SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 28, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From __________ to __________
Commission File Number 33-96680
HERFF JONES, INC.
(Exact Name of registrant as specified in its charter)
INDIANA 35-1637714
(State or other Jurisdiction of (I.R.S. Employer Identification Number)
Incorporation or Organization)
4501 West 62nd Street, Indianapolis, Indiana
(Address of principal executive offices)
46268
(Zip Code)
(317) 297-3740
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Number of shares outstanding of the issuer's Common Stock as of February
10, 1997:
Class
Common Stock, without par value 9,612,563
<PAGE>
INDEX
Part I. - Financial Information Page No.
Condensed Consolidated Statement of Operations -
Second Quarter Ended December 28, 1996
and December 30, 1995 3
Condensed Consolidated Balance Sheet -
As of December 28, 1996, June 29, 1996
and December 30, 1995 4
Condensed Consolidated Statement of Cash Flows -
Second Quarter Ended December 28, 1996
and December 30, 1995 5
Notes to Condensed Consolidated Financial Statements 6 - 8
Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 13
Part II. - Other Information 14
Item 6. Exhibits and Reports on Form 8-K
<PAGE>
Part I - Financial Information
Herff Jones, Inc.
Condensed Consolidated Statement of Operations
(Amounts in thousands of dollars, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Second Quarter Ended Six Months Ended
---------------------------------------- ----------------------------------------
December 28, 1996 December 30, 1995 December 28, 1996 December 30, 1995
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Net sales $ 68,288 $ 56,275 $ 114,944 $ 99,818
Cost of sales
(excludes ESOP compensation) 33,951 27,637 64,073 53,976
Selling, general, and
administrative expenses
(excludes ESOP compensation) 23,594 20,807 44,035 39,985
ESOP compensation
Current year service 3,663 3,166 7,721 5,926
Prior year service -- -- -- 4,033
--------- --------- --------- ---------
Income (loss) from operations 7,080 4,665 (885) (4,102)
Interest income 3 -- 8 615
Interest expense 5,135 5,344 10,112 8,848
--------- --------- --------- ---------
Income (loss) before income taxes and
extraordinary item 1,948 (679) (10,989) (12,335)
Income taxes (692) 259 3,901 4,700
--------- --------- --------- ---------
Net income (loss) before
extraordinary item 1,256 (420) (7,088) (7,635)
Extraordinary item: Prepayment fee on the
senior ESOP notes retirement, less
applicable tax benefit of $3,621 -- -- -- (5,884)
Net income (loss) $ 1,256 $ (420) $ (7,088) $ (13,519)
========= ========= ========= =========
Income (loss) per common share $ 0.63 $ (0.29) $ (3.66) $ (9.79)
========= ========= ========= =========
Weighted average number of
common shares outstanding 2,007,307 1,452,569 1,935,281 1,380,544
========= ========= ========= =========
</TABLE>
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
Herff Jones, Inc.
Condensed Consolidated Balance Sheet
As of December 28, 1996, June 29, 1996,
and December 30, 1995
(Amounts in thousands of dollars)
(Unaudited) (Unaudited)
December 28, June 29, December 30,
1996 1996 1995
--------- --------- ---------
Assets:
Current Assets
Cash and cash equivalents $ 2,638 $ 8,680 $ 2,653
Accounts receivable 40,168 54,066 32,125
Inventories 44,585 36,941 40,994
Prepaid expens 7,859 2,651 6,256
Deferred income taxes 5,321 5,321 2,412
--------- --------- ---------
Total Current Assets 100,571 107,659 84,440
Non-Current Assets
Property, plant, and
equipment 90,602 87,741 74,383
Accumulated depreciation (41,741) (38,700) (35,942)
--------- --------- ---------
Net Property, Plant,
and Equipment 48,861 49,041 38,441
Deferred financing cost,
net and other assets 5,122 5,603 6,460
--------- --------- ---------
Total Non-Current Assets 53,983 54,644 44,901
Total Assets $ 154,554 $ 162,303 $ 129,341
========= ========= =========
Liabilities and Shareholders' Equity:
Current Liabilities
Trade accounts payable $ 5,547 $ 7,541 $ 2,911
Salaries and wages payable 5,126 4,068 3,289
Interest payable 5,082 5,157 4,896
Customer deposits 32,355 19,856 27,045
Commissions payable 4,295 14,857 2,616
Income taxes accrued (4,236) 3,200 (8,255)
Other accrued liabilities 8,759 9,749 9,879
Current portion of
long-term debt 35,097 22,315 32,057
--------- --------- ---------
Total Current Liabilities 92,025 86,743 74,438
Non-Current Liabilities
Other 2,149 2,247 1,987
Long-term debt 160,278 173,574 175,850
Deferred income taxes (211) 81 (402)
--------- --------- ---------
Total Non-Current
Liabilities 162,216 175,902 177,435
Total Liabilities 254,241 262,645 251,873
Shareholders' Equity (Deficit)
Common stock 5,728 5,728 5,737
Retained earnings 112,056 119,525 104,955
Deferred compensation (214,696) (222,953) (231,195)
Foreign currency translation 8 11 11
Excess of cost over market
(shares committed to be
released) (2,783) (2,653) (2,040)
--------- --------- ---------
Total Shareholders'
Equity (Deficit) (99,687) (100,342) (122,532)
Total Liabilities and Shareholders'
Equity (Deficit) $154,554 $162,303 $129,341
======== ======== ========
See accompanying notes to unaudited condensed consolidated financial
statements.
<PAGE>
Herff Jones, Inc.
Consolidated Statement of Cash Flows
(Amounts in thousands of dollars)
(Unaudited)
Six Months Ended
------------------------------
December 28, December 30,
1996 1995
------------ ------------
Cash flows from operating activities:
Net loss $ (7,088) $ (13,519)
Adjustments to reconcile net
loss to net cash (used)
provided by operating activities:
Depreciation
and amortization 3,428 2,654
Amortization and write
off of financing cost 481 448
ESOP compensation
(before dividend exclusion) 8,057 10,155
Tax benefit of ESOP shares
(cost over market) 70 1,255
Other (3) 5
(Gain) loss on disposal of property,
plant and equipment, net (4) 21
Increase (decrease) in cash
generated by changes in
assets and liabilities
Accounts receivable 13,898 19,983
Inventories (7,644) (7,674)
Prepaid expenses (5,208) (4,760)
Trade accounts payable (1,994) (1,494)
Salaries and wages 1,058 (550)
Interest payable (75) 3,735
Customer deposits 12,499 12,159
Commissions payable (10,562) (12,066)
Income taxes payable (7,436) (18,683)
Deferred income taxes (292) --
Other accrued liabilities (1,088) (731)
Other assets -- (89)
--------- ---------
Total adjustments 5,185 4,368
--------- ---------
Net cash (used) provided by operating activities $ (1,903) $ (9,151)
Cash flows from investing activities:
Proceeds from disposal of property,
plant and equipment 10 13
Capital expenditures (3,254) (2,546)
Sale of marketable securities -- 6,219
--------- ---------
Net cash (used) provided
by investing activities $ (3,244) $ 3,686
Cash flows from financing activities:
Purchase of shares by the ESOP trust -- (188,278)
Redemption of common shares -- (8)
Premium on stock redemption -- (74)
Dividends declared (381) (2,687)
Increase (decrease) in revolver, net 10,122 (14,089)
Recapitalization financing cost -- (5,854)
Payment of long-term debt (4,679) (2,250)
Advance term payment (5,957) --
New borrowings -- 216,646
Prepayment of senior ESOP notes -- (69,826)
--------- ---------
Net cash (used) provided in financing
activities $ (895) $ (66,420)
Cash and cash equivalents:
Net increase (decrease) (6,042) (71,885)
Beginning of period 8,680 74,538
--------- ---------
End of period $ 2,638 $ 2,653
========= =========
See accompanying notes to unaudited condensed consolidated financial statements.
<PAGE>
Part I - Financial Information
Notes to Unaudited Condensed Consolidated Financial Statements
Six Months Ended December 28, 1996
(Amounts in thousands of dollars)
Note 1 - Adjustments
The unaudited condensed consolidated financial statements
presented herein have been prepared by the Company and contain all adjustments
(consisting of only normal recurring adjustments) necessary to present fairly
the Company's financial position as of December 28, 1996, and the results of its
operations for the three and six month periods ended December 28, 1996, and
December 30, 1995, and cash flows for the six month periods ended December 28,
1996, and December 30, 1995. These unaudited condensed consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
The significant accounting policies followed by the Company are set forth in
Note (3) of the Company's consolidated financial statements for the year ended
June 29, 1996, which have been included in the Company's Form 10-K which was
filed on September 24, 1996. Statement of Financial Accounting Standards No. 121
Accounting for Impairment of Long Lived Assets and Long Lived Assets to be
Disposed of was adopted by the Company on June 30, 1996 with no material impact
on results of operations. The Company has restated certain prior year items to
conform to the current year presentation.
The Company utilizes a 52/53 week fiscal year for accounting purposes ending on
the last Saturday in June. Fiscal 1996 contained 53 weeks with the additional
week included in the first quarter ended September 30, 1995. Fiscal 1997 will
contain 52 weeks.
Because of the seasonality of the Company's business, operating results on a
quarterly or six month basis are not necessarily indicative of operating results
for the full year. Historically, sales in the second fiscal quarter are at the
second highest level of the year, while the fourth fiscal quarter is the
highest, typically including over 40% of the year's sales.
Note 2 - Allowance for Doubtful Accounts and Returns
December 28, 1996 June 29, 1996 December 30, 1995
----------------- ------------- -----------------
$ 2,841 $ 4,883 $ 1,052
Note 3 - Inventories
The components of inventory balances are summarized below:
December 28, June 29, December 30,
1996 1996 1995
------- ------- -------
Raw materials and supplies
(includes gold) $19,863 $16,017 $17,280
Work-in-process 15,116 13,008 14,712
Finished goods 9,606 7,916 9,002
------- ------- -------
$44,585 $36,941 $40,994
======= ======= =======
<PAGE>
Note 4 - Financing
December 28, June 29, December 30,
1996 1996 1995
------------ ------------ ------------
Long-Term Debt consists
of the following:
Senior Bank Facility (Revolver) $ 25,161 $ 15,039 $ 22,557
Senior Bank Facility (Term) 42,614 53,250 57,750
Senior Subordinated Notes 120,000 120,000 120,000
1994 Industrial Development
Revenue Bonds Due in 2019 7,600 7,600 7,600
------------ ------------ ------------
195,375 195,889 207,907
Less: Current Portion (35,097) (22,315) (32,057)
------------ ------------ ------------
Long-Term Debt $ 160,278 $ 173,574 $ 175,850
============ ============ ============
Note 5 - Common Stock
December 28, June 29, December 30,
1996 1996 1995
------------ ------------ ------------
Common Shares
Authorized 16,500,000 16,500,000 16,500,000
Outstanding 9,618,996 9,618,996 9,636,923
Pursuant to the August 22, 1995 recapitalization plan in which the ESOP
purchased substantially all remaining shares of common stock held by
shareholders other than the ESOP, the weighted average number of common shares
outstanding was calculated on a pro forma basis assuming the recapitalization
occurred at June 25, 1995. The number of common shares outstanding immediately
after the recapitalization took place was 1,236,494. This number has been used
as the pro forma weighted average number of common shares outstanding for the
first one and a half months of fiscal 1996.
The actual weighted average number of common shares outstanding for the six
months ended December 30, 1995, was 3,722,253. The actual loss per common share
for the six months ended December 30, 1995, was ($3.63).
<PAGE>
Note 6 - Statement of Shareholders' Equity
<TABLE>
<CAPTION>
Foreign Total
Common Stock Retained Currency Deferred Excess Cost Shareholders'
Shares Amount Earnings Translation Compensation Over Market Equity
------ ------ -------- ----------- ------------ ----------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance June 29, 1996 9,618,996 $5,728 $119,525 $11 ($222,953) ($2,653) ($100,342)
Tax benefit of cost over market of
ESOP shares committed to be
released - - - - - 36 36
Foreign currency translation
adjustment - - - 1 - - 1
Shares committed to be released - - - - 4,129 (100) 4,029
Net loss for the quarter - - (8,344) - - - (8,344)
--------- ------ -------- --- --------- ------- ---------
Balance September 28, 1996 9,618,996 $5,728 $111,181 $12 ($218,824) ($2,717) ($104,620)
========= ====== ======== === ========= ======= =========
Tax benefit of cost over market of
ESOP shares committed to be
released - - - - - 34 34
Dividends declared ($.25/shares) - - (381) - - - (381)
Foreign currency
translation adjustment - - - (4) - - (4)
Shares committed to be released- - - - - 4,128 (100) 4,028
Net income for the quarter - - 1,256 - - - 1,256
--------- ------ -------- --- --------- ------- ---------
Balance December 28, 1996 9,618,996 $5,728 $112,056 $ 8 ($214,696) ($2,783) ($ 99,687)
========= ====== ======== === ========= ======= =========
</TABLE>
Excess of cost over market represents the cumulative difference between the
estimated market value of shares committed to be released and the cost of those
shares to the ESOP, net of tax effects.
<PAGE>
HERFF JONES, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Herff Jones is one of the leading manufacturers of recognition awards,
educational products and graduation-related products for the scholastic market
in the United States. Its product lines include class rings, medals and awards,
diplomas and graduation announcements (also referred to as "fine paper"),
yearbooks, caps and gowns, school photography services and multimedia education
products. The Company historically has sold approximately 80% of its products to
the high school and elementary market and approximately 20% of its products to
the college and commercial or nonscholastic market through a network of
approximately 700 primarily independent sales representatives. The Company
believes that the Herff Jones name is widely recognized in schools and
universities nationwide.
RESULTS OF OPERATIONS
The Company utilizes a 52/53 week year for accounting purposes. Fiscal 1996
contained 53 weeks and the additional week was included in the first quarter
ended September 30, 1995. Fiscal 1997 will contain 52 weeks. The Company's
business is highly seasonal. Historically, sales in the second fiscal quarter
are at the second highest level of the year. However, because of the seasonality
of the Company's business, operating results on a quarterly or six month basis
are not necessarily indicative of operating results for the full year.
For the second quarter ended December 28, 1996 and December 30, 1995.
General. Net sales rose 21.3% to $68.3 million in fiscal 1997 from $56.3
million in fiscal 1996. Operating income increased to $7.1 million in fiscal
1997 from $4.7 million in fiscal 1996. Net income increased to $1.3 million in
fiscal 1997 from a net loss of $.4 million in fiscal 1996.
Net Sales. Net sales increased $12.0 million or 21.3% to $68.3 million in
fiscal 1997 from $56.3 million in fiscal 1996. Such increases were due to sales
from Delmar (Delmar was acquired as of April 29, 1996) of $6.3 million,
increases in the Jewelry and Education product lines and additional increases in
the Yearbook and Photography product lines. Increases were due primarily to
modest price increases and small unit growth.
Cost Of Sales. Cost of sales increased $6.3 million or 22.8% to $33.9
million in fiscal 1997 from $27.6 million in fiscal 1996, primarily as a
function of increased sales and costs associated with Delmar. Cost of sales as a
percentage of sales is 49.7% in fiscal 1997 compared to 49.1% in fiscal 1996.
<PAGE>
Selling, General And Administrative Expenses. Selling, general and
administrative expense increased $2.8 million or 13.4% to $23.6 million in
fiscal 1997 from $20.8 million in fiscal 1996. The increase was attributable to
an increase in the Company's commission expense resulting from increased net
sales in fiscal 1997 coupled with increases to selling, general and
administrative expense spending related to Delmar. Selling, general and
administrative expense as a percentage of sales was 34.6% in fiscal 1997, down
from 37.0% in fiscal 1996. There are no commissions associated with Delmar's
photography dealer sales, which contributed to the decline in this relationship.
Further, the fiscal 1996 restructuring program at one of the Scholastic plants
has reduced general and administrative expenses in fiscal 1997 in comparison
with the prior year.
ESOP Compensation. ESOP compensation is $3.7 million in fiscal 1997
compared to $3.2 million in fiscal 1996. ESOP compensation expense increased $.5
million due to an increase in the estimated market value of the shares committed
to be released, partially offset by a dividend in the current quarter. There was
no such dividend in the prior year quarter.
Income from Operations. Operating income increased $2.4 million to $7.1
million in fiscal 1997 from $4.7 million in fiscal 1996. The increase was
predominantly due to increases in the operating income from Jewelry and the
Education product lines attributable to increased margins and stronger sales in
those lines described above.
Interest Expense. Interest expense decreased $.2 million to $5.1 million in
the second quarter of fiscal 1997 from $5.3 million in the corresponding quarter
of fiscal 1996 due to repayment of debt incurred in connection with the
recapitalization.
Income Tax. The second quarter income tax increased to an expense of $.7
million in fiscal 1997 from a benefit of $.3 million in fiscal 1996, due to
income before taxes and extraordinary item increasing $2.6 million, partially
offset by a lower fiscal 1997 effective tax rate.
Net Income (Loss). The second quarter net income increased $1.7 million
from a loss of $.4 million in fiscal 1996 to a net income of $1.3 in fiscal
1997. The increase was predominantly due to increases in the Jewelry and the
Education product lines.
For the six months ended December 28, 1996 and December 30, 1995.
General. Net sales rose 15.2% to $114.9 million in fiscal 1997 from $99.8
million in fiscal 1996. Operating losses were $.9 million in fiscal 1997
compared to of $4.1 million in fiscal 1996. Net losses were $7.1 million in
fiscal 1997 compared to a net loss before the extraordinary item of $7.6 million
in fiscal 1996. Net losses after the extraordinary item decreased to $7.1
million in fiscal 1997 from $13.5 million in fiscal 1996.
Net Sales. Net sales increased $15.1 million or 15.2% to $114.9 million in
fiscal 1997 from $99.8 million in fiscal 1996 due primarily to sales from Delmar
of $10.7 million (Delmar was acquired as of April 29, 1996), increases in the
Jewelry and Education product lines, and additional increases in the Yearbook
and Photography product lines. Increases were due primarily to modest price
increases and small unit growth.
Cost Of Sales. Cost of sales increased $10.1 million or 18.7% to $64.1
million in fiscal 1997 from $54.0 million in fiscal 1996, primarily as a
function of increased sales and costs associated with Delmar. Cost of sales as a
percentage of sales increased to 55.7% in fiscal 1997 from 54.1% in fiscal 1996,
primarily because of higher manufacturing costs at Delmar.
<PAGE>
Selling, General And Administrative Expenses. Selling, general and
administrative expense increased $4.0 million or 10.1% to $44.0 million in
fiscal 1997 from $40.0 million in fiscal 1996. The increase was primarily
attributable to increases in the Company's commission expense resulting from
increased net sales in fiscal 1997, coupled with increases in selling, general
and administrative expense related to Delmar. Selling, general and
administrative expense as a percentage of sales decreased to 38.3% in fiscal
1997, from 40.1% in fiscal 1996. There are no commissions associated with
Delmar's photography dealer sales, which contributed to the decline in this
relationship. Further, the fiscal 1996 restructuring program at one of the
Scholastic plants has reduced general and administrative expenses in fiscal 1997
in comparison with the prior year.
ESOP Compensation. ESOP compensation decreased $2.2 million to $7.7 million
in fiscal 1997 from $9.9 million in fiscal 1996. The August 22, 1995
recapitalization resulted in a significant increase in the number of shares to
be allocated to employee accounts effective each December 31 from 1995 through
2009. The shares allocated effective December 31, 1995 related to service
rendered by employees during calendar 1995. ESOP compensation expense for the
six months ended December 30, 1995 includes $4.0 million relating to employee
service rendered in fiscal 1995 and $5.9 million relating to employee service
rendered in fiscal 1996. The increase in the current year service expense over
the comparable prior year amount results primarily from an increase in the
market value of the shares committed to be released.
Loss from Operations. Operating losses were $.9 million in fiscal 1997
compared to $4.1 million in fiscal 1996. The decrease was predominantly due to
increased profitability in the Jewelry and Education product lines, coupled with
a decrease in ESOP compensation expense as discussed above, partially offset by
losses related to Delmar.
Net Interest. Net interest expense increased $1.9 million to $10.1 million
in the first six months of fiscal 1997 from $8.2 million in the corresponding
six months of fiscal 1996, due to a full six months in fiscal 1997 of increased
debt associated with the recapitalization.
Income Tax Benefit. The income tax benefit decreased to $3.9 million in
fiscal 1997 compared to $4.7 million in fiscal 1996 due to a decrease in the
loss before income taxes and the extraordinary item, coupled with a lower fiscal
1997 effective tax rate.
Extraordinary Item. In fiscal 1996 the Company incurred a prepayment fee of
$5.9 million, net of the applicable tax benefit, on the retirement of the Senior
ESOP Notes.
Net Income (Loss). Net losses decreased $6.4 million to a loss of $7.1
million in fiscal 1997 from a loss of $13.5 in fiscal 1996. The decreased loss
was primarily attributable to increased profitability in the Jewelry and
Education product lines, coupled with a decrease in ESOP compensation expense
and the fiscal 1996 extraordinary item as discussed above, partially offset by
seasonal losses related to Delmar, increased interest expense due to the
recapitalization debt being outstanding for a longer period, and the virtual
elimination of interest income in the current year.
<PAGE>
FINANCIAL CONDITION AND LIQUIDITY
The Company's business is highly seasonal. Historically the first six
months requires the use of working capital due to losses from operations, caused
by relatively low shipping of product; the absorption of fixed costs that are
incurred evenly throughout the year; the build up of inventories for the
pre-Christmas photography and class ring activity; the payment of the Company's
income taxes from the previous fiscal year; and the settlement of commission
accounts with the Company's independent sales representatives. This is partially
offset by the reduction of accounts receivable resulting from payment for
products shipped prior to graduations in the fourth quarter of the previous
fiscal year and the receipt of customer deposits for products that ship in the
spring.
Beginning in the first quarter of fiscal 1996, the August 22, 1995
recapitalization significantly changed the Company's financial condition, adding
substantial indebtedness and resulting in a deficit shareholders' equity
position. The cash flow pattern and expectations of the Company's highly
seasonal business result in the classification, at December 28, 1996, of $25.2
million of the senior bank facility (revolver) as a current liability, although
payment within the next year is not necessarily required by the terms of the
Company's financing arrangements.
Capital expenditures were $3.3 million and $2.5 million in the first six
months of fiscal 1997 and 1996, respectively. The increase over the prior year
is attributable to increased expenditures for equipment in the Photography and
Yearbook product lines.
A 25 cents per share dividend was paid during the second quarter of fiscal
1997, totaling $2.4 million, which was less than the 35 cents per share dividend
paid in the first quarter of fiscal 1996. Substantially all of this dividend was
paid to the ESOP trust, which used the funds to make payments on the loan from
the Company.
Income taxes accrued are a negative $4.2 million at December 28, 1996
compared to $3.2 million at June 29, 1996 and a negative $8.3 million at
December 30, 1995. The decrease from June is the result of the payment of taxes
for the prior fiscal year, coupled with the provision for the tax benefit
associated with the seasonal losses this year. The decreased tax benefit at the
end of the second quarter compared to the prior year second quarter end is the
result of the lower pre-tax loss in this fiscal year compared to the combined
pre-tax loss and pre-tax extraordinary item in the prior fiscal year.
For the six months ended December 28, 1996, cash and cash equivalents
declined $6.0 million to $2.6 million as compared to a decrease of $71.9 million
to $2.7 million for the six months ended December 30, 1995. The substantially
greater decline in the first six months of 1996 was primarily the result of
funding the ESOP trust's purchase of substantially all remaining outstanding
shares of the Company's stock in the first quarter of fiscal 1996.
Cash used in operating activities was $1.9 million in the six months ended
December 28, 1996, compared to $9.2 million in the six months ended December 30,
1995, as described below.
Net losses were $7.1 million in the six months of fiscal 1997 compared to
$13.5 million in fiscal 1996. This was primarily attributable to increases in
the Jewelry and Education product lines, coupled with a decrease in ESOP
compensation expense and the fiscal 1996 extraordinary item, partially offset by
increased seasonal losses related to Delmar, increased interest expense due to
the recapitalization debt being outstanding for a longer period, and the virtual
elimination of interest income in the current year.
Accounts receivable decreased $13.9 million in the first six months of
fiscal 1997 compared to a decline of $20.0 million in fiscal 1996. The reduction
in the decline was primarily the result of increased second quarter sales and
additional accounts receivable balances related to Delmar in the first six
months of fiscal 1997 compared with fiscal 1996.
<PAGE>
Customer deposits decreased $12.5 million in the first six months of fiscal
1997 compared to a decline of $12.2 million in fiscal 1996. The larger decline
was attributable to increased Delmar sales activity in the first six months of
fiscal 1997.
Income taxes accrued decreased $7.4 million in the first six months of
fiscal 1997 compared to a decline of $18.7 million in fiscal 1996. The decline
was primarily attributable to the decreased pre-tax loss of the Company in the
first six months of fiscal 1997 compared to the combined pre- tax loss and
pre-tax extraordinary item in fiscal 1996. Additionally, the payment of the
previous year tax liability in fiscal 1997 was lower than the payment made in
fiscal 1996 related to the 1995 tax liability.
Net cash used by investing activities was $3.2 million for the six months
ended December 28, 1996 compared to $3.7 million provided in the six months
ended December 30, 1995. The primary reason for the decrease was the sale of
$6.2 million of marketable securities in fiscal 1996.
Net cash used in financing activities was $.9 million in the six months
ended December 28, 1996 compared to $66.4 million used in the six months ended
December 30, 1995. The decrease was attributable to the fiscal 1996 purchase of
substantially all the remaining shares of Herff Jones stock by the ESOP trust
for $188.3 million, partially offset by the related net increase in borrowings
of $131.0 million. In addition, there were higher seasonal borrowings under the
revolver in fiscal 1997 of $10.1 million, partially offset by payments on
long-term debt of $10.6 million.
Deferred Compensation at December 28, 1996 decreased to $214.7 million from
$223.0 million at June 29, 1996 and $231.2 million at December 30, 1995. The
decrease is the result of recording ESOP shares committed to be released.
<PAGE>
PART II - OTHER INFORMATION
Exhibits and Reports on Form 8-K
Item 6.
(a) The following Exhibits are filed as a part of this report:
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K;
No reports on Form 8-K were filed during the quarter for which the report
is filed.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act as of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HERFF JONES, INC.
(Registrant)
By: / S / Lawrence F. Fehr
------------------------------
Lawrence F. Fehr
Vice President and
Chief Financial Officer
February 10, 1997
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
REGISTRANT'S CONSOLIDATED FINANCIAL STATEMENTS FOR THE SIX MONTHS ENDED DECEMBER
28, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<CIK> 0001000371
<NAME> Herff Jones, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-28-1997
<PERIOD-START> JUN-30-1996
<PERIOD-END> DEC-28-1996
<EXCHANGE-RATE> 1.000
<CASH> 2,638
<SECURITIES> 0
<RECEIVABLES> 40,168
<ALLOWANCES> 2,841
<INVENTORY> 44,585
<CURRENT-ASSETS> 100,571
<PP&E> 90,602
<DEPRECIATION> 41,741
<TOTAL-ASSETS> 154,554
<CURRENT-LIABILITIES> 92,025
<BONDS> 160,278
<COMMON> 5,728
0
0
<OTHER-SE> (105,415)
<TOTAL-LIABILITY-AND-EQUITY> 154,554
<SALES> 114,944
<TOTAL-REVENUES> 114,944
<CGS> 64,073
<TOTAL-COSTS> 64,073
<OTHER-EXPENSES> 51,756
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,104
<INCOME-PRETAX> (10,989)
<INCOME-TAX> 3,901
<INCOME-CONTINUING> (7,088)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (7,088)
<EPS-PRIMARY> (3.66)
<EPS-DILUTED> (3.66)
</TABLE>
