-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, WOdYdkEVHwHG4U1+ZMpu5zB7SMccLylYzWKjeGBYHMAZ+xsZRSXd81lUnKa6alcB AXrrVV06eEk6CXMNyzK7sQ== 0000731947-95-000011.txt : 19950823 0000731947-95-000011.hdr.sgml : 19950823 ACCESSION NUMBER: 0000731947-95-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORSCHNER GROUP INC CENTRAL INDEX KEY: 0000731947 STANDARD INDUSTRIAL CLASSIFICATION: 5072 IRS NUMBER: 132797726 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-12823 FILM NUMBER: 95561532 BUSINESS ADDRESS: STREET 1: ONE RESEARCH DRIVE CITY: SHELTON STATE: CT ZIP: 06484-6226 BUSINESS PHONE: 2039296391 MAIL ADDRESS: STREET 1: ONE RESEARCH DRIVE CITY: SHELTON STATE: CT ZIP: 06484-6226 10-Q 1 THIS IS A LIVE FILING SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 10-Q [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 1995 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-1282-3 The Forschner Group, Inc. (Exact name of registrant as specified in its charter) Delaware 13-2797726 (State of incorporation) (I.R.S. Employer Identification No.) One Research Drive, Shelton, Connecticut 06484 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (203) 929-6391 NOT APPLICABLE (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No The number of shares of Issuer's Common Stock, $.10 par value, outstanding on July 31, 1995, was 8,185,360 shares. THE FORSCHNER GROUP, INC. AND SUBSIDIARIES INDEX PART I: FINANCIAL INFORMATION Page No. Item 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of June 30, 1995 and December 31, 1994. 3 - 4 Consolidated Statements of Operations for the three and six months ended June 30, 1995 and 1994. 5 Consolidated Statements of Stockholders' Equity for the six months ended June 30, 1995 and 1994. 6 Consolidated Statements of Cash Flows for the six months ended June 30, 1995 and 1994. 7 Notes to Consolidated Financial Statements 8 - 9 Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 - 12 Part II: OTHER INFORMATION Item 6. EXHIBITS AND REPORTS ON FORM 8-K 13 Signatures 14 The Exhibit Index appears on page 13. 2 THE FORSCHNER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Assets At June 30, At December 31, 1995 1994 (unaudited) ----------- ------------ Current assets: Cash and short-term investments $7,286,580 $18,019,797 Accounts receivable, less allowance for doubtful accounts of $600,000 and $755,000, 19,686,609 29,606,328 respectively Inventories 42,350,599 27,862,105 Deferred income tax benefits 2,412,812 2,467,440 Prepaid and other 2,510,822 685,273 ------------ ----------- Total current assets 74,247,422 78,640,943 ------------ ----------- Deferred income tax benefits 138,892 56,634 Property, plant and equipment, at cost: Leasehold improvements 772,799 658,842 Equipment 5,713,295 5,189,298 Furniture and fixtures 1,339,063 1,256,462 ----------- ---------- 7,825,157 7,104,602 Less-accumulated depreciation (3,632,546) (2,876,944) ----------- ---------- 4,192,611 4,227,658 ----------- ---------- Investments in equity securities, at cost 7,518,990 7,002,990 Investments in unconsolidated affiliates 7,392,189 4,463,080 Foreign distribution rights, net of accumulated amortization of $1,503,198 and $1,165,129, respectively 5,239,154 5,579,079 Other assets, net of accumulated amortization of $2,663,236 and $2,159,756, respectively 6,573,209 5,737,337 ----------- ----------- Total Assets $105,302,467 $105,707,721 ============ ============ 3 THE FORSCHNER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Liabilities and Stockholders' Equity At June 30 At December 31, 1995 1994 (unaudited) ------------ ------------ Current liabilities: Accounts payable $14,321,166 $14,057,507 Accrued liabilities 7,679,501 8,651,738 Income taxes payable - 1,223,193 ------------- ------------- Total current liabilities 22,000,667 23,932,438 ------------- ------------- Commitments and contingencies Stockholder' equity Preferred stock, par value $.10 per share: shares authorized - 2,000,000; no shares issued - - Common stock, par value $.10 per share: shares authorized - 12,000,000; shares issued - 8,799,468 and 8,796,968, respectively 879,947 879,697 Additional paid-in capital 45,889,676 45,866,814 Foreign currency translation adjustment (13,645) (28,085) Retained earnings 41,659,289 40,170,324 ------------- ------------- 88,415,267 86,888,750 Less-cost of common stock in treasury; 614,108 shares (5,113,467) (5,113,467) ------------- ------------- Total stockholders' equity 83,301,800 81,775,283 ------------- ------------- Total Liabilities and Stockholders' Equity $105,302,467 $105,707,721 ============= ============= 4 THE FORSCHNER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited) Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 ------------ ----------- ---------- ----------- Net sales $25,925,259 $39,935,320 $55,294,980 $66,984,358 Cost of sales 17,209,810 26,559,947 35,878,937 42,835,995 ---------- ---------- ---------- ---------- Gross profit 8,715,449 13,375,373 19,416,043 24,148,363 Selling, general and administrative expenses 8,011,483 11,010,140 17,132,520 19,203,557 ---------- ---------- ---------- ---------- Operating income 703,966 2,365,233 2,283,523 4,944,806 Interest (expense) (18,534) (5,182) (18,534) (12,335) Interest income 165,438 4,973 416,304 19,225 Other income (expense), net (312,097) 18,645 52,312 90,045 ---------- ---------- --------- --------- Total interest and other income, net (165,193) 18,436 450,082 96,935 -------- --------- --------- --------- Income before income taxes 538,773 2,383,669 2,733,605 5,041,741 Income tax provision 320,590 1,003,525 1,244,640 2,122,573 -------- --------- --------- --------- Net income $218,183 $1,380,144 $1,488,965 $2,919,168 ======== ========== ========== ========== Net income per share $0.03 $0.17 $0.18 $0.38 ======== ========== ========== ========== Weighted average number of shares outstanding 8,202,333 8,061,638 8,219,643 7,596,585 ========= ========= ========= ========= 5 THE FORSCHNER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
Common Stock Foreign Par Value $.10 Additional Currency -------------- Paid-In Translation Retained Treasury Shares Amount Capital Adjustment Earnings Stock ---------------------- ----------- ---------- ---------- ----------- BALANCE December 31, 1993 7,648,968 $764,897 $34,520,872 $(6,829) $30,810,594 $(5,472,110) Net income for six months ended June 30, 1994 (unaudited) - - - - 2,919,168 - Stock options and warrants exercised 1,086,000 108,600 10,279,177 - - - Issuance of common stock from treasury - - 391,360 - - 358,643 Foreign currency translation adjustment - - - (6,574) - - ---------- --------- ----------- --------- --------- ----------- BALANCE, June 30, 1994 (unaudited) 8,734,968 $873,497 45,191,409 $(13,403) 33,729,762 $(5,113,467) ============= ============ =========== ========== ========== ============== BALANCE December 31, 1994 8,796,968 $879,697 $45,866,814 $(28,085) $40,170,324 $(5,113,467) Net income for six months ended June 30, 1995 (unaudited) - - - - 1,488,965 - Stock options exercised 2,500 250 22,862 - - - Foreign currency translation adjustment - - - 14,440 - - ------------ --------- ----------- --------- ---------- ------------ BALANCE, June 30, 1995 (unaudited) 8,799,468 $879,947 $45,889,676 $(13,645) $41,659,289 $(5,113,467) ============ ========= =========== ========== ========== =============
6 THE FORSCHNER GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six months ended June 30, 1995 1994 ------------ ----------- Cash flows from operating activities: Net income $ 1,488,965 $ 2,919,168 Adjustments to reconcile net income to cash (used for) operating activities: Depreciation and amortization 2,081,723 1,464,615 Equity in earnings of unconsolidated subsidiaries, net of goodwill amortization (19,562) - Deferred income taxes 134,858 (125,539) Treasury shares contributed to charitable foundation - 750,003 Gain on sale of partial investment in stock - (36,720) ----------- ------------ 3,685,984 4,971,527 Changes in other current assets and liabilities: Accounts receivable 9,947,125 (2,400,409) Inventories (14,488,494) (3,989,564) Prepaid and other (1,825,549) 2,400,233 Accounts payable 263,659 (3,182,432) Accrued liabilities (972,237) 1,182,459 Income taxes payable (1,223,193) (400,000) --------------- -------------- Net cash (used for) operating activities (4,612,705) (1,418,186) --------------- -------------- Cash flows from investing activities: Capital expenditures (743,960) (787,193) Proceeds from sales of property, plant & equipment 10,206 - Additions to other assets (1,432,689) (159,956) Investment in preferred stock - (6,250,000) Investments in common stock (3,821,287) - Proceeds from sale of investments in stock - 374,400 Proceeds from note receivable - 21,141 ------------ -------------- Net cash (used for) investing activities (5,987,730) (6,801,608) ------------ -------------- Cash flows from financing activities: Proceeds from exercise of stock options 23,112 10,387,777 -------------- --------------- Net cash provided from financing activities 23,112 10,387,777 -------------- -------------- Effect of exchange rate changes on cash (155,894) 63,455 ------------- --------------- Net increase (decrease) in cash and short-term investments (10,733,217) 2,231,438 Cash and short-term investments, beginning of period 18,019,797 7,835,848 -------------- -------------- Cash and short-term investments, end of period $ 7,286,580 $10,067,286 ============= ============= Cash paid during the period: Interest $ 18,534 $ 12,335 ============= ============= Income taxes $ 2,546,571 $ 1,888,098 ============= =============
7 THE FORSCHNER GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1995 and 1994 (unaudited) CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements included in this Form 10-Q have been prepared by The Forschner Group, Inc. ("Forschner", the "Company") without audit. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Company's report on Form 10-K for the year ended December 31, 1994. In the opinion of management of the Company, the interim financial statements included herein reflect all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the financial position, results of operations and cash flows for the interim periods presented. Due to the seasonal nature of the Company's business, the results of operations for the interim periods presented are not necessarily indicative of the operating results for the full year. INVENTORIES Domestic inventories are stated at the lower of cost (determined by the last-in, first-out (LIFO) method) or market. Had the first-in, first-out (FIFO) method been used to value domestic inventories as of June 30, 1995 and 1994, the balance at which inventories are stated would have been $2,683,000 and $2,487,000 higher, respectively. Foreign inventories are valued at the lower or cost or market determined by the FIFO method. Inventories principally consist of finished goods and packaging material. INVESTMENTS Investments is comprised of the following as of June 30, 1995 and December 31, 1994: June 30, December 31, 1995 1994 ------------------------------ Investment in preferred stock, at cost (A) $7,002,990 $7,002,990 Investment in common stock, at cost (B) 516,000 - ---------- ---------- Total investments in equity securities, at cost $7,518,990 $7,002,990 ========== ========== Investments in unconsolidated affiliates (C) $7,392,189 $4,463,080 (A) Represents Forschner's investment in Forschner Enterprises, Inc., a privately held corporation. Forschner's preferred stock has cumulative dividends and voting rights. Forschner is accounting for this investment on the cost basis. (B) Represents Forschner's investment in a development stage company involved in the design, manufacture and marketing of fine jewelry. As of June 30, 1995, Forschner owned 19.0% of the outstanding common stock of this company and accounts for the investment on the cost basis. 8 (C) Includes Forschner's investments in Simmons Outdoor Corporation ("Simmons") and SweetWater, Inc ("SweetWater"). In the first quarter of 1995, Forschner increased its percentage ownership of Simmons to 20% and SweetWater to 37%. In accordance with generally accepted accounting principles, as of March 31, 1995, these investments were accounted for under the equity method, with Forschner recording its proportional share of net income or losses of these companies and amortization of goodwill related to the acquisition of the two investments. The total net impact for the six months ended June 30, 1995 is recorded in other income (expense), net in the accompanying statement of operations, including a $635,000 one-time favorable impact of Forschner's share of net income of both of these companies, less amortization of goodwill, computed from the date when Forschner first acquired stock in each of the companies. The accompanying balance sheet as of December 31, 1994 reflects adjustments necessary to show Forschner's investments in Simmons and SweetWater on a cost basis instead of at market as previously shown in the Company's Form 10-K. SIGNIFICANT CUSTOMER Special promotional programs with a single customer of the Corporate Markets Division accounted for 0% and 42% of total sales for the quarter ended June 30, 1995 and 1994, respectively, and 14% and 34% of total sales for the six months ended June 30, 1995 and 1994, respectively. The Company is not participating in a program with this customer currently, nor are any programs currently scheduled for the remainder of 1995 with this customer. INCOME TAXES Income taxes are provided at the projected annual effective tax rate. The income tax provisions for the interim 1995 and 1994 periods exceed the federal statutory rate of 34% due primarily to state income taxes (net of federal benefit), foreign tax rate differences and, in 1995, to the non-deductibility of equity in losses of unconsolidated affiliates. EARNINGS PER COMMON SHARE The weighted average number of shares of common stock outstanding include the dilutive effect of stock options outstanding. The fully diluted earnings per share amount for both periods is the same as primary earnings per share. 9 THE FORSCHNER GROUP, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (unaudited) RESULTS OF OPERATIONS Comparison of the Three Months Ended June 30, 1995 and 1994 Sales for the three months ended June 30, 1995 were $25.9 million compared with $39.9 million for the same period a year ago, representing a decrease of $14.0 million or 35%. Sales comparisons with the second quarter of 1994 are significantly impacted by the exceptional promotional program for a single customer of the Corporate Markets Division which began in 1994 and concluded at the end of the first quarter of 1995. The promotional program accounted for 42% of the Company's sales for the second quarter of 1994 versus zero in 1995. Excluding the impact of this promotional program on results for the 1994 period, sales increased in the three months ended June 30, 1995. However, with the end of the program, sales for the second quarter decreased substantially. Including results of the special promotional program, sales of Swiss Army Knives, Swiss Army Brand Watches and Swiss Army Brand Sunglasses decreased while sales of cutlery increased. Excluding the impact of sales to this customer, the Company's sales were 11% higher than in the second quarter of 1994, with increases among all major products. Gross profit of $8.7 million for the three months ended June 30, 1995 decreased $4.7 million or 35% from 1994. The decrease relates principally to the impact of sales decreases previously discussed. The gross profit margin for the second quarter of 1995 of 33.6% was comparable to the margin of 33.5% reported for the same period of 1994. Forschner's gross profit margin is a function of both product mix and Swiss franc exchange rates. Since Forschner imports virtually all of its products from Switzerland, its costs are affected by both the spot rate of exchange and by its foreign currency hedging program. The weakness of the U.S. dollar in relation to the Swiss franc began to impact Forschner's gross margin in the second quarter of 1995, and unless the exchange rate between the U.S. dollar and Swiss franc improves substantially in favor of the dollar, continuing weakness will have a significant adverse impact on earnings in the second half of the year. Selling, general and administrative expenses for the three months ended June 30, 1995 of $8.0 million were $3.0 million or 27% lower than the amount for the comparable period in 1994, which included a special charitable contribution of $1.5 million. The remaining $1.5 million decrease in expenses resulted primarily from decreased national advertising and lower printed material costs offset slightly by personnel costs related to an increase in Forschner's direct sales force. As a percentage of net sales, selling, general and administrative expenses (including the charitable contribution) increased from 27.6% in 1994 to 30.9% in 1995. Due to higher invested cash balances in the three months ended June 30, 1995 than in the comparable period of 1994, interest income of $165,000 in 1995 exceeded the $5,000 recorded in the year earlier period. Other expense of $312,000 for the quarter ended June 30, 1995 was $331,000 lower than the $18,000 of income for the same period in 1994, due to recognition of Forschner's share of losses in its equity investment SweetWater, Inc., offset somewhat by its share of income of its other equity investment, Simmons Outdoor Corporation, and amortization of goodwill relating to the two investments. 10 As a result of these changes, income before income taxes for the quarter ended June 30, 1995 was $0.5 million versus $2.4 million for the same period in 1994, for a decrease of $1.9 million or 77%. Income tax expense was provided at an effective rate of 59.6% for the three months ended June 30, 1995, versus 42.1% in 1994, with the increase related primarily to the non-deductibility of Forschner's share of losses and amortization of goodwill relating to its equity investments. Net income was $0.2 million for the three months ended June 30, 1995 versus $1.4 million in the comparable period of 1994, representing a decrease of $1.2 million or 84%. On a per share basis for the quarter ended June 30, 1995, net income was $0.03 compared with $0.17 in 1994, an 82% decrease. Comparison of the Six Months Ended June 30, 1995 and 1994 Sales for the six months ended June 30, 1995 were $55.3 million compared with $67.0 million for the same period a year ago, representing a decrease of $11.7 million or 18%. Sales comparisons with the first half of 1994 are significantly impacted by the exceptional promotional program for a single customer of the Corporate Markets Division which began in 1994 and concluded at the end of the first quarter of 1995. The promotional program accounted for 34% of the Company's sales for the first half of 1994 versus 14% in 1995. Excluding the impact of this promotional program on results for the 1994 period, sales increased 8% in the six months ended June 30, 1995. However, with the end of the program, sales for the first half decreased 18%. Including results of the special promotional program, sales of Swiss Army Knives, Swiss Army Brand Watches and Sunglasses decreased while sales of cutlery increased. Excluding the impact of sales to this customer, the Company's sales of Swiss Army Knives were modestly higher than in the first half of 1994. Swiss Army Brand Watch sales and sales of cutlery also posted increases. Gross profit of $19.4 million for the six months ended June 30, 1995 decreased $4.7 million or 20% from 1994. The decrease relates principally to sales decreases previously discussed, reduced gross profit margins on sales to the promotional customer and the negative impact of a weaker U.S. dollar against the Swiss franc. The gross profit margin for the first half of 1995 of 35.1% was down slightly from the margin of 36.1% reported for the same period of 1994. Forschner's gross profit margin is a function of both product mix and Swiss franc exchange rates. Since Forschner imports virtually all of its products from Switzerland, its costs are affected by both the spot rate of exchange and by its foreign currency hedging program. The weakness of the U.S. dollar in relation to the Swiss franc began to impact Forschner's gross margin in the second quarter of 1995, and unless the exchange rate between the U.S. dollar and Swiss franc improves substantially in favor of the dollar, continuing weakness will have a significant adverse impact on earnings in the second half of the year. Selling, general and administrative expenses for the six months ended June 30, 1995 of $17.1 million were $2.1 million or 11% lower than the amount for the comparable period in 1994, which included a special charitable contribution of $1.5 million. The remaining $0.6 million decrease in expenses resulted primarily from decreased national advertising and lower printed material costs offset somewhat by personnel costs related to an increase in Forschner's direct sales force. As a percentage of net sales, selling, general and administrative expenses (including the charitable contribution) increased from 28.7% in 1994 to 31.0% in 1995. 11 Due to higher invested cash balances in the six months ended June 30, 1995 than in the comparable period of 1994, interest income of $416,000 in 1995 exceeded the $19,000 recorded in the year earlier period. Other income of $52,000 for the six months ended June 30, 1995 was $38,000 lower than the $90,000 of income for the same period in 1994, due to recognition of Forschner's share of losses in its equity investment SweetWater, Inc. and amortization of goodwill relating to its two equity investments, offset somewhat by its share of income of its other equity investment, Simmons Outdoor Corporation, and the one-time favorable impact of recognizing Forschner's cumulative share of net income, less amortization of goodwill, of Forschner's two equity investments. As a result of these changes, income before income taxes for the six months ended June 30, 1995 was $2.7 million versus $5.0 million for the same period in 1994, a decrease of $2.3 million or 46%. Income tax expense was provided at an effective rate of 45.5% for the six months ended June 30, 1995, versus 42.1% in 1994, with the increase related primarily to the non-deductibility of Forschner's share of losses and amortization of goodwill relating to its equity investments. Net income was $1.5 million for the six months ended June 30, 1995 versus $2.9 million in the comparable period of 1994, representing a decrease of $1.4 million or 49%. On a per share basis for the six months ended June 30, 1995, net income was $0.18 compared with $0.38 in 1994, a 53% decrease. LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1995, Forschner had working capital of $52.2 million compared with $54.7 million as of December 31, 1994, a decrease of $2.5 million principally due to investments the Company made during the six months ended June 30, 1995. Sources of working capital included net income of $1.5 million and depreciation and amortization of $2.1 million. Significant uses of working capital included the Company's $3.8 million increase in the common stock investments of Simmons Outdoor Corporation and SweetWater, Inc. and capital expenditures and additions to other assets of $2.2 million. The Company currently has no material commitments for capital expenditures. Cash used in operating activities was approximately $4.6 million in the six months ended June 30, 1995 compared with $1.4 million in the comparable period in 1994. The increased usage of cash in operations resulted from a much larger increase in inventories in 1995 than in the prior year, an increase in prepaid expenses versus a decrease in 1994, a decrease in accrued liabilities versus an increase in 1994 and a larger decrease in taxes payable in 1995 than in 1994, all of which were somewhat offset by a reduction in accounts receivable versus an increase in 1994, an increase in accounts payable versus a decrease in 1994 and lower net income in 1995 than in 1994. Forschner meets its short-term liquidity needs with cash generated from operations, and, when necessary, bank borrowings under its revolving credit agreement. As of June 30, 1995, Forschner had no outstanding borrowings under its revolving line of credit, leaving an unused line of $15 million. Forschner's short-term liquidity is affected by seasonal changes in inventory levels, payment terms and seasonality of sales. The Company believes that cash generated from operations and borrowings under its credit facility will be sufficient to meet the Company's anticipated operating and capital needs through the expiration of the revolving credit agreement in April 1996. 12 PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K A.) Exhibits (2) Not Applicable (3) Not Applicable (4) Not Applicable (10) Agreement dated June 30, 1995 between The Forschner Group, Inc. and Bill-Mar Specialty Company, Inc. (11) Statement regarding computation of per share earnings is not required because the relevant computation can be clearly determined from the material contained in the Financial Statements included herein. (15) Not Applicable (18) Not Applicable (19) Not Applicable (22) Not Applicable (23) Not Applicable (24) Not Applicable (27) Financial Data Schedule (28) Not Applicable B.) There were no reports or exhibits on Form 8-K filed for the three months ended June 30, 1995. 13 Pursuant to the requirements to 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. THE FORSCHNER GROUP, INC. (Registrant) By /s/ Thomas D. Cunningham Date: August 9, 1995 --------------------------- Name: Thomas D. Cunningham Title: Executive Vice President, Principal Financial Officer and a Director By /s/ Thomas M. Lupinski -------------------------- Name: Thomas M. Lupinski Title: Senior Vice President, Controller 14 EX-10 2 AGREEMENT AGREEMENT Agreement and releases, dated as of June 30, 1995, among The Forschner Group, Inc., a Delaware corporation ("Forschner"), Bill-Mar Specialty Company, Inc., an Ohio corporation ("Bill-Mar") and, in respect of section 5 hereof only, William Ferrara. WHEREAS, Victorinox of Switzerland, Ltd. and Bill-Mar are parties to an agreement dated as of October 1, 1980, as amended, (the "Distribution Agreement"); WHEREAS, Victorinox of Switzerland, Ltd. has been merged into Forschner; and WHEREAS, subject to the terms hereof, the parties wish to terminate the Distribution Agreement and to settle all claims and controversies between them arising out of or relating to the Distribution Agreement or otherwise. NOW, THEREFORE, in consideration of the promises, covenants and agreements set forth herein, the parties agree as follows: 1. Defined Terms. Unless otherwise provided herein, all defined terms in the Distribution Agreement shall have the same meaning in this Agreement. 2. Termination of Distribution Agreement. The Distribution Agreement is hereby terminated effective the date hereof and Bill-Mar shall immediately cease sales of Victorinox Specialty Knives. All rights and privileges granted Bill-Mar under the Distribution Agreement are hereby terminated; it is understood and agreed that Bill-Mar shall have no right to use the name "Swiss Army" and Forschner's trademarks, tradenames and logos. Bill-Mar shall immediately discontinue all uses of the Swiss Army mark and name, and Forschner's and its affiliates' logos. Bill-Mar shall not advertise, directly or indirectly, that Bill-Mar formerly sold Victorinox Specialty Knives and Bill- Mar shall make no further reference to the Swiss Army mark or name or to Forschner, its affiliates or any of their tradenames and logos in connection with Bill-Mar's business or otherwise. Bill-Mar shall remove or cause to be remove any reference to the name "Swiss Army" and to any of Forschner's or its affiliates' logos or any colorable imitation thereof which may exist on its premises, vehicles, stationery, invoices, labels, catalogues, signs, advertisements, and in directories or books of reference. Bill-Mar shall promptly execute and deliver to Forschner or its designee any and all documents required to transfer to Forschner or its designee any trademark rights or equities that may have -2- vested in Bill-Mar as a result of Bill-Mar's use of the Swiss Army mark or of the name "Swiss Army" or any of Forschner's or its affiliates' logos or trademarks pursuant to the Distribution Agreement. Subsequent to two years from the date hereof, nothing in this section 2 shall be deemed to prohibit Bill-Mar from utilizing the name "Swiss Army"; provided that such use does not infringe on any trademark or other rights of Forschner; and further provided that this sentence shall not be deemed to constitute the license or consent of Forschner to any such use, infringing or non-infringing. 3. Payment by Forschner. Simultaneously with the execution of this Agreement, Forschner has delivered to Bill-Mar a check payable to the order of Bill-Mar in the amount of $400,000, receipt of which is hereby acknowledged. 4. Royalty. Forschner agrees to pay to Bill-Mar within 90 days of the end of each calendar year an amount equal to 10% of the net sales by Forschner of Victorinox Specialty Knives sold to the Advertising and Premium Market by Forschner's Corporate Markets Division in the Exclusive Territory up to a maximum aggregate payment under this paragraph of $200,000. Net sales as used herein shall mean the amount shown on invoices by Forschner to its customers less: sales and similar taxes paid to any authority, discounts, credits for returned merchandise, uncollected accounts, and shipping, insurance and similar costs. -3- At such time that Bill-Mar shall have received an aggregate of $200,000 pursuant to this paragraph, Forschner shall have no further obligations to make any further payments hereunder. Simultaneously with the payment of the royalty hereunder, Forschner shall supply Bill-Mar with a complete and accurate statement of all sales of Victorinox Specialty Knives sold to the Advertising and Premium Market by Forschner's Corporate Markets Division in the Exclusive Territory during the previous calendar year. In the event that Bill-Mar shall dispute such royalty report, Bill-Mar may request, in writing within 60 days of receipt of the royalty report, Forschner to conduct an audit of Forschner's books and records pertaining to such sales solely for the purpose of confirming Forschner's performance under this section. Such audit shall be conducted by an accounting firm chosen by Forschner provided that such accounting firm is a "big six" accounting firm. Such accounting firm may be the accounting firm that regularly audits the books and records of Forschner if agreed to by Bill-Mar. In the event such audit reveals a deficiency in payments from Forschner to Bill-Mar, Forschner shall pay to Bill-Mar the amount of such deficiency. In the event that such deficiency is more than 5% of the amount actually paid to Bill-Mar (a "Material Deficiency"), Forschner shall be responsible for the cost of such audit. In the event that no Material Deficiency is found, Bill-Mar shall be responsible for payment of the cost of such audit. The right of audit set forth in this section shall be Bill-Mar's sole remedy in the event of a -4- dispute pertaining to the royalty payable hereunder and under no circumstances shall Bill-Mar have any right to review, inspect or audit any of the books and records of Forschner. 5. Covenant not to Compete. Each of Bill-Mar and William Ferrara acknowledge that in the course of their relationship with Forschner, they have become privy to various relationships of Forschner. Therefore, each of Bill-Mar and Mr. Ferrara hereby agree that they will not, directly or indirectly, for two years from the date hereof, whether as an employee, consultant, officer, director, shareholder participate in the manufacture, importation or sale of multi-function pocket knives in the Exclusive Territory; provided, however, that nothing herein shall be deemed to prohibit the ownership of less than 5% of the stock of any publicly held company. 6. List of Customers. Bill-Mar represents and warrants that Schedule A hereto contains a complete and correct list of the twenty persons and entities to whom Bill-Mar has sold the largest quantities of Victorinox Specialty Knives in the two years preceding the date hereof. 7. Release by Bill-Mar. Bill-Mar, for good and valuable consideration, does hereby release and discharge Forschner, and all of its past and present employees, agents, representatives, servants, assigns, attorneys, insurers, -5- predecessors, successors, stockholders, partners, parents, subsidiaries and affiliates, and all past and present officers and directors of Forschner (collectively referred to as the "Forschner Releasees"), of and from all liabilities, losses, costs, damages, expenses, sums of money, contracts, agreements, promises, claims, demands, actions, causes of action, suits at law and proceedings in equity, known or unknown, whether accrued or not, which Bill-Mar ever had, now has or hereafter can, shall or may, have, for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date hereof against the Forschner Releasees, including without limitation those which relate to or arise out of the Distribution Agreement, provided, however, that nothing herein shall constitute or be deemed to constitute a release from any claims or rights of Bill-Mar against the Forschner Releasees arising under or in connection with this Agreement, and provided further that should any claims (including without limitation claims in respect of taxes and any charges relating thereto), demands, actions, causes of action, suits at law or proceedings in equity be asserted or instituted against Bill-Mar by any third-party individual or entity (including without limitation any regulatory or governmental authority), then Bill-Mar does not hereby waive any right of cross-claim, counterclaim or third-party claim or demand against the Forschner Releasees. -6- 8. Release by Forschner. Forschner, for good and valuable consideration, does hereby release and discharge Bill-Mar, and all of its past and present employees, agents, representatives, servants, assigns, attorneys, insurers, predecessors, successors, stockholders, partners, parents, subsidiaries and affiliates, and all past and present officers and directors of Bill-Mar (collectively referred to as the "Bill-Mar Releasees"), of and from all liabilities, losses, costs, damages, expenses, sums of money, contracts, agreements, promises, claims, demands, actions, causes of action, suits at law and proceedings in equity, known or unknown, whether accrued or not, which Forschner ever had, now has or hereafter can, shall or may, have, for, upon or by reason of any matter, cause or thing whatsoever from the beginning of the world to the date hereof against the Bill-Mar Releasees, including without limitation those which relate to or arise out of the Distribution Agreement, provided, however, that nothing herein shall constitute or be deemed to constitute a release from any claims or rights of Forschner against the Bill-Mar Releasees arising under or in connection with this Agreement, and provided further that should any claims (including without limitation claims in respect of taxes and any charges relating thereto), demands, actions, causes of action, suits at law or proceedings in equity be asserted or instituted against Forschner or any affiliate thereof by any third-party individual or entity (including without limitation any regulatory or governmental authority), -7- then Forschner does not hereby waive any right of cross-claim, counterclaim or third-party claim or demand against the Bill-Mar Releasees. 9. Entire Agreement. This instrument constitutes the entire agreement of the parties with respect to the subject matter hereof and supersedes all prior written and oral agreements with respect thereto. 10. Captions. The descriptive headings of the several sections of this instrument are inserted for convenience only and do not constitute a part hereof. 11. Counterparts. This instrument may be executed in two or more counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. -8- IN WITNESS WHEREOF, the parties hereto have set their hands as of the date first written above. THE FORSCHNER GROUP, INC. By:/s/ James W. Kennedy ------------------------ James W. Kennedy, Co-Chairman and Co-Chief Executive Officer BILL-MAR SPECIALTY COMPANY, INC. By:/s/ William Ferrara ----------------------- William Ferrara, President William Ferrara, individually, in respect of Section 5 hereof only -9- STATE OF CONNECTICUT) ) SS: COUNTY OF FAIRFIELD) On June 30, 1995, before me, the undersigned, personally appeared James W. Kennedy known to me to be the Co-Chairman and Co-Chief Executive Officer of The Forschner Group, Inc., and he, as such Co-Chairman and Co-Chief Executive Officer, executed the foregoing Agreement and release on behalf of The Forschner Group, Inc. NOTARY PUBLIC -10- STATE OF OHIO ) ) SS: COUNTY OF ) On June 30, 1995, before me, the undersigned, personally appeared William Ferrara known to me to be President of Bill-Mar Specialty Company, Inc., and he, as such President, executed the foregoing Agreement and release on behalf of Bill-Mar Specialty Company, Inc. NOTARY PUBLIC -11- STATE OF OHIO ) ) SS: COUNTY OF ) On June 30, 1995, before me, the undersigned, personally appeared William Ferrara who executed the foregoing Agreement. NOTARY PUBLIC -12- EX-27 3 FDS FOR 2ND QUARTER 10-Q 1995
5 0000731947 The Forschner Group, Inc. 1,000 U.S. Dollar 6-Mos Dec-31-1994 Jan-01-1995 Jun-30-1995 1 7,287 0 20,287 600 42,351 72,247 7,825 3,632 105,302 22,001 0 880 0 0 82,421 105,302 55,295 55,295 35,879 17,132 450 0 0 2,734 1,245 1,489 0 0 0 1,489 .18 .18
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