-----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, PR0M1vxCx3AubCj6+gNLlQVADvpCnWG0Yuj/N4V9lGgNHkQgrw4CcOo59pD3Vp3T cBkIBMaSvbrMWrQbex9BVg== 0000950152-96-006347.txt : 19961202 0000950152-96-006347.hdr.sgml : 19961202 ACCESSION NUMBER: 0000950152-96-006347 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19961026 FILED AS OF DATE: 19961127 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICHAEL ANTHONY JEWELERS INC CENTRAL INDEX KEY: 0000799515 STANDARD INDUSTRIAL CLASSIFICATION: JEWELRY, PRECIOUS METAL [3911] IRS NUMBER: 132910285 STATE OF INCORPORATION: DE FISCAL YEAR END: 0128 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10645 FILM NUMBER: 96673132 BUSINESS ADDRESS: STREET 1: 115 SO MACQUESTEN PKWY CITY: MOUNT VERNON STATE: NY ZIP: 10550 BUSINESS PHONE: 9146990000 MAIL ADDRESS: STREET 1: 115 SOUTH MACQUESTEN PKWY STREET 2: 115 SOUTH MACQUESTEN PKWY CITY: MOUNT VERNON STATE: NY ZIP: 10550 10-Q 1 MICHAEL ANTHONY JEWLERS 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter ended October 26, 1996 Commission file number: 015230 MICHAEL ANTHONY JEWELERS, INC. (Exact name of registrant as specified in its charter) Delaware No. 132910285 (State of Incorporation) (I.R.S. Employer Identification No.) 115 South MacQuesten Parkway Mount Vernon, New York 105501724 (Address of principal executive offices) Registrant's telephone number, including area code: (914) 699-0000 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 ---- ----. CLASS ----- Number of Shares Common Stock, Par Value $.001 Outstanding as of November 21, 1996 ----------------- 8,253,909 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES INDEX ----- PAGE ---- PART I FINANCIAL INFORMATION: ITEM 1. FINANCIAL STATEMENTS Consolidated Condensed Balance Sheets, October 26, 1996 (Unaudited) and January 27, 1996............................................. 3 Consolidated Condensed Statements of Operations Nine-Month Period Ended October 26, 1996 and October 28, 1995 (Unaudited) ........... 4 Consolidated Condensed Statement of Changes in Stockholders' Equity, Nine-Month Period Ended October 26, 1996 (Unaudited)................................. 5 Consolidated Condensed Statements of Cash Flows, Nine-Month Period Ended October 26, 1996 and October 28, 1995 (Unaudited)............ 6 Notes to Consolidated Condensed Financial Statements..................................................... 7-9 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS................................................... 10-15 PART II OTHER INFORMATION: Item 1 Through Item 6 ............................................. 16 Signature Page..................................................... 17 -2- 3 MICHAEL ANTHONY JEWELERS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS - ------ Unaudited) October 26, January 27, 1996 1996 ------------ ------- CURRENT ASSETS: Cash and equivalents $ 6 $ 6,673 Accounts receivable: Trade (less allowances of $1,326 and $1,575, respectively) 37,446 30,062 Other 136 47 Inventories 21,446 19,698 Prepaid expenses and other current assets 747 1,169 Deferred taxes 855 855 -------- -------- Total current assets 60,636 58,504 PROPERTY, PLANT AND EQUIPMENT - net 18,634 18,441 INTANGIBLES - net 962 998 OTHER ASSETS 780 703 -------- -------- $ 81,012 $ 78,646 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable - trade $ 8,581 $ 4,575 Current portion of long-term debt and lease liability 3,296 3,272 Accrued expenses 4,212 3,980 Taxes payable 1,040 541 -------- -------- Total current liabilities 17,129 12,368 -------- -------- LONG-TERM DEBT 15,616 18,401 -------- -------- CAPITAL LEASE LIABILITY 450 791 -------- -------- DEFERRED TAXES 1,038 1,038 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS' EQUITY: Preferred stock - par value $1.00 per share; 1,000,000 shares authorized; none issued -- -- Common stock - par value $.001 per share; 20,000,000 shares authorized; 8,274,000 and 9,239,000 shares issued and outstanding as of October 26, 1996, and January 27, 1996, respectively 8 9 Additional paid-in capital 31,717 35,170 Retained earnings 15,117 14,306 Treasury stock, 20,000 and 965,200 shares as of October 26, 1996 and January 27, 1996, respectively (63) (3,437) -------- -------- Total stockholders' equity 46,779 46,048 -------- -------- $ 81,012 $ 78,646 ======== ========
The accompanying notes are an integral part of these consolidated condensed financial statements. -3- 4 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
Three Months Ended Nine Months Ended ------------------ ----------------- October 26 October 28, October 26, October 28, 1996 1995 1996 1995 ---- ---- ---- ---- NET SALES $ 48,772 $ 47,037 $ 105,681 $ 99,198 COST OF GOODS SOLD 39,800 38,789 87,691 82,463 --------- --------- --------- --------- GROSS PROFIT ON SALES 8,972 8,248 17,990 16,735 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 6,019 5,431 14,836 14,061 --------- --------- --------- --------- OPERATING INCOME 2,953 2,817 3,154 2,674 OTHER INCOME/(EXPENSES): Gold consignment fee, net (349) (485) (1,012) (1,347) Interest expense (426) (428) (1,265) (1,336) Interest income 94 55 379 314 Other income 34 8 54 89 --------- --------- --------- --------- Total Other Income/(Expense) (647) (850) (1,844) (2,280) --------- --------- --------- --------- INCOME BEFORE INCOME TAXES 2,306 1,967 1,310 394 INCOME TAX PROVISION 878 776 499 147 --------- --------- --------- --------- NET INCOME $ 1,428 $ 1,191 $ 811 $ 247 ========= ========= ========= ========= EARNINGS PER SHARE $ 0.17 $ 0.14 $ 0.10 $ 0.03 ========= ========= ========= ========= WEIGHTED AVERAGE NUMBER OF SHARES 8,254 8,441 8,261 8,527 ========= ========= ========= =========
The accompanying notes are an integral part of these consolidated condensed financial statements. -4- 5 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (IN THOUSANDS)
Common Stock Additional Treasury Stock ------------ Paid-In Retained -------------- Shares Dollars Capital Earnings Shares Dollars Total ------ ------- ---------- -------- ------ ------- ----- Balance - January 27, 1996 9,239 $ 9 $ 35,170 $ 14,306 (965) $ (3,437) $ 46,048 Purchase of treasury stock -- -- -- -- (20) (80) (80) Retirement of treasury stock (965) (1) (3,453) -- 965 3,454 -- Net income -- -- -- 811 -- -- 811 -------- -------- -------- -------- -------- -------- -------- Balance - October 26, 1996 8,274 $ 8 $ 31,717 $ 15,117 (20) $ (63) $ 46,779 ======== ======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these consolidated condensed financial statements. -5- 6 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Nine Months Ended October 26, October 28, 1996 1995 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 811 $ 247 Adjustments to reconcile net income to net cash used in operating activities: Depreciation and amortization 2,974 2,691 Provision for accounts receivable 210 270 Provision for sales returns (187) (80) (Increase)/decrease in operating assets: Accounts receivable (7,496) (12,912) Inventories (1,748) (1,124) Prepaid expenses and other current assets 297 (359) Other assets (312) (287) Intangibles (119) (427) Increase/(decrease) in operating liabilities: Accounts payable 4,006 (1,495) Accrued expenses 232 1,308 Taxes payable 499 155 -------- -------- Net cash used in operating activities (833) (12,013) -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment - net (2,643) (3,905) -------- -------- Net cash used in investing activities (2,643) (3,905) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt and capital lease liabilities (3,111) (2,595) Proceeds from long term debt -- 6,000 Purchase of treasury stock (80) (673) Proceeds from line of credit -- 5,000 Proceeds from mortgage -- 2,500 -------- -------- Net cash (used in)/provided by financing activities (3,191) 10,232 -------- -------- DECREASE IN CASH AND EQUIVALENTS (6,667) (5,686) CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 6,673 5,815 -------- -------- CASH AND EQUIVALENTS AT END OF PERIOD $ 6 $ 129 ======== ======== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest and gold consignment fees $ 2,498 $ 2,817 Taxes $ 0 $ 176
The accompanying notes are an integral part of these consolidated condensed financial statements. -6- 7 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED OCTOBER 26, 1996 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ------------------------------------------ The unaudited interim consolidated condensed balance sheet as of October 26, 1996 and the consolidated condensed statements of operations for the nine months ended October 26, 1996 and October 28, 1995, and the consolidated condensed statements of cash flows for the nine months ended October 26, 1996 and October 28, 1995, and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying unaudited interim consolidated condensed financial statements and related notes should be read in conjunction with the financial statements and related notes included in the 1996 Annual Report to Stockholders of Michael Anthony Jewelers, Inc. (the "Company"). The information furnished reflects, in the opinion of the management of the Company, all adjustments, consisting of normal recurring accruals, which are necessary to present a fair statement of the results for the interim periods presented. The interim figures are not necessarily indicative of the results to be expected for the fiscal year due to the seasonal nature of the business. Earnings Per Share ------------------ Earnings per share for all periods presented were computed on a primary basis using the weighted average number of shares of common stock outstanding. Options and warrants outstanding were not materially dilutive. Reclassifications ----------------- Certain reclassifications were made to the prior year's financial statements to conform to the current year's presentation. 2. PRODUCT PRICING --------------- The Company's products, the principal component of which is gold, are generally sold at prices which are based on the market price of gold on the date merchandise is shipped to the customer. -7- 8 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED OCTOBER 26, 1996 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED) 2. PRODUCT PRICING (Continued) --------------- Therefore, the Company's sales volume is significantly influenced by the market price of gold. The selling prices for certain customers may be fixed for a specific period of time. In such cases, the Company is able to shift a substantial portion of the risks of gold price fluctuation by hedging against changes in the price of gold by entering into forward contracts or purchasing futures or options on futures. The Company's consigned gold inventory is hedged against the effects of price fluctuations. The Company has entered into arrangements with certain gold lenders (the "Gold Lenders") pursuant to which the Company does not purchase gold from the Gold Lenders until receipt of a purchase order from, or shipment of jewelry to, its customers. These arrangements permit the Company to match the sales price of the product with the price the Company pays for the gold. The average price of gold in the current quarter was $382 per ounce as compared to $383 per ounce for the quarter ended October 28, 1995. 3. INVENTORIES ----------- Inventories consist of: October 26, January 27, 1996 1996 ---------- ---------- (Unaudited) (In thousands) Finished goods $46,866 $56,621 Work in process 30,210 15,240 Raw materials 10,911 8,537 ------- ------- 87,987 80,398 Less: Consigned gold 66,541 60,700 ------- ------- $21,446 $19,698 ======= ======= Inventories as of October 26, 1996 and January 27, 1996 excluded 173,900 and 149,300 ounces of gold on consignment, respectively. -8- 9 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED OCTOBER 26, 1996 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED) 4. STOCK REPURCHASE PROGRAM ------------------------ In December 1995, the Company announced a Common Stock repurchase program pursuant to which the Company may repurchase up to 750,000 shares of Common Stock. As of November 21, 1996, the Company had repurchased a total of 80,000 shares on the open market for an aggregate price of approximately $220,000, of which 60,000 shares have been retired. Effective May 24, 1996 the Board of Directors authorized the Company to retire 965,200 shares of Common Stock, previously held as Treasury Stock. 5. NEW ACCOUNTING STANDARD ----------------------- Pursuant to Statement of Financial Accounting Standards No. 123 "Accounting for Stock Based Compensation," ("FASB 123") the Company has elected not to change to the fair value method of accounting for employees' stock-based transactions. As permitted by FASB 123, the Company will be permitted to continue to account for such transactions under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," but will be required to disclose in a note to the financial statements, the proforma net income and earnings per share as if the Company had applied the new standard. -9- 10 ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED) RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 26, 1996 AND OCTOBER 28, 1995 - ------------------------------------------- Net sales for the three months ended October 26, 1996 were approximately $48,772,000, an increase of 3.7% from net sales of approximately $47,037,000 for the comparable period last year. The increase in net sales resulted from increased shipments to the retail segment of the Company's customer base, which increase was offset in part by decreased shipments to the wholesale segment of the Company's customer base. Gross profit margin increased to approximately 18.4% of net sales for the three months ended October 26, 1996, compared to approximately 17.5% for the comparable period last year. The increase in the gross profit margin was attributable to a change in the Company's product mix and increased sales of the Company's licensed products. Selling, general and administrative expenses for the three months ended October 26, 1996 were approximately $6,019,000, an increase of $588,000 or 10.8% from approximately $5,431,000 for the comparable period last year. As a percentage of net sales, selling, general and administrative expenses increased to 12.3% for the three months ended October 26, 1996 from 11.5% for the comparable period last year. Included in selling, general and administrative expenses for the three months ended October 26, 1996, was $275,000 of costs related to the terminated acquisition negotiations with OroAmerica. The other increase of $313,000 is primarily attributable to increases in (i) royalty and licensing expenses and (ii) product and packaging supplies. These increases were offset in part by decreases in (i) legal and accounting expenses and (ii) advertising related expenses. Other expenses-net for the three months ended October 26, 1996 were approximately $647,000, a decrease of $203,000 or 23.9% compared to approximately $850,000 for the comparable period last year. Gold consignment fees decreased $136,000 primarily due to the lower level of consignment inventory and lower consignment interest rates from the comparable period last year. Interest income increased $39,000 due to the Company's higher cash position from the comparable period last year. As a result of the above factors, the Company's net income for the three months ended October 26, 1996 was approximately $1,428,000 or $.17 per share on 8,254,000 weighted average shares outstanding, compared to net income of $1,191,000 or $.14 per share on 8,441,000 weighted average shares outstanding for the comparable period last year. -10- 11 ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED) RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 26, 1996 AND OCTOBER 28, 1995 - ------------------------------------------- Net sales for the nine months ended October 26, 1996 were approximately $105,681,000, an increase of 6.5% from net sales of approximately $99,198,000 for the comparable period last year. The increase in net sales resulted from increased shipments to the retail segment of the Company's customer base, which increase was offset in part by decreased shipments to the wholesale segment of the Company's customer base. Selling, general and administrative expenses for the nine months ended October 26, 1996 were approximately $14,836,000, an increase of $775,000 or 5.5% from approximately $14,061,000 for the comparable period last year. Included in selling, general and administrative expenses for the nine months ended October 26, 1996, was $275,000 of costs related to the terminated acquisition negotiations with OroAmerica. The other increase of $500,000 is primarily attributable to increases in (i) royalty and licensing expenses and (ii) product and packing supplies. These increases were offset in part by decreases in (i) legal and accounting expenses and (ii) advertising related expenses. As a percentage of net sales, selling, general and administrative expenses decreased to 14.0% for the nine months ended October 26, 1996, from 14.2% for the comparable period last year. Other expenses-net for the nine months ended October 26, 1996 were approximately $1,844,000, a decrease of $436,000 or 19.1% compared to approximately $2,280,000 for the comparable period last year. Gold consignment fees decreased $335,000 primarily due to the lower level of consignment inventory and lower consignment interest rates from the comparable period last year. Interest expense decreased $71,000 due to the Company's principal payments on its long term debt, in January 1996 and May 1996. Interest income increased $65,000 due to the Company's higher cash position from the comparable period last year. As a result of the above factors, the Company's net income for the nine months ended October 26, 1996 was approximately $811,000 or $.10 per share on 8,261,000 weighted average shares outstanding, compared to net income of $247,000 or $.03 per share on 8,527,000 weighted average shares outstanding for the comparable period last year. -11- 12 ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED) Liquidity and Capital Resources - ------------------------------- The Company relies on a gold consignment program, short-term and long-term borrowings and internally generated funds to finance its operations. The Company fills most of its gold supply needs through gold consignment arrangements with the Gold Lenders. Under the terms of those arrangements, the Company is entitled to lease the lesser of (i) an aggregate of 250,000 ounces of fine gold or (ii) consigned gold with an aggregate value equal to $106,899,000. The consigned gold is secured by certain property of the Company including inventory and machinery and equipment. The Company pays the Gold Lenders a consignment fee based on the dollar value of ounces of gold outstanding under their respective agreements, which value is based on the daily Second London Gold Fix. The Company believes that its financing rate under the consignment arrangements is substantially similar to the financing rates charged to gold consignees similarly situated to the Company. As of October 26, 1996, the Company held 173,900 ounces of gold on consignment with a market value of $66,541,000. The consignment agreements contain certain restrictive covenants relating to maximum usage, net worth, working capital and other financial ratios and each of the agreements requires the Company to own a specific amount of gold at all times. At October 26, 1996, the Company was in compliance with the covenants in its consignment agreements and the Company's owned gold inventory was valued at approximately $6,304,000. Management believes that the supply of gold available through the Company's gold consignment arrangements, in conjunction with the Company's owned gold, is sufficient to meet the Company's requirements. The consignment agreements are terminable by the Company or the respective Gold Lenders upon 30 days notice. If any Gold Lender were to terminate its existing gold consignment arrangement, the Company does not believe it would experience an interruption of its gold supply that would materially adversely affect its business. The Company believes that other consignors would be willing to enter into similar arrangements if any Gold Lender terminates its relationship with the Company. On August 21, 1996 and September 19, 1996, the Company received notice from two existing Gold Lenders that they both plan to discontinue their involvement in the jewelry lending business and will be terminating their respective consignment agreements with the Company in February 1997. This will reduce the aggregate ounces the Company is entitled to lease from 250,000 ounces of fine gold to 243,000, with an aggregate value equal to $105,975,000. However, based upon current and anticipated needs, this change will not have any impact on the Company. -12- 13 ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED) Liquidity and Capital Resources (Continued) - ------------------------------------------- Consigned gold is not included in the Company's inventory, and there is no related liability recorded. As a result of these consignment arrangements, the Company is able to shift a substantial portion of the risk of market fluctuations in the price of gold to the Gold Lenders, since the Company does not purchase gold from the Gold Lenders until receipt of a purchase order from, or shipment of jewelry to, its customers. The Company then either locks in the selling price of the jewelry to its customers concurrently with the required purchase of gold from the Gold Lenders or hedges against changes in the price of gold by entering into forward contracts or purchasing futures or options on futures that are listed on the COMEX. While the Company believes its supply of gold is relatively secure, significant increases or rapid fluctuations in the cost of gold may result in reduced demand for the Company's products. From January 28, 1996 until October 26, 1996, the closing price of gold according to the Second London Gold Fix ranged from a low of $379 per ounce to a high of nearly $415 per ounce. There can be no assurances that fluctuations in the precious metals and credit markets would not result in an interruption of the Company's gold supply or the credit arrangements necessary to allow the Company to support its accounts receivable and continue the use of consigned gold. In each of 1987 and 1992, the Company issued $10,000,000 principal amount of senior secured notes with various insurance companies, which accrue interest at 10.5% and 8.61% per annum, respectively. In February 1995, the Company issued an additional $6,000,000 principal amount of senior secured notes with various insurance companies, which currently accrue interest at 7.00% per annum. The various insurance company lenders are collectively referred to as the "Senior Note Holders". These notes are secured by the Company's accounts receivable, machinery and equipment, inventory (secondary lien to the Gold Lenders) and proceeds. In addition, the note purchase agreements contain certain restrictive financial covenants and restrict the payment of dividends. At October 26, 1996, the Company was in compliance with the covenants and $15,917,000 of principal remained outstanding under the notes issued in 1987, 1992 and 1995. On October 6, 1995, the Company obtained a loan from a bank in the amount of $2,500,000. As collateral for the loan, the Company granted the bank a first mortgage on the Company's corporate headquarters. The mortgage has a ten-year term and interest on the mortgage accrues at 8% per annum. In addition, the mortgage contains certain restrictive financial covenants. At October 26, 1996, the Company was in compliance with the covenants and $2,408,000 of principal remained outstanding under the mortgage. -13- 14 ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED) Liquidity and Capital Resources (Continued) - ------------------------------------------- In September 1994, the Company entered into a line of credit arrangement with a commercial bank (the "Line of Credit"), under which the Company may borrow up to $15,000,000. The Line of Credit is secured by certain assets of the Company, including accounts receivable and inventory. As of October 26, 1996, there was no amount outstanding under the Line of Credit. As of November 21, 1996, $4,100,000 was outstanding under the Line of Credit. The Line of Credit currently expires on July 31, 1997, subject to annual renewal. Cash and marketable securities decreased from $6,673,000 at January 27, 1996 to $6,000 at October 26, 1996. This decrease was primarily due to the Company's seasonal increase in accounts receivable and inventory. During the nine months ended October 26, 1996, the Company used $833,000 of cash from operations as compared with $12,013,000 for the comparable period last year. The decrease is primarily due to (i) improved collections of accounts receivable and (ii) increased accounts payable, principally due to seasonal gold purchases and the timing of payments. Cash of $2,643,000 was used for investing activities, comprised of equipment purchases, as compared to $3,905,000 used for equipment and land purchases during the comparable nine-month period last year. Cash of $3,191,000 was used for financing activities during the nine-month period, primarily representing scheduled payments of long-term debt. As part of its long-term strategic planning, the Company is negotiating an agreement to expand its manufacturing and distribution facilities by acquiring certain properties it is currently leasing from MacQuesten Realty Company ("MRC") (the "Leased Properties"). In the event the Company acquires any of such properties, the Company may incur or assume additional long-term indebtedness in order to finance their purchase. For the balance of fiscal 1997, the Company projects capital expenditures of approximately $900,000, which includes certain improvements on its leased and owned properties, but does not include any other expenses related to the possible acquisition of the Leased Properties. The Company believes that its long-term debt and existing lines of credit provide sufficient funding for the Company's operations. Except with respect to financing for the possible acquisition of its Leased Properties as discussed above, the Company believes that its long-term debt and existing lines of credit provide sufficient funding for the Company's operations. In the event that the Company requires additional financing during fiscal 1997, it will be necessary to fund this require- -14- 15 ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED) Liquidity and Capital Resources (Continued) - ------------------------------------------- ment through expanded credit facilities with its existing or other lenders. The Company believes that such additional financing can be arranged. On November 18, 1996, the Company terminated its acquisition negotiations with OroAmerica, Inc. Included in selling, general and administrative expenses for the three and nine months ended October 26, 1996 was a pre-tax charge of $275,000 related to the terminated acquisition. -15- 16 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1 through Item 5 Not applicable. Item 6. (a) Exhibits -------- 10.1 Amendment to the 1993 Long Term Incentive Plan 10.2 Amendment to the Non-Employee Directors' Plan 27 Financial Data Schedule (b) Reports on Form 8-K ------------------- Not applicable. -16- 17 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES 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. MICHAEL ANTHONY JEWELERS, INC. Dated: November 27, 1996 By:/s/Allan Corn ------------------------ Allan Corn Senior Vice President and Chief Financial Officer -17- 18 EXHIBIT INDEX TO FORM 10-Q FOR QUARTER ENDED OCTOBER 26, 1996 Exhibit No. Page No. - ---------- ------- 10.1 Amendment to the 1993 Long Term Incentive Plan 18 10.2 Amendment to the Non-Employee Directors' Plan 20 27 Financial Data Schedule 22 -18- EX-10.1 2 EXHIBIT 10.1 1 Exhibit 10.1 AMENDMENT TO THE 1993 LONG-TERM INCENTIVE PLAN OF MICHAEL ANTHONY JEWELERS, INC. 1. Section 2.6 of the Plan is hereby amended by adding the phrase ",to the extent practical," after the word "eligibility" in the phrase "whose members meet the requirements for eligibility to serve" near the end of the sentence. 2. Section 3 of the Plan is hereby amended to increase the number of Shares reserved for use, upon the issuance, vesting or exercise of Awards to be granted from time to time under the Plan, from 1,000,000 to 2,000,000 Shares. 3. Section 4 of the Plan is hereby amended by deleting the first two sentences of the paragraph and adding the following three sentences at the beginning of the paragraph: "The Board may appoint a Committee to administer the Plan, which Committee shall consist of not less than two (2) disinterested directors, to the extent practical, as defined in Rule 16b-3. Subject to the provisions of the Plan, the Committee or the Board shall have full authority, in its discretion, to determine the Employees to whom Awards shall be granted, the number of Shares to be covered by each of the Awards, and the terms of any such Award; to amend or cancel Awards (subject to Section 23 of the Plan), to accelerate the vesting of Awards; to require the cancellation or surrender of any previously granted awards under this Plan or any other plans of the Company as a condition to the granting of an Award, to interpret the Plan; and to prescribe, amend, and rescind rules and regulations relating to the Plan, and generally to interpret and determine any and all matters whatsoever relating to the administration of the Plan and the granting of Awards hereunder. Notwithstanding anything in the Plan to the contrary any and all rights conferred upon the Committee shall also be conferred upon the Board." 4. Section 17 of the Plan is hereby amended by adding the phrase "(other than Awards of non-qualified stock options, which Awards may be freely transferred by the recipient upon prior written notice to the Company)" after the words "An Award" at the beginning of the first sentence in the paragraph. 5. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Plan. 6. This Amendment No. 2 to the Plan shall be effective when approved by the Board. Unless this Amendment No. 2 to the Plan is approved by the affirmative votes of the holder of shares having a majority of the voting power of all shares represented at a meeting duly held in accordance with Delaware law within twelve (12) months after being approved by the Board, this Amendment No. 2 and all Awards granted under it shall be void and of no force and effect. 2 As approved by the Board of Directors of the Company on November 8, 1996, subject to stockholder approval. EX-10.2 3 EXHIBIT 10.2 1 Exhibit 10.2 AMENDMENT NO. 1 TO THE NON-EMPLOYEE DIRECTORS' PLAN OF MICHAEL ANTHONY JEWELERS, INC. 1. Section 2.4 of the Plan is hereby amended by adding the phrase ",to the extent practical," after the word "eligibility" in the phrase "whose members meet the requirements for eligibility to serve" near the end of the sentence. 2. Section 4 of the Plan is hereby amended by deleting the first two sentences of the paragraph and adding the following three sentences at the beginning of the paragraph: "The Board may appoint a Committee to administer the Plan, which Committee shall consist of not less than two (2) disinterested directors, to the extent practical, as defined in Rule 16b- 3. Subject to the provisions of the Plan, the Committee or the Board shall have full authority, in its discretion, to interpret the Plan, to prescribe, amend, and rescind rules and regulations relating to the Plan, and generally to interpret and determine any and all matters whatsoever relating to the administration of the Plan and the granting of Options hereunder. Notwithstanding anything in the Plan to the contrary any and all rights conferred upon the Committee shall also be conferred upon the Board." 3. Section 7.1 of the Plan is hereby amended by deleting the phrase "held for more than six (6) months," from the second sentence of the paragraph. 4. Section 9 of the Plan is hereby amended by deleting the existing paragraph in its entirety and replacing it with the following: "TRANSFERABILITY OF OPTIONS. An Option granted under the Plan shall be freely transferable by the recipient, as long as the recipient shall notify the Company prior to the transfer of such Option." 5. Section 15 of the Plan is hereby amended by deleting the following sentence from said paragraph: "Notwithstanding the foregoing, the Plan may not be amended more than once every six (6) months to change the Plan provisions listed in section (c)(2)(ii)(A) of Rule 16b-3, other than to comport with changes in the Code, ERISA or Rule 16b-3." 6. Capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Plan. 2 7. This Amendment No. 1 to the Plan shall be effective when approved by the Board. As approved by the Board of Directors of the Company on November 8, 1996. EX-27 4 EXHIBIT 27
5 THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS FOR MICHAEL ANTHONY JEWELERS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 3-MOS JAN-25-1997 JUL-28-1996 OCT-26-1996 6 0 38,772 (1,326) 21,446 60,636 37,893 19,259 81,012 17,129 16,066 8 0 0 46,771 81,012 48,772 48,772 39,800 39,800 5,751 140 775 2,306 878 0 0 0 0 1,428 .17 0
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