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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 October 31, 1997.
[ ] 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 0-21862
OROAMERICA, INC.
(Exact name of registrant as specified in its charter)
Delaware 94-2385342
---------------------------- -------------------------------------
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or
organization)
443 North Varney Street, Burbank, California 91502
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(Address of principal executive offices) (Zip Code)
(818) 848-5555
--------------
(Registrants 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:
SHARES OUTSTANDING AS OF
CLASS December 11, 1997
----- -----------------
Common Stock 6,254,378
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OROAMERICA, INC.
REPORT ON FORM 10-Q FOR THE
QUARTER ENDED OCTOBER 31, 1997
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
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Item 1. Financial Statements
Condensed Consolidated Balance Sheets .................................. 1
Condensed Consolidated Statements of Income ............................ 2
Condensed Consolidated Statements of Cash Flows ........................ 3
Notes to Condensed Consolidated Financial Statements.................... 4 - 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations .................................... 7
PART II - OTHER INFORMATION
Items 1. through 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K ............................................ 11
SIGNATURES.................................................................................... 12
</TABLE>
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PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OROAMERICA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1997 1997
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<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 22,381 $ 6,592
Accounts receivable less allowance for returns
and doubtful accounts of $10,222 and $8,524 17,837 33,388
Other accounts and notes receivable 521 341
Inventories (Note 2) 9,411 14,906
Deferred income taxes 2,712 2,712
Prepaid income taxes - 1,281
Prepaid items and other current assets 582 1,302
----------- -----------
Total current assets 53,444 60,522
Property and equipment, net 10,219 10,464
Excess of purchase price over net assets acquired, net 4,395 4,375
Patents, net 5,666 5,299
Investments in and advances to affiliates 642 642
Non-current accounts receivable 768 490
Other assets 127 53
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$ 75,261 $ 81,845
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 514 $ 381
Notes payable (Note 3) - 1,322
Accounts payable 6,094 4,487
Income taxes payable 443 2,923
Accrued expenses 5,730 7,329
----------- -----------
Total current liabilities 12,781 16,442
Deferred income taxes payable 285 285
Long-term debt, less current portion 2,685 2,426
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Total liabilities 15,751 19,153
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Stockholders' equity:
Preferred stock, 500,000 shares authorized,
$.001 par value; none issued and outstanding -- --
Common stock, 10,000,000 shares authorized, $.001 par
value; 6,252,378, and 6,254,378 shares issued and outstanding
at January 31, 1997 and October 31, 1997, respectively 6 6
Paid-in capital 42,970 42,979
Retained earnings 16,534 19,707
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Total stockholders' equity 59,510 62,692
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$ 75,261 $ 81,845
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</TABLE>
See accompanying notes to condensed consolidated financial statements.
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OROAMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
PERIODS ENDED NOVEMBER 1, 1996 AND OCTOBER 31, 1997
(Unaudited)
(Dollars in thousands, except share amounts)
<TABLE>
<CAPTION>
FOR THE FOR THE
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------- -------------------------
NOVEMBER 1, OCTOBER 31, NOVEMBER 1, OCTOBER 31,
1996 1997 1996 1997
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<S> <C> <C> <C> <C>
Net sales $ 55,649 $ 46,373 $ 130,311 $ 106,608
Cost of goods sold, exclusive of
depreciation 44,900 35,899 106,260 84,282
---------- ---------- ---------- ----------
Gross profit 10,749 10,474 24,051 22,326
Selling, general and administrative
expenses (Note 5) 7,101 3,609 19,373 15,250
---------- ---------- ---------- ----------
Operating income 3,648 6,865 4,678 7,076
Interest expense 685 507 2,118 1,306
---------- ---------- ---------- ----------
Income before income taxes 2,963 6,358 2,560 5,770
Provision for income taxes 1,341 2,862 1,296 2,597
---------- ---------- ---------- ----------
Net income $ 1,622 $ 3,496 $ 1,264 $ 3,173
========== ========== ========== ==========
Net income per share (Note 1) $ .26 $ .56 $ .20 $ .51
========== ========== ========== ==========
Weighted average shares outstanding 6,274,709 6,271,236 6,271,153 6,271,014
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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OROAMERICA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
FOR THE
THIRTY-NINE WEEKS ENDED
-----------------------
NOVEMBER 1, OCTOBER 31,
1996 1997
-----------------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 1,264 $ 3,173
Adjustments to reconcile net income to net
cash provided by (used in)
operating activities:
Depreciation and amortization 1,863 1,782
Provision for losses on accounts receivable 353 647
Provision for estimated returns (750) (1,640)
Provision for uncollectible vendor advances (228) --
Gain on sale of fixed assets (20) --
Change in assets and liabilities, net of effects
from acquisition of business:
Accounts receivable (15,004) (12,990)
Other accounts and notes receivable 158 236
Inventories (1,451) (620)
Prepaid income taxes and income taxes payable 1,252 1,199
Prepaid items and other current assets 40 (741)
Long-term note receivable (807) 278
Accounts payable, accrued expenses and
deferred liabilities 4,549 (426)
-------- --------
Net cash used in operating activities (8,781) (9,102)
-------- --------
Cash flows from investing activities:
Capital expenditures (691) (1,423)
Acquisition of a business, net of cash acquired (Note 4) -- (4,506)
Proceeds from sale of fixed assets 32 --
-------- --------
Net cash used in investing activities (659) (5,929)
-------- --------
Cash flows from financing activities:
Gross borrowings under line-of-credit agreement -- 300
Repayment of borrowings under line-of-credit -- (300)
Principal repayments of long-term debt
and other notes payable (599) (767)
Issuance of common stock 19 9
-------- --------
Net cash used in financing activities (580) (758)
-------- --------
Decrease in cash and cash equivalents (10,020) (15,789)
Cash and cash equivalents at beginning of period 12,310 22,381
-------- --------
Cash and cash equivalents at end of period $ 2,290 $ 6,592
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 2,286 $ 1,268
Income taxes paid $ 44 $ 2,828
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
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OROAMERICA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The condensed consolidated financial statements included herein include
all adjustments, all of which are of a normal recurring nature, that, in the
opinion of management, are necessary for a fair presentation of financial
information for the thirteen and thirty-nine week periods ended November 1, 1996
and October 31, 1997. Certain information and footnote disclosures normally
included in consolidated financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. It is
suggested that these condensed consolidated statements be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's January 31, 1997 audited consolidated financial statements. The
results of operations for the thirteen and thirty-nine week periods ended
October 31, 1997 are not necessarily indicative of the results for a full year.
NET INCOME PER SHARE
Net income per share is computed by dividing net income for all periods
presented by the weighted average number of shares outstanding during each
period, including dilutive shares issuable upon the exercise of stock options
granted, calculated using the treasury stock method.
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands, except per ounce
data):
<TABLE>
<CAPTION>
January 31, October 31,
1997 1997
(Unaudited)
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<S> <C> <C>
Gold and other raw materials $ 2,880 $ 3,602
Manufacturing costs and other 9,041 11,247
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Jewelry inventories 11,921 14,849
Tobacco inventories -- 2,084
Perfume inventories -- 386
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Subtotal 11,921 17,319
LIFO cost less than FIFO cost (1,880) (1,783)
Allowance for vendor advances (630) (630)
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$ 9,411 $ 14,906
======== ========
Gold price per ounce $ 345.50 $ 311.40
======== ========
</TABLE>
The Company values its jewelry inventories using the last-in, first-out
(LIFO) method. The Company values its tobacco and perfume inventories using the
first-in, first-out (FIFO) method. The Company acquired approximately $4.9
million of gold jewelry inventory as a result of its acquisition of Jerry
Prince, Inc. (Note 4).
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The Company has several consignment agreements with gold consignors
providing for a maximum aggregate consignment of 270,000 fine troy ounces. In
accordance with the consignment agreements, title remains with the gold
consignors until purchased by the Company.
At January 31, 1997 and October 31, 1997, the Company held
approximately 147,500 and 182,000 fine troy ounces of gold under consignment
agreements, respectively. Consigned gold is not included in inventory and there
is no related liability recorded at quarter end. The purchase price per ounce is
based on the daily Second London Gold Fixing. Manufacturing costs included in
inventory represent costs incurred to process consigned and Company owned gold
into finished jewelry products.
The gold consignors and the Company's revolving credit lender
(Note 3) have a security interest in substantially all the assets of the
Company. The Company pays to the gold consignors a consignment fee based on the
dollar equivalent of ounces outstanding, computed based on the Second London
Gold Fixing, as defined in the agreements. Each consignment agreement is
terminable on 30 days notice by the Company or the consignor.
The gold consignment agreements require the Company to comply with
certain covenants with respect to its working capital, current ratio and
tangible net worth and to maintain the aggregate of its accounts receivable and
inventory of gold at specified minimums. Additional provisions of the agreements
(a) prohibit the payment of dividends, (b) limit capital expenditures, (c) limit
the amount of debt the Company may incur, (d) prohibit the Company from engaging
in mergers and acquisitions without prior approval, (e) require the Company to
maintain and assign as additional collateral key man life insurance on its chief
executive officer in the amount of $5.0 million, (f) prohibit termination of the
chief executive officer's employment for any reason other than death or
disability and prohibit any material amendment to his employment contract and
(g) require notice if the Company's principal stockholder (who is also its chief
executive officer) ceases to own at least 40% of the Company's outstanding
common stock. At October 31, 1997, the Company was in compliance with all of the
requirements of its consignment agreements.
NOTE 3 - NOTES PAYABLE
The Company has a revolving credit facility with Bank of America, NT &
SA which varies seasonally from $20.0 million to $35.0 million and may not
exceed the lesser of the credit line, as seasonally adjusted, or 80% of eligible
accounts receivable minus a reserve amount, as provided for under the credit
facility. Advances under the credit facility bear interest at the lender's prime
rate minus 0.25%, or, at the Company's option, at short-term fixed rates or
rates determined by reference to offshore interbank market rates plus 1.75%. The
revolving credit facility also provides for the issuance of banker's
acceptances, and for the issuance of letters of credit in an aggregate amount
not to exceed $2.5 million at any one time. Banker's acceptances bear an
interest rate based on the bank's prevailing discount rate at the time of
issuance plus 1.75%. No banker's acceptances were outstanding as of January 31,
1997 and October 31, 1997. No short-term advances were outstanding at January
31, 1997 and at October 31, 1997. Stand-by letters of credit outstanding at
January 31, 1997 and at October 31, 1997 totaled $1,583,000 and $1,500,000,
respectively. The revolving credit facility also provides for a separate $1
million reducing-revolving line of credit, whereby the amount of credit
available decreases $200,000 annually every June 30th until June 30, 1999, when
the then outstanding principal balance becomes payable in full. Advances under
the reducing-revolving credit facility bear interest at the bank's prime rate
plus .75%. No advances under the reducing-revolving credit facility were
outstanding at January 31, 1997 and October 31, 1997. The revolving credit
agreement expires August 1, 1998.
Amounts outstanding under the Bank of America credit agreement are
secured by substantially all of the Company's assets; the Company's gold
consignors also have security interests in these assets, and all
5
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of the consignors and Bank of America are parties to a collateral sharing
agreement. The revolving credit agreement contains substantially the same
covenants and other requirements as are contained in the Company's gold
consignment agreements (Note 2). At October 31, 1997, the Company was in
compliance with all of the requirements of the revolving credit agreement.
The Company assumed approximately $1.7 million of short-term notes payable
as a result of its acquisition of Jerry Prince, Inc. (Note 4). On October 31,
1997, the Company repaid $375,000 of the acquired debt.
NOTE 4 - ACQUISITION OF JERRY PRINCE, INC.
On October 29, 1997, the Company consummated an Asset Purchase-Sale Agreement
with Jerry Prince, Inc. ("JPI"), a jewelry manufacturer and distributor located
in San Diego, California, to purchase substantially all of JPI's assets
(principally accounts receivable and inventories) and to assume certain
liabilities incurred by JPI. The purchase price for these net assets
approximated $4.9 million and was funded from existing cash. The acquisition was
accounted for using the purchase method of accounting. Accordingly, the purchase
price has been preliminarily allocated to assets acquired and liabilities
assumed based on fair market value at the date of acquisition. The purchase
price allocation will be finalized upon completion of certain audit procedures
and will be reported in the Company's financial statements for the year ended
January 30, 1998.
NOTE 5 - LITIGATION SETTLEMENT AWARD
In September 1997, the Company recovered approximately $4.7 million, net of
attorney fees, from settlement of litigation involving the insurers for two
former gold jewelry manufacturers. The settlement award is included in selling,
general and administrative expense for the current quarter.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read together with the
financial statements and notes thereto. Additionally, the discussion below
contains "forward-looking statements" within the meaning of the federal
securities laws. The forward-looking statements in this report are subject to
risks and uncertainties that could cause actual results to differ materially
from those expressed in or implied by the statements.
GENERAL
The Company's business, and the jewelry business in general, is highly
seasonal. The third and fourth quarters of the Company's fiscal year, which
include the Christmas shopping season, historically have accounted for
approximately 60% of the Company's annual net sales and a somewhat higher
percentage of the Company's income before taxes. While the third and fourth
quarters generally produce the strongest results, the relative strengths of the
third and fourth quarters are subject to variation from year to year based on a
number of factors, including the purchasing patterns of the Company's customers.
The seasonality of the Company's business places a significant demand on working
capital resources to provide for a buildup of inventory in the third quarter
(which is primarily satisfied by an increase in the amount of gold held under
consignment) and in turn has led to a seasonal buildup in customer receivables
in the fourth quarter that must be funded by increased borrowings.
Prices for the Company's products generally are determined by reference
to the current market price of gold. Consequently, the Company's sales could be
affected by significant increases, decreases or volatility in the price of gold.
The Company accounts for its Jewelry inventories at the lower of cost or
market, using the last-in, first-out (LIFO) method to determine cost, less the
allowance for vendor advances. As a result, the Company's gross profit margin
can be affected by changes in LIFO reserves and the allowance for vendor
advances, as well as by changes in the amount of gold owned at each period end
and fluctuations in the price of gold.
On February 27, 1997, the Company announced its entry into the
premium cigar business. In its Form 10-K for fiscal year ended January 31, 1997,
the Company disclosed its intent to market perfume under an exclusive license
agreement with a French manufacturer. As of October 31, 1997, no premium cigar
revenues or perfume revenue have been recognized.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the
percentage of net sales represented by certain items included in the
consolidated statements of income.
<TABLE>
<CAPTION>
As a Percentage of Net Sales
----------------------------------------------------
Thirteen Weeks Ended Thirty-nine Weeks Ended
------------------------- --------------------------
November 1, October 31, November 1, October 31,
1996 1997 1996 1997
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<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 80.7 77.4 81.5 79.1
--------- --------- ---------- -----------
Gross profit 19.3 22.6 18.5 20.9
Selling, general and
administrative expenses 12.8 7.8 14.9 14.3
--------- --------- ---------- -----------
Operating income 6.5 14.8 3.6 6.6
Interest expense 1.2 1.1 1.6 1.2
--------- --------- ---------- -----------
Income before income taxes 5.3 13.7 2.0 5.4
Provision for income taxes 2.4 6.2 1.0. 2.4
--------- --------- ----------- -----------
Net income 2.9% 7.5% 1.0% 3.0%
========= ========= ========== ===========
</TABLE>
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THIRTEEN WEEKS ENDED OCTOBER 31, 1997 COMPARED TO THIRTEEN WEEKS ENDED
NOVEMBER 1, 1996
Net sales for the thirteen weeks ended October 31, 1997 decreased by
$9.3 million, or 16.7%, from the comparable period of the prior year. This
decrease was primarily attributable to a decrease in the amount of gold jewelry
(by weight) sold and to a decrease in sales prices due to a reduction in the
average market price of gold.
Gross profit for the thirteen week period ended October 31, 1997
decreased by $275,000, or 2.6%, from the comparable period of the prior year. As
a percentage of net sales, gross profit increased from 19.3% for the thirteen
week period ended November 1, 1996 to 22.6% for the current period. Excluding
the effects of gold price fluctuations and LIFO reserve and vendor allowance
adjustments on cost of goods sold, the gross margin for the thirteen week
periods ended October 31, 1997 and November 1, 1996 would have been 22.7% and
18.8%, respectively. The increase on a comparable basis was due to changes in
sales product mix. The gold prices used to cost inventory at October 31, 1997,
August 1, 1997, November 1, 1996 and August 2, 1996 were $311.40, $324.10,
$377.60 and $386.35 per ounce, respectively.
Selling, general and administrative expenses for the thirteen weeks
ended October 31, 1997, decreased by $3.5 million or 49.2%, from the comparable
period of the prior year. As a percentage of net sales, these expenses decreased
from 12.8% in the thirteen weeks ended November 1, 1996 to 7.8% in the thirteen
weeks ended October 31, 1997. The decrease in the dollar amount of selling,
general and administrative expenses is primarily attributable to increases in
other income due to a litigation settlement award approximating $4.7 million.
The increase in other income was offset by increased selling and product
expenses of $649,000, increased personnel costs of $434,000 and increased bad
debt expense of $126,000. Selling and product expense have risen due to
increases in cooperative advertising and royalty fee expense. Personnel costs
have increased due to increased personnel for the Company's cigar and perfume
operations and administrative functions, and to increased bonus expense. Bad
debt expense has increased due to the write-off of working capital advances to a
jewelry manufacturer.
Interest expense for the thirteen weeks ended October 31, 1997 decreased
by approximately $178,000 or 26.0% from the comparable period of the prior year.
Interest expense declined due to reduced borrowings under the gold consignment
agreements.
The effective tax rate in the thirteen weeks ended October 31, 1997 was
45% as compared to 45.3% in the comparable period of the prior year.
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THIRTY-NINE WEEKS ENDED OCTOBER 31, 1997 COMPARED TO THIRTY-NINE WEEKS ENDED
NOVEMBER 1, 1996
Net sales for the thirty-nine weeks ended October 31, 1997 decreased by
$23.7 million, or 18.2%, from the comparable period of the prior year. This
decrease was primarily attributable to a decrease in the amount of gold
jewelry (by weight) sold by the Company, and to a decrease in sales prices due
to a reduction in the average market price of gold.
Gross profit for the thirty-nine week period ended October 31, 1997
decreased by $1.7 million, or 7.2%, from the comparable period of the prior
year. As a percentage of net sales, gross profit increased from 18.5% for the
thirty-nine weeks ended November 1, 1996 to 20.9% for the current period.
Excluding the effects of gold price fluctuations and LIFO reserve and vendor
allowance adjustments on cost of goods sold, the gross margin for the
thirty-nine week periods ended October 31, 1997 and November 1, 1996 would have
been 20.9% and 18.1% of sales, respectively. The increase on a comparable basis
was due to changes in sales product mix. The gold prices used to cost inventory
at October 31, 1997, January 31, 1997, November 1, 1996 and February 2, 1996
were $311.40, $345.50, $377.60 and $414.50 per ounce, respectively.
Selling, general and administrative expenses for the thirty-nine weeks
ended October 31, 1997 decreased by $4.1 million or 21.3% from the comparable
period of the prior year. As a percentage of net sales, these expenses decreased
from 14.9% in the thirty-nine weeks ended November 1, 1996 to 14.3% in the
current period. The decrease in the amount of selling, general and
administrative expenses is primarily attributable to increased other income of
$4.8 million and decreased professional and consulting services of $1.5 million.
The increase in other income is primarily attributable to a litigation
settlement award approximating $4.7 million. Professional and consulting
services decreased due to a reduction in legal fees caused by the settlement of
certain litigation in fiscal 1997. These decreases to selling, general and
administrative expense were offset by increased selling and product costs of
$830,000, increased personnel costs of $506,000, increased temporary personnel
expense of $480,000 and increased bad debt expense of $294,000. Selling and
product costs have risen due to increases in cooperative advertising and royalty
fee expense. Personnel costs have increased primarily due to increased personnel
for cigar and perfume operations and administrative functions, and to increased
bonus expense. Temporary personnel costs have increased due to a higher
utilization of temporary personnel in the Company's operations. Bad debt expense
has risen primarily due to the write-off of certain accounts receivable due to
bankruptcy filings.
Interest expense for the thirty-nine weeks ended October 31, 1997
decreased by approximately $812,000 or 38.3% from the comparable period of the
prior year. Interest expense declined due to reduced borrowings under the line
of credit and gold consignment agreements.
The effective tax rate in the thirty-nine weeks ended October 31, 1997
was 45% as compared to 50.6% in the comparable period of the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company has satisfied its working capital requirements through
internally generated funds, a gold consignment program and borrowings under its
revolving credit facilities. A substantial portion of the Company's gold supply
needs have been satisfied through gold consignment arrangements with various
banks and bullion dealers. Under the consignment arrangements, the Company may
defer the purchase of gold used in the manufacturing process and held in
inventory until the time of sale of finished goods to customers. Financing costs
under the consignment arrangements currently are approximately 3% per annum of
the market value of the gold held under consignment, computed daily. The gold
consignment agreements contain covenants restricting the amount of consigned
gold the Company may reconsign or otherwise have outside its possession at any
one time. The aggregate amount of gold that the Company may acquire under its
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consignment arrangements was approximately 270,000 ounces at October 31, 1997
and is subject to fluctuations based on changes in the market value of gold. At
October 31, 1997, the Company held approximately 182,000 ounces of gold on
consignment.
The Company's credit facility with Bank of America NT & SA expires
August 1, 1998. The credit facility provides for borrowings which vary
seasonally from $20.0 million to $35.0 million and are limited to the lesser of
the credit line, as seasonally adjusted, or 80% of eligible accounts receivable
minus a reserve amount as provided for under the credit facility.
For further information regarding the Company's gold consignment
agreements and revolving credit facilities, see Notes to Condensed Consolidated
Financial Statements.
Net accounts receivable increased from $17.8 million at January 31, 1997
to $33.4 million at October 31, 1997. The increase in net accounts receivable
results primarily from seasonal fluctuations in sales. The allowance for returns
and doubtful accounts decreased from $10.2 million at January 31, 1997 to $8.5
million at October 31, 1997. The decrease in the amount of the allowance at
October 31, 1997 is primarily attributable to seasonal adjustments in the
reserve for returns.
Inventories increased from $9.4 million at January 31, 1997 to $14.9
million at October 31, 1997. The increase is primarily attributable to the
acquisition of jewelry inventories and to the build up of tobacco and perfume
inventories of approximately $2.5 million.
Accounts payable decreased from $6.1 million at January 31, 1997 to $4.5
million at October 31, 1997. This decrease is primarily attributable to seasonal
gold purchases and the timing of payments. Accrued expenses increased from $5.7
million at January 31, 1997 to $7.3 million at October 31, 1997. This increase
results from increased amounts accrued for payroll, selling expense and gold
price adjustments.
During the thirteen weeks ended October 31, 1997, the Company has
expended approximately $4.0 million for its cigar and perfume operations,
principally for the purchase of tobacco and perfume inventories. The Company
also estimates that its capital expenditure requirements for its cigar
operations for the balance of fiscal 1998 will approximate $0.5 million. The
Company believes that funds generated from operations, the gold consignment
program and the borrowing capacity under its revolving credit facility will be
sufficient to finance its working capital and capital expenditure requirements
for at least the next 12 months.
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PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K:
On September 9, 1997, the Company filed a report on Form 8-K disclosing,
under Item 2, that OroAmerica, Inc. entered into a Purchase-Sale agreement
with Ravel, Inc., a manufacturer of gold jewelry, for the purchase of
Ravel's entire gold in-house inventory and consignment inventory held by
certain Ravel consignment customers.
On November 12, 1997, the Company filed a report on Form 8-K, disclosing
under Item 2, that OroAmerica, Inc. had entered into an Asset Purchase-
Sale Agreement with Jerry Prince, Inc. ("JPI"), a California-based jewelry
manufacturer and distributor, for the purchase of JPI's substantial assets
and assumption of certain liabilities, expenses and debts incurred by JPI.
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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.
OROAMERICA, INC.
Date: December 11, 1997 By: SHIU SHAO
----------------- -----------------------------
SHIU SHAO, Vice President and
Chief Financial Officer
Date: December 11, 1997 By: BETTY SOU
----------------- -----------------------------
BETTY SOU, Controller
12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OROAMERICA,
INC.'S CONSOLIDATED BALANCE SHEET AT OCTOBER 31, 1997 (UNAUDITED) AND
CONSOLIDATED STATEMENT OF INCOME FOR THE THIRTY-NINE WEEKS ENDED OCTOBER 31,
1997 (UNAUDITED) AND IS QUALIFIED IN ITS ENTIRERTY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-30-1997
<PERIOD-END> OCT-31-1997
<CASH> 6,592
<SECURITIES> 0
<RECEIVABLES> 41,912
<ALLOWANCES> 8,524
<INVENTORY> 14,906
<CURRENT-ASSETS> 60,522
<PP&E> 22,174
<DEPRECIATION> 11,710
<TOTAL-ASSETS> 81,845
<CURRENT-LIABILITIES> 16,442
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 62,692
<TOTAL-LIABILITY-AND-EQUITY> 81,845
<SALES> 106,608
<TOTAL-REVENUES> 106,608
<CGS> 84,282
<TOTAL-COSTS> 84,282
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 647
<INTEREST-EXPENSE> 1,306
<INCOME-PRETAX> 5,770
<INCOME-TAX> 2,597
<INCOME-CONTINUING> 3,173
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,173
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
