<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended
January 27, 1996
Commission File Number
0-15230
MICHAEL ANTHONY JEWELERS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
DELAWARE 13-2910285
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
115 SOUTH MACQUESTEN PARKWAY 10550
MOUNT VERNON, NEW YORK (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (914) 699-0000
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
COMMON STOCK, PAR VALUE $.001
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------- -------
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. [ ]
<PAGE> 2
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of April 17, 1996.
COMMON STOCK, PAR VALUE $.001 8,273,901
(Title of each class) (Number of Shares)
Aggregate market value of common stock held by non-affiliates at April 17,
1996: $21,614,121*
DOCUMENTS INCORPORATED BY REFERENCE:
Part III - Portions of registrant's Definitive Proxy Statement for Annual
Meeting of Stockholders for Fiscal 1996 (to be filed within 120 days of end
of Fiscal Year).
Part IV - Certain exhibits to (i) registrant's Registration Statement on Form
S-1 (File No. 33-8289), (ii) registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1991, (iii) registrant's Current Report on Form 8-K
filed on June 24, 1992, (iv) registrant's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1993, (v) registrant's Annual Report on Form 10-K for
the fiscal year ended June 30, 1993, (vi) registrant's Registration Statement
on Form S-3 (File No. 33-71308), (vii) registrant's Annual Report on Form 10-K
for the fiscal year ended June 30, 1994, (viii) registrant's Transition Report
on Form 10-K for the transition period from July 1, 1994 to January 28, 1995,
(ix) registrant's Quarterly Report on Form 10-Q for the quarter ended April 29,
1995, (x) registrant's Quarterly Report on Form 10-Q for the quarter ended July
29, 1993, and (xi) registrant's Quarterly Report on Form 10-Q for the quarter
ended October 28, 1995.
- --------------------
* Excludes holdings, among others, of RoseAnn Bosco, Allan Corn,
Frances Durden, David Harris, Donald R. Miller, Michael Anthony Paolercio,
Greg Torski, Michael K.L. Wager and Fredric R. Wasserspring who should not be
deemed affiliates for any other purpose.
<PAGE> 3
PART I
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ITEM 1. BUSINESS.
General
- -------
Michael Anthony Jewelers, Inc. (the "Company") is a leading designer,
manufacturer and distributor of gold jewelry in the United States. The Company
sells its jewelry directly to major retailers, wholesalers, mass merchandisers,
discount stores, catalogue distributors and television home shopping networks.
The Company manufactures approximately 8,000 different styles of jewelry
targeted towards the middle market, which generally retail between $20 and
$200. The Company's products include rope chain, bracelets, charms, pendants,
earrings, rings and watches, which jewelry is sold in over 20,000 retail
locations nationwide.
Most of the Company's products are manufactured at its Mount Vernon,
New York facility. The Company utilizes manufacturing processes that combine
modern technology and mechanization with handcraftsmanship. In order to better
meet its customers' needs, the Company has developed a wide range of customer
service programs, such as inventory management assistance through electronic
data interchange, customized packaging, bar-coding and computerized analysis of
sales and marketing trends. As a result of its vertical integration and
customer service programs, the Company is able to be responsive to its
customers' needs and manufacture and deliver most orders on a timely and more
cost-effective basis than many of its competitors.
The Company was organized as a Delaware corporation in 1986 and is
the successor to Michael Anthony Jewelers, Inc., a New York corporation,
organized in 1977.
Change in Fiscal Year
- ---------------------
On November 4, 1994, the Company announced that it was changing its
fiscal year end from June 30th to the last Saturday in January, effective with
the seven month period ended January 28, 1995. Accordingly, references in this
Form 10-K to the "Transition Period" refer to the seven month transition period
from July 1, 1994 through January 28, 1995. References in this Form 10-K to a
year (i) prior to 1994 preceded by the word "fiscal" refer to the twelve months
ended June 30th of such year and (ii) after 1995 preceded by the word "fiscal"
refer to the year ended on the last Saturday in January.
Product Lines
- -------------
The Company offers a broad selection of handcrafted gold and silver
jewelry. Many of the Company's products carry the "Ma" trademark, which has
become widely recognized in the jewelry industry and with certain consumers.
One of the Company's largest product lines is an extensive selection of casted
gold charms and pendants. The charms and pendants manufactured by the Company
include religious symbols; popular sayings ("talking charms"); sport themes
and team
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logos; animal motifs; nautical, seashore, western, musical, zodiac and other
thematic figures; initials; and abstract artistic creations.
The M.A.J. manufacturing division manufactures gold rope chain and
designs gold tubing and bangle blanks used in the production of bangle
bracelets. The M.A.E. manufacturing division manufactures gold earrings and
gold locks used in the production of rope chain.
The Company also manufactures a line of mens and ladies 14 karat gold
watches under the "Michael Anthony" brand name.
The tables below set forth the approximate percentage of (i) sales and
(ii) kilos shipped in fiscal year 1996, the Transition Period and in fiscal
year 1994 and 1993, respectively, attributable to each of the Company's product
categories.
<TABLE>
<CAPTION>
FISCAL 1996
Product Category
- ----------------
Approximate
Approximate % of Kilos
% of Sales Shipped
----------- -----------
<S> <C> <C>
Casted................................ 45 34
Chains................................ 42 51
Earrings.............................. 6 4
Other items........................... 7 11
--- ---
Total 100% 100%
=== ===
TRANSITION PERIOD
Product Category
- ----------------
Approximate
Approximate % of Kilos
% of Sales Shipped
----------- -----------
Casted................................ 43 34
Chains................................ 42 52
Earrings.............................. 5 4
Other items........................... 10 10
--- ---
Total 100% 100%
=== ===
FISCAL 1994
Product Category
- ----------------
Approximate
Approximate % of Kilos
% of Sales Shipped
----------- -----------
Casted................................ 45 35
Chains................................ 40 49
Earrings.............................. 7 6
Other items........................... 8 10
--- ---
Total 100% 100%
=== ===
</TABLE>
2
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<TABLE>
<CAPTION>
FISCAL 1993
Product Category
- ----------------
Approximate
Approximate % of Kilos
% of Sales Shipped
----------- -----------
<S> <C> <C>
Casted................................ 39 32
Chains................................ 46 51
Earrings.............................. 9 7
Other items........................... 6 10
--- ---
Total 100% 100%
=== ===
</TABLE>
The Company's jewelry line includes licensed products manufactured
pursuant to arrangements with such licensors as National Football League
Properties, Inc., NBA Properties, Inc., Major League Baseball Properties, Inc.,
NHL Enterprises, Inc., ACOP (Atlanta Centennial Olympics), Mattel (Barbie(R)),
Cathy(R), Playboy Enterprises, Inc., General Motors Corporation (Cadillac(R)),
Warner Bros., Inc. (licensors of Looney Tunes(R) characters), United Features
Syndicate (Peanuts(R)) and many nationally recognized colleges, including Notre
Dame and the University of Miami. The Company manufactures jewelry products,
particularly charms, pendants and pins, depicting the popular logos and symbols
associated with these licensors. The Company pays each of these licensors a
royalty ranging from 6% to 12% on sales of the licensed products. During the
fiscal year ended January 27, 1996, the Company's licensed products represented
approximately 8% of the Company's net sales.
The Company maintains an in-house design staff which utilizes CAD/CAM
(computer aided design/computer aided manufacturing) technology to enhance its
design, modeling and production capabilities. The equipment is utilized for the
design of the Company's new products and for modifying the scale of existing
Company designs. The Company's policy is to obtain proprietary protection for
its products and designs whenever possible.
The Company updates its product catalogue each year by adding new
designs and eliminating less popular styles. Items removed from the Company's
current catalogue generally remain available on a special order basis.
Manufacturing Process
- ---------------------
At the Company's manufacturing facility in Mount Vernon, New York,
manufacturing processes combine modern technology and mechanization with
handcraftsmanship to produce fashionable and affordable gold jewelry. The
manufacturing processes utilized by the Company include the casting (or lost
wax) method, a photo-etching process which has allowed the Company to enter the
lower priced segment of the market through production of ultra-light products
and the diamond-cut process, a technique which produces a sparkling effect on a
finished piece of gold jewelry.
3
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The Company's rope chain product is manufactured by machinery
designed in accordance with a patented process. The equipment is capable of
operating 24 hours a day and requires minimal direct labor costs, which has
enabled the Company to become one of the lowest cost producers of rope chain in
the United States.
During fiscal 1996, the Company manufactured approximately 95% of its
products from gold bullion and other raw materials and purchased approximately
5% of its product as semi-finished or finished goods. The Company does not
believe the loss of any supplier would have a material adverse effect on its
business. Alternative sources of supply for the goods purchased by the Company
are readily available.
Backlog
- -------
Orders from the Company's retail customers typically have shipment
dates that range from 24 hours to 60 days. Substantially all of the Company's
wholesale customers' orders are for immediate shipment and generally are
shipped within 7 days of receipt. As of April 16, 1996, the aggregate dollar
value of the Company's backorders was approximately $8,500,000. The Company
expects that substantially all of the current backlog will be shipped in the
next 45 days. Management of the Company does not believe that backlog is
indicative of the Company's future results of operations, as backlog as of any
given date is not necessarily indicative of sales trends.
Marketing and Sales
- -------------------
The Company markets and sells its jewelry primarily through its
in-house sales force. Sales are made by the Company's sales personnel primarily
at the Company's showroom in Mount Vernon, New York and direct presentations at
customers' locations. Products are promoted through the use of catalogues,
advertisements in trade publications, trade show exhibitions and cooperative
advertising allowances with certain customers.
The Company's marketing strategy includes a campaign to increase
brand recognition for the "Michael Anthony" name. This campaign includes
advertising in consumer magazines and a specially selected and packaged line of
karat gold jewelry, including watches, sold by the Company to certain retailers
under the "Michael Anthony" name. The Company believes that there is growing
brand recognition of the "Michael Anthony" name and the "Ma" trademark with
consumers and that this recognition has enhanced sales of its products.
The Company's jewelry is sold primarily to discount stores, jewelry
chain stores, department stores, catalogue retailers, television home shopping
network and wholesalers. The Company assists its customers in allocating their
purchasing budget among the items in the various product lines by advising them
of items having higher consumer demand as determined by the Company's
computerized market analysis. Prices vary on the basis of service required by
customers. The Company ships its products in bulk to wholesale distributors and
for certain retail chains, such as Wal*Mart, K-Mart, Sears, J.C. Penney, Zales,
Service Merchandise and
4
<PAGE> 7
Montgomery Ward, the Company pre-packages and price-tags most items, and then
ships an order of many different items to distribution centers and stores in the
chain. The Company provides additional services to certain of its customers to
meet their specific marketing needs, such as tagging, boxing and point-of-sale
displays.
The Company also ships its jewelry to a limited number of customers
on a consignment basis. Under these arrangements, the Company delivers
its products under consignment, and upon sale, the customer pays the Company
for the consigned merchandise. Consigned merchandise is subject to the
Company's own consignment arrangements with its gold lenders (the "Gold
Lenders"). See ITEM 1. "BUSINESS - SUPPLY; RELATED FINANCING ARRANGEMENTS"
AND ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES."
During the fiscal year ended January 27, 1996, sales to the five
largest of the Company's customers aggregated approximately 49% of total net
sales. The Company's two largest customers were Wal*Mart Stores, Inc. and
Sterling Jewelers, Inc. (a division of Signet Group PLC and the owner of Kay
Jewelers and J.B. Robinson Jewelers), accounting for approximately 17% and 12%
of net sales, respectively. The Company has no long term contractual
commitments with any of its customers, nor are any of the Company's customers
subject to any contractual provisions or other restrictions which preclude them
from purchasing products from the Company's competitors.
The Company reduces gross sales by the amount of returns and
discounts to determine net sales each month. The Company establishes each month
a reserve for returns based on its historical experience, the amount of gross
sales and the customer base. The total of actual returns and the provision for
the returns reserve amounted to approximately 14% of gross sales in fiscal
1996, 16% of gross sales for the Transition Period and 10% of gross sales for
fiscal 1994. For further information regarding the reserve for returns, see
Note 1 - Notes to Consolidated Financial Statements.
Patents and Trademarks
- ----------------------
The Company manufactures its rope chain using machinery that is
designed in accordance with patented processes. The Company also maintains
certain trademarks and generally applies for copyrights covering the design of
its charms and other selected products. The level of copyright protection
available under the law for the Company's proprietary designs and products
varies depending upon a number of factors, including the distinctiveness of the
product and originality of design. There can be no assurance that the Company's
patents, trademarks and copyrights will prevent competitors from producing
products that are substantially similar to those of the Company. See ITEM 1.
"BUSINESS - PRODUCT LINES."
5
<PAGE> 8
Competition
- -----------
The jewelry industry is highly competitive, both in the United States
and on a global basis. The Company encounters competition primarily from
manufacturers with national and international distribution capabilities and, to
a lesser extent, from small regional suppliers of jewelry. Management believes
that the Company is well positioned in the industry and has a reputation for
responsive customer service, high-quality and well-designed jewelry with broad
consumer appeal.
The principal competitive factors in the industry are price, quality,
design and customer service. The Company's specialized customer service
programs are important competitive factors in sales to non-traditional jewelry
retailers, including television shopping networks and discount merchandisers.
The Company believes that its infrastructure which enables it to offer these
programs, combined with low cost manufacturing capabilities, provide the
Company with competitive strengths that distinguish it from most of its current
competitors. The recent trend towards consolidation at the retail level in the
jewelry industry may increase the level of competition facing the Company.
Seasonal Nature of Business
- ---------------------------
The Company's business is seasonal in nature. Presented below are the
Company's net sales for each quarter of fiscal 1996, for the first quarter of
the Transition Period and the four month period ended January 28, 1995 and for
each quarter of fiscal 1994:
<TABLE>
<CAPTION>
Net % of
($ in thousands) Sales Net Sales
----- ---------
<S> <C> <C>
Fiscal 1996
First Quarter $27,260 19%
Second Quarter $24,902 17%
Third Quarter $47,037 32%
Fourth Quarter $46,058 32%
Transition Period
First Quarter $34,101 37%
Four Months ended $59,220 63%
January 28, 1995
Fiscal 1994
First Quarter $27,779 19%
Second Quarter $55,102 39%
Third Quarter $28,492 20%
Fourth Quarter $31,414 22%
</TABLE>
6
<PAGE> 9
While the Company's net sales are subject to seasonal fluctuation,
this fluctuation is mitigated to a degree by the early placement of orders by
many of the Company's customers, particularly for the Christmas holiday season.
In addition, the Company markets holiday and seasonal products year-round for
such occasions as Mother's Day, Valentine's Day, Father's Day, religious
holidays and school graduations.
Supply; Related Financing Arrangements
- --------------------------------------
Gold acquired for manufacture is at least .995 fine and is then
combined with other metals to produce 14 karat and 10 karat gold. The term
"karat" refers to the gold content of alloyed gold, measured from a maximum of
24 karats (100% fine gold). Varying quantities of metals such as silver,
copper, nickel and zinc are combined with fine gold to produce 14 karat gold of
different colors. These alloys are in abundant supply and are readily available
to the Company.
The Company utilizes gold consignment arrangements with the Gold
Lenders to supply substantially all of its gold needs. 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 $106,215,000. 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. At January
27, 1996, the Company held 149,324 ounces of gold on consignment with a market
value of $60,700,000.
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 January 27, 1996, the Company was in compliance with
the covenants in its consignment agreements and the Company's owned gold
inventory was valued at approximately $7,015,000. 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 arrangements 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. See ITEM 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS AND FINANCIAL CONDITION AND RESULTS OF OPERATIONS."
7
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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 Commodity Exchange, Inc. ("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 July 1, 1993 until January 27,
1996, the closing price of gold according to the Second London Gold Fix ranged
from a low of $343 per ounce to a high of $406 per ounce. There can be no
assurance that fluctuations in the credit and precious metals 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.
Insurance
- ---------
The Company maintains primary all-risk insurance, with limits in
excess of the Company's current inventory levels (including consigned gold), to
cover thefts and damage to inventory located on the Company's premises and
insurance on its goods in transit. The Company also maintains insurance
covering thefts and damage to inventory located at the premises of its
suppliers. The amount of coverage available under such policies is limited and
may vary by location, but generally is in excess of the value of the gold held
by a particular supplier. Additional insurance coverage is provided by some of
the Company's suppliers. The Company also maintains fidelity insurance
(insurance providing coverage against theft or embezzlement by employees of the
Company).
Employees
- ---------
As of January 27, 1996, the Company employed 554 persons, 446 of
which were directly engaged in manufacturing and distribution operations, with
the remaining 108 employees who were engaged in administration and sales.
None of the Company's employees are covered by a collective
bargaining agreement. The Company considers relations with its employees to be
satisfactory; however, on or about March 28, 1996, Local 74 of the Service
Employees International Union, AFL-C10 (the "Union") commenced an organizing
effort of certain of the Company's employees. To date, the Company has not
received a demand for recognition from the Union.
8
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Environmental Matters
- ---------------------
The Company's manufacturing operations routinely involve the use of
certain materials that are classified as hazardous. The Company's use of such
materials is in compliance in all material respects with applicable federal,
state and local laws and regulations concerning the environment, health and
safety. The costs incurred by the Company in complying with such laws and
regulations have not been material to the Company's results of operations.
Acquisitions
- ------------
While the Company intends to continue to aggressively market its gold
jewelry product lines to its existing customer base, management of the Company
believes opportunities exist to increase sales by expanding its customer base
and exploring product lines that may utilize diamonds or colored stones
(precious, semi-precious or synthetic). As part of the Company's strategy to
increase sales to new and existing customers, in 1994 and 1995 the Company
acquired two small jewelry manufacturers. As a result of these transactions,
the Company increased its market share with an existing customer and added
certain new customers. In order to further increase sales, the Company may
consider acquiring one or more additional companies that manufacture and
distribute jewelry products.
ITEM 2. PROPERTIES.
----------
The manufacturing and distribution facilities of the Company are
located in three adjacent buildings in Mount Vernon, New York having a total of
approximately 74,000 square feet. Pursuant to lease agreements entered into in
May 1991 and May 1995, respectively, with Michael Anthony Company, now known as
MacQuesten Realty Company ("MRC"), a New York general partnership, the general
partners of which are Michael Paolercio ("MP") and Anthony Paolercio ("AP"),
the Company pays an average annual rent of approximately $606,000 over the term
of the leases, plus real estate taxes and other occupancy costs. The Company
believes that the terms of these lease arrangements with MRC are no less
favorable than those that could have been obtained from an unaffiliated party.
On December 1, 1994, the Company acquired its corporate headquarters
premises in Mount Vernon, New York (the "Headquarters Property") from MRC. The
Headquarters Property has approximately 71,000 square feet.
A Special Real Estate Committee of the Board of Directors, comprised
of the Company's independent, outside directors obtained an appraisal of the
Headquarters Property, and after review of the appraisal and negotiation with
MRC as to the terms of purchase of the Headquarters Property, recommended the
acquisition to the Company's Board of Directors. On November 28, 1994, the
Board of Directors voted unanimously, with MP abstaining and AP absent, to
authorize the acquisition of the Headquarters Property. Under the terms of a
Contract of Sale, dated
9
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November 28, 1994, the Company acquired the Headquarters Property
from MRC for the sum of $2,490,000. The Company funded the acquisition of the
Headquarters Property with cash from its operations and subsequently financed
the purchase with a mortgage loan from a bank. See ITEM 7. "MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS" and
ITEM 13. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
The offices and facilities of the Company are protected by
state-of-the-art security systems, procedures and a security staff.
ITEM 3. LEGAL PROCEEDINGS.
-----------------
Legal proceedings to which the Company is a party are either routine
litigation incidental to Michael Anthony's business or other litigation not
material to the Company's business or financial condition.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
---------------------------------------------------
Not applicable.
PART II
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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
-------------------------------------------------------------
MATTERS.
-------
The Company's Common Stock is traded on the American Stock Exchange
("AMEX") under the symbol MAJ. The Company's Common Stock began its listing on
AMEX on October 25, 1991. Prior to its listing on AMEX, the Company's Common
Stock was traded in NASDAQ National Market System. The following table sets
forth the high and low sale prices per share on AMEX for the fiscal year 1996,
the Transition Period for the periods indicated and fiscal 1994.
<TABLE>
<CAPTION>
Fiscal Year Ended January 27, 1996 High Low
- ---------------------------------- ---- ---
<S> <C> <C>
First Quarter......................................... 3 7/8 3 1/8
Second Quarter........................................ 3 1/2 2 5/8
Third Quarter......................................... 3 2 3/8
Fourth Quarter........................................ 3 1/8 2 1/2
Transition Period Ended January 28, 1995 High Low
- ---------------------------------------- ---- ---
First Quarter......................................... 6 3/8 5
Four Months ended January 28, 1995 ................... 7 3 1/2
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
Fiscal Year Ended June 30, 1994 High Low
- ------------------------------- ---- ---
<S> <C> <C>
First Quarter................................ 8 3/8 5 5/8
Second Quarter............................... 9 1/2 7 1/2
Third Quarter................................ 9 1/2 6 1/8
Fourth Quarter............................... 7 4 5/8
</TABLE>
As of April 17, 1996, there were 235 holders of record of the
Company's Common Stock (including brokers holding in street name).
The Company has never paid a cash dividend. The Company anticipates
that all of its earnings will be retained for use in its business and does not
intend to pay cash dividends in the foreseeable future. In addition, the
Company's senior secured note agreements contain covenants which limit the
payment of dividends. Future dividend policy will depend upon, among other
factors, the Company's earnings and its financial condition. See ITEM 7.
"MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS."
On November 5, 1993, the Company filed a registration statement with
the Securities and Exchange Commission for an offering of 2,000,000 shares of
Common Stock of the Company and certain stockholders. On December 20, 1993, the
Company sold 1,600,000 shares pursuant to the offering. On January 14, 1994,
the underwriters partially exercised an over-allotment option whereby the
Company sold an additional 7,600 shares. The net proceeds to the Company from
the sale of the Common Stock were approximately $11,679,000 after deducting
underwriting discounts, commissions, and expenses of the offering payable by
the Company. The proceeds to the Company from this offering were used for
working capital and general corporate purposes, including strategic
acquisitions of other companies engaged in the manufacture and distribution of
jewelry. See ITEM 7. "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - LIQUIDITY AND CAPITAL RESOURCES."
In connection with the Common Stock repurchase program that the
Company announced in 1994 (the "1994 Stock Repurchase Program"), the Company
repurchased a total of 441,600 shares of Common Stock for an aggregate price of
approximately $1,439,000. The Company will not reissue these shares to the
public. In November 1995, the Company discontinued its 1994 Stock Repurchase
Program.
In December 1995, the Company announced a new Common Stock Repurchase
Program (the "1995 Stock Repurchase Program") pursuant to which the Company may
repurchase up to 750,000 shares of Common Stock. As of April 17, 1996, the
Company had repurchased a total of 60,000 shares of Common Stock under the 1995
Stock Repurchase Program for a total of approximately $159,000.
11
<PAGE> 14
ITEM 6. SELECTED FINANCIAL DATA.
-----------------------
The following selected financial data of the Company should be read in
conjunction with the consolidated financial statements and related notes
appearing elsewhere in this Form 10-K.
12
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<TABLE>
<CAPTION>
Year Ended June 30,
-------------------------------------------------
Year Ended Seven Months Ended
January 27, January 28,
1996 1995 1994 1993 1992 1991
---- ---- ---- ---- ---- ----
(In thousands, except per share amounts)
STATEMENT OF OPERATIONS
<S> <C> <C> <C> <C> <C> <C>
Net sales $145,257 $93,321 $142,787 $119,615 $112,748 $120,193
Cost of goods sold 121,195 76,782 114,151 97,509 92,028 96,646
-------- ------- -------- -------- -------- --------
Gross profit 24,062 16,539 28,636 22,106 20,720 23,547
Selling, general and administrative
expenses 19,455 12,628 17,887 17,148 19,030 15,727
-------- ------- -------- -------- -------- --------
Operating income 4,607 3,911 10,749 4,958 1,690 7,820
Other (expense) income:
Interest expense/gold consignment fee (3,835) (2,030) (3,157) (3,066) (2,629) (2,963)
Other Income (expense) - net (1) 442 117 564 643 458 (1,194)
-------- ------- -------- -------- -------- --------
Income/(loss) before income taxes 1,214 1,998 8,156 2,535 (481) 3,663
Income tax provision/(benefit) 486 774 3,176 964 (112) 1,532
-------- ------- -------- -------- -------- --------
Net income/(loss) $ 728 $ 1,224 $ 4,980 $ 1,571 $ (369) $ 2,131
======== ======= ======== ======== ======== ========
Earnings/(loss) per share $ 0.09 $ 0.14 $ 0.63 $ 0.23 $ (0.06) $ 0.35
======== ======= ======== ======== ======== ========
Weighted average number of shares 8,475 8,749 7,945 6,916 6,450 6,059
======== ======= ======== ======== ======== ========
BALANCE SHEET DATA:
Working capital $ 46,136 $42,778 $ 46,250 $ 31,311 $ 31,954 $ 22,793
Total assets (2) 78,646 72,039 69,962 53,707 52,733 41,906
Long-term debt and capital lease liability 19,192 13,282 13,210 15,824 18,009 8,456
Stockholders' equity 46,048 46,445 45,608 28,402 26,137 24,310
</TABLE>
1. Other income (expense) - net for fiscal 1991 is comprised principally of
expense associated with the proposed and subsequently terminated merger
negotiations. No additional costs related to this matter were incurred.
2. The year ended January 27, 1996, the seven months ended January 28, 1995
and the years ending June 30, 1994, 1993, 1992 and 1991 do not include
consigned inventory, which had approximate value of $60,700,000,
$72,936,000, $70,818,000, $61,796,000, $39,345,000 and $39,623,000
respectively.
13
<PAGE> 16
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
---------------------------------------------------------------
RESULTS OF OPERATIONS.
---------------------
Introduction
------------
On November 3, 1994, the Company's Board of Directors approved a
change in the fiscal year end of the Company from June 30th to a fiscal year
ending on the last Saturday in January, effective for the seven month period
ended January 28, 1995. As used below, (a) fiscal 1996 refers to the fiscal
year ended January 27, 1996, (b) "Transition Period" refers to the seven months
ended January 28, 1995 and (c) "fiscal 1994" and "fiscal 1993" refer to the
fiscal years ended June 30, 1994 and 1993, respectively.
Results of Operations
---------------------
The following table sets forth, as a percentage of net sales, certain
items appearing in the Company's Statements of Operations for the indicated
fiscal years.
<TABLE>
<CAPTION>
Year ended Seven Months Year Ended June 30,
January 27, Ended January 28, ------------------
1996 1995 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales.................................. 100.0% 100.0% 100.0% 100.0%
Cost of sales.............................. 83.4 82.3 80.0 81.5
Selling, general and
administrative expenses.................. 13.4 13.5 12.5 14.3
Interest and gold consignment
fee expense.............................. 2.6 2.2 2.2 2.6
Other income............................... (.2) (.1) (.4) (.5)
Income tax provision....................... .3 .8 2.2 0.8
Net income................................. .5% 1.3% 3.5% 1.3%
</TABLE>
1996 vs. Twelve Months Ended January 28, 1995 (Unaudited)
- --------------------------------------------------------
Net sales for fiscal 1996 were approximately $145,257,000, a decrease of 3%
from net sales of approximately $149,583,000 for the comparable period in the
prior year. The decrease in sales was primarily related to a significant
reduction in volume of sales to the wholesale segment of the Company's customer
base. This decrease was partly offset by an increase in volume of sales to the
retail segment of the Company's customer base.
Gross profit margin decreased to 16.6% of net sales in fiscal 1996 compared to
18.0% for the comparable period in the prior year. The decrease in the gross
margin was due to the sale of discontinued and excess inventory, which
represented approximately 5% of net sales, at margins
14
<PAGE> 17
substantially below the Company's normal gross margin and an increased
percentage of sales of the Company's rope chain which carries a lower gross
margin than the Company's other products.
Selling, general and administrative expenses for fiscal 1996 were approximately
$19,455,000, compared to $19,454,000 for the comparable period in the prior
year. As a percentage of net sales, these expenses increased to 13.4% in fiscal
1996 from 13.0% in the prior year. The increased percentage of selling expenses
is primarily attributed to advertising expenses that came from additional
support required by the Company's retail customers and the Company's effort to
increase its brand name recognition through advertising placed directly in a
consumer magazine.
Other income and expenses for fiscal 1996 were approximately $3,393,000, an
increase of $604,000 or 22% from $2,789,000 for the comparable period in the
prior year. Interest expense (including gold consignment fees) was
approximately $3,835,000, an increase of $579,000, or 18%, from $3,256,000 for
the comparable period in the prior year. This increase was primarily due to (i)
higher consignment rates, (ii) a higher average level of consigned inventory,
and (iii) the new loans placed in February and October 1995. The higher
consignment rates had a negative impact later in the fiscal year. The higher
average level of consigned inventory had a more significant impact in the
beginning of the fiscal year. The increase in gold consignment fees was
partially offset by lower interest expense due to principal payments in
February and May 1995 on the Company's other long-term debt and lower interest
expense on the Company's short-term borrowings.
The effective tax rates for fiscal 1996 and the comparable period in the prior
year were 40% and 36.6%, respectively.
As a result of the above factors, the Company's net income for fiscal 1996 was
approximately $728,000 compared to $2,978,000 for the comparable period in the
prior year.
Transition Period vs. Seven Months Ended January 29, 1994 (Unaudited)
- --------------------------------------------------------------------
Net sales for the Transition Period were approximately $93,321,000, an
increase of 8% from net sales of approximately $86,524,000 for the comparable
period in the prior year. The increase in net sales was primarily related to
increased shipments to the retail segment of the Company's customer base and
also to increased sales of the Company's rope chain product line.
Gross profit margin decreased to 17.7% of net sales for the Transition
Period, as compared to 21.1% for the comparable period in the prior year. The
decrease in gross margin was attributable to a change in the Company's product
mix and an average increase in the price of gold of approximately 2%.
Selling, general and administrative expenses for the Transition Period
were approximately $12,628,000, an increase of 13.9% from $11,086,000 for the
comparable period in the prior year. The
15
<PAGE> 18
increase is primarily attributed to increased salaries, advertising, and retail
displays and packaging supplies to which the Company committed in anticipation
of higher sales.
Interest expense (including gold consignment fees) for the Transition
Period was $2,030,000, an increase of $99,000, or 5%, from the prior comparable
period. The increase is attributed to the costs to finance the Company's
increased inventory position. Interest income decreased by $44,000 for the
Transition Period compared to the comparable period of the prior year. This was
due to lower amounts of funds available for short-term investments, which was a
result of higher accounts receivable levels and capital expenditures.
As a result of the above factors, the Company's net income for the
Transition Period was $1,224,000, as compared to $3,227,000 for the
comparable period of the prior year.
1994 vs. 1993
- -------------
Net sales for fiscal 1994 were approximately $142,787,000, an increase
of approximately 19% from net sales of approximately $119,615,000 for fiscal
1993. The increase in net sales primarily was a result of increased sales to
retail customers. The sales increase was attributable in part to an increase of
approximately 10% in the average price of gold as compared to fiscal 1993.
Gross profit margin increased to 20% of net sales in fiscal 1994, as
compared to 18.5% of net sales in fiscal 1993. The increase in gross profit
margin was attributable primarily to increased sales to retailers where the
Company has higher gross margins.
Selling, general and administrative expenses for fiscal 1994 were
approximately $17,887,000, an increase of approximately 4.3% from $17,148,000
for fiscal 1993. Included in selling, general and administrative expenses for
fiscal 1993 was a charge of $2,059,000 which was related to the termination of
the Company's employment arrangements with two executives and compensation
expense related to the earnout provisions of the terminated employees'
employment agreements. If it were not for this charge in fiscal 1993, selling,
general and administrative expenses would have increased in fiscal 1994 by
$2,798,000 or approximately 18.5%. The increase is primarily attributable to
(i) higher advertising, royalties and retail support costs which were related
to the Company's increased sales for fiscal 1994 and (ii) increased salaries
and benefits. As a percent of sales, excluding the termination expense,
selling, general and administrative expenses decreased to approximately 12.5%
of net sales for fiscal 1994 as compared to 12.6% of net sales for fiscal 1993.
Interest expense (including gold consignment fees) for fiscal 1994 was
$3,157,000, an increase of $91,000 from fiscal 1993, due to higher consignment
levels needed to support the Company's increased sales. Interest income
increased by $41,000 for fiscal 1994, as compared to fiscal 1993 as a result of
the Company's temporary investment of certain of the proceeds from its common
stock offering in fiscal 1994.
16
<PAGE> 19
As a result of the above factors, the Company's net income for fiscal
1994 was $4,980,000, as compared to $1,571,000 for fiscal 1993.
Liquidity and Capital Resources
- -------------------------------
The Company relies on a gold consignment program, short-term and
long-term borrowings and internally generated funds to finance increased
inventories and accounts receivable. 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 $106,215,000. 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 January 27, 1996, the Company held 149,324 ounces of gold on
consignment with a market value of $60,700,000.
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 January 27, 1996, the Company was in compliance with
the covenants in its consignment agreements and the Company's owned gold
inventory was valued at approximately $7,015,000. 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.
During fiscal 1996, the Company entered into a consignment agreement
with a new Gold Lender and amended its existing consignment agreements with its
other Gold Lenders. As of February 29, 1996, one of the Company's Gold Lenders
terminated its gold consignment arrangement with the Company as a result of its
decision to discontinue its involvement in the jewelry industry.
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
17
<PAGE> 20
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 July 1, 1993 until January 27,
1996, the closing price of gold according to the Second London Gold Fix ranged
from a low of $343 per ounce to a high of nearly $406 per ounce. There can be
no assurances that fluctuations in the precious metals markets and credit 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
7.38% per annum. 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 January 27, 1996,
the Company was in compliance with the covenants and $18,528,000 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 will accrue at 8% per annum. In
addition, the mortgage contains certain restrictive financial covenants. At
January 27, 1996, the Company was in compliance with the covenants. As of
January 27, 1996, $2,478,000 of principal remained outstanding under the
mortgage.
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 January 27,
1996, there was no amount outstanding under the Line of Credit. The Line of
Credit has been renewed and currently expires on July 31, 1996, subject to
annual renewal. Management believes that the Line of Credit will be renewed;
however, if the current lender decides not to renew the Line of Credit, the
Company believes that other lenders would be willing to enter into a similar
arrangement.
On November 5, 1993, the Company filed a registration statement with the
Securities and Exchange Commission for an offering of 2,000,000 shares of
Common Stock of the Company and certain stockholders. On December 20, 1993, the
Company sold 1,600,000 shares pursuant to the offering. On January 14, 1994,
the underwriters partially exercised an over-allotment option whereby the
Company sold an additional 7,600 shares. The net proceeds to the Company from
the sale of the
18
<PAGE> 21
Common Stock were approximately $11,679,000 after deducting underwriting
discounts, commissions, and expenses of the offering payable by the Company.
The proceeds to the Company from this offering were used for working capital
and general corporate purposes, including strategic acquisitions of other
companies engaged in the manufacture and distribution of jewelry.
During fiscal 1996, cash from operating activities was approximately
$821,000. This was primarily attributable to net income of $728,000 which
included depreciation and amortization of $4,009,000, offset by an increase in
accounts receivable of $3,735,000. The increase in accounts receivable was due
to an increase of sales in the fourth quarter in addition to customers placing
orders later in the season.
Cash of approximately $4,616,000 was utilized for investing purposes
during fiscal 1996, primarily to purchase machinery and equipment of
approximately $3,225,000 and for building and leasehold improvements of
$1,250,000.
During fiscal 1996, cash provided by financing activities totalled
$4,653,000. This was primarily attributed to the issuance of $6,000,000 of
senior secured notes and $2,500,000 in mortgage financing for the Company's
corporate headquarters. This was offset by $2,722,000 in payments of debt and
$1,125,000 utilized to repurchase common stock.
As part of its long-term strategic planning, the Company is reviewing a
plan to expand its manufacturing and distribution facilities and to acquire
certain properties it is currently leasing from MRC (the "Leased Properties").
In the event the Company were to acquire any of such properties, the Company
may incur or assume additional long-term indebtedness in order to finance their
purchase.
For fiscal 1997, the Company projects capital expenditures of
approximately $2,600,000, 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. See ITEM 2. "PROPERTIES" and
ITEM 13. "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS".
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 requirement through expanded
credit facilities with its existing or other lenders. The Company believes that
such additional financing can be arranged.
19
<PAGE> 22
New Accounting Standards
- ------------------------
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of"
(SFAS No. 121), effective for financial statements for fiscal years beginning
after December 15, 1995. The Company will adopt SFAS No. 121 in fiscal 1997.
In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123, "Accounting for
Stock-Based Compensation," which requires adoption of the disclosure provisions
no later than fiscal years beginning after December 15, 1995 and adoption of
the recognition and measurement provisions for nonemployee transactions no
later than after December 15, 1995. The new standard defines a fair value
method of accounting for stock options and other equity instruments. Under the
fair value method, compensation cost is measured at the grant date based on the
fair value of the award and is recognized over the service period, which is
usually the vesting period.
Pursuant to the new standard, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employees
stock-based transactions. Companies are also permitted to continue to account
for such transactions under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees," but would be required to disclose
in a note to the financial statements pro forma net income and, if presented,
earnings per share as if the Company had applied the new method of accounting.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of adoption. The
Company has not yet determined if it will elect to change to the fair value
method, nor has it determined the effect the new standard will have on net
income and earnings per share should it elect to make such a change. Adoption
of the new standard will have no effect on the Company's cash flows.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
-------------------------------------------
See Item 14 and pages F-1 through F-22 and S-1.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
---------------------------------------------------------------
FINANCIAL DISCLOSURE.
--------------------
Not applicable.
20
<PAGE> 23
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
--------------------------------------------------
The information contained under the heading "Election of Directors"
of the Company's Proxy Statement for the 1996 Annual Meeting of Stockholders
is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
----------------------
The information contained under the heading "Executive Compensation"
of the Company's Proxy Statement for the 1996 Annual Meeting of Stockholders is
incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
--------------------------------------------------------------
The information contained under the heading "Beneficial Ownership
of Common Stock" of the Company's Proxy Statement for the 1996 Annual Meeting
of Stockholders is incorporated by reference herein.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
----------------------------------------------
The information contained under the heading "Certain Transactions"
of the Company's Proxy Statement for the 1996 Annual Meeting of Stockholders is
incorporated herein by reference. See also ITEM 2. "PROPERTIES".
21
<PAGE> 24
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORT ON FORM 8-K.
--------------------------------------------------------------
(a) The following documents are filed as a part of this Report:
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
(1) Financial Statements:
Independent Auditors' Report......................... F-1
Consolidated Balance Sheets.......................... F-2
Consolidated Statements of Operations................ F-3
Consolidated Statements of Changes in
Stockholders' Equity............................... F-4
Consolidated Statements of Cash Flows................ F-5
Notes to Consolidated Financial Statements........... F-7
(2) Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts...... S-1
</TABLE>
All other schedules are omitted as the required information is
inapplicable or is presented in the consolidated financial statements or
related notes.
The financial statement schedule should be read in conjunction with the
financial statements in the 1996 Annual Report to Stockholders.
(3) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description Page No.
----------- ----------- --------
<S> <C> <C>
3.1 Certificate of Incorporation of Registrant, as Incorporated by reference to Exhibit 3.1 to
amended Amendment No. 2 to the Company's Registration
Statement on Form S-3 (File No. 33-71308) (the
"1993 Registration Statement")
3.1.1 Certificate of Merger of Michael Anthony Incorporated by reference to Exhibit 3.1.1 of
Jewelers,Inc. (New York) and Michael Anthony the Company's Annual Report on Form 10-K for
Jewelers, Inc. (Delaware) the fiscal year ended June 30, 1993 (the "1993
Form 10-K")
</TABLE>
22
<PAGE> 25
<TABLE>
<S> <C> <C>
3.2 Amended and Restated By-Laws of Registrant Incorporated by reference to Exhibit 3.2 to the
Company's Quarterly Report on Form 10-Q for the
quarter ended July 29, 1995
4.1 Form of Common Stock Certificate Incorporated by reference to Exhibit 3.3 to the
Company's Registration Statement on Form S-1
(File No. 33-8289) (the "1986 Registration
Statement")
4.2 Form of Common Stock Purchase Incorporated by reference to Exhibit 3.4 to the
Warrant Certificate 1986 Registration Statement
10.1 1986 Incentive Stock Option Plan of Registrant Incorporated by reference to Exhibit 10.14 to
the 1986 Registration Statement
10.2 Note Purchase Agreement, dated as of December Incorporated by reference to Exhibit 10.3 of
15, 1987, between and among Registrant and the 1993 Form 10-K
Northwestern National Life Insurance Company,
Northern Life Insurance Company and The North
Atlantic Life Insurance Company of America
10.3 Security Agreement, dated as of December 30, Incorporated by reference to Exhibit 10.4 of
1987, between and among Registrant and the 1993 Form 10-K
Northwestern National Life Insurance Company,
Northern Life Insurance Company and The North
Atlantic Life Insurance Company of America
10.4 $5,000,000 Senior Note due 1998 of Registrant Incorporated by reference to Exhibit 10.5 of
in favor of Northwestern National Life the 1993 Form 10-K
Insurance Company
10.5 $4,000,000 Senior Note due 1998 of Registrant Incorporated by reference to Exhibit 10.6 of
in favor of Northern Life Insurance Company the 1993 Form 10-K
</TABLE>
23
<PAGE> 26
<TABLE>
<S> <C> <C>
10.6 $1,000,000 Senior Note due 1998 of Registrant in Incorporated by reference to Exhibit 10.7 of
favor of The North Atlantic Life Insurance Company the 1993 Form 10-K
10.7 Lease dated as of May 1, 1991 between Michael Incorporated by reference to Exhibit 10.46
Anthony Company and Registrant to the Company's Annual Report on Form 10-K
for the fiscal year ended June 30, 1991 (the
"1991 Form 10-K")
10.8 Lease dated as of May 1, 1991 between Michael Incorporated by reference to Exhibit 10.47
Anthony Company and Registrant to the 1991 Form 10-K
10.9 Note Purchase Agreement, dated as of June 5, 1992, Incorporated by reference to Exhibit 8 to
among the Registrant and the holders of the the Company's Current Report on Form 8-K
Registrant's Senior Notes due 2002 (the "2002 dated June 24, 1992 (the "1992 Form 8-K")
Notes")
10.10 Security Agreement, dated as of June 5, 1992, among Incorporated by reference to Exhibit 9 to
the Registrant and the holders of the 2002 Notes the 1992 Form 8-K
10.11 $3,500,000 Senior Note due 2002 of the Registrant Incorporated by reference to Exhibit 10 to
in favor of Northern Life Insurance Company the 1992 Form 8 K
10.12 $3,000,000 Senior Note due 2002 of the Registrant Incorporated by reference to Exhibit 11 to
in favor of Royal Maccabees Life Insurance Company the 1992 Form 8-K
10.13 $1,000,000 Senior Note due 2002 of the Registrant Incorporated by reference to Exhibit 12 to
in favor of The North Atlantic Life Insurance the 1992 Form 8-K
Company of America
10.14 $1,000,000 Senior Note due 2002 of the Registrant Incorporated by reference to Exhibit 13 to
in favor of Farm Bureau Life Insurance Company of the 1992 Form 8-K
Michigan
</TABLE>
24
<PAGE> 27
<TABLE>
<S> <C> <C>
10.15 $1,000,000 Senior Note due 2002 of the Registrant Incorporated by reference to Exhibit 14 to
in favor of FB Annuity Company the 1992 Form 8-K
10.16 $500,000 Senior Note due 2002 of the Registrant in Incorporated by reference to Exhibit 15 to
favor of FB Annuity Company the 1992 Form 8-K
10.17 1993 Long Term Incentive Plan of the Registrant Incorporated by reference to Exhibit 19.01
to the Company's Quarterly Report on Form
10-Q for the Quarter ended March 31, 1993
10.18 1993 Non-Employee Directors' Stock Option Plan of Incorporated by reference to Exhibit 19.02
the Registrant to the Company's Quarterly Report on Form
10-Q for the Quarter ended March 31, 1993
10.19 Agreement dated as of June 14, 1993 between the Incorporated by reference to Exhibit 10.36
Registrant and Fredric R. Wasserspring of the 1993 Form 10-K
10.20 Consignment Agreement dated as of August 20, 1993 Incorporated by reference to Exhibit 10.40
between the Registrant and Fleet Precious Metals of the 1993 Form 10-K
Inc.
Security Agreement dated as of August 20, 1993 Incorporated by reference to Exhibit 10.39
10.21 among the Registrant, Fleet National Bank and Fleet of the 1993 Form 10-K
Precious Metals Inc.
10.22 Amended and Restated Consignment Agreement dated as Incorporated by reference to Exhibit 10.41
of August 20, 1993 between the Registrant and Rhode of the 1993 Form 10-K
Island Hospital Trust National Bank
10.23 Amended and Restated Consignment Agreement dated as Incorporated by reference to Exhibit 10.44
of August 20, 1993 between the Registrant and of the 1993 Form 10-K
ABN-AMRO Bank N.V., New York Branch ("ABN")
</TABLE>
25
<PAGE> 28
<TABLE>
<S> <C> <C>
10.24 Amended and Restated Security Agreement dated as Incorporated by reference to Exhibit 10.46
of August 20, 1993 between the Registrant and to the 1993 Form 10-K
Rhode Island Hospital Trust National Bank ("RIHT")
10.25 Amended and Restated Intercreditor Agreement dated Incorporated by reference to Exhibit 10.47
as of August 20, 1993, among the Registrant, RIHT, to the 1993 Form 10-K
ABN, Swiss Bank Corporation, New York Branch, Mase
Westpac, Inc., the Mocatta Group, a division of
Standard Chartered Bank ("Mocatta"), Fleet, the
holders of the Registrant's Senior Notes due 1998
and the holders of the Registrant's 2002 Notes
10.26 First Amendment to 1993 Long Term Incentive Plan Incorporated by reference to Exhibit 10.48
of the Registrant dated as of September 21, 1993 to the 1993 Form 10-K
10.27 Second Amendment to Assignment of Trademarks and Incorporated by reference to Exhibit 10.49
Service Marks as Collateral dated as of July 12, to the 1993 Form 10-K
1990 between the Registrant and RIHT, individually
and as agent
10.28 Consignment Agreement dated as of January 31, 1994 Incorporated by reference to Exhibit 10.46
(effective as of May 16, 1994 between the to the Company's Annual Report on Form 10-K
Registrant and Credit Suisse, New York Branch for the fiscal year ended June 30, 1994 (the
("Credit Suisse") "1994 Form 10-K")
10.29 First Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.47
Agreement dated as of May 16, 1994 among the to the 1994 Form 10-K
Registrant, RIHT, individually and as agent
</TABLE>
26
<PAGE> 29
<TABLE>
<S> <C> <C>
10.30 Second Amendment to Amended and Restated Incorporated by reference to Exhibit 10.48
Intercreditor Agreement dated as of May 16, 1994 to the 1994 Form 10-K
among the Registrant, RIHT, ABN, Swiss Bank
Corporation, New York Branch, WestPac, Mocatta,
Credit Suisse, Fleet, the holders of the
Registrant's Senior Notes due 1998 and the
holders of the Registrant's 2002 Notes
10.31 Third Amendment to Assignment of Trademarks and Incorporated by reference to Exhibit 10.49
Service Marks as Collateral dated as of May 16, 1994 to the 1994 Form 10-K
between the Registrant and RIHT individually and as
agent
10.32 Consignment Agreement dated as of September 1,1994 Incorporated by reference to Exhibit 10.50
between the Registrant and Deutsche Bank Sharps to the 1994 Form 10-K
Pixley ("Deutsche Bank")
10.33 Second Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.53
Agreement dated as of September 1, 1994 among the to the 1994 Form 10-K
Registrant, RIHT, individually and as agent
10.34 Third Amendment to Amended and Restated Incorporated by reference to Exhibit 10.54
Intercreditor Agreement dated as of September 1, to the 1994 Form 10-K
1994 among the Registrant, RIHT, ABN, Mocatta,
Fleet, Credit Suisse, Deutsche Bank, the holders of
the Registrant's Senior Notes due 1998, the holders
of the Registrant's 2002 Notes and Chemical Bank
10.35 Fourth Amendment to Assignment of Trademarks and Incorporated by reference to Exhibit 10.55
Service Marks as collateral dated as of September 1, to the 1994 Form 10-K
1994 between the Registrant and RIHT, individually
and as agent
10.36 Third Amendment to Amended and Restated Consignment Incorporated by reference to Exhibit 10.56
Agreement dated as of September 1, 1994 between the to the 1994 Form 10-K
Registrant and RIHT
</TABLE>
27
<PAGE> 30
<TABLE>
<S> <C> <C>
10.37 Fourth Amendment to Amended and Restated Consignment Incorporated by reference to Exhibit 10.51 to
Agreement dated as of November 22, 1994 between the the Company's Transition Report on Form
Registrant and RIHT 10-K for the transition period ended
January 28, 1995 (the "1995 Form 10-K")
10.38 Contract of Sale dated as of November 28, 1994 Incorporated by reference to Exhibit 10.52
between Michael Anthony Company and the Registrant to the Company's 1995 Form 10-K
10.39 Note Purchase Agreement dated as of February 15, Incorporated by reference to Exhibit 10.53
1995, among the Registrant and the holders of the to the Company's 1995 Form 10-K
Registrant's Senior Notes due 2004 (the "2004 Notes")
10.40 Security Agreement, dated as of February 15, 1995, Incorporated by reference to Exhibit 10.54
among the Registrant and the holders of the 2004 to the Company's 1995 Form 10-K
Notes
10.41 $5,000,000 Senior Note due 2004 of the Registrant in Incorporated by reference to Exhibit 10.55
favor of Northern Life Insurance Company. to the Company's 1995 Form 10-K
10.42 $1,000,000 Senior Note due 2004 of the Registrant in Incorporated by reference to Exhibit 10.56
favor of Northwestern National Life Insurance Company to the Company's 1995 Form 10-K
10.43 Third Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.57
Agreement dated as of February 15, 1995 among the to the Company's 1995 Form 10-K
Registrant, RIHT, individually and as agent, ABN,
Mocatta, Fleet, Credit Suisse and Deutsche Bank
10.44 Fourth Amendment to Amended and Restated Incorporated by reference to Exhibit 10.58
Intercreditor Agreement dated as of February 15, to the Company's 1995 Form 10-K
1995 among the Registrant, RIHT, ABN, Mocatta,
Fleet, Credit Suisse, Deutsche Bank, the holders of
the Registrant's Senior Notes due 1998, the holders
of the Registrant's 2002 Notes, the holders of the
Registrant's 2004 Notes and Chemical Bank
</TABLE>
28
<PAGE> 31
<TABLE>
<S> <C> <C>
10.45 Fifth Amendment to Amended and Restated Consignment Incorporated by reference to Exhibit 10.59
Agreement dated as of February 15, 1995 between the to the Company's 1995 Form 10-K
Registrant and RIHT
10.46 Amended Security Agreement dated as of March 29, Incorporated by reference to Exhibit 10.61
1995 between the Registrant and Chemical Bank to the Company's 1995 Form 10-K
10.47 Lease dated as of May 1, 1995 between the Registrant Incorporated by reference to Exhibit 10 to
and Michael Anthony Company the Company's Quarterly Report on Form
10-Q for the quarter ended April 29, 1995
10.48 Loan Agreement dated October 6, 1995 between First Incorporated by reference to Exhibit 10.1
Fidelity Bank, National Association ("First to the Company's Quarterly Report on Form
Fidelity") and Registrant 10-Q for the quarter ended October 28,
1995 (the "October 1995 Form 10-Q")
10.49 Mortgage Note in principal amount of $2,500,000 Incorporated by reference to Exhibit 10.2
dated October 6, 1995 issued by Registrant in favor to the October 1995 Form 10-Q
of First Fidelity
10.50 Mortgage and Security Agreement dated October 6, Incorporated by reference to Exhibit 10.3
1995 by Registrant for the benefit of First Fidelity to the October 1995 Form 10-Q
10.51 Consignment Agreement dated October 20, 1995 between Incorporated by reference to Exhibit 10.4
Registrant and Union Bank of Switzerland ("UBS") to the October 1995 Form 10-Q
10.52 Fourth Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.5
Agreement dated October 20, 1995 among Registrant, to the October 1995 Form 10-Q
UBS and Registrant's other gold lenders.
10.53 Fifth Amendment to Amended and Restated Security Incorporated by reference to Exhibit 10.6
Agreement dated October 20, 1995 among Registrant, to the October 1995 Form 10-Q
UBS and Registrant's other lenders.
</TABLE>
29
<PAGE> 32
<TABLE>
<S> <C> <C>
10.54 Fifth Amendment to Assignment of Trademarks and Incorporated by reference to Exhibit 10.7
Service Marks dated October 20, 1995 among to the October 1995 Form 10-Q
Registrant, UBS and Registrant's other lenders
10.55 Seventh Amendment to Amended and Restated Incorporated by reference to Exhibit 10.8
Consignment Agreement dated October 20, 1995 between to the October 1995 Form 10-Q
Registrant and Rhode Island Hospital Trust National
Bank
10.56 Assignment of Trademarks and Service Marks as Filed as an Exhibit to this Form 10-K on
Collateral, dated July 12, 1990, between Registrant page 58
and Rhode Island Hospital Trust National Bank,
individually and as agent
10.57 First Amendment to Assignment of Trademarks and Filed as an Exhibit to this Form 10-K on
Service Marks as Collateral dated as of June 5, page 62
1992, between Registrant and Rhode Island Hospital
Trust National Bank, individually and as agent
10.58 Promissory Note of the Registrant dated February 1, Filed as an Exhibit to this Form 10-K on
1996 in favor of Chemical Bank page 66
10.59 Deferred Compensation Plan dated as of March 4, 1996 Filed as an Exhibit to this Form 10-K on
page 73
21 Subsidiaries of the Registrant Filed as an Exhibit to this Form 10-K on
page 87
27 Financial Data Schedule Filed as an Exhibit to this Form 10-K on
page 88
</TABLE>
REPORT ON FORM 8-K
------------------
(b) Not applicable
30
<PAGE> 33
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Michael Paolercio
----------------------------------------
Michael W. Paolercio, Co-Chairman of
the Board and Chief Executive Officer
Date: April 25, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed by the following persons on behalf of the
registrant in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Michael Paolercio Co-Chairman of the Board April 25, 1995
(Michael W. Paolercio) and Chief Executive Officer
(Pricnipal Execuitve Officer)
/s/ Anthony Paolercio Co-Chairman of the Board April 25, 1996
(Anthony Paolercio, Jr.) and Executive Vice President
/s/ Fredric R. Wasserspring President, Chief Operating April 25, 1996
(Fredric R. Wasserspring) Officer and Director
/s/ Allan Corn Chief Financial Officer, April 25, 1996
(Allan Corn) Senior Vice President
and Director (Principal
Accounting Officer)
/s/ Michael A. Paolercio Senior Vice President, April 25, 1996
(Michael Anthony Paolercio) Treasurer and Director
/s/ Michael K.L. Wager Director April 25, 1996
(Michael K.L. Wager)
/s/ David Harris Director April 25, 1996
(David Harris)
/s/ Donald Miller Director April 25, 1996
(Donald Miller)
</TABLE>
31
<PAGE> 34
INDEPENDENT AUDITORS' REPORT
Board of Directors and Stockholders
Michael Anthony Jewelers, Inc.
Mount Vernon, New York
We have audited the accompanying consolidated balance sheets of Michael Anthony
Jewelers, Inc. and subsidiaries as of January 27, 1996 and January 28, 1995 and
the related consolidated statements of operations, changes in stockholders'
equity and cash flows for the year ended January 27, 1996, for the seven-month
period ended January 28, 1995, and for each of the two years in the period
ended June 30, 1994. Our audits also included the financial statement schedule
listed in the Index at Item 14(a)(2). These consolidated financial statements
and financial statement schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Michael Anthony Jewelers, Inc. and
subsidiaries as of January 27, 1996 and January 28, 1995, and the results of
their operations and their cash flows for the year ended January 27, 1996, for
the seven-month period ended January 28, 1995 and for each of the two years in
the period ended June 30, 1994, in conformity with generally accepted
accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
April 12, 1996
F-1
<PAGE> 35
MICHAEL ANTHONY JEWELERS, INC
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS January 27, January 28
------ 1996 1995
------------ ---------
<S> <C> <C>
CURRENT ASSETS:
Cash and equivalents $ 6,673 $ 5,815
Accounts receivable:
Trade (less allowances of $1,575 and $1,400, respectively) 30,062 26,671
Other 47 150
Inventories 19,698 20,150
Prepaid expenses and other current assets 1,169 659
Deferred taxes 855 651
----------- ---------
Total current assets 58,504 54,096
PROPERTY, PLANT AND EQUIPMENT - net 18,125 16,281
INTANGIBLES - net 998 705
OTHER ASSETS 1,019 957
----------- ---------
$78,646 $72,039
=========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable - trade $ 4,575 $ 4,989
Current portion of long-term debt
and lease liability 3,272 2,680
Accrued expenses 3,980 3,255
Taxes payable 541 394
----------- ---------
Total current liabilities 12,368 11,318
----------- ---------
LONG-TERM DEBT 18,401 12,528
----------- ---------
CAPITAL LEASE LIABILITY 791 754
----------- ---------
DEFERRED TAXES 1,038 994
----------- ---------
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; 9,239,000
shares issued and outstanding as of January 27,
1996, and January 28, 1995, respectively 9 9
Additional paid-in capital 35,170 35,170
Retained earnings 14,306 13,578
Treasury stock, 965,200 and 577,700 shares as of
January 27, 1996 and January 28, 1995,
respectively (3,437) (2,312)
----------- ---------
Total stockholders' equity 46,048 46,445
----------- ---------
$78,646 $72,039
=========== =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-2
<PAGE> 36
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
Seven Months
Year Ended Ended Year Ended June 30,
January 27, January 28, ----------------------
1996 1995 1994 1993
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
NET SALES $145,257 $ 93,321 $142,787 $119,615
COST OF GOODS SOLD 121,195 76,782 114,151 97,509
-------- -------- -------- --------
GROSS PROFIT ON SALES 24,062 16,539 28,636 22,106
SELLING, GENERAL AND ADMINISTRATIVE
EXPENSES 19,455 12,628 17,887 17,148
-------- -------- -------- --------
OPERATING INCOME 4,607 3,911 10,749 4,958
-------- -------- -------- --------
OTHER INCOME (EXPENSES):
Gold consignment fee (2,006) (1,031) (1,487) (1,313)
Interest expense (1,829) (999) (1,670) (1,753)
Interest income 359 100 426 385
Other income 83 17 138 258
-------- -------- -------- --------
Total other income (expenses) (3,393) (1,913) (2,593) (2,423)
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 1,214 1,998 8,156 2,535
INCOME TAX PROVISION 486 774 3,176 964
-------- -------- -------- --------
NET INCOME $ 728 $ 1,224 $ 4,980 $ 1,571
======== ======== ======== ========
EARNINGS PER SHARE $ .09 $ .14 $ .63 $ .23
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER OF SHARES 8,475 8,749 7,945 6,916
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE> 37
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
---------------- Paid-In Retained Deferred -------------------
Shares Dollars Capital Earnings Compensation Shares Dollars Total
------ ------- ---------- -------- ------------ ------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Balance -June 30, 1992 7,320 $ 7 $22,028 $ 5,803 $ (1,544) (40) $ (157) $ 26,137
Purchase of treasury - - - - - (424) (1,682) (1,682)
stock
Amortization of deferred
compensation - - - - 1,344 - - 1,344
Deferred compensation
forfeited - - - - 200 (50) (200) -
Cancellation of shares (50) - (200) - - 50 200 -
Exercise of stock
options (including
related income tax 230 1 1,031 - - - - 1,032
benefit)
Net income - - - 1,571 - - - 1,571
----- ------- -------- ------- ---------- ----- --------- --------
Balance - June 30, 1993 7,500 8 22,859 7,374 - (464) (1,839) 28,402
Exercise of stock
options (including
related income tax
benefit) 113 - 547 - - - - 547
Public stock offering (net
of underwriters'
discounts and offering
costs of $1,182) 1,608 1 11,678 - - - - 11,679
Net income - - - 4,980 - - - 4,980
----- ------- -------- ------- ---------- ----- --------- --------
Balance - June 30, 1994 9,221 9 35,084 12,354 - (464) (1,839) 45,608
Exercise of stock
options (including
related income tax
benefit) 18 - 86 - - - - 86
Purchase of treasury stock - - - - - (114) (473) (473)
Net income - - - 1,224 - - - 1,224
----- ------ -------- ------- ---------- ----- --------- --------
Balance - January 28,
1995 9,239 9 35,170 13,578 - (578) (2,312) 46,445
Purchase of treasury stock - - - - - (387) (1,125) (1,125)
Net income - - - 728 - - - 728
----- ------ -------- ------- ---------- ----- --------- --------
Balance - January 27, 1996 9,239 $ 9 $35,170 $14,306 $ - (965) $(3,437) $46,048
===== ====== ======== ======= ========== ===== ========= ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE> 38
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Seven Months
Year Ended Ended Year Ended June 30,
January 27, January 28, ---------------------
1996 1995 1994 1993
----------- ----------- --------- -------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 728 $1,224 $4,980 $1,571
Adjustments to reconcile net income to net cash
provided by/(used in) operating activities:
Depreciation and amortization 4,009 1,948 2,802 3,175
Provision for accounts receivable 247 211 (70) 577
Provision for sales returns 200 369 (1,098) 214
Deferred tax benefit (160) (70) (41) (929)
Loss on disposal of property, plant
and equipment 48 - - -
Provision for deferred compensation - - - 1,344
(Increase)/decrease in operating assets:
Accounts receivable (3,735) (1,606) (11,480) 352
Inventories 452 (159) (3,576) (4,982)
Prepaid expenses and other current assets (593) 422 (164) (309)
Other assets (833) (451) (74) 151
Increase/(decrease) in operating liabilities:
Accounts payable (414) (48) 696 (6)
Accrued expenses 725 656 219 435
Taxes payable 147 42 311 (179)
--------- ------- ------ --------
Net cash provided by/(used in)
operating activities 821 2,538 (7,495) 1,414
--------- ------ ------ --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (4,616) (5,675) (3,046) (2,593)
Purchase of marketable securities - - (3,870) (33,809)
Sale of marketable securities - 1,869 5,124 42,777
--------- ------ ------ --------
Net cash (used in)/provided by
investing activities (4,616) (3,806) (1,792) 6,375
--------- ------ ------ --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt
and capital lease liabilities (2,722) (171) (2,613) (1,349)
Proceeds from mortgage 2,500 - - -
Borrowings of long-term debt 6,000 - - -
Purchase of treasury stock (1,125) (125) - (1,682)
Proceeds from stock issuance
including related income tax benefit - 86 547 1,031
Proceeds from public offering - - 11,679 -
--------- -------- ------ --------
Net cash provided by/(used in)
financing activities 4,653 (210) 9,613 (2,000)
--------- ------- ------ --------
NET INCREASE/(DECREASE) IN CASH 858 (1,478) 326 5,789
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 5,815 7,293 6,967 1,178
--------- ------ ------ --------
CASH AND EQUIVALENTS AT END OF PERIOD $6,673 $5,815 $7,293 $6,967
======= ====== ====== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE> 39
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
Seven Months
Year Ended Ended
January 27, January 28, Year Ended June 30,
------------------------
1996 1995 1994 1993
----------- --------- --------- ---------
<S> <C> <C> <C> <C>
SUPPLEMENTAL SCHEDULE OF NON-CASH
INVESTING ACTIVITIES:
Liability incurred for acquisition of
equipment $ 200 $ 307 $ - $ 325
Capital lease obligations 524 - $ - $ 414
SUPPLEMENTAL SCHEDULE OF NON-CASH
FINANCING ACTIVITIES:
Purchase of treasury stock $ - $ 348 $ - $ -
Deferred compensation forfeited $ - $ - $ - $ 200
Cancellation of common stock $ - $ - $ - $ 200
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the year for:
Interest and gold consignment fees $ 3,701 $1,929 $3,101 $3,149
Income taxes $ 475 $ 789 $2,790 $2,061
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE> 40
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
Nature of Operations
--------------------
Michael Anthony Jewelers, Inc. ("the Company") and its subsidiaries is a
marketer and manufacturer of more than 8,000 styles of handcrafted gold
jewelry. The Company's customers include discount stores, jewelry chain
stores, department stores, catalogue retailers, television shopping
networks and wholesalers. The Company's products are sold in over 20,000
retail locations nationwide.
Basis of Consolidation
----------------------
The accompanying consolidated financial statements include the accounts of
Michael Anthony Jewelers, Inc. and its subsidiaries, all of which are
wholly-owned. All intercompany balances and transactions have been
eliminated.
The Company changed its fiscal year end from June 30 to the last Saturday
in January, effective for the seven months ended January 28, 1995 (the
"Transition Period").
Selected Financial Data for the Twelve Months Ended January 28, 1995:
--------------------------------------------------------------------
The following sets forth unaudited financial data for the twelve months
ended January 28, 1995, the comparable prior year to the year ended January
27, 1996 (in thousands):
<TABLE>
<S> <C>
Net sales $149,583
Operating income 7,484
Income before income taxes 4,695
Provision for income taxes 1,717
Net income 2,978
</TABLE>
Inventories and Cost of Goods Sold
----------------------------------
Inventories are valued at lower of cost (first-in first-out method) or
market.
The Company satisfies a majority of its gold supply needs through gold
consignment agreements with financial institutions that lease gold to the
Company ("gold lenders"), whereby the gold lenders have agreed to consign
fine gold to the Company (see Note 4). In accordance with the terms of the
agreements, the Company has the option of repaying the gold lenders in an
equivalent number of ounces of fine gold or cash based upon the then quoted
market price of gold.
The principal component of cost of goods sold is the cost of the gold
bullion and other raw materials used in the production of the Company's
jewelry. Other components of cost of goods sold include direct costs
incurred by the Company in its manufacturing operations, depreciation,
freight and insurance.
F-7
<PAGE> 41
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
(Continued)
Property, Plant and Equipment
-----------------------------
Property, plant and equipment are carried at cost. Depreciation is computed
using the straight-line method over the estimated useful lives of the
assets, five to fifteen years for machinery and equipment and thirty years
for building. Leasehold improvements are amortized over the lesser of the
estimated life of the asset or the lease.
Intangibles
-----------
Intangible assets (net of accumulated amortization of $1,002,000 and
$795,000 as of January 27, 1996 and January 28, 1995, respectively) consist
of patents which are amortized on a straight-line basis over the lives of
the patents, approximately 14 years, and a covenant-not-to-compete which
is amortized on a straight-line basis over the life of the covenant of five
years.
Revenue Recognition
-------------------
Revenue from sales to customers (other than consignment) is recognized at
the time the merchandise is shipped. Merchandise sold under consignment
arrangements between the Company and certain customers is not recognized as
revenue by the Company until the products are sold by the consignee. In
certain cases, the Company accepts payment for merchandise in either cash
or gold. Additionally, the Company enters into arrangements for certain
customers of its rope chain and tubing products whereby the gold value of
the finished product is transferred in the form of fine gold ounces from
the customer to the Company. The value of the finished product that exceeds
the gold content value is recovered as revenue and the related cost to
manufacture is recorded as an expense ("tolling arrangements").
Allowance for Sales Returns
---------------------------
The Company reduces gross sales by the amount of discounts and returns to
determine net sales. Each month the Company estimates a reserve for returns
based on historical experience and the amount of gross sales. The reserve
is adjusted periodically to reflect the Company's actual return experience.
Catalog Costs
-------------
Catalog costs are charged to expense as incurred, the only exception being
major catalog revisions. At January 27, 1996, in connection with a
significant catalog revision, approximately $250,000 had been capitalized
and will be amortized over the units of catalogs shipped, up to a maximum
of two years. Since the catalog distribution will commence subsequent to
January 27, 1996, there was no amortization for the year ended January 27,
1996 pertaining to this revision. Included in the statements of operations
is $82,000, $90,000 and $257,000 of amortization expense for the year ended
January 27, 1996, the seven month period ended January 28, 1995, and the
year ended June 30, 1994, respectively, related to a 1993 catalog revision.
Cash Equivalents
----------------
Highly liquid investments with maturities of three months or less at the
date of acquisition are classified as cash equivalents.
F-8
<PAGE> 42
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
(Continued)
Financial Instruments
---------------------
The Company utilizes derivative financial instruments, including commodity
futures, forwards and options on futures, to limit its exposure to
fluctuations in the price of gold. The Company does not hold or issue such
instruments for trading purposes. Gains and losses on all instruments are
included in the determination of income currently as a component of cost of
goods sold. There were no significant derivative financial instruments
outstanding at January 27, 1996 or January 28, 1995. The company's
exposure to market risk related to the derivative financial instruments is
limited to fluctuations in the price of gold. The Company is also exposed
to credit loss in the event of nonperformance by the counterparties to the
instruments; however, the risk of credit loss is not significant.
Earnings Per Share
------------------
Earnings per share for all periods presented were computed on a primary
basis using the weighted average number of common shares outstanding.
Options and warrants outstanding were not materially dilutive.
New Accounting Standard
-----------------------
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," which requires adoption of the disclosure provisions no
later than fiscal years beginning after December 15, 1995 and adoption of
the recognition and measurement provisions for nonemployee transactions no
later than after December 15, 1995. The new standard defines a fair value
method of accounting for stock options and other equity instruments. Under
the fair value method, compensation cost is measured at the grant date
based on the fair value of the award and is recognized over the service
period, which is usually the vesting period.
Pursuant to the new standard, companies are encouraged, but are not
required, to adopt the fair value method of accounting for employees
stock-based transactions. Companies are also permitted to continue to
account for such transactions under Accounting Principles Board Opinion No.
25, "Accounting for Stock Issued to Employees," but would be required to
disclose in a note to the financial statements pro forma net income and, if
presented, earnings per share as if the company had applied the new method
of accounting.
The accounting requirements of the new method are effective for all
employee awards granted after the beginning of the fiscal year of adoption.
The Company has not yet determined if it will elect to change to the fair
value method, nor has it determined the effect the new standard will have
on net income and earnings per share should it elect to make such a change.
Adoption of the new standard will have no effect on the Company's cash
flows.
Use of Estimates
----------------
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 and
disclosure of contingent 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.
F-9
<PAGE> 43
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
-------------------------------------------------------------------
(Continued)
Reclassifications
-----------------
Certain reclassifications were made to the prior year's financial
statements to conform to the current year's presentation.
2. INVENTORIES
-----------
Inventories consist of:
<TABLE>
<CAPTION>
January 27, January 28,
1996 1995
--------- ---------
(In thousands)
<S> <C> <C>
Finished goods $56,621 $60,411
Work in process 15,240 21,807
Raw materials 8,537 10,868
-------- --------
80,398 93,086
Less:
Consigned gold 60,700 72,936
-------- --------
$19,698 $20,150
======= =======
</TABLE>
At January 27, 1996 and January 28, 1995 inventories excluded approximately
149,300 and 192,700 ounces of gold on consignment, respectively.
3. PROPERTY, PLANT AND EQUIPMENT
-----------------------------
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
January 27, January 28,
1996 1995
---------- -----------
(In thousands)
<S> <C> <C>
Machinery and equipment $27,118 $23,718
Leasehold improvements 3,781 3,079
Building 2,711 2,087
Land 1,070 545
--------- --------
34,680 29,429
Less: Accumulated depreciation
and amortization 16,555 13,148
-------- -------
$18,125 $16,281
======= =======
</TABLE>
F-10
<PAGE> 44
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
4. GOLD CONSIGNMENT AGREEMENTS
---------------------------
The Company has gold consignment agreements with gold lenders. During the
year ended January 27, 1996, the Company entered into a consignment
agreement with a new gold lender. In connection with the new consignment
agreement, the Company amended its existing consignment agreements with the
other gold lenders. Under the terms of the agreements, the Company is
entitled to lease the lesser of an aggregate amount of 250,000 ounces, or
an aggregate consigned gold value not to exceed $106,215,000. The consigned
gold is secured by certain property of the Company including its inventory
and equipment. Title to such consigned gold remains with the gold lenders
until the Company purchases the gold. However, during the period of
consignment, the entire risk of physical loss, damage or destruction of the
gold is borne by the Company. The purchase price per ounce is based on the
daily Second London Gold Fix. The Company pays the gold consignors a
consignment fee based on the dollar value of gold ounces outstanding, as
defined in the agreements.
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 agreement, 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.
The consignment agreements contain certain restrictive covenants relating
to maximum usage, net worth, working capital, and other financial ratios
and each of the agreements require the Company to own a specific amount of
gold at all times. As of January 27, 1996, the Company was in compliance
with these covenants and the Company's owned gold inventory was valued at
approximately $7,015,000.
5. ACCRUED EXPENSES
----------------
Accrued expenses consist of the following:
<TABLE>
<CAPTION>
January 27, January 28,
1996 1995
--------- ---------
(In thousands)
<S> <C> <C>
Accrued advertising $2,321 $1,539
Accrued payroll expenses 654 664
Accrued interest 643 541
Customer deposits payable 86 340
Other accrued expenses 276 171
------ ------
$3,980 $3,255
====== ======
</TABLE>
F-11
<PAGE> 45
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCAL STATEMENTS
6. LONG-TERM DEBT
--------------
Long-term debt consists of the following:
<TABLE>
<CAPTION>
January 27, January 28,
1996 1995
-------- ----------
(In thousands)
<S> <C> <C>
Notes payable - insurance companies,
interest at 10.5% payable quarterly,
principal payable in annual installments
of $1,500,000 to $1,750,000 through
January 31, 1998 $4,750 $ 6,000
Notes payable - insurance companies,
interest at 8.61% payable semi-annually,
principal payable in annual installments of
$1,111,000 through May 15, 2002 7,778 8,889
Notes payable - insurance companies,
interest at 1.5% above the London Interbank
Offered Rate, adjusted and payable quarterly
(7.38% as of January 27, 1996), principal payable
in annual installments of $1,000,000 commencing
May 1999 through May 15, 2004 6,000 -
Mortgage payable - interest at 8%, interest and
principal of $24,000 payable monthly over a
ten-year term through October 2005 2,478 -
Promissory notes - interest at 6% payable annually,
principal payable in annual installments of $100,000
through February 1997 200 -
-------- -------
21,206 14,889
Less: current portion 2,805 2,361
-------- -------
$18,401 $12,528
======== =======
</TABLE>
The notes payable are secured by the Company's accounts receivable, machinery
and equipment, inventory (secondary lien to the gold lenders) and proceeds. The
mortgage payable is secured by the Company's corporate headquarters building
and land, having a net book value of approximately $4,521,000 at January 27,
1996, and certain equipment therein.
The note purchase agreements contain certain restrictive financial covenants
and limit the payment of dividends. Although the Company does not expect to pay
dividends in the near future, approximately $4,239,000 would have been
available for payment at January 27, 1996. Additionally, the mortgage
agreement contains certain restrictive financial covenants. At January 27,
1996 the Company was in compliance with the covenants under the note agreements
and mortgage agreement.
F-12
<PAGE> 46
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
6. LONG-TERM DEBT (Continued)
--------------
Maturities of long-term debt as of January 27, 1996 are as follows (in
thousands):
<TABLE>
<CAPTION>
Year Ending January
------------------
<S> <C>
1997 $ 2,805
1998 2,813
1999 2,971
2000 2,230
2001 2,240
Thereafter 8,147
--------
$21,206
=======
</TABLE>
7. LINE OF CREDIT
--------------
At January 27, 1996, the Company had a $15,000,000 line of credit agreement
with no borrowings outstanding. The line of credit is secured by certain
assets of the Company, including accounts receivable and inventory.
Borrowings under the facility bear interest at the bank's prime rate. The
line of credit expires on July 31, 1996, subject to annual renewal.
Management believes that the line of credit will be renewed; however, if
the current lender decides not to renew the line, the Company believes that
other lenders would be willing to enter into a similar arrangement.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS
-----------------------------------
The carrying amounts and fair values of the Company's financial instruments
are as follows:
<TABLE>
<CAPTION>
January 27, 1996
---------------------------------
Carrying Fair
Value Value
--------- -----
(In thousands)
Notes with insurance companies:
<S> <C> <C>
10.5% notes payable $4,750 $4,887
8.61% notes payable 7,778 7,909
1995 notes payable 6,000 6,000
Mortgage payable $2,478 $2,478
Promissory notes $200 $200
</TABLE>
The fair values of the 10.5% and 8.61% notes payable were based on current
rates available to the Company for debt with similar remaining maturities.
The fair values of the 1995 notes payable, the mortgage payable and the
promissory notes were assumed to reasonably approximate their carrying amounts
since these instruments have been recently issued, contain variable interest
rates, or have short maturities.
The Company believes the carrying amount of the following financial
instruments is equal to their fair value, due to their short period of
maturity: cash, accounts receivable, accounts payable and accrued expenses.
The Second London Gold Fix is used daily to value the ounces of gold and as
such the carrying value of inventory approximates fair value.
F-13
<PAGE> 47
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES
------------
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amounts of assets and liabilities for
financial purposes and for income tax purposes.
Income tax provision/(benefit) consists of the following:
<TABLE>
<CAPTION>
Transition Period
Year Ended Ended Year Ended June 30,
January 27, January 28, -----------------------
1996 1995 1994 1993
----------- ------ ------ ------
(In thousands)
<S> <C> <C> <C> <C>
Current:
Federal $565 $676 $2,532 $1,679
State and local 81 168 685 214
------ ---- ------- -------
646 844 3,217 1,893
Deferred income tax (160) (70) (41) (929)
------ ------ ------- ------
Total $ 486 $ 774 $3,176 $ 964
====== ===== ====== ======
</TABLE>
The following is a reconciliation of the federal statutory rate to the
effective tax rate:
<TABLE>
<CAPTION>
Transition Period
Year Ended Ended Year Ended June 30,
January 27, January 28, ----------------------
1996 1995 1994 1993
---------- ------- ------- ------
<S> <C> <C> <C> <C>
Statutory tax rate 34.0% 34.0% 34.0% 34.0%
State and local taxes,
net of federal benefit 5.0 5.5 5.5 2.6(a)
Federal tax on state
income tax refund - - - 1.9
Other 1.0 (0.8) (0.6) (0.5)
----- ------ ---- -----
40.0% 38.7% 38.9% 38.0%
===== ===== ==== =====
<FN>
(a) For the year ended June 30, 1993, "state and local taxes" include a benefit
of $144,000 related to the settlement of a state audit on prior years tax
returns.
</TABLE>
F-14
<PAGE> 48
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
9. INCOME TAXES (Continued)
------------
The tax effects of significant items comprising the Company's deferred tax
liabilities and assets are as follows (in thousands):
<TABLE>
<CAPTION>
January 27, January 28,
1996 1995
----------- -----------
<S> <C> <C>
Non-current deferred tax liabilities:
Difference between book and tax
depreciation methods $1,038 $994
------ ----
Current deferred tax assets:
Reserves for sales returns and
doubtful accounts 608 542
Inventory reserve 181 -
Other 66 109
------ -----
855 651
----- -----
Net deferred tax liabilities $183 $343
====== ====
</TABLE>
10. RELATED PARTY TRANSACTIONS
--------------------------
In May 1991, the Company entered into two lease agreements with MacQuesten
Realty Company ("MRC"), a partnership consisting of certain stockholders of
the Company. Pursuant to the agreements, the Company agreed to rent the
manufacturing and distributing facilities from MRC for a period of ten
years, at an average annual rental of $478,000, plus real estate taxes and
other occupancy costs.
On December 1, 1994, under the terms of a Contract of Sale dated November
28, 1994, the Company acquired its corporate headquarters premises from MRC
for $2,490,000. The Company funded the acquisition with cash from its
operations and subsequently financed the purchase with a mortgage loan from
a bank.
In May 1995, the Company entered into another lease agreement with MRC.
Pursuant to the agreement, the Company agreed to rent a manufacturing
facility from MRC for a period of six years, at an average annual rental of
$128,000, plus real estate taxes and other occupancy costs.
F-15
<PAGE> 49
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. LEASES AND COMMITMENTS
----------------------
(a) Leases
The Company conducts its operations from leased manufacturing and
distribution facilities. In addition to rent, the Company pays property
taxes, insurance and certain other expenses relating to leased facilities
and equipment. The Company also leases machinery and equipment.
The following is a schedule of net minimum lease payments owed under
capital and operating leases as of January 27, 1996:
<TABLE>
<CAPTION>
Year Ending Capital Operating
January Leases Leases
--------- -------- -------
(In thousands)
<S> <C> <C>
1997 $538 $601
1998 489 632
1999 238 642
2000 111 673
2001 9 505
------ ------
Minimum lease payments: 1,385 $3,053
======
Less: Interest 127
-----
Present value of net
minimum lease payments 1,258
Less: current portion 467
-----
$791
=====
</TABLE>
The majority of the payments set forth above for operating leases are to
MacQuesten Realty Company.
The interest rates applicable to the capital leases range from 4.84% -
8.18%. Included in property, plant and equipment as of January 27, 1996,
are capitalized assets with a carrying value of $842,000. Total
capitalized lease amortization expense was $246,000, $126,000, $263,000
and $384,000 for the year ended January 27, 1996, the Transition Period
and for the years ended June 30, 1994 and 1993, respectively.
Rent expense for the year ended January 27, 1996, the Transition Period
and for the years ended June 30, 1994 and 1993, respectively, amounted
to $563,000, $420,000, $876,000 and $806,000, respectively, principally
for manufacturing and distribution facilities.
(b) The Company has a severance agreement with one executive.
Pursuant to the terms of the agreement, severance payments will be
determined by length of service.
(c) The Company's product line includes licensed goods manufactured
pursuant to two or three year agreements with licensors. Royalty fees
range from 6% to 12% of net sales of these products, or a minimum
guarantee, whichever is greater. The Company records the related
expense over the units sold.
F-16
<PAGE> 50
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
11. LEASES AND COMMITMENTS (Continued)
----------------------
As of January 27, 1996, the future guaranteed royalty commitments are as
follows:
<TABLE>
<CAPTION>
Guaranteed
Year Ending Royalty
January Commitments
----------- -----------
(In thousands)
<S> <C>
1997 $299
1998 60
---
$359
====
</TABLE>
12. STOCK PLANS
-----------
INCENTIVE STOCK OPTION PLANS
(1) During July 1986, the Company adopted the 1986 Incentive Stock
Option Plan. The Plan, as amended, permits the granting of incentive
stock options and non-qualified stock options to employees for the
purchase of up to an aggregate of 500,000 shares of common stock. The
option term is for a period not to exceed ten years from the date of
grant. At January 27, 1996, all shares reserved under the plan had been
granted.
The changes in the number of shares under option and the option price
per share are as follows:
1986 Incentive Stock Option Plan
--------------------------------
<TABLE>
<S> <C> <C>
Outstanding and exercisable, June 30, 1992 476,530 $3.50 - $4.50
Lapsed (50,933) $3.50 - $4.50
Exercised (225,164) $3.50 - $4.00
--------
Outstanding and exercisable, June 30, 1993 200,433 $3.50 - $4.00
Lapsed (2,800) $3.50
Exercised (103,133) $3.50 - $4.00
--------
Outstanding and exercisable, June 30, 1994 94,500 $3.50 - $4.00
Exercised (3,000) $3.625
------
Outstanding and exercisable, January 28, 1995 91,500 $3.50 - $4.00
Lapsed (37,000) $3.50 - $4.00
-------
Outstanding and exercisable, January 27, 1996 54,500 $3.625
========
</TABLE>
F-17
<PAGE> 51
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK PLANS (Continued)
-----------
(2) During the year ended June 30, 1994, the Company adopted the 1993
Long-Term Incentive Plan and the 1993 Non-Employee Directors' Stock
Option Plan. The Plans permit the granting of incentive stock options
and non-qualified stock options to employees and non- employee directors
for the purchase of up to an aggregate of 1,000,000 and 250,000 shares
of common stock, respectively. The option term is for a period not to
exceed five years from the date of grant.
Long-Term Incentive Plan
------------------------
<TABLE>
<S> <C> <C> <C>
Outstanding at June 30, 1993 -
Granted 242,500 $4.125 - $7.75
-------
Outstanding at June 30, 1994 242,500 $4.125 - $7.75
Granted 93,000 $4.125 - $7.75
Exercised (15,000) $4.125
--------
Outstanding at January 28, 1995 320,500 $4.125 - $7.75
Lapsed (27,000) $4.125 - $6.125
Granted 371,400 $2.625 - $3.23
-------
Outstanding at January 27, 1996 664,900 $2.625 - $7.75
=======
</TABLE>
Options exercisable at January 27, 1996 were for 166,347 shares of
common stock at a price between $4.125 - $7.75 a share. At January 27,
1996, shares for future option grants totalling 320,100 were available
under the plan.
Non-Employee Directors' Stock Option Plan
<TABLE>
<S> <C> <C> <C>
Outstanding at June 30, 1993 -
Granted 25,000 $4.187 - $8.00
------
Outstanding at June 30, 1994 25,000 $4.187 - $8.00
Granted 10,000 $6.625
------
Outstanding at January 28, 1995 35,000 $4.187 - $8.00
Lapsed (10,000) $6.625 - $8.00
Granted 15,000 $2.625 - $3.50
--------
Outstanding at January 27, 1996 40,000 $2.625 - $8.00
========
</TABLE>
Options exercisable at January 27, 1996 were for 11,667 shares of common stock
at a price between $4.187 - $8.00 a share. At January 27, 1996, shares for
future option grants totalling 210,000 were available under this plan.
F-18
<PAGE> 52
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
12. STOCK PLANS (Continued)
-----------
WARRANTS
(3) The Company has granted common stock purchase warrants. Of the
70,000 warrants outstanding as of January 27, 1996, 15,000 warrants were
outstanding to three of the Company's directors.
The changes in the number of shares under the stock purchase warrants
and the price per share are as follows:
<TABLE>
<S> <C> <C>
Outstanding, June 30, 1992 105,000 $4.00 - $4.75
Lapsed (7,500)
Granted 6,000 $3.25
Exercised (5,000) $4.00
---------
Outstanding and exercisable, June 30, 1993 98,500 $3.25 - $4.75
Granted 19,000 $4.00 - $7.50
Exercised (10,000) $4.75
--------
Outstanding and exercisable, June 30, 1994 107,500 $3.25 - $7.50
Granted 15,000 $6.25
--------
Outstanding and exercisable, January 28, 1995 122,500 $3.25 - $7.50
Lapsed (52,500) $4.00 - $4.50
-------
Outstanding and exercisable, January 27, 1996 70,000 $3.25 - $7.50
=========
</TABLE>
13. RETIREMENT PLAN
---------------
Effective January 1, 1992, the Company established a 401(k) Profit
Sharing Plan and Trust for all eligible employees. Under the terms of
the plan the employee may contribute 1% to 20% of compensation. There
is no employer matching contribution.
14. SIGNIFICANT CUSTOMERS
---------------------
Sales to the Company's two largest customers aggregated approximately
29%, 24%, 25% and 23% of net sales for the year ended January 27, 1996,
the Transition Period and for the years ended June 30, 1994 and 1993,
respectively.
F-19
<PAGE> 53
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
15. PUBLIC STOCK OFFERING
---------------------
On December 20, 1993, the Company sold 1.6 million shares pursuant to an
offering. On January 14, 1994, the underwriters partially exercised the
over-allotment option, whereby the Company sold 7,600 shares. The
remaining over-allotment option lapsed on January 20, 1994. The net
proceeds from the offering of approximately $11,679,000 (net of
underwriters' discounts and commission and expenses of approximately
$1,182,000) were used for working capital and for general corporate
purposes which included strategic acquisitions of other companies
engaged in the manufacture and distribution of jewelry.
16. STOCK REPURCHASE PROGRAM
------------------------
In connection with the Common Stock repurchase program that the Company
announced in 1990 (the "1990 Stock Repurchase Program"), the Company
repurchased a total of 463,600 shares of Common Stock for an aggregate
price of approximately $1,839,000. The Company will not reissue these
shares to the public. In October 1993, the Company discontinued its
1990 Stock Repurchase Program.
In May 1994, the Company announced a Common Stock repurchase program
(the "1994 Stock Repurchase Program"), pursuant to which the Company
could repurchase up to 500,000 shares of Common Stock. During the year
ended January 27, 1996 and the Transition Period ended January 28, 1995,
the Company had repurchased 114,100 and 327,500 shares, respectively, on
the open market under the 1994 Stock Repurchase Program for
approximately $473,000 and $966,000, respectively. The Company will not
reissue these shares to the public. In November 1995, the Company
discontinued its 1994 Stock Repurchase Program.
In December 1995, the Company announced a Common Stock Repurchase
Program, (the "1995 Stock Repurchase Program"), pursuant to which the
Company may repurchase up to 750,000 shares of Common Stock. As of
January 27, 1996, the Company had repurchased a total of 60,000 on the
open market under the 1995 Stock Repurchase Program for an aggregate
price of approximately $159,000.
17. DEFERRED COMPENSATION
---------------------
Two executive officers and directors entered into agreements with the
Company pursuant to which, among other things, on July 16, 1990, the two
executives each received as part of their compensation for future
employment a stock award of 625,000 shares of common stock, subject to
vesting and risk of forfeiture. Such stock award was recorded as
deferred compensation amounting to $5,000,000.
As a result of this transaction, the Company issued 1,250,000 shares of
common stock to the individuals. During the year ended June 30, 1992,
151,500 shares vested, and $606,000 of compensation expense was
recorded. The Company paid an additional $2,100,000 to the individuals
during the year ended June 30, 1991, representing the personal tax
impact to the individuals as a result of the employment agreements. The
$2,100,000 payment was recorded as a deferred asset and was amortized as
the shares of common stock vested under the employment agreements.
F-20
<PAGE> 54
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
17. DEFERRED COMPENSATION (continued)
---------------------
Additionally, during the year ended June 30, 1991, the two individuals,
in the aggregate, purchased 1 million shares and 250,000 shares of
common stock at $4.00 per share from the Company and from the majority
stockholders, respectively.
On September 23, 1992, the Board of Directors of the Company ratified an
amendment effective June 30, 1992 to the employment agreements with the
two executives. The amendment eliminated the vesting and risk of
forfeiture of the common stock awards relating to the employment aspects
of the agreements. The amendment resulted in 362,500 shares vesting and
$2,010,000 was charged to expense during the year ended June 30, 1992
consisting of $1,450,000 of additional compensation expense and $560,000
of amortization of the deferred asset relating to the personal tax
impact of the employees, which is included in selling, general and
administrative expenses for the year ended June 30, 1993. All other
provisions of the agreement remained in force.
During the fiscal year ended June 30 1993, the Company terminated its
employment agreements with the two executives. As part of the
termination of the employment agreements, the Company authorized the
vesting of 336,000 shares resulting in a charge of $2,059,000 to
expense, consisting of $1,344,000 of additional compensation expense and
$715,000 of amortization of the deferred asset relating to the personal
tax impact of the employees, which is included in selling, general and
administrative expenses for the year ended June 30, 1993.
In addition, 50,000 shares of common stock previously awarded to one
executive by the Company that had not yet vested were forfeited upon
termination of the employment agreement. On April 15, 1993, the Company
cancelled the 50,000 shares of common stock. During the year ended June
30, 1993, the Company purchased 375,000 shares of common stock at $4.00
per share for a total purchase price of $1,500,000 from one executive.
18. LEGAL PROCEEDINGS
-----------------
The Company is involved in various legal claims and disputes, none of
which is considered material and all of which, for the most part, are
normal to the Company's business. In the opinion of management, the
amount of losses that might be sustained, if any, from such claims and
disputes would not have a material effect on the Company's financial
statements.
F-21
<PAGE> 55
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
19. SUMMARY OF QUARTERLY RESULTS (Unaudited)
----------------------------
<TABLE>
<CAPTION>
Year Ended January 27, 1996 Transition Period Year Ended June 30, 1994
---------------------------------------- --------------------- --------------------------------------
Quarter Ended Quarter Ended
---------------------------------------- --------------------------------------
(In thousands, 3 Months 4 Months
except Ended Ended
per share April July October January Sept. Jan. Sept. Dec. Mar. June
amounts) 29, 29, 28, 27, 30, 18, 30, 31, 31, 30,
1995 1995 1995 1996 1994 1995 1993 1993, 1994 1994
------- ------- -------- ------- ------- -------- -------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales (A) 27,260 24,902 47,037 46,058 $34,101 $59,220 $27,779 $55,102 $28,492 $31,414
Cost of goods sold 22,048 21,628 38,789 38,730 27,483 49,299 21,808 43,349 22,896 26,098
------- ------- -------- ------- ------- ------- -------- ------- -------- -------
Gross profit 5,212 3,274 8,248 7,328 6,618 9,921 5,971 11,753 5,596 5,316
Selling, general
& administrative
expenses 4,493 4,137 5,431 5,394 4,257 8,371 4,085 5,601 4,286 3,915
------- ------- -------- ------- ------- ------- -------- ------- -------- -------
Operating income/
(loss) 719 (863) 2,817 1,934 2,361 1,550 1,886 6,152 1,310 1,401
Other income
(expense):
Gold
consignment fees (414) (448) (485) (659) (381) (650) (390) (439) (312) (346)
Interest expense (456) (451) (428) (494) (365) (634) (426) (435) (391) (418)
Interest income 124 135 55 45 76 24 62 24 183 157
Other - net 5 75 8 (5) 16 1 45 39 39 15
------- ------- -------- ------- ------- ------- -------- ------- -------- -------
Total other income
(expense) (741) (689) (850) (1,113) (654) (1,259) (709) (811) (481) (592)
Income (loss)
from operations
before income
taxes (22) (1,552) 1,967 821 1,707 291 1,177 5,341 829 809
Income
taxes/(benefit) ( 9) (621) 776 340 683 91 485 2,182 341 168
------- ------- -------- ------- ------- ------- -------- ------- -------- --------
Net income/
(loss) $ (13) $ (931) $ 1,191 $ 481 $ 1,024 $ 200 $ 692 $ 3,159 $ 488 $ 641
======= ======= ======== ======= ======= ======= ======== ======= ======== ========
Earnings/(loss)
per share(B) $ 0.00 $ (0.11) $ 0.14 $ 0.06 $ 0.12 $ 0.02 $ 0.10 $ 0.43 $ 0.06 $ 0.07
======= ======= ======== ======= ======= ======= ======== ======= ======== ========
</TABLE>
(A) The Company's net sales for the second quarter are subject to seasonal
fluctuation. This fluctuation is mitigated to a degree by the early
placement of orders for the holiday season.
(B) Per share amounts do not always add because the figures are required to
be independently calculated.
F-22
<PAGE> 56
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Additions Additions
Balance at charged to charged Balance
beginning costs and to other at end
Description of period expenses accounts Deductions(A) of period
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Allowance for doubtful
accounts:
Year ended January 27, 1996 $646 $247 $ - $(8) $901
Seven month period ended
January 28, 1995 496 211 - 61 646
Year ended June 30, 1994 443 (70) 49 74 496
Year ended June 30, 1993 277 577 - 411 443
Allowance for sales
returns:
Year ended January 27, 1996 $754 $200 $ - $280 $674
Seven month period ended
January 28, 1995 385 369 - - 754
Year ended June 30, 1994 525 1,098 - 1,238 385
Year ended June 30, 1993 581 214 - 270 525
<FN>
(A) Allowances, returns and uncollectible accounts charged against the reserve,
(net of collections on previously written-off accounts).
</TABLE>
<PAGE> 57
EXHIBIT INDEX
-------------
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.56 Assignment of Trademarks and Service Marks as
Collateral, dated July 12, 1990, between Registrant
and Rhode Island Hospital Trust National Bank,
individually and as agent . . . . . . . . . . . . . .
10.57 First Amendment to Assignment of Trademarks and
Service Marks as Collateral dated as of June 5, 1992,
between Registrant and Rhode Island Hospital Trust
National Bank, individually and as agent . . . . . .
10.58 Promissory Note of the Registrant dated February 1,
1996 in favor of Chemical Bank . . . . . . . . . . .
10.59 Deferred Compensation Plan dated as of March 4,
1996 . . . . . . . . . . . . . . . . . . . . . . . .
21 Subsidiaries of the Registrant. . . . . . . . . . . .
27 Financial Data Schedule . . . . . . . . . . . . . . .
</TABLE>
<PAGE> 1
EXHIBIT 10.56
-------------
ASSIGNMENT OF TRADEMARKS
AND SERVICE MARKS AS COLLATERAL
-------------------------------
THIS ASSIGNMENT made as of the 12th day of July, 1990, by and between
MICHAEL ANTHONY JEWELERS, INC., a Delaware corporation (the "Company"), and
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, a national banking association (the
"Agent"), individually and as agent for each of the following lenders (jointly
and severally the "Lenders") in accordance with the terms of a Security
Agreement dated as of May 23, 1990, as amended by a certain First Amendment
dated as of the date hereof; RHODE ISLAND HOSPITAL TRUST NATIONAL BANK;
ALGEMENE BANK NEDERLAND N.V., NEW YORK BRANCH; PRUDENTIAL-BACHE METAL CO. INC.;
SWISS BANK CORPORATION, NEW YORK BRANCH; and NATIONAL WESTMINSTER BANK USA.
RECITALS
WHEREAS, the Company, MA Acquisition Corporation, a Delaware
corporation ("MAC"), and each of the Lenders (other than National Westminster
Bank USA) are parties to certain Consignment Agreements dated as of May 23,
1990, as amended by certain First Amendments dated as of the date hereof
(hereinafter, as amended by such First Amendments and as the same may be
amended hereafter from time to time, the "Consignment Agreements"); and
WHEREAS, National Westminster Bank USA and the Company have entered or
will enter into certain agreements and/or promissory notes, which agreements
and/or promissory notes (hereinafter, as the same may be amended from time to
time, the "NWB Agreements"); and
WHEREAS, as additional security for the indebtedness, liabilities and
obligations evidenced by the Consignment Agreements and NWB Agreements and any
and all other indebtedness, obligations and liabilities of the Company to the
Lenders now existing or hereafter arising, the Company has agreed to assign to
the Lenders all of the Company's right, title and interest in and to its United
States trademarks, service marks and trademark and service mark applications
and the rights described and claimed therein, which are more particularly
described and referenced on Exhibit A attached hereto and made a part hereof
(collectively, the "Trademarks");
NOW, THEREFORE, in consideration of the foregoing, the parties hereby
agree as follows:
1
<PAGE> 2
1. The Company does hereby assign and transfer and grant a lien
and security interest unto the Lenders and the Agent (acting on behalf of
itself and the other Lenders) as security for (1) performance by the Company of
each and every obligation to be performed by it contained in, and payment of
all amounts now or hereafter due under, the Consignment Agreements and the NWB
Agreements; (2) performance of each and every obligation of the Company
contained in this Assignment and payment of all sums now or hereafter due
hereunder; and (3) payment and performance of any and all other indebtedness,
obligations and liabilities of the Company to the Lenders of every kind and
description, direct, indirect and contingent, now existing or hereafter
arising, due or to become due (the foregoing obligations of the Company are
hereinafter collectively referred to as the "Obligations"), all of the
Company's right, title and interest in and to the Trademarks, together with the
goodwill of the business relating to each and all of the Trademarks and the
right to sue for and recover damages for past or future infringements of the
Trademarks, the same to be held and enjoyed by the Lenders and the Agent for
their own use and benefit and the use and benefit of their legal
representatives, successors and assigns to the full end of the term of which
the Trademarks are granted as fully and entirely as the same would have been
held by the Company had this Assignment not been made; PROVIDED, HOWEVER, that
until demand for payment has been made by the Lenders, the Company, may
continue to use the Trademarks in its business, and all goodwill symbolized by
the Trademarks shall accrue to the Company as if it had not made this
Assignment, so long as the nature and quality of all services rendered and
goods sold by the Company in connection with the Trademarks shall conform to
standards not less than those currently set by the Company. The rights and
remedies of the Lenders upon demand for payment with respect to the assignment
and security interest granted herein are more fully set forth in a certain
Security Agreement of even date herewith between the Company and the Lenders
(the "Security Agreement"). The provisions of the Security Agreement are
hereby incorporated herein by reference.
2. The Company agrees to maintain registration of the Trademarks
and to otherwise protect the Trademarks from infringement.
3. The Company hereby agrees also to execute any further lawful
document as reasonably requested by the Agent or the Lenders in order to
effectuate fully the assignment contemplated by this Agreement.
4. Upon full payment, performance and observance of the
Obligations, each of the Agent and the Lenders agrees at the Company's request
to give their written consent to termination of this Assignment, and to execute
and deliver to the Company all assignments and other
2
<PAGE> 3
instruments of transfer as may be reasonably necessary or proper to reassign to
the Company the Trademarks, such termination and reassignment to be at the
Company's sole expense.
5. The date of this Assignment first set forth above is for
identification purposes only and is the date this Assignment is deemed to have
been delivered by the Company to the Lenders and the Agent. This Assignment
was executed by the parties on the dates set forth in the acknowledgments
below.
6. The Company irrevocably agrees to, and does hereby indemnify
and hold harmless the Agent, the Lenders, any of their agents and employees,
and each and all and any of them (the "Indemnified Parties"), against any and
all losses, claims, actions, causes of action, damages or liabilities
(including any amount paid in settlement of any action, commenced or
threatened), joint or several, to which they, or any of them, may become
subject under statutory law or at common law, and to reimburse the Indemnified
Parties for any legal or other expenses reasonably incurred by it or them in
connection with investigating, preparing for or defending against any actions,
commenced or threatened, insofar as such losses, claims, damages, liabilities
or actions arise out of or are related to this Assignment and the use by the
Company of the Trademarks from and after the date of this Assignment.
7. This Assignment shall inure to the benefit of the successors
and assigns of the Agent and the Lenders and shall be binding upon the
successors and assigns of the Company.
8. This Assignment shall be construed in accordance with and
governed by the laws of the State of New York.
IN WITNESS WHEREOF, the Company, the Agent and the Lenders have caused
this Assignment to be duly executed by their duly authorized officers, all of
the day and year first above written.
MICHAEL ANTHONY JEWELERS, INC.
By: Allan Corn
-----------------------------------------
Title: Vice President, Chief Financial Officer
3
<PAGE> 4
RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK, individually and as
Agent for each of the Lenders
By: /s/______________
Title:
ALGEMENE BANK NEDERLAND N.V.,
NEW YORK BRANCH
By: /s/_______________
Title:
By: /s/_______________
Title:
PRUDENTIAL-BACHE METAL CO. INC.
By: /s/_______________
Title:
SWISS BANK CORPORATION,
NEW YORK BRANCH
By: /s/________________
Title:
By: /s/________________
Title:
NATIONAL WESTMINSTER BANK USA
By: /s/________________
Title:
MFD/mh:
fran\aot
Assignment of Trademarks
4
<PAGE> 1
EXHIBIT 10.57
-------------
FIRST AMENDMENT TO ASSIGNMENT OF TRADEMARKS
AND SERVICE MARKS AS COLLATERAL
DATED AS OF JULY 12, 1990
THIS FIRST AMENDMENT made as of the 5th day of June, 1992, by and
between MICHAEL ANTHONY JEWELERS, INC., a Delaware corporation (the "Company"),
and RHODE ISLAND HOSPITAL TRUST NATIONAL BANK, a national banking association
(the "Agent"), individually and as agent for each of the following lenders:
RHODE ISLAND HOSPITAL TRUST NATIONAL BANK; ABN AMRO BANK N.V. (formerly known
as "ALGEMENE BANK NEDERLAND N.V."), NEW YORK BRANCH; PRUDENTIAL-BACHE METAL CO.
INC. ("PBM"); SWISS BANK CORPORATION, NEW YORK BRANCH; MOCATTA METALS
CORPORATION ("Mocatta"); MASE WESTPAC INC. ("Mase"); and NATIONAL WESTMINSTER
BANK USA ("NWB") (jointly and severally the "Lenders").
W I T N E S S E T H T H A T:
-----------------------------
WHEREAS, the Lenders (other than Mase and Mocatta), the Agent and the
Company are parties to a certain Assignment of Trademarks and Service Marks As
Collateral dated as of July 12, 1990 (the "Assignment"), pursuant to which the
Company assigned, transferred and granted the Lenders and the Agent an interest
in certain Trademarks (as defined therein and as described in Exhibit A
attached hereto and thereto); and
WHEREAS, the Company and Mocatta desire to add Mocatta as a "Lender"
pursuant to the terms of the Assignment as Mocatta will be entering into a
consignment arrangement with the Company; and
WHEREAS, the Company and Mase desire to add Mase as a "Lender"
pursuant to the terms of the Assignment and Mase will be entering into a
consignment arrangement with the Company; and
WHEREAS, each of Mocatta and Mase is willing to assume all obligations
and liabilities under the Assignment as a Lender thereunder and to comply with
the covenants and terms of such Assignment and any documents executed by the
Agent and/or the Lenders in connection with the Assignment; and
WHEREAS, PBM and the Company have terminated the consignment
arrangement between PBM and the Company; and
1
<PAGE> 2
WHEREAS, NWB and the Company have terminated the NWB Agreements (as
defined in the Assignment);
NOW, THEREFORE, in consideration of the premises and the agreement
hereinafter set forth and for other good and valuable consideration, the
receipt whereof is hereby acknowledged, the parties hereto agree as follows:
1. The Agent, the Lenders and the Company hereby consent to the addition
of Mocatta and Mase as parties to the Assignment, with Mocatta and Mase to be
included as Lenders pursuant to the terms of the Assignment.
2. The Assignment is hereby amended from and after the date hereof so
that the term "Lenders" as used therein and herein shall include each of
Mocatta and Mase and each of Mocatta and Mase shall be entitled to all of the
rights and benefits as a Lender thereunder and hereby assumes full liability
for the performance and observance of all and singular of the covenants,
agreements and conditions of the Assignment which are to be performed by the
Lenders thereunder.
3. PBM is hereby deleted as a party to the Assignment and PBM is hereby
released of any and all liability for the performance and observance of all and
singular of the covenants, agreements and conditions of the Assignment which
are to be performed by the Lenders thereunder. PBM shall no longer be entitled
to any of the benefits ofd the Assignment and all references in the Assignment
to "the Consignment Agreements" shall no longer include the Consignment
Agreement dated as of May 23, 1990 between PBM and the Company.
4. NWB is hereby deleted as a party to the Assignment and NWB is hereby
released of any and all liability for the performance and observance of all and
singular of the covenants, agreements and conditions of the Assignment which
are to be performed by the Lenders thereunder. NWB shall no longer be entitled
to any of the benefits of the Assignment and all references in the Assignment
to the "NWB Agreements" are hereby deleted.
5. Any necessary, conforming changes to the Assignment occasioned by
reason of this Amendment shall be deemed to have been made.
6. This Amendment shall be binding upon the parties and their respective
successors and assigns.
2
<PAGE> 3
7. Except as specifically amended hereby, the Assignment shall remain in
full force and effect.
8. This Amendment may be executed with one or more counterparts hereof,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this First
Amendment to be executed by their duly authorized officers as of the date first
above written.
MICHAEL ANTHONY JEWELERS, INC.
By: Allan Corn
--------------------------------
Title: Chief Financial Officer
RHODE ISLAND HOSPITAL TRUST
NATIONAL BANK, individually and as
Agent for each of the Lenders
By: /s/____________________
Title:
ABN AMRO BANK N.V.,
NEW YORK BRANCH
By: /s/_____________________
Title:
By: /s/_____________________
Title:
PRUDENTIAL-BACHE METAL CO. INC.
By: /s/_____________________
Title:
3
<PAGE> 4
SWISS BANK CORPORATION,
NEW YORK BRANCH
By: /s/_____________________
Title:
By: /s/_____________________
Title:
NATIONAL WESTMINSTER BANK USA
By: /s/_______________________
Title:
MFD/mh:
fran\firstamd
First Amendment to
Assignment of Trademarks
4
<PAGE> 1
EXHIBIT 10.58
-------------
PROMISSORY NOTE
$15,000,000 New York, New York
February 1, 1996
FOR VALUE RECEIVED, MICHAEL ANTHONY JEWELERS, INC. (the "Debtor"),
HEREBY PROMISES TO PAY to the order of CHEMICAL BANK (the "Bank"), at its
offices located at 111 West 40th Street, New York, New York, or at such other
place as the Bank or any holder hereof may from time to time designate, the
principal sum of FIFTEEN MILLION DOLLARS ($15,000,000), or such lesser amount
as may constitute the outstanding balance hereof, in lawful money of the United
States, on the Maturity Date (as hereinafter defined) set forth on the Grid
Schedule attached hereto (or earlier as hereinafter referred to), and to pay
interest in like money at such office or place from the date hereof on the
unpaid principal balance of each Loan (as hereinafter defined) made hereunder
at a rate equal to the Applicable Interest Rate (as hereinafter defined) for
such Loan, which shall be payable on the last day of the Interest Period
relating to such Loan and, if such Interest Period is greater than three (3)
months, at three (3) month intervals after such Loan is made, until such Loan
shall be due and payable (whether at maturity, by acceleration or otherwise)
and thereafter, on demand. Interest after maturity shall be payable at a rate
of two percent (2%) per annum above the Bank's Prime Rate which rate shall be
computed for actual number of days elapsed on the basis of a 360-day year and
shall be adjusted as of the date of such change, but in no event higher than
the maximum permitted under applicable law. "Prime Rate" shall mean the rate
of interest as is publicly announced at the Banks's principal office from time
to time as its Prime Rate.
INTEREST/GRID SCHEDULE
----------------------
The Bank is authorized to enter on the Grid Schedule attached
hereto (i) the amount of each Loan made from time to time hereunder, (ii) the
date on which each Loan is made, (iii) the date on which each Loan shall be due
and payable to the Bank which in no event shall be later than July 31, 1996
(the "Maturity Date"), (iv) the interest rate agreed between the Debtor and the
Bank as the interest rate to be paid to the Bank on each Loan (each such rate,
the "Applicable Interest Rate"), which rate, at the Debtor's option in
accordance herewith, shall be at (a) the Prime Rate (the "Prime Rate Loan(s)"),
(b) a fixed rate of interest determined by and available at the Bank in its
sole discretion (the "Fixed Rate") for the
1
<PAGE> 2
applicable Interest Period (the "Fixed Rate Loan(s)") or (c) the Adjusted
Eurodollar Rate (as hereafter defined) plus 2.5% (the "Eurodollar Loan"), (v)
the amount of each payment made hereunder, and (vi) the outstanding principal
balance of the Loans hereunder from time to time, all of which entries, in the
absence of manifest error, shall be rebuttably presumed correct and binding on
the Debtor; PROVIDED, HOWEVER, that the failure of the Bank to make any such
entries shall not relieve the Debtor from its obligations to pay any amount due
hereunder.
PREPAYMENT
----------
The Debtor shall not have the right to repay any Loan, other than
Loans based on the Prime Rate, prior to the Maturity Date of such Loan. Except
with respect to Prime Rate Loans, in the event the Debtor does prepay a Loan
prior to the Maturity Date, the Debtor shall reimburse the Bank on demand for
any loss incurred or to be incurred by it in the reemployment of the funds
released by any prepayment.
DISCRETIONARY LOANS BY THE BANK
-------------------------------
The Bank may lend, in its sole discretion in each instance, such
amounts (each a "Loan" and collectively the "Loans") as may be requested by the
Debtor hereunder, which Loans shall in no event exceed $15,000,000 in aggregate
principal amount outstanding at any time. Any Eurodollar Loan shall be in a
minimum principal amount of $500,000 and in increments of $100,000. Each such
request for a Loan shall be made by any officer of the Debtor or any person
designated in writing by any such officer, all of which are hereby designated
and authorized by the Debtor to request Loans and agree to the terms thereof
(including without limitation the Applicable Interest Rate and Maturity Date
with respect thereto). The Debtor shall give the Bank notice at least three
(3) Business Days prior to the date hereof and the end of each Interest Period
(as hereafter defined) specifying whether the Loan shall bear interest at the
Prime Rate, the Fixed Rate or the Eurodollar Rate and the Interest Period
applicable thereof. In the event the Debtor shall fail to provide such notice,
the Loan shall be deemed to bear interest at the applicable Prime Rate and
shall have an Interest Period of one month. The principal amount of each Loan
shall be prepaid on the earlier to occur of the Maturity Date applicable
thereto, or the date upon which the entire unpaid balance hereof shall
otherwise become due and payable.
2
<PAGE> 3
INCREASED COST
--------------
If at any time after the date hereof, the Board of Governors of the
Federal Reserve System or any political subdivision of the United States of
America or any other government, governmental agency or central bank shall
impose or modify any reserve or capital requirement on or in respect of loans
made or deposits with the Bank or shall impose on the Bank or the Eurodollar
market any other conditions affecting Fixed Rate Loans or Eurodollar Loans, and
the result of the foregoing is to increase the cost to (or, in the case of
Regulation D, to impose a cost on) the Bank of making or maintaining any Fixed
Rate Loans or Eurodollar Loans or to reduce the amount of any sum receivable by
the Bank in respect thereof, by an amount deemed by the Bank to be material,
then, within 30 days after notice and demand by the Bank, the Debtor shall pay
to the Bank such additional amounts as will compensate the Bank for such
increased cost or reduction; PROVIDED, that the Debtor shall not be obligated
to compensate the Bank for any increased cost resulting from the application of
Regulation D as required by the definition of Adjusted Eurodollar Rate. Any
such obligation by the Debtor to the Bank shall not be due and owing until the
Bank has delivered written notice to the Debtor. Failure by the Bank to
provide such notice shall not be deemed a waiver of any of its rights
hereunder. A certificate of the Bank claiming compensation hereunder and
setting forth the additional amounts to be paid to it hereunder and the method
by which such amounts were calculated shall be conclusive in the absence of
manifest error.
INDEMNITY
---------
The Debtor shall indemnify the Bank against any loss or expense which
the Bank may sustain or incur as a consequence of the occurrence of any Event
of Default or any loss or reasonable expense sustained or incurred in
liquidating or employing deposits from third parties acquired to effect or
maintain any Fixed Rate Loan or Eurodollar Loan or any part thereof which the
Bank may sustain or incur as a consequence of any default in payment of the
principal amount of the Loan or any part thereof or interest accrued thereon.
The Bank shall provide to the Debtor a statement, supported where applicable by
documentary evidence, explaining the amount of any such loss or expense, which
statement shall be conclusive absent manifest error.
CHANGE IN LEGALITY
------------------
(a) Notwithstanding anything to the contrary contained elsewhere in
this Note, if any change after the date hereof in any law or regulation or in
the interpretation thereof by any governmental authority charged with the
3
<PAGE> 4
administration thereof shall make it unlawful (based on the opinion of any
counsel, whether in-house, special or general, for the Bank) for the Bank to
make or maintain any Eurodollar Loan or to give effect to its obligations as
contemplated hereby with respect to any Eurodollar Loan, then, by written
notice to the Debtor by the Bank, the Bank may require that all outstanding
Eurodollar Loans made hereunder be converted to Prime Loans, whereupon all such
Eurodollar Loans shall be automatically converted to Prime Loans as of the
effective date of such notice as provided in paragraph (b) below.
(b) For purposes of this Section, a notice to the Debtor by the Bank
pursuant to paragraph (a) above shall be effective, if unlawful and if any
Eurodollar Loans shall then be outstanding, on the last day of the then current
Interest Period; otherwise, such notice shall be effective on the date of
receipt by the Debtor.
EVENTS OF DEFAULT
-----------------
If the Debtor shall default in the punctual payment of any sum payable
with respect to, or in the observance or performance of any of the terms and
conditions of this Note, or any other agreement with or in favor of the Bank,
or if a default or event of default that is accelerated shall occur for any
reason under any such agreement, or in the event of default in any other
indebtedness of the Debtor in excess of $100,000, or if the Bank shall, in its
sole discretion, consider any of the obligations of the Debtor hereunder
insecure, or if any warranty, representation or statement of fact made in
writing to the Bank at any time by an officer, agent or employee of the Debtor
is false or misleading in any material respect when made, or if the Debtor
refuses upon the request of the Bank to furnish any information or to permit
inspection of any of its books or records within a reasonable amount of time,
or if the Debtor shall be dissolved or shall fail to maintain its existence in
good standing, or if the usual business of the Debtor shall be suspended or
terminated, of if any levy, execution, seizure, attachment or garnishment shall
be issued, made or filed on or against any material portion of the property of
the Debtor, or if the Debtor shall become insolvent (however defined or
evidenced), made an assignment for the benefit of creditors or make or send a
notice of intended bulk transfer, or if a committee of creditors is appointed
for, or any petition or proceeding for any relief under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, receivership,
liquidation or dissolution law or statute now or hereafter in affect (whether
at law or in equity) is filed or commenced by or against the Debtor or any
material portion of its property which, if such petition or proceeding for
relief is involuntarily commenced, shall not have been vacated, discharged or
stayed or bonded pending appeal within 60 days from the entry thereof, or if
any trustee or receiver is
4
<PAGE> 5
appointed for the Debtor or any such property, then and in any such event, in
addition to all rights and remedies of the Bank under applicable law and
otherwise, all such rights and remedies cumulative, not exclusive and
enforceable alternatively, successively and concurrently, the Bank may, at its
option, declare any and all of the amounts owing under the Note to be due and
payable, whereupon the maturity of the then unpaid balance hereof shall be
accelerated and the same, together with all interest accrued hereon, shall
forthwith become due and payable.
DEFINITIONS
-----------
A. ADJUSTED EURODOLLAR RATE
"Adjusted Eurodollar Rate" shall mean, with respect to any
Eurodollar Loan for any Interest Period, an interest rate per
annum (rounded upwards, if necessary, to the next 1/8 of 1%)
equal to the product of (i) the Eurodollar Rate in effect for
such Interest Period and (ii) Statutory Reserves.
"Eurodollar Rate" shall mean, with respect to any Eurodollar
Loan for any Interest Period, the rate (rounded upwards, if
necessary, to the next 1/8 of 1% at which dollar deposits
approximately equal in principal amount to the Bank's
Eurodollar Loan and for the maturity equal to the applicable
Interest Period are offered by the Bank in immediately
available funds in an Interbank Market for Eurodollars at
approximately 11:00am, New York City time two Business Days
prior to the commencement of such Interest Period.
B. BUSINESS DAY
A "Business Day" shall mean any day other than a Saturday,
Sunday or other day on which the Bank is authorized or
required by law or regulation to close, and which is a day on
which transactions in dollar deposits are being carried out in
London, England for Eurodollar Loans and New York City for
Fixed Rate Loans and Prime Loans.
C. INTEREST PERIOD
(i) For Eurodollar Loans, "Interest Period" shall mean
the period commencing on the date of move such Loan
and ending 1, 2, 3 or 6 months (as selected by the
Debtor and recorded on the grid attached hereto)
after the date of
5
<PAGE> 6
such Loan, however, the Interest Period shall not
exceed past the Maturity Date.
(ii) For Fixed Rate Loans, "Interest Period" shall mean
the period requested by the Debtor and agreed to by
the Bank, as available, however, the Interest Period
shall not extend past the Maturity Date.
(iii) For Prime Loans, "Interest Period" shall mean the
period agreed to by the parties hereto, however, the
Interest Period shall not extend past the Maturity
Date.
If any Interest Period would end on a day which shall not be a
Business Day, such Interest Period shall be extended to the
next succeeding Business Day.
D. STATUTORY RESERVES
"Statutory Reserves" shall mean a fraction (expressed as a
decimal) the numerator of which is the number one and the
denominator of which is the number one minus the aggregate of
the maximum reserve percentages (including, without
limitation, any marginal, special emergency, or supplemental
reserves) expressed as a decimal established by the Board of
Governors of the Federal Reserve System and any other banking
authority to which the Bank is subject, (a) with respect to
the Adjusted Certificate of Deposit Rate, for new negotiable
time deposits in dollars of over $100,000 with maturities
approximately equal to the applicable Interest Period, and (b)
with respect to the Adjusted Eurodollar Rate, for Eurocurrency
Liabilities as defined in Regulation D. Eurodollar Loans
shall be deemed to constitute Eurocurrency Liabilities and as
such shall be deemed to be subject to such reserve
requirements without benefit of or credit for
proration, exceptions or offsets which may be available from
time to time to the Bank under such Regulation D. Statutory
Reserves shall be adjusted automatically on and as of the
effective date of any change in any reserve percentage.
6
<PAGE> 7
MISCELLANEOUS
-------------
The Debtor hereby waives diligence, demand, presentment, protest and
notice of any kind, and assents to extensions of the time of payment, release,
surrender or substitution of security, or forbearance or other indulgence,
without notice.
This note may not be changed, modified or terminated orally, but only
by an agreement in writing signed by the party to be charged and consented to
in writing by the party hereof.
In the event the Bank or any holder hereof shall refer this note to an
attorney for collection, the Debtor agrees to pay, in addition to unpaid
principal and interest, all the costs and expenses incurred in attempting or
effecting collection hereunder, including reasonable attorney's fees, whether
or not suit is instituted.
In the event of any litigation with respect to this Note, THE BORROWER
WAIVES THE RIGHT TO A TRIAL BY JURY and all rights of setoff and rights to
interpose counter-claims and cross-claims. The Debtor hereby irrevocably
consents to the jurisdiction of the courts of the State of New York and of any
Federal court located in such State in connection with any action or proceeding
arising out of or relating to this Note. The execution and delivery of this
Note has been authorized by the Board of Directors and by any necessary vote or
consent of the stockholders of the Debtor. The Debtor hereby authorizes the
Bank to complete this Note in any particulars according to the terms of the
loan evidenced hereby. This Note shall be governed by and construed in
accordance with the laws of the State of New York applicable to contract made
and to be performed in such State, and shall be binding upon the successors and
assigns of the Debtor and inure to the benefit of the Bank, its successors,
endorsees and assigns.
If any term or provision of this Note shall be held invalid, illegal
or unenforceable the validity of all other terms and provisions hereof shall in
no way be affected thereby.
MICHAEL ANTHONY JEWELERS, INC.
BY: /s/ Michael A. Paolercio
------------------------------------
Treasurer
BY: /s/ Allan Corn
------------------------------------
Chief Financial Officer
7
<PAGE> 1
EXHIBIT 10.59
-------------
MICHAEL ANTHONY JEWELERS, INC.
DEFERRED COMPENSATION PLAN
FOREWORD
Effective as of March 4, 1996, Michael Anthony Jewelers, Inc. adopted the
Michael Anthony Jewelers, Inc. Deferred Compensation Plan to promote the
interest of Michael Anthony Jewelers, Inc. and its affiliates by permitting
Participants (as defined herein) to defer all or a portion of their
compensation.
SECTION 1
DEFINITIONS
As used herein, the following terms shall have the following respective
meanings, unless a different meaning is required by the context:
1.1 "APPROPRIATE FORM" means the written form provided or prescribed by
the Trustees for the particular purpose.
1.2 "BOARD OF DIRECTORS" means the Board of Directors of Michael Anthony
Jewelers, Inc.
1.3 "COMPANY" means Michael Anthony Jewelers, Inc. and any successor by
merger, purchase, reorganization or otherwise. If the Board of
Directors extends the Plan to any subsidiary or affiliate, that
subsidiary or affiliate shall be deemed the Company with respect to
its employees.
1.4 "COMPENSATION" means the total current and deferred cash compensation,
in the form of salary, bonus, and/or commissions payable by the
Company to a Participant.
1.5 "DEFERRAL AGREEMENT" means the Compensation deferral agreement between
the Participant and the Company on the Appropriate Form and which
shall comply with and be subject to the provisions of the Plan.
Deferral Agreements may be executed for the Company by its Chief
Executive Officer, Chief Operating Officer, or Chief Financial
Officer. In any conflict between the terms of the Plan and the
Deferral Agreements, the Plan shall control.
- 1 -
<PAGE> 2
1.6 "DEFERRED COMPENSATION ACCOUNT" means the account established for the
benefit of the Participant pursuant to Section 3 of the Plan.
1.7 "EFFECTIVE DATE" means March 4, 1996.
1.8 "PARTICIPANT" means an employee who is eligible to participate in the
Plan as provided in Section 2 hereof or a former employee whose
Deferred Compensation Account has not been fully distributed.
1.9 "PLAN" means the Michael Anthony Jewelers, Inc. Deferred Compensation
Plan as herein set forth, or as it may be amended from time to time.
1.10 "TRUSTEES" means the individuals then serving as Trustees under the
Trust Agreement for Michael Anthony Jewelers, Inc. Deferred
Compensation Plan.
- 2 -
<PAGE> 3
SECTION 2
ELIGIBILITY AND PARTICIPATION
2.1 ELIGIBILITY FOR PARTICIPATION
Upon designation by the President or Chief Executive Officer of the
Company, employees so designated may become Participants by completing
and submitting the Appropriate Form by the appropriate deadline.
The names of employees eligible to become Participants shall be set
forth in an Appendix to the Plan.
2.2 CONTINUATION OF PARTICIPATION
An employee who has become a Participant shall continue as a
Participant as long as he or she continues to be designated as
eligible and while the Plan is in effect, and thereafter as long as he
or she is entitled to benefits under the Plan.
2.3 APPROPRIATE FORM
Participation in the Plan shall be evidenced by a Deferral Agreement
between the Participant and the Company.
2.4 CONTENTS AND EFFECT OF APPROPRIATE FORM
In order to become a Participant, each employee shall complete the
Appropriate Form and:
(a) agree to the terms of the Plan;
(b) designate a beneficiary on the Appropriate Form;
(c) specify the amount or percentage of his or her otherwise
payable Compensation to be deferred in accordance with
Section 3;
(d) specify the investment of his or her
Deferred Compensation Account; and
(e) elect payment under Section 4.2.
- 3 -
<PAGE> 4
SECTION 3
DEFERRAL OF COMPENSATION
3.1 IN GENERAL
As of the Effective Date, the Company may commence to compensate each
Participant for his or her services as an employee in the form of both
current and deferred cash Compensation. The amount of the
Participant's combined current and deferred cash Compensation may be
adjusted from time to time by agreement of the Participant and the
Company without altering the terms of his or her Deferral Agreement;
however, the amount or percentages of such Compensation which shall be
paid currently and deferred shall be controlled by the terms of the
Deferral Agreement and shall be subject to the approval of the
Company.
3.2 DEFERRALS
(a) Prior to the Effective Date, the Participant shall elect the
amount or percentage, if any, of his or her Compensation to be
earned during the balance of 1996 which shall be deferred.
(b) Prior to the first day of each calendar year after 1996 during
which the Deferral Agreement is in effect, the Participant
shall elect the amount or percentage, if any, of his or her
Compensation to be earned (or, with respect to bonuses, to be
paid) during such succeeding calendar year which shall be
deferred.
(c) Any election executed prior to the Participant's commencement
of employment as an employee shall be effective as of such
commencement date. Upon being designated as eligible to
become a Participant, an employee shall be given 30 days to
make a deferral election with respect to Compensation to be
earned during his or her first year of Plan participation.
(d) Notwithstanding the preceding provisions of this Section 3.2,
the deferral percentage or amount in effect for the preceding
calendar year shall remain in effect with respect to any
calendar year for which no prior election has been filed.
- 4 -
<PAGE> 5
3.3 DEFERRED COMPENSATION ACCOUNTS
The deferred portion of a Participant's Compensation will not be paid
by the Company as it is earned by or becomes payable to the
Participant. Instead, the Company shall, pursuant to Section 3.4,
credit to such Participant's Deferred Compensation Account the amounts
of deferred Compensation as such amounts are earned or become payable,
and such deferred Compensation shall be paid in accordance with the
previous election of the Participant, under the provisions of Section
4.
3.4 "GRANTOR TRUST"
(a) The Company shall establish a "grantor trust" within the
meaning of Sections 671 through 679 of the Code) to satisfy its
obligations under Section 3.3.
(b) Each Deferred Compensation Account established pursuant to
Section 3.3 above shall be invested in such mutual fund(s) as
are designated by the Participant (from among a selection of
mutual funds made available by the Trustees from time to
time).
(c) Benefits under the Plan will be paid from the general assets
of the Company. The "grantor trust" established by the
Company shall not under any circumstances be deemed to be an
asset of this Plan but, at all times, shall remain a part of
the general assets of the Company, subject to claims of the
Company's creditors. Neither a Participant nor his or her
beneficiary shall have any interest in any specific asset of
the Company as a result of the Plan.
- 5 -
<PAGE> 6
SECTION 4
PAYMENT OF DEFERRALS
4.1 PAYMENT OF DEFERRALS
All amounts contributed to the Participant's Deferred Compensation
Account shall be payable to the Participant (or, upon his death, to
his beneficiary under such Deferred Compensation Account) upon the
earliest to occur of the following:
(a) The Participant's termination of employment due to retirement,
death or any other reason; or
(b) Pursuant to the Participant's election, January 1st of the
third full calendar year beginning after the calendar year of
the deferral (e.g., after a deferral of two full calendar
years for years after the first year).
4.2 SUBSEQUENT DEFERRAL
At the end of each two year deferral period, amounts previously
deferred by a Participant shall automatically be re-deferred for an
additional two year deferral period unless the Participant elects on
the Appropriate Form to receive the deferred amounts as a lump sum.
This election must be made prior to January 1st of the calendar year
prior to the time they would be re-deferred under the prior sentence.
There is no limit on how many times previous deferrals may be
re-deferred.
4.3 FORM OF PAYMENT
(a) All distributions pursuant to Section 4 to or on behalf of a
Participant shall be paid in a lump sum in cash as soon as
administratively possible after the date as of which the
distribution is payable.
(b) If a Participant dies before receiving payment of any amounts
credited to his or her Deferred Compensation Account, the
unpaid balance will be paid to his or her designated
beneficiary. If both the Participant and his or her
designated beneficiary die before such payment, the total
amount standing to his or her credit in the Deferred
Compensation Account shall be determined as of the date of the
death of the designated beneficiary and shall be paid as
promptly as possible in one lump sum to the estate of such
designated beneficiary.
- 6 -
<PAGE> 7
If no such beneficiary has been designated, or if no
designated beneficiary survives the Participant, the total
amount standing to his or her credit in the Deferred
Compensation Account shall be determined as of the date of the
Participant's death and shall be paid as promptly as possible
in one lump sum to the Participant's estate.
4.4 SPECIAL RULES UPON FINANCIAL HARDSHIP
(a) Subject to the approval of the Trustees, a Participant who has
incurred a "Financial Hardship" (as described below) may:
(i) Reduce the amount or percentage, if any, of his or
her Compensation to be earned during the current
calendar year which shall be deferred; and/or
(ii) Request distribution of an amount not in excess of
the sum of the amounts credited to the Deferred
Compensation Account to the extent that such
distribution is necessary to meet the Financial
Hardship.
(b) A "Financial Hardship" will be deemed to occur upon the
demonstration by the Participant that the funds are necessary
because of:
(i) Medical expenses described in Code Section 213(d)
previously incurred by the Participant, the
Participant's spouse, or any dependents of the
Participant (as defined in Code Section 152) or
necessary for those persons to receive medical care
as described in Code section 213(d);
(ii) The purchase (excluding mortgage payments) of a
principal residence for the Participant;
(iii) Payment of tuition and related fees and room and
board for the next 12 months for post-secondary
education for the Participant, his or her spouse,
children, or dependents;
(iv) The need to prevent the eviction of the Participant
from his or her principal residence or foreclosure on
the mortgage of the Participant's principal
residence; or
(v) Such other Financial Hardship as may be determined by
the Trustees.
- 7 -
<PAGE> 8
SECTION 5
MISCELLANEOUS
5.1 PARTICIPANTS 100% VESTED - UNFUNDED PLAN
Each Participant shall have a 100% nonforfeitable right to receive
payments from the Company under the Deferral Agreement, such payments
to be contributed or credited to his or her designated Deferred
Compensation Account.
Nothing contained in the Plan or Deferral Agreement and no action
taken pursuant to the provisions of the Plan or Deferral Agreement
shall create or be construed to create a "funded plan" for purposes of
the Employee Retirement Income Security Act of 1974.
Any Compensation deferred under the provisions of the Deferral
Agreement (and any earnings thereon) shall continue for all purposes
to be a part of the general funds of the Company, subject to the
claims of creditors. To the extent that any person acquires a right
to receive payments from the Company under the Deferral Agreement,
such right shall be no greater than the right of any unsecured general
creditor of the Company.
5.2 RESTRICTION AGAINST ASSIGNMENT
It is a condition of the Plan, and all rights of each Participant and
beneficiary shall be subject thereto, that no right or interest of any
Participant or beneficiary in the Plan and no benefit payable under
the Plan shall be subject in any manner to anticipation, alienation,
sale, transfer, assignment, pledge, encumbrance, or charge, and any
action by way of anticipating, alienating, selling, transferring,
assigning, pledging, encumbering, or charging the same shall be void
and of no effect; nor shall any such right, interest or benefit be in
any manner liable for or subject to the debts, contracts, liabilities,
engagements, or torts of the person entitled to such right, interest
or benefit, except as specifically provided in this Plan.
5.3 NO EMPLOYMENT RIGHTS
The establishment of the Plan shall not be construed as conferring any
rights upon any employee for employment or continuation of employment,
nor shall it be construed as limiting in any way the right of the
Company to discharge any employee or to treat him or her without
regard to the effect which such treatment might have upon him or her
as a Participant under the Plan.
- 8 -
<PAGE> 9
5.4 DISCHARGE OF PLAN OBLIGATIONS
The determination of the Trustees as to the identity of the proper
payee of any benefit payment and the amount properly payable shall be
conclusive, and payments in accordance with such determination shall
constitute a complete discharge of all obligations of the Company with
respect to such payment under the Plan.
- 9 -
<PAGE> 10
SECTION 6
ADMINISTRATION OF THE PLAN
6.1 ADMINISTRATION OF THE PLAN
Administration of the Plan shall be the responsibility of the Trustees
except to the extent that authority to act for it has otherwise been
reserved to the Board of Directors.
6.2 RESPONSIBILITY OF TRUSTEES
Subject to Section 6.1, the Trustees shall be responsible for the
administration, operation and interpretation of the Plan. The
Trustees shall establish rules from time to time for the
administration of the Plan. They shall have the exclusive right to
interpret the Plan and to decide any and all matters arising
thereunder or in connection with the administration of the Plan, and
they shall endeavor to act, whether by general rules or by particular
decisions, so as not to discriminate in favor of any person or class
of person. Such decisions, actions and records of the Trustees shall
be conclusive and binding upon it and all persons having or claiming
to have any right or interest in or under the Plan.
The Trustees shall maintain accounts to the extent they deem necessary
or appropriate showing the fiscal transactions of the Plan.
6.3 CLAIMS PROCEDURE
In the event that any Participant or other payee claims to be entitled
to a benefit under the Plan, and the Trustees determine that such
claim should be denied in whole or in part, the Trustees shall, in
writing, notify such claimant within 90 days of receipt of such claim
that his or her claim has been denied, setting forth the specific
reasons for such denial. Such notification shall be written in a
manner reasonably expected to be understood by such Participant or
other payee and shall set forth the pertinent sections of the Plan
relied on, and where appropriate, an explanation of how the claimant
can obtain review of such denial. Within 60 days after receipt of
such notice, such claimant may request, by mailing or delivery of
written notice to the Trustees, a review by the Trustees of the
decision denying the claim. If the claimant fails to request such a
review within such 60 day period, it shall be conclusively determined
for all purposes of this Plan that the denial of such claim by the
Trustees is correct. If such claimant requests a review within such
60 day period, the Participant or other payee shall have 30 days after
filing a request for review to submit additional written
material in support of the claim. Within 60
- 10 -
<PAGE> 11
days after the later of its receipt of the request for review or the
request to submit additional written material, the Trustees shall
determine whether such denial of the claim was correct and shall
notify such claimant in writing of its determination. If such
determination is favorable to the claimant, it shall be binding and
conclusive. If such determination is adverse to such claimant, it
shall be binding and conclusive unless the claimant notifies the
Trustees within 90 days after the mailing or delivery to him or her by
the Trustees of their determination, that the claimant intends to
institute legal proceedings challenging the determination of the
Trustees, and actually institutes such legal proceedings within 180
days after such mailing or delivery.
6.4 LIMITATION ON LIABILITY
The Trustees shall not be liable for any act or omission on their
part, excepting only their own willful misconduct or gross negligence
or except as otherwise expressly provided by applicable law. To the
extent permitted by law, and not otherwise covered by insurance,
Michael Anthony Jewelers, Inc. shall indemnify and save harmless the
Trustees against any and all claims, demands, suits or proceedings in
connection with the Plan that may be brought by Participants or their
beneficiaries, or by any other person, corporation, entity, government
or agency thereof; provided, however that such indemnification shall
not apply with respect to acts or omissions of willful misconduct or
gross negligence. The Board of Directors at the expense of the
Company, may settle such claim or demand asserted, or suit or
proceedings brought, against the Trustees when such settlement appears
to be in the best interest of the Michael Anthony Jewelers, Inc.
6.5 AGENT FOR SERVICE OF PROCESS
The Trustees or such other person as may from time to time be
designated by the Trustees shall be the agent for service of process
under the Plan.
6.6 DELIVERY OF ELECTIONS TO COMPANY
All elections, designation, requests, notices, instructions and other
communications required or permitted under the Plan from a
Participant, beneficiary or other person to the Company shall be on
the Appropriate Form, shall be mailed by first-class mail or delivered
to such address as shall be specified by the Company, and shall be
deemed to have been given or delivered only upon actual receipt
thereof by the Company at such location.
- 11 -
<PAGE> 12
6.7 DELIVERY OF NOTICE TO PARTICIPANTS
All notices, statements, reports and other communications required or
permitted under the Plan from the Company to any employee,
Participant, beneficiary or other person, shall be deemed to have been
duly given when delivered to, or when mailed by first-class mail,
postage prepaid, and addressed to such person at this address last
appearing on the records of the Company.
- 12 -
<PAGE> 13
SECTION 7
AMENDMENT OR TERMINATION OF THE PLAN
7.1 AMENDMENT OF THE PLAN
This Plan may be wholly or partially amended or otherwise modified at
any time by the Board of Directors; provided, however, that no
amendment or modification shall have any retroactive effect so as to
deprive any person of any amounts credited to his or her Deferred
Compensation Account.
7.2 TERMINATION OF THE PLAN
The Plan may be terminated at any time by the Board of Directors;
provided, however, that termination of the Plan shall not have any
retroactive effect so as to deprive any person of his or her Deferred
Compensation Account.
- 13 -
<PAGE> 14
SECTION 8
CONSTRUCTION OF THE PLAN
8.1 CONSTRUCTION OF THE PLAN
The validity of the Plan or any of the provisions thereof shall be
determined under and shall be construed according to the laws of the
State of New York.
8.2 HEADINGS
Headings or titles to sections or paragraphs in this document are for
convenience of reference only and are not part of the Plan for any
other purposes.
IN WITNESS WHEREOF, and as evidence of the adoption of the Plan by the Company,
it has caused the same to be signed by its officer duly authorized, and its
corporate seal to be affixed this 4th day of March, 1996.
ATTEST:
MICHAEL ANTHONY JEWELERS, INC.
By: /s/ Frances Durden By: /s/ FredricWasserspring
---------------------- ------------------------
Secretary President
- 14 -
<PAGE> 1
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
The following are the Company's subsidiaries as of April 24, 1996. All
beneficial interests are wholly-owned by the Company and are included in the
Company's consolidated financial statements.
Name of Subsidiary State of Organization Date of Incorporation
------------------ --------------------- ---------------------
F & F Acquisition Corp. New York 9-12-94
Mount Vernon Distributors, Inc. New York 10-15-93
<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>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-27-1996
<PERIOD-START> JAN-29-1995
<PERIOD-END> JAN-27-1996
<CASH> 6,673
<SECURITIES> 0
<RECEIVABLES> 31,637
<ALLOWANCES> (1,575)
<INVENTORY> 19,698
<CURRENT-ASSETS> 58,504
<PP&E> 34,680
<DEPRECIATION> 16,555
<TOTAL-ASSETS> 78,646
<CURRENT-LIABILITIES> 12,368
<BONDS> 19,192
<COMMON> 9
0
0
<OTHER-SE> 46,039
<TOTAL-LIABILITY-AND-EQUITY> 78,646
<SALES> 145,257
<TOTAL-REVENUES> 0
<CGS> 121,195
<TOTAL-COSTS> 24,062
<OTHER-EXPENSES> (442)
<LOSS-PROVISION> 246
<INTEREST-EXPENSE> 3,835
<INCOME-PRETAX> 1,214
<INCOME-TAX> 486
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 728
<EPS-PRIMARY> 9
<EPS-DILUTED> 0
</TABLE>
