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, 1996
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
Swiss Army Brands, 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
The Forschner Group, Inc.
One Research drive, Shelton, Connecticut 06484
(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, 1996, was 8,206,360 shares.
<PAGE>
SWISS ARMY BRANDS, INC.
AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE NO.
- ------- --------------------- --------
<S> <C> <C>
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995. 3 - 4
Consolidated Statements of Operations for the
three and six months ended June 30, 1996 and 1995. 5
Consolidated Statements of Stockholders Equity
for the six months ended June 30, 1996 and 1995. 6
Consolidated Statements of Cash Flows for the
six months ended June 30, 1996 and 1995. 7
Notes to Consolidated Financial Statements 8 - 9
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 10 - 13
Part II: OTHER INFORMATION
- -------- -----------------
Item 6. EXHIBITS AND REPORTS ON FORM 8-K 14
Signatures 15
The Exhibit Index appears on page 14.
</TABLE>
2
<PAGE>
SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Assets
<TABLE>
<CAPTION>
At June 30, At December 31,
1996 1995
<S> <C> <C>
(unaudited)
Current assets:
Cash and short-term investments ........... $ 860,026 $ 608,757
Accounts receivable, less
allowance for doubtful accounts
of $900,000 and $975,000, respectively ... 21,538,164 31,970,449
Inventories ............................... 41,595,130 36,733,146
Deferred income tax benefits .............. 2,395,858 2,395,858
Prepaid and other ......................... 5,804,393 2,647,121
--------- ---------
Total current assets ................... 72,193,571 74,355,331
---------- ----------
Deferred income tax benefits ................. 771,371 771,371
Property, plant and equipment, at cost:
Leasehold improvements .................... 954,963 818,446
Equipment ................................. 6,762,421 6,199,914
Furniture and fixtures .................... 1,515,063 1,473,188
--------- ---------
9,232,447 8,491,548
Less-accumulated depreciation ............. (5,209,849) (4,385,683)
----------- -----------
4,022,598 4,105,865
--------- ---------
Investments in preferred units, at cost ...... 9,002,998 7,002,990
Investments in unconsolidated affiliates ..... 2,444,000 2,591,415
Foreign distribution rights, net of
accumulated amortization of $2,186,990
and $1,843,812, respectively .............. 4,555,737 4,900,396
Other assets, net of accumulated
amortization of $2,141,331 and
$3,166,339, respectively .................. 7,036,716 7,502,884
--------- ---------
Total Assets ................................. $ 100,026,991 $ 101,230,252
============= =============
</TABLE>
3
<PAGE>
SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
Liabilities and Stockholders' Equity
<TABLE>
<CAPTION>
At June 30, At December 31,
1996 1995
<S> <C> <C>
---- ----
(unaudited)
Current liabilities:
Accounts payable .......................... $ 8,881,246 $ 6,479,200
Accrued liabilities ....................... 6,822,341 8,697,994
Note payable .............................. 2,747,000 --
Income taxes payable ...................... -- 1,114,389
--------- ---------
Total current liabilities ............... 18,450,587 16,291,583
---------- ----------
Commitments and contingencies
Stockholders 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 -
8,820,468 and 8,800,718, respectively ..... 882,047 880,072
Additional paid-in capital ................. 46,136,390 45,897,740
Unrealized gain on marketable ............. 701,035 --
securities
Foreign currency translation adjustment ... (11,300) (9,216)
Retained earnings ......................... 38,981,699 43,283,540
---------- ----------
86,689,871 90,052,136
Less-cost of common stock in
treasury; 614,108 shares ............... (5,113,467) (5,113,467)
----------- -----------
Total stockholders equity ................... 81,576,404 84,938,669
---------- ----------
Total Liabilities and Stockholders Equity ... $ 100,026,991 $ 101,230,252
============= =============
</TABLE>
4
<PAGE>
SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $28,676,650 $25,925,259 $54,756,163 $55,294,980
Cost of sales 23,287,729 17,209,810 40,774,485 35,878,937
---------- ---------- ---------- ----------
Gross profit 5,388,921 8,715,449 13,981,678 19,416,043
Selling, general and
administrative expenses 9,537,199 8,011,483 18,709,364 17,132,520
Special charges 2,073,000 - 2,073,000 -
--------- --------- --------- ----------
Operating income (loss) (6,221,278) 703,966 (6,800,686) 2,283,523
Interest (expense) (12,524) (18,534) (42,062) (18,534)
Interest income 24,212 165,438 101,925 416,304
Impairment of investment (800,000) - (800,000) -
Other income (expense), net 11,723 (312,097) 127,982 52,312
------ --------- ------- ------
Total interest and other
income,net (776,589) (165,193) (612,155) 450,082
--------- --------- --------- -------
Income (loss) before
income taxes (6,997,867) 538,773 (7,412,841) 2,733,605
Income tax provision (benefit) (2,941,000) 320,590 (3,111,000) 1,244,640
----------- ------- ----------- ---------
Net income (loss) $(4,056,867) $218,183 $(4,301,841) $1,488,965
============ ======== ============ ==========
Net income (loss) per share $(0.49) $0.03 $(0.52) $0.18
============ ======== ============ ==========
Weighted average number of
shares outstanding 8,237,465 8,202,333 8,325,643 8,219,643
============ ========== ============ ==========
</TABLE>
5
<PAGE>
SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
Foreign
Common Stock Par Additional Currency Unrealized Gain
Value $.10 Paid-In Translation on Marketable Retained Treasury
Shares Amount Capital Adjustment Securities Earnings Stock
------ ------ ------- ---------- ---------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE $8,796,968 $879,697 $45,866,814 $(28,085) -- $40,170,324 $(5,113,467)
December 31, 1994
Net income for
six months ended
June 30, 1995
(unaudited) -- -- -- -- -- 1,488,965 --
Stock options and
warrants exercised 2,500 250 22,862 -- -- -- --
Foreign currency
translation adjustment -- -- -- 14,440 -- -- --
---------- --------- ---------- -------- --------- ----------- ------------
BALANCE, June 30, 8,799,468 $879,947 $45,889,676 $(13,645) -- $41,659,289 $(5,113,467)
1995 (unaudited)
========== ========= =========== ========== ========= =========== ============
BALANCE
December 31, 1995 8,800,718 $880,072 $45,897,740 $(9,216) -- $43,283,540 $(5,113,467)
Net income (loss) for
six months ended
June 30, 1996
(unaudited) -- -- -- -- -- (4,301,841) --
Stock options and
warrants exercised 19,750 1,975 238,650 -- -- -- --
Unrealized gain on
marketable securities -- -- -- -- 701,035 -- --
Foreign currency
translation adjustment -- -- -- (2,084) -- -- --
---------- --------- ----------- --------- --------- ----------- ------------
BALANCE, June 30,
1996 (unaudited) 8,820,468 $882,047 $46,136,390 $(11,300) $701,035 $38,981,699 $(5,113,467)
=========== ========= =========== ========= ========= =========== ============
</TABLE>
6
<PAGE>
SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
1996 1995
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $(4,301,841) $1,488,965
Adjustments to reconcile net income (loss) to cash
(used for) operating activities:
Depreciation and amortization 1,610,685 2,081,723
Equity in earnings of unconsolidated
subsidiaries, net of goodwill amortization -- (19,562)
Deferred income taxes -- 134,858
Special charges 6,594,000 --
Impairment of investment 800,000 --
Gain on sale of partial investment in stock (11,050) --
---------- ----------
4,691,794 3,685,984
Changes in other current assets and liabilities:
Accounts receivable 10,561,652 9,947,125
Inventories (9,380,426) (14,488,494)
Prepaid and other (3,565,739) (1,825,549)
Accounts payable 2,403,112 263,659
Accrued liabilities (2,176,232) (972,237)
Income taxes payable (1,676,898) (1,223,193)
----------- -----------
Net cash provided from (used for) operating
activities 857,263 (4,612,705)
------- -----------
Cash flows from investing activities:
Capital expenditures (740,899) (743,960)
Proceeds from sales of property, plant & equipment -- 10,206
Additions to other assets (902,884) (1,432,689)
Investment in preferred units (2,000,008) --
Investments in common stock -- (3,821,287)
Proceeds from sale of investments in stock 59,500 --
--------- ----------
Net cash (used for) investing activities (3,584,291) (5,987,730)
----------- -----------
Cash flows from financing activities:
Proceeds from Note Payable 2,747,000 --
Proceeds from exercise of stock options 240,625 23,112
------- ------
Net cash provided from financing activities 2,987,625 23,112
--------- ------
Effect of Exchange Rate changes on cash (9,328) (155,894)
------- ---------
Net increase (decrease) in cash and short-term
investments 251,269 (10,733,217)
Cash and short-term investments, beginning of period 608,757 18,019,797
------- ----------
Cash and short-term investments, end of period $860,026 $7,286,580
======== ==========
Cash paid during the period:
Interest $42,062 $18,534
======== ==========
Income taxes $1,683,295 $2,546,571
========== ==========
</TABLE>
7
<PAGE>
SWISS ARMY BRANDS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 1996 and 1995
(unaudited)
CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included in this Form 10-Q have been
prepared by Swiss Army Brands, Inc. (the Company, formerly The Forschner
Group, Inc.) 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, 1995. 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. The preparation of financial statements
in conformity with generally accepted accounting principles requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates. 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. Foreign inventories are valued at
the lower of cost or market determined by the FIFO method. Inventories
principally consist of finished goods and packaging material.
INVESTMENTS
- -----------
Investments are comprised of the following as of June 30, 1996 and
December 31, 1995:
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
---- ----
<S> <C> <C>
Investment in preferred units, at cost (A) $ 9,002,998 $ 7,002,990
Investment in common stock and note
receivable (B) ....................... -- 800,000
Investment in unconsolidated affiliate (C) $ 2,444,000 $ 1,791,415
----------- -----------
Total investments .................... $11,446,998 $ 9,594,405
=========== ===========
</TABLE>
(A) Represents the Company's investment in Victory Capital LLC, a
privately held limited liability company. The Company's preferred units
capital account is allocated preferred amounts under certain circumstances
in years in which Victory has profit. During the second quarter, the
Company increased its investment in Victory by approximately $2,000,000.
The Company is accounting for this investment on the cost basis.
8
<PAGE>
(B) Represents the Company's investment in a private affiliated
start-up entity that is in the business of designing, manufacturing and
marketing fine jewelry. The common stock and note receivable were recorded
at cost. This investment was written-off during the second quarter, due to
impairment in the value of this investment.
(C) Represents the Company's investment in SweetWater, Inc
(SweetWater). Effective January 1, 1996, Swiss Army decreased its
percentage ownership of SweetWater to below 20%. In accordance with
generally accepted accounting principles, in 1996 this investment is being
accounted for at fair value, with the Company recording unrealized gains
(losses) as a component of stockholders equity.
SPECIAL CHARGES
- ---------------
The Company recorded non-cash special charges totaling $7.4
million in the second quarter. The write-offs consist of $4.5 million
in discontinued inventory (reflected in cost of sales) and $2.9
million in obsolete displays, goodwill, intangible assets, and
non-strategic investments.
SIGNIFICANT CUSTOMER
- --------------------
Special promotional programs with a single customer of the
Corporate Markets Division accounted for 0% of total sales for the
quarter ended June 30, 1996 and 1995, and 0% and 14% of total sales
for the six months ended June 30, 1996 and 1995, respectively. The
Company is not participating in a program with this customer
currently, nor are any programs currently scheduled for the remainder
of 1996 with this customer.
INCOME TAXES
- ------------
Income taxes are provided at the projected annual effective tax
rate. The income tax provisions (benefits) for the interim 1996 and
1995 periods exceed the federal statutory rate of 34% due primarily to
state income taxes (net of federal benefit).
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>
SWISS ARMY BRANDS, 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, 1996 and 1995
- -----------------------------------------------------------
Sales for the three months ended June 30, 1996 were $28.7 million
compared with $25.9 million for the same period a year ago,
representing an increase of $2.8 million or 10.8%. For the three month
period, sales of Swiss Army watches and cutlery increased, while sales
of Swiss Army Knives decreased.
Gross profit of $5.4 million for the three months ended June 30,
1996 decreased $3.3 million or 38% from 1995. The decrease relates
principally to a $4.5 million write-off of discontinued inventory
which is reflected in cost of sales. The gross profit margin for the
second quarter of 1996 of 18.8% reflects the impact of this inventory
adjustment compared to the margin of 33.6% reported for the same
period of 1995. Excluding the inventory write-off, the gross profit
margin for 1996 would have been 33.5%. Profit margin was also
negatively impacted by the decrease in the value of the U.S. dollar
versus the Swiss franc. Swiss Army's gross profit margin is a function
of both product mix and Swiss franc exchange rates. Since the Company
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 Company enters into foreign currency contracts
and options to hedge the exposure associated with foreign currency
fluctuations. However, such hedging activity cannot eliminate the
long-term adverse impact on the Company's competitive position and
results of operations that would result from a sustained decrease in
the value of the dollar versus the Swiss franc. These hedging
transaction's, which are meant to reduce foreign currency risk, also
reduce the beneficial effects to the Company if the dollar increases
relative to the Swiss franc. The Company plans to continue to engage
in hedging transactions; however, it is uncertain as to what extent to
which such hedging transactions will reduce the effect of adverse
currency fluctuations.
Selling, general and administrative expenses for the three months
ended June 30, 1996 of $9.5 million were $1.5 million or 19% higher
than the amount for the comparable period in 1995. The $1.5 million
increase in expenses resulted primarily from increases in selling
expenses and merchandising and promotional expenses. As a percentage
of net sales, selling, general and administrative expenses increased
from 30.9% in 1995 to 33.3% in 1996.
The Company recorded a special charge of $2.1 million relating to
the write-off of obsolete displays, goodwill and other intangible
assets. There were no special charges recorded for the comparable
period in 1995.
Due to lower invested cash balances in the three months ended
June 30, 1996 than in the comparable period of 1995, interest income
of $24,000 in 1996 is lower than the $165,000 recorded in the year
earlier period.
The Company recorded a $0.8 million charge associated with the
impairment of a non-strategic investment. There were no comparable
investment charges for the same period in 1995.
10
<PAGE>
Other income of $11,000 for the quarter ended June 30, 1996
versus $312,000 of expense for the same period in 1995, was due to
recognition of the Company's share of losses in 1995 in its equity
investment SweetWater, Inc., offset somewhat by its share of income in
1995 of its other equity investment, Simmons Outdoor Corporation, and
amortization of goodwill relating to the two investments.
As a result of these changes, net loss before income taxes for
the quarter ended June 30, 1996 was $7.0 million versus $0.5 million
of income for the same period in 1995, for a decrease of $7.5 million.
Income tax expense was provided at an effective rate of 42.0% for
the three months ended June 30, 1996, versus 59.6% in 1995, with the
decrease related primarily to the non-deductibility of the Company's
share of losses and amortization of goodwill relating to its equity
investments in 1995.
Net loss was $4.1 million for the three months ended June 30,
1996 versus net income of $0.2 million in the comparable period of
1995, representing a decrease of $4.3 million.
On a per share basis for the quarter ended June 30, 1996, net
loss was $0.49 compared with net income of $0.03 in 1995.
Comparison of the Six Months Ended June 30, 1996 and 1995
- ---------------------------------------------------------
Sales for the six months ended June 30, 1996 were $54.8 million
compared with $55.3 million for the same period a year ago,
representing a decrease of $0.5 million or 1%. Sales comparisons with
the first half of 1995 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 14% of the
Companys sales for the first half of 1995 versus 0% in 1996.
Excluding the impact of this promotional program on results for the
1995 period, sales increased 15% in the six months ended June 30,
1996. Including results of the special promotional program, sales of
Swiss Army Knives and Swiss Army Brand Watches decreased while sales
of cutlery increased. Excluding the impact of sales to this customer,
the Company's sales of Swiss Army Knives were slightly lower than in
the first half of 1995 while Swiss Army Brand Watch sales and sales of
cutlery posted increases.
Gross profit of $14.0 million for the six months ended June 30,
1996 decreased $5.4 million or 28% from 1995. The decrease relates
principally to a $4.5 million inventory write-off in the second
quarter and the negative impact of a weaker U.S. dollar against the
Swiss franc. The gross profit margin for the first half of 1996 of
25.5% was down from the margin of 35.1% reported for the same period
of 1995. Excluding the inventory write-off, the gross profit margin
for 1996 would have been 33.8%. The Company's gross profit margin is a
function of both product mix and Swiss franc exchange rates. Since the
Company 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 Company enters into foreign
currency contracts and options to hedge the exposure associated with
foreign currency fluctuations. However, such hedging activity cannot
eliminate the long-term adverse impact on the Company's competitive
position and results of operations that would result from a sustained
decrease in the value of the dollar versus the Swiss franc. These
hedging transactions, which are meant to reduce foreign currency risk,
also reduce the beneficial effects to the Company if the dollar
increases relative to the Swiss franc. The Company plans to continue
to engage in hedging transactions; however, it is uncertain as to what
extent to which such hedging transactions will reduce the effect of
adverse currency fluctuations.
11
<PAGE>
Selling, general and administrative expenses for the six months
ended June 30, 1996 of $18.7 million were $1.6 million or 9.2% higher
than the amount for the comparable period in 1995. This increase is
due primarily to higher selling expenses and merchandising and
promotional costs. As a percentage of net sales, selling, general and
administrative expenses increased from 30.9% in 1995 to 34.2% in 1996.
Excluding sales associated with the special promotion program in 1995,
the percentage decreased in 1996 to 30.9% from 36.0% in 1995.
The Company recorded a special charge of $2.1 million
relating to the write-off of obsolete displays, goodwill and
other intangible assets. There were no special changes recorded
for the comparable period in 1995.
Due to lower invested cash balances in the six months ended
June 30, 1996 than in the comparable period of 1995, interest
income of $102,000 in 1996 was lower than the $416,000 recorded
in the year earlier period.
The Company recorded a $0.8 million charge associated with
the impairment of a non-strategic investment. There were no
comparable investment charges for the same period in 1995.
Other income of $128,000 for the six months ended June 30,
1996 was $76,000 higher than the comparable period in 1995, due
to recognition of the Company's share of losses in 1995 in its
equity investment SweetWater, Inc. and amortization of goodwill
relating to its two equity investments, offset somewhat by its
share of income in 1995 of its other equity investment, Simmons
Outdoor Corporation, and the one-time favorable impact of
recognizing the Company's cumulative share of net income, less
amortization of goodwill, of the Company's two equity investments
during 1995.
As a result of these changes, loss before income taxes for
the six months ended June 30, 1996 was $7.4 million versus income
of $2.7 million for the same period in 1995, a decrease of $10.1
million.
Income tax expense was provided at an effective rate of
41.9% for the six months ended June 30, 1996, versus 45.5% in
1995, with the decrease related primarily to the
non-deductibility of the Company's share of losses and
amortization of goodwill relating to its equity investments.
Net loss was $4.3 million for the six months ended June 30,
1996 versus net income of $1.5 million in the comparable period
of 1995, representing a decrease of $5.8 million.
On a per share basis for the six months ended June 30, 1996,
net loss was $0.52 compared with net income of $0.18 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
As of June 30, 1996, the Company had working capital
$53.7 million compared with $58.1 million as of December 31,
1995, a decrease of $4.4 million principally due to investments
the Company made during the six months ended June 30, 1996.
Sources of working capital included depreciation and amortization
of $1.6 million. Significant uses of working capital included the
Company's $2.0 million increase in the preferred units of Victory
Capital LCC and capital expenditures and additions to other
assets of $1.6 million. The Company currently has no material
commitments for capital expenditures.
12
<PAGE>
Cash provided from operating activities was approximately
$0.9 million in the six months ended June 30, 1996 compared with
$4.6 million of cash used in the comparable period in 1995. The
cash provided from operations resulted primarily from a smaller
increase in inventories in 1996 than in the prior year, a larger
increase in accounts payable versus 1995, all of which were
somewhat offset by a greater increase in prepaids and other
assets and a greater reduction in accrued liabilities versus
1995.
The Company 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, 1996, the
Company had $2.7 million of outstanding borrowings under its
revolving line of credit, leaving an unused line of $17.3
million. The Company'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.
13
<PAGE>
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
The annual meeting of the shareholders of the Company was
held on May 16, 1996, pursuant to notice, at which meeting
shareholders approved by an affirmative majority vote of
4,180,399 shares a proposal to approve the adoption of the 1996
Stock Option Plan which authorizes the grant of stock options to
purchase an aggregate of 1,000,000 shares of Common Stock. There
were 1,012,002 shares that voted against this proposal, 20,855
votes abstained, and there were 1,810,864 broker non-votes.
In addition, shareholders approved by an affirmative
majority vote of 6,985,548 shares a proposal to approve an
ammendment to Article First of the Company's Certificate of
Incorporation to change the name of the Company to Swiss Army
Brands, Inc. There were 33,197 shares that voted against this
proposal and 5,375 votes that abstained.
Item 6. Exhibits and Reports on Form 8-K
A.) Exhibits
(2) Not Applicable
(3) Certificate of Incorporation
(4) Not Applicable
(10) Not Applicable
(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
(99) Not Applicable
B.) There were no reports or exhibits on Form 8-K filed for
the three months ended June 30, 1996.
14
<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.
SWISS ARMY BRANDS, INC.
(Registrant)
Date: August 13, 1996 By /s/ Thomas D. Cunningham
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
15
<PAGE>
RESTATED CERTIFICATE OF INCORPORATION
OF
THE FORSCHNER GROUP, INC.
-------------------------
It is hereby certified that:
FIRST: The present name of the corporation (hereinafter
referred to as the "Corporation") is The Forschner Group, Inc.
The Corporation was originally incorporated under the name R. H.
Forschner Co., Inc. The original Certificate of Incorporation was
filed with the Secretary of State of the State of Delaware on
December 12, 1974.
SECOND: The provisions of the Certificate of Incorporation
as heretofore amended are hereby restated and integrated into a
single instrument that is entitled Restated Certificate of
Incorporation of The Forschner Group, Inc. There is no
discrepancy between the provisions of the Certificate of
Incorporation as heretofore amended and the provisions of the
Restated Certificate of Incorporation of the Forschner Group as
hereinafter set forth.
THIRD: The Board of Directors of the Corporation has duly
adopted this Restated Certificate of Incorporation of the
Corporation pursuant to the provisions of Section 245 of the
General Corporation Law of the State of Delaware in the form set
forth as follows:
"RESTATED CERTIFICATE OF INCORPORATION
of
THE FORSCHNER GROUP, INC.
-------------------------
FIRST: The name of the corporation is:
THE FORSCHNER GROUP, INC.
SECOND: The address of its registered office in the State of
Delaware is 26 The Green, in the City of Dover, County of Kent.
The name of the registered agent at such address is XL Corporate
Services, Inc.
1
<PAGE>
THIRD: The nature of the business or purposes to be
conducted or promoted is to engage in any lawful act or activity
for which corporations may be organized under the General
Corporation Law of Delaware.
FOURTH: The total number of shares which the Corporation
shall have the authority to issue shall be Eight Million
(8,000,000) shares, par value $.10 per share, all of which shall
be designated as Common Stock.
FIFTH: The corporation reserves the right to amend, alter,
change or repeal any provision contained in this certificate of
incorporation, in the manner now or hereafter prescribed by
statute, and all rights and powers conferred herein upon
stockholders and directors are granted subject to this
reservation.
SIXTH: To the fullest extent permitted by the Delaware
General Corporation Law as the same exists or may hereafter be
amended, a director of this Corporation shall not be liable to
the Corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director. Without limiting the
foregoing in any respect, a director of this Corporation shall
not be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director,
except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under Section 174
of the Delaware General Corporation Law, or (iv) for any
transaction from which the director derived an improper personal
benefit.
SEVENTH: (a) Right to Indemnification. (i) Each person who
was or is made a party or is threatened to be made a party to or
is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he or she, or a person
of whom he or she is the legal representative, is or was a
director or officer of the Corporation, including service with
respect to employee benefit plans, whether the basis of such
proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity
while serving as a director, officer, employee or agent, shall be
indemnified and held harmless by the Corporation to the fullest
extent authorized by the Delaware General Corporation Law, as the
same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits
the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such
amendment), against all expense, liability and loss (including
attorneys' fees,
2
<PAGE>
judgments, fines, ERISA excise taxes or penalties and
amounts paid or to be paid in settlement) reasonably incurred or
suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to
be a director, officer, employee or agent and shall inure to the
benefit of his or her heirs, executors and administrators, and
(ii) the Corporation may indemnify and hold harmless in such
manner any person who was or is made a party or is threatened to
be made a party to a proceeding by reason of the fact that he,
she or a person of whom he or she is the legal representative, is
or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation or a
partnership, joint venture, trust or other enterprise; provided,
however, that except as provided in paragraph (b) hereof, the
Corporation shall indemnify any such person seeking
indemnification in connection with a proceeding (or part thereof)
initiated by such person only if such proceeding (or part
thereof) was authorized by the board of directors of the
Corporation. In the event a director or officer of the
Corporation shall serve as a director, officer, employee or agent
of any corporation, partnership, joint venture, trust or other
enterprise in which the Corporation maintains an investment it
shall be conclusively presumed for purposes of the
indemnification provided for in subsection (ii) above that such
service has been undertaken at the request of the Corporation.
The foregoing presumption shall apply regardless of whether such
director or officer is serving such entity at the request of a
third party or that his or her service with such entity was
commenced prior to the effectiveness of this Article of the
Certificate of Incorporation or prior to his or her becoming an
officer or director of the Corporation. The right to
indemnification conferred in subsection (i) above shall be a
contract right based upon an offer from the Corporation which
shall be deemed to be accepted by such person's service or
continued service with the Corporation for any period after the
adoption of this Article of the Certificate of Incorporation and
shall include the right to be paid by the Corporation the
expenses incurred in defending any such proceeding in advance of
its final disposition; provided, however, that, if the Delaware
General Corporation Law requires, the payment of such expenses
incurred by a director or officer in his or her capacity as a
director or officer (and not in any other capacity in which
service was or is rendered by such person while a director or
officer, including, without limitation, service to an employee
benefit plan) in advance of the final disposition of a
proceeding, shall be made only upon delivery to the Corporation
of an undertaking, by or on behalf of such director or officer,
to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be
indemnified under this Section or otherwise. The Corporation may,
by action of its Board of Directors, provide
3
<PAGE>
indemnification to employees or agents of the Corporation
with the same scope and effect as the foregoing indemnification
of directors and officers.
(b) Right of Claimant to Bring Suit. If a claim under
subsection a(i) of this Article is not paid in full by the
Corporation within thirty days after a written claim has been
received by the Corporation, the claimant may at any time
thereafter bring suit against the Corporation to recover the
unpaid amount of the claim and, if successful in whole or in
part, the claimant shall be entitled to be paid also the expense
of prosecuting such claim. It shall be a defense to any such
action (other than an action brought to enforce a claim for
expenses incurred in defending any proceeding in advance of its
final disposition where the required undertaking, if any is
required, has been tendered to the Corporation) that the claimant
has not met the standards of conduct which make it permissible
under the Delaware General Corporation Law for the Corporation to
indemnify the claimant for the amount claimed, but the burden of
proving such defense shall be on the Corporation. Neither the
failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to have made a
determination prior to the commencement of such action that
indemnification of the claimant is proper in the circumstances
because he or she has met the applicable standard of conduct set
forth in the Delaware General Corporation Law, nor an actual
determination by the Corporation (including its Board of
Directors, independent legal counsel, or its stockholders), that
the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.
(c) Non-Exclusivity of Rights. The right to indemnification
and the payment of expenses incurred in defending a proceeding in
advance of its final disposition conferred in this Section shall
not be exclusive of any other right which any person may have or
hereafter acquire under any statute, provision of the Certificate
of Incorporation, by-law, agreement, vote of stockholders or
disinterested directors or otherwise.
(d) Insurance. The Corporation may maintain insurance, at
its expense, to protect itself and any director, officer,
employee or agent of the Corporation or another corporation,
partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation
would have the power to indemnify such person against such
expense, liability or loss under the Delaware Corporation Law.
4
<PAGE>
EIGHTH: The Board of Directors of the Corporation is
expressly authorized to adopt, amend or repeal the By-Laws of the
Corporation."
IN WITNESS WHEREOF, the undersigned have executed this
Restated Certificate of Incorporation this 10th day of June,
1987.
Signature
James W. Kennedy
President
ATTEST:
Signature
Joel Wulinsky
Secretary
5
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE FORSCHNER GROUP, INC.
The Forschner Group, Inc. (the "Corporation"), a corporation
organized and existing by virtue of the General Corporation Law
of the State of Delaware, does hereby certify as follows:
1. The Certificate of Incorporation of the Corporation, as
heretofore amended, authorized the issuance of eight million
(8,000,000) shares of capital stock, all of which shares were
designated Common Stock, par value $.10 per share.
2. In order to change the capital structure of the
Corporation, Article FOURTH of the Certificate of Incorporation
of the Corporation is hereby amended to read in its entirety as
follows:
"FOURTH: Capital Stock. The total number of shares of
capital stock ("Capital Stock") which the Corporation shall have
authority to issue is fourteen million (14,000,000), all of the
par value $.10 per share, of which twelve million (12,000,000)
shares shall be designated Common Stock and two million
(2,000,000) shares shall be designated Preferred Stock.
Except for shares of Preferred Stock, the powers,
preferences and relative, participating, optional or other
special rights, including, without limitation, the right to
receive dividends, and the qualifications, limitations or
restrictions with respect thereto, of each share of capital stock
shall be identical, share for share.
1
<PAGE>
(a) Voting. Shares of Common Stock shall entitle the holders
thereof to one vote for each share upon all matters upon which
stockholders have the right to vote. Shares of Preferred Stock
shall entitle the holders thereof to such vote, if any, as shall
be fixed by the Board of Directors (or duly authorized committee
thereof) pursuant to Article FOURTH (b).
(b) Preferred Stock. Authority is hereby expressly granted
to the Board of Directors or a duly authorized committee thereof
at any time and from time to time to issue shares of Preferred
Stock in one or more series and for such consideration as may be
fixed from time to time by the Board of Directors, and to fix,
before the issuance of any shares of a particular series of
Preferred Stock, the designation of such series; the number of
shares to comprise such series; the dividend rate per annum,
liquidation rights and redemption price or prices, if any, of
such series; the terms and conditions of any such redemption; the
sinking fund provisions, if any, in respect of such series; the
terms and conditions on which the shares of such series are
convertible, if they are convertible; and any other rights,
preferences and limitations pertaining to such series. All shares
of any one series of Preferred Stock shall be identical. To the
extent so fixed by the Board of Directors and consistent with
applicable law, each such series of Preferred Stock shall have
rights and preferences senior to the rights herein granted to the
Common Stock.
(c) Dividends. Subject to the rights of the holders of
shares of Preferred Stock (if any shares of Preferred Stock shall
be issued), dividends payable in cash or property are payable if,
when, and as declared by the Board of Directors out of funds
legally available therefor.
(d) Reservation of Shares. Such number of shares of Common
Stock as may from time to time be required for the purpose shall
be reserved for issuance (i) upon conversion of any Preferred
Stock which shall be convertible or any obligation of the
Corporation convertible into shares of Common Stock and (ii) upon
exercise of any options or warrants to purchase shares of Common
Stock."
3. This amendment to the Certificate of Incorporation has
been duly adopted by the vote of the holders of a majority of the
outstanding securities of the Corporation entitled to vote
thereon in accordance with the provisions of Section 242 of the
Delaware General Corporation Law.
2
<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of this 30th day of June, 1993.
Signature
James W. Kennedy
President and Chief
Executive Officer
Attest:
Signature
Thomas M. Lupinski
Secretary
3
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
THE FORSCHNER GROUP, INC.
The Forschner Group, Inc. (the "Corporation"), a corporation
organized and existing by virtue of the General Corporation Law
of the State of Delaware, does hereby certify as follows:
FIRST: The name of the Corporation is "THE FORSCHNER GROUP,
INC."
SECOND: The Certificate of Incorporation of the Corporation
was filed in the Office of the Secretary of State of the State of
Delaware on the 12th day of December, 1974 under the name R.H.
Forschner Co., Inc.
THIRD: A Certificate of Amendment to the Certificate of
Incorporation was filed in the office of the Secretary of State
of Delaware on the 4th day of December, 1983 for the purpose of
changing the name of the Corporation to The Forschner Group, Inc.
FOURTH: The purpose of the amendment of the Certificate of
Incorporation effected by this Certificate of Amendment is to
change the name of the Corporation.
1
<PAGE>
FIFTH: To accomplish the foregoing amendment, Article FIRST
of the Certificate of Incorporation of the Corporation is hereby
deleted in its entirety and a new Article FIRST is inserted in
its stead, to read as follows:
"FIRST: The name of the Corporation is: SWISS ARMY BRANDS,
INC."
SIXTH: This amendment to the Certificate of Incorporation
has been duly adopted by the vote of the holders of a majority of
the outstanding securities of the Corporation entitled to vote
thereon in accordance with the provisions of Section 242 of the
Delaware General Corporation Law.
IN WITNESS WHEREOF, the undersigned have executed this
Certificate as of this 16th day of May, 1996.
Signature
J. Merrick Taggart
President
Attest:
Signature
Thomas M. Lupinski
Secretary
2
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<ARTICLE> 5
<CIK> 0000731947
<NAME> Swiss Army Brands, Inc.
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<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
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