<PAGE> 1
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 April 30, 1999.
[ ] 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
(Address of principal executive offices) (Zip Code)
(818) 848-5555
(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:
SHARES OUTSTANDING AS OF
CLASS June 9, 1999
----- -------------------------
Common Stock, $.001 par value 6,123,378
<PAGE> 2
OROAMERICA, INC.
REPORT ON FORM 10-Q FOR THE
QUARTER ENDED APRIL 30, 1999
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE
<S> <C> <C> <C>
Item 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets ............................................................ 1
Consolidated Statements of Income ...................................................... 2
Consolidated Statements of Cash Flows .................................................. 3
Notes to Condensed Consolidated Financial Statements.................................... 4
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS .................................................... 8
PART II - OTHER INFORMATION
Items 1 through 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K ................................................................ 13
SIGNATURES ....................................................................................................... 14
</TABLE>
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OROAMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, January 29,
(Dollars in thousands, except share amounts) 1999 1999
- --------------------------------------------------------------------------------------------------------------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 22,636 $ 30,263
Accounts receivable less allowance for returns
and doubtful accounts of $9,420 and $11,797 24,633 19,454
Other accounts and notes receivable 629 969
Inventories (Note 2) 12,636 13,694
Deferred income taxes 3,205 3,205
Prepaid items and other current assets 1,826 788
--------------- ---------------
Total current assets 65,565 68,373
Property and equipment, net 12,198 11,342
Goodwill and other intangible assets, net 5,402 5,532
Patents, net 4,565 4,687
Other assets 439 169
--------------- ---------------
$ 88,169 $ 90,103
=============== ===============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,851 $ 8,165
Income taxes payable 1,882 1,660
Accrued expenses 6,521 7,821
--------------- ---------------
Current and total liabilities 15,254 17,646
Stockholders' equity:
Preferred stock, 500,000 shares authorized, $.001 par value;
none issued and outstanding - -
Commonstock, 10,000,000 shares authorized, $.001 par value; 6,368,878 an
6,366,378 shares issued at April 30, 1999
and January 29, 1999, respectively 6 6
Paid-in capital 43,564 43,551
Note receivable from stock sales (190) (190)
Treasury stock, 95,000 shares at April 30, 1999 and January 29, 1999 (576) (576)
Retained earnings 30,111 29,666
--------------- ---------------
Total stockholders' equity 72,915 72,457
--------------- ---------------
$ 88,169 $ 90,103
=============== ===============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
1
<PAGE> 4
OROAMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
THIRTEEN WEEKS ENDED APRIL 30, 1999 AND MAY 1, 1998
(Unaudited)
<TABLE>
<CAPTION>
April 30, May 1,
(Dollars in thousands, except per share amounts) 1999 1998
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net sales $ 39,277 $ 42,477
Cost of goods sold, exclusive of depreciation 30,497 33,029
--------------- -----------
Gross profit 8,780 9,448
Selling, general and administrative, and other expenses 7,743 7,140
--------------- -----------
Operating income 1,037 2,308
Interest expense 295 41
--------------- ------------
Income before income taxes 742 1,887
Provision for income taxes 297 736
--------------- -----------
Net income $ 445 $ 1,151
=============== ===========
Net income per share - basic $ 0.07 $ 0.18
=============== ===========
Net income per share - diluted $ 0.07 $ 0.18
=============== ===========
Weighted average shares outstanding 6,272,211 6,254,711
Dilutive effect of stock options 79,122 58,312
--------------- -----------
Weighted average shares outstanding assuming dilution 6,351,333 6,313,023
=============== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
2
<PAGE> 5
OROAMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
April 30, May 1,
(Dollars in thousands) 1999 1998
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 445 $ 1,151
Adjustments to reconcile net income to net
cash provided by (used in) operating activities:
Depreciation and amortization 664 690
Provision for losses on accounts receivable 165 165
Provision for estimated returns (2,434) (1,070)
Change in assets and liabilities:
Accounts receivable (2,910) 3,826
Other accounts and notes receivable 340 (713)
Inventories 1,058 1,348
Prepaid income taxes and income taxes payable (498) 142
Prepaid items and other current assets (318) (857)
Accounts payable, accrued expenses and deferred liabilities (2,614) 778
------------- -------------
Net cash (used in) provided by operating activities (6,102) 5,460
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (1,268) (303)
Purchase of investment (270) -
------------- -------------
Net cash used in investing activities (1,538) (303)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments of long-term debt - (96)
Issuance of common stock 13 5
------------- -------------
Net cash provided by (used in) financing activities 13 (91)
------------- -------------
(DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS (7,627) 5,066
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 30,263 30,351
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 22,636 $ 35,417
============= =============
Supplemental disclosure of cash flow information:
Interest paid $ 274 $ 464
Income taxes paid $ 795 $ 615
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE> 6
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 week periods ended April 30, 1999 and May 1, 1998.
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 29, 1999 audited
consolidated financial statements. The results of operations for the
thirteen-week period ended April 30, 1999 are not necessarily indicative of the
results for a full year.
NET INCOME PER SHARE
Basic net income per share excludes all dilution and is computed by
dividing net income by the weighted-average number of common shares outstanding.
Diluted earnings per share reflects the potential dilution that would occur if
securities or other contracts to issue common stock were exercised or converted
into common stock. Diluted net income per share includes the dilutive effect of
stock options.
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands, except per ounce
data):
<TABLE>
<CAPTION>
April 30, January 29,
1999 1999
------------- --------------
(Unaudited)
<S> <C> <C>
Gold and other raw materials $ 2,104 $ 2,401
Manufacturing costs and other 9,541 10,304
------------ -------------
Jewelry inventories 11,645 12,705
Tobacco inventories 2,652 2,541
Other inventories 2 116
------------ -------------
Subtotal 14,299 15,362
LIFO cost less than FIFO cost (983) (988)
Allowance for vendor advances (680) (680)
------------ -------------
$ 12,636 $ 13,694
============ =============
Gold price per ounce $ 286.60 $ 285.40
============ =============
</TABLE>
4
<PAGE> 7
The Company values its jewelry inventories using the last-in, first-out
(LIFO) method. The Company values its tobacco and other inventories using the
first-in, first-out (FIFO) method.
The Company has several consignment agreements with gold consignors
providing for a maximum aggregate consignment of 282,000 fine troy ounces. In
accordance with the consignment agreements, title remains with the gold
consignors until the consigned gold is purchased by the Company.
At April 30, 1999 and January 29, 1999, the Company held approximately
188,100 and 199,100 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 gold consignment 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 April 30, 1999, the Company was in compliance with all of the
requirements of its consignment agreements.
The Company has encountered a number of disputes with its former
Indonesian partner. In connection with this, the Company has been prevented
access to its tobacco inventories located in Indonesia. The Company is focused
on resolving these disputes and does not anticipate any material impact on the
results of operations, financial position or cash flows from the ultimate
resolution of these disputes.
5
<PAGE> 8
NOTE 3 - NOTES PAYABLE
The Company has a $10 million revolving credit facility with Bank of
America, NT & SA which expires August 1, 2000. Available borrowings may not
exceed the lesser of $10 million or 75% 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 interest at a 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 April 30, 1999 or January 29, 1999. No
short-term advances were outstanding at April 30, 1999 or January 29, 1999.
Stand-by letters of credit outstanding at April 30, 1999 and at January 29, 1999
totaled $1,500,000 and $1,500,000, respectively.
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 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 April 30, 1999, the Company was in compliance with all of the
requirements of the revolving credit agreement.
NOTE 4 - SEGMENT INFORMATION
The Company's operating structure includes two reportable operating
segments: Jewelry and Cigar. The segments were determined based upon the types
of products produced and markets served by each segment. The Jewelry Segment
manufactures and distributes gold jewelry products to large retailers, including
mass merchandisers, department stores and national jewelry chains. The Cigar
Segment manufactures and distributes premium cigars to medium-to-small cigar
retailers. Financial information regarding the Company's operating segments is
shown below (dollars in thousands):
<TABLE>
<CAPTION>
Quarter ended April 30, 1999 Jewelry Cigar Consolidated
- ---------------------------- ------------------ ---------------- -----------------
<S> <C> <C> <C>
Net sales $ 38,958 $ 319 $ 39,277
Operating income (loss) 1,404 (367) 1,037
Interest expense 294 1 295
Depreciation and amortization expense 613 51 664
Income (loss) before taxes 1,110 (368) 742
Provision (benefit) for income taxes 444 (147) 297
Net income (loss) 666 (221) 445
Identifiable operating assets 83,946 4,223 88,169
</TABLE>
6
<PAGE> 9
<TABLE>
<CAPTION>
Quarter ended May 1, 1998 Jewelry Cigar Consolidated
- ------------------------- ------------------ ---------------- -----------------
<S> <C> <S> <S>
Net sales $ 42,351 $ 126 $ 42,477
Operating income (loss) 2,715 (407) 2,308
Interest expense 421 - 421
Depreciation and amortization expense 690 - 690
Income (loss) before taxes 2,294 (407) 1,887
Provision (benefit) for income taxes 895 (159) 736
Net income (loss) 1,399 (248) 1,151
Identifiable operating assets 84,343 4,302 88,645
</TABLE>
NOTE 5 - NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board issued Statement
No. 133, "Accounting for Derivatives and Hedging Activities" ("SFAS 133"), which
is likely required to be adopted in fiscal years beginning after June 15, 2000.
SFAS 133 requires that an entity recognize all derivatives as either assets or
liabilities in the statement of financial position and measure those instruments
at fair value. Additionally, SFAS 133 defines the accounting for changes in the
fair value of the derivatives depending on the intended use of the derivative.
The impact of SFAS 133 on the Company's financial statements will depend on a
variety of factors, including, the extent of the Company's hedging activities,
the types of hedging instruments used and the effectiveness of such instruments.
The Company has not yet determined what the effect of adoption of SFAS 133 will
be on the earnings and financial position of the Company.
7
<PAGE> 10
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.
GENERAL
The Company's business, and the jewelry business in general, is highly
seasonal. Historically, the third and fourth quarters of the Company's fiscal
year, which include the Christmas shopping season, 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. Consequently,
the results of first quarter operations are not necessarily indicative of the
Company's performance for an entire year.
Prices for the Company's jewelry products generally are determined by
reference to the current market price of gold. Consequently, the Company's sales
could be affected by 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.
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.
8
<PAGE> 11
<TABLE>
<CAPTION>
As a Percentage of Net Sales
------------------------------
Thirteen Weeks Ended
April 30, May 1,
1999 1998
-------- ----------
<S> <C> <C>
Net sales 100.0% 100.0%
Cost of goods sold 77.6 77.8
-------- ----------
Gross profit 22.4 22.2
Selling, general and administrative,
and other expenses 19.7 16.8
-------- ----------
Operating income 2.7 5.4
Interest expense 0.8 1.0
-------- ----------
Income before income taxes 1.9 4.4
Provision for income taxes 0.8 1.7
-------- ----------
Net income 1.1% 2.7%
======== ==========
</TABLE>
THIRTEEN WEEKS ENDED APRIL 30, 1999 COMPARED TO THIRTEEN WEEKS ENDED MAY 1, 1998
Net sales for the thirteen weeks ended April 30, 1999 decreased by $3.2
million, or 7.5%, from the comparable period of the prior year. The Company
attributes this decrease to a decline in sales prices due to a reduction in the
average market price of gold. The Company also attributes this decrease to
aggressive post-holiday season inventory restocking among retailers during the
first quarter of fiscal 1999 that was not repeated during the current quarter.
Gross profit for the thirteen-week period ended April 30, 1999
decreased by $668,000 or 7.1%, from the comparable period of the prior year. As
a percentage of net sales, gross profit increased from 22.2% for the
thirteen-week period ended May 1, 1998 to 22.4% for the current period.
Excluding the effects of gold price fluctuations and LIFO reserve adjustments on
the cost of goods sold, the gross margin for the thirteen-week periods ended
April 30, 1999 and May 1, 1998 would have been 22.3% and 21.8% of sales,
respectively. The gold prices used to cost inventory at January 29, 1999, April
30, 1999, January 30, 1998 and May 1, 1998, were $285.40, $286.60, $304.85 and
$306.90, respectively.
Selling, general and administrative, and other expenses include bad
debt expense, depreciation and amortization expense, and other income or other
expense, in addition to selling, general and administrative expenses. Selling,
general and administrative, and other expenses for the thirteen weeks ended
April 30, 1999, increased by $603,000, or 8.4%, from the comparable period of
the prior year. As a percentage of net sales, these expenses increased from
16.8% in the thirteen weeks ended May 1, 1998 to 19.7% in the thirteen weeks
ended April 30, 1999. The increase in the dollar amount of selling, general and
administrative, and other expenses is primarily attributable to increased
selling and product expenses of $232,000, increased personnel costs of $187,000,
and decrease in other income of $224,000. The increase in selling and product
expenses results primarily from expanded cooperative advertising agreements with
certain customers. Personnel costs have risen due to increased headcount.
9
<PAGE> 12
Selling, general and administrative, and other expenses for the Company's cigar
operations were $456,000 and $316,00 for the quarters ended April 30, 1999 and
May 1, 1998, respectively.
The effective tax rate in the thirteen weeks ended April 30, 1999 was
40.0% as compared to 39.0% 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
consignment arrangements was approximately 282,000 ounces at April 30, 1999 and
is subject to fluctuations based on changes in the market value of gold. As of
April 30, 1999, the Company held approximately 188,100 ounces of gold on
consignment.
The Company has a $10 million revolving credit facility with Bank of
America NT & SA, which expires August 1, 2000. Available borrowings may not
exceed the lessor of $10 million or 75% 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 $19.5 million at January 29,
1999 to $24.7 million at April 30, 1999. The increase in net accounts receivable
results primarily from a temporary change in payment terms granted to the
Company's largest customer. The allowance for returns and doubtful accounts
decreased from $11.8 million at January 29, 1999 to $9.4 million at April 30,
1999. The decrease in the amount of the allowance at April 30, 1999 is primarily
attributable to seasonal adjustments in the reserve for returns.
Total inventories decreased from $13.7 million at January 29, 1999 to
$12.6 million at April 30, 1999. The decrease is primarily attributable to
decrease in the Company's jewelry inventories during the period. At April 30,
1999, a substantial portion of the gold included in the Company's finished goods
and work-in-process consisted of gold acquired pursuant to the Company's
consignment program. Consigned gold is not included in inventory.
Accounts payable decreased from $8.2 million at January 29, 1999 to
$6.9 million at April 30, 1999. This decrease is primarily attributable to
seasonal gold purchases and the timing of payments. Accrued expenses decreased
10
<PAGE> 13
from $7.8 million at January 29, 1999 to $6.5 million at April 30, 1999. This
decrease is primarily due to the payment of payroll liabilities and decrease in
advertising accruals.
The Company expects to incur capital expenditures of $1.3 million
during the balance of fiscal 2000, principally for the acquisition of
manufacturing and computer equipment, and upgrade of the Company's primary
business application software. 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.
YEAR 2000
The Year 2000 issue is the result of computer programs having been
written using two digits, rather than four, to define the applicable year. When
the millennium date change occurs, date-sensitive systems may recognize the year
2000 as the year 1900, or not at all. This inability to recognize or properly
treat the Year 2000 may result in system failures or cause systems to process
critical financial and operational information incorrectly.
During fiscal 1999, the Company completed its assessment of the
potential impact of the Year 2000 issue on the Company's internal computerized
information systems. The Company believes that it has identified substantially
all of the major computers, software applications, and related equipment used in
connection with its internal operations that must be modified, upgraded or
replaced to become Year 2000 compliant. In fiscal 1999, the Company began
upgrading its primary business application software to the latest version, which
is Year 2000 compliant. The Company expects to complete this conversion during
the third quarter of fiscal year 2000. The Company's distribution and electronic
data interchange software applications and equipment are already Year 2000
compliant. All remaining business applications will be upgraded or replaced by
the end of the second quarter of fiscal 2000. In addition, the Company's
non-information technology systems and equipment, such as its security and
communications systems, are already Year 2000 compliant or are currently being
upgraded or replaced.
The total estimated cost of the Company's Year 2000 compliance is
$300,000, of which $175,000 was expended through April 30, 1999. The cost of the
Year 2000 project is being expensed as incurred and is not expected to have a
material adverse effect on the Company's results of operations, liquidity or
capital resources. The estimated cost of implementing the Company's primary
business software upgrade is approximately $1.5 million and is not included in
the Year 2000 project cost estimate. The software upgrade was initiated to meet
future business and industry requirements and the related cost will be
capitalized in accordance with generally accepted accounting principles. The
costs associated with the Company's Year 2000 compliance efforts and software
upgrade are being funded with cash flows from operations.
The Company has begun examining its relationships with certain key
customers and suppliers to determine the extent to which the Company is
vulnerable to failure of those third parties to address their own Year 2000
11
<PAGE> 14
issues. Year 2000 interruptions in customers' operations could result in reduced
sales, increased inventory or receivable levels and cash flow reductions. The
Company does not currently have any formal information concerning the Year 2000
compliance of its customers but has received indications that its larger
customers are working on Year 2000 compliance. If a significant portion of the
Company's customers do not successfully and timely achieve Year 2000 compliance,
the Company's business operations could be adversely affected. Management does
not believe that the Company's relationship with any individual inventory
supplier is material to the Company's operations and therefore, does not believe
that the failure of any inventory vendor to be Year 2000 compliant would have a
material adverse effect on the Company.
To date, the Company has not established a contingency plan for
possible Year 2000 issues. Where needed, the Company will develop such
contingency plans based upon the results of its primary business software
conversion and final assessment of risks associated with third parties. The
major efforts related to contingency planning are expected to occur in the
second half of fiscal 2000.
The discussion of the Company's efforts, and management expectations,
relating to Year 2000 compliance are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The cost of the project
and the date by which the Company plans to complete its Year 2000 compliance
efforts are based on management's estimates, which were derived utilizing
numerous assumptions of future events, including the continued availability of
personnel trained in this area, third party modification plans, and other
factors, each of which is subject to uncertainty. There can be no guarantee that
these estimates will be achieved, and actual results could differ materially
from these estimates.
12
<PAGE> 15
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:
None
13
<PAGE> 16
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: June 10, 1999 By: SHIU SHAO
------------- ---------------------------------------
SHIU SHAO, Chief Operating Officer,
Chief Financial Officer, Vice President
and Director
Date: June 10, 1999 By: BETTY SOU
------------- ---------------------------------------
BETTY SOU, Controller
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM OROAMERICA,
INC.'S CONSOLIDATED BALANCE SHEET AT APRIL 30, 1999 (UNAUDITED) AND CONSOLIDATED
STATEMENT OF INCOME FOR THE THIRTEEN WEEKS ENDED APRIL 30, 1999 (UNAUDITED) AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-28-2000
<PERIOD-END> APR-30-1999
<CASH> 22,636
<SECURITIES> 0
<RECEIVABLES> 34,053
<ALLOWANCES> 9,420
<INVENTORY> 12,636
<CURRENT-ASSETS> 65,565
<PP&E> 26,172
<DEPRECIATION> 13,974
<TOTAL-ASSETS> 88,169
<CURRENT-LIABILITIES> 15,254
<BONDS> 0
0
0
<COMMON> 6
<OTHER-SE> 72,909
<TOTAL-LIABILITY-AND-EQUITY> 88,169
<SALES> 39,277
<TOTAL-REVENUES> 39,277
<CGS> 30,497
<TOTAL-COSTS> 30,497
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 165
<INTEREST-EXPENSE> 295
<INCOME-PRETAX> 742
<INCOME-TAX> 297
<INCOME-CONTINUING> 445
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 445
<EPS-BASIC> .07
<EPS-DILUTED> .07
</TABLE>
