Three Months Ended    

Nine Months Ended    

September 30,      

September 30,     

________________________________________________________________________________

2004 

2003 

2004 

2003 

________________________________________________________________________________

(In thousands, except per share data)

Net (loss) income:

    Net (loss) income as reported

$        (986)

$   1,670 

$      895 

$  6,685 

       Deduct:  Total stock-based

       employee compensation expense

       determined under the fair value

       based method, net

(28)

(28)

(77)

(79)

________________________________________________________________________________

    Pro forma net (loss) income

$     (1,014)

$   1,642 

$      818 

$  6,606 

================================================================================

Net (loss) income per share:

     As reported

$       (0.21)

$     0.36 

$      0.19 

$    1.45 

     Pro forma

$       (0.22)

$     0.36 

$      0.18 

$    1.44 

________________________________________________________________________________

   In May of 2004, the FASB issued Staff Position ("FSP") 106-2, "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." The FSP provides guidance on the accounting for the effects of the Medicare Prescription Drug, Improvement and Modernization Act of 2003 for employers that provide prescription drug benefits. FSP 106-2 supersedes FSP 106-1 "Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003." Adoption of this position has not had a material impact on the Company's results of operations or equity.

 2.

Related Parties:

   Under the tax allocation agreement between the Company and its parent, Loews, the Company paid, net of payments received, $1,775,000 and $3,614,000 for the nine months ended September 30, 2004 and 2003.

   Loews provides administrative and managerial services for which the Company was charged $750,000 and $2,250,000 for each of the three and nine month periods ended September 30, 2004 and 2003. This expense is included in selling, general and administrative expenses. The cost allocated to the Company is estimated to be the incremental cost incurred by Loews in providing these services to the Company.

Page 7

   The Company and Loews have a credit agreement (the "Credit Agreement") which provides for unsecured loans to be made by Loews from time to time, in principal amounts aggregating up to $50,000,000. The interest rate for amounts outstanding under the Credit Agreement is a fixed rate equal to the Six-Month London Interbank Offered Rate ("LIBOR"), in effect on the date the Company requests the loan, plus 250 basis points (2.5%). The Credit Agreement has been periodically extended and currently expires on December 31, 2005. At September 30, 2004 and December 31, 2003, no balance was outstanding.

   See Note 2 of the Notes to Consolidated Financial Statements in the Company's Annual Report on Form 10-K for the year ended December 31, 2003 for additional discussion of related parties.

3.

Benefit Plans:

   Pension Plans -- The Company maintains non-contributory pension plans for all of its employees in the United States. Separate retirement plans, which are not material, are maintained by the Company's Canadian subsidiary. 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. Union participants become eligible upon retirement at age 55 and 10 years of service or upon completion of 20 years of service. Another plan covers salaried employees who are eligible upon retirement at age 55 and 20 years of service or upon retirement at age 60 and 10 years of service. The benefits provided by the Company include health, and for certain retirees, life insurance type benefits.

 4.

Geographic Information:

   The Company operates in a single industry segment, the distribution and sale of watches and clocks under the brand names of Bulova, Caravelle, Wittnauer and Accutron. Substantially all of the Company's sales are in the United States, Canada, Mexico and Europe. In January of 2003, the Company's Swiss subsidiary commenced operations and currently distributes products using third party independent agents and/or distributors covering a number of European countries, Russia, Australia and New Zealand. The Company has also signed distribution agreements for Brazil, South and Central America and the Philippines and license agreements for Hong Kong, China, Taiwan and Macao. Sales from distribution agreements covering territories in South and Central America are included within the United States results and were not material for the periods covered hereby. The Company evaluates performance based on operating earnings of the respective geographic area. The geographic di stribution of the Company's operating results are summarized in the following tables:

 5.

Shareholders' equity:

   For the three and nine months ended September 30, 2004 and 2003, comprehensive (loss) income totaled ($627,000), $1,536,000, $231,000 and $8,938,000, respectively. Comprehensive (loss) income includes net (loss) income, foreign currency translation gains or losses and pension liability adjustments.

Page 10

 6.

Environmental Matters:

   In April 2004, the Company became aware of additional contamination at its former manufacturing facility located in Jackson Heights, New York. Based on the information available at that time, in the second quarter of 2004, the Company recorded an accrual of $727,000 for its estimated environmental ability. Since that time, the Company has been working with two environmental remediation consulting firms. Based on the studies conducted and estimates provided by such firms, in the third quarter of 2004, the Company recorded an additional $4,122,000 accrual to increase its environmental liability which, together with the amount previously recorded, represents the Company's best cost point estimate of the cost of remediating the contamination at this location. The Company cannot presently estimate any additional costs it may incur as a result of further testing, sampling, reporting or remediation, if any, that may be required by the New York State Department of Health, however, such additional costs could have a material adverse impact on the Company's results of operations, cash flow or equity in future periods. The Company does not expect to receive insurance proceeds related to environmental matters. The Company expects to fund these costs from its working capital.

   Prior to 2003, the Company had received notices of potential environmental contaminants at various facilities formerly owned by the Company or used as offsite disposal locations. The Company continues to cooperate with the current owners of those properties and the appropriate regulatory agencies. During 2003, the Company also settled a claim related to contaminants at an offsite disposal location formerly used by the Company. At September 30, 2004, the Company maintained a reserve of $103,000 for these locations, which represents the Company's estimate of its remaining cost of remediation for these properties.

 7.

Warranty Reserve:

   The Company maintains a reserve for costs that it estimates will be needed to cover future product warranty obligations for products sold. Estimates are based upon the Company's historical experience as well as current production techniques.

   For the year ended December 31, 2003, the beginning warranty reserve was $445,000, reduced by charges incurred of $12,000, resulting in an ending balance of $433,000. For the nine months ended September 30, 2004, the beginning and ending balance of the warranty reserve is $433,000. The Company charges warranty expenses as incurred and there have been no significant claims made for the nine months ended September 30, 2004.

 8.

Commitments and Contingencies:

   The Company leases certain of its warehouse and office facilities. The estimated remaining future minimum lease payments under these operating leases are as follows: $123,000, $491,000 for each of the years ended 2004, 2005, 2006 and 2007, and $2,048,000 in 2008 and thereafter.

   On October 27, 2004, the Company sold its clock warehouse in Brooklyn, New York for $12,750,000. The transaction provides for a lease of the property back to the Company for a period of up to one year at a monthly rent of $50,000, with the Company having the right to terminate the lease on sixty days notice. The pretax gain on the sale is approximately $7,600,000 and will be recorded in the Company's financials for the year ended December 31, 2004.

9.

Income Taxes:

   The effective income tax rate for the nine months ended September 30, 2004 increased to 39.6%, as compared to 30.0% for the corresponding period of the prior year. The lower effective tax rate in 2003 is primarily attributable to franchise, state and city tax settlements totaling $1,202,000 received in the nine months ended September 30, 2003.

Page 11

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.

CRITICAL ACCOUNTING ESTIMATES

   The preparation of the Consolidated Financial Statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the amounts reported in the Consolidated Financial Statements and the related notes. Actual results could differ from those estimates.

  The Consolidated Financial Statements and accompanying notes have been prepared in accordance with GAAP, applied on a consistent basis. The Company continually evaluates the accounting policies and estimates used to prepare the Consolidated Financial Statements. In general, management's estimates are based on historical experience, evaluation of current trends, information from third party professionals and various other assumptions that are believed to be reasonable under the known facts and circumstances.

  The accounting policies discussed below are considered by management to be critical to an understanding of the Company's Consolidated Condensed Financial Statements as their application places the most significant demands on management's judgment. Due to the inherent uncertainties involved with this type of judgment, actual results could differ significantly from estimates and have a material adverse impact on the Company's results of operations or equity.

Allowance for Doubtful Accounts

   Sales are recognized upon shipment of products to customers since title passes upon shipment or, in the case of consignment sales, upon notification from our customers that products have been sold. Allowances for estimated uncollectible accounts, discounts, returns and allowances are provided when sales are recorded and adjusted for market and consumer conditions as necessary based upon historical experience and current trends.

Inventory Reserve

   The Company has established a reserve against inventory in order to report it at the lower of cost or market value. The cost of inventory is determined on a first-in, first out basis. In determining the market value of inventory, management considers sales history of the individual product, current consumer purchasing trends, secondary distribution channels, as well as overall sales activity. The inventory reserve also contemplates inventory at customer locations which were shipped under consignment arrangements.

Warranty Reserve

   The Company maintains a reserve for costs that it estimates will be needed to cover future product warranty obligations for products sold during the year. This estimate is based upon the Company's historical experience as well as current production techniques.

Reserve for Environmental Matters

Page 12

Pension and Other Postretirement Benefits

   The Company's pension and other postretirement benefit costs are developed from actuarial valuations. Inherent in these valuations are key assumptions provided by the Company to our actuaries, including the discount rate and expected long-term rate of return on plan assets. Management is required to consider current market conditions, including changes in interest rates, in making these assumptions. The expected long-term rate of return on pension plan assets is selected by taking into account historical trends, the expected duration of the projected benefit obligation for the plans, the asset mix of the plans, and known economic and market conditions at the time of valuation. Material changes in the Company's pension and postretirement benefit costs may occur in the future due to changes in these assumptions.

RESULTS OF OPERATIONS

   Net sales increased $1,539,000 or 4.1% for the three months ended September 30, 2004 and decreased $1,367,000, or 1.2%, for nine months ended September 30, 2004, as compared to the comparable periods of the prior year.

   The increase in sales for the quarter ended September 30, 2004 is primarily attributable to increases in watch unit selling prices of 11.8%, partially offset by decreases in watch unit sales volume of 4.3%, as compared to the corresponding period of the prior year.

   The decrease in sales for the nine months ended September 30, 2004 is primarily attributable to declines in watch unit sales volume of 8.0%, partially offset by increases in watch unit selling prices of 7.7%, as compared to the corresponding period of the prior year.

   In the United States, the relative weakness in the mid-to-low price retail market has had a negative impact on the Bulova and Caravelle product lines. The decline in Licensed Product sales, which includes the Harley Davidson product line, is attributable not so much to market performance as to the sharp spike in sales of exclusive Harley Davidson product during the 2003 commemoration of its company's 100^th anniversary. Accutron, however, continues to perform well, due in part to strong sales of its sports-oriented product lines. Accutron has also benefited from the overall strength of the high-price, Swiss-made retail product. Domestically, unit sales volume and net sales revenue for the three and nine months ended September 30, 2004 have also declined, as compared to the corresponding periods of the prior year, due to additional consignment agreements executed during the second quarter of 2004. In the prior year, sales to these customers were reco rded upon shipment of merchandise. In addition, International operations have been faced with difficult retail environments as well as economic weaknesses.

   Gross profit as a percentage of net sales for the three and nine months ended September 30, 2004 was 51.9% and 51.2%, respectively, as compared to 51.1% and 52.7% for the corresponding periods of the prior year. The Company's overall gross margins are primarily affected by three major factors: sales mix, product pricing strategy and efficient procurement practices. For the three months ended September 30, 2004, the improvement in gross profit is primarily due to sales mix within the product lines. For the nine months ended September 30, 2004, the decline in gross profit is a function of the sale of slow-moving inventory at discounted prices for Bulova and Wittnauer product lines, and higher costs in the material sales and service departments, as well as, the impact of sales mix within the brands.

   The Company's operating expenses as a percentage of net sales for the three and nine months ended September 30, 2004 were 45.9% and 45.8%, respectively, as compared to 45.8% and 44.8%, respectively, for the corresponding periods of the prior year. The Company's management continues to invest in marketing and selling activities necessary to support the Company's current market position.

   Net (loss) income was negatively impacted by the accruals for environmental liabilities of $4,122,000 and $4,849,000 for the three and nine months ended September 30, 2004. See Contingencies discussion below for additional information.

Contingencies

   In April 2004, the Company became aware of additional contamination at its former manufacturing facility located in Jackson Heights, New York. Based on the information available at that time, in the second quarter of 2004, the Company recorded an accrual of $727,000 for its estimated environmental ability. Since that time, the Company has been working with two environmental remediation consulting firms. Based on the studies conducted and estimates provided by such firms, in the third quarter of 2004, the Company recorded an additional $4,122,000 accrual to increase its environmental liability which, together with the amount previously recorded, represents the Company's best cost point estimate of the

Page 13

cost of remediating the contamination at this location. The Company cannot presently estimate any additional costs it may incur as a result of further testing, sampling, reporting or remediation, if any, that may be required by the New York State Department of Health, however, such additional costs could have a material adverse impact on the Company's results of operations, cash flow or equity in future periods. The Company does not expect to receive insurance proceeds related to environmental matters. The Company expects to fund these costs from its working capital.

   Prior to 2003, the Company had received notices of potential environmental contaminants at various facilities formerly owned by the Company or used as offsite disposal locations. The Company continues to cooperate with the current owners of those properties and the appropriate regulatory agencies. During 2003, the Company also settled a claim related to contaminants at an offsite disposal location formerly used by the Company. At September 30, 2004, the Company maintained a reserve of $103,000 for these locations, which represents the Company's estimate of its remaining cost of remediation for these properties.

Income Taxes

   The effective income tax rate for the nine months ended September 30, 2004 increased to 39.6%, as compared to 30.0% for the corresponding period of the prior year. The lower effective tax rate in 2003 is primarily attributable to franchise, state and city tax settlements totaling $1,202,000 received in the nine months ended September 30, 2003.

Foreign Currency

   The Company imports most of its watch and clock products. The Company's purchases are primarily denominated in U.S. dollars for product acquired from vendors located in Asia, principally Hong Kong, as well as Europe. The Hong Kong dollar is pegged to the U.S. dollar and has not been subject to significant fluctuations. In the event that the peg between the two currencies is removed and the Company's purchases are denominated in Hong Kong dollars, currency fluctuations could have a material impact on the cost of those imported products which ultimately could have a negative impact on the Company's gross profit, operating income and cash flow. Foreign currency fluctuations have not had a material impact on results of operations for the three and nine months ended September 30, 2004 and 2003.

LIQUIDITY AND CAPITAL RESOURCES

   Net cash provided by operating activities was $5,987,000 as compared to utilization of $9,920,000 for the corresponding period in the prior year. The increase in the net cash position in 2004, as compared to the corresponding period of the prior year, is attributable to the increase in collections of accounts receivables, partially offset by a reduction in accrued expenses and accounts payable and a higher level of prepaid expenses.

   The Company and Loews have a credit agreement (the "Credit Agreement") which provides for unsecured loans to be made by Loews from time to time, in principal amounts aggregating up to $50,000,000. The interest rate for amounts outstanding under the Credit Agreement is a fixed rate equal to the Six-Month London Interbank Offered Rate ("LIBOR") in effect on the date the Company requests the loan, plus 250 basis points (2.5%). The Credit Agreement has been periodically extended and currently expires on December 31, 2005. In the future, the Company may require additional working capital advances under this agreement for its international expansion efforts. At September 30, 2004 and December 31, 2003 no balance was outstanding.

   On October 27, 2004, the Company sold its clock warehouse in Brooklyn, New York for $12,750,000. The transaction provides for a lease of the property back to the Company for a period of up to one year at a monthly rent of $50,000, with the Company having the right to terminate the lease on sixty days notice. The pretax gain on the sale is approximately $7,600,000 and will be recorded in the Company's financials for the year ended December 31, 2004.

Page 14

FORWARD-LOOKING STATEMENTS

   When included in this Report, the words "believes," "expects," "intends," "anticipates," "estimates" and analogous expressions are intended to identify forward-looking statements. Such statements inherently are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those projected. Such risks and uncertainties include, among others, general economic and business conditions, changes in financial markets, significant changes in consumer spending patterns, competition in the Company's product areas, the closing of the sale of the Company's Brooklyn, New York warehouse, the extent of any future liabilities for environmental clean up costs, changes in foreign currency valuations in relation to the U.S. dollar, changes in foreign, political, social and economic conditions, and various other matters, many of which are beyond the Company's control. These forward-looking statements speak only as of the date of this Re port. The Company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statement contained herein to reflect any change in the Company's expectations with regard thereto or any change in events, conditions or circumstances on which any statement is based.

Item 4. Disclosure Controls and Procedures.

   The Company maintains a system of disclosure controls and procedures which are designed to ensure that information required to be disclosed by the Company in reports that it files or submits under the federal securities laws, including this report, is recorded, processed, summarized and reported on a timely basis. These disclosure controls and procedures include controls and procedures designed to ensure that information required to be disclosed under the federal securities laws is accumulated and communicated to the Company's management on a timely basis to allow decisions regarding required disclosure.

   The Company's principal executive officer and principal financial officer evaluated the Company's disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) as of the end of the period covered by this report and concluded that the Company's controls and procedures were effective.

Page 15

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K.

    (a)  Exhibits--

Description of Exhibits

Number

(31) Rule 13a -- 14(a)/15d -- 14(a) Certifications

   Certification dated November 1, 2004, by the Chief Executive Officer of the Company pursuant to Rule 13a-14(a) and Rule 15d-14(a)

31.1 

   Certification dated November 1, 2004, by the Chief Financial Officer of the Company pursuant to Rule 13a-14(a) and Rule 15d-14(a)

31.2 

(32) Section 1350 Certifications

   Certification dated November 1, 2004, by the Chief Executive Officer of the Company pursuant to 18 U.S.C. Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of 2002)

32.1 

   Certification dated November 1, 2004, by the Chief Financial Officer of the Company pursuant to 18 U.S.C. Section 1350 (as adopted by Section 906 of the Sarbanes-Oxley Act of 2002)

32.2 

    (b)  Current reports on Form 8-K --

            None

SIGNATURES

   Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

BULOVA CORPORATION

(Registrant)

Dated:  November 1, 2004

By:

          /s/ John T. O'Reilly             

           JOHN T. O'REILLY

            Executive V. P. and

         Chief Financial Officer

     (Duly authorized officer and

       principal financial officer)

Page 16