Item 1 - Business
The term "Corporation" refers to BIC Corporation, a New York corporation which was incorporated in 1958, and its subsidiaries, unless the context indicates otherwise.
The Corporation's primary focus is the manufacture and sale of high-quality, low-cost consumer products. These products include stationery products, lighters and shavers. The Corporation also distributes sailboards which are purchased from a foreign affiliate. While most of the Corporation's operations are conducted in the United States, operations are also conducted at other locations in North and Central America. Societe BIC, S.A. is the Corporation's majority shareholder.
The following table sets forth the net sales and income (loss) before income taxes, extraordinary credit and cumulative effect of change in accounting principle for each of the Corporation's principal products for the periods indicated:
Products
The principal products of the Corporation are as follows:
Stationery Products
The Corporation is the largest manufacturer and distributor of ball pen writing instruments in North America. Based on market research studies and other public information, the number of ball pens sold by the Corporation in 1993 represents approximately 40% of the office products market in the United States and close to 60% of the over-the-counter market. These pens, which are marketed under trademarks owned by the Corporation, are available in both non- retractable, non-refillable models and retractable, refillable models. The pens are available in various ink and barrel colors and point sizes. In addition to ball pens, the Corporation manufactures highlighting markers, roller pens and correction fluids and distributes mechanical pencils.
Stationery Products (Continued)
In 1992, the Corporation acquired Wite-Out Products, Inc., the second largest manufacturer of correction fluid in the United States. During the fourth quarter of 1993, the Corporation introduced four performance-based correction fluids formulated to meet the specific needs of individual consumers: For Everything(R) Quick Dry, For Everything Extra Coverage, For Everything Super Smooth and Water Base. This line contains no chemicals known to deplete the ozone layer. With this introduction, BIC(R) Wite-Out(R) Formula 109(R), BIC Wite-Out For Copies, and BIC Wite-Out for Pen & Ink have been discontinued. The new Wite-Out line will be supported with special consumer and trade promotions during 1994.
During 1993, the Corporation expanded its line of Soft Feel(R) pens to include Soft Feel Stic. Soft Feel pens have rubberized barrels for greater writing comfort. The Corporation also introduced six new BIC Wavelengths(R) designs in 1993, which include Clear Clics(TM), clear clic pens with fashion tinted bodies; and Hot-Lites(TM), highlighters with heat sensitive barrels that change color when held. The other new designs are Art Attacks(TM), Flats(TM), Spaz(TM) and Glow Stics(TM). BIC Wavelengths is a line of fashionable pens and mechanical pencils featuring a variety of colorful designs, images and ink colors. The Corporation will continue to expand its BIC Wavelengths line in 1994.
Lighters
The Corporation is the leading manufacturer and distributor of disposable butane lighters in North America. Based on market research studies and other public information, BIC lighters continue to maintain their market leadership position despite the importation of low-quality, inexpensive lighters from the Far East.
During the second quarter of 1992, the Corporation introduced to the market its BIC Lighter with Child Guard(R). This new model, which has a lever that makes it even more difficult for children to light, exceeds the United States Consumer Product Safety Commission standard that will go into effect on July 12, 1994.
The Corporation continues to expand its Limited Edition line to include new fashions and designs. During the first quarter of 1993, BIC introduced Country Western and Flowers. The Country Western series offers five full-color illustrations of scenes from the American West; the Flowers series consists of five floral designs in a variety of rich colors.
Shavers
One-piece shavers, the only type sold by the Corporation, account for over 60% of the wet-shave market. In the one-piece shaver market, which consists of over 1.2 billion units annually, the Corporation continues to share the number one position. These statistics are based on market research studies and other public information.
In 1992, the Corporation introduced a new line of twin-blade shavers: BIC Twin Select(R) Normal Skin, BIC Twin Select(R) Sensitive Skin and BIC Twin Pastel(TM) for women. The BIC twin-blade shaver features precise twin-blade orientation for different skin types, a slimmer shaver head, a long and tapered handle and a reusable guard. During 1993, the Corporation supported this line with special promotions and television advertising, and will continue to do so in 1994. The promotions will primarily be account specific in 1994, whereas in 1993, the promotions were directed towards the mass market.
Sport
The principal sport product distributed by the Corporation is the BIC Sailboard. These sailboards are purchased from a foreign affiliate.
Sales/Marketing
The Corporation's principal products are sold through the Corporation's sales force and manufacturer representative groups to approximately 18,500 accounts, which include food, drug, wholesale club, superstore, variety and retail outlets, as well as tobacco, drug and stationery wholesalers, who in turn distribute the products to retail outlets. Sales to commercial customers are generated both by the Corporation's own sales force and by selected manufacturer representative groups who sell to office supply distributors and retailers. Stationery products, lighters and shavers carrying the purchaser's name, trademark, corporate symbol or other imprint are sold to customers for advertising specialty or premium purposes by the Corporation's Special Markets Division.
The Corporation relies upon advertising on national television networks, in national publications with broad circulation and in publications for specialized audiences. In addition, the Corporation maintains a cooperative advertising program pursuant to which it shares the cost of certain advertising with retailers. The Corporation also provides a wide variety of product displays, seasonal sales promotion materials and other advertising and merchandising aids to retail outlets.
International Operations
The Corporation's international operations consist of the operations of its subsidiaries in Canada, Mexico, Guatemala and Puerto Rico. Sales by foreign subsidiaries were approximately 15% of consolidated net sales in 1993 and 16% in 1992 and 1991.
International operations are subject to certain risks, including changes in currency exchange rates and imposition of foreign exchange controls. During 1992, the Corporation's Mexican subsidiaries' economy ceased to be considered highly inflationary, and the Mexican peso became the subsidiaries' functional currency. The operations in Guatemala and Mexico showed slight improvements in sales for 1993.
Competition
Although the Corporation is the leading domestic manufacturer of ball pen writing instruments and disposable butane lighters, it is subject to intense competition in all areas of its business. Competitors include both smaller specialized firms and larger diversified companies, some of which have broader product lines and substantially greater financial resources than the Corporation. The Corporation's major competitor in stationery products is Gillette Company. Major competitors in lighters are Scripto Tokai Corporation, Swedish Match Corporation and importers of low-quality, inexpensive lighters from the Far East. In shavers, major competitors are Gillette Company and the Schick Division of Warner Lambert Company.
Trademarks
The Corporation owns a number of trademarks relating to its products which are the subject of intensive advertising and marketing programs. The principal registered trademarks, which the Corporation believes are important to its business, are BIC, (Logo of BIC), "Flick My BIC", (Logo of BIC Wavelengths), and (Logo of BIC Wite-Out).
Employee Relations
At January 2, 1994, the Corporation had approximately 2,500 employees, of whom approximately 590 were unionized personnel at the Corporation's facility in Milford, Connecticut. These unionized personnel are represented under a collective bargaining agreement which expires on November 29, 1997. The Corporation considers its employee relations to be good.
Item 2
Item 2 - Properties
At January 26, 1994, the Corporation owned and operated manufacturing plants in the United States, Mexico, Canada and Guatemala. Manufacturing areas, including related office and service areas of the Corporation, are as follows:
In January 1993, the Corporation's Special Markets Division began leasing a 30,500 square foot building in Clearwater, Florida for additional office and warehouse space. During 1993, the Corporation expanded its Duncan (formerly Spartanburg), South Carolina; Fountain Inn, South Carolina; Clearwater, Florida and Cuautitlan, Mexico facilities. The Corporation recently relocated its Wite-Out operation from a leased facility in Beltsville, Maryland to its Fountain Inn, South Carolina facility.
The Corporation leases sales offices and warehouse space at various other locations and owns or leases such machinery and equipment as is necessary for the operation of its business. In general, the machinery and plants are in good condition, adequately meet the Corporation's needs and operate at reasonable levels of production capacity.
Item 3
Item 3 - Legal Proceedings
The Corporation has significant contingent liabilities with respect to pending litigation, claims and disputes, principally relating to its lighters, which arise in the ordinary course of its business.
In 1985, the United States District Court, Southern District of New York (the "District Court"), in connection with pending patent actions between BIC Sport U.S.A. Inc. and Windsurfing International, ruled that Windsurfing's sailboard patent was valid and was infringed by BIC boards. The patent in question expired in January 1987. By decision dated April 8, 1991, the District Court awarded damages of lost profits to Windsurfing International based upon a market share theory. BIC appealed the decision and on August 4, 1993, the United States Court of Appeal for the Federal Circuit reversed the District Court's award based on lost profits and remanded the case to the District Court for a determination of damages based upon a reasonable royalty. As of January 2, 1994, BIC has provided for this liability in its consolidated financial statements.
Item 3 - Legal Proceedings (Continued)
In November 1992, a state court jury in Creek County, Oklahoma, in a 9 to 3 verdict, awarded $11,000,000 in actual damages and $11,000,000 in punitive damages against the Corporation in connection with a product liability action. Management is vigorously appealing the verdict on a number of grounds. It is the opinion of management, based on advice of legal counsel, that it is probable that the verdict will be overturned on appeal.
BIC has been named a Potentially Responsible Party at a superfund site. Refer to Part II, Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations for further discussion.
While the ultimate liability with respect to the above matters, including any additional liability not provided for, is not presently determinable, it is the opinion of management, after consultation with counsel to the Corporation, that any liabilities resulting therefrom will not have a material adverse effect on the Corporation's consolidated financial position or on its results of operations if such operations continue at the present level.
Item 4
Item 4 - Submission of Matters to a Vote of Security Holders
No matters were submitted during the fourth quarter of fiscal year 1993 to a vote of security holders through solicitation of proxies or otherwise.
PART II
Item 5
Item 5 - Market for Registrant's Common Shares and Related Shareholder Matters
On October 6, 1992, the Corporation began trading its common shares on the New York Stock Exchange. The shares previously traded on the American Stock Exchange.
Set forth below is the range of sales prices of the Corporation's common shares for each quarter during 1993 and 1992.
/1/ Per share amounts have been retroactively restated to reflect the 1992 share split effected in the form of a 100% share dividend.
The Corporation paid quarterly cash dividends which totaled $0.72 in 1993 and $1.06 in 1992. The 1992 cash dividends included a special cash dividend of $0.50 per share. During the first quarter of 1994, the Board of Directors voted an increase in the regular quarterly dividend from $0.18 per share to $0.20 per share, effective with the dividend paid on January 31, 1994, to shareholders of record on January 17, 1994.
In 1993, the Corporation amended its Certificate of Incorporation to increase the number of authorized common shares, $1 par value, from 25,000,000 to 50,000,000.
Item 5 - Market for Registrant's Common Shares and Related Shareholder Matters (Continued)
As of January 26, 1994, there were approximately 1,400 shareholders of record of the Corporation's Common Shares.
Item 6
Item 6 - Selected Financial Data
The following selected consolidated financial data for the five fiscal years ended January 2, 1994, insofar as it relates to the 1993, 1992 and 1991 fiscal years, should be read in conjunction with the Corporation's consolidated financial statements included herein.
/1/ Cash dividends per share represent the total dividends paid each year. Per share amounts have been retroactively restated to reflect the 1992 share split effected in the form of a 100% share dividend.
Item 7
Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Liquidity and Capital Resources
The cash required by the Corporation for working capital, capital expenditures and dividend payments was generated from operations and, to a lesser extent, short-term borrowings. The Corporation expects to continue to satisfy most of its cash requirements through internally generated funds. The Corporation's current ratio was 1.87 in 1993 and 1.79 in 1992, reflecting the Corporation's highly liquid position and ability to finance its current operations without significant short-term borrowings.
Allowance for doubtful accounts decreased by $1.0 million to $4.1 million in 1993 and increased by $2.7 million to $5.1 million in 1992. These fluctuations are related to an increase in bad debt expense in 1992 and an increase in amounts written-off in 1993. Both of these increases are related to Phar Mor Stores Inc. filing for bankruptcy during the third quarter of 1992.
Inventories increased by $1.3 million in 1993 and by $10.9 million in 1992. These increases were associated with higher production levels to support sales increases. Average inventory turnover was 4.0 times in 1993 and 4.3 times in 1992.
Liquidity and Capital Resources (Continued)
Bank borrowings were $6.7 million at January 2, 1994 and $7.7 million at January 3, 1993 which primarily reflect borrowings by the Corporation's United States operations. Information concerning the Corporation's bank borrowings is contained in Note 6 of Notes to Consolidated Financial Statements.
Accounts payable and accrued expenses decreased by $2.8 million in 1993 and increased by $5.5 million in 1992. The 1993 decrease is primarily due to the timing of income tax payments by the Corporation's Canadian subsidiary. The 1992 fluctuation primarily reflected a $7.7 million increase in the provision for insurance associated with general liability and workers' compensation, partially offset by a $2.9 million decrease in the payroll liability mainly due to the timing of bonus payments.
Capital spending decreased in 1993 and increased in 1992. Purchases of property, plant and equipment were $41.2 million in 1993 and $44.9 million in 1992. Spending in 1993 included purchases of machinery and equipment for productivity increases and quality improvements in stationery products and lighters; capacity increases in stationery products and new stationery products; expansions of the Duncan, South Carolina; Fountain Inn, South Carolina; Clearwater, Florida and Cuautitlan, Mexico facilities and building improvements for the Gaffney, South Carolina facility. Spending in 1992 was principally for productivity increases and quality improvements in stationery products, lighters and shavers, which included the purchase of approximately 60 new molding machines; capacity increases in stationery products and the purchase of two facilities in South Carolina. 1994 capital spending for all of the Corporation's locations is expected to be lower than the 1993 level.
In July 1993, the U.S. Environmental Protection Agency ("EPA") issued its final volumetric ranking of Potentially Responsible Parties ("PRPs") for the Solvents Recovery Service of New England ("SRSNE") Superfund Site in Southington, Connecticut. The Corporation has been notified that it is a PRP at the Site and has been ranked, by the EPA, number 192 of a total of 1,659 PRPs named. This ranking represents less than 1% of the total volume of waste disposed at the SRSNE Site with the first 191 PRPs representing 90% of the total volume.
The Corporation cannot predict with certainty the total costs of cleanup, the Corporation's share of the total costs or the extent to which contributions will be available from other parties, the amount of time necessary to complete the cleanup, or the availability of insurance coverage. Based on currently available information, the Corporation believes that its share of the ultimate cleanup costs at this Site will not have a material adverse impact on the Corporation's financial position or on its results of operations if such operations continue at the present level.
At January 2, 1994 and January 3, 1993, the Corporation carried no long-term debt. At January 2, 1994, unused lines of credit were $99.7 million and stand-by letters of credit were $35.5 million, which management believes is more than adequate to meet the Corporation's current or future requirements.
During the first quarter of 1994, the Board of Directors voted an 11.1% increase in the regular quarterly cash dividend from $0.18 per share to a new rate of $0.20 per share, effective with the dividend paid on January 31, 1994 to shareholders of record on January 17, 1994.
Liquidity and Capital Resources (Continued)
In 1993, the Corporation amended its Certificate of Incorporation to increase the number of authorized common shares, $1 par value, from 25,000,000 to 50,000,000.
During the first quarter of 1992, the Corporation paid a special cash dividend of $0.50 per share, which was in addition to the regular quarterly cash dividend of $0.14 per share.
In January 1994, the Corporation concluded negotiations with its unionized employees, local utilities and local taxing authorities. Concessions received through these negotiations will result in a modest, but important, reduction in future operating costs at its Milford, Connecticut facility. In addition, the State of Connecticut has offered the Corporation a $9 million grant and loan package to offset capital spending for its Milford, Connecticut facility.
Consistent with common practice, the Corporation self-insures to a degree against certain types of risk. The Corporation also has in place risk management programs other than insurance to minimize exposure to loss. The programs remained relatively unchanged from the prior year. Management believes its overall risk management and insurance programs are adequate to protect its assets and earnings against significant loss.
Results of Operations
In 1993, the Corporation's net sales increased by $21.9 million to $439.3 million due to increased sales of stationery products of $17.1 million, lighters of $1.3 million and shavers of $4.0 million, partially offset by a decline in sport products of $0.5 million. The increase in stationery products primarily represents an increase in average selling prices of approximately 9% by its North American operations. The increase in lighters primarily reflects an increase in units sold of approximately 3% by its United States operations. The shaver increase is attributable to higher average selling prices of approximately 10% in North America. This shaver increase is partially offset by a slight decline in units sold.
In 1992, the Corporation's net sales increased by $48.2 million to $417.4 million due to increased sales of stationery products of $31.5 million, lighters of $4.9 million and shavers of $12.5 million, partially offset by a decline in sport products of $0.7 million. The increase in stationery products, which included the incremental sales of Wite-Out products, reflected increased units sold of approximately 11% and higher average selling prices in the United States. One of the Corporation's Mexican subsidiaries also showed improvements in units sold and higher average selling prices. The increase in lighters was primarily attributable to increased units sold of approximately 4% in North America. The shaver increase was largely the result of the incremental sales of twin-blade shavers.
Net sales of sport products decreased by $0.5 million in 1993 and by $0.7 million in 1992. These reductions reflect a decrease in the number of units sold of approximately 11% in 1993 and 5% in 1992, and lower average selling prices. Income before income taxes, extraordinary credit and cumulative effect of change in accounting principle was $1.6 million in 1993 and $0.2 million in 1992 for sport products. The increase in 1993 is related to a reduction in the provision related to sailboard litigation which is discussed further in Part I, Item 3 - Legal Proceedings.
Foreign sales remained relatively flat in 1993, while increasing by approximately 13% in 1992. The increase in 1992 primarily reflected increased sales of stationery products by one of the Corporation's Mexican subsidiaries.
Results of Operations (Continued)
The Corporation's purchases from Societe BIC, S.A., the Corporation's majority shareholder, and from other affiliated companies, decreased by $1.8 million to $42.2 million in 1993 and increased by $2.4 million to $44.0 million in 1992. The 1993 decrease primarily represents lower inventory purchases from Societe BIC, S.A. The 1992 increase reflects higher inventory purchases from Societe BIC, S.A., partially offset by favorable foreign exchange rates. The Corporation purchases from Societe BIC, S.A. and other affiliated companies, products that it does not presently manufacture, certain component parts and machinery and equipment. Information concerning the Corporation's transactions and balances with Societe BIC, S.A. and other related parties is contained in Note 15 of Notes to Consolidated Financial Statements.
Gross profit, as a percentage of net sales, increased by 0.4% in 1993 and by 2.7% in 1992. The 1992 increase primarily reflected improvements in the United States and Canadian operations. The improvements in the United States were principally due to favorable foreign exchange rates associated with imports, and higher average selling prices in shavers resulting from the incremental sales of twin-blade shavers. The improvements in the Canadian operations reflected higher average selling prices in shavers and BIC Wavelengths, and favorable foreign exchange rates associated with imports.
Advertising, selling, general and administrative, marketing and research and development expenses increased by $7.3 million to $133.7 million in 1993 and by $12.2 million to $126.4 million in 1992. The 1993 increase reflects higher selling expenses and an 18% increase in marketing expenses. These increases are partially offset by an 8% decrease in general and administrative expenses. The increase in selling expense is attributable to higher sales levels. The increase in marketing is related to the costs associated with the promotion of the Corporation's line of twin-blade shavers. The decrease in general and administrative expenses reflects a decrease in the provision for general liability and workers' compensation insurance, relocation costs and bad debt expense. These decreases are partially offset by an increase in the amortization of intangibles associated with the purchase of Wite-Out Products, Inc. The 1992 increase included a 23% increase in general and administrative expenses and a 20% increase in marketing and advertising. The general and administrative expense reflected the increase in the provision for general liability and workers' compensation insurance, relocation costs attributable to the relocation of the marker division, higher bad debt expense and the amortization of the intangible assets acquired in the purchase of Wite-Out Products, Inc. The increase in marketing and advertising included the promotional costs associated with the introduction of the Corporation's line of twin-blade shavers. One of the Corporation's Mexican subsidiaries incurred higher advertising costs, in order to mitigate the effects of increased competition resulting from the removal of price controls and the easing of restrictions on foreign imports.
Other income - net increased by $2.0 million to $4.2 million in 1993 and by $0.8 million to $2.2 million in 1992. The 1993 fluctuation is due to an increase in net foreign currency gains and to a reduction in the provision related to the sailboard litigation which is discussed further in Part I, Item 3 - Legal Proceedings. These fluctuations are partially offset by lower interest income and higher interest expense. The 1992 fluctuation was primarily due to decreases in several miscellaneous expense items, none of which was individually significant. These decreases were partially offset by lower interest income in the United States.
Results of Operations (Continued)
The effective tax rate has varied each year as follows: 39.5% in 1993, 40.6% in 1992 and 42.1% in 1991. During 1991, the Corporation utilized the tax benefit of a foreign net tax operating loss carryforward of $1.1 million which was shown as an extraordinary credit in the Statement of Consolidated Income.
Income before extraordinary credit and cumulative effect of change in accounting principle increased by $4.8 million and by $12.9 million in 1993 and 1992, respectively. These increases were primarily due to improvements in core operations (stationery products, lighters and shavers) in the United States.
In 1993, net income included a $9.8 million cumulative effect of a change in accounting principle which was entirely related to the adoption of Statement of Financial Accounting Standards No. 106, "Employers' Accounting for Postretirement Benefits Other Than Pensions." Refer to New Accounting Standards below for further discussion.
New Accounting Standards
Effective January 4, 1993, the Corporation adopted Statement of Financial Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Corporation elected to recognize the cumulative effects 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 costs of $16.2 million and a decrease in net earnings of $9.8 million, or $0.42 per share. The adoption of SFAS 106 had no effect on the Corporation's cash flow.
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 material cumulative effect on the Corporation's financial position or on its results of operations by adopting SFAS 109.
The Corporation is required to adopt Statement of Financial Accounting Standards No. 112 ("SFAS 112"), "Employers' Accounting for Postemployment Benefits," by fiscal 1994. The adoption of SFAS 112 will not have a significant effect on the Corporation's consolidated financial position or on its results of operations if such operations continue at the present level.
Item 8
Item 8 - Financial Statements and Supplementary Data
The consolidated financial statements and supplementary data are set forth beginning on page 13 of this Annual Report.
Item 9
Item 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
There were no changes in accountants, or disagreements with accountants on accounting principles or practices, or financial statement disclosure.
PART III
Item 10
Item 10 - Directors and Executive Officers of the Registrant*
Item 11
Item 11 - Executive Compensation*
Item 12
Item 12 - Security Ownership of Certain Beneficial Owners and Management*
Item 13
Item 13 - Certain Relationships and Related Transactions*
*Responses to Items 10 through 13 are omitted since the Corporation will, no later than 120 days after January 2, 1994, the close of its most recent fiscal year, file a definitive proxy statement pursuant to Regulation 14(a) of the General Rules and Regulations under the Securities Exchange Act of 1934.
PART IV
Item 14
Item 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) 1. Financial Statements: See the attached Index to Consolidated Financial Statements and Financial Statement Schedules. 2. Financial Statement Schedules: See the attached Index to Consolidated Financial Statements and Financial Statement Schedules. 3. Exhibits: 3. a. Restated Certificate of Incorporation, as filed May 5, 1993. b. By-Laws, as amended./1/ 4. Instruments relating to long-term debt are not filed, but the Registrant agrees to file a copy of such instruments, upon the request of the Securities and Exchange Commission. 9. a. Voting Trust Agreement, dated February 5, 1991, by and among Societe BIC, S.A., Marcel L. Bich, Neil A. Polio, Bruno Bich, Francois Bich and BIC Corporation, as amended February 3, 1992, for the purpose of naming Alexander Alexiades as successor voting trustee./2/ b. Amendment to Voting Trust Agreement, dated July 5, 1993. 10. a. Selected Executive Retirement Plan, as amended. b. Agreement, dated July 1, 1971, including amendments, between Societe BIC, S.A. and BIC Pen Corporation./2/ 21. Subsidiaries of the Registrant. 23. Consent of Independent Auditors. - ------------------------- /1/ Incorporated by reference to the Corporation's Annual Report on Form 10-K for its fiscal year ended January 3, 1993.
/2/ Incorporated by reference to the Corporation's Annual Report on Form 10-K for its fiscal year ended December 30, 1990.
Shareholders may obtain a copy of any exhibit not contained herein by writing to the Secretary, BIC Corporation, 500 BIC Drive, Milford, CT 06460. A charge of $.50 per page to cover the cost of copying and handling will be imposed.
(b) No reports on Form 8-K were filed by the Corporation during the last quarter of its fiscal year ended January 2, 1994.
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.
BIC CORPORATION By: BRUNO BICH Bruno Bich, Chairman and Chief Executive Officer
Date: March 9, 1994
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.
SIGNATURE AND TITLE DATE - -------------------------------------------------------------------------------
BRUNO BICH March 9, 1994 - ------------------------------------------------------------ (Bruno Bich) Chairman and Chief Executive Officer and Director (Chief Executive Officer)
RAYMOND WINTER March 9, 1994 - ------------------------------------------------------------ (Raymond Winter) President and Chief Operating Officer and Director (Chief Operating Officer)
ROBERT L. MACDONALD March 9, 1994 - ------------------------------------------------------------ (Robert L. Macdonald) Vice President-Finance and Treasurer (Principal Financial and Accounting Officer)
ALEXANDER ALEXIADES March 9, 1994 - ------------------------------------------------------------ (Alexander Alexiades) Director
ROBERT E. ALLEN March 9, 1994 - ------------------------------------------------------------ (Robert E. Allen) Director
DAVID W. HELENIAK March 9, 1994 - ------------------------------------------------------------ (David W. Heleniak) Director
ANTOINE G. TREUILLE March 9, 1994 - ------------------------------------------------------------ (Antoine G. Treuille) Director - -------------------------------------------------------------------------------
BIC CORPORATION AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
All other financial statement schedules have been omitted because the conditions requiring the filing thereof do not exist or because the required information is shown in the consolidated financial statements or notes thereto.
(Logo of Deloitte & Touche)
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of BIC Corporation:
We have audited the accompanying consolidated financial statements and related financial statement schedules of BIC Corporation and its subsidiaries (the "Corporation") listed in the preceding Index to Consolidated Financial Statements and Financial Statement Schedules of the Annual Report on Form 10-K of the Corporation for the year ended January 2, 1994. These consolidated financial statements and financial statement schedules are the responsibility of the Corporation's management. Our responsibility is to express an opinion on the consolidated 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 BIC Corporation and its subsidiaries at January 2, 1994 and January 3, 1993 and the consolidated results of their operations and their cash flows for each of the three fiscal years in the period ended January 2, 1994 in conformity with generally accepted accounting principles. Also, in our opinion, such consolidated 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 described in Note 1 to the consolidated financial statements, in 1993, the Corporation changed its methods of accounting for income taxes and postretirement benefits other than pensions.
DELOITTE & TOUCHE
New Haven, Connecticut
January 28, 1994
BIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS JANUARY 2, 1994 and JANUARY 3, 1993
See Notes to Consolidated Financial Statements.
BIC CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME FOR THE 1993, 1992 AND 1991 FISCAL YEARS
STATEMENTS OF CONSOLIDATED RETAINED EARNINGS FOR THE 1993, 1992 AND 1991 FISCAL YEARS
See Notes to Consolidated Financial Statements.
BIC CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS FOR THE 1993, 1992 AND 1991 FISCAL YEARS
See Notes to Consolidated Financial Statements.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
A summary of significant accounting policies for BIC Corporation and its subsidiaries (the "Corporation"), manufacturers and distributors of high- quality, low-cost consumer products, is as follows:
Consolidation
The consolidated financial statements include the accounts of BIC Corporation and its subsidiaries. An investment in an affiliated company is accounted for on the equity method. All significant intercompany balances and transactions have been eliminated.
Inventories
Inventories are valued at the lower of cost (determined on the first-in, first-out basis) or market.
Property, Plant and Equipment
Property, plant and equipment is recorded at cost. Depreciation, principally on the declining balance method, is provided over the estimated useful lives of the assets as follows:
Buildings and improvements 10-50 years Machinery and equipment 3-12 years
Expenditures for maintenance and repairs are charged to operations as incurred. Expenditures for betterments and major renewals are capitalized. Costs of assets sold or retired and the related amounts of accumulated depreciation are eliminated from the accounts in the year of disposal and any resulting gains or losses are included in income.
Intangibles
Costs pertaining to goodwill and patents are amortized on the straight-line method over five to seventeen years. Trademarks are amortized over five to forty years.
Accrued Expenses - Insurance
Accrued expenses - insurance represents the estimated costs of known and anticipated claims under the Corporation's product liability (principally relating to its lighters) and workers' compensation insurance policies. For each claim, the Corporation maintains self-insurance up to the estimated amount of the probable claim or the amount of the deductible, whichever is lower. At each financial reporting date, probable claim amounts, individually or in aggregate, were not expected to materially exceed the deductible. Claims are generally settled within five years of origination.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Employee Benefit Plans
Substantially all employees in the United States and Canada are covered by defined benefit pension plans. The plans are noncontributory and provide for pension benefits based on average pay and years of service to the Corporation. Funding for the pension plans is based on a review of the specific requirements and an evaluation of the assets and liabilities of each plan.
The Corporation has a share purchase plan for substantially all full-time United States unionized employees who elect to participate. Effective July 1992, a 401(k) Savings and Investment Plan was established, which constitutes a replacement of the BIC Corporation Employees Share Purchase Plan for non- unionized employees. The plans provide that the Corporation match a portion of participant contributions.
The Corporation provides certain postretirement medical and life insurance benefits for qualifying retired and active unionized and non-unionized employees in the United States. Most retirees outside the United States are covered by government sponsored and administered programs.
In 1993, the Corporation adopted Statement of Financial Accounting Standards No. 106 ("SFAS 106"), "Employers' Accounting for Postretirement Benefits Other Than Pensions." The Corporation elected to recognize the cumulative effects 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 costs of $16.2 million and a decrease in net earnings of $9.8 million, or $0.42 per share. Aside from the one-time effect of the cumulative adjustments, adoption of SFAS 106 was not material to the Corporation's 1993, 1992 and 1991 consolidated results of operations.
The Corporation is required to adopt Statement of Financial Accounting Standards No. 112 ("SFAS 112"), "Employers' Accounting for Postemployment Benefits," by fiscal year 1994. The adoption of SFAS 112 will not have a significant effect on the Corporation's consolidated financial position or its results of operations if such operations continue at the present level.
Foreign Currency
Assets and liabilities of certain foreign subsidiaries, whose local currency is the functional currency, are translated at exchange rates in effect at the balance sheet date. During 1992, the Corporation's Mexican subsidiaries' economy ceased to be considered highly inflationary and the Mexican peso became the subsidiaries' functional currency. Translation gains and losses are not included in the Statements of Consolidated Income, but are accumulated in a separate component of shareholders' equity. Gains and losses from foreign currency transactions are included in the Statements of Consolidated Income.
The Corporation enters into forward exchange contracts denominated in foreign currencies providing protection from currency fluctuations affecting certain inventory and equipment purchase commitments denominated in foreign currencies. Gains and losses associated with these transactions are deferred and included in the determination of the cost of the assets acquired.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Income Taxes
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 material effect on the Corporation's financial position or results of operations by adopting SFAS 109.
The Corporation does not provide for Federal or state income taxes on the accumulated earnings and profits of its foreign subsidiaries to the extent that the current intention of the Corporation is to allow its foreign subsidiaries to reinvest these earnings or to the extent that any Federal or state taxes attributable to the repatriation of such earnings would be substantially offset by foreign tax credits.
Earnings Per Common Share
Earnings per common share are based on the weighted average number of shares outstanding in each year. The weighted average number of shares outstanding was 23,559,244 during 1993 and 1992, and 24,082,368 during 1991 after giving retroactive effect to the 1992 share split effected in the form of a 100% share dividend.
Fiscal Year
The Corporation's fiscal year is the 52 or 53 weeks ending on the Sunday closest to December 31.
Reclassifications
The consolidated financial statements for years prior to 1993 have been reclassified to conform with the 1993 financial statement presentation.
2. CASH AND CASH EQUIVALENTS:
Cash and cash equivalents consist of the following:
The Corporation's cash management policy is to invest in highly liquid, short- term financial instruments. The interest-bearing certificates of deposit have maturity dates of less than three months when purchased and, accordingly, have been classified as cash and cash equivalents.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
3. INVENTORIES:
Inventories consist of the following:
4. PROPERTY, PLANT AND EQUIPMENT - NET:
Property, plant and equipment - net consists of the following:
5. OTHER ASSETS:
Other assets consist of the following:
In 1992, the Corporation acquired Wite-Out Products, Inc. for $19,848,000, which was accounted for by the purchase method of accounting. Accordingly, the excess of cost over the fair value of net tangible assets acquired, approximately $16,900,000, was allocated to intangibles.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6. BANK BORROWINGS:
Information with respect to the Corporation's bank borrowings is as follows:
7. OTHER CURRENT LIABILITIES:
Other current liabilities consist of the following:
8. EMPLOYEE BENEFIT PLANS:
The Corporation's net periodic pension cost for 1993, 1992 and 1991 is summarized as follows:
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
8. EMPLOYEE BENEFIT PLANS (Continued):
The following table sets forth the funded status at January 2, 1994 and January 3, 1993 of the Corporation's defined benefit pension plans:
Prior service costs primarily relate to plan amendments which retroactively increase benefits to plan participants. These costs are recognized in net periodic pension cost over appropriate periods.
The following assumptions were used in developing the above benefit obligation amounts:
Contributions under the employees share purchase plans and the 401(k) Savings and Investment Plan were approximately $728,000, $406,000 and $123,000 in 1993,1992 and 1991, respectively.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
9. POSTRETIREMENT BENEFITS OTHER THAN PENSIONS:
The Corporation provides certain postretirement medical and life insurance benefits for qualifying retired and active unionized and non-unionized employees in the United States. Most retirees outside the United States are covered by government sponsored and administered programs. Postretirement benefits are non pre-funded and are paid by the Corporation as incurred.
The Corporation's net periodic postretirement benefit cost included the following components:
The following table sets forth the status of postretirement benefits:
For measurement purposes, a 14.0% annual rate of increase in the per capita cost was assumed for 1993. The rate was assumed to decrease gradually to 5.5% through the year 2009 and remain at that level thereafter. The discount rate used in determining the accumulated postretirement benefit obligation was 8.5% at January 4, 1993, and 7.0% at January 2, 1994. The unamortized net loss represents a change in actuarial assumptions (discount rate) that will be amortized over future periods.
A 1% increase in the assumed health care cost trend rate for each year would increase the accumulated postretirement benefit obligation as of January 2, 1994 by $2.6 million and the net periodic postretirement benefit cost by $368,000.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
10. SHAREHOLDERS' EQUITY:
On November 18, 1992, the Corporation's Board of Directors canceled the Corporation's 745,506 shares of common stock held as treasury shares. These shares were restored to the status of authorized but unissued shares in accordance with Section 515(e) of the New York Business Corporation Law. The excess of cost over par value ($13,687,381) was allocated to additional paid-in capital.
On November 18, 1992, the Corporation's Board of Directors declared a two- for-one share split effected in the form of a 100% share dividend of 11,779,622 authorized common shares, $1 par value, distributed on December 15, 1992, to shareholders of record on December 1, 1992. In connection therewith, approximately $1,302,000 and $10,478,000 was transferred from additional paid- in capital and retained earnings, respectively, to common shares. 1992 and 1991 per share data has been restated to reflect the share split.
The following represents a summary of the above transactions, other than the reduction in retained earnings shown in the Statements of Consolidated Retained Earnings:
The Corporation declared and paid cash dividends of $0.72 per share in 1993 and $1.06 per share in 1992. The 1992 amount included a special dividend of $0.50 per share. The Corporation increased its regular quarterly dividend from $0.18 per share to $0.20 per share effective with the dividend payable on January 31, 1994 to shareholders of record on January 17, 1994.
In 1993, the Corporation amended its Certificate of Incorporation to increase the number of authorized common shares, $1 par value, from 25,000,000 to 50,000,000 shares.
Foreign currency translation adjustments included in shareholders' equity were $(680,000), $(1,111,000) and $(33,000) for the fiscal years 1993, 1992 and 1991, respectively.
11. OTHER INCOME - NET:
Other income - net consists of the following:
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
12. SUPPLEMENTARY INCOME STATEMENT INFORMATION:
The following items were charged to expenses in the Statements of Consolidated Income:
13. INCOME TAXES:
The provision (credit) for income taxes consists of the following:
The total income tax provision shown in the Statements of Consolidated Income differed from the total income tax expense as computed by applying the statutory United States Federal ("Federal") income tax rate to income before income taxes, extraordinary credit and cumulative effect of change in accounting principle as follows:
Federal income taxes have not been provided for on cumulative unremitted earnings of foreign subsidiaries of approximately $16,076,000 at January 2, 1994, $14,051,000 at January 3, 1993 and $11,955,000 at December 29, 1991.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. INCOME TAXES (Continued):
The provision for deferred Federal income taxes consists of the following:
During 1991, the Corporation utilized the tax benefit of a foreign net tax operating loss carryforward of $1,050,000 which was shown as an extraordinary credit in the Statement of Consolidated Income.
The provision for deferred foreign income taxes consists primarily of temporary differences related to inventory.
Deferred income taxes at January 2, 1994 and January 3, 1993 consist of the following:
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. INCOME TAXES (Continued):
At January 2, 1994, current deferred tax assets of $16.8 million and current deferred tax liabilities of $2.1 million were included in Deferred Income Taxes and Accrued Expenses - Other, respectively. In addition, non- current deferred tax assets of $1.4 million were included in Other Assets.
14. CONTINGENCIES AND COMMITMENTS:
The Corporation has significant contingent liabilities with respect to pending litigation, claims and disputes, principally relating to its lighters, which arise in the ordinary course of its business.
In July 1993, the U.S. Environmental Protection Agency ("EPA") issued its final volumetric ranking of Potentially Responsible Parties ("PRPs") for the Solvents Recovery Service of New England ("SRSNE") Superfund Site in Southington, Connecticut. The Corporation has been notified that it is a PRP at the Site and has been ranked, by the EPA, number 192 of a total of 1,659 PRPs named. This ranking represents less than 1% of the total volume of waste disposed at the SRSNE Site with the first 191 PRPs representing 90% of the total volume.
The Corporation cannot predict with certainty the total costs of cleanup, the Corporation's share of the total costs or the extent to which contributions will be available from other parties, the amount of time necessary to complete the cleanup, or the availability of insurance coverage. Based on currently available information, the Corporation believes that its share of the ultimate cleanup costs at this Site will not have a material adverse impact on the Corporation's financial position or on its results of operations if such operations continue at the present level.
In November 1992, a state court jury in Creek County, Oklahoma, in a 9 to 3 verdict, awarded $11,000,000 in actual damages and $11,000,000 in punitive damages against the Corporation in connection with a product liability action. Management is vigorously appealing the verdict on a number of grounds. It is the opinion of management, based on advice of legal counsel, that it is probable that the verdict will be overturned on appeal.
While the ultimate liability with respect to the above matters, including any additional liability not provided for, is not presently determinable, it is the opinion of management, after consultation with counsel to the Corporation, that any liabilities resulting therefrom will not have a material adverse effect on the Corporation's consolidated financial position or on its results of operations if such operations continue at the present level.
At January 2, 1994, the Corporation had outstanding approximately $23,165,000 of forward exchange contracts, under which the Corporation is required to purchase French francs at an average contract rate of approximately 6.04 French francs to the dollar during 1994. See Note 1 - Foreign Currency.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED STATEMENTS (Continued)
15. RELATED PARTY TRANSACTIONS AND BALANCES:
Material transactions and balances with the Corporation's majority shareholder, Societe BIC, S.A. and with other related parties are as follows:
16. FINANCIAL INSTRUMENTS:
The following disclosure of the estimated fair value of financial instruments is made in accordance with the requirements of Statement of Financial Accounting Standards No. 107, "Disclosure about Fair Value of Financial Instruments." The estimated fair value amounts have been determined by the Corporation, using available market information and appropriate valuation methodologies. However, considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value. Accordingly, the estimates presented herein are not necessarily indicative of the amounts that the Corporation could realize in a current market exchange.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued):
16. FINANCIAL INSTRUMENTS (Continued):
Cash and Cash Equivalents
The Corporation compared the certificates of deposit interest rates at the contract dates to the prevailing interest rates at January 2, 1994 and January 3, 1993 and determined that there were no significant differences. Therefore, the carrying amounts of these items are a reasonable estimate of their fair value.
Bank Borrowings
Due to the relatively short period of time between the origination of the bank borrowings and their repayments, the carrying amounts approximate their estimated fair value.
Forward Foreign Currency Contracts
The fair value of foreign currency contracts is the amount as of January 2, 1994 and January 3, 1993 at which contracts with the same date of maturity as existing contracts could be purchased, based on estimates obtained from dealers.
Unused Lines of Credit and Stand-By Letters of Credit
There is no annual cost of maintaining the unused lines of credit. The annual cost of maintaining stand-by letters of credit is estimated based on fees of 1/4% to 3/4% of the amount of the letter of credit, which would be currently charged for similar arrangements.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
17. FOREIGN OPERATIONS:
A summary of information about the Corporation's operations in different geographic areas is as follows (see Note 15 for sales to affiliated companies):
/1/ Transfers between geographic areas are generally accounted for at a range of cost to cost plus 10%.
BIC CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued):
18. SELECTED QUARTERLY FINANCIAL DATA (Unaudited):
/1/ The quarter ended April 4, 1993 includes a decrease in net earnings for the cumulative effect of a change in accounting for postretirement benefits other than pensions of $9,816 or $0.42 per share.
/2/ 1992 quarterly per share amounts have been retroactively restated to reflect the share split effected in the form of a 100% share dividend.
SCHEDULE II
BIC CORPORATION AND SUBSIDIARIES
SCHEDULE OF AMOUNTS RECEIVABLE FROM EMPLOYEES FOR THE FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 3, 1993 AND DECEMBER 29, 1991
SCHEDULE V
BIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED PROPERTY, PLANT AND EQUIPMENT FOR THE FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 3, 1993 AND DECEMBER 29, 1991
/1/ Transferred to appropriate classification upon completion of construction.
SCHEDULE VI
BIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED ACCUMULATED DEPRECIATION OF PROPERTY, PLANT AND EQUIPMENT FOR THE FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 3, 1993 AND DECEMBER 29, 1991
SCHEDULE VIII
BIC CORPORATION AND SUBSIDIARIES
CONSOLIDATED VALUATION ACCOUNTS FOR THE FISCAL YEARS ENDED JANUARY 2, 1994, JANUARY 3, 1993 AND DECEMBER 29, 1991
/1/ Principally accounts written-off, less recoveries.
FORM 10K
For the fiscal year ended Commission File No. 1-6832 January 2, 1994
BIC CORPORATION
EXHIBIT INDEX -------------
Exhibit No. - -----------
3. a. Restated Certificate of Incorporation, as filed May 5, 1993.
b. By-Laws, as amended./1/
4. Instruments relating to long-term debt are not filed, but the Registrant agrees to file a copy of such instruments, upon request of the Securities and Exchange Commission.
9. a. Voting Trust Agreement, dated February 5, 1991, by and among Societe BIC, S.A., Marcel L. Bich, Neil A. Pollio, Bruno Bich, Francois Bich and BIC Corporation, as amended February 3, 1992, for the purpose of naming Alexander Alexiades as successor voting trustee./2/
b. Amendment to Voting Trust Agreement, dated July 5, 1993.
10. a. Selected Executive Retirement Plan, as amended.
b. Agreement, dated July 1, 1971, including amendments, between Societe BIC, S.A. and BIC Pen Corporation./2/
21. Subsidiaries of the Registrant.
23. Consent of Independent Auditors.
- --------------------------
/1/ Incorporated by reference to the Corporation's Annual Report on Form 10-K for its fiscal year ended January 3, 1993.
/2/ Incorporated by reference to the Corporation's Annual Report on Form 10-K for its fiscal year ended December 30, 1990.