FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 or 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the fiscal year ended December 31, 1994
( ) 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 1-5292
MEM COMPANY, INC.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
NEW YORK 13-5546930
------------------------------- -------------------
(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
UNION STREET EXTENSION
NORTHVALE, NEW JERSEY 07647
--------------------------------------- ----------
(Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (201) 767-0100
Securities registered pursuant to Section 12 (b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- ----------------------
Common stock, $.05 par value American Stock Exchange
Securities registered pursuant to Section 12 (g) of the Act:
NONE
<PAGE>
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 ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
There were 2,580,184 shares of the Registrant's Common Stock outstanding at
March 15, 1995. The aggregate market value of the Common Stock held by
non-affiliates of the Registrant (based upon the closing price of the stock on
the American Stock Exchange as reported in The Wall Street Journal) on March 15,
1995 was $2,584,890.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents, or portions thereof, have been incorporated herein by
reference:
(i) portions of the Registrant's definitive proxy statement to be furnished in
connection with its Annual Meeting of Shareholders to be held April 27, 1995
(the "Definitive Proxy Statement") have been incorporated by reference in Part
III hereof.
PART I
Item 1. Business
(a) General Development of Business
MEM Company, Inc. (the "Company" or the "Registrant") was incorporated in
1948 under the laws of the State of New York. The business of the Company
principally consists of manufacturing, selling and distributing a diversified
line of toiletries in several fragrance groups. These are marketed under the
nationally advertised trademarks English Leather(R), Heaven Sent(R), LOVE'S(R)
and Tinkerbell(R). The Company also markets Acqua di Selva(R), a premium priced
imported line of men's toiletries, through a subsidiary.
In May 1994, the Company acquired the trademark and inventories relating
to the British Sterling(R) fragrance line of men's products. In mid 1994, the
Company introduced the Timberline(R) fragrance line for young men in the
"Generation X" category. In the women's product category, the Company began
marketing its Heaven Sent Vanilla line and also introduced the Love's Frenzy(R)
and Love's Clean & Natural product lines.
The Company manufactures and markets Heaven Sent(R), a line of women's
fragrance items, in the United States and Canada and owns the distribution
rights in Puerto Rico and elsewhere in the Western Hemisphere. The Company also
manufactures and distributes, under the trademark LOVE'S(R), a line of
toiletries, cosmetics and accessories for teenage girls which are distributed
through franchised dealers consisting primarily of chain and independent drug
stores, mass merchandisers and department stores in the United States and
Canada.
Tom Fields, Ltd. ("Tom Fields"), operates as a division of the Company.
Tom Fields manufactures and markets a line of children's cosmetics and
accessories principally under the trademark Tinkerbell(R). A subsidiary, Tom
Fields (U.K.) Ltd., markets this line of children's products in the United
Kingdom and in Europe.
The principal market for all of the above products is the United States.
With the exception of the new brands acquired or introduced in 1994, no
significant change occurred during the fiscal year 1994 in kinds of products,
markets or methods of distribution.
(b) Financial Information About Industry Segments
The Company operates in one industry segment: the production and
distribution of toiletries and accessories for men, women and children.
Consolidated financial information relating to product lines, domestic and
foreign operations and export sales for the years ended December 31 is as
follows ($000 omitted):
<TABLE>
<CAPTION>
------------------------------------------------------------
1994 1993 1992
------------------------------------------------------------
<S> <C> <C> <C>
Sales by product lines:
English Leather and
other men's $29,484 $17,287 $18,348
Women's 12,623 11,171 13,188
Tinkerbell 10,987 9,996 13,215
------- ------- -------
$53,094 $38,454 $44,751
======= ======= =======
Sales to unaffiliated
customers:
United States $46,029 $31,798 $36,650
Canada 2,894 2,709 3,684
United Kingdom 3,144 2,502 2,729
Export sales to other
countries 1,027 1,445 1,688
------- ------- -------
$53,094 $38,454 $44,751
======= ======= =======
Income (loss) before
interest & taxes:
United States $ (169) $(1,665) $(3,557)
Canada (15) (316) 5
United Kingdom (32) (100) (226)
------- ------- -------
$ (216) $(2,081) $ 3,778
======= ======= =======
Identifiable assets:
United States $42,772 $29,983 $33,705
Canada 2,763 2,881 4,074
United Kingdom 1,726 1,418 1,735
------- ------- -------
$47,261 $34,282 $39,514
======= ======= =======
------------------------------------------------------------
</TABLE>
(c) Narrative Description of Business
The Company is principally engaged in the manufacture, sale and
distribution of a diversified line of toiletries and accessories under the
nationally advertised trademarks English Leather(R), British Sterling(R),
Timberline(R), Love's(R), Heaven Sent(R) and Tinkerbell(R). The principal market
for these products is the continental United States with a distribution service
network consisting of three warehouse locations.
The primary shipping location is Northvale, New Jersey and two other
distribution warehouses are located in Texas and California. At the end of 1994,
the Company terminated its arrangement with a distribution facility in Georgia.
The toiletries industry is highly competitive and, based on available industry
sources, the Company believes that it is among the leading producers of products
sold within the same price range as its products.
Although the Company and its subsidiaries are not dependent upon a single
customer or a very few customers for their business, one national customer
represented 14% of net sales in 1994. The Company has done substantial business
with this customer for several years and feels they have a good business
relationship. Although the total loss of business with the customer would have a
material adverse effect, the Company considers that possibility to be remote.
Due to the seasonal nature of the business and the heavy volume of shipments
made in the last half of the year, there was no significant backlog of orders as
of December 31, 1994 or 1993. In 1994 and 1993 the last half of the calendar
year accounted for 79% and 82% of net sales, respectively. The related inventory
requirements and accounts receivable are financed by the Company's revolving
credit agreement. Present supply sources are adequate for the requirements of
the business and several alternate sources are available if needed. For
protection against misuse by others, the trademarks under which most of the
toiletry and accessory products are sold by the Company have been registered in
the United States Patent Office and in many other countries. At December 31,
1994, the Company and its subsidiaries employed 411 persons.
The Company's terms of sale do not provide the purchaser any right to
return merchandise to the Company. Returns of merchandise which has been damaged
and of seasonal merchandise must be approved by the Company before the customer
receives credit, which the Company does not unreasonably withhold. Orders are
generally shipped promptly after receipt and cancellations have been negligible.
The Company owns the majority of the trademarks under which it markets its
products and for which it pays no royalties. It uses certain trademarks pursuant
to licensing agreements which generally provide for royalties based on the net
sales volume of trademarked products. In 1993 the Company exercised its option
to make a one time $500,000 payment under a licensing agreement in lieu of
making any future royalty payments under the agreement. Royalties were not a
material portion of the Company's costs during the Company's last three fiscal
years. All the licenses are of perpetual duration.
The Company's expenditures for research and development were immaterial
during the years ended December 31, 1994, 1993 and 1992.
Item 1A. Executive Officers of the Registrant
(See Item 10 herein)
All of the officers set forth below have been elected to serve until the
next Annual Meeting of the Company's Board of Directors or until their
successors are elected and qualified.
<TABLE>
<CAPTION>
Officer
Name Office Held Age Since
---- ----------- --- -------
<S> <C> <C> <C>
Gay A. Mayer Chairman of the 52 1966
Board, President,
Chief Executive Officer
Michael G. Executive Vice President, 51 1990
Kazimir, Jr. Chief Operating Officer,
Chief Financial Officer
Steven M. Vice President, Sales 47 1991
Feigenbaum
Robert O. Hurry Vice President, Finance 56 1966
and Treasurer
Donald E. Jensen Vice President, Operations 50 1994
Nicholas J. Vice President, Marketing 47 1994
Marinacci
Margaret A. Secretary 60 1983
Powers
-------------------
</TABLE>
All officers serve at the pleasure of the Board of Directors. All of the
above executive officers have served in such offices for the past five years
except Messrs. Kazimir, Feigenbaum, Jensen and Marinacci.
Mr. Kazimir was elected Executive Vice President and Chief Operating
Officer in March, 1993. Previously, he had been Senior Vice President of Finance
and Administration, Chief Financial Officer since November, 1990. He had been
the President of his own consulting firm for two years prior to joining MEM.
Before that he was with Elizabeth Arden, Inc. in various financial and operating
capacities.
Mr. Feigenbaum, before becoming Vice President of Sales in 1991, was
National Sales Manager since 1989. Other previous positions with MEM included
National Field Sales Manager and National Key Accounts Manager.
Mr. Jensen, before becoming Vice President of Operations in 1994, was
Director of Operations since 1993. Prior to that, he was Director of
Manufacturing since his employment in 1986.
Mr. Marinacci, prior to becoming Vice President of Marketing in 1994, had
been employed by Houbigant, Inc. since 1989 in various capacities. From March
1993 to April 1994, he was Vice President of Operations and in 1992 and 1993 he
was Vice President, Corporate Marketing. From 1989 to 1992 he held various
marketing positions. Houbigant, Inc. entered Chapter 11 proceedings in November,
1993, and Mr. Marinacci also served as acting Chief Operating Officer from
December, 1993 to April, 1994.
Item 2. Properties
The facilities and plant machinery and equipment owned by the Company and
its subsidiaries are, in the opinion of management, adequate for the conduct of
its business, and are well maintained and in good condition.
The Company's executive offices and main plant are located in a 206,000
square foot building located on 16.3 acres in Northvale, New Jersey and owned by
the Company. The Tom Fields plant is located in a 53,000 square foot building in
Northvale, New Jersey and is owned by a subsidiary of the Company. Manufacturing
facilities in Canada are located in a 32,000 square foot plant in Boucherville,
Quebec which is owned by MEM Company (Canada) Ltd. The Company leases a 51,000
square foot facility in Kenilworth, New Jersey which is used for inventory
storage. Tom Fields (U.K.) assembles products in leased facilities in
Folkestone, Kent.
Item 3. Legal Proceedings
No material legal proceedings, other than ordinary routine litigation
incidental to the business, are pending to which the Company or any of its
subsidiaries is a party or of which any of their property is the subject.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable
PART II
Item 5. Market for the Registrant's Common Stock and
Related Stockholder Matters
Quarterly Market and Dividend Information
The common stock of the Company is traded on the American Stock Exchange
under the ticker symbol MEM. As of March 24, 1995 the number of record holders
of common stock was 420. The quarterly high and low sales prices for the past
two years are as follows:
<TABLE>
<CAPTION>
Price Range of Common Stock
1994 1993
High Low High Low
---- --- ---- ---
<S> <C> <C> <C> <C>
First Quarter $4.50 $3.88 $6.50 $4.63
Second Quarter 4.50 3.88 5.13 4.19
Third Quarter 6.38 3.88 4.75 3.75
Fourth Quarter 5.63 3.75 4.63 3.50
</TABLE>
The Company has not declared any cash dividends for the past three years, and
does not anticipate that dividends will be paid in the foreseeable future.
Restrictions on dividend payments contained in the Company's financing agreement
currently prohibit the declaration of dividends if the Company operates at a
loss.
Item 6. Selected Financial Data, (In thousands, except per share figures)
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992 1991 1990
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Summary of Operations:
Net sales .................. $53,094 $38,454 $44,751 $57,949 $71,425
Net income (loss) .......... $(1,328) $(2,570) $(4,300) $ 44 $ (479)
Per share ................ $( .52) $( 1.00) $( 1.67) $ .02 $ (.19)
Dividends declared ......... $ -- $ -- $ -- $ -- $ .10
Weighted average shares
outstanding .............. 2,576 2,572 2,571 2,570 2,583
Year-End Financial Position:
Working capital ............ $15,602 $18,068 $19,636 $24,471 $23,616
Property, plant and
equipment-net ............. $ 5,324 $ 5,513 $ 6,084 $ 6,685 $ 7,208
Total assets ............... $47,261 $34,282 $39,514 $43,626 $52,365
Long term notes ............ $ 4,907 $ 699 $ -- $ 838 $ 849
Stockholders' equity ....... $27,496 $28,919 $31,589 $36,310 $36,317
Stockholders' equity
per share ................ $ 10.66 $ 11.24 $ 12.29 $ 14.13 $ 14.14
Shares outstanding at
end of year .............. 2,580 2,573 2,571 2,570 2,569
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
1994 Compared to 1993
Consolidated net sales in 1994 were 38% higher than in 1993. This sales
increase resulted primarily from the acquisition of the British Sterling line of
men's toiletries in May, 1994 from the Speidel Division of Textron, Inc. and
from the introduction of the Timberline fragrance line for "Generation X" young
men. In addition, the Company introduced its Heaven Sent Vanilla line of
fragrance products, the Love's Frenzy product line and the Love's Clean &
Natural environmentally sensitive product line. All of these new brands and
products were sold through the Company's existing channels of distribution by
its regular salesforce. Sales of English Leather fragrances increased modestly
over 1993, and sales of Love's Baby Soft and Heaven Sent were slightly lower
than in 1993, excluding the new products. Sales of Tinkerbell products increased
almost $1,000,000, of which $642,000 came from the United Kingdom. Lower
domestic Tinkerbell sales of $1,090,000 were primarily the result of no 1994
sales to a customer with sizable 1993 volume, and this decline was more than
offset by a decline in returns of $1,250,000. The increase in overall
consolidated sales is primarily the result of higher unit sales, as unit sales
price increases in 1994 were not significant.
Sales in the United States increased 45% as the result of new product
sales. This sales growth was achieved in spite of the fact that some retailers
continued to reduce their commitments to fragrance products, and most all
continued their efforts to minimize their inventory investment. Sales of men's
and women's fragrances continued to be impacted by competition from higher
priced "prestige" fragrances being sold in the Company's distribution channels
and from companies with larger resources to commit to advertising and marketing
programs.
Canadian sales were up 13% in local currency and 7% in U. S. dollar
equivalent, and the operating loss was sharply reduced from the prior year.
Tinkerbell sales in the United Kingdom increased over 25% and are now
approaching the volume necessary to achieve profitable operations. Overall, the
effects of inflation and exchange rate fluctuations were not material. The
Company continues to investigate opportunities to develop or acquire
contraseasonal brands or products to compensate for the current seasonality of
its business.
Retailers continue to consider fragrance merchandise to be highly
promotional and seasonal, and request permission to return unsold goods. During
the past two years, management has worked closely with the customers concerning
their level of anticipated sales. As a result, actual and anticipated returns
decreased by $100,000 in 1994 compared to 1993 despite the significantly higher
sales level in 1994, and the percentage of returns to gross sales decreased to
15% in 1994 from 20% in 1993. Management anticipates further reductions in this
returns ratio in 1995.
Cost of sales declined in relation to sales from 59% of sales in 1993 to
54% in 1994. The primary reason for this improvement is the higher gross margins
on the new brands introduced in 1994, principally Timberline. In addition,
production costs were lower in 1994 due to higher manufacturing volume. Selling
and shipping expense increased from 34% of sales in 1993 to 37% in 1994.
Shipping and distribution expenses were slightly lower in relation to sales in
1994 than in 1993. Selling expenses remained the same despite the large sales
increase, reflecting the relatively fixed nature of these expenses. Marketing
expenses rose significantly from 17% of sales in 1993 to 23% in 1994 principally
as a result of expenditures incurred in the introduction of the Timberline
fragrance line. Introductions of new product lines typically require large
investments in advertising and marketing in the initial year to establish brand
awareness. The Company anticipates that Timberline marketing expenditures will
be lower in relation to sales in 1995. General and administrative expense
increased $311,000, which resulted from an increase in the provision for losses
on accounts receivable. Personnel and other administrative costs were the same
as in 1993.
Royalty income decreased in 1994 due to lower amounts received from a
Tinkerbell licensee. Amortization of intangibles increased due to the inclusion
of amortization of the British Sterling trademark since June, 1994. Interest
expense increased $429,000 as the result of new long term debt incurred during
the year and increased $193,000 as the result of higher short term loans
outstanding during the year and a modest increase in interest rates paid.
Financing costs decreased in 1994 due to certain non-recurring charges in early
1993 in connection with a prior financing agreement. The Company has over
$8,400,000 of domestic and foreign income tax loss carryforwards and accordingly
does not anticipate paying income taxes until future earnings exceed the
carryforwards.
1993 Compared to 1992
Consolidated net sales in 1993 were 14% lower than in 1992. Sales of
English Leather fragrances declined $1,100,000, and the decline of $2,000,000 in
women's fragrance sales was primarily from lower sales of Love's Baby Soft
products. Sales of Tinkerbell declined $3,200,000 from 1992, primarily as the
result of the decision by a few important customers not to purchase Tinkerbell
in 1993. The decrease in overall sales was primarily the result of lower unit
sales. Unit sales price increases in 1993 were not significant.
Sales in the United States continued to contract, although to a much
lesser extent than in 1992, as the retail environment did not rebound from 1992
levels. Some retailers reduced their commitments to fragrance products, and most
all continued their efforts to minimize their investment in inventories.
Tinkerbell sales were also impacted by a proliferation of character merchandise
offerings. Sales of men's and women's fragrances continued to be impacted by
competition from higher priced "prestige" fragrances being sold in the Company's
distribution channels and from companies with larger resources to commit to
advertising and marketing programs, whereas the Company reduced its marketing
expenditures by $1,600,000 in 1993.
Canadian sales were 26% lower than in 1992, reflecting the continued weak
economy and the decision by a few retailers not to carry the Tinkerbell and Baby
Soft lines. Tinkerbell sales in the United Kingdom were up 8% in local currency,
but declined in U. S. dollar equivalent. Overall, the effects of inflation and
exchange rate fluctuations were not material.
During the past two years, management has worked closely with the
customers concerning their level of anticipated sales, and as a result, returns
decreased by $4,300,000 in 1993 compared to 1992, and the percentage of returns
to gross sales decreased to 20% in 1993 from 24% in 1992.
Cost of sales rose in relation to sales primarily as a result of lower
gross margins on Tinkerbell products resulting from changes in product mix and
lower unit sales. The impact on gross profit from lower customer returns was
offset by higher per unit manufacturing costs resulting from lower production
levels in 1993. Selling and shipping expense declined from 39% to 35% of sales
due primarily to $960,000 lower selling expense as a result of a reorganization
and reduction of the salesforce in early 1993 and a reduction of marketing
expense in relation to sales of slightly over 1%. In addition, royalty expense
decreased $575,000 mostly due to the termination of certain royalty obligations
in 1993 and thereafter. General and administrative expense decreased $927,000,
of which $266,000 was from a reduction of bad debt expense, $454,000 from
personnel and related expenses and the balance of $207,000 from other general
operating expenses.
Interest income declined due to a lower rate of interest earned on and
lower outstanding principal of a note receivable. Interest expense declined due
to significantly lower short term loans outstanding during the year, offset by a
modest increase in interest rates paid. Financing expense decreased in 1993 due
to the absence of costs incurred in 1992 in connection with the prior financing
agreement.
Liquidity and Capital Resources
The Company's business is highly seasonal. In the first nine months of the year,
cash is required to buy and manufacture inventories. The peak shipping months
are from August through November and funds are required to finance accounts
receivable from shipment date to December and January, when the Company receives
significant cash collections. To finance these needs, the Company uses its
working capital, which was $15,601,800 at the end of 1994, and a revolving
credit agreement with financial institutions, which provides for a $17,500,000
line of credit expiring in 1998. In 1994, the maximum amount outstanding on
short-term borrowings was $14,300,000. At December 31, 1994, short-term loans of
$6,397,000 were outstanding under the agreement. The borrowings were
subsequently reduced to less than $100,000 in February 1995. The revolving
credit agreement contains a prohibition on the payment of dividends if the
Company operates at a loss. There are no material commitments for capital
expenditures.
Net cash used in operating activities in 1994 was $4,327,000 and resulted
from the higher level of business activity in 1994. Accounts receivable
increased $4,762,000 as a result of higher sales and the provision for losses on
uncollectible receivables increased by $326,000 in 1994. Excluding the original
British Sterling inventories acquired in May, other inventories increased
$2,484,000, reflecting the requirements of the new brands introduced during the
year as well as additional requirements for British Sterling. The increase in
inventories was accompanied by an increase of $2,205,000 in accounts payable,
reflecting the higher level of purchases. Other accrued expenses, principally
advertising and promotion, increased $980,000 as a result of higher expenses
associated with the higher sales level. All of these higher working capital
requirements were financed by an increase in short term borrowings of $5,500,000
at December 31, 1994.
Additions to plant and equipment increased $304,000 over the prior year as
a result of the packaging requirements of the new product lines. The cash
portion of the purchase price for the British Sterling assets resulted in
payments of $6,409,000 for intangibles and $1,037,000 for inventory. The source
of the cash was a five year term loan for $7,050,000. In October, 1994, the
Company received payment on a note receivable of $2,636,000 and this in turn was
used to reduce the term loan. As a result of all this activity, the Company's
cash increased $137,000 to a total of $1,129,000 at the end of 1994.
Item 8. Financial Statements and Supplementary Data
The Company's consolidated financial statements, the Report of Independent
Auditors thereon and related schedule appear on pages F-2 to F-14. See Index to
Consolidated Financial Statements and Financial Statement Schedules, page F-1.
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.
Not Applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Information with respect to the directors of the Company is
incorporated by reference to the information under the caption "Election of
Directors - Information Concerning Nominees for Election as Directors" of the
Definitive Proxy Statement. Information with respect to the executive officers
of the Company is set forth in Item 1A of this Form 10-K.
Item 11. Executive Compensation
Information with respect to Item 11 is incorporated by reference to
the information under the caption "Election of Directors - Executive
Compensation" of the Definitive Proxy
Statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
Information with respect to Item 12 is incorporated by reference to
the information under the caption "Election of Directors - Information
Concerning Nominees for Election as Directors" and "Election of Directors -
Principal Shareholders"
of the Definitive Proxy Statement.
Item 13. Certain Relationships and Related Transactions
Not Applicable
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K
(a) Financial Statements, Financial Statement Schedules and
Exhibits.
(1) Financial Statements - See accompanying Index to
Consolidated Financial Statements and Financial
Statement Schedules, Page F-1.
(2) Financial Statement Schedules - See accompanying
Index to Consolidated Financial Statements and
Financial Statement Schedules, Page F-1.
(3) See Exhibit Index on page 16.
(b) Reports on Form 8-K
The Registrant did not file any reports on Form 8-K during the
quarter ended December 31, 1994.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
MEM COMPANY, INC.
Date: March 29, 1995 By:/S/ Michael G. Kazimir, Jr.
---------------------------
Michael G. Kazimir, Jr.
Executive Vice President
Chief Operating Officer
and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/S/ Michael G. Kazimir, Jr. /S/ Michael G. Kazimir, Jr.
--------------------------- ---------------------------
Michael G. Kazimir, Jr. Michael G. Kazimir, Jr.
as Attorney-in-Fact for: Executive Vice President
Gay A. Mayer, Chairman, Chief Financial and
President, Chief Executive Accounting Officer
Officer and Director March 29, 1995
Robert E. Mulcahy, III, Director
Paul Hallingby, Jr., Director
Laurette M. Beach, Director
Derek B. Van Dusen, Director
March 29, 1995
<PAGE>
Exhibit Index
Exhibit No. Document
3(A) Certificate of Incorporation.
Incorporated by reference from the
Registrant's Form 10-K for the fiscal
year ended December 31, 1980.
3(B) Amendment to the Certificate of Incorporation dated
April 28, 1988. Incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended
December 31, 1988.
3(C) Amendment to the Certificate of Incorporation dated
June 19, 1988. Incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended
December 31, 1988.
3(D) Amendment to the Certificate of Incorporation, dated
April 28, 1987. Incorporated by reference from the
Registrant's Form 10-K for the fiscal year ended
December 31, 1987.
3(E) By-Laws. Incorporated by reference
from the Registrant's Form 10-K for the
fiscal year ended December 31, 1986.
10 Purchase and sale agreement, dated as of
May 5, 1994, between Textron, Inc. and
MEM Company, Inc. Incorporated by
reference from the Registrant's Form
8-K dated May 20, 1994.
21 Subsidiaries of Registrant.
Incorporated by reference from the
Registrant's Form 10-K for the fiscal
year ended December 31, 1992.
23 Consent of Accountants.
Filed herewith
24 Power of Attorney. Filed
herewith.
27 Financial Data Schedule. Filed herewith.
<PAGE>
MEM COMPANY, INC.
Index to Consolidated Financial Statements and Financial
Statement Schedules
The following consolidated financial statements of MEM Company,
Inc. are included in Item 8:
Report of Independent Auditors
Consolidated Statements of Operations for the
years ended December 31, 1994, 1993 and 1992
Consolidated Balance Sheets as of December
31, 1994 and 1993
Consolidated Statements of Changes in Stockholders'
Equity for the years ended December 31,
1994, 1993 and 1992
Consolidated Statements of Cash Flows for the
years ended December 31, 1994, 1993 and 1992
Notes to Consolidated Financial Statements
The following consolidated financial statement schedule of MEM
Company, Inc. is included in Item 14(d):
II Valuation and Qualifying Accounts
All other schedules for which provision is made in the applicable accounting
regulations of the Securities and Exchange Commission are not required under the
related instructions or are inapplicable, and therefore have been omitted.
<PAGE>
Report of Independent Auditors
------------------------------------------------------------
The Board of Directors and Stockholders
MEM Company, Inc.
We have audited the accompanying consolidated balance sheets of MEM Company,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of MEM
Company, Inc. and subsidiaries at December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
Ernst & Young LLP
Hackensack, New Jersey
February 28, 1995
<PAGE>
MEM COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Years Ended December 31,
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Net sales $53,094,217 $38,453,774 $44,750,700
Costs and expenses:
Cost of sales 28,541,205 22,622,236 25,657,787
Selling and shipping expense 19,612,873 13,281,251 17,375,474
General and administrative expense 5,202,902 4,892,234 5,818,958
----------- ----------- -----------
Total costs and expenses 53,356,980 40,795,721 48,852,219
----------- ----------- -----------
(262,763) (2,341,947) (4,101,519)
Other income(expense):
Royalty income 264,535 409,119 387,161
Interest income 226,226 247,245 377,670
Amortization of intangibles (306,326) ( 57,936) ( 58,483)
Other income (expense) 11,816 ( 48,617) ( 6,349)
Interest expense (1,112,403) (489,363) (734,322)
Financing expense (149,362) (288,407) (376,912)
----------- ----------- -----------
(Loss) before income taxes (1,328,277) (2,569,906) (4,512,754)
----------- ----------- -----------
(Benefit) of deferred income taxes - - (213,000)
----------- ----------- -----------
Net (loss) $(1,328,277) $(2,569,906) $(4,299,754)
=========== =========== ===========
Per share, based on weighted
average shares outstanding $ ( .52) $ (1.00) $ (1.67)
=========== =========== ===========
See accompanying notes.
</TABLE>
<PAGE>
MEM COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
Assets
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Current assets:
Cash $ 1,128,897 $ 992,019
Accounts receivable, less allowance
for doubtful accounts of $661,654
in 1994 and $450,136 in 1993 12,843,943 8,533,242
Inventories, at lower of cost
(first-in, first-out) or market:
Finished goods 6,095,908 5,377,576
Raw materials & work in process 9,228,083 6,475,502
Prepaid expenses 1,163,589 1,182,966
Current portion of note receivable - 170,913
----------- -----------
Total current assets 30,460,420 22,732,218
Property, plant & equipment, at cost:
Land 340,829 342,766
Buildings & improvements 4,250,376 4,232,509
Machinery & equipment 11,174,123 10,371,463
Furniture & fixtures 2,347,180 2,287,888
----------- -----------
18,112,508 17,234,626
Less accumulated depreciation (12,788,644) (11,722,023)
----------- -----------
Net property, plant & equipment 5,323,864 5,512,603
Other assets:
Advance royalty payments & license
agreements - net of accumulated
amortization of $604,490 in 1994
and $462,040 in 1993 710,010 852,460
Note receivable - 2,465,076
Net cash value of life insurance
& other assets 193,729 178,476
Intangible assets - net of accumulated
amortization of $761,765 in 1994
and $460,742 in 1993 10,572,940 2,541,367
----------- -----------
Total assets $47,260,963 $34,282,200
=========== ===========
See accompanying notes.
</TABLE>
<PAGE>
MEM COMPANY, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
December 31, 1994 and 1993
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
1994 1993
---- ----
<S> <C> <C>
Current liabilities:
Loans payable $ 6,528,016 $ 1,013,661
Accounts payable 4,488,160 2,277,926
Accrued expenses 1,004,720 854,328
Accrued advertising and promotion 1,303,667 498,592
Notes payable-current portion 1,534,066 19,977
----------- -----------
Total current liabilities 14,858,629 4,664,484
Long-term notes:
8% - payable to 1997 1,288,000 -
8.19% - payable to 1998 642,039 699,077
11% - payable to 1999 2,976,585 -
Commitments and contingencies
Stockholders' equity:
Common stock, $.05 par value;
shares authorized: 6,000,000;
issued: 3,000,000 150,000 150,000
Additional paid-in capital 3,090,110 3,090,110
Retained earnings 29,442,756 30,771,033
----------- -----------
32,682,866 34,011,143
Less common stock in treasury,
at cost (1994 - 419,816 shares;
1993 - 427,336) (4,607,180) (4,637,510)
Cumulative translation adjustment (579,976) (454,994)
----------- -----------
Total stockholders' equity 27,495,710 28,918,639
----------- -----------
Total liabilities and
stockholders' equity $47,260,963 $34,282,200
=========== ===========
</TABLE>
See accompanying notes.
<PAGE>
MEM COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Changes in Stockholders' Equity
Years Ended December 31, 1994, 1993 and 1992
<TABLE>
<CAPTION>
Additional
Common Paid-in Retained Treasury Translation
Stock Capital Earnings Stock Adjustment Total
----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance December 31, 1991 $150,000 $3,090,110 $37,640,693 $(4,648,310) $ 77,831 $36,310,324
Issuance of treasury shares 4,300 4,300
Translation adjustment (425,966) (425,966)
Net income(loss) (4,299,754) (4,299,754)
----------------------------------------------------------------------------
Balance December 31, 1992 150,000 3,090,110 33,340,939 (4,644,010) (348,135) 31,588,904
Issuance of treasury shares 6,500 6,500
Translation adjustment (106,859) (106,859)
Net income (loss) (2,569,906) (2,569,906)
----------------------------------------------------------------------------
Balance December 31, 1993 150,000 3,090,110 30,771,033 (4,637,510) (454,994) 28,918,639
Issuance of treasury shares 30,330 30,330
Translation adjustment (124,982) (124,982)
Net income (loss) (1,328,277) (1,328,277)
----------------------------------------------------------------------------
Balance December 31, 1994 $150,000 $3,090,110 $29,442,756 $(4,607,180) $(579,976) $27,495,710
============================================================================
</TABLE>
See accompanying notes.
<PAGE>
MEM COMPANY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Years Ended December 31
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net income (loss) $(1,328,277) $(2,569,906) $(4,299,754)
Depreciation and amortization 1,640,308 1,451,331 1,455,614
Provision for losses on accounts receivable 445,065 119,098 384,661
Deferred income tax (benefit) -- -- (213,000)
(Increase) decrease in accounts receivable (4,762,020) 1,705,326 3,664,358
(Increase) decrease in inventory (3,512,810) 2,079,755 (258,265)
(Increase) decrease in other current assets 20,741 270,840 31,372
Increase (decrease) in accounts payable 2,205,017 (377,412) (515,354)
Increase (decrease) in other accrued expenses 980,500 (315,929) (363,892)
(Increase) decrease in other assets (15,253) (27,941) (14,745)
----------- ----------- -----------
Net cash (used in) provided by operating
activities (4,326,729) 2,335,162 (129,005)
Cash Flows from Investing Activities
Additions to plant and equipment (1,023,003) (719,030) (795,148)
Payment in lieu of future royalties -- (500,000) --
Acquisition of intangibles (6,409,215) -- --
Acquisition of former minority interest in
subsidiary -- -- (47,000)
Collection of note receivable 2,635,989 240,473 205,905
----------- ----------- -----------
Net cash (used in) investing activities (4,796,229) (978,557) (636,243)
Cash Flows from Financing Activities
Short-term borrowings 14,709,272 7,326,415 12,601,893
(Repayments of) short-term borrowings (9,209,825) (9,121,954) (10,543,570)
Proceeds from long-term notes 7,050,000 -- --
(Payments of) long-term notes (3,220,833) (12,691) (11,886)
Issuance of treasury stock 8,250 6,500 4,300
----------- ----------- -----------
Net cash provided by (used in) financing
activities 9,336,864 (1,801,730) 2,050,737
Effect of exchange rate changes on cash (77,028) (11,643) (31,075)
----------- ----------- -----------
Net increase (decrease) in cash 136,878 (456,768) 1,254,414
Cash at the beginning of the year 992,019 1,448,787 194,373
----------- ----------- -----------
Cash at the end of the year $ 1,128,897 $ 992,019 $ 1,448,787
=========== =========== ===========
Supplemental cash flow data:
Interest paid $ 995,727 $ 530,488 $ 733,228
=========== =========== ===========
</TABLE>
See accompanying notes.
<PAGE>
MEM COMPANY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1994, 1993 and 1992
Note 1. Accounting Policies
Nature of business: The Company's business consists of manufacturing, selling
and distributing a diversified line of toiletries and accessories to retailers.
The Company operates in one industry segment. In 1994, one national customer
represented 14% of net sales. The Company performs periodic credit evaluations
of its customers' financial condition and generally does not require collateral.
Financial information about geographic data is disclosed in Item 1(b) of the
Company's 1994 Form 10-K.
Consolidation: The consolidated financial statements include the accounts of the
Company's subsidiaries. All material intercompany items have been eliminated.
The assets and liabilities of foreign subsidiaries have been translated at the
exchange rate at the balance sheet date. Revenues, expenses, gains and losses
are translated at the average rate for the year, determined by averaging the
rates at the end of each calendar quarter.
Deferred financing costs: Deferred financing costs are included in prepaid
expenses and are being amortized over the life of the loans.
Intangible assets: The intangible assets arising from the excess of purchase
price of subsidiaries acquired prior to 1971 over the fair value of the net
assets acquired are not amortized since no diminution in value is anticipated.
Other intangible assets are being amortized on a straight-line basis over twenty
to forty years.
Depreciation: For financial accounting purposes, depreciation is provided on the
straight-line basis as follows: buildings and improvements - 3 to 25 years;
machinery and equipment - 5 to 12 years; furniture and fixtures - 4 to 10 years.
For income tax purposes, the Company generally uses accelerated depreciation.
Advance royalty payments and license agreements: License agreements and
nonrefundable royalty payments in connection with a licensing agreement are
being amortized as selling expense on a straight-line basis which averages
seventeen years.
Royalty income: Royalty income represents amounts earned by licensing the
English Leather and Tinkerbell trademarks for use by various third parties.
Revenue recognition: Revenues are recorded at the time of shipment of
merchandise. The Company provides for estimated sales returns and allowances.
Note 2. British Sterling Asset Purchase
On May 20, 1994, the Company acquired certain assets relating to the British
Sterling fragrance line of products from the Speidel Division of Textron, Inc.
for $9,182,000, of which $8,145,000 was for intangibles, $1,029,000 for
inventories and $8,000 for other assets. Other direct costs of the acquisition
were $196,215. The purchase was financed by a term loan of $7,050,000 and a note
for $1,932,000 payable to Textron. The balance of $396,215 was paid from the
Company's working capital.
Note 3. Credit Arrangements and Notes Payable
In March, 1993 the Company obtained a new three year secured financing agreement
with a financial institution which provided for a revolving line of credit of up
to $15,000,000 for working capital purposes. The agreement contains certain
covenants generally associated with this type of financing including the
pledging of substantially all assets as collateral and a prohibition on the
payment of dividends. Interest on borrowings is at the Bank of America prime
rate (8 1/2% at December 31, 1994) plus 2.5% and an unused line fee of 1/4% is
payable at various levels of borrowing.
In connection with the Company's acquisition described in Note 2 above, the
agreement was amended in May, 1994 to provide for a five year term loan of
$7,050,000, extend the maturity of the agreement by two years to April, 1998 and
increase the total permitted borrowings at any time to $17,500,000 (including
the outstanding term loan). The term loan was reduced by $2,465,076 in October,
1994 from the collection of a note receivable held by the Company. Principal of
the term loan is payable in equal monthly installments over five years, and
interest is determined on the same basis as the revolving line of credit.
Under the terms of the acquisition, the seller received an unsecured note
payable for $1,932,000 at 8% interest. This note is payable in three equal
annual installments beginning June 1, 1995.
The Company's Canadian subsidiary has pledged its land and building as security
for 8.19% notes payable which are payable in monthly principal installments of
$1,572 until October, 1998 when the balance is due. The aggregate amounts of all
notes payable during each of the four years subsequent to December 31, 1995 are:
1996 - $1,534,066; 1997 - $1,534,066; 1998 - $1,475,507; 1999 - $362,985.
The Company's United Kingdom subsidiary has a line of credit of $939,000 for
short term financing at various interest rates, of which $131,474 was
outstanding at December 31, 1994. This line is secured by the subsidiary's
accounts receivable.
The weighted average interest rate on short-term borrowings outstanding at
December 31,1994 and 1993 was 11% and 8.3%, respectively.
Note 4. Income Taxes
At December 31, 1994, the Company had loss carryforwards for U. S. tax purposes
of approximately $6,916,000 of which $679,000 expires in 2006, $3,834,000 in
2007, $1,703,000 in 2008 and $700,000 in 2009. The Company also had
approximately $1,484,000 of foreign tax loss carryforwards as of December 31,
1994. Approximately $597,000 of these loss carryforwards will expire between
1998 and 2001 while the remaining $887,000 can be carried forward indefi-
nitely. Under the provisions of SFAS No. 109, a valuation allowance is
established if, based on the weight of available evidence, it is more likely
than not that a portion of the deferred asset will not be realized.
Consequently, at December 31, 1994, the Company has established a valuation
allowance against a portion of the above loss carryforwards.
Income (loss) before income taxes is as follows:
1994 1993 1992
---- ---- ----
Domestic $(1,151,029) $(1,974,147) $(4,068,608)
Foreign (177,248) (595,759) (444,146)
----------- ----------- -----------
$(1,328,277) $(2,569,906) $(4,512,754)
=========== =========== ===========
The source of significant temporary differences in 1994, 1993 and 1992 which
gave rise to deferred tax benefit and its effect was as follows:
1994 1993 1992
---- ---- ----
Utilization of net operating
loss carryforwards $ - $ - $(213,000)
========= ========= =========
The components of the net deferred tax asset and liability as of December 31,
1994 and 1993, were as follows:
1994 1993
---- ----
Deferred tax liabilities:
Property, plant and equipment $ 443,000 $ 493,000
---------- ----------
Total deferred tax liability $ 443,000 $ 493,000
========== ==========
Deferred tax assets:
Net operating loss carryforwards $3,360,000 $2,960,000
Valuation allowance for deferred
tax assets (2,917,000) (2,467,000)
---------- ----------
Net deferred tax asset 443,000 493,000
---------- ----------
Net deferred tax liability $ -0- $ -0-
========== ==========
The reconciliation of the (benefit) for federal income tax in the financial
statements and the (benefit) computed at the statutory rates are as follows:
1994 1993 1992
---- ---- ----
(Benefit) at statutory rate $(451,614) $(873,768) $(1,534,336)
Limitation on utilization
of domestic losses 347,150 632,110 1,134,146
Limitation on utilization
of foreign losses 60,264 202,558 151,009
Other - Net 44,200 39,100 36,181
--------- --------- -----------
$ -0- $ -0- $ (213,000)
========= ========= ===========
Note 5. Leases
The Company rents warehouse and office space under leases which expire through
2003. The Company is also responsible for the payment of insurance, taxes and
maintenance of the properties. The future minimum rental commitments for these
leases are as follows: 1995 - $353,000; 1996 - $86,000; 1997 - $63,000; 1998 -
$63,000; 1999 - $63,000; thereafter - $250,000. Rental expense amounted to
$351,000 in 1994, $342,000 in 1993 and $332,000 in 1992.
Note 6. Stock Options
Under the 1987 Non-Qualified Stock Option Plan, 240,000 shares were authorized
for issuance. No options have been granted under the Plan.
Under the 1991 Stock Incentive Plan, 200,000 shares of common stock were
authorized for issuance to key employees at an option price which is the fair
market value on the date of grant. Awards made under the Plan may be options or
contingent options. Contingent options will become exercisable in whole or in
part based upon an evaluation of the employee's performance during the year in
which the option is granted. Under the 1993 Non-Employee Stock Incentive Plan,
50,000 shares of common stock were authorized for issuance to non-employee
members of the Board of Directors and certain individuals who provide consulting
services to the Company at an option price which is the fair market value on the
date of grant.
Options issued under the Plans to date are exercisable in various installments,
and are exercisable in full after two years from grant.
Information with respect to options is as follows:
Option Price
Number of Shares per Share
-------------------- ------------
Contingent
Options Options
------- ----------
Outstanding - December 31, 1991 27,375 32,625 $5.00
Issued as options 20,250 (20,250) $5.00
Cancelled (4,250) (12,375) $5.00
------ ------
Outstanding - December 31, 1992 43,375 0 $5.00
Granted 35,750 $4.13-$5.00
Exercised (500) $5.00
Cancelled (7,000) $5.00
------
Outstanding - December 31, 1993 71,625 $4.13-$5.00
Granted 20,700 $4.13
Cancelled (10,000) $4.13-$5.00
------
Outstanding - December 31, 1994 82,325 $4.13-$5.00
======
Options were exercisable at December 31 as follows: 1994 - 48,625 shares; 1993 -
35,875; 1992 - 26,375.
Note 7. Postretirement Benefits
The Company does not provide any postretirement health care, life insurance or
other welfare benefit programs to current or former employees except that the
Company maintains a defined benefit pension plan for employees who meet certain
eligibility requirements. Benefits under the plan are based on salary and years
of service. For the past three years, no contributions have been required.
-----------------------------------------------------------------------
1994 1993 1992
-----------------------------------------------------------------------
Service cost-benefits earned
during the period $ 182,915 $ 226,383 $ 220,700
Interest cost on projected
benefit obligation 291,992 308,755 298,717
Investment return on plan assets 204,838 (471,152) (214,416)
Other (710,709) ( 31,352) (310,984)
---------- ---------- ----------
Net pension cost (benefit) $ (30,964) $ 32,634 $ (5,983)
========== ========== ==========
Assumptions:
Discount rate 8% 8% 8%
Compensation increases 5% 5% 5%
Rate of return on assets 8% 8% 8%
-----------------------------------------------------------------------
A reconciliation between the plan's funded status and the pension asset as
recorded in the Company's balance sheet is presented below:
Plan's assets at fair value,
primarily stocks and bonds $4,295,427 $5,121,274 $5,026,935
Plan's projected benefit
obligation (3,699,488) (3,898,265) (3,781,645)
---------- ---------- ----------
Funded status 595,939 1,223,009 1,245,290
Unrecognized net asset to be
amortized over 13 years (676,531) (787,438) (898,345)
Unrecognized prior service cost 95,864 106,635 117,406
Unrecognized asset (gain)
over expected return 727 (557,171) (446,682)
---------- ---------- ----------
Prepaid (accrued) pension cost $ 15,999 $ (14,965) $ 17,669
========== ========== ==========
Actuarial present value of
accumulated benefit obligation:
Vested $2,636,587 $2,532,562 $2,583,479
Not yet vested 148,055 175,622 170,563
---------- ---------- ----------
Accumulated benefit obligation $2,784,642 $2,708,184 $2,754,042
========== ========== ==========
Note 8. Quarterly Financial Data (Unaudited)
Following is a schedule of key financial data by quarter for the years 1994 and
1993.
Average
Net Gross Net shares
Quarters sales profit income Net income outstanding
Ended (000) (000) (000) per share (000)
-------- ----- ------ ------ ---------- -----------
03/31/93 $ 5,094 $ 2,227 $(2,044) $( .79) 2,571
06/30/93 $ 1,947 $( 911) $(3,392) $(1.32) 2,571
09/30/93 $13,647 $ 6,547 $ 1,282 $ .50 2,572
12/31/93 $17,766 $ 7,969 $ 1,584 $ .61 2,572
03/31/94 $ 5,241 $ 2,159 $(1,087) $( .42) 2,573
06/30/94 $ 5,647 $ 1,870 $(2,129) $( .83) 2,573
09/30/94 $19,057 $ 9,797 $ 1,162 $ .45 2,575
12/31/94 $23,149 $10,727 $ 726 $ .28 2,576
Since the Company's business is seasonal in nature, comparisons among quarters
of the year are not necessarily indicative of a trend in the results of
operations, but principally reflect this seasonality.
MEM COMPANY, INC. AND SUBSIDIARIES
Schedule II - Valuation and Qualifying Accounts
Years Ended December 31, 1994, 1993 and 1992
Balance Additions Deductions Balance
at charged to write-off of at end
beginning costs & uncollectible of
Description of year expenses accounts year
----------- --------- ---------- ------------- -------
Allowance for
doubtful
accounts:
1994 $450,136 $445,065 $233,547 $661,654
1993 $496,368 $119,098 $165,330 $450,136
1992 $427,975 $384,661 $316,268 $496,368
Accounts receivable are stated net of a gross provision for merchandise
returns and other items in the amounts of $5,600,000, $3,700,000 and $3,800,000
for the years ended December 31, 1994, 1993 and 1992, respectively.
The net deferred tax asset is stated net of valuation allowances of
$2,917,000, $2,467,000 and $1,848,000 for the years ended December 31, 1994,
1993 and 1992, respectively. After deducting deferred tax liability, the net
deferred tax asset was $-0- in each of the three years.
Exhibit 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statements
(Form S-8 No. 33-50790) pertaining to the MEM Company, Inc. 1991 Stock Incentive
Plan and (Form S-8 No. 33-79144) pertaining to the MEM Company, Inc. 1993
Non-Employee Stock Incentive Plan of our report dated February 28, 1995, with
respect to the consolidated financial statements and schedule of MEM Company,
Inc. included in the Annual Report (Form 10-K) for the year ended December 31,
1994.
Ernst & Young LLP
Hackensack, New Jersey
March 27, 1995
Exhibit 24
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned, an officer
and/or a director of MEM Company, Inc. (the "Corporation"), does hereby
constitute and appoint GAY A. MAYER, MICHAEL G. KAZIMIR, JR., and ROBERT O.
HURRY, and any of them, his true and lawful attorneys or attorney and agents or
agent with full power of authority on his behalf to sign his name in such
capacity to the Annual Report on Form 10-K for the year ended December 31, 1994,
and any and all amendments thereto, to be filed with the Securities and Exchange
Commission and does hereby ratify and confirm all the said attorneys or attorney
and agents or agent may do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has subscribed these presents
this 28th day of February, 1995.
/S/Paul Hallingby, Jr. /S/ Gay A. Mayer
------------------------- -----------------------
Paul Hallingby, Jr. Gay A. Mayer
/S/ Derek B. Van Dusen /S/Laurette M. Beach
------------------------- -----------------------
Derek B. Van Dusen Laurette M. Beach
/S/ Michael G. Kazimir, Jr. /S/Robert E. Mulcahy III
------------------------- -----------------------
Michael G. Kazimir, Jr. Robert E. Mulcahy III
Elizabeth C. Mayer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 1,128,897
<SECURITIES> 0
<RECEIVABLES> 13,505,597
<ALLOWANCES> 661,654
<INVENTORY> 15,323,991
<CURRENT-ASSETS> 30,460,420
<PP&E> 18,112,508
<DEPRECIATION> 12,788,644
<TOTAL-ASSETS> 47,260,963
<CURRENT-LIABILITIES> 14,858,629
<BONDS> 4,906,624
<COMMON> 150,000
0
0
<OTHER-SE> 27,345,710
<TOTAL-LIABILITY-AND-EQUITY> 47,260,963
<SALES> 53,094,217
<TOTAL-REVENUES> 53,094,217
<CGS> 28,541,205
<TOTAL-COSTS> 52,911,915
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 445,065
<INTEREST-EXPENSE> 1,112,403
<INCOME-PRETAX> (1,328,277)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,328,277)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,328,277)
<EPS-PRIMARY> (.52)
<EPS-DILUTED> (.52)
</TABLE>
