10Q-94-11--10--AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 27, 1994
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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: 0-14394
TOWN & COUNTRY CORPORATION
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(Exact name of Registrant as specified in its charter)
Massachusetts 04-2384321
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(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification
organization) Number)
25 Union Street, Chelsea, Massachusetts 02150
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617)884-8500
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
---
On December 23, 1994, the Registrant had outstanding 20,767,523 shares of Class
A Common Stock, $.01 par value and 2,664,926 shares of Class B Common Stock,
$.01 par value.
<PAGE>
PART 1 - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS
November 27, February 27,
1994 1994
---- ----
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,053,620 $ 3,273,876
Restricted cash 760,871 37,971
Accounts receivable--
Less allowances for doubtful
accounts of $7,143,000 at
11/27/94 and $5,510,000 at
2/27/94 89,573,992 55,623,418
Inventories (Note 4) 81,218,991 75,029,397
Prepaid expenses & other current
assets 3,702,030 3,991,883
Total current assets $ 176,309,504 $ 137,956,545
PROPERTY, PLANT & EQUIPMENT, at cost $ 82,438,375 $ 79,340,723
Less - Accumulated depreciation 38,010,257 33,636,099
$ 44,428,118 $ 45,704,624
INVESTMENT IN AFFILIATES (Notes 6 & 7) $ 15,373,717 $ 27,038,089
OTHER ASSETS (Note 2) $ 7,852,084 $ 13,221,467
$ 243,963,423 $ 223,920,725
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED BALANCE SHEETS (Continued)
November 27, February 27,
1994 1994
---- ----
(Unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable (Note 3) $ 30,723,141 $ -
Current portion of long-term debt 1,362,260 1,479,590
Accounts payable 26,721,329 12,727,357
Accrued expenses 14,202,146 19,956,332
Accrued and currently deferred
income taxes 1,471,659 874,253
Total current liabilities $ 74,480,535 $ 35,037,532
LONG-TERM DEBT, less current portion
(Note 3) $ 94,731,417 $ 91,827,239
OTHER LONG-TERM LIABILITIES $ 1,923,897 $ 2,093,755
Total liabilities $ 171,135,849 $ 128,958,526
COMMITMENTS AND CONTINGENCIES (Note 2)
MINORITY INTEREST $ 4,535,606 $ 3,843,117
EXCHANGEABLE PREFERRED STOCK, $1.00
par value-
Authorized--200,000 shares and
2,700,000 shares, respectively
Issued and outstanding--152,217 and
2,533,255 shares, respectively $ 2,235,959 $ 35,785,399
(Notes 3 and 6)
STOCKHOLDERS' EQUITY (Note 3):
Preferred stock, $1.00 par value-
Authorized and unissued--2,266,745 shares
and 2,300,000 shares, respectively $ - $ -
Convertible preferred stock, $1.00 par
value, $6.50 preference value
Authorized--2,533,255 shares
Issued and outstanding--2,381,038 (Note 6) 2,381,038 -
Class A Common Stock, $ .01 par value-
Authorized--40,000,000 shares
Issued and outstanding--20,767,523
and 20,755,901 shares, respectively 207,675 207,559
Class B Common Stock, $.01 par value-
Authorized--8,000,000 shares
Issued and outstanding--2,664,926
and 2,670,693 shares, respectively 26,649 26,707
Additional paid-in capital 72,900,361 69,909,485
Retained deficit (9,459,714) (14,810,068)
Total stockholders' equity $ 66,056,009 $ 55,333,683
$ 243,963,423 $ 223,920,725
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Nine Months Ended
November 27, November 28, November 27, November 28,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 96,719,682 $ 94,346,432 $ 222,088,070 $ 209,535,199
COST OF SALES 67,887,824 62,714,041 153,900,409 136,881,202
Gross profit $ 28,831,858 $ 31,632,391 $ 68,187,661 $ 72,653,997
SELLING, GENERAL &
ADMINISTRATIVE
EXPENSES 25,399,922 21,680,010 68,275,433 58,730,197
Income (loss) from
operations $ 3,431,936 $ 9,952,381 $ (87,772)$ 13,923,800
INTEREST EXPENSE, (3,311,455) (3,184,917) (8,653,946) (10,402,992)
net
GAIN ON LITTLE
SWITZERLAND, INC.
EXCHANGE (NOTES 6 & 7) 17,277,988 - 17,277,988 -
INCOME FROM
AFFILIATES 193,049 7,303 576,049 253,601
MINORITY INTEREST (368,475) (416,507) (692,489) (903,925)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF OPERATIONS (continued)
(Unaudited)
For the Three Months Ended For the Nine Months Ended
November 27, November 28, November 27, November 28,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME BEFORE
INCOME TAXES $ 17,223,043 $ 6,358,260 $ 8,419,830 $ 2,870,484
PROVISION FOR
INCOME TAXES 799,000 452,000 1,643,177 554,000
NET INCOME $ 16,424,043 $ 5,906,260 $ 6,776,653 $ 2,316,484
ACCRETION OF
DIVIDEND ON
PREFERRED STOCK 479,551 455,154 1,426,299 986,308
INCOME ATTRIBUTABLE
TO COMMON
STOCKHOLDERS $ 15,944,492 $ 5,451,106 $ 5,350,354 $ 1,330,176
INCOME PER COMMON
SHARE (Note 5): $ 0.68 $ 0.23 $ 0.23 $ 0.06
WEIGHTED AVERAGE
COMMON SHARES
OUTSTANDING
(Note 5): 23,432,449 23,421,576 23,429,811 20,466,322
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
November 27, November 28,
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATNG ACTIVITIES:
Net income $ 6,776,653 $ 2,316,484
Adjustments to reconcile net income
to net cash used in operating activities-
Depreciation and amortization 3,672,238 4,441,982
Loss (gain) on disposal of certain
assets 4,275 (99,963)
Gain on Little Switzerland, Inc. exchange (17,277,988) -
Ordinary dividends received from affiliates - 2,045,533
Undistributed earnings of affiliates,
net of minority interest 116,439 841,566
Interest paid with issuance of debt 7,647,666 3,495,571
Change in assets and liabilities--
Decrease (increase) in accounts
receivable (33,950,574) (35,659,410)
Decrease (increase) in inventory (6,189,594) (6,875,982)
Decrease (increase) in prepaid
expenses and other current assets 289,853 2,906,017
Decrease (increase) in other assets 5,064,340 1,654,928
Increase (decrease) in accounts
payable 13,993,972 9,859,404
Increase (decrease) in accrued
expenses (5,854,186) (2,002,686)
Increase (decrease) in accrued and
current deferred taxes 597,406 (15,417)
Increase (decrease) in other
liabilities (169,858) (91,264)
Net cash used in operating
activities (25,279,358) (17,183,237)
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (2,411,243) (2,863,277)
Proceeds from sale of certain assets 5,318 199,933
Proceeds from sale of investments - 3,485,999
Net cash provided by (used in)
investing activities (2,405,925) 822,655
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
For the Nine Months Ended
November 27, November 28,
1994 1993
---- ----
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on revolving credit facilities $ (180,579,784) $ (118,638,725)
Proceeds from borrowings under
revolving credit facilities 209,280,999 142,108,860
Payments on long-term debt (4,549,851) (7,641,237)
Decrease (increase) in restricted cash (722,900) (113,179)
Proceeds from the issuance of common stock 14,637 19,815
Change in notes payable 2,021,926 1,985,957
Payments to retire credit facility - (37,250,000)
Proceeds from senior secured notes - 30,000,000
Payment of dividend by Essex - (534,617)
Payments for recapitalization expenses - (5,760,577)
Net cash provided by
financing activities $ 25,465,027 $ 4,176,297
NET DECREASE IN CASH AND CASH
EQUIVALENTS $ (2,220,256) $ (12,184,285)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,273,876 15,353,259
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 1,053,620 $ 3,168,974
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ 3,089,777 $ 4,363,780
Income taxes 1,102,135 486,099
Supplemental Disclosure of Non-Cash Investing & Financing Activities (Notes 6 & 8)
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
<PAGE>
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 27, 1994
(1) Significant Accounting Policies
The unaudited consolidated financial statements presented herein have been
prepared by the Company and contain all adjustments (consisting of only normal
recurring adjustments) necessary to present fairly and on a basis consistent
with the consolidated financial statements for the year ended February 27, 1994,
the Company's financial position as of November 27, 1994, and the results of its
operations for the three- and nine-month periods ended November 27, 1994, and
November 28, 1993, and cash flows for the nine-month periods ended November 27,
1994, and November 28, 1993.
The significant accounting policies followed by the Company are set forth in
Note (1) of the Company's consolidated financial statements for the year ended
February 27, 1994, which have been included in the Annual Report on Form 10-K,
Commission File Number 0-14394, for the fiscal year ended February 27, 1994. The
Company has made no change in these policies during the nine months ended
November 27, 1994.
The consolidated financial statements include the accounts of subsidiary
companies more than fifty percent owned.
The results of operations for the nine-month period ended November 27, 1994, are
not necessarily indicative of the results to be expected for the year due to the
seasonal nature of the Company's operations.
(2) Commitments and Contingencies
Zale Bankruptcy
The Company's largest customer for a number of years has been the Zale
Corporation and its affiliated companies, including Gordon Jewelry Corporation.
On July 30, 1993, this group of companies completed a reorganization under
Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy
Court and emerged from bankruptcy as Zale Delaware, Inc. (Zale).
The Company has reached agreement with the new Zale concerning the Company's
claim of approximately $40 million, filed with the Bankruptcy Court,
representing the net outstanding balance of trade accounts receivable and the
wholesale value of the consignment inventory as of the date of Zale's bankruptcy
petition.
<PAGE>
The Company's Consolidated Financial Statements at February 28, 1992, originally
reflected a net valuation of approximately $13 million, which was classified as
Other Assets in the Consolidated Balance Sheets, due to the uncertainty of the
timing of a final settlement. The Company has subsequently received proceeds
from Zale and from liquidation of claim assets of approximately $11.7 million.
The Consolidated Financial Statements at November 27, 1994, reflect a net
valuation of approximately $1.3 million, representing management's estimate of
the value of the remaining claim related assets.
The Company continues to conduct business with Zale.
(3) Loan Arrangements
In order to significantly reduce the amount of the Company's cash interest and
principal requirements and to satisfy the Company's near-term and long-term
liquidity needs, the Company completed a major recapitalization on May 14, 1993.
This recapitalization revised the Company's consolidated capitalization,
including debt structure, to be consistent with the Company's current and
expected operating performance levels. The amount of debt outstanding was
reduced and a significant portion of the old subordinated debt was exchanged
for new debt, shares of Class A Common Stock and Exchangeable Preferred Stock.
The new debt structure consisted of a new revolving credit agreement which was
obtained from Foothill Capital Corporation to provide secured financing in an
aggregate amount of up to $30 million, new gold consignment agreements which
were obtained from the Company's gold suppliers to provide an aggregate gold
consignment availability of up to approximately 100,000 troy ounces, $30 million
principal amount of 11 1/2% Senior Secured Notes due September 15, 1997, which
were purchased by various investors, and approximately $53 million principal
amount of 13% Senior Subordinated Notes due May 31, 1998, issued as a component
of the exchange.
The results of the exchange offer were:
(a) holders of approximately 93% of the Company's existing 13% Senior
Subordinated Notes due December 15, 1998, exchanged each $1,000 principal amount
of those notes for $478.96 principal amount of the Company's 13% Senior
Subordinated Notes due May 31, 1998, $331.00 of the Company's Exchangeable
Preferred Stock, par value $1.00 per share, and 89.49 shares of the Company's
Class A Common Stock, par value $0.01 per share, and
<PAGE>
(b) holders of approximately 98% of the Company's existing 10 1/4% Subordinated
Notes due July 1, 1995, exchanged each $1,000 principal amount of those notes
for $408.11 principal amount of the Company's 13% Senior Subordinated Notes due
May 31, 1998, $282.04 of the Company's Exchangeable Preferred Stock, par value
$1.00 per share, and 76.25 shares of the Company's Class A Common Stock, par
value $0.01 per share.
The Company reached an agreement with Chemical Bank to change the terms of the
IRB financing for the Company's facility located in New York, New York. This
agreement includes, among other things, an accelerated payment schedule relative
to that which had previously been in place and the release of certain collateral
by Chemical Bank.
During the second quarter of fiscal 1995, the Company entered into an amendment
to the revolving credit agreement to increase the maximum amount available under
the agreement from $30,000,000 to $35,000,000 during the months of September
through December 1994 to address its seasonality needs. As of November 27, 1994,
approximately $28.7 million was outstanding under the revolving credit
agreement.
During fiscal 1995, the Company agreed to reduce its gold consignment facilities
from 94,000 ounces, the availability at November 27, 1994, to approximately
73,000 ounces. This reduction will take place beginning in December 1994 and
will be completed by February 1, 1995. As of November 27, 1994, approximately
76,000 ounces were on consignment under the gold agreements.
During the second quarter of fiscal 1995, modifications to the consolidated
tangible net worth covenant were made in the revolving credit and gold
agreements. The covenant previously provided that the Company was required
to maintain consolidated tangible net worth of $38,000,000 through February 27,
1994, and $43,000,000 thereafter. As amended, the covenant provides that the
Company will maintain consolidated tangible net worth of $40,000,000 from
July 1, 1994, through November 26, 1994, and $43,000,000 thereafter.
(4) Inventories
Inventories consisted of the following at November 27, 1994, and February 27,
1994:
November 27, February 27,
1994 1994
---- ----
Raw Materials $16,640,088 $16,753,865
Work-in-Process 10,052,379 7,154,300
Finished Goods 54,526,524 51,121,232
$81,218,991 $75,029,397
<PAGE>
(5) Earnings Per Common Share
Earnings per common share is computed by adjusting the Company's net income for
the accretion of dividends on Exchangeable Preferred Stock and Convertible
Preferred Stock and dividing by the weighted average number of common and common
equivalent shares, where dilutive, outstanding during each period.
(6) Exchange of Stock
On November 23, 1994, holders of approximately 94% of the Company's Exchangeable
Preferred Stock exchanged their shares for shares of Little Switzerland, Inc.
Common Stock on a share-for-share basis. Such an exchange was provided for by
the terms of the Exchangeable Preferred Stock. The Company offered to each
participant one share of new Convertible Preferred Stock with each share of
Little Switzerland, Inc. Common Stock to induce the holders to exercise their
exchange rights.
Since the carrying value of the Company's investment in Little Switzerland, Inc.
was substantially less than the recorded value of the Exchangeable Preferred
Stock, the transaction resulted in a nonrecurring, noncash gain of approximately
$17 million, net of the estimated fair value of the Convertible Preferred Stock
inducement.
The Company's remaining investment in Little Switzerland, Inc. consists of
318,962 shares and represents an approximate 4% interest in Little Switzerland.
Due to this decrease in percentage ownership, the Company will change its method
of accounting for this investment from the equity method to the cost method.
CONVERTIBLE PREFERRED STOCK
Each share of Convertible Preferred Stock is initially convertible, at the
option of the holder, into two shares of Class A Common Stock, subject to
adjustment in certain circumstances. In the event the market price of a share of
Class A Common Stock equals or exceeds $3.25 for 30 consecutive trading days,
the Company may require the holders of Convertible Preferred Stock to convert
such stock into shares of Class A Common Stock at the then-applicable conversion
rate. Beginning on November 23, 1995, the Company may redeem, in whole or in
part, shares of Convertible Preferred Stock at a price equal to 104% of the
liquidation value and thereafter at prices declining annually to 100% of the
liquidation value on or after November 23, 1997. The Convertible Preferred Stock
has a liquidation value of $6.50 per share and pays dividends at the rate of 6%
of the liquidation value per annum. The Company, at its option, may pay such
dividends in cash or in additional shares of Convertible Preferred Stock.
The Convertible Preferred Stock is subordinate on liquidation and with respect
to dividend payments to the outstanding shares of Exchangeable Preferred Stock
but senior to the Class A Common Stock and the Class B Common Stock. Holders of
shares of Convertible Preferred Stock shall be entitled to vote on all matters
on which the holders of Class A Common Stock are entitled to vote. Each share of
Convertible Preferred Stock shall entitle the holder to the number of votes per
share equal to the number of shares of Class A Common Stock into which each
share of Convertible Preferred Stock is then convertible.
<PAGE>
The Company has agreed with the holders of the Convertible Preferred Stock to
register such stock (and the Class A Common Stock into which it is convertible)
under the Securities Act and to keep such registration effective until the
earlier of (i) the date on which such holders no longer own any of such
securities or (ii) the date on which each of the holders has notified the
Company that such holder may dispose of all of its securities pursuant to Rule
144(k) under the Securities Act.
(7) Investment in Little Switzerland, Inc.
Presented below is summarized financial information (in thousands) for Little
Switzerland, Inc. as of and for the three months ended August 31, 1994, and
1993:
1994 1993
==== ====
Current Assets $ 37,678 $ 40,444
Noncurrent Assets 17,117 13,956
Current Liabilities 11,089 14,498
Noncurrent Liabilities 356 794
Total Equity 43,350 39,108
Sales $ 12,101 $ 11,489
Gross Profit 5,293 4,921
Net Income (Loss) (119) (210)
(8) Supplemental Disclosure of Non-Cash Investing & Financing
Activities
On May 14, 1993, the Company completed its recapitalization as described in
Note 3. As a result of this transaction, long-term debt with a carrying value of
$122.7 million, including accrued interest and deferred financing costs, was
retired. New debt with a carrying value of $61.5 million, Exchangeable Preferred
Stock valued at $34.3 million, and common stock valued at $26.9 million were
issued in exchange for the debt which was retired.
As payment for the commitment to purchase up to 100% of the Company's senior
secured notes, an investor received 750,000 shares of the Company's Class A
common stock with a value of $2 million at the time of issuance.
For the nine months ended November 27, 1994, and November 28, 1993, accretion of
dividends on preferred stocks has amounted to $1.4 million and $1.0 million,
respectively.
<PAGE>
On May 15, 1994, the Company issued approximately $3.7 million in new 13% Senior
Subordinated Notes due May 31, 1998, as payment-in-kind of the semiannual
interest installment. Approximately $2.2 million of this amount was classified
as accrued expenses in the February 27, 1994, Consolidated Balance Sheet. On
November 15, 1994, the Company issued approximately $3.9 million in new 13%
Senior Subordinated Notes due May 31, 1998, as payment-in-kind of the
semi-annual interest installment.
During September 1994, the Company had fixed asset additions of approximately
$.7 million funded by increases in capital lease obligations.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED NOVEMBER 27, 1994 COMPARED TO
THE NINE MONTHS ENDED NOVEMBER 28, 1993
On November 23, 1994, holders of approximately 94% of the Company's Exchangeable
Preferred Stock exchanged their shares for shares of Little Switzerland, Inc.
Common Stock on a share-for-share basis. Such an exchange was provided for by
the terms of the Exchangeable Preferred Stock. The Company offered to each
participant one share of new Convertible Preferred Stock with each share of
Little Switzerland, Inc. Common Stock to induce the holders to exercise their
exchange rights.
Since the carrying value of the Company's investment in Little Switzerland, Inc.
was substantially less than the recorded value of the Exchangeable Preferred
Stock, the transaction resulted in a nonrecurring, noncash gain of approximately
$17 million, net of the estimated fair value of the Convertible Preferred Stock
inducement.
Net sales for the nine months ended November 27, 1994, increased $12.6 million
or 6.0% from $209.5 million in fiscal 1994 to $222.1 million in fiscal 1995.
Current year sales of fine jewelry have increased approximately $16.8 million or
12.2% over the corresponding period in fiscal 1994. The majority of the
increases in fine jewelry sales have come from the Company's existing discount
department store customers as a result of emphasis by these customers on the
promotion of jewelry sales. Sales for the Company's direct response distribution
business of licensed sports and other specialty products have decreased
approximately $1.4 million or 12.8% from $10.9 million in fiscal 1994 to $9.5
million in fiscal 1995.
Gross profit for the nine months ended November 27, 1994, decreased $4.5 million
from $72.7 million in fiscal 1994 to $68.2 million in fiscal 1995. Gross profit
margin decreased 4.0% from 34.7% in fiscal 1994 to 30.7% in fiscal 1995. The
Company's sales increase has been primarily in the lower margin fine jewelry
product categories and this change in product mix has negatively impacted gross
profit margin by approximately 0.7%. In its effort to manage inventory levels,
the Company has also sold, or made provisions to sell, inventory in excess of
current requirements, at less than normal margins. These sales and provisions
negatively impacted margin by approximately 2.1%. The Company's inability to
reduce fixed overhead costs, while production requirements for direct response
and other specialty products were lower this year than last year, has
negatively impacted margin by approximately 1.2%. The division which
distributes these products moved to a new facility during the second quarter of
fiscal 1995. The Company believes this move will result in reducing overhead.
<PAGE>
Selling, general, and administrative expenses for the current period increased
approximately $9.6 million or 16.3% from $58.7 million in fiscal 1994 to $68.3
in fiscal 1995. As a percentage of net sales, selling, general, and
administrative expenses were approximately 2.7% more in the current year than
for the nine months ended November 28, 1993. Increases primarily relate to
higher costs associated with the Company's direct response distribution business
of licensed sports and other specialty products, particularly in advertising,
and the requirement for higher than anticipated provisions for uncollectible
accounts. Sales of these products have not materialized at the rate anticipated.
Net interest expense for the nine months ended November 27, 1994, decreased
approximately $2 million relative to the corresponding period in fiscal 1994.
This decrease is the result of the recapitalization that occurred on May 14,
1993. Approximately $115 million of the Company's long-term debt was exchanged
for approximately $53 million in new debt, approximately $37 million of
exchangeable preferred stock, and approximately 10 million shares of the
Company's Class A stock.
The Company has recorded a tax provision of approximately $1.6 million for the
nine months ended November 27, 1994. The tax provision was primarily due to the
Company's utilization of tax benefits from operating losses in certain
jurisdictions offset by state and foreign income taxes.
LIQUIDITY AND WORKING CAPITAL
Cash used in operating activities for the nine months ended November 27, 1994,
was $25 million compared with $17 million used during the corresponding period
in fiscal 1994, an $8 million increase in cash used. The Company had a loss
before the effect of the nonrecurring noncash gain from the Little Switzerland,
Inc. exchange of approximately $11 million compared with income of $2 million
for the similar period in fiscal 1994. The Company's increased loss was
therefore approximately $5 million greater than its increased cash usage. This
was as a result of having made higher provisions for operating reserves in the
current fiscal period.
Cash used in investing activities was $2.4 million for the nine months ended
November 27, 1994, compared with $.8 million of cash provided by investing
activities in the corresponding period in fiscal 1994. The change is primarily
the result of the $3.5 million partial redemption of the preferred share
investment in Solomon Brothers, Limited which took place in fiscal 1994.
Cash provided by financing activities was $25.5 million for the first nine
months in fiscal 1995 versus $4.2 million in the corresponding period in fiscal
1994. Net cash provided by financing activities in the current period has been
primarily used to fund current operations. In fiscal 1994, cash from financing
activities was used for costs associated with the recapitalization which took
place on May 14, 1993. Fiscal 1994 operations were primarily funded with
beginning period cash. Current period financing cash has been primarily provided
by the Company's revolving credit facility which had an outstanding balance of
$28.7 million at November 27, 1994, versus $23.5 million at November 28, 1993.
The Company is required to escrow net proceeds from the Zale claim and Solomon
investment for repayment of Senior Secured Notes. Fiscal 1995 operating cash
flow includes proceeds from the Zale bankruptcy claim of $5 million versus $2
million in fiscal 1994. Fiscal 1994 operating cash flows include $2 million of
cash proceeds from dividends related to the Company's investment in Solomon
Brothers, Limited. Approximately $3.4 million and $5.5 million of Senior Secured
Notes have been redeemed with such proceeds during the first nine months of
fiscal 1995 and fiscal 1994, respectively.
<PAGE>
The Company's net cash position decreased from approximately $3.3 million at
February 27, 1994, to approximately $1.1 million at November 27, 1994, compared
to a decrease from $15.4 million at February 28, 1993, to $3.2 million at
November 28, 1993.
To address seasonality needs, the Company entered into an amendment to the
revolving credit agreement to increase the maximum amount available under the
agreement from $30,000,000 to $35,000,000 during the months of September through
December 1994. During fiscal 1995, the Company agreed to reduce its gold
consignment facilities from 94,000 ounces, the availability at November 27,
1994, to approximately 73,000 ounces. This reduction will take place beginning
in December 1994 and will be completed by February 1, 1995. As of November 27,
1994, approximately 76,000 ounces were on consignment under the gold agreements.
The Company believes that it can meet its future working capital needs through
cash flow from operations and from its secured gold and revolving credit
facilities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
11 Earnings Per Share Computations
27 Financial Data Schedule
(b) Reports on Form 8-K
The Registrant made two 8-K filings under Item 5 - Other Events dated
November 9, 1994, and November 30, 1994. The reports described the exchange by
holders of the Company's Exchangeable Preferred Stock, of their shares for
shares of Little Switzerland, Inc. Common Stock, and the issuance to such
holders of new shares of the Company's Convertible Preferred Stock.
<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 thereunto duly authorized.
TOWN & COUNTRY CORPORATION
(Registrant)
Date: January 10, 1995 /s/ Francis X. Correra
------------------------
Francis X. Correra
Senior Vice President and
Chief Financial Officer
<PAGE>
TOWN & COUNTRY CORPORATION & SUBSIDIARIES
EXHIBIT 11
<TABLE>
<CAPTION>
Earnings Per Share Computations
(Unaudited)
For the Three Months Ended For the Nine Months Ended
November 27, November 28, November 27, November 28,
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
PRIMARY EPS:
Net income $ 16,424,043 $ 5,906,260 $ 6,776,653 $ 2,316,484
Accretion of dividend on
preferred stock 479,551 455,154 1,426,299 986,308
Net income for EPS
calculation $ 15,944,492 $ 5,451,106 $ 5,350,354 $ 1,330,176
Weighted average common
shares outstanding 23,432,449 23,421,576 23,429,811 20,466,322
Weighted shares issued
from exercise and
assumed execise of:
warrants - - - -
options - - - -
Shares for EPS
calculation 23,432,449 23,421,576 23,429,811 20,466,322
REPORTED EPS:
Net income $ 0.70 $ 0.25 $ 0.29 $ 0.11
Accretion of dividend on
preferred stock (0.02) (0.02) (0.06) (0.05)
Net income per common
share: $ 0.68 $ 0.23 $ 0.23 $ 0.06
FULLY DILUTED EPS:
For the periods presented in this exhibit, there is no dilution from Primary
EPS.
</TABLE>
This exhibit should be reviewed in conjunction with Note 5 of Notes to
Consolidated Financial Statements.
<PAGE>
TOWN & COUNTRY CORPORATION EXHIBIT 27
<TABLE>
<CAPTION>
FINANCIAL DATA SCHEDULE
<S> <C>
Cash and cash items $ 1,053,620
Marketable securities 0
Notes and accounts receivable--
Trade 89,573,992
Allowances for doubtful accounts 7,143,000
Inventory 81,218,991
Total current assets 176,309,504
Property, plant and equipment 82,438,375
Accumulated depreciation (38,010,257)
Total assets 243,963,423
Total current liabilities 74,480,535
Bonds, mortgages, and similar debt 94,731,417
Preferred stock--
Mandatory redemption 2,235,959
No mandatory redemption 2,381,038
Common stock 234,324
Other stockholders' equity 63,440,647
Total liabilities and stockholders' equity 243,963,423
Net sales of tangible products 222,088,070
Total revenues 222,088,070
Cost of tangible goods sold 153,900,409
Total costs and expenses applicable to
sales and revenues 153,900,409
Other costs and expenses 0
Provision for doubtful accounts and notes 3,622,390
Interest and amortization of debt discount 8,653,946
Income before taxes and other items 8,419,830
Income tax expense 1,643,177
Income (loss) continuing operations 6,776,653
Discontinued operations 0
Extraordinary items 0
Cumulative effect--
Changes in accounting principles 0
Net income (loss) per common share 5,350,354
Earnings per share--
Primary $ 0.23
Fully diluted $ 0.23
</TABLE>
