SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-6081
THE LORI CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 36-2262248
------------------------------- -----------------
State or other jurisdiction I.R.S. Employer
of incorporation or organization Identification No.
500 Central Avenue, Northfield, IL 60093
-------------------------------------- --------
Address of principal executive offices Zip Code
Registrant's telephone number, including area code: (708) 441-7300
Not Applicable
--------------------------------------------------------------------------------
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1995
---------------------------- ----------------------------
Common stock, $.01 par value 3,356,143
<PAGE>
THE LORI CORPORATION
INDEX
<TABLE>
<CAPTION>
Page
Number
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited):
Condensed Consolidated Balance Sheets
June 30, 1995 and December 31, 1994 2
Condensed Consolidated Statements of Operations
for the three and six months ended June 30, 1995 and 1994 4
Condensed Consolidated Statement of Changes in Shareholders'
Equity (Deficit) for the six months ended June 30, 1995 5
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1995 and 1994 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
PART II OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
SIGNATURES 22
</TABLE>
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
THE LORI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands)
<CAPTION>
June 30, December 31,
1995 1994
------- --------
<S> <C> <C>
ASSETS
Current assets:
Cash and equivalents .............................................. $ 52 $ 783
Restricted cash and equivalents ................................... 550
Receivables, less allowance for doubtful accounts
and markdowns of $820 in 1995 and $1,338 in 1994 ............... 939 814
Inventories ....................................................... 1,649 2,105
Other ............................................................. 470 260
------- -------
Total current assets .................................. 3,110 4,512
------- -------
Property, plant and equipment ........................................ 1,444 1,563
Less accumulated depreciation and amortization ....................... 1,050 1,119
------- -------
394 444
------- -------
Other assets:
Excess of cost over net assets acquired,
net of accumulated amortization of $3,415 in 1994 .............. 13,140
Other, principally retail fixtures, net of accumulated
amortization of $698 in 1995 and $477 in 1994 ................. 930 608
------- -------
930 13,748
------- -------
$ 4,434 $18,704
======= =======
<FN>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
THE LORI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited in thousands)
<CAPTION>
June 30, December 31,
1995 1994
------- --------
<S> <C> <C>
LIABILITIES
Current liabilities:
Notes payable, including amount due to related party of $775 ...... $1,475
Current maturities of long-term debt ............................... $ 750
Accounts payable ................................................... 3,199 3,414
Accrued expenses ................................................... 1,125 905
Due to ARTRA ....................................................... 465 289
------- -------
Total current liabilities .............................. 6,264 5,358
------- -------
Debt subsequently discharged .......................................... 7,105
------- -------
Other noncurrent liabilities .......................................... 979 963
------- -------
Commitments and contingencies
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 par value, authorized 1,000 shares, all series;
Series C, issued 10 shares, including accrued dividends ............ 19,515 19,515
Common stock, $.01 par value; authorized 10,000 shares;
issued 3,456 shares in 1995 and 3,265 shares in 1994 ............... 34 32
Less restricted common stock (100 shares) ............................. (700) (700)
Additional paid-in capital ............................................ 65,768 65,392
Accumulated deficit ................................................... (87,426) (78,961)
------- -------
(2,809) 5,278
------- -------
$ 4,434 $ 18,704
======= =======
<FN>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
THE LORI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
<CAPTION>
Three Months Six Months
Ended June 30, Ended June 30,
-------------------- --------------------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales ........................................... $ 2,695 $ 9,043 $ 7,639 $ 18,312
-------- -------- -------- --------
Costs and expenses:
Cost of goods sold ............................... 2,233 5,206 5,096 10,303
Selling, general and administrative .............. 2,214 4,419 4,343 9,000
Depreciation and amortization .................... 142 362 280 726
Goodwill impairment .............................. 12,930 12,930
-------- -------- -------- --------
17,519 9,987 22,649 20,029
-------- -------- -------- --------
Operating loss ...................................... (14,824) (944) (15,010) (1,717)
-------- -------- -------- --------
Other income (expense):
Interest expense ................................. (74) (547) (136) (1,038)
Other income, net ................................ 27 5 27 14
-------- -------- -------- --------
(47) (542) (109) (1,024)
-------- -------- -------- --------
Loss before income taxes and extraordinary credit ... (14,871) (1,486) (15,119) (2,741)
Provision for income taxes .......................... (1) (1) (3) (6)
-------- -------- -------- --------
Loss before extraordinary credit .................... (14,872) (1,487) (15,122) (2,747)
Extraordinary credit, net discharge of indebtedness . 6,657
-------- -------- -------- --------
Net earnings (loss) ................................. ($14,872) ($ 1,487) ($ 8,465) ($ 2,747)
======== ======== ======== ========
Earnings (loss) per share:
Loss before extraordinary credit ................. ($ 4.32) ($ 0.47) ($ 4.64) ($ 0.87)
Extraordinary credit ............................. 2.04
-------- -------- -------- --------
Net earnings (loss) .................. ($ 4.32) ($ 0.47) ($ 2.60) ($ 0.87)
======== ======== ======== ========
Weighted average number of shares of common stock and
common stock equivalents outstanding ............. 3,325 3,163 3,257 3,163
======== ======== ======== ========
<FN>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
THE LORI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
(Unaudited in thousands, except share data)
<CAPTION>
Restricted Total
Preferred Stock Common Stock Common Stock Additional Shareholders'
--------------- ---------------- ---------------- Paid-in Accumulated Equity
Shares Dollars Shares Dollars Shares Dollars Capital (Deficit) (Deficit)
------ ------- -------- ------- ------ ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 9,701 $ 19,515 3,265,019 $ 32 100,000 ($700) $ 65,392 ($ 78,961) $ 5,278
Net earnings ............ (8,465) (8,465)
Common stock issued as
consideration for debt
restructuring ......... 150,000 1 336 337
Common stock issued as
additional consideration
for short-term
borrowings ............ 41,176 1 40 41
Fractional shares purchased (46)
------ ------- --------- --- ------- ---- ------- -------- -------
Balance at June 30, 1995 ... 9,701 $ 19,515 3,456,149 $ 34 100,000 ($700) $ 65,768 ($ 87,426) ($ 2,809)
====== ======= ========= === ======= ==== ======= ======== =======
<FN>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
THE LORI CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited in thousands)
<CAPTION>
Six Months Ended June 30,
1995 1994
------- -------
<S> <C> <C>
Net cash flows used by operating activities, ....................... ($1,377) ($ 679)
------- -------
Cash flows from investing activities:
Payment of liabilities with restricted cash ..................... 550
Additions to property, plant and equipment ...................... (20) (22)
Retail fixtures ................................................. (610) (199)
------- -------
Net cash flows used by investing activities ........................ (80) (221)
------- -------
Cash flows from financing activities:
Net increase (decrease) in short-term debt ...................... 1,475 (47)
Proceeds from long-term borrowings .............................. 1,241
Reduction of long-term debt ..................................... (750) (449)
Other ........................................................... 1
------- -------
Net cash flows from financing activities ........................... 726 745
------- -------
Increase in cash and cash equivalents .............................. (731) (155)
Cash and equivalents, beginning of period .......................... 783 540
------- -------
Cash and equivalents, end of period ................................ $ 52 $ 385
======= =======
Supplemental cash flow information: Cash paid during the period for:
Interest ..................................................... $ 80 $ 296
Income taxes paid, net ....................................... 3 21
Supplemental schedule of noncash investing and financing activities:
Common stock issued as consideration for debt restructuring
and short-term loans ........................................ 378
<FN>
The accompanying notes are an integral part of the condensed consolidated
financial statements.
</FN>
</TABLE>
<PAGE>
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
ARTRA GROUP INCORPORATED ("ARTRA"), a public company whose shares are traded on
the New York Stock Exchange, owns, through its wholly-owned subsidiary Fill-Mor
Holding, Inc. ("Fill-Mor"), approximately 62.6% of the common stock and all of
the outstanding preferred stock of The Lori Corporation ("Lori" or the
"Company"). Lori is operating in one industry segment (popular-priced fashion
costume jewelry and accessories) through its two wholly-owned subsidiaries
Lawrence Jewelry Corporation ("Lawrence") and Rosecraft, Inc. ("Rosecraft").
The Company's condensed consolidated financial statements are presented on a
going concern basis, which contemplates the realization of assets and the
satisfaction of liabilities in the normal course of business. In the opinion of
the Company, the accompanying condensed consolidated financial statements
reflect all normal recurring adjustments necessary to present fairly the
financial position as of June 30, 1995, and the results of operations and
changes in cash flows for the six month periods ended June 30, 1995 and June 30,
1994. The Company has incurred losses from continuing operations in recent
years, has a deficiency of working capital at June 30, 1995 and does not does
sufficient financing facilities in place for the remainder of 1995. No
assurances can be given that either the business and operations of Lori or the
market conditions in the fashion jewelry industry generally will improve in the
immediate future. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
At March 31, 1995 and at December 31, 1994, the Company had anticipated that the
restructuring of its debt (see Note 2), along with a consolidation and
restructuring of its operations in order to reduce overhead costs and improve
operational efficiencies, would permit it to obtain a sufficient level of
borrowings to fund its capital requirements in 1995. During the second quarter
of 1995, due primarily to competitive conditions in the costume jewelry
industry, the Company experienced a reduction in business with certain major
customers. Additionally, the Company discontinued certain unprofitable programs
with other customers resulting in charges to operations for merchandise credits
and inventory valuation allowances totaling $450,000. Due to the continued
losses from operations and the inability of the Company to obtain conventional
bank financing, the Company determined that its remaining goodwill balance could
no longer be recovered over its remaining life through forecasted future
operations. Accordingly, the Company recorded a charge against operations of
$12,930,000 ($3.97 per share) to write-off all of the goodwill of its costume
jewelry operations (see Note 4).
During June, 1995, Lori entered into a series of agreements with certain
unaffiliated investors that provided for $700,000 of short-term loans due
January 1, 1996. In August, 1995 Lori obtained a credit facility for the
factoring of the accounts receivable of its costume jewelry operations. The
credit facility provides for advances of 80% of receivables assigned, after
allowances for markdowns and other merchandise credits. The factoring charge, a
minimum of 1.75% of the receivables assigned, increases on a sliding scale if
the receivables assigned are not collected within 45 days. Borrowings under the
credit facility are collateralized by the accounts receivable, inventory and
equipment of Lori's operating subsidiaries and guaranteed by Lori. Lori
continues to search for additional funding to meet its capital requirements for
the remainder of 1995 and beyond, either through borrowings or equity infusions.
Additionally, Lori is attempting to increase sales through the solicitation of
new customers and the addition of new programs with existing customers such that
operating results will improve. However, there can be no assurance that such
efforts will result in increased sales and operating profits. If Lori is unable
to obtain additional working capital borrowings or equity infusions to fund its
operations in for the remainder of 1995 and beyond, and improve the results of
operations, it may be forced to liquidate its assets or file for protection
under the Bankruptcy Code.
Lori's business plan for the remainder of 1995 is based on the continued
dependence upon certain major customers which include Target Stores, Walgreens
and Wal-Mart. The Company does not have sales contracts with its customers.
These condensed consolidated financial statements are presented in accordance
with the requirements of Form 10-Q and consequently do not include all the
disclosures required in the Company's annual report on Form 10-K. Accordingly,
the Company's annual report on Form 10-K for the fiscal year ended December 31,
1994, as filed with the Securities and Exchange Commission, should be read in
<PAGE>
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
conjunction with the accompanying consolidated financial statements. The
condensed consolidated balance sheet as of December 31, 1994 was derived from
the audited consolidated financial statements in the Company's annual report on
Form 10-K.
Reported interim results of operations are based in part on estimates which may
be subject to year-end adjustments. In addition, these quarterly results of
operations are not necessarily indicative of those expected for the year.
2. DEBT RESTRUCTURING
Effective August 18, 1994, as amended December 23, 1994, ARTRA, Fill-Mor, Lori
and Lori's operating subsidiaries, (including New Dimensions Accessories, Ltd.,
"New Dimensions", which terminated operations effective December 27, 1994)
entered into an agreement with Lori's bank lender to settle obligations due the
bank under terms of the bank loan agreements of Lori and its operating
subsidiaries and Fill-Mor.
Per terms of the Amended Settlement Agreement, borrowings due the bank under the
loan agreements of Lori and its operating subsidiaries and Fill-Mor
(approximately $25,000,000 as of December 23, 1994), plus amounts due the bank
for accrued interest and fees were reduced to $10,500,000 (of which $7,855,000
pertained to Lori's obligation to the bank and $2,645,000 pertained to
Fill-Mor's obligation to the bank). Upon the satisfaction of certain conditions
of the Amended Settlement Agreement in 1995, as discussed below, the balance of
this indebtedness was discharged.
In conjunction with the Amended Settlement Agreement, ARTRA entered into a
$1,850,000 short-term loan agreement with a non-affiliated corporation, the
proceeds of which were advanced to Lori and used to fund amounts due the bank as
discussed below. The loan, due June 30, 1995, with interest payable monthly at
10%, is collateralized by 100,000 shares of Lori common stock. These 100,000
Lori common shares, originally issued to the bank under terms of the August 18,
1994 Settlement Agreement, were carried in the Company's condensed consolidated
balance sheet at June 30, 1995 and December 31, 1994 as restricted common stock.
In August, 1995 the loan was extended until September 15, 1995 and the lender
received the above mentioned 100,000 Lori common shares as consideration for the
loan extension.
In exchange for the reduction of amounts due the bank, and as additional
consideration for the $1,850,000 short-term loan agreement from the
non-affiliated corporation, Lori and Lori's operating subsidiaries, ARTRA and
Fill-Mor agreed to pay the following consideration:
A) A cash payment to the bank of $1,900,000, which was made in
December, 1994.
B) 400,000 shares of ARTRA common stock. These 400,000 ARTRA
common shares were originally issued to the bank under terms
of the August 18, 1994 Settlement Agreement. The bank retained
100,000 shares and the non-affiliated corporation received
300,000 shares as additional consideration for its short-term
loan.
C) Assignment to the bank of all of the assets of Lori's New
Dimensions subsidiary.
D) A $750,000 note payable to the bank due March 31, 1995.
The Settlement Agreement required ARTRA to advance $400,000 to Lori which, along
with $150,000 of the ARTRA $1,850,000 short-term loan agreement noted above, was
deposited in trust at December, 1994. This deposit was used to fund the
installment payment due December 31, 1994 for unsecured claims arising from the
May 3, 1993 reorganization of New Dimensions. The installment payment was made
in January, 1995.
<PAGE>
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
The August 18, 1994 settlement agreement required ARTRA to contribute cash of
$1,500,000 to Lori for working capital. ARTRA's cash contribution was funded by
private placements of ARTRA common stock. An officer/director of Lori
participated in the private placement of ARTRA common stock purchasing $150,000
of ARTRA common stock (37,500 shares), subject to the same terms and conditions
as the other outside investors.
Lori recognized an extraordinary gain of $8,965,000 ($2.81 per share) in
December 1994 as a result of the reduction of amounts due the bank under the
loan agreements of Lori and its operating subsidiaries and Fill-Mor to
$10,500,000 (of which $7,855,000 pertained to Lori's obligation to the bank and
$2,645,000 pertained to Fill-Mor's obligation to the bank) as of December 23,
1994 calculated (in thousands) as follows:
Amounts due the bank under loan agreements
of Lori and its operating subsidiaries $ 22,749
Less amounts due the bank at December 29, 1994 (7,855)
--------
Bank debt discharged 14,894
Accrued interest and fees discharged 3,635
Other liabilities discharged 1,985
Less consideration to the bank per terms of the
amended settlement agreement
Cash (1,900)
ARTRA common stock (2,500)
New Dimensions assets assigned to the
bank at estimated fair value (7,149)
--------
Net extraordinary gain $ 8,965
========
Lori also recorded a charge against operations in December 1994 to write-off New
Dimensions' goodwill, which had a book value of $10,800,000.
On March 31, 1995 the $750,000 note due the bank was paid and the remaining
indebtedness of Lori and Fill-Mor was discharged, resulting in an additional
extraordinary gain to Lori of $6,657,000 ($2.04 per share) in the first quarter
of 1995. The $750,000 note payment was funded with the proceeds of a $850,000
short-term loan from a director of Lori. The loan provides for interest at the
prime rate plus 1%. As consideration for assisting in the debt restructuring,
the director received 150,000 Lori common shares valued at $337,500 ($2.25 per
share) based upon Lori's closing market value on March 30, 1995. The first
quarter 1995 extraordinary gain was calculated (in thousands) as follows:
Amounts due the bank under loan agreements
of Lori and its operating subsidiaries $ 7,855
Less amounts due the bank applicable to Lori (561)
--------
Bank debt discharged 7,294
Less fair market value of Lori common stock
issued as consideration for the debt restructuring (337)
Other fees and expenses (300)
--------
Net extraordinary gain $ 6,657
========
<PAGE>
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
3. INVENTORIES
<TABLE>
Inventories (in thousands) consist of:
<CAPTION>
June 30, December 31,
1995 1994
------- -------
<S> <C> <C>
Raw materials and supplies ..... $ 69 $ 115
Work in process ................ 3 19
Finished goods ................. 1,577 1,971
------- -------
$ 1,649 $ 2,105
======= =======
</TABLE>
4. GOODWILL IMPAIRMENT
The net assets of a purchased business are recorded at their fair value at the
date of acquisition. The excess of purchase price over the fair value of net
assets acquired (goodwill) is reflected as intangible assets and was amortized
on a straight-line basis principally over a period of 40 years.
The Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance over its remaining life can be
recovered through forecasted future operations.
At March 31, 1995 and at December 31, 1994, the Company's business plan had
anticipated that the restructuring of its debt (see Note 2), along with a
consolidation and restructuring of its operations would permit it to obtain a
sufficient level of borrowings to fund its capital requirements in 1995 and
beyond. With the above business plan in place, funded by an adequate level of
conventional working capital borrowings, it was anticipated that future cash
flows from operations would be sufficient to recover the carrying value of the
Company's goodwill.
During the second quarter of 1995, due primarily to competitive conditions in
the costume jewelry industry, the Company experienced a reduction in business
with certain major customers. Additionally, the Company discontinued certain
unprofitable programs with other customers resulting in charges to operations
for merchandise credits and inventory valuation allowances totaling $450,000.
Due to the continued losses from operations and the inability of the Company to
obtain conventional bank financing, the Company determined that its remaining
goodwill balance could no longer be recovered over its remaining life through
forecasted future operations. Accordingly, the Company recorded a charge against
operations of $12,930,000 ($3.97 per share) to write-off all of the goodwill of
its costume jewelry operations at June 30, 1995.
<PAGE>
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
5. NOTES PAYABLE AND LONG-TERM DEBT
Notes payable and long-term debt (in thousands) consists of:
June 30, December 31,
1995 1994
------- -------
Notes payable
Amount due to a related party,
interest at the prime rate plus 1% $ 775
Other ................................ 700
-------
$ 1,475
=======
Long-term debt
Amounts due a bank term under terms of
a debt settlement agreement ..... $ 7,855
Current scheduled maturities ......... (750)
Debt subsequently discharged ......... (7,105)
-------
$ -
=======
As discussed in Note 2, effective August 18, 1994, as amended effective December
23, 1994, ARTRA, Fill-Mor, Lori and Lori's operating subsidiaries entered into
an agreement with Lori's bank lender to settle obligations due the bank under
terms of the bank loan agreements of Lori and its operating subsidiaries and
Fill-Mor. Per terms of the Amended Settlement Agreement, borrowings due the bank
under the loan agreements of Lori and its operating subsidiaries and Lori's
parent, Fill-Mor, plus amounts due the bank for accrued interest and fees were
reduced to $10,500,000 as of December 23, 1994 (of which $7,855,000 pertained to
Lori's obligation to the bank and $2,645,000 pertained to Fill-Mor's obligation
to the bank). As partial consideration for the Amended Settlement Agreement the
bank received a $750,000 Lori note payable due March 31, 1995.
On March 31, 1995 the $750,000 note due the bank was paid and the remaining
indebtedness of Lori and Fill-Mor was discharged, resulting in an additional
extraordinary gain to Lori of $6,657,000 in 1995 (See Note 2). The $750,000 note
payment was funded with the proceeds of a $850,000 short-term loan from a
director of Lori. The loan provides for interest at the prime rate plus 1%. As
consideration for assisting with the debt restructuring, the director received
150,000 Lori common shares valued at $337,500 ($2.25 per share) based upon
Lori's closing market value on March 30, 1995. The principal amount of the loan
was reduced to $775,000 at June 30, 1995 and further reduced to $750,000 at July
31, 1995. The remaining loan principle was not repaid on its scheduled to
maturity date of July 31, 1995. Per terms of the loan agreement, the Lori
director received an additional 50,000 Lori common shares as compensation for
the non-payment of the loan at its scheduled maturity. The due date of the loan
was subsequently extended to September 30, 1995 and the Lori director received
an additional 50,000 Lori common shares as consideration for the loan extension.
<PAGE>
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
During the second quarter of 1995, Lori entered into a series of agreements with
certain unaffiliated investors that provided for $700,000 of short-term loans
due January 1, 1996 that provide for interest at 15%. As additional compensation
the lenders received an aggregate of 41,176 Lori common shares.
In August, 1995 Lori obtained a credit facility for the factoring of the
accounts receivable of its costume jewelry operations. The credit facility
provides for advances of 80% of receivables assigned, after allowances for
markdowns and other merchandise credits. The factoring charge, a minimum of
1.75% of the receivables assigned, increases on a sliding scale if the
receivables assigned are not collected within 45 days. Borrowings under the
credit facility are collateralized by the accounts receivable, inventory and
equipment of Lori's operating subsidiaries and guaranteed by Lori.
At June 30, 1995 the common stock and virtually all the assets of the Company
and its operating subsidiaries have been pledged as collateral for a short-term
loan from a director of Lori, the proceeds of which were used to fund the
$750,000 note payment to the bank under terms of the debt settlement agreement.
In August, 1995 the director of Lori agreed to subordinate his interest the Lori
assets pledged as collateral for the above accounts receivable factoring credit
facility.
At June 30, 1995 and December 31, 1994, other noncurrent liabilities of $929,000
and $963,000, respectively, consisted of amounts due December 31, 1996 and 1997
representing unsecured claims arising from the May 3, 1993 reorganization of New
Dimensions.
6. PREFERRED STOCK
The Series C cumulative preferred stock, owned in its entirety by ARTRA, accrues
dividends at the rate of 13% per annum on its liquidation value. Accumulated
dividends were $7,011,000 at June 30, 1995 and December 31, 1994. Due to the
limited ability of the Company to receive funds from its operating subsidiaries
in recent years under terms of their former bank loan agreements, effective July
1, 1989, ARTRA placed a moratorium on the accrual of interest and the
declaration and accrual of dividends on its Lori preferred stock. The moratorium
has been extended indefinitely.
The Series C preferred stock is redeemable at Lori's option at prices based upon
the principal amount paid plus accumulated dividends and a redemption premium
that increased each year until 1995.
7. EARNINGS PER SHARE
Earnings (loss) per share is computed by dividing net earnings (loss) by the
weighted average number of shares of common stock and common stock equivalents
(stock options and warrants), unless anti-dilutive, outstanding during each
period. Fully diluted earnings per share are not presented since the result is
equivalent to primary earnings per share.
8. INCOME TAXES
Due to the Company's tax loss carryforwards and the uncertainty of future
taxable income, no income tax benefit was recognized in connection with the
Company's 1995 and 1994 pre-tax losses. The 1995 extraordinary credit represents
a net gain from discharge of bank indebtedness.
<PAGE>
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
9. LITIGATION
Lori has been notified by the Federal Environment Protection Agency that it is a
potentially responsible party for the disposal of hazardous substances by its
predecessor company at a site on Ninth Avenue in Gary, Indiana.. Lori has no
records indicating that it deposited hazardous substances at this site and
intends to vigorously defend itself in this matter.
Lori and its subsidiaries are parties in various other business related
litigation which, in the opinion of management, will not have a material adverse
effect on the Company's financial position and results of operations.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion supplements the information found in the financial
statements and related notes:
Liquidity and Capital Resources
Cash and Cash Equivalents and Working Capital
Cash and cash equivalents decreased $731,000 during the six months ended June
30, 1995. Cash flows used by operating activities of $1,377,000 and cash flows
used by investing activities of $80,000 exceeded cash flows from financing
activities of $726,000. Cash flows used by operating activities were principally
attributable to the Company's loss from operations, exclusive of the effect of a
charge to operations of $12,930,000 representing an impairment of the Company's
goodwill. Cash flows from investing activities consisted of expenditures for
retail fixtures of $610,000 and expenditures for equipment of $20,000, less
$550,000 deposited in trust in December, 1994 used to fund an installment
payment in January, 1995 for unsecured claims arising from the May, 1993
reorganization of the former New Dimensions subsidiary. Cash flows from
financing activities were attributable to short-term loans used to fund the
$750,000 payment due the Company's former bank lender under terms of the debt
settlement agreement and to fund working capital requirements.
During the six months ended June 30, 1995, the Company's working capital
deficiency increased by $2,308,000. The increase in working capital deficiency
is principally attributable to the Company's loss from operations, exclusive of
the effect of a charge to operations of $12,930,000 representing an impairment
of the Company's goodwill.
Debt Restructuring
In recent years, the Company has experienced a pattern of significantly lower
sales levels and related operating losses primarily due to a shift in the buying
patterns of its major customers (i.e. certain mass merchandisers) from
participation in the Company's service program to purchases of costume jewelry
and accessories directly from manufacturers. As a result of the significant
operating loss incurred in 1992, on February 5, 1993, the Company's former New
Dimensions subsidiary filed a petition for reorganization under Chapter 11 of
the Bankruptcy Code. On April 9, 1993, New Dimensions' reorganization plan was
confirmed by an order of the Bankruptcy Court and on May 3, 1993, the
consummation date of the reorganization, New Dimensions emerged from Chapter 11
bankruptcy court protection. Lori assumed and guaranteed certain New Dimensions'
pre-bankruptcy loans payable to its bank and the bank also provided New
Dimensions with certain credit facilities. Additionally, Lori's bank lender
provided Lawrence and Rosecraft with new credit facilities in the first quarter
of 1993.
At December 31, 1993 and during 1994, Lori and its operating subsidiaries were
not in compliance with certain provisions of their respective bank loan
agreements.
Effective August 18, 1994, as amended December 23, 1994, Lori and Lori's
operating subsidiaries (collectively, the "Borrowers"), ARTRA and Fill-Mor
entered into an agreement with Lori's bank lender to settle obligations due the
bank under terms of the bank loan agreements of Lori and its operating
subsidiaries.
Per terms of the Amended Settlement Agreement, borrowings due the bank under the
loan agreements of the Borrowers and Fill-Mor (approximately $25,000,000 as of
December 23, 1994), plus amounts due the bank for accrued interest and fees were
reduced to $10,500,000 as of December 23, 1994 (of which $7,855,000 pertained to
Lori's obligation to the bank and $2,645,000 pertained to Fill-Mor's obligation
to the bank). Upon the satisfaction of certain conditions of the Amended
Settlement Agreement in March 1995, as discussed below, the balance of this
indebtedness was discharged.
In conjunction with the Amended Settlement Agreement, ARTRA entered into a
$1,850,000 short-term loan agreement with a non-affiliated corporation, the
proceeds of which were advanced to Lori and used to fund amounts due the bank as
discussed below. The loan, due June 30, 1995, with interest payable monthly at
10%, is collateralized by 100,000 shares of Lori common stock. These 100,000
Lori common shares, originally issued to the bank under terms of the August 18,
1994 Settlement Agreement, were carried in the Company's condensed consolidated
balance sheet at June 30, 1995 and December 31, 1994 as
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
restricted common stock. In August, 1995 the loan was extended until September
15, 1995 and the lender received the above mentioned 100,000 Lori common shares
as consideration for the loan extension. In exchange for the reduction of
amounts due the bank, and as additional consideration for the $1,850,000
short-term loan agreement from the non-affiliated corporation, the Borrowers,
ARTRA and Fill-Mor agreed to pay the following consideration, which supersedes
the consideration agreed to under terms of the August 18, 1994 Settlement
Agreement:
A) A cash payment to the bank of $1,900,000, which was made prior
to consummation of the Amended Settlement Agreement.
B) 400,000 shares of ARTRA common stock.. These 400,000 ARTRA
common shares were originally issued to the bank under terms
of the August 18, 1994 Settlement Agreement. The bank retained
100,000 shares and the non-affiliated corporation received
300,000 shares as additional consideration for its short-term
loan.
C) Assignment to the bank of all of the assets of Lori's New
Dimensions subsidiary.
D) A $750,000 note payable to the bank due March 31, 1995.
Additionally, ARTRA advanced $400,000 to Lori to be used to fund the installment
payment due December 31, 1994 for unsecured claims arising from the May 3, 1993
reorganization of New Dimensions.
The August 18, 1994 settlement agreement required ARTRA to contribute cash of
$1,500,000 to Lori for working capital. ARTRA's cash contribution was funded by
private placements of ARTRA common stock. An officer/director of Lori
participated in the private placement of ARTRA common stock purchasing $150,000
of ARTRA common stock (37,500 shares), subject to the same terms and conditions
as the other outside investors.
Lori recognized an extraordinary gain of $8,965,000 ($2.81 per share) in
December 1994 as a result of the reduction of amounts due the bank under the
loan agreements of the Borrowers and Fill-Mor to $10,500,000 (of which
$7,855,000 pertained to Lori's obligation to the bank and $2,645,000 pertained
to Fill-Mor's obligation to the bank) as of December 23, 1994. Lori also
recorded a charge against operations of $10,800,000 in December 1994 to
write-off New Dimensions' remaining goodwill.
On March 31, 1995 the $750,000 note due the bank was paid and the remaining
indebtedness of Lori and Fill-Mor was discharged, resulting in an additional
extraordinary gain to Lori and Fill-Mor of $6,657,000 ($2.04 per share) in the
first quarter of 1995. The $750,000 note payment was funded with the proceeds of
a $850,000 short-term loan from a director of Lori. The loan provides for
interest at the prime rate plus 1%. As consideration for assisting in the debt
restructuring, the director received 150,000 Lori common shares valued at
$337,500 ($2.25 per share) based upon Lori's closing market value on March 30,
1995.
In recent years, New Dimensions had experienced a pattern of significantly lower
sales levels and related operating losses primarily due to a shift in the buying
patterns of its major customers (i.e. certain mass merchandisers) from
participation in the New Dimension's service program to purchases of costume
jewelry and accessories directly from manufacturers. In the fourth quarter of
1994, New Dimensions' largest customer, Wal-Mart, ended its participation in New
Dimension's service program. Accordingly, the assignment to the Company's bank
lender of all of the assets of the New Dimensions subsidiary in accordance with
terms of the Amended Settlement Agreement, resulted in New Dimensions ceasing
its operations effective December 27, 1994. Due to the pattern of operating
losses, New Dimensions cessation of operations is not expected to have a
material adverse effect on the financial condition, liquidity or results of
operations of the Company in the immediate future.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
1995 Plan of Operations
At March 31, 1995 and at December 31, 1994, the Company had anticipated that the
restructuring of its debt (see Note 2 to the Company's condensed consolidated
financial statements), along with a consolidation and restructuring of its
operations in order to reduce overhead costs and improve operational
efficiencies, would permit it to obtain a sufficient level of borrowings to fund
its capital requirements in 1995. During the second quarter of 1995, due
primarily to competitive conditions in the costume jewelry industry, the Company
experienced a reduction in business with certain major customers. Additionally,
the Company discontinued certain unprofitable programs with other customers
resulting in charges to operations for merchandise credits and inventory
valuation allowances totaling $450,000. Due to the continued losses from
operations and the inability of the Company to obtain conventional bank
financing, the Company determined that its remaining goodwill balance could no
longer be recovered over its remaining life through forecasted future
operations. Accordingly, the Company recorded a charge against operations of
$12,930,000 ($3.97 per share) to write-off all of the goodwill of its costume
jewelry operations (see Note 4 to the Company's condensed consolidated financial
statements).
Lori's business plan for the remainder of 1995 is based on the continued
dependence upon certain major customers which include Target Stores, Walgreens
and Wal-Mart. The Company does not have sales contracts with its customers.
At March 31, 1995, subsequent to the discharge of the Company's former bank
indebtedness, the Company did not have a credit facility in place to fund its
1995 capital requirements. The Company entered into negotiations with various
financial institutions and other lenders to obtain a working capital financing.
These negotiations did not result in the placement of a credit facility. During
June, 1995, Lori entered into a series of agreements with certain unaffiliated
investors that provided for $700,000 of short-term loans due January 1, 1996. In
August, 1995 Lori obtained a credit facility for the factoring of the accounts
receivable of its costume jewelry operations. The credit facility provides for
advances of 80% of receivables assigned, after allowances for markdowns and
other merchandise credits. The factoring charge, a minimum of 1.75% of the
receivables assigned, increases on a sliding scale if the receivables assigned
are not collected within 45 days. Borrowings under the credit facility are
collateralized by the accounts receivable, inventory and equipment of Lori's
operating subsidiaries and guaranteed by Lori.
The above borrowings are not sufficient to adequately fund Lori's capital
requirements for the remainder of 1995. Lori continues to search for additional
funding to meet its capital requirements for the remainder of 1995 and beyond,
either through borrowings or equity infusions. Additionally, Lori is attempting
to increase sales through the solicitation of new customers and the addition of
new programs with existing customers such that operating results will improve.
However, there can be no assurance that such efforts will result in increased
sales and operating profits. If Lori is unable to obtain additional working
capital borrowings or equity infusions to fund its operations in for the
remainder of 1995 and beyond, and improve the results of operations, it may be
forced to liquidate its assets or file for protection under the Bankruptcy Code.
At June 30, 1995 the common stock and virtually all the assets of the Company
and its operating subsidiaries have been pledged as collateral for a short-term
loan from a director of Lori, the proceeds of which were used to fund the
$750,000 note payment to the bank under terms of the debt settlement agreement.
In August, 1995 the director of Lori agreed to subordinate his interest the Lori
assets pledged as collateral for the above accounts receivable factoring credit
facility.
Due to the limited ability of the Company to receive funds from its operating
subsidiaries in recent years under terms of their former bank loan agreements,
effective July 1, 1989, ARTRA placed a moratorium on the declaration and accrual
of dividends on its Lori preferred stock. The moratorium has been extended
indefinitely. The payment of accrued preferred stock dividends and the
redemption of the preferred stock is contingent upon the ability of the Company
and its operating subsidiaries to generate adequate cash flow, of which there
can be no assurance, to redeem these obligations. Additionally, Lori has not
paid dividends on its common stock in recent years and no dividend payments are
anticipated in the immediate future.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
During the six months ended June 30, 1995, ARTRA made net advances of $220,000
to Lori. During 1994, ARTRA made net advances to Lori of $2,531,000. The
advances consisted of a $1,850,000 short-term note with interest at 10%, the
proceeds of which were used to fund the $1,900,000 cash payment to the bank in
conjunction with the Amended Settlement Agreement with Lori's former bank
lender, and certain non-interest bearing advances used to fund Lori working
capital requirements.
Effective December 29, 1994 ARTRA exchanged $2,242,000 of its notes and advances
for additional Lori Series C preferred stock. Additionally, the August 18, 1994
Settlement Agreement required ARTRA to contribute cash of $1,500,000 and ARTRA
common stock with a fair market value of $2,500,000 to Lori's capital account.
Rosecraft, Lawrence and Lori's corporate entity have no material commitments for
capital expenditures.
Litigation
Lori has been notified by the Federal Environment Protection Agency that it is a
potentially responsible party for the disposal of hazardous substances by its
predecessor company at a site on Ninth Avenue in Gary, Indiana.. Lori has no
records indicating that it deposited hazardous substances at this site and
intends to vigorously defend itself in this matter.
Lori and its subsidiaries are parties in various other business related
litigation which, in the opinion of management, will not have a material adverse
effect on the Company's financial position and results of operations.
Net Operating Loss Carryforwards
At June 30, 1995, the Company and its subsidiaries had Federal income tax loss
carryforwards of approximately $53,000,000 available to be applied against
future taxable income, if any, expiring principally in 1995 - 2009. During 1994
and 1995, the Company has issued shares of its common stock as consideration for
various transactions. Section 382 of the Internal Revenue Code of 1986 limits a
corporation's utilization of its Federal income tax loss carryforwards when
certain changes in the ownership of a corporation's common stock occurs. In the
opinion of management, the Company is not currently subject to such limitations
regarding the utilization of its Federal income tax loss carryforwards. Should
the Company continue to issue a significant number of shares of its common
stock, it could trigger a limitation that would prevent it from utilizing a
substantial portion of its Federal income tax loss carryforwards.
Results of Operations
The assignment to a bank lender of all of the assets of Lori's New Dimensions
subsidiary in accordance with terms of the debt settlement agreement, resulted
in New Dimensions terminating its operations effective December 27, 1994. The
results of operations for the three and six months ended June 30, 1994 included
New Dimensions net sales of $4,345,000 and $7,896,000 and operating losses of
$403,000 and $888,000, respectively. New Dimensions terminated operations
effective December 27, 1994. In recent years, New Dimensions had experienced a
pattern of significantly lower sales levels and related operating losses
primarily due to a shift in the buying patterns of its major customers (i.e.
certain mass merchandisers) from participation in the New Dimension's service
program to purchases of costume jewelry and accessories directly from
manufacturers. Due to the pattern of operating losses, New Dimensions cessation
of operations is not expected to have a material adverse effect on the results
of operations of the Company in the immediate future.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
Three Months Ended June 30, 1995 vs. Three Months Ended June 30, 1994
Net sales of $2,695,000 for the three months ended June 30, 1995 were
$6,348,000, or 70.2%, lower than net sales for the three months ended June 30,
1994. The 1995 sales decrease is principally attributable to the termination of
New Dimensions operations effective December 27, 1994 and to a soft retail
environment in 1995. During the second quarter of 1995, due primarily to
competitive conditions in the costume jewelry industry, the Company experienced
a reduction in business with certain major customers. Additionally, the Company
discontinued certain unprofitable programs with other customers.
The Company's cost of sales of $2,233,000 for the three months ended June 30,
1995 decreased $2,973,000 as compared to the three months ended June 30, 1994.
Cost of sales in the three months ended June 30, 1995 was 82.9% of net sales
compared to a cost of sales percentage of 57.6% for the three months ended June
30, 1994. The 1995 cost of sales decrease is principally attributable to the
decrease in sales volume due to the termination of New Dimensions operations
effective December 27, 1994. The 1995 cost of sales percentage increase of 25.3%
is primarily attributable to a soft retail environment that resulted in
depressed operating margins. Additionally, the Company discontinued certain
unprofitable programs with other customers resulting in charges to operations
for inventory valuation allowances.
Selling, general and administrative expenses of $2,214,000 in the three months
ended June 30, 1995 decreased $2,205,000 as compared to the three months ended
June 30, 1994. Selling, general and administrative expenses were 82.2% of net
sales in the three months ended June 30, 1995 as compared to 48.9% of net sales
in the three months ended June 30, 1994. The 1995 decrease in selling, general
and administrative expenses is attributable to the decrease in sales volume due
to the termination of New Dimensions operations effective December 27, 1994. The
1995 increase in selling, general and administrative expenses as a percentage of
net sales is attributable to the combination of the semi-fixed nature of these
costs and a significant decrease in sales volume.
Depreciation and amortization expense decreased approximately $220,000 in the
three months ended June 30, 1995 as compared to the three months ended June 30,
1994. The decrease is primarily attributable to the termination of New
Dimensions operations effective December 27, 1994.
As discussed in Note 4 to the Company's condensed consolidated financial
statements, during the second quarter of 1995 the Company determined that its
remaining goodwill balance could no longer be recovered over its remaining life
through forecasted future operations. Accordingly, the Company recorded a charge
against operations of $12,930,000 ($3.97 per share) to write-off all of the
goodwill of its costume jewelry operations at June 30, 1995.
Operating loss in the three months ended June 30, 1995 was $14,824,000 as
compared to operating loss of $944,000 in the year ended three months ended June
30, 1994. The increased 1995 operating loss is principally attributable to a
charge against operations of $12,930,000 to write-off all of the goodwill of its
costume jewelry operations at June 30, 1995, as discussed in Note 4 to the
Company's condensed consolidated financial statements.
Interest expense in the three months ended June 30, 1995 decreased $473,000 as
compared to the three months ended June 30, 1994. The 1995 decrease is
principally due the settlement agreement with the Company's bank lender. See
Note 2 to the Company's condensed consolidated financial statements. with the
Company's 1994 pre-tax loss.
Due to the Company's tax loss carryforwards and the uncertainty of future
taxable income, no income tax benefit was recognized in connection with the
Company's 1995 and 1994 pre-tax losses.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
Six Months Ended June 30, 1995 vs. Six Months Ended June 30, 1994
Net sales of $7,639,000 for the six months ended June 30, 1995 were $10,673,000,
or 58.3%, lower than net sales for the six months ended June 30, 1994. The 1995
sales decrease is principally attributable to the termination of New Dimensions
operations effective December 27, 1994 and a soft retail environment in 1995.
During the second quarter of 1995, due primarily to competitive conditions in
the costume jewelry industry, the Company experienced a reduction in business
with certain major customers. Additionally, the Company discontinued certain
unprofitable programs with other customers.
The Company's cost of sales of $5,096,000 for the six months ended June 30, 1995
decreased $5,207,000 as compared to the six months ended June 30, 1994. Cost of
sales in the six months ended June 30, 1995 was 66.7% of net sales compared to a
cost of sales percentage of 56.3% for the six months ended June 30, 1994. The
1995 cost of sales decrease is principally attributable to the decrease in sales
volume due to the termination of New Dimensions operations effective December
27, 1994. The 1995 cost of sales percentage increase of 10.4% is primarily
attributable to a soft retail environment that resulted in depressed operating
margins. Additionally, the Company discontinued certain unprofitable programs
with other customers resulting in charges to operations for inventory valuation
allowances.
Selling, general and administrative expenses of $4,343,000 in the six months
ended June 30, 1995 decreased $4,657,000 as compared to the six months ended
June 30, 1994. Selling, general and administrative expenses were 56.9 % of net
sales in the six months ended June 30, 1995 as compared to 49.1% of net sales in
the six months ended June 30, 1994. The decrease in selling, general and
administrative expenses is attributable to the decrease in sales volume due to
the termination of New Dimensions operations effective December 27, 1994. The
1995 increase in selling, general and administrative expenses as a percentage of
net sales is attributable to the combination of the semi-fixed nature of these
costs and a significant decrease in sales volume.
Depreciation and amortization expense decreased approximately $446,000 in the
six months ended June 30, 1995 as compared to the six months ended June 30,
1994. The decrease is primarily attributable to the termination of New
Dimensions operations effective December 27, 1994.
As discussed in Note 4 to the Company's condensed consolidated financial
statements, during the second quarter of 1995 the Company determined that its
remaining goodwill balance could no longer be recovered over its remaining life
through forecasted future operations. Accordingly, the Company recorded a charge
against operations of $12,930,000 ($3.97 per share) to write-off all of the
goodwill of its costume jewelry operations at June 30, 1995.
Operating loss in the six months ended June 30, 1995 was $15,010,000 as compared
to operating loss of $1,717,000 in the six months ended June 30, 1994. The
increased 1995 operating loss is principally attributable to a charge against
operations of $12,930,000 to write-off all of the goodwill of its costume
jewelry operations at June 30, 1995, as discussed in Note 4 to the Company's
condensed consolidated financial statements.
Interest expense in the three months ended June 30, 1995 decreased $902,000 as
compared to the six months ended June 30, 1994. The 1995 decrease is principally
due the settlement agreement with the Company's bank lender. See Note 2 to the
Company's condensed consolidated financial statements.
Due to the Company's tax loss carryforwards and the uncertainty of future
taxable income, no income tax benefit was recognized in connection with the
Company's 1995 and 1994 pre-tax losses. The 1995 extraordinary credit represents
a net gain from discharge of bank indebtedness.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS - (continued)
Seasonality
Retail sales of the Company are higher during the Spring (February through
April) and Christmas (September through December) seasons. As a result of these
seasonal factors, the Company's inventories of finished goods reach peak levels
during these periods and are generally lower during the balance of the year.
Impact of Inflation and Changing Prices
Inflation has become a less significant factor in our economy; however, to the
extent permitted by competition, the Company generally passes increased costs to
its customers by increasing sales prices over time.
<PAGE>
PART II - OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT 11
Computation of earnings per share and equivalent share of
common stock for the six months ended June 30, 1995 and
1994.
(b) Reports on Form 8-K:
None
<PAGE>
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 thereunder duly authorized.
THE LORI CORPORATION
--------------------
Registrant
Dated: August 21, 1995 JAMES D. DOERING
------------------------ ------------------------------------------
Vice President and Chief Financial Officer
EXHIBIT 11
THE LORI CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS (LOSS) PER SHARE
AND EQUIVALENT SHARE OF COMMON STOCK
(In thousands except per share amounts)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1995 1994
-------- --------
Line
<S> <C> <C> <C>
AVERAGE SHARES OUTSTANDING
1 Weighted average number of shares of common stock
outstanding during the period 3,257 3,163
2 Net additional shares assuming stock options and warrants
exercised and proceeds used to purchase treasury shares
-------- --------
3 Weighted average number of shares and equivalent shares
of common stock outstanding during the period 3,257 3,163
======== ========
EARNINGS (LOSS)
4 Loss before extraordinary credit ($15,122) ($2,747)
-------- --------
5 Amount for per share computation ($15,122) ($2,747)
======== ========
6 Net loss ($8,465) ($2,747)
-------- --------
7 Amount for per share computation ($8,465) ($2,747)
======== ========
PER SHARE AMOUNTS
Loss before extraordinary credit
(line 5 / line 3) ($4.64) ($0.87)
====== ======
Net loss
(line 7 / line 3) ($2.60) ($0.87)
====== ======
<FN>
Earnings (loss) per share is computed by dividing net earnings (loss),
less preferred stock dividends, by the weighted average number of shares
of common stock and common stock equivalents (stock options and
warrants), unless anti-dilutive, outstanding during the period. Fully
diluted earnings (loss) per share is not presented since the result is
equivalent to primary earnings (loss) per share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information from the third quarter Form
10-Q and is qualified in its entirety by reference to such Form 10-Q.
</LEGEND>
<CIK> 0000006814
<NAME> The Lori Corporation
<MULTIPLIER> 1,000
<CURRENCY> dollars
<S> <C>
<PERIOD-TYPE> 6-mos
<FISCAL-YEAR-END> Dec-31-1995
<PERIOD-START> Jan-01-1995
<PERIOD-END> Jun-30-1995
<EXCHANGE-RATE> 1.000
<CASH> 52
<SECURITIES> 0
<RECEIVABLES> 1,759
<ALLOWANCES> 820
<INVENTORY> 1,649
<CURRENT-ASSETS> 3,110
<PP&E> 1,444
<DEPRECIATION> 1,050
<TOTAL-ASSETS> 4,434
<CURRENT-LIABILITIES> 6,264
<BONDS> 0
<COMMON> 34
0
19,515
<OTHER-SE> (22,358)
<TOTAL-LIABILITY-AND-EQUITY> 4,434
<SALES> 7,639
<TOTAL-REVENUES> 7,639
<CGS> 5,096
<TOTAL-COSTS> 5,096
<OTHER-EXPENSES> 17,526
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 136
<INCOME-PRETAX> (15,119)
<INCOME-TAX> 3
<INCOME-CONTINUING> (15,122)
<DISCONTINUED> 0
<EXTRAORDINARY> 6,657
<CHANGES> 0
<NET-INCOME> (8,465)
<EPS-PRIMARY> (2.60)
<EPS-DILUTED> 0
</TABLE>
