<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 July 28, 2000.
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[ ] Transition Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from to .
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Commission File Number 0-21862
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OROAMERICA, INC.
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(Exact name of registrant as specified in its charter)
Delaware 94-2385342
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(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
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(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 September 5, 2000
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Common Stock, $.001 par value 5,547,398
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OROAMERICA, INC.
REPORT ON FORM 10-Q FOR THE
QUARTER ENDED July 28, 2000
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION Page
------
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets ................................................... 1
Consolidated Statements of Income ............................................. 2
Consolidated Statements of Cash Flows.......................................... 3
Notes to Consolidated Financial Statements ................................... 4 - 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................ 7 -11
PART II - OTHER INFORMATION
Items 1 through 3. Not Applicable
Item 4 Submission of Matters to a Vote of Security Holders........................... 12
Item 5. Not Applicable
Item 6. Exhibits and Reports on Form 8-K............................................... 12
SIGNATURES ............................................................................... 13
</TABLE>
<PAGE> 3
PART I - Financial Information
Item 1. Financial Statements
OROAMERICA, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
July 28, January 28,
(Dollars in thousands, except share amounts) 2000 2000
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<S> <C> <C>
ASSETS (Unaudited)
Current assets:
Cash and cash equivalents $ 29,823 $ 26,923
Accounts receivable less allowance for returns
and doubtful accounts of $6,403 and $11,840 11,678 15,270
Other accounts and notes receivable 428 865
Inventories (Note 2) 14,759 15,846
Deferred income taxes 3,449 3,449
Prepaid items and other current assets 1,515 780
Assets available for sale 426 468
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Total current assets 62,078 63,601
Property and equipment, net 14,530 15,232
Goodwill and other intangible assets, net 4,198 4,428
Patents, net 3,953 4,198
Other assets 557 635
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$ 85,316 $ 88,094
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,225 $ 5,726
Income taxes payable 1,089 1,092
Accrued expenses 7,541 8,733
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Current and total liabilities 13,855 15,551
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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;
6,370,878 and 6,368,878 shares issued at July 28, 2000
and January 28, 2000, respectively 6 6
Paid-in capital 43,574 43,564
Accumulated other comprehensive loss (67) (34)
Note receivable from stock sale (190) (190)
Treasury stock, 706,280 shares and 510,830 shares at
July 28, 2000 and January 28, 2000, respectively (Note 4) (5,116) (3,841)
Retained earnings 33,254 33,038
-------- --------
Total stockholders' equity 71,461 72,543
-------- --------
$ 85,316 $ 88,094
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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OROAMERICA, INC.
CONSOLIDATED STATEMENTS OF INCOME
Periods Ended July 28, 2000 and July 30, 1999
(Unaudited)
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
For the For the
Thirteen Weeks Ended Twenty-Six Weeks Ended
--------------------------- ---------------------------
July 28, July 30, July 28, July 30,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net sales $ 26,448 $ 28,327 $ 64,108 $ 65,975
Cost of goods sold, exclusive of depreciation 21,885 23,418 52,787 55,376
----------- ----------- ----------- -----------
Gross profit 4,563 4,909 11,321 10,599
Selling, general and administrative expenses 5,281 4,426 9,990 8,352
Depreciation and amortization expense 865 670 1,756 1,332
Interest expense 406 295 806 589
Other income (1,103) (205) (1,489) (507)
----------- ----------- ----------- -----------
Total expenses 5,449 5,186 11,063 9,766
----------- ----------- ----------- -----------
(Loss) income from continuing operations
before income taxes (886) (277) 258 833
(Benefit) provision for income taxes (328) (110) 95 334
----------- ----------- ----------- -----------
Net (loss) income from continuing operations (558) (167) 163 499
Net income (loss) from discontinued operations 43 (480) 53 (701)
----------- ----------- ----------- -----------
Net (loss) income $ (515) $ (647) $ 216 $ (202)
=========== =========== =========== ===========
Basic net income (loss) per share:
Net income (loss) from continuing operations $ (0.10) $ (0.03) $ 0.03 $ 0.07
Net income (loss) from discontinued operations 0.01 (0.08) 0.01 (0.11)
----------- ----------- ----------- -----------
Net income (loss) per share $ (0.09) $ (0.11) $ 0.04 $ (0.04)
=========== =========== =========== ===========
Diluted net income (loss) per share:
Net income (loss) from continuing operations $ (0.10) $ (0.03) $ 0.03 $ 0.07
Net income (loss) from discontinued operations 0.01 (0.08) 0.01 (0.11)
----------- ----------- ----------- -----------
Net income (loss) per share $ (0.09) $ (0.11) $ 0.04 $ (0.04)
=========== =========== =========== ===========
Weighted average shares outstanding 5,718,565 6,068,878 5,772,348 6,170,545
Dilutive effect of stock options -- -- 33,277 --
----------- ----------- ----------- -----------
Weighted average shares outstanding
assuming dilution 5,718,565 6,068,878 5,805,625 6,170,545
=========== =========== =========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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OROAMERICA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the Twenty-six Weeks Ended
July 28, July 30,
(Dollars in thousands) 2000 1999
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 216 $ (202)
Less income (loss) from discontinued operations 53 (701)
-------- --------
Net income from continuing operations 163 499
Adjustments to reconcile net income from continuing operations
to net cash provided by (used in) continuing operations:
Depreciation and amortization 1,756 1,332
Provision for losses on accounts receivable 226 330
Provision for estimated returns (5,467) (3,430)
Gain on sale of property (696) (10)
Change in assets and liabilities:
Accounts receivable 8,834 10,755
Other accounts and notes receivable 258 320
Inventories 1,087 (3,989)
Prepaid income taxes and income taxes payable (408) (960)
Prepaid items and other current assets (286) (516)
Accounts payable, accrued expenses and deferred liabilities (1,445) (5,002)
-------- --------
Net cash provided by (used in) operating activities
of continuing operations 4,022 (671)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (666) (3,513)
Proceeds from sale of property 772 10
Purchase of available for sale securities -- (270)
-------- --------
Net cash used in investing activities of
continuing operations 106 (3,773)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Purchase of treasury stock (1,275) (1,764)
Issuance of common stock 10 13
-------- --------
Net cash used in financing activities
of continuing operations (1,265) (1,751)
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CASH PROVIDED BY DISCONTINUED OPERATIONS 37 21
-------- --------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 2,900 (6,174)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 26,923 30,263
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,823 $ 24,089
======== ========
Supplemental disclosure of cash flow information:
Interest paid $ 829 $ 494
Income taxes paid $ 472 $ 826
</TABLE>
See accompanying notes to condensed consolidated financial statements.
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OROAMERICA, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - BASIS OF PRESENTATION
The 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 twenty-six week periods ended July 28, 2000 and July 30,
1999. 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
consolidated statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's January 28, 2000 audited
consolidated financial statements. The results of operations for the thirteen
and twenty-six week periods ended July 28, 2000 are not necessarily indicative
of the results for a full year.
Net income (loss) per share
Basic net income (loss) per share excludes all dilution and is computed
by dividing net income (loss) by the weighted-average number of common shares
outstanding. Diluted net income 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. For the twenty-six week period ended
July 28, 2000, diluted net income per share includes the dilutive effect of
stock options. For the thirteen and twenty-six week periods ended July 30, 1999,
and the thirteen week period ended July 28, 2000, the assumed exercise of stock
options would have been anti-dilutive and, therefore, was not considered in the
computation of diluted net loss per share.
Reclassifications
In fiscal 2000, the Company elected to reclassify certain expenses in
its Consolidated Statements of Income. As a result, net sales, cost of sales,
and selling, general and administrative expenses have been restated for all
periods presented to reflect these new classifications. The effect of this
reclassification was to decrease net sales, increase cost of sales and decrease
selling, general and administrative expenses for all periods presented. This
change in classification has no effect on previously reported net income or
earnings per share.
In January 2000, the Company decided to discontinue its cigar operating
segment. As a result, the Company's cigar operations have been classified as
discontinued operations for all periods presented.
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<PAGE> 7
NOTE 2 - INVENTORIES
Inventories consist of the following (in thousands, except per ounce
data):
<TABLE>
<CAPTION>
July 28, January 28,
2000 2000
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(Unaudited)
<S> <C> <C>
Gold and other raw materials $ 3,628 $ 3,264
Manufacturing costs and other 11,823 13,478
-------- --------
Jewelry inventories 15,451 16,742
LIFO cost less than FIFO cost (12) (216)
Allowance for vendor advances (680) (680)
-------- --------
$ 14,759 $ 15,846
======== ========
Gold price per ounce $ 278.10 $ 286.75
======== ========
</TABLE>
The Company values its jewelry inventories using the last-in,
first-out (LIFO) method.
The Company has several consignment agreements with gold consignors
providing for a maximum aggregate consignment of 365,000 fine troy ounces. In
accordance with the consignment agreements, title remains with the gold
consignors until purchased by the Company.
At July 28, 2000 and January 28, 2000, respectively, the Company held
approximately 216,900 and 227,600 fine troy ounces of gold under consignment
agreements, respectively. Consigned gold is not included in inventory and no
related liability is recorded on the Company's balance sheet. 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) limit the repurchase of treasury
stock, (e) prohibit the Company from engaging in mergers and acquisitions
without prior approval, (f) 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, (g) 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 (h) 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 July 28, 2000,
the Company was in compliance with all of the requirements of its consignment
agreements.
NOTE 3 - NOTES PAYABLE
The Company has a $10 million revolving credit facility with Bank of
America, NT & SA, which expires November 1, 2000. Borrowings may not exceed the
lesser of $10 million or 75% of eligible accounts receivable minus a
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<PAGE> 8
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%. No short-term advances were
outstanding at July 28, 2000 or January 28, 2000. 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 July 28, 2000 or January 28, 2000. Stand-by
letters of credit outstanding at July 28, 2000 and at January 28, 2000 totaled
$1,000,000 and $1,000,000, 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 July 28, 2000, the Company was in compliance with all of the
requirements of the revolving credit agreement.
NOTE 4 - STOCK REPURCHASE PROGRAM
In fiscal 1999, the Company's Board of Directors approved a stock
repurchase program pursuant to which the Company is authorized to purchase up to
300,000 shares of its outstanding common stock in the open market at prevailing
market prices or off the market in negotiated transactions. The Board of
Directors has twice authorized the Company to repurchase an additional 300,000
shares for a total of 900,000 shares authorized for repurchase. During the
twenty-six weeks ended July 28, 2000, the Company repurchased 195,450 shares for
an aggregate price of approximately $1.3 million. At July 28, 2000, the Company
has repurchased a total of 706,280 shares at an approximate cost of $5.1 million
under the program.
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
the Company is required to adopt 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 is currently assessing the impact SFAS 133 will have on its
consolidated financial statements.
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<PAGE> 9
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. 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 fourth quarter
generally produces 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 build up 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 build up in customer receivables
in the fourth quarter that must be funded by increased borrowings. Consequently,
the results of second quarter operations are not necessarily indicative of the
Company's performance for an entire year.
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.
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.
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<TABLE>
<CAPTION>
AS A PERCENTAGE OF NET SALES
-----------------------------------------------
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
JULY 28, JULY 30, JULY 28, JULY 30,
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales 100.0% 100.0% 100.0% 100.0%
Cost of goods sold 82.7 82.7 82.3 83.9
----- ----- ----- -----
Gross profit 17.3 17.3 17.7 16.1
Selling, general and
administrative expenses 20.0 15.6 15.6 12.8
Depreciation and amortization 3.3 2.4 2.7 2.0
Interest expense 1.5 1.0 1.3 0.9
Other income (4.2) (0.7) (2.3) (0.8)
----- ----- ----- -----
Total expense 20.6 18.3 17.3 14.9
----- ----- ----- -----
(Loss) income before
income taxes (3.3) (1.0) 0.4 1.2
(Benefit) provision for
income taxes (1.2) (0.4) 0.1 0.5
----- ----- ----- -----
Net (loss) income from con-
tinuing operations (2.1) (0.6) 0.3 0.7
Net income (loss) from dis-
continued operations 0.2 (1.7) 0.0 (1.0)
----- ----- ----- -----
Net income (loss) (1.9)% (2.3)% 0.3% (0.3)%
===== ===== ===== =====
</TABLE>
THIRTEEN WEEKS ENDED JULY 28, 2000 COMPARED TO THIRTEEN WEEKS ENDED JULY 30,
1999.
Net sales for the thirteen weeks ended July 28, 2000 decreased by $1.9
million, or 6.6%, 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. The decrease results from inventory reductions by certain major
retailers.
Gross profit for the thirteen weeks ended July 28, 2000 decreased by
$346,000, or 7.0%, from the comparable period of the prior year. As a percentage
of net sales, gross profit was 17.3% for the current quarter and the second
quarter of fiscal 2000. Excluding the effects of LIFO reserve adjustments on
cost of goods sold, the gross margin for the thirteen-week periods ended July
28, 2000 and July 30, 1999 would have been 16.7% and 13.8%, respectively. The
increase on a comparable basis was due to changes in sales product mix. The gold
prices used to cost inventory at July 28, 2000, April 28, 2000, July 30, 1999,
and April 30, 1999 were $278.10, $275.05, $255.60, and $286.60, respectively.
Selling, general and administrative expenses for the thirteen weeks
ended July 28, 2000 increased by $855,000, or 19.3%, from the comparable period
of the prior year. This increase is primarily attributable to increased
personnel costs of $426,000, increased selling and product expense of $299,000,
and increased consulting and outside services expense of $161,000. Personnel
costs have risen due to increased head count from expanded product development
and customer service activities. Selling and product expenses have increased due
to expanded sales efforts at trade shows and increased magazine and catalog
advertising of the Company's products, including the new the PushlockTM clasp.
Consulting services have increased primarily due to expanded use of computer
consultants.
Depreciation and amortization expense for the thirteen weeks ended July
28, 2000 increased $195,000, or 29.1%, from the comparable period of the prior
year. This increase is due to additional depreciation expense from fiscal 2000
capital expenditures, which totaled approximately $6.9 million.
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<PAGE> 11
Interest expense for the thirteen weeks ended July 28, 2000 increased
approximately $111,000, or 37.6%, from the comparable period of the prior year
due to an increase in gold forward purchase contracts outstanding and an
increase in rates charged thereon.
Other income for the thirteen weeks ended July 28, 2000 increased by
$898,000, or 438.0%, from the comparable period of the prior year. This increase
is primarily due to the gain resulting from the sale of certain jewelry
machinery and from increased interest income on invested funds.
The effective tax rate in the thirteen weeks ended July 28, 2000 was
37% compared to 40% in the comparable period of the prior year.
Net income from discontinued operations for the thirteen weeks ended
July 28, 2000 was $43,000 compared to a net loss of $480,000 for the same period
of the prior year. The increase on a comparable basis was due to the write-off
of assets related to the Company's Beverly Hills cigar store, which was closed
in June 1999. No similar write-off of assets took place in the current quarter.
TWENTY-SIX WEEKS ENDED JULY 28, 2000 COMPARED TO TWENTY-SIX WEEKS ENDED JULY 30,
1999.
Net sales for the twenty-six weeks ended July 28, 2000 decreased by
$1.9 million, or 2.8%, 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. The decrease results from inventory reductions by certain
major retailers.
Gross profit for the twenty-six weeks ended July 28, 2000 increased by
$722,000, or 6.8%, from the comparable period of the prior year. As a percentage
of net sales, gross profit increased from 16.1% for the twenty-six weeks ended
July 30, 1999, to 17.7% for the current period. Excluding the effects of LIFO
reserve adjustments on cost of goods sold, the gross margin for the twenty-six
week periods ended July 28, 2000 and July 30, 1999 would have been 17.3% and
14.6%, respectively. The increase on a comparable basis was due to changes in
sales product mix. The gold prices used to cost inventory at July 28, 2000,
January 28, 2000, July 30, 1999, and January 29, 1999 were $278.10, $286.75,
$255.60, and $285.40, respectively.
Selling, general and administrative expenses for the twenty-six weeks
ended July 28, 2000 increased by $1,638,000, or 19.6%, from the comparable
period of the prior year. The increase in the amount of selling, general and
administrative expenses is primarily attributable to increased personnel costs
of $898,000, increased consulting and professional services expense of $528,000,
and increased selling and product expense of $322,000. Personnel costs have
risen due to expanded product development activities. Selling and product
expenses have increased due to expanded sales efforts at trade shows and
expanded magazine and catalog advertising of the Company's products, including
the new PushlockTM clasp. Consulting and professional service expense has risen
due to increased use of computer consultants and increased legal fees related to
certain ongoing litigation.
Depreciation and amortization expense for the twenty-six weeks ended
July 28, 2000 has increased $424,000, or 31.8%, from the comparable period of
the prior year. This increase is due to additional depreciation expense from
fiscal 2000 capital expenditures, which totaled approximately $6.9 million.
Interest expense for the twenty-six weeks ended July 28, 2000 increased
approximately $217,000, or 36.8%, from the comparable period of the prior year.
Interest expense increased due to an increase in gold forward purchase contracts
outstanding and an increase in rates charged thereon.
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<PAGE> 12
Other income for the twenty-six weeks ended July 28, 2000 increased by
$982,000, or 193.7%, from the comparable period of the prior year. This increase
is primarily due to the gain resulting from the sale of certain jewelry
machinery and from increased interest income on invested funds.
The effective tax rate in the twenty-six weeks ended July 28, 2000 was
37% tax rate expense compared to a 40% tax rate benefit in the comparable period
of the prior year.
Net income from discontinued operations for the twenty-six weeks ended
July 28, 2000 was $53,000 compared to a net loss of $701,000 for the comparable
period of the prior year. The increase on a comparable basis was due to the
write-off of assets related to the Company's Beverly Hills cigar store, which
was closed in June 1999. No similar write-off of assets took place in the
current period.
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 365,000 ounces at July 28, 2000 and is subject to
fluctuations based on changes in the market value of gold. At July 28, 2000, the
Company held approximately 216,900 ounces of gold on consignment.
The Company has a $10 million revolving credit facility with Bank of
America NT & SA, which expires November 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 Consolidated Financial
Statements and the Company's January 28, 2000 audited consolidated financial
statements.
Net accounts receivable decreased from $15.3 million at January 28,
2000 to $11.7 million at July 28, 2000. The decrease in net accounts receivable
results primarily from seasonal fluctuations in sales. The allowance for returns
and doubtful accounts decreased from $11.8 million at January 28, 2000 to $6.4
million at July 28, 2000. The decrease in the amount of the allowance at July
28, 2000 is primarily attributable to seasonal adjustments in the reserve for
returns.
Inventories decreased from $15.8 million at January 28, 2000 to $14.8
million at July 28, 2000. This decrease is primarily attributable to a decline
in the manufacturing component of the Company's jewelry inventories. At July 28,
2000, 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 $5.7 million at January 28, 2000 to
$5.2 million at July 28, 2000. This decrease is primarily attributable to
seasonal gold purchases and the timing of payments thereon. Accrued expenses
decreased
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from $8.7 million at January 28, 2000 to $7.5 million at July 28, 2000. This
decrease is primarily due to the payment of payroll liabilities and decreased
cooperative advertising accruals.
The Company incurred capital expenditures of approximately $700,000 for
the twenty-six weeks ended July 28, 2000, principally related to computer
equipment and facility improvements. The Company expects to incur capital
expenditures of $1.0 million during the balance of fiscal 2001, principally for
the acquisition of manufacturing facilities and equipment, and computer
equipment. 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 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Stockholders of the Company was held on June 8,
2000. At the Annual Meeting, Guy Benhamou, Bertram K. Massing, Shiu Shao, David
P. Rousso, and John Arzoian were elected as directors of the Company. Of the
5,680,899 shares of common stock represented in person or by proxy at the Annual
Meeting, Messrs. Benhamou, Massing, Shao, Rousso, and Arozian received
5,650,199, 5,397,199, 5,650,799, 5,650,099 and 5,650,299 votes in favor of
election, respectively.
At the Annual Meeting, the stockholders also approved the
proposal to ratify the selection of PricewaterhouseCoopers LLP as independent
accountants for fiscal 2001, such proposal receiving 5,418,299 votes for
approval and 262,600 votes against approval.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 Financial Data Schedule.
(b) Reports on Form 8-K:
None
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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: September 6, 2000 By: SHIU SHAO
----------------- ------------------------------------
SHIU SHAO,
Director,
Chief Operating Officer,
Chief Financial Officer,
and Vice President
Date: September 6, 2000 By: BETTY SOU
----------------- ------------------------------------
BETTY SOU, Controller
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