accounting
for postemployment benefits and in 1993, net income included the cumulative
effect of change in accounting for postretirement benefits other than
pensions.
8
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: May 12, 1994 Robert L. Macdonald
--------------------------------------------
(Signature)
Robert L. Macdonald, Vice President - Finance
(Principal Accounting Officer)