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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1994
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
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 or organization) Identification No.)
One Bulova Avenue, Woodside, New York 11377-7874
(Address of principal executive offices) (Zip Code)
(718) 204-3300
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common stock, par value $5.00 per share
(Title of Class)
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
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
--------- ---------
As at February 24, 1995, 4,599,249 shares of Common Stock of the Registrant
were outstanding and the aggregate market value of voting stock held by non-
affiliates was approximately $486,000.
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1
BULOVA CORPORATION
INDEX TO ANNUAL REPORT ON
FORM 10-K FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION
For The Year Ended December 31, 1994
Item Page
No. PART I No.
---- ------
1 BUSINESS .......................................................... 3
2 PROPERTIES ........................................................ 3
3 LEGAL PROCEEDINGS ................................................. 3
4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ............... 3
PART II
5 MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS .......................................................... 4
6 SELECTED FINANCIAL DATA ........................................... 4
7 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ............................................ 5
8 FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA ....................... 8
9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE ............................................. 25
PART III
10 DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT ................ 25
11 EXECUTIVE COMPENSATION ............................................ 26
12 SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT .... 27
13 CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS .................... 28
PART IV
14 EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K ... 29
2
PART I
Item 1. Business.
Bulova Corporation (together with its subsidiaries referred to herein as
"Registrant" or the "Company," unless the context otherwise requires) is a New
York corporation. Loews Corporation ("Loews") owns approximately 97% of
Registrant's outstanding Common Stock. See Item 12 below.
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 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 agreement.
Registrant is engaged in the distribution and sales of watches, clocks and
timepiece parts for consumer use. The principal watch brands are Bulova,
Caravelle, Accutron and Sportstime. Clocks are principally sold under the Bulova
brand name. The Registrant's market segment breakdown includes a luxury watch
line represented by Accutron, a mid-ranged priced watch brand represented by
Bulova, and economy lower-priced watch line targeted by Caravelle. In addition,
the Registrant's Sportstime by Bulova brand is at various price levels with
watches using names and logos of various professional and college athletic
teams. The principal markets are the United States and Canada. During 1994,
approximately 13% of the sales were made outside the United States,
substantially all of which were in Canada. In most other areas of the world,
Registrant has appointed licensees who market watches under Registrant's
trademarks in return for a royalty. For additional information concerning
Registrant's sales in foreign markets, see Note 11 of the Notes to Consolidated
Financial Statements of the accompanying 1994 Annual Report to Shareholders.
Registrant primarily buys complete watches and clocks from foreign suppliers.
Watch movements, cases and other components are purchased from foreign
suppliers. In the United States, most of Registrant's consumer products are sold
directly to retail jewelry and premium outlets through Registrant's commission
sales force and outside sales representatives. In Canada, Registrant, through a
marketing subsidiary, sells directly to retailers.
The business is intensely competitive. The principal methods of competition
are price, styling, aftersale service, warranty and product performance. In all
five categories, Registrant occupies a favorable position of long standing.
There are approximately ten major competitors with well established names and
positions in the principal markets in which Registrant competes. At least three
of these have sales and assets substantially greater than Registrant. In
addition, there are an indeterminate number of minor competitors.
It is characteristic of Registrant's business and of the watch industry
generally that customer receivables from watch sales are carried for relatively
long periods. Registrant grants its retailers seasonal credit terms, in a few
instances up to twelve months, depending on the product and date of sale. In
certain circumstances, Registrant also extends credit to its retailers on an
interest-bearing basis.
Any backlog of orders is not believed to be significant. The business is
seasonal; with the greatest sales coming in the third and fourth fiscal quarters
in expectation of the holiday selling season.
Employees
Registrant currently employs approximately 460 persons, approximately 130 of
whom are union members, and has experienced satisfactory labor relations. The
Company has comprehensive benefit plans for substantially all employees.
Item 2. Properties.
The Company leases its primary facilities which include an 80,000 square foot
plant in Woodside, New York for executive and sales offices, watch distribution,
service and warehouse purposes, a 71,000 square foot plant in Maspeth, New York,
for clock service and warehouse purposes, and a 25,000 square foot plant in
Toronto, Canada, for watch and clock sales and service.
Item 3. Legal Proceedings.
Pending litigation includes various civil actions for damages. On the basis of
the facts presently known to it, management does not believe that these actions
will have a material adverse effect upon the financial condition or results of
operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
3
PART II
Item 5. Market for the Registrant's Common Stock and Related Stockholder
Matters.
MARKET PRICES
The following table sets forth, for the periods indicated, the high and low
bid prices for the Company's Common Stock in the over-the-counter market as
reported by Carr Securities Corp. These quotations represent prices between
dealers and do not include retail mark-up, mark-down or commissions. They do not
represent actual transactions.
1994 1993
------------------------------------------------
High Low High Low
--------------------------------------------------------------------------------
First Quarter ................. 3 1/4 2 3/4 4 4
Second Quarter ................ 3 1/4 2 5/8 4 4
Third Quarter ................. 3 1/4 3 4 4
Fourth Quarter ................ 3 1/4 3 1/4 4 4
DIVIDEND INFORMATION
The Company paid no dividends for the years ended December 31, 1994 and 1993.
APPROXIMATE NUMBER OF EQUITY SECURITY HOLDERS
There were approximately 1,500 holders of record of common stock of the
Company at February 24, 1995.
Item 6. Selected Financial Data.
Years Ended December 31,
-----------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------
(In thousands, except per share data)
Results of Operations:
Revenues....................... $100,046 $101,303 $ 98,841 $101,001 $104,279
Income (loss) from continuing
operations.................... 532 1,911 (1,342) (486) (159)
Per share ................... .11 .41 (.29) (.11) (.03)
Income (loss) before
extraordinary credit and
cumulative effect of
accounting changes (1)........ 834 2,514 4,793 65 (4,962)
Per share.................... .18 .54 1.04 .01 (1.08)
Income (loss) before cumulative
effect of accounting changes
(1) .......................... 834 2,514 4,793 1,947 (4,080)
Per share.................... .18 .54 1.04 .42 (.89)
Net income (loss).............. 834 2,514 (13,189) 1,947 (4,080)
Per share.................... .18 .54 (2.87) .42 (.89)
Financial Position:
Total assets................... 151,035 149,865 165,489 143,971 140,286
Discontinued operations-net (1) 20,082 15,445 11,245 29,435 25,993
Long-term debt................. 200 600 1,000 1,400 1,800
Debt to affiliate.............. 19,000 16,000 31,000 36,000 32,000
Shareholders' equity........... 62,930 64,101 61,893 76,067 73,847
Dividends per share............ None None None None None
(1) See Notes 2, 7 and 8 of the Notes to Consolidated Financial Statements.
4
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
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
agreement.
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 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. Based on business volume,
management believes inventory levels cannot be significantly reduced. Business
conditions are expected to remain difficult, therefore, it is likely that
pricing will be reduced affecting gross profit, income and cash flow.
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 provides 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.
At December 31, 1994 loans aggregating $19,000,000 were outstanding under the
Credit Agreement. The largest amount outstanding under the Credit Agreement
during 1994 was $20,000,000. At December 31, 1993 loans aggregating $16,000,000
were outstanding under the Credit Agreement and the largest amount outstanding
during 1993 was $31,000,000. The increase in borrowing was primarily due to an
increase in inventory purchases during the fourth quarter of 1994. See Note 3 of
the Notes to Consolidated Financial Statements.
The Company from time to time will require additional borrowings from Loews to
meet its working capital needs, including normal inventory purchases. While
Loews has no obligation to enter into or maintain arrangements for any further
borrowing, the Company anticipates that its additional working capital needs
will be provided by Loews under the Credit Agreement.
Cash Flow From Operations
The Company utilized net cash from operations of approximately $3,931,000 for
the year ended December 31, 1994, compared to generated net cash flow of
$10,272,000 and $7,858,000 for the years ended December 31, 1993 and 1992,
respectively.
The reason for the decrease in cash flow is primarily due to the timing of the
transactions; year end levels of accounts receivable increased by $3,522,000, or
7.4%, and accounts payable and accrued expenses decreased by $730,000, or 3.7%.
Additionally, other liabilities and credits decreased $3,551,000, or 7.4%
primarily associated with the recording of a favorable foreign currency
adjustment of $1,472,000, partially offset by an inventory decrease of
$4,528,000, or 11.2%.
5
Cash Flow From Investing Activities
Investing activities include net proceeds from the sale of a former defense
manufacturing facility of $4,487,000 and $2,578,000 in 1993 and 1992,
respectively. In addition, for the year ended December 31, 1993 the Company
received $669,000 in proceeds related to the sale of its Hong Kong office. The
Company does not anticipate any material capital expenditures in 1995.
Cash Flow From Financing Activities
Cash flow from financing activities primarily represents changes in the
amounts due to Loews under the Credit Agreement discussed above.
Contingencies
Material contingencies consist of environmental claims relating to a former
Valley Stream, N.Y. defense manufacturing facility for which the Company, in the
second quarter of 1994, provided for a liability of $250,000, and a former Sag
Harbor, N.Y. watch manufacturing facility, for which the Company provided an
additional liability of $484,000 in the third quarter of 1994. The environmental
clean-up will directly affect cash flow, and it is expected that to the extent
the Company does not have sufficient liquidity, cash needs will be funded
through the Credit Agreement with Loews.
During the fourth quarter of 1994 and 1992 the Company provided $811,000 and
$750,000, respectively, to cover legal and settlement costs related to actions
currently pending. In addition, the Company provided for a liability of $709,000
during the year ended December 31, 1992 in relation to its agreement to fund
certain retirement benefits.
The environmental liability recognized in the Company's financial statements
to date of $2,334,000 represents the minimum of the Company's estimated range of
equally likely outcomes; the upper limit of that range is approximately
$2,834,000.
Management does not believe that the foregoing matters will have a material
adverse effect on the financial condition or results of operations of the
Company. The Company's accrued liabilities for these matters represents a
reasonable estimate made by the Company for various legal and environmental
matters for which it believes it is probable that a liability exists or a
settlement will be negotiated. See Note 13 of the Notes to Consolidated
Financial Statements for further discussion.
Results of Operations
Watch, clock and jewelry revenue decreased by $170,000 and $910,000, or 0.2%
and 1.0%, as compared to 1993 and 1992, respectively. Income before accounting
changes and discontinued operations decreased by $1,379,000, or 72.2%, and
increased by $1,874,000, or 139.6%, as compared to 1993 and 1992, respectively.
The primary reason for the decrease in income before accounting changes and
discontinued operations is the $2,050,000 after-tax gain from disposal of a
former defense manufacturing facility and Hong Kong property which was
recognized in 1993. Additionally, the Company provided $477,000 and $527,000
associated with contingencies and litigation in 1994, respectively, offset by
a favorable foreign currency adjustment of $1,472,000 associated with the
shutdown of the Company's European facilities, which was finalized in November
1994.
Revenues decreased, exclusive of asset dispositions, as compared to 1993 by
approximately $492,000, or 0.5%, due to a decline in the average unit selling
price, partially offset by an increase in unit sales representing approximately
$311,000, or 0.3%. Compared to 1992, revenues declined $4,805,000, or 5.0% due
to lower unit sales, partially offset by a higher average unit selling price
representing approximately $1,206,000, or 1.2%. The decrease, from 1993, in the
average unit selling price resulted from decreases at the Company's Canadian
operation.
6
Consumer products unit volume increased 0.3% and declined 5.0% as compared to
1993 and 1992, respectively. The sales volume increase compared to 1993 is
primarily associated with increased sales in the Bulova and Caravelle watch
brands and Bulova clocks. These increases are partially offset by a decrease in
direct sales associated with the Benetton Line, the license agreement for which
expired in June 1994. Compared to 1992, the Caravelle and Benetton brands
decreased 19.0% and 88.0%, respectively, which was partially offset by volume
increases in the Bulova brand of 26.0%.
Cost of sales as a percentage of sales decreased 2.6% and 1.4% as compared to
1993 and 1992. The primary reason for the decrease is a change in product sales
mix and effective procurement practices implemented by the Company. Selling,
general and administrative costs as a percentage of sales decreased 0.4% and
2.2% compared to 1993 and 1992. The reduction of selling, general and
administrative costs resulted from management's efforts to control discretionary
costs in these areas during periods of flat or declining sales.
The Company recognized $3,780,000, $3,535,000 and $3,507,000 in royalty income
in 1994, 1993 and 1992, respectively, which includes $1,484,000, $2,162,000 and
$2,211,000 of royalties under the "Benetton by Bulova" license agreement for
years ended 1994, 1993 and 1992, respectively. The license agreement with
Benetton 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.
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. As
a result of hedging practices adopted by the Company, foreign currency
fluctuations have not had a material impact on the results of operations for the
years ended December 31, 1994, 1993, and 1992. Future foreign currency
fluctuations, however, could impact gross profit, income and cash flow.
The recent level of inflation has not had a material impact on the results of
operations.
Corporate
Related Parties - Loews has provided administrative services for which the
Company paid $1,200,000 for the year ended December 31, 1994, and $1,000,000 for
each of the years ended December 31, 1993 and 1992. 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 $1,200,000
and $1,500,000. The additional cost would reduce income and cash flow. See
Note 3 of the Notes to Consolidated Financial Statements.
Taxes - For the year ended December 31, 1993 the Company recorded a tax
benefit of $847,000 resulting from the Omnibus Budget Reconciliation Act of
1993, enacted August, 1993, which among other things, increased the corporate
tax rate from 34% to 35% effective January 1, 1993. In accordance with SFAS No.
109 net deferred tax assets have been adjusted for the effect of the change in
tax rates in the period enacted. See Note 7 of the Notes to Consolidated
Financial Statements.
Interest Expense and Other Income - Interest expense decreased $841,000 due to
a $10,000,000 decline in the average borrowing from affiliate. Other income was
higher for the year ended December 31, 1994 primarily due to custom refunds
received.
Other - In the fourth quarter of 1994 the Company completed the shut-down of
its European facilities which resulted in a favorable foreign currency
adjustment of $1,472,000.
7
Item 8. Financial Statements and Supplementary Data.
Bulova Corporation and Subsidiaries
CONSOLIDATED BALANCE SHEETS
December 31,
---------------------------
1994 1993
--------------------------------------------------------------------------------
Assets:
Current assets:
Cash ........................................... $ 3,857,000 $ 5,639,000
Receivables-net (Notes 1 and 5) ................ 51,254,000 47,732,000
Inventories (Notes 1 and 6) .................... 35,750,000 40,278,000
Prepaid expenses ............................... 329,000 520,000
Deferred income taxes (Notes 1 and 7) .......... 10,004,000 10,616,000
Net assets of discontinued operations (Note 2).. 20,082,000 15,445,000
---------------------------
Total current assets ........................ 121,276,000 120,230,000
---------------------------
Property, plant and equipment, at cost (Notes 1
and 12):
Land, buildings and improvements ............... 14,083,000 13,771,000
Machinery and equipment ........................ 2,502,000 3,250,000
Furniture, fixtures and leasehold improvements . 3,513,000 3,608,000
---------------------------
20,098,000 20,629,000
Less accumulated depreciation and amortization . 7,348,000 7,557,000
---------------------------
12,750,000 13,072,000
---------------------------
Other assets:
Deferred income taxes (Notes 1 and 7) ........... 16,744,000 16,171,000
Other assets .................................... 265,000 392,000
---------------------------
17,009,000 16,563,000
---------------------------
Total assets ................................ $151,035,000 $149,865,000
===========================
See Notes to Consolidated Financial Statements.
8
December 31,
---------------------------
1994 1993
--------------------------------------------------------------------------------
Liabilities and Shareholders' Equity:
Current liabilities:
Current installments of long-term debt (Note 12) $ 400,000 $ 400,000
Accounts payable ............................... 5,569,000 4,938,000
Accrued expenses:
Salaries, wages and commissions .............. 2,116,000 2,157,000
Pension (Note 8) ............................. 1,328,000 1,252,000
Postretirement benefits (Note 8) ............. 1,298,000 1,236,000
Advertising .................................. 1,759,000 2,184,000
Warranty ..................................... 1,560,000 1,746,000
Other ........................................ 3,692,000 6,501,000
Accrued federal and foreign income taxes
(Notes 1 and 7) ............................... 2,333,000 1,776,000
---------------------------
Total current liabilities .................... 20,055,000 22,190,000
---------------------------
Obligations under capital leases (Note 12) ....... 200,000 600,000
---------------------------
Other liabilities and credits:
Postretirement benefits payable (Note 8) ....... 43,183,000 41,059,000
Pension benefits payable (Note 8) .............. 2,581,000 3,007,000
Other .......................................... 3,086,000 2,908,000
---------------------------
48,850,000 46,974,000
---------------------------
Debt to affiliate:
10% note payable (Notes 1 and 3) ............... 19,000,000 16,000,000
---------------------------
Commitments and contingent liabilities (Notes 2,3,
7, 8, 12 and 13)
Shareholders' equity (Note 1):
Common stock, $5 par value:
Authorized: 7,500,000 shares
Issued: 4,600,000 shares ..................... 22,999,000 22,999,000
Additional paid-in capital ..................... 23,197,000 23,197,000
Retained earnings .............................. 18,145,000 17,311,000
Cumulative translation adjustment .............. (1,406,000) 599,000
---------------------------
62,935,000 64,106,000
Less 1,000 shares of common stock held in
treasury, at cost ............................. 5,000 5,000
---------------------------
Total shareholders' equity ................... 62,930,000 64,101,000
---------------------------
Total liabilities and shareholders' equity.... $151,035,000 $149,865,000
===========================
9
Bulova Corporation and Subsidiaries
STATEMENTS OF CONSOLIDATED OPERATIONS
Years Ended December 31,
--------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------
Revenues:
Net sales .......................... $ 93,724,000 $ 93,894,000 $ 94,634,000
Royalties, interest and other
(Notes 4 and 10) .................. 6,322,000 7,409,000 4,207,000
--------------------------------------
Total revenues .................. 100,046,000 101,303,000 98,841,000
--------------------------------------
Expenses:
Cost of sales ...................... 59,267,000 61,279,000 60,115,000
Selling, general and administrative
(Notes 3, 8 and 12) ............... 39,416,000 36,895,000 40,361,000
Interest:
Affiliate (Note 3) ............... 467,000 1,357,000 1,485,000
Others ........................... 113,000 64,000 73,000
--------------------------------------
Total expenses .................. 99,263,000 99,595,000 102,034,000
--------------------------------------
Income (loss) from continuing
operations before income taxes ...... 783,000 1,708,000 (3,193,000)
Income tax (expense) benefit (Notes 1
and 7) .............................. (251,000) 203,000 1,851,000
--------------------------------------
Income (loss) from continuing
operations .......................... 532,000 1,911,000 (1,342,000)
Discontinued operations of BTI (net of
tax of $155,000, $254,000 and
$2,857,000) (Note 2) ................ 302,000 603,000 6,135,000
--------------------------------------
Income before cumulative effect of
accounting changes .................. 834,000 2,514,000 4,793,000
Cumulative effect of accounting
changes:
Postretirement benefits other than
pensions (net of income tax benefit
of $13,173,000)(Note 8)............ (25,567,000)
Accounting for income taxes (Note 7) 7,585,000
--------------------------------------
Net income (loss) ............... $ 834,000 $ 2,514,000 $(13,189,000)
======================================
Income (loss) per share (Note 1):
Income (loss) from continuing
operations ........................ $.11 $.41 $ (.29)
Discontinued operations of BTI ..... .07 .13 1.33
--------------------------------------
Income before cumulative effect of
accounting changes ................ .18 .54 1.04
Postretirement benefits other
than pensions ..................... (5.56)
Accounting for income taxes ........ 1.65
--------------------------------------
Net income (loss) ............... $.18 $.54 $(2.87)
=======================================
See Notes to Consolidated Financial Statements.
10
Bulova Corporation and Subsidiaries
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
Shareholders' Equity
Number of --------------------------------------------------------------
Common Additional Cumulative
Shares Common Paid-in Retained Translation Treasury
Issued (1) Stock Capital Earnings Adjustment Stock
-------------------------------------------------------------------------------------------------
Balance, Dec. 31, 1991 4,600,000 $22,999,000 $23,197,000 $ 27,986,000 $ 1,890,000 $(5,000)
Net loss ............. (13,189,000)
Exchange rate changes
during the year (net
of income taxes of
$507,000) ........... (985,000)
------------------------------------------------------------------------
Balance, Dec. 31, 1992 4,600,000 22,999,000 23,197,000 14,797,000 905,000 (5,000)
Net income ........... 2,514,000
Exchange rate changes
during the year (net
of income taxes of
$165,000) ........... (306,000)
------------------------------------------------------------------------
Balance, Dec. 31, 1993 4,600,000 22,999,000 23,197,000 17,311,000 599,000 (5,000)
Net income ........... 834,000
Exchange rate changes
during the year (net
of income taxes of
$287,000) ........... (533,000)
Foreign currency
adjustment .......... (1,472,000)
------------------------------------------------------------------------
Balance, Dec. 31, 1994 4,600,000 $22,999,000 $23,197,000 $ 18,145,000 $(1,406,000) $(5,000)
========================================================================
(1) Includes 1,000 shares of common stock held in treasury.
See Notes to Consolidated Financial Statements.
11
Bulova Corporation and Subsidiaries
STATEMENTS OF CONSOLIDATED CASH FLOWS
Years Ended December 31,
---------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------
Operating activities:
Net income (loss) ................... $ 834,000 $ 2,514,000 $(13,189,000)
Adjustments to reconcile net income
(loss) to net cash (used in)
provided by operating activities:
Cumulative effect of accounting
changes .......................... 17,982,000
Depreciation and amortization ..... 608,000 1,127,000 1,076,000
Loss (gain) on disposition of
assets ........................... 165,000 (3,446,000) (64,000)
Provision for losses and cash
discounts on accounts receivable . 2,577,000 3,262,000 3,677,000
Deferred income taxes ............. 39,000 1,995,000 (17,815,000)
Changes in operating assets and
liabilities-net:
Receivables ....................... (6,099,000) (850,000) (3,010,000)
Inventories ....................... 4,528,000 9,728,000 (10,981,000)
Prepaid expenses .................. 191,000 324,000 26,000
Net assets of discontinued
operations ....................... (4,637,000) (4,200,000) 18,190,000
Other assets ...................... 127,000 (22,000) 4,000
Accounts payable and accrued
expenses ......................... 730,000 1,060,000 366,000
Accrued federal and foreign
income taxes ..................... 557,000 (3,947,000) 1,127,000
Other liabilities and credits ..... (3,551,000) 2,727,000 10,469,000
--------------------------------------
(3,931,000) 10,272,000 7,858,000
--------------------------------------
Investing activities:
Purchases of property, plant and
equipment .......................... (451,000) (524,000) (2,297,000)
Proceeds from disposal of
property, plant and equipment ...... 5,203,000 2,581,000
--------------------------------------
(451,000) 4,679,000 284,000
--------------------------------------
Financing activities:
Proceeds from debt to affiliate ..... 23,000,000 16,000,000 36,000,000
Principal payments on debt to
affiliate .......................... (20,000,000) (31,000,000) (41,000,000)
Principal payments on long-term
debt ............................... (400,000) (400,000) (400,000)
--------------------------------------
2,600,000 (15,400,000) (5,400,000)
--------------------------------------
Net change in cash ................... (1,782,000) (449,000) 2,742,000
Cash, beginning of year .............. 5,639,000 6,088,000 3,346,000
--------------------------------------
Cash, end of year .................... $ 3,857,000 $ 5,639,000 $ 6,088,000
======================================
See Notes to Consolidated Financial Statements.
12
Bulova Corporation and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Summary of Significant Accounting Policies:
(a) Affiliation: Loews Corporation ("Loews") owns approximately 97% of the
Company's outstanding voting stock.
(b) Principles of Consolidation: The consolidated financial statements
include all of its subsidiaries, which are 100% owned, and all material
intercompany accounts and transactions have been eliminated. The equity method
of accounting is used for investments in associated companies in which the
Company has an interest of 20% to 50%.
(c) Accounts Receivable: Watches and clocks are sold to retail outlets
throughout the United States and Canada. The Company grants its retailers
seasonal credit terms as well as extends credit on an interest-bearing basis.
For the years ended December 31, 1994 and 1993, accounts receivable were
substantially comprised of balances due from retailers.
(d) Inventories: Substantially all inventory is computed on a first-in,
first-out basis and are valued at lower of cost or market.
(e) Property, Plant and Equipment: Depreciation is calculated on the
straight-line method over the estimated useful lives of the various classes of
assets. Leasehold improvements are, if such period is shorter, amortized over
the life of the lease. Asset lives range from 2 to 12 years for machinery,
equipment, and furniture and fixtures and from 15 to 40 years for buildings and
improvements.
(f) Income Taxes: The Company is included in Loews consolidated tax return.
Under the tax allocation agreement, the Company is required to provide a current
tax provision calculated on a stand-alone basis. The Company's ability to carry
forward tax losses or credits to offset future years' income or tax is subject
to restrictions of the Internal Revenue Service. No provision is required for
undistributed earnings of subsidiaries, since substantially all of these
earnings may be remitted to the Company with little or no tax becoming payable.
(g) Net Income (Loss) Per Share and Shareholders' Equity: Net income (loss)
per share has been computed on the basis of the weighted average number of
shares outstanding during the periods (4,599,000 for each of the three years
ended December 31, 1994).
In addition to its common stock, the Company has authorized 500,000 shares of
preferred stock.
(h) Foreign Currency Adjustment: The effect of changes in exchange rates in
translating foreign currency financial statements is accumulated in a separate
component of shareholders' equity.
(i) Fair Value of Financial Instruments: SFAS No. 107, "Disclosures about
Fair Value of Financial Instruments," requires disclosure of fair value
information whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. The carrying amount of receivables and
long-term debt other than from affiliate, approximates fair value. The Company
does not maintain any significant banking relationships apart from Loews. A
discount rate therefore, commensurate with the credit, interest rate and
prepayment risks involved, which could be used to estimate fair value of the
affiliate receivable and payable cannot be practicably determined. Therefore,
management is not able to estimate the fair value of the affiliate receivable
and payable.
(j) Forward Exchange Contracts: In connection with purchases of inventory,
the Company has entered into forward exchange contracts in order to hedge its
exposure to fluctuations in foreign currency exchange rates. These agreements
generally involve the exchange of one currency for a second currency at some
future date. Counterparties to these agreements are major international
financial institutions. As of December 31, 1993, the U.S. dollar equivalent of
foreign currency contracts approximated $3,000,000. These agreements matured
through June 30, 1994. As of December 31, 1994, there were no foreign currency
contracts outstanding.
(k) Reclassifications: Certain amounts applicable to prior periods have been
reclassified to conform to the classifications followed in 1994.
13
Note 2. Discontinued Operations:
On October 4, 1994, the Company executed a letter of intent, subject to
certain conditions, to sell its industrial and defense manufacturing business,
Bulova Technologies, Inc. ("BTI"). On January 17, 1995, BTI was sold for
$20,810,000 in cash. The sale results in a pre-tax and after-tax gain of
approximately $558,000 and $363,000, respectively, to be recorded in the first
quarter of 1995. The Company applied $18,000,000 of the consideration received
to the repayment of the entire debt to affiliate.
The operating results of BTI have been reported separately as discontinued
operations in the Consolidated Financial Statements. Accordingly, prior year
amounts have been restated.
Summarized financial information of BTI is as follows:
Years Ended December 31,
-------------------------------------------
1994 1993 1992
-------------------------------------------
Net sales ....................... $ 52,600,000 $ 52,421,000 $ 82,778,000
Cost of sales ................... (45,117,000) (44,359,000) (63,987,000)
Selling, general and
administrative ................. (5,849,000) (5,920,000) (7,395,000)
Interest expense ................ (1,177,000) (1,285,000) (2,404,000)
-------------------------------------------
Income before income taxes ...... 457,000 857,000 8,992,000
Income taxes .................... (155,000) (254,000) (2,857,000)
-------------------------------------------
Income from discontinued
operations .................... $ 302,000 $ 603,000 $ 6,135,000
===========================================
December 31,
-------------------------
1994 1993
-------------------------
Cash ........................................... $ 428,000 $ 241,000
Accounts receivable ............................ 6,699,000 6,942,000
Inventories .................................... 16,246,000 11,831,000
Property, plant and equipment-net .............. 7,834,000 8,395,000
Other assets ................................... 623,000 612,000
-------------------------
Total assets ................................ 31,830,000 28,021,000
-------------------------
Current installment of long-term debt .......... 408,000 616,000
Accounts payable ............................... 3,761,000 3,579,000
Accrued expenses ............................... 3,501,000 3,616,000
Long-term debt ................................. 2,288,000 2,666,000
Other long-term liabilities .................... 1,790,000 2,099,000
-------------------------
Total liabilities ........................... 11,748,000 12,576,000
-------------------------
Net assets of discontinued operations ....... $20,082,000 $15,445,000
=========================
14
During 1994, 1993 and 1992, the Company settled defense contract claims with
the U.S. government for approximately $2,370,000, $1,950,000 and $19,500,000,
respectively, which amounts are included in net sales in the table above. The
net effect of the claims settlement increased earnings for this segment by
$2,370,000, $1,950,000 and $17,100,000 for the years ended December 31, 1994,
1993 and 1992, respectively. In 1992, as a direct result of the contract claims
settlement and the Company's intention not to pursue additional sales and
production of units under this contract, approximately $2,400,000 of parts
inventory and equipment related to production of units under this contract were
written off.
The Company received notice from a customer, in 1992, of its industrial and
defense products segment regarding an allegedly defective product delivered
prior to 1992. The Company provided a reserve of approximately $1,500,000 in
relation to this claim, which was included as a charge to cost of sales for the
year ended December 31, 1992. During the second quarter of 1993, this matter
was settled and the Company accrued an additional $500,000. As of December 31,
1994, the Company has satisfied all outstanding obligations related to this
claim.
Note 3. Related Parties:
In 1979, the Company entered into a credit agreement with Loews (the "Credit
Agreement") which provides for unsecured loans, from time to time, in amounts
aggregating up to $50,000,000 with interest at 10% per annum. The Credit
Agreement initially expired in 1980, but the expiration date has been
periodically extended by the Company and Loews. It currently expires June 30,
1996. In January 1995, the balance was paid in full with the proceeds from the
sale of BTI (see Note 2).
Loews has provided administrative services for which the Company has paid
$1,200,000 for the year ended December 31, 1994 and $1,000,000 for each of the
years ended December 31, 1993 and 1992. In 1994, 1993 and 1992, the Company
allocated $800,000 of these administrative charges to BTI. The cost allocated to
the Company is estimated to be the incremental cost incurred by Loews in
providing administrative services to the Company. If the Company incurred these
costs on a stand-alone basis, it believes the costs incurred could aggregate
between $1,200,000 and $1,500,000.
Note 4. Asset Dispositions:
The Company consummated the sale of a former defense manufacturing facility in
the second quarter of 1993. In the third quarter of 1993 the Company sold its
former Hong Kong office. These transactions resulted in pre-tax and after-tax
gains of approximately $3,154,000 and $2,050,000, respectively, for the year
ended December 31, 1993.
Note 5. Accounts Receivable:
December 31,
----------------------------
1994 1993
----------------------------
Trade accounts and notes receivable ............ $45,311,000 $40,103,000
Other, including $8,126,000 due from affiliate
(Note 7) ...................................... 9,420,000 10,583,000
----------------------------
54,731,000 50,686,000
Less allowance for doubtful receivables and
cash discounts ................................ 3,477,000 2,954,000
----------------------------
Receivables-net .............................. $51,254,000 $47,732,000
============================
Note 6. Inventories:
December 31,
----------------------------
1994 1993
----------------------------
Watches and clocks ............................. $32,924,000 $37,630,000
Jewelry ........................................ 430,000 420,000
Precious metals ................................ 450,000 311,000
Other .......................................... 1,946,000 1,917,000
----------------------------
$35,750,000 $40,278,000
============================
15
Note 7. Income Taxes:
The Company and Loews have a tax allocation agreement with respect to the
filing by Loews of consolidated federal income tax returns, which include the
Company and its subsidiaries. Under the agreement, the Company will (i) be paid
by Loews the amount, if any, by which Loews's consolidated federal income tax is
reduced by virtue of the inclusion of the Company and its subsidiaries in the
return, or (ii) pay to Loews an amount, if any, equal to federal income tax
which would have been payable by the Company if the Company and its subsidiaries
had filed a separate consolidated return. Under this agreement, the federal
income tax (benefit) expense to be paid or received by the Company for the years
ended December 31, 1994, 1993 and 1992 amounted to $(74,000), $(2,451,000) and
$3,287,000, respectively. Pursuant to this agreement, there was $2,039,000
payable to Loews as of December 31, 1994. This agreement may be cancelled by the
Company or Loews upon thirty days written notice.
In 1992, the Company adopted SFAS No. 109, "Accounting for Income Taxes,"
which, among other things, required a change from the deferred method to the
liability method of accounting for income taxes and allows recognition of
deferred tax assets based on the likelihood of realization of a tax benefit in
future years. The cumulative effect as of January 1, 1992 of adopting this
change resulted in the Company recognizing a benefit of $7,585,000, or $1.65 per
share, primarily representing deferred tax assets which will be realized in the
Loews consolidated tax return.
Income before income taxes and income taxes (benefits) consisted of the
following for continuing operations:
Years Ended December 31,
-------------------------------------------
1994 1993 1992
-------------------------------------------
Income (loss) before income
taxes:
Domestic...................... $ 382,000 $ 1,075,000 $(3,771,000)
Foreign....................... 401,000 633,000 578,000
-------------------------------------------
Total........................ $ 783,000 $ 1,708,000 $(3,193,000)
===========================================
Income tax (expense) benefits:
Federal:
Current.................... $ 289,000 $ 693,000 $ (724,000)
Deferred................... (116,000) (18,000) 2,814,000
State and local-current...... (65,000) (132,000) (231,000)
Foreign:
Current.................... (310,000) (370,000) (222,000)
Deferred................... (49,000) 30,000 214,000
-------------------------------------------
$(251,000) $ 203,000 $ 1,851,000
===========================================
The Omnibus Budget Reconciliation Act of 1993, enacted in August 1993, among
other things, increased the corporate tax rate from 34% to 35%, effective
January 1, 1993. In accordance with SFAS No. 109, net deferred tax assets were
adjusted for the effect of the change in tax rates in the period enacted. As a
result, the Company recorded a tax benefit in 1993 of $847,000 to increase its
deferred tax assets.
16
Deferred tax assets are as follows:
December 31,
----------------------------
1994 1993
----------------------------
Employee benefits............................... $24,055,000 $23,128,000
Inventory....................................... 8,161,000 8,837,000
Accrued expenses................................ 2,353,000 2,278,000
Accounts receivable............................. 1,261,000 1,034,000
Tax loss carryforward........................... 902,000 1,374,000
----------------------------
36,732,000 36,651,000
Valuation allowance............................. (9,984,000) (9,864,000)
----------------------------
$26,748,000 $26,787,000
============================
The valuation allowance relates to state and local temporary differences and
loss carryforwards.
Income taxes differ from that computed at the U.S. statutory rate for the
following reasons:
Years Ended December 31,
-------------------------------------------
1994 1993 1992
-------------------------------------------
Income taxes computed at
statutory rate.................. $ 274,000 $ 598,000 $ (1,086,000)
(Decrease) increase in taxes
resulting from:
Tax rate change ............... (847,000)
State and local taxes, net
of federal benefit ........... 42,000 86,000 152,000
Foreign taxes, net of foreign
tax credit ................... (38,000) 35,000 9,000
Benefit related to permanent
differences .................. (482,000) (13,000)
Benefit (expense) related to
prior years' losses .......... 292,000 (25,000) (143,000)
Other ......................... 163,000 (37,000) (783,000)
-------------------------------------------
Income taxes (benefit) ....... $ 251,000 $(203,000) $ (1,851,000)
===========================================
17
Federal, foreign, state and local income tax (refunds) payments amounted to
approximately $(2,314,000), $1,814,000 and $(597,000) for the years ended
December 31, 1994, 1993 and 1992, respectively.
At December 31, 1994 the Company had state and local operating loss
carryforwards of approximately $7,697,000 which expire between 1999 and 2002.
Loews federal income tax returns have been examined through 1988 and settled
through 1983, and the years 1989 and 1990 are currently under examination. While
tax liabilities for subsequent years are subject to audit and final
determination, in the opinion of management the amount accrued in the
consolidated balance sheet is believed to be adequate to cover any additional
assessments which may be made by federal, state and local tax authorities and
should not have a material effect on the financial position and results of
operations of the Company. As of December 31, 1994, the Company has recorded an
$8,126,000 receivable related to the audited adjustments of the examination of
Loews tax returns for 1984 through 1988. Upon final determination of these
audits, the receivable from Loews as adjusted will be collected, together with
accrued interest.
The Company's Canadian tax returns for the years 1984 through 1992 are
currently under examination. The Company is contesting significant assessments
with respect to these examinations. In the opinion of the Company, the
additional tax and interest, if any, resulting from these assessments should not
have a material effect on its consolidated financial position or results of
operations.
Note 8. Retirement Plans:
Pension Plans: The Company maintains non-contributory pension plans for all of
its employees in the United States. Separate retirement plans are maintained by
the Company's foreign subsidiary, which are not material.
Pension cost of the U.S. plans includes the following components:
Years Ended December 31,
-------------------------------------------
1994 1993 1992
-------------------------------------------
Service cost-benefits
earned ......................... $ 740,000 $ 657,000 $ 615,000
Interest cost ................... 1,652,000 1,609,000 1,504,000
Return on assets-actual ......... 424,000 (1,029,000) (829,000)
Net amortization and deferrals .. (1,764,000) (489,000) (689,000)
-------------------------------------------
Net pension cost ............ $ 1,052,000 $ 748,000 $ 601,000
===========================================
18
The status of the underfunded U.S. plans were as follows:
December 31,
----------------------------
1994 1993
----------------------------
Actuarial present value of
benefit obligations:
Accumulated benefit obligation.............. $18,590,000 $20,021,000
============================
Accumulated vested benefit obligation ...... $18,031,000 $19,100,000
============================
Projected benefit obligation .................. $20,684,000 $22,883,000
Plan assets at fair value ..................... 14,194,000 13,928,000
----------------------------
Projected benefit obligation over plan assets . 6,490,000 8,955,000
Unrecognized net asset at January 1 ........... 2,870,000 3,349,000
Unrecognized net loss ......................... (3,165,000) (5,245,000)
Unrecognized prior service cost ............... (45,000) (67,000)
----------------------------
Accrued pension cost ........................ $ 6,150,000 $ 6,992,000
============================
The rates used in the actuarial assumptions were:
Years Ended December 31,
-------------------------------------------
1994 1993 1992
-------------------------------------------
Discount rate .................... 8.75% 7.50% 8.50%
Rate of compensation increase .... 6.25% 5.75% 5.50%
Expected long-term rate of return
on assets ....................... 7.50% 8.50% 9.00%
The Company's funding policy is to make contributions in accordance with
applicable governmental requirements. The assets of the plans are invested
primarily in interest-bearing obligations. Benefits are determined based on
compensation during each year of credited service.
Other Postretirement Benefit Plans: The Company maintains postretirement
health care plans covering eligible employees and retirees. Participants
generally become eligible upon retirement at age 55 and 10 years of service or
upon completion of 20 years of service. Another plan covers certain employees
who had accumulated 10 years of service and were age 55 or who had 20 years of
service as of October 1, 1987. The benefits provided by the Company are
basically health, and for certain retirees, life insurance type benefits.
19
Effective January 1, 1992, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions." This new standard
required accrual of an employer's obligation for postretirement benefits
including medical and life-insurance coverage, during the active service period
of the employee. The Company elected immediate recognition of the transition
obligation of $38,740,000. The cumulative effect of this change, net of income
taxes of $13,173,000, was to reduce income by $25,567,000, or $5.56 per share.
The rates used in the actuarial assumptions were:
December 31,
----------------------------
1994 1993
-----------------------------
Net periodic postretirement benefit cost........ 7.50% 8.50%
Accumulated postretirement benefit liability.... 8.75% 7.50%
The following table sets forth the postretirement plan's status:
December 31,
----------------------------
1994 1993
----------------------------
Accumulated postretirement benefit obligation:
Retirees ..................................... $22,887,000 $27,302,000
Fully eligible active plan participants ...... 4,214,000 6,237,000
Other active plan participants ............... 2,950,000 4,405,000
----------------------------
30,051,000 37,944,000
Unrecognized prior service cost .............. 91,000
Unrecognized net gain ........................ 14,339,000 4,351,000
----------------------------
Accrued postretirement benefit liability .... $44,481,000 $42,295,000
=============================
Postretirement benefit cost includes the following components:
Years Ended December 31,
-------------------------------------------
1994 1993 1992
-------------------------------------------
Service costs .................. $ 562,000 $ 652,000 $ 601,000
Interest costs ................. 2,595,000 3,179,000 3,042,000
-------------------------------------------
Net periodic postretirement
benefit cost ................ $3,157,000 $3,831,000 $3,643,000
===========================================
For measurement purposes, a trend rate of 13.5% pre-65 and 10.5% post-65, for
covered costs was used. These trend rates are expected to decrease gradually to
8.25% at 0.5% per annum. An increase of one percentage point in assumed health
care cost trend rates would increase the accumulated postretirement benefit
obligation by approximately $2,378,000 and the net periodic postretirement
benefit cost by approximately $340,000.
20
Note 9. Foreign Operations:
Foreign currency items included in the Consolidated Financial Statements are
as follows:
December 31,
----------------------------
1994 1993
----------------------------
Current assets ................................. $11,329,000 $12,044,000
Non-current assets ............................. 233,000 311,000
Current liabilities ............................ 2,420,000 3,403,000
Non-current liabilities ........................ 163,000
Retained earnings .............................. 6,568,000 6,215,000
Investment in foreign subsidiaries, at cost .... 2,574,000 2,574,000
Years Ended December 31,
-------------------------------------------
1994 1993 1992
-------------------------------------------
Sales ........................... $11,859,000 $13,604,000 $13,909,000
Net income ...................... 401,000 633,000 578,000
Note 10. Quarterly Financial Data (Unaudited):
1994 Quarters Ended 1993 Quarters Ended
-----------------------------------------------------------------
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31
-----------------------------------------------------------------
(In thousands, except per share data)
Total revenues..$30,727 $27,220 $21,012 $21,087 $26,530 $28,714 $22,270 $23,789
Cost of sales... 17,553 16,219 13,037 12,458 16,615 17,364 12,402 14,898
Income (loss)
from continuing
operations .... 732 81 (469) 188 (3) 1,350 499 65
Per share ...... .16 .02 (.11) .04 .29 .11 .01
Income (loss)
from
discontinued
operations .... 76 (30) 565 (309) 794 209 (477) 77
Per share ...... .02 (.01) .13 (.07) .17 .04 (.10) .02
Net income
(loss)......... 808 51 96 (121) 791 1,559 22 142
Per share....... .18 .01 .02 (.03) .17 .33 .01 .03
In the fourth quarter of 1994, the Company increased its estimated legal and
settlement costs by $811,000 (see Note 13). In addition, the Company recorded a
favorable foreign currency adjustment of $1,472,000 related to the shut-down of
its European facilities, included in other income.
There were no significant adjustments in the fourth quarter of 1993.
21
Note 11. Business Segment Information:
The Company is engaged principally in the sale of watches and clocks. The
following table sets forth, for the periods indicated, identifiable assets and
certain operating information.
Years Ended December 31,
-------------------------------------------
1994 1993 1992
-------------------------------------------
Geographic Area Information:
Net Sales:
Unaffiliated customers:
United States .............. $ 81,865,000 $ 80,276,000 $ 80,579,000
Canada ..................... 11,859,000 13,604,000 13,909,000
Europe ..................... 14,000 146,000
------------------------------------------
$ 93,724,000 $ 93,894,000 $ 94,634,000
==========================================
Inter-area sales to affiliates
(a):
United States .............. $ 1,901,000 $ 2,658,000 $ 2,505,000
Europe ..................... 738,000 741,000 924,000
------------------------------------------
$ 2,639,000 $ 3,399,000 $ 3,429,000
==========================================
Income (loss) contribution (b):
United States ................ $ 796,000 $ 2,434,000 $ (2,017,000)
Canada ....................... 1,126,000 1,102,000 976,000
Europe ....................... (21,000) 20,000 (113,000)
------------------------------------------
$ 1,901,000 $ 3,556,000 $ (1,154,000)
==========================================
Identifiable assets:
United states ................ $139,473,000 $137,510,000 $152,577,000
Canada ....................... 11,562,000 11,906,000 12,437,000
Europe ....................... 449,000 475,000
------------------------------------------
$151,035,000 $149,865,000 $165,489,000
==========================================
(a) Inter-area sales to affiliates are reflected at the cost of the
manufacturing location plus a margin. The amount of export sales from the United
States to unaffiliated customers is not material.
(b) Consists of income (loss) from continuing operations before interest
expense, corporate expenses and income taxes.
22
Note 12. Leases:
The Company leases certain of its warehouse and office facilities. Other
leases cover machinery and equipment. Net book value of assets held under
capital leases, included in property, plant and equipment, amounted to
$4,567,000 and $4,644,000 (net of accumulated amortization of $758,000 and
$681,000) for the years ended December 31, 1994 and 1993, respectively.
The following is a schedule of future minimum lease payments under capital and
operating leases for the five years ending December 31, 1999, together with the
present value of net minimum lease payments of capital leases at December 31,
1994:
Minimum Rentals
----------------------------
Capital Operating
Leases Leases
----------------------------
Years Ending December 31,
1995 ........................................... $ 422,000 $ 440,000
1996 ........................................... 204,000 475,000
1997 ........................................... 382,000
1998 ........................................... 362,000
1999 ........................................... 377,000
---------------------------
Total minimum lease payments ................. 626,000 $2,036,000
==========
Less amount representing interest .............. 26,000
----------
Present value of net minimum lease payments .... $ 600,000
==========
Note 13. Contingencies and Litigation:
(a) During 1991 the Company settled a lawsuit commenced by the owner of
property formerly owned by the Company which sought damages under the
Comprehensive Environmental Response, Compensation and Liability Act of 1980,
for alleged environmental contamination at the property. Under the settlement
agreement the Company assumed responsibility for the clean-up of the property
and agreed to pay to the owner $50,000 per year until the clean-up is completed.
Based on the information available at that time, the Company provided $1,000,000
for estimated clean-up costs. During the fourth quarter of 1992 the Company
became aware of additional facts and provided an additional $250,000. On
September 14, 1994 the Company received revised cost estimates associated with
the environmental clean-up, based upon this information, in the third quarter of
1994, the Company accrued an additional $484,000 to provide for the minimum
level of clean-up expense to be required.
On July 7, 1994 the Company became aware of an environmental contaminate which
was discovered in the ground water of its former defense manufacturing facility.
Testing and evaluation of this site remains in its preliminary stages. Based
upon the information available, during the second quarter of 1994 the Company
accrued $250,000 to provide for the estimated clean-up costs to be required.
Additional testing and further evaluation is required before a definitive cost
of ultimate clean-up can be determined. Therefore, the liability accrued by the
Company in the second quarter may require revisions in the future.
The estimated environmental liability recognized in the Company's financial
statements to date of $2,334,000 represents the minimum of the Company's
estimated range in equally likely outcomes; the upper limit of that range is
approximately $2,834,000.
(b) Executive Life - In April 1991 Executive Life Insurance Company
("Executive Life"), the insurance company that issued annuity policies to the
Company's retirees was placed in conservatorship under the laws of California,
the state in which Executive Life is domiciled. The Company, since April 1991,
has been making up any shortfall which resulted from such conservatorship to
those retirees who were not receiving their full retirement payment from
Executive Life.
23
In July 1993, Executive Life, based in part on an agreement with the National
Organization of Life and Health Guaranty Associations ("NOLHGA"), reimbursed the
Company approximately $1,380,000 in respect of amounts paid by the Company to
its retirees to make up the shortfall prior to the commencement of shortfall
payments under an Interim Agreement in April 1992. The Company expects
reimbursement for an additional $213,000 in respect of payments made during this
period. This amount is included in other receivables.
In September 1993 the Superior Court of the State of California approved a
revised plan of rehabilitation (the "Revised Plan") for Executive Life. Although
approval of the Revised Plan has been appealed, appellate courts have denied
requests to stay the implementation of the Revised Plan. Under the Revised
Plan, (i) Aurora National Life Assurance Company ("Aurora") has assumed the
obligations of Executive Life under annuity policies for those Company retirees
who elect to participate in the Revised Plan, but at a reduced rate, which the
Company understands is expected to average approximately 78%; and (ii) NOLHGA,
on behalf of participating state life and health insurance guaranty
associations, has agreed to pay the balance of the original Executive Life
annuity obligation with respect to substantially all of the participating
retirees. The Company, in the fourth quarter of 1992, agreed to make up any
remaining shortfall ("Remaining Shortfall") with respect to any participating
retiree who does not receive his or her full entitlement from Aurora and NOLHGA.
In December 1993 the Company entered into an agreement with the Department of
Labor in which the Department of Labor acknowledged the termination of its
investigation concerning the purchase of the Executive Life annuity. In that
agreement, the Company agreed, subject to the approval of the Internal Revenue
Service, to amend its retirement plan to include payment of any Remaining
Shortfall contemplated under the Revised Plan and further agreed that should
Aurora or NOLHGA fail to pay any amount required to be paid by them under the
Revised Plan, the Company would cause such payment to be made.
The Company provided $709,000 in relation to the liability concerning payment
of the Remaining Shortfall under the Revised Plan during the year ended December
31, 1992. This liability is subject to adjustment as the Revised Plan is fully
implemented.
In November 1994 the Company submitted claims, under the Revised Plan, to
Aurora for reimbursement of payments made by the Company to Bulova retirees
during the period of March 1, 1993 through September 30, 1993. The Company
expects reimbursement for an additional $140,000 for payments made during this
period. This amount is included in other receivables.
(c) The Company has provided $811,000 in the fourth quarter of 1994 and
$750,000 during 1992 to cover the estimated legal and or settlement costs
related to various lawsuits, disputes with third parties, investigations and
pending actions against the Company. The liability represents the estimate made
by the Company for which it believes it is probable that a liability exists or a
settlement will be negotiated.
It is not possible to predict the outcome of pending litigation; however, on
the basis of the facts presently known to it, management does not believe the
actions pending will have a material adverse effect on the financial condition
or results of operations of the Company. Should additional facts arise in the
future indicating a probable adverse determination of any such actions, such
ultimate determination might have a material adverse effect upon the Company's
financial condition.
24
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant.
(a) Directors.
Principal Occupations Director of
During Past Five Years the Company
Name Age and Other Directorships Since
--------------------------------------------------------------------------------
Harry B. Henshel .... 76 Chairman of the Board of the Company. 1958
Herbert C. Hofmann .. 52 President and Chief Executive Officer 1979
of the Company. Mr. Hofmann also serves
as Senior Vice President of Loews where,
among other things, he is responsible
for Loews's Management Information
Systems and purchasing operations.
Andrew H. Tisch ..... 45 Chairman of the Board and Chief Executive 1979
Officer of Lorillard Tobacco Company.
Mr. Tisch is also a director of Loews
and Gordon Jewelry Corp. Mr. Tisch served
as President and Chief Executive Officer
of the Company from October 1979 to
August 1989.
Laurence A. Tisch ... 72 Co-Chairman of the Board and Co-Chief 1979
Executive Officer of Loews. Mr. Tisch
is also a director of CNA Financial
Corporation ("CNA")(84% owned subsidiary
of Loews), Automatic Data Processing,
Inc., Petrie Stores Corporation,
Chairman of the Board, President and
Chief Executive Officer of CBS Inc.
("CBS").
Preston R. Tisch .... 68 Co-Chairman of the Board and Co-Chief 1988
Executive Officer of Loews. Mr. Tisch
is also a director of Loews, CNA, CBS,
Hasbro Inc. and Rite Aid Corporation.
Messrs. Laurence A. Tisch and Preston R. Tisch are brothers and
Mr. Andrew H. Tisch is the son of Mr. Laurence A. Tisch. There are no other
family relationships among any of the Company's directors.
Each director serves until the annual meeting of shareholders next succeeding
his election and until his successor shall have been duly elected and qualified.
(b) Executive Officers.
First Became
Name Position and Offices Held Age an Officer
--------------------------------------------------------------------------------
Thomas P. Hickerson .... Vice President and Controller 53 1983
Herbert C. Hofmann ..... President and Chief Executive 52 1985
Officer
Warren J. Neitzel....... General Counsel and Corporate 44 1993
Secretary
Paul S. Sayegh ......... Chief Operating Officer 51 1979
25
There are no family relationships among the above. Officers are elected and
hold office until their successors are elected and qualified, and are subject to
removal by the Board of Directors. All officers of the Company have been engaged
actively and continuously in the business of the Company and its subsidiaries
for more than the past five years.
Prior to his appointment as General Counsel and Corporate Secretary, Mr.
Neitzel served as Senior Counsel for the Company's former defense subsidiary
since 1980.
A report under Section 16 of the Securities Exchange Act of 1934, as amended,
was not filed in a timely manner by each of Mr. Hickerson, Mr. Neitzel and Mr.
Sayegh in relation to their election as officers of the Company.
Item 11. Executive Compensation.
The following table sets forth information for the years indicated regarding
the compensation of the chief executive officer and each of the other four most
highly compensated executive officers of the Company as of December 31, 1994,
for services in all capacities to the Company.
Summary Compensation Table
Name and Principal Position Year Salary Bonus
--------------------------------------------------------------------------------
Herbert C. Hofmann 1994 $ - $ -
President and Chief Executive Officer (a) 1993 - -
1992 - -
Paul S. Sayegh 1994 212,000 -
Chief Operating Officer 1993 200,000 -
1992 185,000 -
Thomas P. Hickerson 1994 114,000 -
Vice President and Controller 1993 110,700 -
1992 114,596 -
James S. Waterwash 1994 199,000 -
Vice President 1993 193,325 -
1992 185,000 4,679
Warren J. Neitzel 1994 112,000 -
General Counsel and Corporate Secretary 1993 104,108 -
1992 100,799 -
-------------
(a) Mr. Hofmann is compensated by Loews. Included in the charges to the Company
under a Service Agreement, as discussed in Item 13 below, was $200,000 for Mr.
Hofmann's services in 1994. Loews did not charge the Company for Mr. Hofmann's
services prior to 1994.
Information with respect to certain non-cash compensation made available to
the Company's executive officers in 1994 has not been included because the
incremental costs thereof to the Company was below the Securities and Exchange
Commission's required disclosure threshold.
26
(b) Compensation Pursuant to Plans.
The Company provides a non-contributory retirement plan (the "Plan") for all
employees, except for those covered by Loews's benefit plans, which Plan
provides pensions upon retirement at one and one-half per cent of the employee's
annual compensation during each year of credited service after December 31,
1976, plus one and one-half per cent of annual compensation for the year 1976
multiplied by the number of years of credited service rendered prior to January
1, 1977. Compensation under the Plan includes all compensation as an employee
included in the table above. Pension benefits are not subject to reduction for
Social Security benefits or other amounts. The following table shows estimated
annual benefits payable upon retirement under the Plan for various amounts of
average compensation and years of credited service, based upon retirement in
1994 and a straight life annuity form of pension. Other forms of pension
payments are also available under the Plan. Pension benefits may be limited by
the Internal Revenue Code.
Estimated Annual Pension for Representative
Remuneration Years of Credited Service
------------ -----------------------------------------------
15 20 25 30 35
-- -- -- -- --
$ 50,000................. $11,250 $15,000 $18,750 $ 22,500 $ 26,250
75,000................. 16,875 22,500 28,125 33,750 39,375
100,000................. 22,500 30,000 37,500 45,000 52,500
125,000................. 28,125 37,500 46,875 56,250 65,625
150,000................. 33,750 45,000 56,250 67,500 78,750
175,000................. 39,375 52,500 65,625 78,750 91,875
200,000................. 45,000 60,000 75,000 90,000 105,000
225,000................. 50,625 67,500 84,375 101,250 118,125
The years of credited service and the estimated annual retirement benefit
payable at normal retirement age for the following officers are as follows:
Estimated Annual
Name Years Retirement Benefit
---- ----- ------------------
Thomas P. Hickerson 20 $39,585
Herbert C. Hofmann*
Warren J. Neitzel 14 48,072
Paul S. Sayegh*
*Not covered under the Plan.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
(a) Security Ownership of Certain Beneficial Owners.
The only person known to the Registrant to be the beneficial owner of more
than 5% of any class of Registrant's voting securities is Loews, which owns
beneficially 4,449,859 shares of the outstanding Common Stock of Registrant as
of February 24, 1995 constituting approximately 97% of the total shares of
Common Stock outstanding. Loews's principal executive offices are located at 667
Madison Avenue, New York, New York 10021-8087. For information with respect to
the principal holders of the outstanding voting securities of Loews, see Item 12
(b) below.
27
(b) Security Ownership of Management.
The following table sets forth certain information, as of February 28, 1995,
with respect to the shares of Registrant's Common Stock and shares of Loews
Common Stock beneficially owned by each of the directors of the Company and
executive officers named above and by all directors and executive officers of
the Company as a group:
Shares of
Name of Individual Shares of Loews
or Number of Common Stock Percent of Common Percent of
Persons in Group (1) Class Stock(1) Class
--------------------------------------------------------------------------------
Harry B. Henshel...... 100 *
Thomas P. Hickerson...
Herbert C. Hofmann.... 400(2) *
Warren J. Neitzel.....
Paul S. Sayegh........
Andrew H. Tisch....... 1,000(3) *
Laurence A. Tisch..... 9,449,956 16.0%
Preston R. Tisch...... 9,449,956 16.0%
James S. Waterwash....
All directors and
executive officers as
a group ............. 100 * 18,901,312 32.1%
* Represents less than 1% of the outstanding shares of stock.
(1)Except as otherwise indicated, the persons listed as beneficial owners of
shares of stock have sole voting and investment power with respect to such
shares.
(2)Does not include 375 shares of Loews Common Stock owned by Mr. Hofmann's
children as to which he disclaims any beneficial interest.
(3)In addition, 186 shares of Loews Common Stock are owned by Mr. Tisch's son,
as to which Mr. Tisch disclaims any beneficial interest and 30,000 shares of
Loews Common Stock are held by a charitable foundation as to which Mr. Tisch has
shared voting and investment power.
Item 13. Certain Relationships and Related Transactions.
The Company and Loews have entered into a credit agreement (the "Credit
Agreement") providing for unsecured loans by Loews, from time to time, in
amounts aggregating up to $50,000,000, bearing interest at the rate of 10% per
annum currently expiring on June 30, 1996. The largest amount of indebtedness
outstanding under the Credit Agreement during 1994 was $20,000,000. As noted
above, the Company used a portion of its proceeds from the disposition of BTI to
settle the debt owed to Loews in January 1995. Interest on the notes for the
year ended December 31, 1994 amounted to $1,422,000 which was paid during the
year.
The Company and Loews have entered into a tax allocation agreement with
respect to the filing by Loews of consolidated federal income tax returns which
include the Company and its subsidiaries. Under this agreement, the Company will
(i) be paid by Loews the amount, if any, by which Loews's consolidated federal
income tax is reduced by virtue of the inclusion of the Company and its
subsidiaries in Loews's consolidated federal income tax return or (ii) pay to
Loews an amount, if any, equal to the federal income tax which would have been
payable by the Company if the Company and its subsidiaries had filed a separate
consolidated return. This agreement may be cancelled by the Company or Loews
upon thirty days written notice. Pursuant to this agreement, $2,039,000 was
28
payable to Loews for the year ended December 31, 1994. In addition, the Company
has recorded an $8,126,000 receivable from Loews related to the audited
adjustments of the examination of Loews tax returns for 1984 through 1988. Upon
final determination of these audits, the receivable from Loews as adjusted will
be collected, together with accrued interest.
The Company and Loews have entered into a services agreement pursuant to which
Loews provides to the Company various administrative services, including among
other things, data processing, purchasing, accounts payable, printing services,
tax return preparation and cash management services. Pursuant to this agreement,
each party reimburses the other in an amount not to exceed the allocated cost of
the services provided. The Company and Loews paid $1,200,000 and $122,000,
respectively, for services provided during 1994. Although the Company cannot
practicably estimate the administrative costs which it would incur on a
stand-alone basis, it believes that had the agreement with Loews for
administrative services not been in place during 1994, the Company could have
incurred costs aggregating between $1,200,000 and $1,500,000. In addition, the
Company has reimbursed to Loews approximately $734,000 in salaries and related
employee benefits for 1994 for employees of Loews on loan to the Company.
The Company participates in blanket insurance policies, primarily relating to
property and casualty and general liability insurance, maintained by Loews which
cover properties and facilities of Loews and certain of its subsidiaries,
including the Company. The Company reimbursed to Loews approximately $462,000
for premiums paid with respect to 1994.
Certain of the Company's employee health and life insurance benefits are
provided by an insurance subsidiary of CNA. Premiums and fees for such insurance
amounted to approximately $348,000 for 1994.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. The financial statements appear above under Item 8. The following
additional financial data should be read in conjunction with those financial
statements. Schedules not included with these additional financial data have
been omitted because they are not applicable or the required information is
shown in the consolidated financial statements or notes to consolidated
financial statements.
Page
Number
------
2. Financial statement schedules:
Independent Auditors' Report...................................... 32
Bulova Corporation and Subsidiaries:
Schedule II-Valuation and Qualifying Accounts................... 33
29
3. Exhibits: Exhibit
Description Number
----------- -------
(3) Articles of Incorporation and By-Laws
Restated Certificate of Incorporation, dated May 25, 1964, and
filed on August 4, 1964 as Exhibit 3(a) to Amendment No. 2 to
Registrant's Registration Statement on Form S-1 (Reg. No. 2-22576),
incorporated herein by reference. Copies of amendments thereto,
dated July 26, 1966, April 22, 1969 and July 2, 1969, incorporated
herein by reference to Exhibit 3(a) of Registrant's Annual Report
on Form 10-K for the year ended December 31, 1980. Copy of
Certificate of Change thereto, dated November 25, 1985,
incorporated herein by reference to Exhibit 3(a) of Registrant's
Annual Report on Form 10-K for the year ended December 31, 1985.
Copy of Certificate of Change thereto, dated July 14, 1987,
incorporated herein by reference to Exhibit 3(a) of Registrant's
Annual Report on Form 10-K for the year ended December 31, 1987.
Copy of Certificate of Amendment thereto, dated June 16, 1988,
incorporated herein by reference to Exhibit 3(a) of Registrant's
Annual Report on Form 10-K for the year ended December 31, 1988 ... 3(a)
By-laws currently in effect and incorporated herein by reference
to Exhibit 3(b) of Registrant's Annual Report on Form 10-K for
the year ended December 31, 1984 .................................. 3(b)
(4) Instruments Defining the Rights of Security Holders, Including
Indentures
Registrant hereby agrees to furnish to the Commission upon request
copies of instruments with respect to certain long-term debt which
have not been filed as an exhibit to this report, pursuant to
Item 601 (b)(4)(iii) of Regulation S-K.
(10) Material Contracts
Merger Agreement entered into on January 17, 1995, by Bulova
Technologies, Inc., a New York corporation ("BTI"), BTI
Acquisition Corporation, a Delaware corporation, and Bulova
Corporation, a New York corporation, the form of which was filed
as part of Exhibit (2) to Registrant's Report on Form 8-K dated
January 17, 1995, and incorporated herein by reference ............ 10(a)
Credit Agreement between Loews Corporation and Registrant dated
as of September 19, 1979, the form of which was filed as part of
Exhibit (2) of Item 9(a) of Registrant's Report on Form 10-Q for
the quarter ended September 30, 1979, and incorporated herein by
reference ......................................................... 10(b)
Federal Income Tax Allocation Agreement between Loews Corporation
and Registrant dated as of March 12, 1980 and effective April
1, 1979, incorporated herein by reference to Exhibit 10(b) of
Registrant's Annual Report on Form 10-K for the year ended December
31, 1987 .......................................................... 10(c)
Corporate Services Agreement between Loews Corporation and
Registrant dated as of January 1, 1987, incorporated herein by
reference to Exhibit 10(c) of Registrant's Annual Report on
Form 10-K for the year ended December 31, 1987 .................... 10(d)
(21) Subsidiaries of the Registrant
List of subsidiaries of Registrant ................................ 21*
(27) Financial Data Schedule ........................................... 27*
*Filed herewith
(b) Reports on Form 8-K:
There were no reports on Form 8-K for the three months ended December 31,
1994.
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
Dated: March 27, 1995 By Paul S. Sayegh
--------------------------------
(Paul S. Sayegh, Chief Operating
Officer and Principal Financial
Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Dated: March 27, 1995 By Herbert C. Hofmann
--------------------------------
(Herbert C. Hofmann, President,
Chief Executive Officer and
Director)
Dated: March 27, 1995 By Paul S. Sayegh
--------------------------------
(Paul S. Sayegh, Chief Operating
Officer and Principal Financial
Officer)
Dated: March 27, 1995 By Thomas P. Hickerson
--------------------------------
(Thomas P. Hickerson, Vice
President and Controller,
Principal Accounting Officer)
Dated: March 27, 1995 By Harry B. Henshel
--------------------------------
(Harry B. Henshel, Director)
Dated: March 27, 1995 By Andrew H. Tisch
--------------------------------
(Andrew H. Tisch, Director)
Dated: March 27, 1995 By Laurence A. Tisch
-------------------------------
(Laurence A. Tisch, Director)
Dated: March 27, 1995 By Preston R. Tisch
--------------------------------
(Preston R. Tisch, Director)
31
INDEPENDENT AUDITORS' REPORT
The Board of Directors and
Shareholders of Bulova Corporation:
We have audited the accompanying consolidated balance sheets of Bulova
Corporation and its subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of operations, shareholders' equity and cash
flows for each of the three years in the period ended December 31, 1994. Our
audits also included the financial statement schedules listed in the index at
Item 14(a)2. These financial statements and financial statement schedules are
the responsibility of the Corporation's management. Our responsibility is to
express an opinion on the financial statements and financial statement schedules
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Bulova Corporation and its
subsidiaries at December 31, 1994 and 1993, and the results of their operations
and their cash flows for each of the three years in the period ended December
31, 1994 in conformity with generally accepted accounting principles. Also, in
our opinion such financial statement schedules, when considered in relation to
the basic consolidated financial statements taken as a whole, present fairly in
all material respects the information set forth therein.
As discussed in Notes 7 and 8 to the consolidated financial statements, in
1992 the Company changed its methods of accounting for income taxes and
postretirement benefits.
Deloitte & Touche LLP
New York, New York
February 15, 1995
32
Schedule II
BULOVA CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Column A Column B Column C Column D Column E
-------- -------- -------- -------- --------
Additions
Balance at charged to Balance at
beginning costs and end of
Description of Period expenses Deductions Period
----------- -------------------------------------------------
Year Ended December 31, 1994
Allowance for doubtful
accounts ..................... $2,563,000 $1,675,000 $1,216,000(a) $3,022,000
Allowance for cash discounts .. 391,000 902,000 838,000 455,000
----------------------------------------------
$2,954,000 $2,577,000 $2,054,000 $3,477,000
==============================================
Allowance for loss on
investment in unconsolidated
subsidiary ................... $ 529,000 $ 529,000
========== ==========
Year Ended December 31, 1993
Allowance for doubtful
accounts ..................... $2,709,000 $1,946,000 $2,092,000(a) $2,563,000
Allowance for cash discounts .. 358,000 1,316,000 1,283,000 391,000
----------------------------------------------
$3,067,000 $3,262,000 $3,375,000 $2,954,000
==============================================
Allowance for loss on
investment in unconsolidated
subsidiary ................... $ 529,000 $ 529,000
========== ==========
Year Ended December 31, 1992
Allowance for doubtful
accounts ..................... $2,312,000 $2,692,000 $2,295,000(a) $2,709,000
Allowance for cash discounts .. 285,000 985,000 912,000 358,000
----------------------------------------------
$2,597,000 $3,677,000 $3,207,000 $3,067,000
==============================================
Allowance for loss on
investment in unconsolidated
subsidiary ................... $ 529,000 $ 529,000
========== ==========
-------------
(a) Includes doubtful accounts written off net of recoveries.
33