-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Wc2N6bpnYDUxqvMhJ7fsKVcxpx/0+efq1RqRc/uHXn16F8ZFiRZfSBDl7tbAUwdk 1q0MM6dVucorNxRjkP4PDQ== 0000731947-96-000013.txt : 19960814 0000731947-96-000013.hdr.sgml : 19960814 ACCESSION NUMBER: 0000731947-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960813 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: FORSCHNER GROUP INC CENTRAL INDEX KEY: 0000731947 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-JEWELRY, WATCHES, PRECIOUS STONES & METALS [5094] 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: 96609819 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 QUARTERLY REPORT FOR SWISS ARMY BRANDS, INC. 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, 1996 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 Swiss Army Brands, 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 The Forschner Group, Inc. One Research drive, Shelton, Connecticut 06484 (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, 1996, was 8,206,360 shares. SWISS ARMY BRANDS, INC. AND SUBSIDIARIES INDEX
PART I: FINANCIAL INFORMATION PAGE NO. - ------- --------------------- -------- Item 1. FINANCIAL STATEMENTS Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995. 3 - 4 Consolidated Statements of Operations for the three and six months ended June 30, 1996 and 1995. 5 Consolidated Statements of Stockholders Equity for the six months ended June 30, 1996 and 1995. 6 Consolidated Statements of Cash Flows for the six months ended June 30, 1996 and 1995. 7 Notes to Consolidated Financial Statements 8 - 9 Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 10 - 13 Part II: OTHER INFORMATION - -------- ----------------- Item 6. EXHIBITS AND REPORTS ON FORM 8-K 14 Signatures 15 The Exhibit Index appears on page 14.
2 SWISS ARMY BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Assets
At June 30, At December 31, 1996 1995 (unaudited) Current assets: Cash and short-term investments ........... $ 860,026 $ 608,757 Accounts receivable, less allowance for doubtful accounts of $900,000 and $975,000, respectively ... 21,538,164 31,970,449 Inventories ............................... 41,595,130 36,733,146 Deferred income tax benefits .............. 2,395,858 2,395,858 Prepaid and other ......................... 5,804,393 2,647,121 --------- --------- Total current assets ................... 72,193,571 74,355,331 ---------- ---------- Deferred income tax benefits ................. 771,371 771,371 Property, plant and equipment, at cost: Leasehold improvements .................... 954,963 818,446 Equipment ................................. 6,762,421 6,199,914 Furniture and fixtures .................... 1,515,063 1,473,188 --------- --------- 9,232,447 8,491,548 Less-accumulated depreciation ............. (5,209,849) (4,385,683) ----------- ----------- 4,022,598 4,105,865 --------- --------- Investments in preferred units, at cost ...... 9,002,998 7,002,990 Investments in unconsolidated affiliates ..... 2,444,000 2,591,415 Foreign distribution rights, net of accumulated amortization of $2,186,990 and $1,843,812, respectively .............. 4,555,737 4,900,396 Other assets, net of accumulated amortization of $2,141,331 and $3,166,339, respectively .................. 7,036,716 7,502,884 --------- --------- Total Assets ................................. $ 100,026,991 $ 101,230,252 ============= =============
3 SWISS ARMY BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS Liabilities and Stockholders' Equity
At June 30, At December 31, 1996 1995 ---- ---- (unaudited) Current liabilities: Accounts payable .......................... $ 8,881,246 $ 6,479,200 Accrued liabilities ....................... 6,822,341 8,697,994 Note payable .............................. 2,747,000 -- Income taxes payable ...................... -- 1,114,389 --------- --------- Total current liabilities ............... 18,450,587 16,291,583 ---------- ---------- Commitments and contingencies Stockholders 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 - 8,820,468 and 8,800,718, respectively ..... 882,047 880,072 Additional paid-in capital ................. 46,136,390 45,897,740 Unrealized gain on marketable ............. 701,035 -- securities Foreign currency translation adjustment ... (11,300) (9,216) Retained earnings ......................... 38,981,699 43,283,540 ---------- ---------- 86,689,871 90,052,136 Less-cost of common stock in treasury; 614,108 shares ............... (5,113,467) (5,113,467) ----------- ----------- Total stockholders equity ................... 81,576,404 84,938,669 ---------- ---------- Total Liabilities and Stockholders Equity ... $ 100,026,991 $ 101,230,252 ============= =============
4 SWISS ARMY BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended Six Months Ended June 30, June 30, 1996 1995 1996 1995 ---- ---- ---- ---- Net sales $28,676,650 $25,925,259 $54,756,163 $55,294,980 Cost of sales 23,287,729 17,209,810 40,774,485 35,878,937 ---------- ---------- ---------- ---------- Gross profit 5,388,921 8,715,449 13,981,678 19,416,043 Selling, general and administrative expenses 9,537,199 8,011,483 18,709,364 17,132,520 Special charges 2,073,000 - 2,073,000 - --------- --------- --------- ---------- Operating income (loss) (6,221,278) 703,966 (6,800,686) 2,283,523 Interest (expense) (12,524) (18,534) (42,062) (18,534) Interest income 24,212 165,438 101,925 416,304 Impairment of investment (800,000) - (800,000) - Other income (expense), net 11,723 (312,097) 127,982 52,312 ------ --------- ------- ------ Total interest and other income,net (776,589) (165,193) (612,155) 450,082 --------- --------- --------- ------- Income (loss) before income taxes (6,997,867) 538,773 (7,412,841) 2,733,605 Income tax provision (benefit) (2,941,000) 320,590 (3,111,000) 1,244,640 ----------- ------- ----------- --------- Net income (loss) $(4,056,867) $218,183 $(4,301,841) $1,488,965 ============ ======== ============ ========== Net income (loss) per share $(0.49) $0.03 $(0.52) $0.18 ============ ======== ============ ========== Weighted average number of shares outstanding 8,237,465 8,202,333 8,325,643 8,219,643 ============ ========== ============ ==========
5 SWISS ARMY BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Foreign Common Stock Par Additional Currency Unrealized Gain Value $.10 Paid-In Translation on Marketable Retained Treasury Shares Amount Capital Adjustment Securities Earnings Stock ------ ------ ------- ---------- ---------- -------- ----- BALANCE $8,796,968 $879,697 $45,866,814 $(28,085) -- $40,170,324 $(5,113,467) December 31, 1994 Net income for six months ended June 30, 1995 (unaudited) -- -- -- -- -- 1,488,965 -- Stock options and warrants exercised 2,500 250 22,862 -- -- -- -- Foreign currency translation adjustment -- -- -- 14,440 -- -- -- ---------- --------- ---------- -------- --------- ----------- ------------ BALANCE, June 30, 8,799,468 $879,947 $45,889,676 $(13,645) -- $41,659,289 $(5,113,467) 1995 (unaudited) ========== ========= =========== ========== ========= =========== ============ BALANCE December 31, 1995 8,800,718 $880,072 $45,897,740 $(9,216) -- $43,283,540 $(5,113,467) Net income (loss) for six months ended June 30, 1996 (unaudited) -- -- -- -- -- (4,301,841) -- Stock options and warrants exercised 19,750 1,975 238,650 -- -- -- -- Unrealized gain on marketable securities -- -- -- -- 701,035 -- -- Foreign currency translation adjustment -- -- -- (2,084) -- -- -- ---------- --------- ----------- --------- --------- ----------- ------------ BALANCE, June 30, 1996 (unaudited) 8,820,468 $882,047 $46,136,390 $(11,300) $701,035 $38,981,699 $(5,113,467) =========== ========= =========== ========= ========= =========== ============
6 SWISS ARMY BRANDS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Six months ended June 30, 1996 1995 ---- ---- Cash flows from operating activities: Net income (loss) $(4,301,841) $1,488,965 Adjustments to reconcile net income (loss) to cash (used for) operating activities: Depreciation and amortization 1,610,685 2,081,723 Equity in earnings of unconsolidated subsidiaries, net of goodwill amortization -- (19,562) Deferred income taxes -- 134,858 Special charges 6,594,000 -- Impairment of investment 800,000 -- Gain on sale of partial investment in stock (11,050) -- ---------- ---------- 4,691,794 3,685,984 Changes in other current assets and liabilities: Accounts receivable 10,561,652 9,947,125 Inventories (9,380,426) (14,488,494) Prepaid and other (3,565,739) (1,825,549) Accounts payable 2,403,112 263,659 Accrued liabilities (2,176,232) (972,237) Income taxes payable (1,676,898) (1,223,193) ----------- ----------- Net cash provided from (used for) operating activities 857,263 (4,612,705) ------- ----------- Cash flows from investing activities: Capital expenditures (740,899) (743,960) Proceeds from sales of property, plant & equipment -- 10,206 Additions to other assets (902,884) (1,432,689) Investment in preferred units (2,000,008) -- Investments in common stock -- (3,821,287) Proceeds from sale of investments in stock 59,500 -- --------- ---------- Net cash (used for) investing activities (3,584,291) (5,987,730) ----------- ----------- Cash flows from financing activities: Proceeds from Note Payable 2,747,000 -- Proceeds from exercise of stock options 240,625 23,112 ------- ------ Net cash provided from financing activities 2,987,625 23,112 --------- ------ Effect of Exchange Rate changes on cash (9,328) (155,894) ------- --------- Net increase (decrease) in cash and short-term investments 251,269 (10,733,217) Cash and short-term investments, beginning of period 608,757 18,019,797 ------- ---------- Cash and short-term investments, end of period $860,026 $7,286,580 ======== ========== Cash paid during the period: Interest $42,062 $18,534 ======== ========== Income taxes $1,683,295 $2,546,571 ========== ==========
7 SWISS ARMY BRANDS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS June 30, 1996 and 1995 (unaudited) CONSOLIDATED FINANCIAL STATEMENTS The consolidated financial statements included in this Form 10-Q have been prepared by Swiss Army Brands, Inc. (the Company, formerly The Forschner Group, Inc.) 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, 1995. 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. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 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. Foreign inventories are valued at the lower of cost or market determined by the FIFO method. Inventories principally consist of finished goods and packaging material. INVESTMENTS - ----------- Investments are comprised of the following as of June 30, 1996 and December 31, 1995:
June 30, December 31, 1996 1995 ---- ---- Investment in preferred units, at cost (A) $ 9,002,998 $ 7,002,990 Investment in common stock and note receivable (B) ....................... -- 800,000 Investment in unconsolidated affiliate (C) $ 2,444,000 $ 1,791,415 ----------- ----------- Total investments .................... $11,446,998 $ 9,594,405 =========== ===========
(A) Represents the Company's investment in Victory Capital LLC, a privately held limited liability company. The Company's preferred units capital account is allocated preferred amounts under certain circumstances in years in which Victory has profit. During the second quarter, the Company increased its investment in Victory by approximately $2,000,000. The Company is accounting for this investment on the cost basis. 8 (B) Represents the Company's investment in a private affiliated start-up entity that is in the business of designing, manufacturing and marketing fine jewelry. The common stock and note receivable were recorded at cost. This investment was written-off during the second quarter, due to impairment in the value of this investment. (C) Represents the Company's investment in SweetWater, Inc (SweetWater). Effective January 1, 1996, Swiss Army decreased its percentage ownership of SweetWater to below 20%. In accordance with generally accepted accounting principles, in 1996 this investment is being accounted for at fair value, with the Company recording unrealized gains (losses) as a component of stockholders equity. SPECIAL CHARGES - --------------- The Company recorded non-cash special charges totaling $7.4 million in the second quarter. The write-offs consist of $4.5 million in discontinued inventory (reflected in cost of sales) and $2.9 million in obsolete displays, goodwill, intangible assets, and non-strategic investments. SIGNIFICANT CUSTOMER - -------------------- Special promotional programs with a single customer of the Corporate Markets Division accounted for 0% of total sales for the quarter ended June 30, 1996 and 1995, and 0% and 14% of total sales for the six months ended June 30, 1996 and 1995, respectively. The Company is not participating in a program with this customer currently, nor are any programs currently scheduled for the remainder of 1996 with this customer. INCOME TAXES - ------------ Income taxes are provided at the projected annual effective tax rate. The income tax provisions (benefits) for the interim 1996 and 1995 periods exceed the federal statutory rate of 34% due primarily to state income taxes (net of federal benefit). 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 SWISS ARMY BRANDS, 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, 1996 and 1995 - ----------------------------------------------------------- Sales for the three months ended June 30, 1996 were $28.7 million compared with $25.9 million for the same period a year ago, representing an increase of $2.8 million or 10.8%. For the three month period, sales of Swiss Army watches and cutlery increased, while sales of Swiss Army Knives decreased. Gross profit of $5.4 million for the three months ended June 30, 1996 decreased $3.3 million or 38% from 1995. The decrease relates principally to a $4.5 million write-off of discontinued inventory which is reflected in cost of sales. The gross profit margin for the second quarter of 1996 of 18.8% reflects the impact of this inventory adjustment compared to the margin of 33.6% reported for the same period of 1995. Excluding the inventory write-off, the gross profit margin for 1996 would have been 33.5%. Profit margin was also negatively impacted by the decrease in the value of the U.S. dollar versus the Swiss franc. Swiss Army's gross profit margin is a function of both product mix and Swiss franc exchange rates. Since the Company 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 Company enters into foreign currency contracts and options to hedge the exposure associated with foreign currency fluctuations. However, such hedging activity cannot eliminate the long-term adverse impact on the Company's competitive position and results of operations that would result from a sustained decrease in the value of the dollar versus the Swiss franc. These hedging transaction's, which are meant to reduce foreign currency risk, also reduce the beneficial effects to the Company if the dollar increases relative to the Swiss franc. The Company plans to continue to engage in hedging transactions; however, it is uncertain as to what extent to which such hedging transactions will reduce the effect of adverse currency fluctuations. Selling, general and administrative expenses for the three months ended June 30, 1996 of $9.5 million were $1.5 million or 19% higher than the amount for the comparable period in 1995. The $1.5 million increase in expenses resulted primarily from increases in selling expenses and merchandising and promotional expenses. As a percentage of net sales, selling, general and administrative expenses increased from 30.9% in 1995 to 33.3% in 1996. The Company recorded a special charge of $2.1 million relating to the write-off of obsolete displays, goodwill and other intangible assets. There were no special charges recorded for the comparable period in 1995. Due to lower invested cash balances in the three months ended June 30, 1996 than in the comparable period of 1995, interest income of $24,000 in 1996 is lower than the $165,000 recorded in the year earlier period. The Company recorded a $0.8 million charge associated with the impairment of a non-strategic investment. There were no comparable investment charges for the same period in 1995. 10 Other income of $11,000 for the quarter ended June 30, 1996 versus $312,000 of expense for the same period in 1995, was due to recognition of the Company's share of losses in 1995 in its equity investment SweetWater, Inc., offset somewhat by its share of income in 1995 of its other equity investment, Simmons Outdoor Corporation, and amortization of goodwill relating to the two investments. As a result of these changes, net loss before income taxes for the quarter ended June 30, 1996 was $7.0 million versus $0.5 million of income for the same period in 1995, for a decrease of $7.5 million. Income tax expense was provided at an effective rate of 42.0% for the three months ended June 30, 1996, versus 59.6% in 1995, with the decrease related primarily to the non-deductibility of the Company's share of losses and amortization of goodwill relating to its equity investments in 1995. Net loss was $4.1 million for the three months ended June 30, 1996 versus net income of $0.2 million in the comparable period of 1995, representing a decrease of $4.3 million. On a per share basis for the quarter ended June 30, 1996, net loss was $0.49 compared with net income of $0.03 in 1995. Comparison of the Six Months Ended June 30, 1996 and 1995 - --------------------------------------------------------- Sales for the six months ended June 30, 1996 were $54.8 million compared with $55.3 million for the same period a year ago, representing a decrease of $0.5 million or 1%. Sales comparisons with the first half of 1995 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 14% of the Companys sales for the first half of 1995 versus 0% in 1996. Excluding the impact of this promotional program on results for the 1995 period, sales increased 15% in the six months ended June 30, 1996. Including results of the special promotional program, sales of Swiss Army Knives and Swiss Army Brand Watches decreased while sales of cutlery increased. Excluding the impact of sales to this customer, the Company's sales of Swiss Army Knives were slightly lower than in the first half of 1995 while Swiss Army Brand Watch sales and sales of cutlery posted increases. Gross profit of $14.0 million for the six months ended June 30, 1996 decreased $5.4 million or 28% from 1995. The decrease relates principally to a $4.5 million inventory write-off in the second quarter and the negative impact of a weaker U.S. dollar against the Swiss franc. The gross profit margin for the first half of 1996 of 25.5% was down from the margin of 35.1% reported for the same period of 1995. Excluding the inventory write-off, the gross profit margin for 1996 would have been 33.8%. The Company's gross profit margin is a function of both product mix and Swiss franc exchange rates. Since the Company 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 Company enters into foreign currency contracts and options to hedge the exposure associated with foreign currency fluctuations. However, such hedging activity cannot eliminate the long-term adverse impact on the Company's competitive position and results of operations that would result from a sustained decrease in the value of the dollar versus the Swiss franc. These hedging transactions, which are meant to reduce foreign currency risk, also reduce the beneficial effects to the Company if the dollar increases relative to the Swiss franc. The Company plans to continue to engage in hedging transactions; however, it is uncertain as to what extent to which such hedging transactions will reduce the effect of adverse currency fluctuations. 11 Selling, general and administrative expenses for the six months ended June 30, 1996 of $18.7 million were $1.6 million or 9.2% higher than the amount for the comparable period in 1995. This increase is due primarily to higher selling expenses and merchandising and promotional costs. As a percentage of net sales, selling, general and administrative expenses increased from 30.9% in 1995 to 34.2% in 1996. Excluding sales associated with the special promotion program in 1995, the percentage decreased in 1996 to 30.9% from 36.0% in 1995. The Company recorded a special charge of $2.1 million relating to the write-off of obsolete displays, goodwill and other intangible assets. There were no special changes recorded for the comparable period in 1995. Due to lower invested cash balances in the six months ended June 30, 1996 than in the comparable period of 1995, interest income of $102,000 in 1996 was lower than the $416,000 recorded in the year earlier period. The Company recorded a $0.8 million charge associated with the impairment of a non-strategic investment. There were no comparable investment charges for the same period in 1995. Other income of $128,000 for the six months ended June 30, 1996 was $76,000 higher than the comparable period in 1995, due to recognition of the Company's share of losses in 1995 in its equity investment SweetWater, Inc. and amortization of goodwill relating to its two equity investments, offset somewhat by its share of income in 1995 of its other equity investment, Simmons Outdoor Corporation, and the one-time favorable impact of recognizing the Company's cumulative share of net income, less amortization of goodwill, of the Company's two equity investments during 1995. As a result of these changes, loss before income taxes for the six months ended June 30, 1996 was $7.4 million versus income of $2.7 million for the same period in 1995, a decrease of $10.1 million. Income tax expense was provided at an effective rate of 41.9% for the six months ended June 30, 1996, versus 45.5% in 1995, with the decrease related primarily to the non-deductibility of the Company's share of losses and amortization of goodwill relating to its equity investments. Net loss was $4.3 million for the six months ended June 30, 1996 versus net income of $1.5 million in the comparable period of 1995, representing a decrease of $5.8 million. On a per share basis for the six months ended June 30, 1996, net loss was $0.52 compared with net income of $0.18 in 1995. LIQUIDITY AND CAPITAL RESOURCES - ------------------------------- As of June 30, 1996, the Company had working capital $53.7 million compared with $58.1 million as of December 31, 1995, a decrease of $4.4 million principally due to investments the Company made during the six months ended June 30, 1996. Sources of working capital included depreciation and amortization of $1.6 million. Significant uses of working capital included the Company's $2.0 million increase in the preferred units of Victory Capital LCC and capital expenditures and additions to other assets of $1.6 million. The Company currently has no material commitments for capital expenditures. 12 Cash provided from operating activities was approximately $0.9 million in the six months ended June 30, 1996 compared with $4.6 million of cash used in the comparable period in 1995. The cash provided from operations resulted primarily from a smaller increase in inventories in 1996 than in the prior year, a larger increase in accounts payable versus 1995, all of which were somewhat offset by a greater increase in prepaids and other assets and a greater reduction in accrued liabilities versus 1995. The Company 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, 1996, the Company had $2.7 million of outstanding borrowings under its revolving line of credit, leaving an unused line of $17.3 million. The Company'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. 13 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders --------------------------------------------------- The annual meeting of the shareholders of the Company was held on May 16, 1996, pursuant to notice, at which meeting shareholders approved by an affirmative majority vote of 4,180,399 shares a proposal to approve the adoption of the 1996 Stock Option Plan which authorizes the grant of stock options to purchase an aggregate of 1,000,000 shares of Common Stock. There were 1,012,002 shares that voted against this proposal, 20,855 votes abstained, and there were 1,810,864 broker non-votes. In addition, shareholders approved by an affirmative majority vote of 6,985,548 shares a proposal to approve an ammendment to Article First of the Company's Certificate of Incorporation to change the name of the Company to Swiss Army Brands, Inc. There were 33,197 shares that voted against this proposal and 5,375 votes that abstained. Item 6. Exhibits and Reports on Form 8-K A.) Exhibits (2) Not Applicable (3) Certificate of Incorporation (4) Not Applicable (10) Not Applicable (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 (99) Not Applicable B.) There were no reports or exhibits on Form 8-K filed for the three months ended June 30, 1996. 14 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. SWISS ARMY BRANDS, INC. (Registrant) Date: August 13, 1996 By /s/ Thomas D. Cunningham 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 15 EX-3 2 CERTIFICATE OF INCORPORATION RESTATED CERTIFICATE OF INCORPORATION OF THE FORSCHNER GROUP, INC. ------------------------- It is hereby certified that: FIRST: The present name of the corporation (hereinafter referred to as the "Corporation") is The Forschner Group, Inc. The Corporation was originally incorporated under the name R. H. Forschner Co., Inc. The original Certificate of Incorporation was filed with the Secretary of State of the State of Delaware on December 12, 1974. SECOND: The provisions of the Certificate of Incorporation as heretofore amended are hereby restated and integrated into a single instrument that is entitled Restated Certificate of Incorporation of The Forschner Group, Inc. There is no discrepancy between the provisions of the Certificate of Incorporation as heretofore amended and the provisions of the Restated Certificate of Incorporation of the Forschner Group as hereinafter set forth. THIRD: The Board of Directors of the Corporation has duly adopted this Restated Certificate of Incorporation of the Corporation pursuant to the provisions of Section 245 of the General Corporation Law of the State of Delaware in the form set forth as follows: "RESTATED CERTIFICATE OF INCORPORATION of THE FORSCHNER GROUP, INC. ------------------------- FIRST: The name of the corporation is: THE FORSCHNER GROUP, INC. SECOND: The address of its registered office in the State of Delaware is 26 The Green, in the City of Dover, County of Kent. The name of the registered agent at such address is XL Corporate Services, Inc. 1 THIRD: The nature of the business or purposes to be conducted or promoted is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of Delaware. FOURTH: The total number of shares which the Corporation shall have the authority to issue shall be Eight Million (8,000,000) shares, par value $.10 per share, all of which shall be designated as Common Stock. FIFTH: The corporation reserves the right to amend, alter, change or repeal any provision contained in this certificate of incorporation, in the manner now or hereafter prescribed by statute, and all rights and powers conferred herein upon stockholders and directors are granted subject to this reservation. SIXTH: To the fullest extent permitted by the Delaware General Corporation Law as the same exists or may hereafter be amended, a director of this Corporation shall not be liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director. Without limiting the foregoing in any respect, a director of this Corporation shall not be personally liable to the Corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv) for any transaction from which the director derived an improper personal benefit. SEVENTH: (a) Right to Indemnification. (i) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, 2 judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators, and (ii) the Corporation may indemnify and hold harmless in such manner any person who was or is made a party or is threatened to be made a party to a proceeding by reason of the fact that he, she or a person of whom he or she is the legal representative, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or a partnership, joint venture, trust or other enterprise; provided, however, that except as provided in paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the board of directors of the Corporation. In the event a director or officer of the Corporation shall serve as a director, officer, employee or agent of any corporation, partnership, joint venture, trust or other enterprise in which the Corporation maintains an investment it shall be conclusively presumed for purposes of the indemnification provided for in subsection (ii) above that such service has been undertaken at the request of the Corporation. The foregoing presumption shall apply regardless of whether such director or officer is serving such entity at the request of a third party or that his or her service with such entity was commenced prior to the effectiveness of this Article of the Certificate of Incorporation or prior to his or her becoming an officer or director of the Corporation. The right to indemnification conferred in subsection (i) above shall be a contract right based upon an offer from the Corporation which shall be deemed to be accepted by such person's service or continued service with the Corporation for any period after the adoption of this Article of the Certificate of Incorporation and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. The Corporation may, by action of its Board of Directors, provide 3 indemnification to employees or agents of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. (b) Right of Claimant to Bring Suit. If a claim under subsection a(i) of this Article is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders), that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. (c) Non-Exclusivity of Rights. The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Section shall not be exclusive of any other right which any person may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, by-law, agreement, vote of stockholders or disinterested directors or otherwise. (d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware Corporation Law. 4 EIGHTH: The Board of Directors of the Corporation is expressly authorized to adopt, amend or repeal the By-Laws of the Corporation." IN WITNESS WHEREOF, the undersigned have executed this Restated Certificate of Incorporation this 10th day of June, 1987. Signature James W. Kennedy President ATTEST: Signature Joel Wulinsky Secretary 5 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF THE FORSCHNER GROUP, INC. The Forschner Group, Inc. (the "Corporation"), a corporation organized and existing by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows: 1. The Certificate of Incorporation of the Corporation, as heretofore amended, authorized the issuance of eight million (8,000,000) shares of capital stock, all of which shares were designated Common Stock, par value $.10 per share. 2. In order to change the capital structure of the Corporation, Article FOURTH of the Certificate of Incorporation of the Corporation is hereby amended to read in its entirety as follows: "FOURTH: Capital Stock. The total number of shares of capital stock ("Capital Stock") which the Corporation shall have authority to issue is fourteen million (14,000,000), all of the par value $.10 per share, of which twelve million (12,000,000) shares shall be designated Common Stock and two million (2,000,000) shares shall be designated Preferred Stock. Except for shares of Preferred Stock, the powers, preferences and relative, participating, optional or other special rights, including, without limitation, the right to receive dividends, and the qualifications, limitations or restrictions with respect thereto, of each share of capital stock shall be identical, share for share. 1 (a) Voting. Shares of Common Stock shall entitle the holders thereof to one vote for each share upon all matters upon which stockholders have the right to vote. Shares of Preferred Stock shall entitle the holders thereof to such vote, if any, as shall be fixed by the Board of Directors (or duly authorized committee thereof) pursuant to Article FOURTH (b). (b) Preferred Stock. Authority is hereby expressly granted to the Board of Directors or a duly authorized committee thereof at any time and from time to time to issue shares of Preferred Stock in one or more series and for such consideration as may be fixed from time to time by the Board of Directors, and to fix, before the issuance of any shares of a particular series of Preferred Stock, the designation of such series; the number of shares to comprise such series; the dividend rate per annum, liquidation rights and redemption price or prices, if any, of such series; the terms and conditions of any such redemption; the sinking fund provisions, if any, in respect of such series; the terms and conditions on which the shares of such series are convertible, if they are convertible; and any other rights, preferences and limitations pertaining to such series. All shares of any one series of Preferred Stock shall be identical. To the extent so fixed by the Board of Directors and consistent with applicable law, each such series of Preferred Stock shall have rights and preferences senior to the rights herein granted to the Common Stock. (c) Dividends. Subject to the rights of the holders of shares of Preferred Stock (if any shares of Preferred Stock shall be issued), dividends payable in cash or property are payable if, when, and as declared by the Board of Directors out of funds legally available therefor. (d) Reservation of Shares. Such number of shares of Common Stock as may from time to time be required for the purpose shall be reserved for issuance (i) upon conversion of any Preferred Stock which shall be convertible or any obligation of the Corporation convertible into shares of Common Stock and (ii) upon exercise of any options or warrants to purchase shares of Common Stock." 3. This amendment to the Certificate of Incorporation has been duly adopted by the vote of the holders of a majority of the outstanding securities of the Corporation entitled to vote thereon in accordance with the provisions of Section 242 of the Delaware General Corporation Law. 2 IN WITNESS WHEREOF, the undersigned have executed this Certificate as of this 30th day of June, 1993. Signature James W. Kennedy President and Chief Executive Officer Attest: Signature Thomas M. Lupinski Secretary 3 CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION OF THE FORSCHNER GROUP, INC. The Forschner Group, Inc. (the "Corporation"), a corporation organized and existing by virtue of the General Corporation Law of the State of Delaware, does hereby certify as follows: FIRST: The name of the Corporation is "THE FORSCHNER GROUP, INC." SECOND: The Certificate of Incorporation of the Corporation was filed in the Office of the Secretary of State of the State of Delaware on the 12th day of December, 1974 under the name R.H. Forschner Co., Inc. THIRD: A Certificate of Amendment to the Certificate of Incorporation was filed in the office of the Secretary of State of Delaware on the 4th day of December, 1983 for the purpose of changing the name of the Corporation to The Forschner Group, Inc. FOURTH: The purpose of the amendment of the Certificate of Incorporation effected by this Certificate of Amendment is to change the name of the Corporation. 1 FIFTH: To accomplish the foregoing amendment, Article FIRST of the Certificate of Incorporation of the Corporation is hereby deleted in its entirety and a new Article FIRST is inserted in its stead, to read as follows: "FIRST: The name of the Corporation is: SWISS ARMY BRANDS, INC." SIXTH: This amendment to the Certificate of Incorporation has been duly adopted by the vote of the holders of a majority of the outstanding securities of the Corporation entitled to vote thereon in accordance with the provisions of Section 242 of the Delaware General Corporation Law. IN WITNESS WHEREOF, the undersigned have executed this Certificate as of this 16th day of May, 1996. Signature J. Merrick Taggart President Attest: Signature Thomas M. Lupinski Secretary 2 EX-27 3 FDS --
5 0000731947 Swiss Army Brands, Inc. 1,000 US DOLLARS 6-MOS DEC-31-1996 JAN-01-1996 JUN-30-1996 1 860 0 22,438 900 41,595 72,194 9,232 5,210 100,027 18,451 0 0 0 882 80,694 100,027 54,756 54,756 40,774 20,782 (672) 0 (59) (7,413) (3,111) (4,302) 0 0 0 (4,302) (.52) (.52)
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