<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended October 28, 2000
Commission file number: 015230
MICHAEL ANTHONY JEWELERS, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 13-2910285
(State of Incorporation) (I.R.S. Employer Identification No.)
115 South MacQuesten Parkway
Mount Vernon, New York 10550-1724
(Address of principal executive offices)
Registrant's telephone number, including area code:
(914) 699-0000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No .
--- ---
CLASS
-----
Number of Shares
Common Stock, Par Value $.001 Outstanding as of
December 4, 2000
----------------
6,290,733
-1-
<PAGE> 2
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
PART I FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets,
October 28, 2000 (Unaudited) and
January 29, 2000................................................................................ 3
Consolidated Condensed Statements of Operations,
Three-Month and Nine-Month Periods Ended
October 28, 2000 and October 30, 1999 (Unaudited) .............................................. 4
Consolidated Condensed Statement of Changes in
Stockholders' Equity, Nine-Month Period Ended
October 28, 2000 (Unaudited).................................................................... 5
Consolidated Condensed Statements of Cash Flows,
Nine-Month Periods Ended
October 28, 2000 and October 30, 1999 (Unaudited)............................................... 6
Notes to Consolidated Condensed Financial
Statements........................................................................................ 7-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS...................................................................................... 10-15
PART II OTHER INFORMATION:
Item 1 Through Item 6 .............................................................................. 16
Signature Page..................................................................................... 17
</TABLE>
-2-
<PAGE> 3
MICHAEL ANTHONY JEWELERS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
October 28, January 29,
2000 2000
------------ ----------
(Unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 147 $ 2,580
Accounts receivable:
Trade (less allowances of $1,327 and $1,007, respectively) 34,330 25,521
Other 255 287
Inventories 21,324 16,270
Prepaid expenses and other current assets 1,149 1,389
Deferred taxes 682 682
-------- --------
Total current assets 57,887 46,729
PROPERTY, PLANT AND EQUIPMENT - net 20,399 20,614
INTANGIBLES - net 89 169
OTHER ASSETS 282 402
-------- --------
$ 78,657 $ 67,914
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 4,899 $ 2,198
Note payable 12,800 -
Current portion of long-term debt and lease liability 1,666 1,656
Accrued expenses 4,674 4,941
Taxes payable 108 1,974
-------- --------
Total current liabilities 24,147 10,769
-------- --------
LONG-TERM DEBT 11,422 12,684
-------- --------
DEFERRED TAXES 417 417
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - par value $1.00 per share;
1,000,000 shares authorized; none issued - -
Common stock - par value $.001 per share;
20,000,000 shares authorized; 8,317,000
and 8,308,000 shares issued and outstanding
as of October 28, 2000 and January 29, 2000 8 8
Additional paid-in capital 31,851 31,826
Retained earnings 17,020 18,242
Treasury stock, at cost, 2,027,000 and 1,951,000 shares as of
October 28, 2000 and January 29, 2000, respectively (6,208) (6,032)
-------- --------
Total stockholders' equity 42,671 44,044
-------- --------
$ 78,657 $ 67,914
======== ========
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
-3-
<PAGE> 4
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------------ ----------------------------
October 28, October 30, October 28, October 30,
2000 1999 2000 1999
------------------------------ ---------------------------
<S> <C> <C> <C> <C>
NET SALES $ 41,045 $ 49,935 $ 91,566 $ 104,248
COST OF GOODS SOLD 33,203 38,418 73,461 79,776
--------- --------- --------- ---------
GROSS PROFIT ON SALES 7,842 11,517 18,105 24,472
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 6,854 8,265 18,630 20,848
--------- --------- --------- ---------
OPERATING INCOME/(LOSS) 988 3,252 (525) 3,624
OTHER INCOME/(EXPENSE):
Gold consignment fee (347) (581) (815) (1,082)
Interest expense (294) (270) (787) (742)
Interest income 5 18 115 157
Other income 10 141 40 196
--------- --------- --------- ---------
Total Other Expense (626) (692) (1,447) (1,471)
--------- --------- --------- ---------
INCOME/(LOSS) BEFORE INCOME TAXES 362 2,560 (1,972) 2,153
INCOME TAX PROVISION/(BENEFIT) 137 972 (750) 818
--------- --------- --------- ---------
NET INCOME/(LOSS) $ 225 $ 1,588 $ (1,222) $ 1,335
========= ========= ========= =========
EARNINGS/(LOSS) PER SHARE
- BASIC AND DILUTED $ .04 $ .25 $ (.19) $ .20
========= ========= ========= =========
WEIGHTED AVERAGE NUMBER
OF SHARES 6,338 6,442 6,338 6,670
========= ========= ========= =========
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
-4-
<PAGE> 5
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Common Stock Additional Treasury Stock
------------ Paid-In Retained --------------
Shares Dollars Capital Earnings Shares Dollars Total
------ ------- ------- -------- ------ ------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance -
January 29, 2000 8,308 $ 8 $31,826 $18,242 (1,951) $(6,032) $44,044
Purchase of treasury stock - - - - (76) (176) (176)
Issuance of stock 9 - 25 - - - 25
Net loss - - - (1,222) - - (1,222)
------- ----- ----------- -------- ---------- ----------- --------
Balance - October 28, 2000 8,317 $ 8 $31,851 $17,020 (2,027) $(6,208) $42,671
===== ==== ======= ======= ======= ======== =======
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
-5-
<PAGE> 6
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
Nine Months Ended
----------------------------
October 28, October 30,
2000 1999
------------ -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss)/income $ (1,222) $ 1,335
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 2,644 3,027
Provision for accounts receivable 150 249
Provision for sales returns 170 (18)
Stock compensation 25 20
Gain on sale of property - (46)
(Increase)/decrease in operating assets:
Accounts receivable (9,097) (15,320)
Inventories (5,054) (2,931)
Prepaid expenses and other current assets 240 (263)
Other assets 120 138
Increase/(decrease) in operating liabilities:
Accounts payable 2,701 4,924
Accrued expenses (267) 1,718
Taxes payable (1,866) 14
-------- --------
Net cash used in operating activities (11,456) (7,153)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment - net (2,349) (5,769)
Proceeds from sale of property - 175
-------- --------
Net cash used in investing activities (2,349) (5,594)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt
and capital lease liabilities (1,252) (269)
Proceeds from long-term debt - 901
Proceeds from exercise of stock options - 45
Purchase of treasury stock (176) (1,938)
Proceeds from line of credit 12,800 13,300
-------- --------
Net cash provided by financing activities 11,372 12,039
-------- --------
DECREASE IN CASH AND EQUIVALAENTS (2,433) (708)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 2,580 961
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 147 $ 253
======== ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest and gold consignment fees $ 1,710 $ 2,050
Taxes $ 1,441 $ 804
</TABLE>
See accompanying notes to the consolidated condensed financial statements.
-6-
<PAGE> 7
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED OCTOBER 28, 2000
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 29, 2000 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The unaudited condensed consolidated financial statements as of October 28,
2000 and related notes have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. The
accompanying unaudited interim consolidated condensed financial statements
and related notes should be read in conjunction with the financial
statements and related notes included in the 2000 Annual Report to
Stockholders of Michael Anthony Jewelers, Inc. (the "Company").
The information furnished reflects, in the opinion of the management of the
Company, all adjustments, consisting of normal recurring accruals, which
are necessary to present a fair statement of the results for the interim
periods presented.
The interim figures are not necessarily indicative of the results to be
expected for the fiscal year due to the seasonal nature of the business.
New Accounting Pronouncements Not Yet Adopted
---------------------------------------------
In June 1998, SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," as amended by SFAS No. 137, is effective for fiscal
years beginning after June 15, 2000. SFAS No. 133 requires that all
derivative instruments be measured at fair value and recognized in the
balance sheet as either assets or liabilities. The Company is currently
evaluating the impact of adopting SFAS No. 133.
In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an interpretation of APB No. 25 ("FIN N. 44"). FIN No. 44
clarifies the application of Opinion No. 25 for certain issues including:
(a) the definition of employee for purposes of applying Opinion No. 25, (b)
the criteria for determining whether a plan qualifies as a noncompensatory
plan, (c) the accounting consequence of various modifications to the terms
of a previously fixed stock option or award, and (d) the accounting for an
exchange of stock compensation awards in a business combination. In
general, FIN No. 44 is effective July 1, 2000. The Company does not expect
the adoption of FIN No. 44 to have a material impact on its financial
position or results of operations.
-7-
<PAGE> 8
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED OCTOBER 28, 2000
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 29, 2000 IS UNAUDITED)
Effect of Recently Issued Accounting Standards.
-----------------------------------------------
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial
Statements". In June 2000, the SEC delayed the effective date of SAB 101 to
no later than the fourth quarter of fiscal years beginning after December
15, 1999. The Company does not expect the impact that the adoption of SAB
101 will have on its results of operations and financial position to be
material.
2. PRODUCT PRICING
---------------
The Company's products, the principal component of which is gold, are
generally sold at prices which are based on the market price of gold on the
date merchandise is ordered or shipped to the customer, therefore, the
Company's sales volume is significantly influenced by the market price of
gold. The selling prices for certain customers may be fixed for a specific
period of time. In such cases, the Company is able to shift a substantial
portion of the risks of gold price fluctuation by hedging against changes
in the price of gold by entering into forward contracts or purchasing
futures or options on futures.
The Company's consigned gold inventory is hedged against the effects of
price fluctuations. The Company has entered into arrangements with certain
gold lenders (the "Gold Lenders") pursuant to which the Company does not
purchase gold from the Gold Lenders until receipt of a purchase order from,
or shipment of jewelry to, its customers. These arrangements permit the
Company to match the sales price of the product with the price the Company
pays for the gold.
The average selling price of gold in the current quarter was $283 per ounce
compared to $272 per ounce for the quarter ended October 30, 1999.
3. INVENTORIES
-----------
Inventories consist of:
<TABLE>
<CAPTION>
October 28, January 29,
2000 2000
---------- -----------
(Unaudited)
(In thousands)
<S> <C> <C>
Finished goods $40,852 $34,908
Work in process 17,727 14,012
Raw materials 6,380 5,426
------- --------
64,959 54,346
Less:
Consigned gold 43,635 38,076
-------- -------
$21,324 $16,270
======= =======
</TABLE>
-8-
<PAGE> 9
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED OCTOBER 28, 2000
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 29, 2000 IS UNAUDITED)
3. INVENTORIES (Cont'd)
------------
Inventories as of October 28, 2000 and January 29, 2000 excluded
approximately 165,000 and 133,000 ounces of gold on consignment,
respectively.
4. STOCK REPURCHASE PROGRAM
------------------------
In December 1995, the Company announced a Common Stock repurchase program
pursuant to which the Company may repurchase up to 750,000 shares of Common
Stock. On April 4, 1997, the Board of Directors authorized an increase of
an additional 500,000 shares of Common Stock that the Company may
repurchase under the Stock Repurchase Plan. On May 26, 1998, the Board of
Directors authorized an increase of up to an additional 1,000,000 shares of
common stock that the Company may repurchase under the Stock Repurchase
Plan.
As of December 4, 2000, the Company had purchased a total of 2,027,000
shares on the open market for an aggregate cost of approximately
$6,208,000, of which 60,000 shares have been retired.
-9-
<PAGE> 10
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 29, 2000 IS UNAUDITED)
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED OCTOBER 28, 2000 AND
---------------------------------------------------------------------
OCTOBER 30, 1999
----------------
Net sales for the three months ended October 28, 2000 were approximately
$41,045,000, a decrease of 18% from net sales of approximately $49,935,000 for
the comparable period last year.
Gross profit margin decreased to approximately 19.1% of net sales for the three
months ended October 28, 2000 compared to approximately 23.1% for the comparable
period last year, primarily due to a change in the customer and product mix.
Selling, general and administrative expenses for the three months ended October
28, 2000 were approximately $6,854,000 a decrease of $1,411,000 or 17.1% from
approximately $8,265,000 for the comparable period last year. As a percentage of
net sales, selling, general and administrative expenses remained about the same
for the three months ended October 28, 2000 from comparable period of the prior
year. The decrease is primarily attributable to decreases in (i) advertising
related expenses, (ii) product and packaging supplies and (iii) payroll and
payroll related expenses.
Other expenses for the three months ended October 28, 2000 were approximately
$626,000, a decrease of $66,000 or 9.5% compared to approximately $692,000 for
the comparable period last year. The decrease was primarily due to a decrease in
gold consignment fees primarily due to the company's lower gold consignment
rates and levels. This decrease was partly offset by a decrease in other income
as compared to the prior comparable period.
As a result of the above factors the Company had net income for the three months
ended October 28, 2000 of approximately $225,000 or $.04 per share on 6,338,000
weighted average shares outstanding, compared to net income of $1,588,000 or
$.25 per share on 6,442,000 weighted average shares outstanding for the
comparable period last year.
-10-
<PAGE> 11
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 29, 2000 IS UNAUDITED)
RESULTS OF OPERATIONS FOR THE NINE MONTHS ENDED OCTOBER 28, 2000 AND
--------------------------------------------------------------------
OCTOBER 30, 1999
----------------
Net sales for the nine months ended October 28, 2000 were approximately
$91,566,000, a decrease of 12.2% from net sales of approximately $104,248,000
for the comparable period last year.
Gross profit margin decreased to approximately 19.8% of net sales for the nine
months ended October 28, 2000 compared to approximately 23.5% for the comparable
period last year, primarily due to a change in the customer and product mix.
Selling, general and administrative expenses for the nine months ended October
28, 2000 were approximately $18,630,000 a decrease of $2,218,000 or 10.6% from
approximately $20,848,000 for the comparable period last year. The decrease is
primarily attributable to decreases in (i) advertising related expenses, and
(ii) product and packaging supplies.
Other expenses for the nine months ended October 28, 2000 were approximately
$1,447,000, a decrease of $24,000 or 1.6% compared to approximately $1,471,000
for the comparable period last year. The decrease was primarily due to a
decrease in gold consignment fees primarily due to the company's lower gold
consignment rates and levels. This decrease was partly offset by a decrease in
other income as compared to the prior comparable period.
As a result of the above factors the Company had a net loss for the nine months
ended October 28, 2000 of approximately $1,222,000 or $.19 per share on
6,338,000 weighted average shares outstanding, compared to net income of
$1,335,000 or $.20 per share on 6,670,000 weighted average shares outstanding
for the comparable period last year.
-11-
<PAGE> 12
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 29, 2000 IS UNAUDITED)
Liquidity and Capital Resources
-------------------------------
The Company relies on a gold consignment program, short-term and long-term
borrowings and internally generated funds to finance its operations. The Company
fills most of its gold supply needs through gold consignment arrangements with
the Gold Lenders. Under the terms of those arrangements, the Company is entitled
to lease the lesser of (i) an aggregate of 270,000 ounces of fine gold or (ii)
consigned gold with an aggregate value equal to $95,000,000.
The consigned gold is secured by certain property of the Company including
inventory and machinery and equipment. The Company pays the Gold Lenders a
consignment fee based on the dollar value of ounces of gold outstanding under
their respective agreements, which value is based on the daily Second London
Gold Fix.
The Company believes that its financing rate under the consignment arrangements
is substantially similar to the financing rates charged to gold consignees
similarly situated to the Company. As of October 28, 2000, the Company held
approximately 165,400 ounces of gold on consignment with a market value of
approximately $43,635,000.
The consignment agreements contain certain restrictive covenants relating to
maximum usage, net worth, working capital and other financial ratios and each of
the agreements requires the Company to own a specific amount of gold at all
times. At October 28, 2000, the Company was in compliance with the covenants in
its consignment agreements and the Company's owned gold inventory was valued at
approximately $3,180,000. 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.
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,
projection, or shipment of jewelry to, its customers. The Company then either
establishes the selling price of the jewelry to its customers concurrently with
the required purchase of gold from the Gold Lenders or hedges against changes in
the price of gold by entering into forward contracts or purchasing futures or
options on futures that are listed on the COMEX.
-12-
<PAGE> 13
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 29, 2000 IS UNAUDITED)
Liquidity and Capital Resources (Continued)
-------------------------------
While the Company believes its supply of gold is relatively secure, significant
increases or rapid fluctuations in the cost of gold may result in reduced demand
for the Company's products. From January 29, 2000 until October 28, 2000, the
closing price of gold according to the Second London Gold Fix ranged from a low
of $253 per ounce to a high of nearly $324 per ounce. There can be no assurances
that fluctuations in the precious metals and credit markets would not result in
an interruption of the Company's gold supply or the credit arrangements
necessary to allow the Company to support its accounts receivable and continue
the use of consigned gold.
On January 27, 1999, the Company repaid its long-term debt with the insurance
companies by obtaining a loan from a new lender in the amount of $10,444,000. As
collateral for the loan, the Company granted the lender a lien on the Company's
machinery and equipment. The loan has an eight-year term and will accrue
interest at 6.85%. The loan does not contain any restrictive financial
covenants. At October 28, 2000, $9,549,000 of principal remained outstanding
under the loan.
On February 10, 1999, Michael Anthony obtained a loan in the amount of $937,500.
As collateral for the loan, the Company granted the lender a first mortgage on
one of its manufacturing facilities. The mortgage has a fifteen-year term and
accrues interest at an annual rate of 7.05%. At October 28, 2000, $875,000 of
principal remained outstanding under the loan.
In October 1995, the Company obtained a loan from a bank in the amount of
$2,500,000. As collateral for the loan, the Company granted the bank a first
mortgage on the Company's corporate headquarters. The mortgage has a ten-year
term and interest on the mortgage accrues at 8% per annum. In addition, the
mortgage contains certain restrictive financial covenants. At October 28, 2000,
the Company was in compliance with the covenants and $1,957,000 of principal
remained outstanding under the mortgage.
On September 16, 1999, the Company acquired two buildings which house two
manufacturing facilities, located at 70 and 60 South MacQuesten Parkway, Mount
Vernon, NY from MacQuesten Realty Company for a price of $2,450,000. The Company
incurred $929,000 of long term debt, which has a four-year term and accrues
interest at an annual rate of 7.50%, and paid the balance with cash from its
operations. At October 28, 2000, $707,000 of principal remained outstanding
under the loan.
The Company has a line of credit arrangement with a commercial bank which varies
seasonally from $10,000,000 to $18,350,000 (the "Line of Credit"). The Line of
Credit is secured by certain assets of the Company, including accounts
receivable and inventory. As of October 28, 2000 $12,800,000 was outstanding
under the Line of Credit.
-13-
<PAGE> 14
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 29, 2000 IS UNAUDITED)
Liquidity and Capital Resources (Continued)
-------------------------------
During the nine months ended October 28, 2000, cash used in operating activities
was $11,456,000. The increase compared to last year is primarily due to an
increase in inventory, and a decrease in accounts payable and taxes payable.
During the comparable period of the prior year, the Company used in $7,153,000
of cash in operating activities, primarily due to the decreased accounts
receivable.
Cash of $2,349,000 was used in investing activities as compared to $5,594,000
used during the comparable nine-month period last year. The decrease is
primarily due to the Company's purchases of certain assets, primarily molds,
machinery and equipment, from Town & Country Fine Jewelry Group for the
comparable period last year.
Cash of $11,372,000 was provided by financing activities during the nine-month
period, compared to $12,039,000 provided by the comparable period of the prior
year. The decrease was primarily due to the Company's issuance of long term debt
last year.
For the balance of fiscal 2001, the Company projects capital expenditures of
approximately $750,000.
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 2001, 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.
Forward Looking Statements
--------------------------
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements include the words "believe," "expect," "plans" or
similar words and are based in part on the Company's reasonable expectations and
are subject to a number of factors and risks, many of which are beyond the
Company's control. Actual results could differ materially from those discussed
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and "Year 2000 Compliance" as a result of any of the following
factors:
a) general economic conditions and their impact on the retail environment;
b) fluctuations in the price of gold and other metals used to manufacture
the Company's jewelry;
c) risks related to the concentration of the Company's customers,
particularly the operations of any of its top customers;
-14-
<PAGE> 15
ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 29, 2000 IS UNAUDITED)
Forward Looking Statements (Cont'd)
---------------------------
d) increased competition from outside the United States where labor costs
are substantially lower;
e) variability of customer requirements and the nature of customers'
commitments on projections and orders; and
f) the extent to which the Company is able to attract and retain key
personnel.
In light of these uncertainties and risks, there can be no assurance that the
forward-looking statements in this Quarterly Report on Form 10-Q will occur or
continue in the future. Except for its required, periodic filings under the
Securities Exchange Act of 1934, the Company undertakes no obligations to
release publicly any revisions to these forward looking statements that may
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
New Accounting Standards
------------------------
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities," as amended by
SFAS No. 137, which is effective for the fiscal years beginning after June 15,
2000. SFAS No. 133 establishes accounting and reporting standards for derivative
instruments and for hedging periods. It requires that an entity recognize all
derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The Company is currently
evaluating the impact of adopting SFAS No. 133.
In March 2000, the Financial Accounting Standards Board ("FASB") issued
Interpretation No. 44, "Accounting for Certain Transactions Involving Stock
Compensation - an Interpretation of APB No. 25 ("FIN No. 44"). FIN No. 44
clarifies the application of Opinion No. 25 for certain issues including: (a)
the definition of employee for purposes of applying Opinion No. 25, (b) the
criteria for determining whether a plan qualifies as a noncompensatory plan, (c)
the accounting consequence of various modifications to the terms of a previously
fixed stock option or award, and (d) the accounting for an exchange of stock
compensation awards in a business combination. In general, FIN No. 44 is
effective July 1, 2000. The Company does not expect the adoption of FIN No. 44
to have a material impact on its financial position or results of operations.
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) 101, "Revenue Recognition in Financial Statements". In
June 2000, the SEC delayed the effective date of SAB 101 to no later than the
fourth quarter of fiscal years beginning after December 15, 1999. The Company
does not expect the impact that the adoption of SAB 101 will have on its results
of operations and financial position to be material.
-15-
<PAGE> 16
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 and 2
Not applicable.
Item 3.
Quantitative and Qualitative Disclosure about Market Risk
---------------------------------------------------------
The carrying amounts of financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities,
approximate fair value because of the current nature of these instruments.
The carrying amount reported for revolving credit and long-term debt
approximate fair value because of the interest rates on these instruments
approximate current market rates. Because the interest rates on our long
term debt is fixed and our revolving debt is utilized seasonally we do not
hedge against interest rate increases.
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 form, or shipment of jewelry to, its customers. The Company then
either locks in the selling price of the jewelry to its customers
concurrently with the required purchase of gold from the Gold Lenders or
hedges against changes in the price of gold by entering into forward
contracts or purchasing futures or options on futures that are listed on the
COMEX. While the Company believes its supply of gold is relatively secure,
significant increases or rapid fluctuations in the cost of gold may result
in reduced demand for the Company's products.
All of our revenues are realized in U.S. dollars and all of our revenues are
from customers in the United States. Therefore, we do not believe we face
significant direct foreign currency exchange rate risk. We do not hedge
against foreign currency exchange rate changes.
Item 4 and 5
Not applicable
Item 6.
(a) Exhibits
--------
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
Not applicable.
-16-
<PAGE> 17
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MICHAEL ANTHONY JEWELERS, INC.
Dated: December 8, 2000 /s/ Allan Corn
---------------------------
Allan Corn
Senior Vice President and
Chief Financial Officer
-17-
<PAGE> 18
EXHIBIT INDEX
TO
FORM 10-Q FOR QUARTER ENDED OCTOBER 28, 2000
Exhibit No. Page No.
----------- --------
27 Financial Data Schedule 18
-18-
