SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
FORM 10-Q
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 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 0-1282-3
The Forschner Group, Inc.
(Exact name of registrant as specified in its charter)
Delaware 13-2797726
(State of incorporation) (I.R.S. Employer Identification No.)
One Research Drive, Shelton, Connecticut 06484
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (203) 929-6391
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
The number of shares of Issuer's Common Stock, $.10 par value,
outstanding on July 31, 1995, was 8,185,360 shares.
<PAGE>
THE FORSCHNER GROUP, INC.
AND SUBSIDIARIES
INDEX
PART I: FINANCIAL INFORMATION Page No.
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
June 30, 1995 and December 31, 1994. 3 - 4
Consolidated Statements of Operations for the
three and six months ended June 30, 1995 and 1994. 5
Consolidated Statements of Stockholders' Equity
for the six months ended June 30, 1995 and 1994. 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 1995 and 1994. 7
Notes to Consolidated Financial Statements 8 - 9
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 10 - 12
Part II: OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 13
Signatures 14
The Exhibit Index appears on page 13.
2
<PAGE>
THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Assets
At June 30, At December 31,
1995 1994
(unaudited)
----------- ------------
Current assets:
Cash and short-term investments $7,286,580 $18,019,797
Accounts receivable, less
allowance for doubtful accounts
of $600,000 and $755,000, 19,686,609 29,606,328
respectively
Inventories 42,350,599 27,862,105
Deferred income tax benefits 2,412,812 2,467,440
Prepaid and other 2,510,822 685,273
------------ -----------
Total current assets 74,247,422 78,640,943
------------ -----------
Deferred income tax benefits 138,892 56,634
Property, plant and equipment, at cost:
Leasehold improvements 772,799 658,842
Equipment 5,713,295 5,189,298
Furniture and fixtures 1,339,063 1,256,462
----------- ----------
7,825,157 7,104,602
Less-accumulated depreciation (3,632,546) (2,876,944)
----------- ----------
4,192,611 4,227,658
----------- ----------
Investments in equity securities,
at cost 7,518,990 7,002,990
Investments in unconsolidated
affiliates 7,392,189 4,463,080
Foreign distribution rights, net of
accumulated amortization of $1,503,198
and $1,165,129, respectively 5,239,154 5,579,079
Other assets, net of accumulated
amortization of $2,663,236 and
$2,159,756, respectively 6,573,209 5,737,337
----------- -----------
Total Assets $105,302,467 $105,707,721
============ ============
3
<PAGE>
THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Liabilities and Stockholders' Equity
At June 30 At December 31,
1995 1994
(unaudited)
------------ ------------
Current liabilities:
Accounts payable $14,321,166 $14,057,507
Accrued liabilities 7,679,501 8,651,738
Income taxes payable - 1,223,193
------------- -------------
Total current liabilities 22,000,667 23,932,438
------------- -------------
Commitments and contingencies
Stockholder' equity
Preferred stock, par value $.10
per share: shares authorized -
2,000,000; no shares issued - -
Common stock, par value $.10 per
share: shares authorized -
12,000,000; shares issued -
8,799,468 and 8,796,968,
respectively 879,947 879,697
Additional paid-in capital 45,889,676 45,866,814
Foreign currency translation
adjustment (13,645) (28,085)
Retained earnings 41,659,289 40,170,324
------------- -------------
88,415,267 86,888,750
Less-cost of common stock in
treasury; 614,108 shares (5,113,467) (5,113,467)
------------- -------------
Total stockholders' equity 83,301,800 81,775,283
------------- -------------
Total Liabilities and
Stockholders' Equity $105,302,467 $105,707,721
============= =============
4
<PAGE>
THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
------------ ----------- ---------- -----------
Net sales $25,925,259 $39,935,320 $55,294,980 $66,984,358
Cost of sales 17,209,810 26,559,947 35,878,937 42,835,995
---------- ---------- ---------- ----------
Gross profit 8,715,449 13,375,373 19,416,043 24,148,363
Selling, general
and administrative
expenses 8,011,483 11,010,140 17,132,520 19,203,557
---------- ---------- ---------- ----------
Operating income 703,966 2,365,233 2,283,523 4,944,806
Interest (expense) (18,534) (5,182) (18,534) (12,335)
Interest income 165,438 4,973 416,304 19,225
Other income (expense), net
(312,097) 18,645 52,312 90,045
---------- ---------- --------- ---------
Total interest and
other income, net (165,193) 18,436 450,082 96,935
-------- --------- --------- ---------
Income before income taxes 538,773 2,383,669 2,733,605 5,041,741
Income tax provision 320,590 1,003,525 1,244,640 2,122,573
-------- --------- --------- ---------
Net income $218,183 $1,380,144 $1,488,965 $2,919,168
======== ========== ========== ==========
Net income per share $0.03 $0.17 $0.18 $0.38
======== ========== ========== ==========
Weighted average number of
shares outstanding 8,202,333 8,061,638 8,219,643 7,596,585
========= ========= ========= =========
5
<PAGE>
<TABLE>
THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND 1994
<CAPTION>
Common Stock Foreign
Par Value $.10 Additional Currency
-------------- Paid-In Translation Retained Treasury
Shares Amount Capital Adjustment Earnings Stock
---------------------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE
December 31, 1993 7,648,968 $764,897 $34,520,872 $(6,829) $30,810,594 $(5,472,110)
Net income for
six months ended
June 30, 1994
(unaudited) - - - - 2,919,168 -
Stock options and
warrants exercised 1,086,000 108,600 10,279,177 - - -
Issuance of common stock
from treasury - - 391,360 - - 358,643
Foreign currency
translation adjustment - - - (6,574) - -
---------- --------- ----------- --------- --------- -----------
BALANCE, June 30,
1994 (unaudited) 8,734,968 $873,497 45,191,409 $(13,403) 33,729,762 $(5,113,467)
============= ============ =========== ========== ========== ==============
BALANCE
December 31, 1994 8,796,968 $879,697 $45,866,814 $(28,085) $40,170,324 $(5,113,467)
Net income for
six months ended
June 30, 1995
(unaudited) - - - - 1,488,965 -
Stock options exercised 2,500 250 22,862 - - -
Foreign currency
translation adjustment - - - 14,440 - -
------------ --------- ----------- --------- ---------- ------------
BALANCE, June 30,
1995 (unaudited) 8,799,468 $879,947 $45,889,676 $(13,645) $41,659,289 $(5,113,467)
============ ========= =========== ========== ========== =============
</TABLE>
6
<PAGE>
<TABLE>
THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<CAPTION>
Six months ended
June 30,
1995 1994
------------ -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,488,965 $ 2,919,168
Adjustments to reconcile net income to cash
(used for) operating activities:
Depreciation and amortization 2,081,723 1,464,615
Equity in earnings of unconsolidated
subsidiaries, net of goodwill amortization (19,562) -
Deferred income taxes 134,858 (125,539)
Treasury shares contributed to charitable
foundation - 750,003
Gain on sale of partial investment in stock - (36,720)
----------- ------------
3,685,984 4,971,527
Changes in other current assets and liabilities:
Accounts receivable 9,947,125 (2,400,409)
Inventories (14,488,494) (3,989,564)
Prepaid and other (1,825,549) 2,400,233
Accounts payable 263,659 (3,182,432)
Accrued liabilities (972,237) 1,182,459
Income taxes payable (1,223,193) (400,000)
--------------- --------------
Net cash (used for) operating activities (4,612,705) (1,418,186)
--------------- --------------
Cash flows from investing activities:
Capital expenditures (743,960) (787,193)
Proceeds from sales of property, plant & equipment 10,206 -
Additions to other assets (1,432,689) (159,956)
Investment in preferred stock - (6,250,000)
Investments in common stock (3,821,287) -
Proceeds from sale of investments in stock - 374,400
Proceeds from note receivable - 21,141
------------ --------------
Net cash (used for) investing activities (5,987,730) (6,801,608)
------------ --------------
Cash flows from financing activities:
Proceeds from exercise of stock options 23,112 10,387,777
-------------- ---------------
Net cash provided from financing activities 23,112 10,387,777
-------------- --------------
Effect of exchange rate changes on cash (155,894) 63,455
------------- ---------------
Net increase (decrease) in cash and short-term
investments (10,733,217) 2,231,438
Cash and short-term investments,
beginning of period 18,019,797 7,835,848
-------------- --------------
Cash and short-term investments,
end of period $ 7,286,580 $10,067,286
============= =============
Cash paid during the period:
Interest $ 18,534 $ 12,335
============= =============
Income taxes $ 2,546,571 $ 1,888,098
============= =============
</TABLE>
7
<PAGE>
THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1995 and 1994
(unaudited)
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included in this Form 10-Q have
been prepared by The Forschner Group, Inc. ("Forschner", the "Company") without
audit. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and regulations
of the Securities and Exchange Commission. It is suggested that these
consolidated financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's report on Form 10-K for
the year ended December 31, 1994. In the opinion of management of the Company,
the interim financial statements included herein reflect all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial position, results of operations and cash flows for
the interim periods presented. Due to the seasonal nature of the Company's
business, the results of operations for the interim periods presented are not
necessarily indicative of the operating results for the full year.
INVENTORIES
Domestic inventories are stated at the lower of cost (determined by the
last-in, first-out (LIFO) method) or market. Had the first-in, first-out (FIFO)
method been used to value domestic inventories as of June 30, 1995 and 1994, the
balance at which inventories are stated would have been $2,683,000 and
$2,487,000 higher, respectively. Foreign inventories are valued at the lower or
cost or market determined by the FIFO method. Inventories principally consist of
finished goods and packaging material.
INVESTMENTS
Investments is comprised of the following as of June 30, 1995 and
December 31, 1994:
June 30, December 31,
1995 1994
------------------------------
Investment in preferred stock, at cost (A) $7,002,990 $7,002,990
Investment in common stock, at cost (B) 516,000 -
---------- ----------
Total investments in equity securities, at cost $7,518,990 $7,002,990
========== ==========
Investments in unconsolidated affiliates (C) $7,392,189 $4,463,080
(A) Represents Forschner's investment in Forschner Enterprises, Inc., a
privately held corporation. Forschner's preferred stock has cumulative dividends
and voting rights. Forschner is accounting for this investment on the cost
basis.
(B) Represents Forschner's investment in a development stage company involved in
the design, manufacture and marketing of fine jewelry. As of June 30, 1995,
Forschner owned 19.0% of the outstanding common stock of this company and
accounts for the investment on the cost basis.
8
<PAGE>
(C) Includes Forschner's investments in Simmons Outdoor Corporation ("Simmons")
and SweetWater, Inc ("SweetWater"). In the first quarter of 1995, Forschner
increased its percentage ownership of Simmons to 20% and SweetWater to 37%. In
accordance with generally accepted accounting principles, as of March 31, 1995,
these investments were accounted for under the equity method, with Forschner
recording its proportional share of net income or losses of these companies and
amortization of goodwill related to the acquisition of the two investments. The
total net impact for the six months ended June 30, 1995 is recorded in other
income (expense), net in the accompanying statement of operations, including a
$635,000 one-time favorable impact of Forschner's share of net income of both of
these companies, less amortization of goodwill, computed from the date when
Forschner first acquired stock in each of the companies. The accompanying
balance sheet as of December 31, 1994 reflects adjustments necessary to show
Forschner's investments in Simmons and SweetWater on a cost basis instead of at
market as previously shown in the Company's Form 10-K.
SIGNIFICANT CUSTOMER
Special promotional programs with a single customer of the Corporate
Markets Division accounted for 0% and 42% of total sales for the quarter ended
June 30, 1995 and 1994, respectively, and 14% and 34% of total sales for the six
months ended June 30, 1995 and 1994, respectively. The Company is not
participating in a program with this customer currently, nor are any programs
currently scheduled for the remainder of 1995 with this customer.
INCOME TAXES
Income taxes are provided at the projected annual effective tax rate.
The income tax provisions for the interim 1995 and 1994 periods exceed the
federal statutory rate of 34% due primarily to state income taxes (net of
federal benefit), foreign tax rate differences and, in 1995, to the
non-deductibility of equity in losses of unconsolidated affiliates.
EARNINGS PER COMMON SHARE
The weighted average number of shares of common stock outstanding
include the dilutive effect of stock options outstanding. The fully diluted
earnings per share amount for both periods is the same as primary earnings per
share.
9
<PAGE>
THE FORSCHNER GROUP, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
(unaudited)
RESULTS OF OPERATIONS
Comparison of the Three Months Ended June 30, 1995 and 1994
Sales for the three months ended June 30, 1995 were $25.9 million
compared with $39.9 million for the same period a year ago, representing a
decrease of $14.0 million or 35%. Sales comparisons with the second quarter of
1994 are significantly impacted by the exceptional promotional program for a
single customer of the Corporate Markets Division which began in 1994 and
concluded at the end of the first quarter of 1995. The promotional program
accounted for 42% of the Company's sales for the second quarter of 1994 versus
zero in 1995. Excluding the impact of this promotional program on results for
the 1994 period, sales increased in the three months ended June 30, 1995.
However, with the end of the program, sales for the second quarter decreased
substantially. Including results of the special promotional program, sales of
Swiss Army Knives, Swiss Army Brand Watches and Swiss Army Brand Sunglasses
decreased while sales of cutlery increased. Excluding the impact of sales to
this customer, the Company's sales were 11% higher than in the second quarter of
1994, with increases among all major products.
Gross profit of $8.7 million for the three months ended June 30, 1995
decreased $4.7 million or 35% from 1994. The decrease relates principally to the
impact of sales decreases previously discussed. The gross profit margin for the
second quarter of 1995 of 33.6% was comparable to the margin of 33.5% reported
for the same period of 1994. Forschner's gross profit margin is a function of
both product mix and Swiss franc exchange rates. Since Forschner imports
virtually all of its products from Switzerland, its costs are affected by both
the spot rate of exchange and by its foreign currency hedging program. The
weakness of the U.S. dollar in relation to the Swiss franc began to impact
Forschner's gross margin in the second quarter of 1995, and unless the exchange
rate between the U.S. dollar and Swiss franc improves substantially in favor of
the dollar, continuing weakness will have a significant adverse impact on
earnings in the second half of the year.
Selling, general and administrative expenses for the three months ended
June 30, 1995 of $8.0 million were $3.0 million or 27% lower than the amount for
the comparable period in 1994, which included a special charitable contribution
of $1.5 million. The remaining $1.5 million decrease in expenses resulted
primarily from decreased national advertising and lower printed material costs
offset slightly by personnel costs related to an increase in Forschner's direct
sales force. As a percentage of net sales, selling, general and administrative
expenses (including the charitable contribution) increased from 27.6% in 1994 to
30.9% in 1995.
Due to higher invested cash balances in the three months ended June 30,
1995 than in the comparable period of 1994, interest income of $165,000 in 1995
exceeded the $5,000 recorded in the year earlier period.
Other expense of $312,000 for the quarter ended June 30, 1995 was $331,000
lower than the $18,000 of income for the same period in 1994, due to recognition
of Forschner's share of losses in its equity investment SweetWater, Inc., offset
somewhat by its share of income of its other equity investment, Simmons Outdoor
Corporation, and amortization of goodwill relating to the two investments.
10
<PAGE>
As a result of these changes, income before income taxes for the
quarter ended June 30, 1995 was $0.5 million versus $2.4 million for the same
period in 1994, for a decrease of $1.9 million or 77%.
Income tax expense was provided at an effective rate of 59.6% for the
three months ended June 30, 1995, versus 42.1% in 1994, with the increase
related primarily to the non-deductibility of Forschner's share of losses and
amortization of goodwill relating to its equity investments.
Net income was $0.2 million for the three months ended June 30, 1995
versus $1.4 million in the comparable period of 1994, representing a decrease of
$1.2 million or 84%.
On a per share basis for the quarter ended June 30, 1995, net income
was $0.03 compared with $0.17 in 1994, an 82% decrease.
Comparison of the Six Months Ended June 30, 1995 and 1994
Sales for the six months ended June 30, 1995 were $55.3 million
compared with $67.0 million for the same period a year ago, representing a
decrease of $11.7 million or 18%. Sales comparisons with the first half of 1994
are significantly impacted by the exceptional promotional program for a single
customer of the Corporate Markets Division which began in 1994 and concluded at
the end of the first quarter of 1995. The promotional program accounted for 34%
of the Company's sales for the first half of 1994 versus 14% in 1995. Excluding
the impact of this promotional program on results for the 1994 period, sales
increased 8% in the six months ended June 30, 1995. However, with the end of the
program, sales for the first half decreased 18%. Including results of the
special promotional program, sales of Swiss Army Knives, Swiss Army Brand
Watches and Sunglasses decreased while sales of cutlery increased. Excluding the
impact of sales to this customer, the Company's sales of Swiss Army Knives were
modestly higher than in the first half of 1994. Swiss Army Brand Watch sales and
sales of cutlery also posted increases.
Gross profit of $19.4 million for the six months ended June 30, 1995
decreased $4.7 million or 20% from 1994. The decrease relates principally to
sales decreases previously discussed, reduced gross profit margins on sales to
the promotional customer and the negative impact of a weaker U.S. dollar against
the Swiss franc. The gross profit margin for the first half of 1995 of 35.1% was
down slightly from the margin of 36.1% reported for the same period of 1994.
Forschner's gross profit margin is a function of both product mix and Swiss
franc exchange rates. Since Forschner imports virtually all of its products from
Switzerland, its costs are affected by both the spot rate of exchange and by its
foreign currency hedging program. The weakness of the U.S. dollar in relation to
the Swiss franc began to impact Forschner's gross margin in the second quarter
of 1995, and unless the exchange rate between the U.S. dollar and Swiss franc
improves substantially in favor of the dollar, continuing weakness will have a
significant adverse impact on earnings in the second half of the year.
Selling, general and administrative expenses for the six months ended June
30, 1995 of $17.1 million were $2.1 million or 11% lower than the amount for the
comparable period in 1994, which included a special charitable contribution of
$1.5 million. The remaining $0.6 million decrease in expenses resulted primarily
from decreased national advertising and lower printed material costs offset
somewhat by personnel costs related to an increase in Forschner's direct sales
force. As a percentage of net sales, selling, general and administrative
expenses (including the charitable contribution) increased from 28.7% in 1994 to
31.0% in 1995.
11
<PAGE>
Due to higher invested cash balances in the six months ended June 30,
1995 than in the comparable period of 1994, interest income of $416,000 in 1995
exceeded the $19,000 recorded in the year earlier period.
Other income of $52,000 for the six months ended June 30, 1995 was
$38,000 lower than the $90,000 of income for the same period in 1994, due to
recognition of Forschner's share of losses in its equity investment SweetWater,
Inc. and amortization of goodwill relating to its two equity investments, offset
somewhat by its share of income of its other equity investment, Simmons Outdoor
Corporation, and the one-time favorable impact of recognizing Forschner's
cumulative share of net income, less amortization of goodwill, of Forschner's
two equity investments.
As a result of these changes, income before income taxes for the six
months ended June 30, 1995 was $2.7 million versus $5.0 million for the same
period in 1994, a decrease of $2.3 million or 46%.
Income tax expense was provided at an effective rate of 45.5% for the
six months ended June 30, 1995, versus 42.1% in 1994, with the increase related
primarily to the non-deductibility of Forschner's share of losses and
amortization of goodwill relating to its equity investments.
Net income was $1.5 million for the six months ended June 30, 1995
versus $2.9 million in the comparable period of 1994, representing a decrease of
$1.4 million or 49%.
On a per share basis for the six months ended June 30, 1995, net income
was $0.18 compared with $0.38 in 1994, a 53% decrease.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1995, Forschner had working capital of $52.2 million
compared with $54.7 million as of December 31, 1994, a decrease of $2.5 million
principally due to investments the Company made during the six months ended June
30, 1995. Sources of working capital included net income of $1.5 million and
depreciation and amortization of $2.1 million. Significant uses of working
capital included the Company's $3.8 million increase in the common stock
investments of Simmons Outdoor Corporation and SweetWater, Inc. and capital
expenditures and additions to other assets of $2.2 million. The Company
currently has no material commitments for capital expenditures.
Cash used in operating activities was approximately $4.6 million in the
six months ended June 30, 1995 compared with $1.4 million in the comparable
period in 1994. The increased usage of cash in operations resulted from a much
larger increase in inventories in 1995 than in the prior year, an increase in
prepaid expenses versus a decrease in 1994, a decrease in accrued liabilities
versus an increase in 1994 and a larger decrease in taxes payable in 1995 than
in 1994, all of which were somewhat offset by a reduction in accounts receivable
versus an increase in 1994, an increase in accounts payable versus a decrease in
1994 and lower net income in 1995 than in 1994.
Forschner meets its short-term liquidity needs with cash generated from
operations, and, when necessary, bank borrowings under its revolving credit
agreement. As of June 30, 1995, Forschner had no outstanding borrowings under
its revolving line of credit, leaving an unused line of $15 million. Forschner's
short-term liquidity is affected by seasonal changes in inventory levels,
payment terms and seasonality of sales. The Company believes that cash generated
from operations and borrowings under its credit facility will be sufficient to
meet the Company's anticipated operating and capital needs through the
expiration of the revolving credit agreement in April 1996.
12
<PAGE>
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
A.) Exhibits
(2) Not Applicable
(3) Not Applicable
(4) Not Applicable
(10) Agreement dated June 30, 1995 between The Forschner
Group, Inc. and Bill-Mar Specialty Company, Inc.
(11) Statement regarding computation of per share earnings
is not required because the relevant computation can
be clearly determined from the material contained in
the Financial Statements included herein.
(15) Not Applicable
(18) Not Applicable
(19) Not Applicable
(22) Not Applicable
(23) Not Applicable
(24) Not Applicable
(27) Financial Data Schedule
(28) Not Applicable
B.) There were no reports or exhibits on Form 8-K filed for
the three months ended June 30, 1995.
13
<PAGE>
Pursuant to the requirements to the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE FORSCHNER GROUP, INC.
(Registrant)
By /s/ Thomas D. Cunningham
Date: August 9, 1995 ---------------------------
Name: Thomas D. Cunningham
Title: Executive Vice President,
Principal Financial Officer
and a Director
By /s/ Thomas M. Lupinski
--------------------------
Name: Thomas M. Lupinski
Title: Senior Vice President, Controller
14
<PAGE>
AGREEMENT
Agreement and releases, dated as of June 30, 1995, among The
Forschner Group, Inc., a Delaware corporation ("Forschner"), Bill-Mar Specialty
Company, Inc., an Ohio corporation ("Bill-Mar") and, in respect of section 5
hereof
only, William Ferrara.
WHEREAS, Victorinox of Switzerland, Ltd. and Bill-Mar
are parties to an agreement dated as of October 1, 1980, as
amended, (the "Distribution Agreement");
WHEREAS, Victorinox of Switzerland, Ltd. has been
merged into Forschner; and
WHEREAS, subject to the terms hereof, the parties wish to
terminate the Distribution Agreement and to settle all claims and controversies
between them arising out of or relating to the Distribution Agreement or
otherwise.
NOW, THEREFORE, in consideration of the promises, covenants
and agreements set forth herein, the parties agree as follows:
<PAGE>
1. Defined Terms. Unless otherwise provided herein,
all defined terms in the Distribution Agreement shall have the
same meaning in this Agreement.
2. Termination of Distribution Agreement. The
Distribution Agreement is hereby terminated effective the date
hereof and Bill-Mar shall immediately cease sales of Victorinox
Specialty Knives. All rights and privileges granted Bill-Mar
under the Distribution Agreement are hereby terminated; it is
understood and agreed that Bill-Mar shall have no right to use
the name "Swiss Army" and Forschner's trademarks, tradenames and
logos. Bill-Mar shall immediately discontinue all uses of the
Swiss Army mark and name, and Forschner's and its affiliates'
logos. Bill-Mar shall not advertise, directly or indirectly,
that Bill-Mar formerly sold Victorinox Specialty Knives and Bill-
Mar shall make no further reference to the Swiss Army mark or
name or to Forschner, its affiliates or any of their tradenames
and logos in connection with Bill-Mar's business or otherwise.
Bill-Mar shall remove or cause to be remove any reference to the
name "Swiss Army" and to any of Forschner's or its affiliates'
logos or any colorable imitation thereof which may exist on its
premises, vehicles, stationery, invoices, labels, catalogues,
signs, advertisements, and in directories or books of reference.
Bill-Mar shall promptly execute and deliver to Forschner or its
designee any and all documents required to transfer to Forschner
or its designee any trademark rights or equities that may have
-2-
<PAGE>
vested in Bill-Mar as a result of Bill-Mar's use of the Swiss Army mark or of
the name "Swiss Army" or any of Forschner's or its affiliates' logos or
trademarks pursuant to the Distribution Agreement. Subsequent to two years from
the date hereof, nothing in this section 2 shall be deemed to prohibit Bill-Mar
from utilizing the name "Swiss Army"; provided that such use does not infringe
on any trademark or other rights of Forschner; and further provided that this
sentence shall not be deemed to constitute the license or consent of Forschner
to any such use, infringing or non-infringing.
3. Payment by Forschner. Simultaneously with the
execution of this Agreement, Forschner has delivered to Bill-Mar
a check payable to the order of Bill-Mar in the amount of
$400,000, receipt of which is hereby acknowledged.
4. Royalty. Forschner agrees to pay to Bill-Mar within 90 days
of the end of each calendar year an amount equal to 10% of the net sales by
Forschner of Victorinox Specialty Knives sold to the Advertising and Premium
Market by Forschner's Corporate Markets Division in the Exclusive Territory up
to a maximum aggregate payment under this paragraph of $200,000. Net sales as
used herein shall mean the amount shown on invoices by Forschner to its
customers less: sales and similar taxes paid to any authority, discounts,
credits for returned merchandise, uncollected accounts, and shipping, insurance
and similar costs.
-3-
<PAGE>
At such time that Bill-Mar shall have received an aggregate of $200,000 pursuant
to this paragraph, Forschner shall have no further obligations to make any
further payments hereunder. Simultaneously with the payment of the royalty
hereunder, Forschner shall supply Bill-Mar with a complete and accurate
statement of all sales of Victorinox Specialty Knives sold to the Advertising
and Premium Market by Forschner's Corporate Markets Division in the Exclusive
Territory during the previous calendar year. In the event that Bill-Mar shall
dispute such royalty report, Bill-Mar may request, in writing within 60 days of
receipt of the royalty report, Forschner to conduct an audit of Forschner's
books and records pertaining to such sales solely for the purpose of confirming
Forschner's performance under this section. Such audit shall be conducted by an
accounting firm chosen by Forschner provided that such accounting firm is a "big
six" accounting firm. Such accounting firm may be the accounting firm that
regularly audits the books and records of Forschner if agreed to by Bill-Mar. In
the event such audit reveals a deficiency in payments from Forschner to
Bill-Mar, Forschner shall pay to Bill-Mar the amount of such deficiency. In the
event that such deficiency is more than 5% of the amount actually paid to
Bill-Mar (a "Material Deficiency"), Forschner shall be responsible for the cost
of such audit. In the event that no Material Deficiency is found, Bill-Mar shall
be responsible for payment of the cost of such audit. The right of audit set
forth in this section shall be Bill-Mar's sole remedy in the event of a
-4-
<PAGE>
dispute pertaining to the royalty payable hereunder and under no circumstances
shall Bill-Mar have any right to review, inspect or audit any of the books and
records of Forschner.
5. Covenant not to Compete. Each of Bill-Mar and William
Ferrara acknowledge that in the course of their relationship with Forschner,
they have become privy to various relationships of Forschner. Therefore, each of
Bill-Mar and Mr. Ferrara hereby agree that they will not, directly or
indirectly, for two years from the date hereof, whether as an employee,
consultant, officer, director, shareholder participate in the manufacture,
importation or sale of multi-function pocket knives in the Exclusive Territory;
provided, however, that nothing herein shall be deemed to prohibit the ownership
of less than 5% of the stock of any publicly held company.
6. List of Customers. Bill-Mar represents and warrants that
Schedule A hereto contains a complete and correct list of the twenty persons and
entities to whom Bill-Mar has sold the largest quantities of Victorinox
Specialty Knives in the two years preceding the date hereof.
7. Release by Bill-Mar. Bill-Mar, for good and
valuable consideration, does hereby release and discharge
Forschner, and all of its past and present employees, agents,
representatives, servants, assigns, attorneys, insurers,
-5-
<PAGE>
predecessors, successors, stockholders, partners, parents, subsidiaries and
affiliates, and all past and present officers and directors of Forschner
(collectively referred to as the "Forschner Releasees"), of and from all
liabilities, losses, costs, damages, expenses, sums of money, contracts,
agreements, promises, claims, demands, actions, causes of action, suits at law
and proceedings in equity, known or unknown, whether accrued or not, which
Bill-Mar ever had, now has or hereafter can, shall or may, have, for, upon or by
reason of any matter, cause or thing whatsoever from the beginning of the world
to the date hereof against the Forschner Releasees, including without limitation
those which relate to or arise out of the Distribution Agreement, provided,
however, that nothing herein shall constitute or be deemed to constitute a
release from any claims or rights of Bill-Mar against the Forschner Releasees
arising under or in connection with this Agreement, and provided further that
should any claims (including without limitation claims in respect of taxes and
any charges relating thereto), demands, actions, causes of action, suits at law
or proceedings in equity be asserted or instituted against Bill-Mar by any
third-party individual or entity (including without limitation any regulatory or
governmental authority), then Bill-Mar does not hereby waive any right of
cross-claim, counterclaim or third-party claim or demand against the Forschner
Releasees.
-6-
<PAGE>
8. Release by Forschner. Forschner, for good and valuable
consideration, does hereby release and discharge Bill-Mar, and all of its past
and present employees, agents, representatives, servants, assigns, attorneys,
insurers, predecessors, successors, stockholders, partners, parents,
subsidiaries and affiliates, and all past and present officers and directors of
Bill-Mar (collectively referred to as the "Bill-Mar Releasees"), of and from all
liabilities, losses, costs, damages, expenses, sums of money, contracts,
agreements, promises, claims, demands, actions, causes of action, suits at law
and proceedings in equity, known or unknown, whether accrued or not, which
Forschner ever had, now has or hereafter can, shall or may, have, for, upon or
by reason of any matter, cause or thing whatsoever from the beginning of the
world to the date hereof against the Bill-Mar Releasees, including without
limitation those which relate to or arise out of the Distribution Agreement,
provided, however, that nothing herein shall constitute or be deemed to
constitute a release from any claims or rights of Forschner against the Bill-Mar
Releasees arising under or in connection with this Agreement, and provided
further that should any claims (including without limitation claims in respect
of taxes and any charges relating thereto), demands, actions, causes of action,
suits at law or proceedings in equity be asserted or instituted against
Forschner or any affiliate thereof by any third-party individual or entity
(including without limitation any regulatory or governmental authority),
-7-
<PAGE>
then Forschner does not hereby waive any right of cross-claim, counterclaim or
third-party claim or demand against the Bill-Mar Releasees.
9. Entire Agreement. This instrument constitutes the
entire agreement of the parties with respect to the subject
matter hereof and supersedes all prior written and oral
agreements with respect thereto.
10. Captions. The descriptive headings of the several
sections of this instrument are inserted for convenience only and
do not constitute a part hereof.
11. Counterparts. This instrument may be executed in
two or more counterparts, each of which shall be deemed to be an
original, but all of which together shall constitute one and the
same instrument.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have set their hands as
of the date first written above.
THE FORSCHNER GROUP, INC.
By:/s/ James W. Kennedy
------------------------
James W. Kennedy, Co-Chairman and
Co-Chief Executive Officer
BILL-MAR SPECIALTY COMPANY, INC.
By:/s/ William Ferrara
-----------------------
William Ferrara, President
William Ferrara, individually, in respect of Section 5 hereof only
-9-
<PAGE>
STATE OF CONNECTICUT)
) SS:
COUNTY OF FAIRFIELD)
On June 30, 1995, before me, the undersigned, personally
appeared James W. Kennedy known to me to be the Co-Chairman and Co-Chief
Executive Officer of The Forschner Group, Inc., and he, as such Co-Chairman and
Co-Chief Executive Officer, executed the foregoing Agreement and release on
behalf of The Forschner Group, Inc.
NOTARY PUBLIC
-10-
<PAGE>
STATE OF OHIO )
) SS:
COUNTY OF )
On June 30, 1995, before me, the undersigned, personally
appeared William Ferrara known to me to be President of Bill-Mar Specialty
Company, Inc., and he, as such President, executed the foregoing Agreement and
release on behalf of Bill-Mar Specialty Company, Inc.
NOTARY PUBLIC
-11-
<PAGE>
STATE OF OHIO )
) SS:
COUNTY OF )
On June 30, 1995, before me, the undersigned, personally
appeared William Ferrara who executed the foregoing Agreement.
NOTARY PUBLIC
-12-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000731947
<NAME> The Forschner Group, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 6-Mos
<FISCAL-YEAR-END> Dec-31-1994
<PERIOD-START> Jan-01-1995
<PERIOD-END> Jun-30-1995
<EXCHANGE-RATE> 1
<CASH> 7,287
<SECURITIES> 0
<RECEIVABLES> 20,287
<ALLOWANCES> 600
<INVENTORY> 42,351
<CURRENT-ASSETS> 72,247
<PP&E> 7,825
<DEPRECIATION> 3,632
<TOTAL-ASSETS> 105,302
<CURRENT-LIABILITIES> 22,001
<BONDS> 0
<COMMON> 880
0
0
<OTHER-SE> 82,421
<TOTAL-LIABILITY-AND-EQUITY> 105,302
<SALES> 55,295
<TOTAL-REVENUES> 55,295
<CGS> 35,879
<TOTAL-COSTS> 17,132
<OTHER-EXPENSES> 450
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,734
<INCOME-TAX> 1,245
<INCOME-CONTINUING> 1,489
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,489
<EPS-PRIMARY> .18
<EPS-DILUTED> .18
</TABLE>
