<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended October 26, 1996
Commission file number: 015230
MICHAEL ANTHONY JEWELERS, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 132910285
(State of Incorporation) (I.R.S. Employer Identification No.)
115 South MacQuesten Parkway
Mount Vernon, New York 105501724
(Address of principal executive offices)
Registrant's telephone number, including area code:
(914) 699-0000
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
---- ----.
CLASS
-----
Number of Shares
Common Stock, Par Value $.001 Outstanding as of
November 21, 1996
-----------------
8,253,909
<PAGE> 2
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
INDEX
-----
PAGE
----
PART I FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets,
October 26, 1996 (Unaudited) and
January 27, 1996............................................. 3
Consolidated Condensed Statements of Operations
Nine-Month Period Ended
October 26, 1996 and October 28, 1995 (Unaudited) ........... 4
Consolidated Condensed Statement of Changes in
Stockholders' Equity, Nine-Month Period Ended
October 26, 1996 (Unaudited)................................. 5
Consolidated Condensed Statements of Cash Flows,
Nine-Month Period Ended
October 26, 1996 and October 28, 1995 (Unaudited)............ 6
Notes to Consolidated Condensed Financial
Statements..................................................... 7-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................... 10-15
PART II OTHER INFORMATION:
Item 1 Through Item 6 ............................................. 16
Signature Page..................................................... 17
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<PAGE> 3
MICHAEL ANTHONY JEWELERS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS
- ------ Unaudited)
October 26, January 27,
1996 1996
------------ -------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 6 $ 6,673
Accounts receivable:
Trade (less allowances of $1,326 and $1,575, respectively) 37,446 30,062
Other 136 47
Inventories 21,446 19,698
Prepaid expenses and other current assets 747 1,169
Deferred taxes 855 855
-------- --------
Total current assets 60,636 58,504
PROPERTY, PLANT AND EQUIPMENT - net 18,634 18,441
INTANGIBLES - net 962 998
OTHER ASSETS 780 703
-------- --------
$ 81,012 $ 78,646
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 8,581 $ 4,575
Current portion of long-term debt
and lease liability 3,296 3,272
Accrued expenses 4,212 3,980
Taxes payable 1,040 541
-------- --------
Total current liabilities 17,129 12,368
-------- --------
LONG-TERM DEBT 15,616 18,401
-------- --------
CAPITAL LEASE LIABILITY 450 791
-------- --------
DEFERRED TAXES 1,038 1,038
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - par value $1.00 per share;
1,000,000 shares authorized; none issued -- --
Common stock - par value $.001 per share;
20,000,000 shares authorized; 8,274,000 and
9,239,000 shares issued and outstanding as of
October 26, 1996, and January 27, 1996, respectively 8 9
Additional paid-in capital 31,717 35,170
Retained earnings 15,117 14,306
Treasury stock, 20,000 and 965,200 shares as of October 26, 1996
and January 27, 1996, respectively (63) (3,437)
-------- --------
Total stockholders' equity 46,779 46,048
-------- --------
$ 81,012 $ 78,646
======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-3-
<PAGE> 4
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------ -----------------
October 26 October 28, October 26, October 28,
1996 1995 1996 1995
---- ---- ---- ----
<S> <C> <C> <C> <C>
NET SALES $ 48,772 $ 47,037 $ 105,681 $ 99,198
COST OF GOODS SOLD 39,800 38,789 87,691 82,463
--------- --------- --------- ---------
GROSS PROFIT ON SALES 8,972 8,248 17,990 16,735
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 6,019 5,431 14,836 14,061
--------- --------- --------- ---------
OPERATING INCOME 2,953 2,817 3,154 2,674
OTHER INCOME/(EXPENSES):
Gold consignment fee, net (349) (485) (1,012) (1,347)
Interest expense (426) (428) (1,265) (1,336)
Interest income 94 55 379 314
Other income 34 8 54 89
--------- --------- --------- ---------
Total Other Income/(Expense) (647) (850) (1,844) (2,280)
--------- --------- --------- ---------
INCOME BEFORE INCOME TAXES 2,306 1,967 1,310 394
INCOME TAX PROVISION 878 776 499 147
--------- --------- --------- ---------
NET INCOME $ 1,428 $ 1,191 $ 811 $ 247
========= ========= ========= =========
EARNINGS PER SHARE $ 0.17 $ 0.14 $ 0.10 $ 0.03
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER
OF SHARES 8,254 8,441 8,261 8,527
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-4-
<PAGE> 5
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------ Paid-In Retained --------------
Shares Dollars Capital Earnings Shares Dollars Total
------ ------- ---------- -------- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -
January 27, 1996 9,239 $ 9 $ 35,170 $ 14,306 (965) $ (3,437) $ 46,048
Purchase of treasury stock -- -- -- -- (20) (80) (80)
Retirement of treasury stock (965) (1) (3,453) -- 965 3,454 --
Net income -- -- -- 811 -- -- 811
-------- -------- -------- -------- -------- -------- --------
Balance -
October 26, 1996 8,274 $ 8 $ 31,717 $ 15,117 (20) $ (63) $ 46,779
======== ======== ======== ======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-5-
<PAGE> 6
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
October 26, October 28,
1996 1995
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 811 $ 247
Adjustments to reconcile net income
to net cash used in operating activities:
Depreciation and amortization 2,974 2,691
Provision for accounts receivable 210 270
Provision for sales returns (187) (80)
(Increase)/decrease in operating assets:
Accounts receivable (7,496) (12,912)
Inventories (1,748) (1,124)
Prepaid expenses and other current assets 297 (359)
Other assets (312) (287)
Intangibles (119) (427)
Increase/(decrease) in operating liabilities:
Accounts payable 4,006 (1,495)
Accrued expenses 232 1,308
Taxes payable 499 155
-------- --------
Net cash used in operating activities (833) (12,013)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment - net (2,643) (3,905)
-------- --------
Net cash used in investing activities (2,643) (3,905)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt
and capital lease liabilities (3,111) (2,595)
Proceeds from long term debt -- 6,000
Purchase of treasury stock (80) (673)
Proceeds from line of credit -- 5,000
Proceeds from mortgage -- 2,500
-------- --------
Net cash (used in)/provided by financing activities (3,191) 10,232
-------- --------
DECREASE IN CASH AND EQUIVALENTS (6,667) (5,686)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 6,673 5,815
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 6 $ 129
======== ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest and gold consignment fees $ 2,498 $ 2,817
Taxes $ 0 $ 176
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
-6-
<PAGE> 7
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED OCTOBER 26, 1996
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The unaudited interim consolidated condensed balance sheet as of October
26, 1996 and the consolidated condensed statements of operations for the
nine months ended October 26, 1996 and October 28, 1995, and the
consolidated condensed statements of cash flows for the nine months ended
October 26, 1996 and October 28, 1995, and related notes have been prepared
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to such
rules and regulations. The accompanying unaudited interim consolidated
condensed financial statements and related notes should be read in
conjunction with the financial statements and related notes included in the
1996 Annual Report to Stockholders of Michael Anthony Jewelers, Inc. (the
"Company").
The information furnished reflects, in the opinion of the management of the
Company, all adjustments, consisting of normal recurring accruals, which
are necessary to present a fair statement of the results for the interim
periods presented.
The interim figures are not necessarily indicative of the results to be
expected for the fiscal year due to the seasonal nature of the business.
Earnings Per Share
------------------
Earnings per share for all periods presented were computed on a primary
basis using the weighted average number of shares of common stock
outstanding. Options and warrants outstanding were not materially dilutive.
Reclassifications
-----------------
Certain reclassifications were made to the prior year's financial
statements to conform to the current year's presentation.
2. PRODUCT PRICING
---------------
The Company's products, the principal component of which is gold, are
generally sold at prices which are based on the market price of gold on the
date merchandise is shipped to the customer.
-7-
<PAGE> 8
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED OCTOBER 26, 1996
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED)
2. PRODUCT PRICING (Continued)
---------------
Therefore, the Company's sales volume is significantly influenced by the
market price of gold. The selling prices for certain customers may be fixed
for a specific period of time. In such cases, the Company is able to shift
a substantial portion of the risks of gold price fluctuation by hedging
against changes in the price of gold by entering into forward contracts or
purchasing futures or options on futures.
The Company's consigned gold inventory is hedged against the effects of
price fluctuations. The Company has entered into arrangements with certain
gold lenders (the "Gold Lenders") pursuant to which the Company does not
purchase gold from the Gold Lenders until receipt of a purchase order from,
or shipment of jewelry to, its customers. These arrangements permit the
Company to match the sales price of the product with the price the Company
pays for the gold.
The average price of gold in the current quarter was $382 per ounce as
compared to $383 per ounce for the quarter ended October 28, 1995.
3. INVENTORIES
-----------
Inventories consist of:
October 26, January 27,
1996 1996
---------- ----------
(Unaudited)
(In thousands)
Finished goods $46,866 $56,621
Work in process 30,210 15,240
Raw materials 10,911 8,537
------- -------
87,987 80,398
Less:
Consigned gold 66,541 60,700
------- -------
$21,446 $19,698
======= =======
Inventories as of October 26, 1996 and January 27, 1996 excluded 173,900
and 149,300 ounces of gold on consignment, respectively.
-8-
<PAGE> 9
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED OCTOBER 26, 1996
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED)
4. STOCK REPURCHASE PROGRAM
------------------------
In December 1995, the Company announced a Common Stock repurchase program
pursuant to which the Company may repurchase up to 750,000 shares of Common
Stock. As of November 21, 1996, the Company had repurchased a total of
80,000 shares on the open market for an aggregate price of approximately
$220,000, of which 60,000 shares have been retired. Effective May 24, 1996
the Board of Directors authorized the Company to retire 965,200 shares of
Common Stock, previously held as Treasury Stock.
5. NEW ACCOUNTING STANDARD
-----------------------
Pursuant to Statement of Financial Accounting Standards No. 123 "Accounting
for Stock Based Compensation," ("FASB 123") the Company has elected not to
change to the fair value method of accounting for employees' stock-based
transactions. As permitted by FASB 123, the Company will be permitted to
continue to account for such transactions under Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees," but will be
required to disclose in a note to the financial statements, the proforma
net income and earnings per share as if the Company had applied the new
standard.
-9-
<PAGE> 10
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED)
RESULTS OF OPERATIONS FOR THE THREE MONTHS
ENDED OCTOBER 26, 1996 AND OCTOBER 28, 1995
- -------------------------------------------
Net sales for the three months ended October 26, 1996 were approximately
$48,772,000, an increase of 3.7% from net sales of approximately $47,037,000 for
the comparable period last year. The increase in net sales resulted from
increased shipments to the retail segment of the Company's customer base, which
increase was offset in part by decreased shipments to the wholesale segment of
the Company's customer base.
Gross profit margin increased to approximately 18.4% of net sales for the three
months ended October 26, 1996, compared to approximately 17.5% for the
comparable period last year. The increase in the gross profit margin was
attributable to a change in the Company's product mix and increased sales of the
Company's licensed products.
Selling, general and administrative expenses for the three months ended October
26, 1996 were approximately $6,019,000, an increase of $588,000 or 10.8% from
approximately $5,431,000 for the comparable period last year. As a percentage of
net sales, selling, general and administrative expenses increased to 12.3% for
the three months ended October 26, 1996 from 11.5% for the comparable period
last year. Included in selling, general and administrative expenses for the
three months ended October 26, 1996, was $275,000 of costs related to the
terminated acquisition negotiations with OroAmerica. The other increase of
$313,000 is primarily attributable to increases in (i) royalty and licensing
expenses and (ii) product and packaging supplies. These increases were offset in
part by decreases in (i) legal and accounting expenses and (ii) advertising
related expenses.
Other expenses-net for the three months ended October 26, 1996 were
approximately $647,000, a decrease of $203,000 or 23.9% compared to
approximately $850,000 for the comparable period last year. Gold consignment
fees decreased $136,000 primarily due to the lower level of consignment
inventory and lower consignment interest rates from the comparable period last
year. Interest income increased $39,000 due to the Company's higher cash
position from the comparable period last year.
As a result of the above factors, the Company's net income for the three months
ended October 26, 1996 was approximately $1,428,000 or $.17 per share on
8,254,000 weighted average shares outstanding, compared to net income of
$1,191,000 or $.14 per share on 8,441,000 weighted average shares outstanding
for the comparable period last year.
-10-
<PAGE> 11
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED)
RESULTS OF OPERATIONS FOR THE NINE MONTHS
ENDED OCTOBER 26, 1996 AND OCTOBER 28, 1995
- -------------------------------------------
Net sales for the nine months ended October 26, 1996 were approximately
$105,681,000, an increase of 6.5% from net sales of approximately $99,198,000
for the comparable period last year. The increase in net sales resulted from
increased shipments to the retail segment of the Company's customer base, which
increase was offset in part by decreased shipments to the wholesale segment of
the Company's customer base.
Selling, general and administrative expenses for the nine months ended October
26, 1996 were approximately $14,836,000, an increase of $775,000 or 5.5% from
approximately $14,061,000 for the comparable period last year. Included in
selling, general and administrative expenses for the nine months ended October
26, 1996, was $275,000 of costs related to the terminated acquisition
negotiations with OroAmerica. The other increase of $500,000 is primarily
attributable to increases in (i) royalty and licensing expenses and (ii) product
and packing supplies. These increases were offset in part by decreases in (i)
legal and accounting expenses and (ii) advertising related expenses. As a
percentage of net sales, selling, general and administrative expenses decreased
to 14.0% for the nine months ended October 26, 1996, from 14.2% for the
comparable period last year.
Other expenses-net for the nine months ended October 26, 1996 were approximately
$1,844,000, a decrease of $436,000 or 19.1% compared to approximately $2,280,000
for the comparable period last year. Gold consignment fees decreased $335,000
primarily due to the lower level of consignment inventory and lower consignment
interest rates from the comparable period last year. Interest expense decreased
$71,000 due to the Company's principal payments on its long term debt, in
January 1996 and May 1996. Interest income increased $65,000 due to the
Company's higher cash position from the comparable period last year.
As a result of the above factors, the Company's net income for the nine months
ended October 26, 1996 was approximately $811,000 or $.10 per share on 8,261,000
weighted average shares outstanding, compared to net income of $247,000 or $.03
per share on 8,527,000 weighted average shares outstanding for the comparable
period last year.
-11-
<PAGE> 12
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED)
Liquidity and Capital Resources
- -------------------------------
The Company relies on a gold consignment program, short-term and long-term
borrowings and internally generated funds to finance its operations. The Company
fills most of its gold supply needs through gold consignment arrangements with
the Gold Lenders. Under the terms of those arrangements, the Company is entitled
to lease the lesser of (i) an aggregate of 250,000 ounces of fine gold or (ii)
consigned gold with an aggregate value equal to $106,899,000. The consigned gold
is secured by certain property of the Company including inventory and machinery
and equipment. The Company pays the Gold Lenders a consignment fee based on the
dollar value of ounces of gold outstanding under their respective agreements,
which value is based on the daily Second London Gold Fix. The Company believes
that its financing rate under the consignment arrangements is substantially
similar to the financing rates charged to gold consignees similarly situated to
the Company. As of October 26, 1996, the Company held 173,900 ounces of gold on
consignment with a market value of $66,541,000.
The consignment agreements contain certain restrictive covenants relating to
maximum usage, net worth, working capital and other financial ratios and each of
the agreements requires the Company to own a specific amount of gold at all
times. At October 26, 1996, the Company was in compliance with the covenants in
its consignment agreements and the Company's owned gold inventory was valued at
approximately $6,304,000. Management believes that the supply of gold available
through the Company's gold consignment arrangements, in conjunction with the
Company's owned gold, is sufficient to meet the Company's requirements.
The consignment agreements are terminable by the Company or the respective Gold
Lenders upon 30 days notice. If any Gold Lender were to terminate its existing
gold consignment arrangement, the Company does not believe it would experience
an interruption of its gold supply that would materially adversely affect its
business. The Company believes that other consignors would be willing to enter
into similar arrangements if any Gold Lender terminates its relationship with
the Company.
On August 21, 1996 and September 19, 1996, the Company received notice from two
existing Gold Lenders that they both plan to discontinue their involvement in
the jewelry lending business and will be terminating their respective
consignment agreements with the Company in February 1997. This will reduce the
aggregate ounces the Company is entitled to lease from 250,000 ounces of fine
gold to 243,000, with an aggregate value equal to $105,975,000. However, based
upon current and anticipated needs, this change will not have any impact on the
Company.
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<PAGE> 13
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED)
Liquidity and Capital Resources (Continued)
- -------------------------------------------
Consigned gold is not included in the Company's inventory, and there is no
related liability recorded. As a result of these consignment arrangements, the
Company is able to shift a substantial portion of the risk of market
fluctuations in the price of gold to the Gold Lenders, since the Company does
not purchase gold from the Gold Lenders until receipt of a purchase order from,
or shipment of jewelry to, its customers. The Company then either locks in the
selling price of the jewelry to its customers concurrently with the required
purchase of gold from the Gold Lenders or hedges against changes in the price of
gold by entering into forward contracts or purchasing futures or options on
futures that are listed on the COMEX.
While the Company believes its supply of gold is relatively secure, significant
increases or rapid fluctuations in the cost of gold may result in reduced demand
for the Company's products. From January 28, 1996 until October 26, 1996, the
closing price of gold according to the Second London Gold Fix ranged from a low
of $379 per ounce to a high of nearly $415 per ounce. There can be no assurances
that fluctuations in the precious metals and credit markets would not result in
an interruption of the Company's gold supply or the credit arrangements
necessary to allow the Company to support its accounts receivable and continue
the use of consigned gold.
In each of 1987 and 1992, the Company issued $10,000,000 principal amount of
senior secured notes with various insurance companies, which accrue interest at
10.5% and 8.61% per annum, respectively. In February 1995, the Company issued an
additional $6,000,000 principal amount of senior secured notes with various
insurance companies, which currently accrue interest at 7.00% per annum. The
various insurance company lenders are collectively referred to as the "Senior
Note Holders". These notes are secured by the Company's accounts receivable,
machinery and equipment, inventory (secondary lien to the Gold Lenders) and
proceeds. In addition, the note purchase agreements contain certain restrictive
financial covenants and restrict the payment of dividends. At October 26, 1996,
the Company was in compliance with the covenants and $15,917,000 of principal
remained outstanding under the notes issued in 1987, 1992 and 1995.
On October 6, 1995, the Company obtained a loan from a bank in the amount of
$2,500,000. As collateral for the loan, the Company granted the bank a first
mortgage on the Company's corporate headquarters. The mortgage has a ten-year
term and interest on the mortgage accrues at 8% per annum. In addition, the
mortgage contains certain restrictive financial covenants. At October 26, 1996,
the Company was in compliance with the covenants and $2,408,000 of principal
remained outstanding under the mortgage.
-13-
<PAGE> 14
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED)
Liquidity and Capital Resources (Continued)
- -------------------------------------------
In September 1994, the Company entered into a line of credit arrangement with a
commercial bank (the "Line of Credit"), under which the Company may borrow up to
$15,000,000. The Line of Credit is secured by certain assets of the Company,
including accounts receivable and inventory. As of October 26, 1996, there was
no amount outstanding under the Line of Credit. As of November 21, 1996,
$4,100,000 was outstanding under the Line of Credit. The Line of Credit
currently expires on July 31, 1997, subject to annual renewal.
Cash and marketable securities decreased from $6,673,000 at January 27, 1996 to
$6,000 at October 26, 1996. This decrease was primarily due to the Company's
seasonal increase in accounts receivable and inventory.
During the nine months ended October 26, 1996, the Company used $833,000 of cash
from operations as compared with $12,013,000 for the comparable period last
year. The decrease is primarily due to (i) improved collections of accounts
receivable and (ii) increased accounts payable, principally due to seasonal gold
purchases and the timing of payments.
Cash of $2,643,000 was used for investing activities, comprised of equipment
purchases, as compared to $3,905,000 used for equipment and land purchases
during the comparable nine-month period last year. Cash of $3,191,000 was used
for financing activities during the nine-month period, primarily representing
scheduled payments of long-term debt.
As part of its long-term strategic planning, the Company is negotiating an
agreement to expand its manufacturing and distribution facilities by acquiring
certain properties it is currently leasing from MacQuesten Realty Company
("MRC") (the "Leased Properties"). In the event the Company acquires any of such
properties, the Company may incur or assume additional long-term indebtedness in
order to finance their purchase.
For the balance of fiscal 1997, the Company projects capital expenditures of
approximately $900,000, which includes certain improvements on its leased and
owned properties, but does not include any other expenses related to the
possible acquisition of the Leased Properties.
The Company believes that its long-term debt and existing lines of credit
provide sufficient funding for the Company's operations. Except with respect to
financing for the possible acquisition of its Leased Properties as discussed
above, the Company believes that its long-term debt and existing lines of credit
provide sufficient funding for the Company's operations. In the event that the
Company requires additional financing during fiscal 1997, it will be necessary
to fund this require-
-14-
<PAGE> 15
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 1996 IS UNAUDITED)
Liquidity and Capital Resources (Continued)
- -------------------------------------------
ment through expanded credit facilities with its existing or other lenders. The
Company believes that such additional financing can be arranged.
On November 18, 1996, the Company terminated its acquisition negotiations with
OroAmerica, Inc. Included in selling, general and administrative expenses for
the three and nine months ended October 26, 1996 was a pre-tax charge of
$275,000 related to the terminated acquisition.
-15-
<PAGE> 16
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 through Item 5
Not applicable.
Item 6.
(a) Exhibits
--------
10.1 Amendment to the 1993 Long Term Incentive Plan
10.2 Amendment to the Non-Employee Directors' Plan
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
Not applicable.
-16-
<PAGE> 17
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
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.
MICHAEL ANTHONY JEWELERS, INC.
Dated: November 27, 1996 By:/s/Allan Corn
------------------------
Allan Corn
Senior Vice President and
Chief Financial Officer
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<PAGE> 18
EXHIBIT INDEX
TO
FORM 10-Q FOR QUARTER ENDED OCTOBER 26, 1996
Exhibit No. Page No.
- ---------- -------
10.1 Amendment to the 1993 Long Term Incentive Plan 18
10.2 Amendment to the Non-Employee Directors' Plan 20
27 Financial Data Schedule 22
-18-
<PAGE> 1
Exhibit 10.1
AMENDMENT
TO THE 1993 LONG-TERM INCENTIVE PLAN
OF MICHAEL ANTHONY JEWELERS, INC.
1. Section 2.6 of the Plan is hereby amended by adding the phrase ",to
the extent practical," after the word "eligibility" in the phrase "whose members
meet the requirements for eligibility to serve" near the end of the sentence.
2. Section 3 of the Plan is hereby amended to increase the number of
Shares reserved for use, upon the issuance, vesting or exercise of Awards to be
granted from time to time under the Plan, from 1,000,000 to 2,000,000 Shares.
3. Section 4 of the Plan is hereby amended by deleting the first two
sentences of the paragraph and adding the following three sentences at the
beginning of the paragraph:
"The Board may appoint a Committee to administer the Plan, which
Committee shall consist of not less than two (2) disinterested
directors, to the extent practical, as defined in Rule 16b-3. Subject
to the provisions of the Plan, the Committee or the Board shall have
full authority, in its discretion, to determine the Employees to whom
Awards shall be granted, the number of Shares to be covered by each of
the Awards, and the terms of any such Award; to amend or cancel Awards
(subject to Section 23 of the Plan), to accelerate the vesting of
Awards; to require the cancellation or surrender of any previously
granted awards under this Plan or any other plans of the Company as a
condition to the granting of an Award, to interpret the Plan; and to
prescribe, amend, and rescind rules and regulations relating to the
Plan, and generally to interpret and determine any and all matters
whatsoever relating to the administration of the Plan and the granting
of Awards hereunder. Notwithstanding anything in the Plan to the
contrary any and all rights conferred upon the Committee shall also be
conferred upon the Board."
4. Section 17 of the Plan is hereby amended by adding the phrase
"(other than Awards of non-qualified stock options, which Awards may be freely
transferred by the recipient upon prior written notice to the Company)" after
the words "An Award" at the beginning of the first sentence in the paragraph.
5. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Plan.
6. This Amendment No. 2 to the Plan shall be effective when approved
by the Board. Unless this Amendment No. 2 to the Plan is approved by the
affirmative votes of the holder of shares having a majority of the voting power
of all shares represented at a meeting duly held in accordance with Delaware law
within twelve (12) months after being approved by the Board, this Amendment No.
2 and all Awards granted under it shall be void and of no force and effect.
<PAGE> 2
As approved by the Board of Directors of the Company on November 8, 1996,
subject to stockholder approval.
<PAGE> 1
Exhibit 10.2
AMENDMENT NO. 1
TO THE NON-EMPLOYEE DIRECTORS' PLAN
OF MICHAEL ANTHONY JEWELERS, INC.
1. Section 2.4 of the Plan is hereby amended by adding the phrase ",to
the extent practical," after the word "eligibility" in the phrase "whose members
meet the requirements for eligibility to serve" near the end of the sentence.
2. Section 4 of the Plan is hereby amended by deleting the first two
sentences of the paragraph and adding the following three sentences at the
beginning of the paragraph:
"The Board may appoint a Committee to administer the Plan, which
Committee shall consist of not less than two (2) disinterested
directors, to the extent practical, as defined in Rule 16b- 3. Subject
to the provisions of the Plan, the Committee or the Board shall have
full authority, in its discretion, to interpret the Plan, to prescribe,
amend, and rescind rules and regulations relating to the Plan, and
generally to interpret and determine any and all matters whatsoever
relating to the administration of the Plan and the granting of Options
hereunder. Notwithstanding anything in the Plan to the contrary any and
all rights conferred upon the Committee shall also be conferred upon
the Board."
3. Section 7.1 of the Plan is hereby amended by deleting the phrase
"held for more than six (6) months," from the second sentence of the paragraph.
4. Section 9 of the Plan is hereby amended by deleting the existing
paragraph in its entirety and replacing it with the following:
"TRANSFERABILITY OF OPTIONS. An Option granted under the Plan shall
be freely transferable by the recipient, as long as the recipient
shall notify the Company prior to the transfer of such Option."
5. Section 15 of the Plan is hereby amended by deleting the following
sentence from said paragraph:
"Notwithstanding the foregoing, the Plan may not be amended more
than once every six (6) months to change the Plan provisions listed
in section (c)(2)(ii)(A) of Rule 16b-3, other than to comport with
changes in the Code, ERISA or Rule 16b-3."
6. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to them in the Plan.
<PAGE> 2
7. This Amendment No. 1 to the Plan shall be effective when approved
by the Board. As approved by the Board of Directors of the Company on
November 8, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS FOR MICHAEL ANTHONY JEWELERS, INC. AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-25-1997
<PERIOD-START> JUL-28-1996
<PERIOD-END> OCT-26-1996
<CASH> 6
<SECURITIES> 0
<RECEIVABLES> 38,772
<ALLOWANCES> (1,326)
<INVENTORY> 21,446
<CURRENT-ASSETS> 60,636
<PP&E> 37,893
<DEPRECIATION> 19,259
<TOTAL-ASSETS> 81,012
<CURRENT-LIABILITIES> 17,129
<BONDS> 16,066
<COMMON> 8
0
0
<OTHER-SE> 46,771
<TOTAL-LIABILITY-AND-EQUITY> 81,012
<SALES> 48,772
<TOTAL-REVENUES> 48,772
<CGS> 39,800
<TOTAL-COSTS> 39,800
<OTHER-EXPENSES> 5,751
<LOSS-PROVISION> 140
<INTEREST-EXPENSE> 775
<INCOME-PRETAX> 2,306
<INCOME-TAX> 878
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,428
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
