Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934.
For the quarterly period ended May 25, 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 1-9637.
LILLIAN VERNON CORPORATION
----------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 13-2529859
---------------- -----------------
(State or other jurisdiction (IRS Employer Identification Number)
of incorporation or organization)
543 Main Street, New Rochelle, New York 10801
-----------------------------------------------
(Address of principal executive offices) (Zip Code)
914-576-6400
------------------------------------------------
(Registrant's telephone number, including area code)
N/A
-----------------------------------------------------
(Former name, former address and former fiscal year, if
changed since last report)
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 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
--- ---
Number of shares outstanding of each of the issuer's classes of common stock:
9,727,411 Shares of Common Stock, $.01 par value, as of July 2, 1996.
<PAGE>
LILLIAN VERNON CORPORATION
Form 10-Q
May 25, 1996
Part I. Financial Information Page #
- ------------------------------ --------
Item 1.
Consolidated Balance Sheets as of
May 25, 1996, May 27, 1995
(unaudited) and February 24, 1996
(audited) 3
Consolidated Statements of Operations
for the quarters ended May 25, 1996
and May 27, 1995 (unaudited) 4
Consolidated Statements of Cash Flows
for the quarters ended May 25, 1996
and May 27, 1995 (unaudited) 5
Notes to Consolidated Financial
Statements 6
Item 2.
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7-8
Part II. Other Information 9
- --------------------------
Signatures 10
Exhibits 11
Page 2 of 11
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
LILLIAN VERNON CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MAY 25, MAY 27, FEBRUARY 24,
1996 1995 1996
ASSETS ---------- -------- -----------
---------
(UNAUDITED) (AUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents .............. $ 15,293 $ 39,101 $ 25,771
Accounts receivable .................... 9,027 10,717 21,435
Merchandise inventories ................ 30,689 32,878 30,948
Deferred income taxes .................. 870 -- 923
Prepayments and other current assets ... 24,219 9,038 14,231
---------- ---------- ---------
Total current assets .................... 80,098 91,734 93,308
Property, plant and equipment, net (Note 1) 37,512 29,534 33,624
Deferred catalog costs .................... 6,339 7,874 6,506
Other assets .............................. 2,949 3,018 2,947
---------- ---------- -----------
Total ................................... $126,898 $132,160 $136,385
---------- ---------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
Trade accounts payable and accrued
expenses ............................... $ 10,500 $ 15,284 $ 12,115
Customer deposits ............ ......... 99 158 128
Current portion of long-term debt and
lease obligations ...................... 1,461 1,428 1,452
Income taxes payable..................... -- -- 2,892
Deferred income taxes.................... -- 58 --
---------- ---------- ----------
Total current liabilities ............... 12,060 16,928 16,587
Long-term debt, less current portion ...... 1,908 3,184 2,544
Capital lease obligations, less current
portion .................................. 289 474 339
Deferred compensation ..................... 3,200 3,071 3,099
Deferred income taxes ..................... 633 856 623
---------- ---------- ----------
Total liabilities ....................... 18,090 24,513 23,192
---------- ---------- -----------
Stockholders' equity:
Preferred stock, $.01 par value; 2,000,000
shares authorized; no shares issued and
outstanding ........................... -- -- --
Common stock, $.01 par value; 20,000,000
shares authorized; issued--10,336,415 shares,
9,934,537 shares and 9,993,643 shares . 103 99 100
Additional paid-in capital ............. 30,489 26,146 27,026
Retained earnings ...................... 87,603 85,416 91,923
Unearned compensation .................. (125) -- --
Treasury stock, at cost--608,458 shares,
227,699 shares and 359,999 shares ..... (9,262) (4,014) (5,856)
---------- --------- -------------
Total stockholders' equity .............. 108,808 107,647 113,193
---------- --------- -------------
Total ................................... $126,898 $132,160 $136,385
---------- --------- --------------
</TABLE>
See Notes to Consolidated Financial Statements
Page 3 of 11
<PAGE>
LILLIAN VERNON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
----------------------
MAY 25, MAY 27,
1996 1995
---------- ----------
<S> <C> <C>
Revenues ............................................ $26,313 $29,614
Costs and expenses:
Product and delivery costs ......................... 14,048 15,229
Selling, general and administrative expenses ...... 17,861 18,972
---------- ----------
31,909 34,201
---------- ----------
Operating loss .................................... (5,596) (4,587)
Interest income ..................................... 293 521
Interest expense .................................... (116) (152)
---------- ----------
Loss before income taxes .......................... (5,419) (4,218)
Provision for (benefit from) income taxes:
Current ............................................ (1,851) (1,741)
Deferred ........................................... 63 349
---------- ----------
(1,788) (1,392)
---------- ----------
Net loss .......................................... $(3,631) $(2,826)
---------- ----------
Net loss per common share ........................... $ (.38) $ (.29)
---------- ----------
Weighted average number of common shares outstanding 9,617 9,686
---------- ----------
</TABLE>
See Notes to Consolidated Financial Statements
Page 4 of 11
<PAGE>
LILLIAN VERNON CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FISCAL QUARTER ENDED
----------------------
MAY 25, MAY 27,
1996 1995
---------- ----------
(UNAUDITED)
<S> <C> <C>
Cash Flows from operating activities:
Net loss ......................................................... $ (3,631) $ (2,826)
Adjustments to reconcile net loss to net cash provided by (used
in) operating activities:
Depreciation .................................................... 602 644
Amortization .................................................... 57 87
(Increase) decrease in accounts receivable ...................... 12,408 10,765
(Increase) decrease in merchandise inventories .................. 259 (2,460)
(Increase) decrease in prepayments and other current assets .... (9,988) (1,543)
(Increase) decrease in deferred catalog costs ................... 167 (1,242)
(Increase) decrease in other assets ............................. (48) (59)
Increase (decrease) in trade accounts payable and accrued
expenses ....................................................... (1,615) 1,228
Increase (decrease) in customer deposits ........................ (29) (227)
Increase (decrease) in income taxes payable ..................... (2,892) (3,576)
Increase (decrease) in deferred compensation .................... 101 158
Increase (decrease) in deferred income taxes .................... 63 349
---------- ----------
Net cash provided by (used in) operating activities ........... (4,546) 1,298
---------- ----------
Cash flows from investing activities:
Purchases of property, plant and equipment ....................... (4,490) (591)
---------- ----------
Net cash used in investing activities .......................... (4,490) (591)
---------- ----------
Cash flows from financing activities:
Principal payments on long-term debt and capital lease
obligations ..................................................... (677) (669)
Proceeds from issuance of common stock ........................... 849 666
Dividends paid ................................................... (690) (679)
Payments to acquire treasury stock ............................... (1,575) --
Other ............................................................ 651 297
---------- ----------
Net cash used in financing activities .......................... (1,442) (385)
---------- ----------
Net increase (decrease) in cash and cash equivalents .......... (10,478) 322
---------- ----------
Cash and cash equivalents at beginning of period .................. 25,771 38,779
---------- ----------
Cash and cash equivalents at end of period ........................ $ 15,293 $39,101
---------- ----------
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest ........................................................ $ 216 $ 288
Income taxes .................................................... 3,104 3,884
Supplemental disclosure of noncash financing activities--see Note 2
</TABLE>
See Notes to Consolidated Financial Statements
Page 5 of 11
<PAGE>
LILLIAN VERNON CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The year-end balance sheet data
was derived from audited financial statements, but does not include all
disclosures required by generally accepted accounting principles. The interim
financial statements furnished with this report reflect all adjustments,
consisting only of items of a normal recurring nature, which are, in the
opinion of management, necessary for the fair statement of the consolidated
financial condition and consolidated results of operations for the interim
periods presented. It is suggested that these financial statements be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended February 24, 1996.
1. PROPERTY, PLANT AND EQUIPMENT
------------------------------
Property, plant and equipment are summarized as follows (in thousands):
<TABLE>
<CAPTION>
May 25, May 27, February 24,
1996 1995 1996
-------- -------- -------------
<S> <C> <C> <C>
Land and buildings $28,078 $20,196 $25,578
Machinery and equipment 23,851 22,214 21,894
Furniture and fixtures 3,248 3,040 3,240
Leasehold improvements 3,801 3,574 3,777
Capital leases 1,262 1,262 1,262
------- ------- -------
Total property, plant & equipment,
at cost 60,240 50,286 55,751
Less, accumulated depreciation and
amortization 22,728 20,752 22,127
------- ------- -------
Property, plant and equipment - net $37,512 $29,534 $33,624
------- ------- -------
</TABLE>
2. NONCASH FINANCING ACTIVITIES
----------------------------
During the three months ending May 25, 1996, non-qualified stock options
aggregating 180,000 shares were exercised by one of the Company's Officers,
with a total exercise price of $1,440,000. As consideration for
the exercise price and for income taxes required to be withheld, the Company
received an aggregate of 133,759 shares of Lillian Vernon Common Stock, which
are reported as Treasury Stock on the balance sheet. The number of shares was
determined by the market price of the Company's common stock on the exercise
date.
Page 6 of 11
<PAGE>
ITEM 2
- ------
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
- -----------------------------------------------------------
AND RESULTS OF OPERATIONS
- -------------------------
Results of Operations
- ---------------------
First Quarter Ended May 25, 1996
- --------------------------------
Revenues for the quarter ended May 25, 1996 of $26.3 million decreased by $3.3
million, or 11.1%, as compared to the same period last year. The decrease in
revenues was primarily attributable to the Company's strategic decision to
reduce catalog circulation by approximately 20% in the first quarter.
Circulation was reduced because higher paper prices required the Company to more
closely target catalog circulation to those customers whose sales response was
expected to cover the higher costs of the catalogs. The Company anticipates
increasing circulation in the second half of the fiscal year, its most important
selling season. Average revenue per order increased approximately 7%, and
customer response rate increased by approximately 6%.
Product and delivery costs decreased by $1.2 million, or 7.8%, in the quarter
ended May 25, 1996, as compared to the same period last year. The decrease in
costs was principally attributable to lower order volume. As a percentage of
revenues, these costs increased from 51.4% to 53.4% in the current quarter.
The rise in costs as a percentage of revenues was principally due to the
effect of fixed costs of the Company's distribution center and its labor force
on the lower sales volume. Gross profit on products sold was comparable to the
same period last year.
Selling, general and administrative expenses ("SG&A"), the largest component
of which is the cost of producing, printing and distributing the Company's
catalogs, decreased $1.1 million, or 5.9% in the current quarter, principally
because of the circulation reduction. As a percentage of revenues, SG&A costs
rose from 64.1% to 67.9%. Although average revenue per catalog rose by 13.5%,
catalog costs rose at a faster rate, causing SG&A as a percentage of revenues
to increase. Higher paper prices were the principal factor which raised the
average cost of the Company's catalogs in the first quarter, as compared to the
first quarter last year. The impact of these higher paper prices was to
increase expense by approximately $1.2 million on a pretax basis, or $.08 per
share. Higher paper costs are expected to continue to negatively affect the
Company's earnings for the second quarter of the fiscal year as well. The other
elements of SG&A costs declined in dollars in the current quarter, but rose as
a percentage of revenues due to the revenue reduction.
Interest income for the quarter ended May 25, 1996 of $293,000 decreased by
$228,000 as compared to the first quarter of the prior year, principally due
to a lower investment balance. Interest expense for the quarter ended May 25,
1996 of $116,000 was $36,000 lower than the same period last year, due to debt
repayments.
The effective income tax rate was 33% in the current quarter, the same as in
the first quarter of fiscal 1996.
Financial Condition
- -------------------
The Company's current ratio at May 25, 1996 was 6.64 to 1, as compared to 5.63
to 1 at February 24, 1996 and 5.42 to 1 at May 27, 1995. The Company's working
capital needs have been met with funds generated from operations.
During the quarter ended May 25, 1996, the Company used more funds for net
working capital needs than in the same quarter last year. Higher receivables
from the deferred billing program were collected in the current quarter as
compared with the first quarter last year. The net reduction in inventory levels
in the quarter also improved cash flow as compared to last year. However, the
Company spent more on future catalog editions than last year, and prepayments
and other current assets on the Balance Sheet increased, primarily reflecting a
higher paper inventory. Due to a very tight market for paper last year, the
Company purchased additional paper to ensure an uninterrupted supply to produce
its catalogs. The additional paper is
Page 7 of 11
<PAGE>
expected to be consumed by the end of fiscal 1997. During the quarter, the
Company spent $4.5 million on capital expenditures, including approximately $4.0
million related to the expansion of its National Distribution Center. In
addition, the Company paid $1.6 million to repurchase 114,700 shares of its
common stock, received $849,000 for the issuance of stock, principally due to
the exercise of stock options which were expiring, and paid a $.07 per share
cash dividend totalling $690,000.
As more fully described in the Company's Annual Report on Form 10K for the
fiscal year ended February 24, 1996, the Company has received a commitment from
Chemical Bank to provide a $40 million four-year revolving credit facility. The
facility can be used to finance working capital needs, the expansion of the
Company's National Distribution Center, and up to $10 million of inventory
letters of credit. The Company expects to finalize the facility in July 1996.
Page 8 of 11
<PAGE>
PART II.
OTHER INFORMATION
-------------------
Items 1, 2, 3, and 4 are not applicable and have been omitted.
Item 5. Other Information
- ------
On June 27, 1996, Robert S. Mednick joined the Company as Vice
President - Chief Financial Officer. For the past 17 years, Mr.
Mednick, 53, was Vice President of Finance and Chief Financial Officer
at U.S. Sales Corporation, one of the nation's largest privately-held
direct marketing catalog companies. He has 30 years of corporate
finance experience in the direct mail and retailing industries.
Mr. Mednick will report to Howard Goldberg, President and Chief
Operating Officer.
Item 6. Exhibits and Reports on Form 8-K
- -------
Exhibit #10.33: Employment Agreement dated May 30, 1996 between Robert S.
Mednick and Lillian Vernon Corporation.
Exhibit #11: Computation of Loss per Share Assuming Primary and Full Dilution
Reports on Form 8-K:
- Filed April 15, 1996 - Item 5 - Other Information: Employment
Agreement Between Registrant and Howard P. Goldberg - President
and Chief Operating Officer and Director.
Page 9 of 11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, a duly authorized officer and registrant's principal financial
and accounting officer.
Lillian Vernon Corporation
/s/ Robert S. Mednick
By: ----------------------------
Robert S. Mednick
Vice President-Chief Financial Officer
Page 10 of 11
Date: July 8, 1996
May 30, 1996
Mr. Robert S. Mednick
5711 Hoback Glen Road
Hidden Hills, California 91301
Dear Mr. Mednick:
We are writing to confirm our understanding regarding your
employment by Lillian Vernon Corporation (the "Company").
1. You will be employed as the Vice President - Chief Financial
Officer of the Company for a term of one (1) year commencing no later than
July 1, 1996 ("Initial Term"). After expiration of the Initial Term, your
employment will continue at will, subject to your rights herein with respect
to termination without "cause". In the event that you are terminated without
"cause", as that term is herein defined, at any time whether or not during the
Initial Term, you will be entitled to receive an amount equal to the pro rata
amount of your base salary to the later of eighteen (18) months from the
commencement of your employment or six (6) months after termination of your
employment. You shall have no obligation to mitigate damages. You will have
the customary duties and authority of a Chief Financial Officer of a public
company. You will report directly to the Company's President and Chief
Operating Officer, Howard Goldberg. You will also report, on a "dotted-line"
basis to the Company's Chief Executive Officer, Lillian Vernon. All of the
Company's finance, cash management, internal audit and accounting personnel,
including, among others, the Company's controller, shall report to you.
2. Your annual salary will be Two Hundred Twenty-Five Thousand
($225,000) Dollars. In addition to your base salary, you shall be entitled to
receive an annual bonus of up forty (40%)
<PAGE>
Mr. Robert Mednick
May 30, 1996
Page 2
percent of your base annual compensation as determined by the Compensation
Committee of the Board of Directors of the Company, in their sole discretion,
pursuant to the terms and conditions of the Company's Executive Bonus Plan.
3. The Company shall grant to you, on the date of the commencement
of your employment, non-qualified stock options for twenty-five thousand
(25,000) shares of common stock which will vest and become exercisable over a
three-year period - one-third (1/3) on each annual anniversary date of your
employment. The exercise price shall be the closing price of the stock on the
American Stock Exchange on the date of the commencement of your employment.
The Company shall also grant to you five thousand (5,000) shares of Restricted
Stock at par value, which will vest on the first anniversary date of your
employment with the Company. The above grants shall be made pursuant to the
Company's Performance Unit, Restricted Stock, Non-Qualified Option and
Incentive Stock Option Plan, as amended (the "Plan"). You shall be eligible to
receive further grants of options and restricted stock under the Plan, as
appropriate for your position, as determined by the Compensation Committee. In
the event that you are terminated at any time (whether or not during the
Initial Term) without "cause", all stock options which you hold will vest in
full and become immediately exercisable and all restricted stock which you
hold will immediately vest. In the event of a change of control (whether or
not during the Initial Term), as that term is herein defined, all stock
options which you hold will vest in full and become immediately exercisable
and all restricted stock which you hold will immediately vest. For purposes
hereof, a Change in Control shall be deemed to have occurred (i) if there has
occurred a "change in control", as the term "control" is defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended at the date
hereof (the "Act"), (ii) when any "person" (as such term is defined in
Sections 3(a)(9) and 13(d)(3) of the Act) becomes a beneficial owner, directly
or indirectly, of securities of the Company representing fifty (50%) percent
or more of the Company's then outstanding securities having the right to vote
on the election of directors, (iii) when individuals who are members of the
Company's Board of Directors at any one time shall immediately thereafter
cease to constitute a majority of the Board of Directors or (iv) when a
majority of the directors elected at an annual or special meeting of
stockholders are not individuals nominated by the Company's incumbent Board of
Directors.
4. The Company will reimburse you for a leased automobile for
business and personal use in an amount not to exceed $5,000 per year. You will
also be provided with a gas credit card and will be reimbursed for maintenance
and repairs on
<PAGE>
Mr. Robert Mednick
May 30, 1996
Page 3
this car. You will also be provided with appropriate automobile insurance. If
you are in an accident during personal use, you will be responsible for the
insurance deductible. You will receive a supplemental Form W-2 at the end of
the year for personal use of said automobile as required by applicable
Internal Revenue Service regulations.
5. During the employment period, you shall be furnished with such
benefits (including but not limited to any health, disability and life
insurance benefits and profit sharing plans and the like) as are made
available to other senior executives of the Company subject, however, to such
eligibility requirements, restrictions and limitations as may be generally
provided with regard to any such benefits and plans and subject always to the
Company's right to amend or terminate such benefits or plans for its employees
generally or its senior executives.
6. The Company will pay you directly or reimburse you for all
one-time expenses, not to exceed Twelve Thousand ($12,000) Dollars in the
aggregate, that you incur as a result of the relocation of you and your
household goods from California to the New York area.
7. The Company shall be entitled, in accordance with the procedures
set forth below, to terminate this Agreement and to discharge you for "cause"
without further obligation or liability on the part of the Company under the
terms of this Agreement or otherwise relating to your employment except for
accrued compensation and benefits. The term "cause" shall be limited to the
following grounds:
(i) You shall fail to remedy any intentional material breach of
your obligations to the Company, under this Agreement, within fifteen (15)
business days after you have received written notice from the Company
specifying such breach in reasonable detail, or if such breach cannot be
reasonably remedied within fifteen (15) business day period, you shall have
commenced diligent efforts to remedy such breach within such fifteen (15)
business day period and shall have remedied such breach within sixty (60) days
after you have received written notice as aforesaid;
(ii) You shall intentionally materially breach any such
obligation on a second occasion after you have received written notice of such
breach as provided in (i) above;
(iii) Conviction of a felony crime;
(iv) The crime of theft or intentional
<PAGE>
Mr. Robert Mednick
May 30, 1996
Page 4
misappropriation of the Company's property;
(v) Intentionally making a material false written statement to
the Company's Board of Directors regarding the affairs of the Company; and
(vi) You shall become disabled.
For purposes of this Agreement, "disability" shall mean an illness,
disability or other incapacity (whether physical or mental) which has
prevented you from performing your regular duties on a full-time basis for
ninety five (95) consecutive days, or ninety five (95) days in any consecutive
twelve (12) month period. In the event you dispute that you are disabled and
provide to the Company a written opinion of a licensed physician of the State
of New York to that effect, then you agree to submit to a physical examination
by a licensed physician of the State of New York chosen by the Company (the
"Company's Physician"). If the Company's Physician issues a written opinion to
the effect that you are disabled, then such dispute shall be submitted to a
third physician chosen jointly by you and the Company (the "Neutral
Physician"). If you and the Company cannot agree on the Neutral Physician
within ten (10) days after the issuance of the Company's Physician's opinion,
then either party may apply to the American Arbitration Association for the
appointment of the Neutral Physician. The determination of the Neutral
Physician shall be final and binding upon the parties hereto.
8. You hereby recognize as the exclusive property of and assign,
transfer and convey to the Company, its successors and assigns, without
further consideration, all of your right, title and interest in each and every
idea, invention, discovery or improvement (whether or not patentable or
copyrightable) relating to any subject matter with which your work for the
Company is concerned and which is made, conceived or developed by you, either
solely or jointly with others, during the period of your employment with the
Company or with the use of the Company's personnel, material or facilities
("Ideas", "Systems" and/or "Inventions").
You agree without charge to the Company, but at its expense, to
execute, acknowledge and deliver all such papers, including applications for
patents or copyrights, as may be necessary to obtain patents or convey rights
for Ideas, Systems or Inventions in any and all countries and to vest title
thereto in the Company, its successors or assigns or otherwise vest in the
Company full and complete ownership of any such Inventions, copyrights or
other protections for intellectual property.
<PAGE>
Mr. Robert Mednick
May 30, 1996
Page 5
You acknowledge that the Company's trade secrets and know-how form a
valuable part of its assets. These trade secrets include, but are not limited
to the following:
Acquisition and Development Plans
Marketing Plans
Sources of Supply
Methods of Operations
Processes, Methods and Specifications
Machine and Apparatus Design
Customer Lists
Credit Information
Prices
Scheduling
Inventory Information
Mailing Lists
Billing Information
Information Systems
Computer Programs.
You agree that you will not disclose any information relating to
these or any other trade secrets of the Company during or subsequent to your
employment for a period of three (3) years and indefinitely for processes,
methods and systems identified to you as confidential in writing within ninety
(90) days after the termination of your employment with the Company except as
authorized in writing by the Company, and you further agree that upon
termination of your employment by the Company, you shall return all Company
files, letters and data which may be in your possession. Information will be
deemed not confidential if it is in the public domain or contained in any
filing made with the United States Securities and Exchange Commission.
9. You shall be included in the coverage provided by the Company's
Directors and Officers Liability Policy. The Company shall provide you with
its standard indemnification agreement promptly upon the commencement of your
employment.
10. You represent and warrant that you are not contractually bound
to perform services for any person or entity and that you are not restricted
from performing your obligations hereunder by reason of a restrictive covenant
agreement or otherwise.
11. This Agreement contains our entire understanding, shall be
interpreted and governed under the laws of the State of New York without
regard to its conflict of laws rules and may not be amended except by a
further writing between the parties hereto.
<PAGE>
Mr. Robert Mednick
May 30, 1996
Page 6
Please acknowledge your Agreement with the foregoing by
countersigning below and returning the enclosed copy of this letter.
Very truly yours,
LILLIAN VERNON CORPORATION
By:
-----------------------------
LILLIAN VERNON
ACCEPTED AND AGREED:
By:
-----------------------------
HOWARD GOLDBERG
- --------------------------
ROBERT S. MEDNICK
<PAGE>
May 31, 1996
Mr. Howard Goldberg
President & COO
Lillian Vernon Corp.
543 Main Street
New Rochelle, New York 10801
It is my understanding that the agreement dated May 30, 1996 between myself
and Lillian Vernon Corp. (the "Company") shall not become effective until I
notify the Company of the date of commencement of my employment. Such date
shall not be later than July 1, 1996.
Very truly yours,
Robert S. Mednick
<PAGE>
Robert S. Mednick
5711 Hoback Glen Road
Hidden Hills, CA. 91302
June 13, 1996
Mr. Howard Goldberg:
This letter serves to notify you that I will be beginning my employment at
Lillian Vernon Corporation on June 27, 1996.
I am looking forward to working with you.
Sincerely,
Robert S. Mednick
EXHIBIT 11
LILLIAN VERNON CORPORATION AND SUBSIDIARIES
COMPUTATION OF LOSS PER SHARE ASSUMING PRIMARY AND FULL DILUTION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MAY 25, 1996 MAY 27, 1995
--------------------------- ---------------------------
PRIMARY FULLY DILUTED PRIMARY FULLY DILUTED
---------- --------------- ---------- ---------------
<S> <C> <C> <C> <C>
Net loss ............................. $(3,631) $(3,631) $(2,826) $ (2,826)
---------- --------------- ---------- ---------------
Common Shares:
Average number of shares outstanding 9,617 9,617 9,686 9,686
Assumed exercise of stock options .. 22 30 395 406
---------- --------------- ---------- ---------------
9,639 9,647 10,081 10,092
---------- --------------- ---------- ---------------
Loss Per Share ....................... $(0.38) $(0.38) $ (0.28) $ (0.28)
---------- --------------- ---------- ---------------
</TABLE>
Page 11 of 11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
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<PERIOD-END> MAY-25-1996
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<PP&E> 60,240
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<CURRENT-LIABILITIES> 12,060
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0
0
<COMMON> 103
<OTHER-SE> 108,705
<TOTAL-LIABILITY-AND-EQUITY> 126,898
<SALES> 26,313
<TOTAL-REVENUES> 26,313
<CGS> 14,048
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<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 116
<INCOME-PRETAX> (5,419)
<INCOME-TAX> (1,788)
<INCOME-CONTINUING> (3,631)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,631)
<EPS-PRIMARY> (0.38)
<EPS-DILUTED> (0.38)
</TABLE>
