-----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, CSRd12EcGHGbjdZsu+WEoBpUK2wn30a4JJred0fQY/EvqFvaCApfQvyl1b6bCvqn 4QffXv8rXP6YH4q/xFOfXA== 0000950152-02-004726.txt : 20020607 0000950152-02-004726.hdr.sgml : 20020607 20020606160038 ACCESSION NUMBER: 0000950152-02-004726 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020504 FILED AS OF DATE: 20020606 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: 0130 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10645 FILM NUMBER: 02672275 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 l94782ae10vq.txt MICHAEL ANTHONY JEWELERS, INC. FORM 10-Q 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 May 4, 2002 Commission file number: 015230 MICHAEL ANTHONY JEWELERS, INC. (Exact name of registrant as specified in its charter) Delaware No. 13-2910285 (State of Incorporation) (I.R.S. Employer Identification No.) 115 South MacQuesten Parkway Mount Vernon, New York 10550-1724 (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 June 5, 2002 ------------ 6,238,234 -1- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES INDEX
PAGE ---- PART I FINANCIAL INFORMATION: ITEM 1. FINANCIAL STATEMENTS Consolidated Condensed Balance Sheets, May 4, 2002 (Unaudited) and February 2, 2002................................................................................ 3 Consolidated Condensed Statements of Operations, Three-Month Period Ended May 4, 2002 and April 28, 2001 (Unaudited) ..................................................... 4 Consolidated Condensed Statement of Changes in Stockholders' Equity, Three-Month Period Ended May 4, 2002 (Unaudited)......................................................................... 5 Consolidated Condensed Statements of Cash Flows, Three-Month Period Ended May 4, 2002 and April 28, 2001 (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- MICHAEL ANTHONY JEWELERS, INC. CONSOLIDATED CONDENSED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
May 4, February 2, 2002 2002 -------- -------- (Unaudited) ASSETS - ------ CURRENT ASSETS: Cash and equivalents $ 101 $ 2,129 Accounts receivable: Trade (less allowances of $1,330 and $2,536, respectively) 23,211 17,067 Other 128 153 Inventories 25,133 25,826 Prepaid expenses and other current assets 1,693 1,544 Deferred taxes 672 672 -------- -------- Total current assets 50,938 47,391 PROPERTY, PLANT AND EQUIPMENT - net 17,008 17,605 INTANGIBLES - net - -- OTHER ASSETS 362 364 -------- -------- $ 68,308 $ 65,360 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY - ------------------------------------ CURRENT LIABILITIES: Accounts payable - trade $ 4,773 $ 2,321 Line of credit 7,200 3,300 Current portion of long-term debt and lease liability 1,852 1,820 Accrued expenses 2,092 3,952 Taxes payable 147 1,274 -------- -------- Total current liabilities 16,064 12,667 -------- -------- LONG-TERM DEBT 8,690 9,166 DEFERRED TAXES 35 35 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; 8,379,000 shares issued and outstanding as of May 4, 2002 and and February 2, 2002, respectively 8 8 Additional paid-in capital 32,371 32,221 Retained earnings 17,465 17,753 Accumulated comprehensive income/(loss) 104 (61) Treasury stock, at cost, 2,143,000 shares as of May 4, 2002 and February 2, 2002, respectively (6,429) (6,429) -------- -------- Total stockholders' equity 43,519 43,492 -------- -------- $ 68,308 $ 65,360 ======== ========
See accompanying notes to the consolidated condensed financial statements. -3- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT EARNINGS PER SHARE) THREE MONTHS ENDED -------------------- May 4, April 28, 2002 2001 -------- -------- NET SALES $30,135 $29,176 COST OF GOODS SOLD 24,270 23,920 -------- -------- GROSS PROFIT ON SALES 5,865 5,256 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES 5,685 5,119 NON-CASH STOCK COMPENSATION 150 -- -------- -------- OPERATING INCOME 30 137 OTHER INCOME/(EXPENSE): Gold consignment fee (311) (250) Interest expense (200) (247) Interest income 6 34 Other income 11 7 -------- -------- Total Other Expense (494) (456) -------- -------- LOSS BEFORE INCOME TAXES (464) (319) INCOME TAX BENEFIT (176) (116) -------- -------- NET LOSS $(288) $(203) ======== ======== LOSS PER SHARE - BASIC AND DILUTED $(0.05) ($0.03) ======== ======== WEIGHTED AVERAGE NUMBER OF SHARES - BASIC AND DILUTED 6,237 6,221 ======== ======== See accompanying notes to the consolidated condensed financial statements. -4- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (IN THOUSANDS)
Common Stock Additional Accumulated Treasury Stock ------------------ Paid-In Retained Comprehensive ------------------- Shares Dollars Capital Earnings Income/(Loss) Shares Dollars Total ------ ------- ------- -------- -------------- ------ ------- ----- Balance - February 2, 2002 8,329 $ 8 $32,221 $17,753 $(61) (2,143) $(6,429) $43,492 Issuance of stock 50 - 150 - - - - 150 Comprehensive Income: Change in fair value of Cash flow hedges - - - - 165 - - 165 Net loss - - - (288) - - - (288) ------- ----- ----------- -------- ------- --------- ---------- --------- Total Comprehensive income - - - (288) 165 - - (123) ------- ----- ----------- -------- ------ --------- ---------- --------- Balance - May 4, 2002 8,379 $ 8 $32,371 $17,465 $104 (2,143) $(6,429) $43,519 ======= ===== =========== ======== ====== ========= ========== =========
See accompanying notes to the consolidated condensed financial statements. -5- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
Three Months Ended --------------------- May 4, April 28, 2002 2001 -------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: Net loss $(288) $(203) Adjustments to reconcile net income to net cash Provided by operating activities: Depreciation and amortization 809 895 Provision for accounts receivable (25) (30) Provision for sales returns (2,951) (1,926) Non-cash stock compensation 150 -- (Increase)/decrease in operating assets: Accounts receivable (3,193) (6,007) Inventories 693 (1,488) Prepaid expenses and other current assets (149) (48) Other assets (4) 92 Increase/(decrease) in operating liabilities: Accounts payable 2,452 4,167 Accrued expenses (1,695) (514) Taxes payable (1,127) (114) ------- ------- Net cash used in operating activities (5,278) (5,176) ------- ------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment - net (206) (411) ------- ------- Net cash used in investing activities (206) (411) ------- ------- CASH FLOWS FROM FINANCING ACTIVITIES: Principal payments of long-term debt and capital lease liabilities (444) (414) Proceeds from line of credit 3,900 2,500 Purchase of treasury stock -- (16) ------- ------- Net cash provided by financing activities 3,456 2,070 ------- ------- DECREASE IN CASH AND EQUIVALAENTS (2,028) (3,517) CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 2,129 4,114 ------- ------- CASH AND EQUIVALENTS AT END OF PERIOD $101 $599 ======= ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the period for: Interest and gold consignment fees $628 $634 Taxes $581 $ --
See accompanying notes to the consolidated condensed financial statements. -6- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 4, 2002 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 2, 2002 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The unaudited condensed consolidated financial statements as of May 4, 2002 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 2002 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. RECLASSIFICATIONS Certain reclassifications were made to the prior year's financial statements to conform to the current year's presentation. EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141), which supersedes APB Opinion No. 16, "Business Combinations". SFAS No. 141 eliminates the pooling-of-interests method of accounting for business combinations and modifies the application of the purchase accounting method. The elimination of the pooling-of-interests method is effective for transactions initiated after June 30, 2001. The remaining provisions of SFAS No. 141 will be effective for transactions accounted for using the purchase method that are completed after June 30, 2001. The Company has reviewed the statement, and has determined that the new standard does not have any effect on its financial statements. -7- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 4, 2002 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 2, 2002 IS UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS (Continued) In July 2001, the FASB also issued Statement of Financial Accounting Standards No. 142, "Goodwill and Intangible Assets" (SFAS No. 142), which supersedes APB Opinion No. 17, "Intangible Assets". SFAS No. 142 eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets, addresses the amortization of intangible assets with a defined life and addresses the impairment testing and recognition for goodwill and intangible assets. SFAS 142 will apply to goodwill and intangible assets arising from transactions completed before and after the Statement's effective date. SFAS No. 142 is effective for fiscal 2003. The Company has reviewed the statement, and has determined that the new standard does not have any effect on its financial statements. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets. SFAS No. 144 requires that those long-lived assets be measured at the lower of carrying amount of fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Therefore, discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not occurred. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, is to be applied prospectively. The Company has reviewed the statement, and has determined that the new standard does not have any effect on its financial statements. In November 2001, the FASB Emerging Issues Task Force released Issue 01-9, "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)." The scope of Issue 01-9 includes vendor consideration to any purchasers of the vendor's products at any point along the distribution chain, regardless of whether the purchaser receiving the consideration is a direct customer of the vendor. Issue 01-9 is to be applied to annual or interim periods beginning after December 15, 2001. The Company has reviewed the statement, and has determined that the new standard does not have any effect on its financial statements. 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 ordered or shipped to the customer, 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. -8- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 4, 2002 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 2, 2002 IS UNAUDITED) 2. PRODUCT PRICING (Continued) The Company has recorded a $104,000 gain as a component of other comprehensive income related to the gold price hedge. 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 selling price of gold in the current quarter was $292 per ounce compared to $272 per ounce for the quarter ended May 4, 2002. 3. INVENTORIES Inventories consist of: May 4, February 2, 2002 2002 ---------- -------- (Unaudited) (In thousands) Finished goods $46,426 $42,151 Work in process 21,380 18,494 Raw materials 6,767 5,816 -------- ------- 74,573 66,461 Less: Consigned gold 49,440 40,635 -------- ------- $25,133 $25,826 ======== ======= Inventories as of May 4, 2002 and February 2, 2002 excluded approximately 159,000 and 149,000 ounces of gold on consignment, respectively. 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. On April 4, 1997, the Board of Directors authorized an increase of an additional 500,000 shares of Common Stock that the Company may repurchase under the Stock Repurchase Plan. On May 26, 1998, the Board of Directors authorized an increase of up to an additional 1,000,000 shares of common stock that the Company may repurchase under the Stock Repurchase Plan. As of May 4, 2002, the Company had purchased a total of 2,143,000 shares on the open market for an aggregate cost of approximately $6,429,000, of which 60,000 shares have been retired. -9- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 2, 2002 IS UNAUDITED) RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 4, 2002 AND APRIL 28, 2001 Net sales for the three months ended May 4, 2002 were approximately $30,135,000, an increase of 3.3% from net sales of approximately $29,176,000 for the comparable period last year. The increase in sales was primarily due to the increase in the average gold price, $292 per ounce compared to $272 per ounce for the comparable period last year. Gross profit margin increased to approximately 19.5% of net sales for the three months ended May 4, 2002 compared to approximately 18.0% for the comparable period last year, primarily due to a change in the product and customer mix. Selling, general and administrative expenses for the three months ended May 4, 2002 were approximately $5,685,000, an increase of $566,000 or 11.1% from approximately $5,119,000 for the comparable period last year. The increase is primarily attributable to increases in payroll and payroll related expenses and advertising expenses. Interest expense and gold consignment fees for the three months ended May 4, 2002 were approximately $494,000, an increase of $38,000 or 8.3% compared to approximately $456,000 for the comparable period last year. The increase was primarily due to the higher gold price and the Company's higher consignment levels. The effective income tax rate was approximately 38.0% for the three months ended May 4, 2002 and 36.3% for the three months ended April 28, 2001. As a result of the above factors, the Company had a net loss for the three months ended May 4, 2002 of $288,000 compared to a net loss of $203,000 for the comparable period last year. Basic and diluted loss per share for the three months ended May 4, 2002 was $.05 compared to $.03 for the comparable period last year on a .3% increase in weighted average shares outstanding. -10- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 2, 2002 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 240,000 ounces of fine gold or (ii) consigned gold with an aggregate value equal to $79,000,000. 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 May 4, 2002, the Company held approximately 159,000 ounces of gold on consignment with a market value of approximately $49,440,000. 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 May 4, 2002, the Company was in compliance with the covenants in its consignment agreements and the Company's owned gold inventory was valued at approximately $4,682,000. 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. 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, projection, or shipment of jewelry to, its customers. -11- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 2, 2002 IS UNAUDITED) LIQUIDITY AND CAPITAL RESOURCES (Continued) The Company then either establishes 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 February 2, 2002 until May 4, 2002, the closing price of gold according to the Second London Gold Fix ranged from a low of $287 per ounce to a high of nearly $311 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. On January 27, 1999, the Company repaid its long-term debt with the insurance companies by obtaining a loan from a new lender in the amount of $10,444,000. As collateral for the loan, the Company granted the lender a lien on the Company's machinery and equipment. The loan has an eight-year term and will accrue interest at 6.85%. The loan does not contain any restrictive financial covenants. At May 4, 2002, $7,614,000 of principal remained outstanding under the loan. On February 10, 1999, Michael Anthony obtained a loan in the amount of $937,500. As collateral for the loan, the Company granted the lender a first mortgage on one of its manufacturing facilities. The mortgage has a fifteen-year term and accrues interest at an annual rate of 7.05%. At May 4, 2002, $813,000 of principal remained outstanding under the loan. In October 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 May 4, 2002, the Company was in compliance with the covenants and $1,747,000 of principal remained outstanding under the mortgage. On September 16, 1999, the Company acquired two buildings which house two manufacturing facilities, located at 70 and 60 South MacQuesten Parkway, Mount Vernon, NY from MacQuesten Realty Company for a price of $2,450,000. The Company incurred $929,000 of long term debt, which has a four-year term and accrues interest at an annual rate of 7.50%, and paid the balance with cash from its operations. At May 4, 2002, $368,000 of principal remained outstanding under the loan. -12- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 2, 2002 IS UNAUDITED) LIQUIDITY AND CAPITAL RESOURCES (Continued) The Company has a line of credit arrangement with a commercial bank which varies seasonally from $10,000,000 to $18,350,000 (the "Line of Credit"). The Line of Credit is secured by certain assets of the Company, including accounts receivable and inventory. As of May 4, 2002 $7,200,000 was outstanding under the Line of Credit. During the three months ended May 4, 2002, cash used in operating activities was $5,278,000. During the comparable period of the prior year, the Company used $5,176,000 of cash in operating activities, primarily due to the increased accounts receivable and a decrease in the provision for sales returns. Cash of $206,000 was used in investing activities as compared to $411,000 used during the comparable three-month period last year. The decrease is primarily due to decreases in the Company's purchase of machinery and equipment. Cash of $3,456,000 was provided by financing activities during the three-month period, compared to $2,070,000 in the comparable period of the prior year. The increase was primarily due to the Company's borrowings on its line of credit. For the balance of fiscal 2003, the Company projects capital expenditures of approximately $1,300,000. 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 2003, it will be necessary to fund this requirement through expanded credit facilities with its existing or other lenders. The Company believes that such additional financing can be arranged. FORWARD LOOKING STATEMENTS This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include the words "believe," "expect," "plans" or similar words and are based in part on the Company's reasonable expectations and are subject to a number of factors and risks, many of which are beyond the Company's control. Actual results could differ materially from those discussed under "Management's Discussion and Analysis of Financial Condition and Results of Operations" as a result of any of the following factors: -13- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 2, 2002 IS UNAUDITED) FORWARD LOOKING STATEMENTS (Cont'd) a) general economic conditions and their impact on the retail environment; b) fluctuations in the price of gold and other metals used to manufacture the Company's jewelry; c) risks related to the concentration of the Company's customers, particularly the operations of any of its top customers; d) increased competition from outside the United States where labor costs are substantially lower; e) variability of customer requirements and the nature of customers' commitments on projections and orders; and f) the extent to which the Company is able to attract and retain key personnel. In light of these uncertainties and risks, there can be no assurance that the forward-looking statements in this Quarterly Report on Form 10-Q will occur or continue in the future. Except for its required, periodic filings under the Securities Exchange Act of 1934, the Company undertakes no obligations to release publicly any revisions to these forward looking statements that may reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS. In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141), which supersedes APB Opinion No. 16, "Business Combinations". SFAS No. 141 eliminates the pooling-of-interests method of accounting for business combinations and modifies the application of the purchase accounting method. The elimination of the pooling-of-interests method is effective for transactions initiated after June 30, 2001. The remaining provisions of SFAS No. 141 will be effective for transactions accounted for using the purchase method that are completed after June 30, 2001. The Company has reviewed the statement, and has determined that the new standard does not have any effect on its financial statements. -14- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 2, 2002 IS UNAUDITED) EFFECT OF RECENTLY ISSUED ACCOUNTING STANDARDS (Continued) - ---------------------------------------------- In July 2001, the FASB also issued Statement of Financial Accounting Standards No. 142, "Goodwill and Intangible Assets" (SFAS No. 142), which supersedes APB Opinion No. 17, "Intangible Assets". SFAS No. 142 eliminates the current requirement to amortize goodwill and indefinite-lived intangible assets, addresses the amortization of intangible assets with a defined life and addresses the impairment testing and recognition for goodwill and intangible assets. SFAS 142 will apply to goodwill and intangible assets arising from transactions completed before and after the Statement's effective date. SFAS No. 142 is effective for fiscal 2003. The Company has reviewed the statement, and has determined that the new standard does not have any effect on its financial statements. In August 2001, the FASB issued SFAS No. 144, Accounting for the Impairment of Disposal of Long-Lived Assets. SFAS No. 144 requires that those long-lived assets be measured at the lower of carrying amount of fair value less cost to sell, whether reported in continuing operations or in discontinued operations. Therefore, discontinued operations will no longer be measured at net realizable value or include amounts for operating losses that have not occurred. SFAS No. 144 is effective for financial statements issued for fiscal years beginning after December 15, 2001 and, generally, is to be applied prospectively. The Company has reviewed the statement, and has determined that the new standard does not have any effect on its financial statements. In November 2001, the FASB Emerging Issues Task Force released Issue 01-9, "Accounting for Consideration Given by a Vendor to a Customer (Including a Reseller of the Vendor's Products)." The scope of Issue 01-9 includes vendor consideration to any purchasers of the vendor's products at any point along the distribution chain, regardless of whether the purchaser receiving the consideration is a direct customer of the vendor. Issue 01-9 is to be applied to annual or interim periods beginning after December 15, 2001. The Company has reviewed the statement, and has determined that the new standard does not have any effect on its financial statements. -15- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1 and 2 Not applicable. Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of the current nature of these instruments. The carrying amount reported for revolving credit and long-term debt approximate fair value because of the interest rates on these instruments approximate current market rates. Because the interest rates on our long term debt is fixed and our revolving debt is utilized seasonally we do not hedge against interest rate increases. 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 form, 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. All of our revenues are realized in U.S. dollars and all of our revenues are from customers in the United States. Therefore, we do not believe we face significant direct foreign currency exchange rate risk. We do not hedge against foreign currency exchange rate changes. Item 4 and 5 Not applicable Item 6. (a) Reports On Form 8-K ------------------- Not applicable. -16- 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: June 6, 2002 BY: /S/ ALLAN CORN ---------------------------- Allan Corn Senior Vice President and Chief Financial Officer -17- -----END PRIVACY-ENHANCED MESSAGE-----