SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended November 29, 1997
Commission File No. 0-19369
LITTLE SWITZERLAND, INC.
(Exact name of registrant as specified in its charter)
Delaware 66-0476514
(State of Incorporation) (I.R.S Employer
Identification No.)
161-B Crown Bay Cruise Ship Port
St. Thomas U.S.V.I. 00802
(Address of Principal Executive Offices) (Zip Code)
(809) 776-2010
(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 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
At December 27, 1997, 8,467,359 shares of $.01 par value
common stock of the registrant were outstanding.
<PAGE>
LITTLE SWITZERLAND, INC.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED November 29, 1997
PAGE
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of
November 29, 1997 (unaudited) and
May 31, 1997 3
Consolidated Statements of Income (unaudited)
for the three and six months ended
November 29, 1997 and November 30, 1996 4
Consolidated Statements of Cash Flows (unaudited)
for the six months ended November 29,1997 and
November 30, 1996 5
Notes to Consolidated Financial
Statements (unaudited) 6-11
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations 12-16
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 17
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 17
Signature Page 18
<PAGE>
PART I. FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial Statements Page 3
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands except per share data)
November 29, May 31,
ASSETS 1997 1997
------ --------- ---------
Current assets: (unaudited)
Cash and cash equivalents..........................$ 4,416 $ 1,710
Accounts receivable................................ 3,288 2,083
Inventory.......................................... 52,075 44,728
Prepaid income taxes............................... 83 ---
Prepaid expenses and other current assets.......... 3,715 2,172
--------- ---------
Total current assets......................... 63,577 50,693
--------- ---------
Property, plant and equipment, at cost................ 39,147 38,565
Less -- Accumulated depreciation................... (16,483) (15,201)
--------- ---------
22,664 23,364
--------- ---------
Other assets.......................................... 3,162 3,334
--------- ---------
Total assets.................................$ 89,403 $ 77,391
========= =========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Current portion of long term debt..................$ 2,225 $ 2,225
Unsecured notes payable............................ 15,525 8,100
Accounts payable................................... 12,572 7,002
Accrued and currently deferred income taxes........ --- 429
Other accrued expenses and deferred income......... 3,037 2,431
--------- ---------
Total current liabilities.................... 33,359 20,187
Long term debt........................................ 5,281 6,119
Deferred income taxes................................. 186 186
--------- ---------
Total liabilities............................ 38,826 26,492
--------- ---------
Commitments and contingencies......................... --- ---
Minority interest..................................... 1,619 1,619
--------- ---------
Stockholders' equity:
Preferred stock, $.01 par value--
Authorized--5,000 shares
Issued and outstanding--none...................... --- ---
Common stock, $.01 par value--
Authorized--20,000 shares
Issued and outstanding--8,462 shares
at November 29, 1997 and at May 31, 1997 ....... 85 85
Capital in excess of par.............................. 14,814 14,811
Retained earnings..................................... 34,059 34,384
--------- ---------
Total stockholders' equity...................... 48,958 49,280
--------- ---------
Total liabilities, minority interest
and stockholders' equity.....................$ 89,403 $ 77,391
========= =========
See accompanying notes to consolidated financial statements
<PAGE>
PART I. FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial statements Page 4
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands except per share data)
(unaudited)
For the three For the six
months ended months ended
November 29, November 30, November 29, November 30,
1997 1996 1997 1996
--------- --------- --------- ---------
Net sales..................$ 21,034 $ 17,458 $ 41,404 $ 33,326
Cost of sales.............. 11,997 9,820 23,710 18,792
--------- --------- --------- ---------
Gross profit............... 9,037 7,638 17,694 14,534
Selling, general and
administrative expenses.... 8,826 8,019 17,306 15,948
Business interruption
insurance (proceeds)....... -- (132) -- (560)
--------- --------- --------- ---------
Operating income(loss)... 211 (249) 388 (854)
Interest expense, net...... 426 436 796 768
--------- --------- --------- ---------
(Loss) before
income taxes......... (215) (685) (408) (1,622)
(Benefit) for
income taxes............... (47) (125) (82) (293)
--------- --------- --------- ---------
Net (loss).................$ (168) $ (560) $ (326) (1,329)
========= ========= ========== =======
Net (loss)
Per share...............$ (0.02) $ (0.07) $ (0.04) $ (0.16)
========= ========= ========== =======
Weighted average shares
outstanding............. 8,676 8,494 8,679 8,476
========= ========= ========== =======
See accompany notes to consolidated financial statements
<PAGE>
PART I. FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial statements Page 5
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
For the six months ended
November 29, November 30,
Cash flows from operating activities: 1997 1996
------- -------
Net (loss)............................................$ (325) $ (1,329)
Adjustments to reconcile net (loss) to net cash
provided by (used in) operating activities--
Depreciation................................... 1,282 1,571
Changes in assets and liabilities:
(Increase) decrease in accounts receivable... (1,206) 28
(Increase) in inventory...................... (7,347) (6,148)
(Increase) in prepaid income taxes........... (83) --
(Increase) in prepaid expenses
and other current assets................... (1,542) (1,587)
Decrease in other assets.................... 171 119
Increase in accounts payable................ 5,570 5,152
Increase (decrease) in other accrued
expenses and deferred income.............. 606 (757)
(Decrease) in accrued and currently
deferred income taxes...................... (428) (1,490)
------- -------
Net cash (used in) operating activities............ (3,302) (4,441)
------- -------
Cash flows from investing activities:
Capital expenditures............................. (582) (2,651)
------- -------
Net cash (used in) investing activities............ (582) (2,651)
------- -------
Cash flows from financing activities:
Proceeds from unsecured notes payable............ 21,125 12,600
Repayments of unsecured notes payable............ (13,700) (6,100)
Repayments of long term borrowings............... (838) --
Issuance of common stock......................... 3 9
------- -------
Net cash provided by financing activities............. 6,590 6,509
------- -------
Net increase (decrease) in cash and cash equivalents.. 2,706 (583)
Cash and cash equivalents, beginning of period........ 1,710 5,393
------- -------
Cash and cash equivalents, end of period..............$ 4,416 $ 4,810
======= =======
During the six months ended November 29, 1997 and November 30, 1996, the
Company paid income taxes of $428 and $1,197, respectively, and paid interest
of $785 and $709, respectively.
See accompanying notes to consolidated financial statements
<PAGE>
FINANCIAL INFORMATION FORM 10-Q
Item 1. Financial statements Page 6
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
1. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the operations
of Little Switzerland, Inc. (the "Company") and its wholly owned subsidiaries,
L.S. Holding, Inc. and L.S. Wholesale, Inc. All significant intercompany
balances have been eliminated in consolidation. The interim financial statements
are unaudited and, in the opinion of management, contain all adjustments
necessary to present fairly the Company's financial position as of November 29,
1997 and November 30, 1996 and the results of its operations and cash flows for
the interim periods presented. It is suggested that these interim financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's latest report on Form 10-K.
The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for a full fiscal year, due
to the seasonal nature of the Company's operations.
2. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH AFFILIATES
The Company enters into a number of transactions with Town & Country
Corporation and its affiliates ("Town & Country"), of which one of the Company's
directors is controlling shareholder and one of the Company's directors is an
executive officer. The Company purchases a portion of its merchandise from Town
& Country at prices that management believes approximate arm's-length
transactions.
<PAGE>
FORM 10-Q
Page 7
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
4. CREDIT ARRANGEMENTS
The Company has available a total of $22.2 million in unsecured credit
facilities, of which $2.5 million is available for borrowing. Approximately $4.2
million of the credit facilities is utilized to secure customs bonds and other
bank guarantees required in the normal course of business. Any unfunded portion
of the facilities can be withdrawn at the bank's discretion. Outstanding
borrowings against these credit facilities totaled approximately $15.5 million
as of November 29, 1997. Additionally, in February 1996, the Company secured
term debt of approximately $8.9 million from its two lead banks to finance the
acquisition of the fixtures, leasehold rights and inventories of two stores in
Barbados. Interest on this debt accrues at an annual interest rate of
approximately 7.25%, and is payable monthly. The principal is payable in equal
quarterly payments over a four year period, commencing March 1997. As of
November 29, 1997, the Company had $7.5 million of term debt outstanding and was
in compliance with all restrictive covenants related to its unsecured and term
debt agreements. Additionally, the Company has available separate facilities for
foreign exchange contracts.
5. EARNINGS PER SHARE
Earnings per share is based on the weighted average number of common and
dilutive common equivalent shares (stock options) outstanding during each
period.
6. ACCOUNTING FOR INCOME TAXES
The Company follows the liability method of accounting for income taxes as
set forth in SFAS No. 109, Accounting for Income Taxes. Under SFAS No. 109,
deferred tax assets and liabilities are recognized for the expected future tax
consequences of events that have been included in the financial statements or
tax returns. The amount of deferred tax asset or liability is based on the
difference between the financial statement and tax bases of assets and
liabilities using enacted tax rates in effect for the year in which the
differences are expected to reverse.
<PAGE>
FORM 10-Q
Page 8
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
7. OTHER ASSETS
Other assets consist primarily of amounts related to non- competition
agreements, rental deposits and the excess of cost over the fair market value of
the net assets of the business acquired (goodwill). Amounts related to
non-competition agreements are amortized over the lives of the respective
agreements. Amounts related to goodwill are being amortized over periods of up
to 10 years. Accumulated amortization totaled approximately $495,000 and
$340,000 at November 29, 1997 and May 31, 1997, respectively.
The Company accounts for long-lived and intangible assets in accordance
with SFAS No. 121, Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed of. The Company continually reviews applicable
assets for events or changes in circumstances which might indicate the carrying
amount of the assets may not be recoverable. The Company assesses the
recoverability of these assets by determining whether the amortization over
their remaining lives can be recovered through projected undiscounted future
results. The amount of impairment, if any, is measured based on projected
discounted future results using a discount rate commensurate with the risks
involved. No such impairment existed as of November 29, 1997.
8. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128 - EARNINGS
PER SHARE
In March 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128 ("SFAS No. 128"), Earnings per Share,
which supersedes Accounting Principles Board Opinion 15, the existing
authoritative guidance. SFAS No. 128 is designed to improve the earnings per
share information provided in the financial statements by simplifying the
existing computational guidelines, revising the disclosure requirements, and
increasing the comparability of earnings per share on an international basis.
SFAS No. 128 is effective for financial statements for both interim and annual
periods ending after December 15, 1997 and requires restatement of all
prior-period earnings per share data presented.
<PAGE>
FORM 10-Q
Page 9
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
The new statement modifies the calculations of primary and fully diluted
earnings per share and replaces them with basic and diluted earnings per share.
Basic earnings per share includes no dilution and is calculated by dividing net
income by the weighted average number of common shares outstanding for the
period. Diluted earnings per share reflects the potential dilution of stock
options that could share in the earnings of an entity, similar to fully diluted
earnings per share. Earnings per share in these financial statements would not
be affected under the new pronouncement.
9. STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123 -
ACCOUNTING FOR STOCK-BASED COMPENSATION
In December 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation, which became effective for fiscal
years beginning after December 15, 1995. SFAS No. 123 requires employee
stock-based compensation to be either recorded or disclosed at its fair value.
Management continues to account for employee stock-based compensation under
Accounting Principles Board Opinion No. 25 and did not adopt the new accounting
provision for employee stock-based compensation under SFAS No. 123. The
additional required disclosures will be included in the Company's fiscal year
end financial statements.
10. ADVERTISING
The Company expenses the costs of advertising as advertisements are printed
and distributed. The Company's advertising consists primarily of advertisements
with local, regional and national travel magazines which are produced on a
periodic basis and distributed to visiting tourists, and fees paid for
promotional "port lecturer" programs directed primarily at cruise ship
passengers.
<PAGE>
FORM 10-Q
Page 10
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
11. COMMITMENTS AND CONTINGENCIES
HURRICANE DAMAGE
In September 1995, Hurricanes Luis and Marilyn inflicted damage to several
of the Company's stores and caused significant damage to various islands'
infrastructures, including hotels and other tourist facilities. As of November
20, 1996, all stores had reopened.
The Company has settled all outstanding claims related to the hurricanes
with its insurance carrier. In connection with this final settlement, the
Company received approximately $13.4 million in property and business
interruption insurance proceeds. The Company recorded a net gain of
approximately $4.7 million in fiscal 1996, after write-offs related to damaged
assets of approximately $8.1 million, including furniture and fixtures,
inventory and other assets related to stores affected by the hurricanes. In
addition, approximately $560,000, representing fiscal 1997 lost profits for a
store in Marigot not reopened until November 1996, was recorded as deferred
income on the Company's consolidated balance sheet as of June 1, 1996. In the
three and six month periods ended November 30, 1996, the Company recorded
$132,000 and $560,000, respectively, as business interruption insurance
proceeds.
EMPLOYEE DEFALCATION
In July 1997, management disclosed to its independent auditors that certain
transactions may have been recorded in error on the books of the Company for the
fiscal year ended May 31, 1997. As a result, the Company engaged Arthur
Andersen, LLP to evaluate the matter and determine the impact, if any, on the
Company's previously and currently reported consolidated financial statements.
After extensive review, analysis and evaluation, which focused on unlocated
differences in cash balances, management believes that an employee defalcation
occurred during the 1997 fiscal year. The employee was able to circumvent
existing internal controls largely due to lapses in appropriate segregation of
<PAGE>
FORM 10-Q
Page 11
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(unaudited)
duties regarding cash deposits and disbursements, inter-bank transfers and bank
account reconciliations. These lapses in the segregation of such duties were
further exacerbated by the resignation of the Company's Assistant Treasurer on
February 28, 1997, which office was not filled until April 29, 1997. The
estimated loss of approximately $2.4 million was classified as Selling, General
and Administrative expense in the consolidated financial statements for the
fiscal year ended May 31, 1997. Selling, General and Administrative expenses for
the three and six month periods ended November 30, 1996 include $481,000 and
$758,000, respectively, of defalcation loss expense.
The Company has insurance coverage with a maximum claim limitation of
$1,000,000 (less a $25,000 deductible). A claim has been submitted to the
Company's fidelity bond carrier and the Company is seeking restitution from the
employee, but the Company does not know what, if any, of the funds are still in
the possession or under the control of the employee. Recoveries relating to
these losses, if any, will be recorded as income in the period(s) received.
<PAGE>
FORM 10-Q
Page 12
PART I. FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
RESULTS OF OPERATIONS
NET SALES
Net sales for the second quarter ended November 29, 1997 were $21.0 million
or 20.5% higher than net sales of $17.5 million for the same period last year.
Net sales of $41.4 million for the six month period ended November 29, 1997 were
24.2% higher than net sales of $33.3 million for the corresponding period last
year.
Net sales for the stores which were open for the full three month period
this year and last year improved to $20.1 million or 15.6% from $17.4 million
last year. Net sales of $38.7 million for stores which were open for the full
six month period this year increased 17.0% from net sales of $33.1 million for
the same period last year.
Management attributes both improvements to strong sales in Alaska, an
increase in tourism in the Caribbean, concentration on core product lines and
suppliers and the Company's aggressive promotional programs directed toward
Caribbean cruise ships, hotels and resorts.
GROSS PROFIT
Gross profit as a percentage of net sales during the three and six month
periods ended November 29, 1997 were 43.0% and 42.7%, respectively, compared to
the three and six month periods ended November 30, 1996 of 43.7% and 43.6%,
respectively. Management attributes the decline in gross margin percentage to
clearance markdowns to liquidate discontinued product lines, and the effect of
relative changes in the sales mix.
<PAGE>
FORM 10-Q
Page 13
PART I. FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Second quarter Selling, General and Administrative expenses ("SG&A")
increased 10.1% to $8.8 million for the three month period ended November 29,
1997 from $8.0 million for the same period last year. As a percent to net sales,
SG&A expenses decreased to 42.0% for the quarter ended November 29, 1997 from
45.9% for the same quarter last year. Six month SG&A increased 8.5% to $17.3
million for the period ended November 29, 1997 from $15.9 million for the same
period last year. As a percent to net sales, SG&A decreased to 41.8% for the six
month period this year from 47.9% for the same period last year. The dollar
increase of approximately $1.4 million is primarily due to new stores in St.
Lucia and in Skagway, Alaska, and non-recurring professional fees of
approximately $400,000 for the three month period and $660,000 for the six month
period ended November 29, 1997 which are related to the Company's strategic
planning efforts. Also, the three and six month periods last year include
$481,000 and $758,000, respectively, of defalcation loss expense. The percent to
sales decrease is primarily due to the effect of the sales increases on fixed
expenses.
EMPLOYEE DEFALCATION
In July 1997, management disclosed to its independent auditors that certain
transactions may have been recorded in error on the books of the Company. As a
result, the Company engaged Arthur Andersen, LLP to evaluate the matter and
determine the impact, if any, on the Company's consolidated financial
statements. After extensive review, analysis and evaluation, which focused on
unlocated differences in cash balances, management determined that an employee
theft occurred during the fiscal year ended May 31, 1997. The employee was able
to circumvent existing internal controls largely due to lapses in appropriate
segregation of duties regarding cash deposits and disbursements, inter-bank
transfers and bank account reconciliations. These lapses in the segregation of
such duties were further exacerbated by the resignation of the Company's
Assistant Treasurer on February 28, 1997, which office was not filled until
<PAGE>
FORM 10-Q
Page 14
PART I. FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
April 29, 1997. The estimated loss of approximately $2.4 million was charged to
Selling, General and Administrative expense for the fiscal year ended May 31,
1997.
As a result of the charge, the Company filed amended financial statements
on Form 10-Q for each of the quarters within the fiscal year. Accordingly, the
comparative consolidated Statements of Income for the three month period ended
November 30, 1996 reflects a net loss of $560,000 or $0.07 per share, including
a charge to administrative expense of $481,000 which, after tax, negatively
impacted net income and earnings per share by $394,000 and $.05, respectively.
For the six month period ended November 30, 1996, the comparative consolidated
Statement of Income reflects a net loss of $1.3 million or $0.16 per share,
including a charge to general and administrative expense of $758,000 which,
after tax, negatively impacted net income and earnings per share by $621,000 and
$0.08, respectively.
OTHER
Net interest expense for the quarter was $426,000 compared to $436,000 in
the same period last year. For the six month period, net interest expense was
$796,000 compared to $768,000 in the same period last year. This increase
reflects higher average borrowings this year.
The Company's effective tax rates for the three and six month periods ended
November 29, 1997 was approximately 21% and 20%, respectively. For the three and
six month periods ended November 30, 1996, the effective tax rate was
approximately 18%.
FORWARD-LOOKING STATEMENTS
This quarterly report on Form 10-Q contains certain statements that are
"forward-looking statements" as that term is defined under the Private
Securities Litigation Reform Act of 1995 and releases issued by the Securities
and Exchange Commission. The words "believe," "expect," "anticipate," "intend,"
<PAGE>
FORM 10-Q
Page 15
PART I. FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
"estimate" and other expressions which are predictions of or indicate future
events and trends and which do not relate to historical matters identify
forward-looking statements. Forward-looking statements involve known and unknown
risks, uncertainties and other factors, which may cause the actual results,
performance or achievements of the Company to differ materially from anticipated
future results, performance or achievements expressed or implied by such
forward- looking statements. The Company undertakes no obligation to publicly
update or revise any forward-looking statement, whether as a result of new
information, future events or otherwise.
The future operating results and performance trends of the Company may be
affected by a number of factors, including, without limitation, the following:
(i) the frequency of tourist visits to the locations where the Company maintains
retail stores (ii) the Company's ability to retain relationships with its major
suppliers of product for resale (iii) weather in the Company's markets (iv)
actions of the Company's competitors and the Company's ability to respond to
such actions (v) economic conditions that affect the buying patterns of the
Company's customers (vi) availability of new tourist markets for expansion and
(vii) the continued success of the Company's efforts to implement its planned
strategic initiatives.
LIQUIDITY AND CAPITAL RESOURCES
Net cash used in operations during the six month period ended November 29,
1997 was $3.3 million, compared to $4.4 million for the same six month period
last year. The decrease in net cash used in operations primarily reflects a
lower net loss, an increase in accrued expenses and a lower decrease in accrued
taxes this year, partially offset by higher seasonal increases in account
receivables and merchandise inventories this year.
The Company's working capital position as of November 29, 1997 decreased
slightly to $30.2 million from $30.5 million at May 31, 1997. Current ratios
were 1.9 and 2.5 as of the same periods, respectively. Capital expenditures were
approximately $582 thousand during the six month period ended November 29, 1997,
compared to $2.7 million during the same period last year.
<PAGE>
FORM 10-Q
Page 16
PART I. FINANCIAL INFORMATION
ITEM 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
The Company has available a total of $22.2 million in unsecured credit
facilities, of which $2.5 million is available for borrowing. Approximately $4.2
million of the credit facilities is utilized to secure customs bonds and other
bank guarantees required in the normal course of business. Any unfunded portion
of the facilities can be withdrawn at the bank's discretion. Outstanding
borrowings against these credit facilities totaled approximately $15.5 million
as of November 29, 1997. Additionally, in February 1996, the Company secured
term debt of approximately $8.9 million from its two lead banks to finance the
acquisition of the fixtures, leasehold rights and inventories of two stores in
Barbados. Interest on this debt accrues at an annual interest rate of
approximately 7.25%, and is payable monthly. The principal is payable in equal
quarterly payments over a four year period, commencing March 1997. As of
November 29, 1997, the Company had $7.5 million of term debt outstanding and was
in compliance with all restrictive covenants related to its unsecured and term
debt agreements. Additionally, the Company has available separate facilities for
foreign exchange contracts. It remains management's expectation that funds
available from operations and bank financing will be sufficient to fund
operations and expansion for at least the next three years.
<PAGE>
FORM 10-Q
Page 17
PART II. OTHER INFORMATION
Item 3. Quantitative and Qualitative Disclosures about Market Risk
None.
Item 6. Exhibits and Reports of Form 8-K
(a) Exhibits
3.1 The Amended and Restated Certificate of Incorpo-
ration of the Company is incorporated herein
by reference to Exhibit 3.3 to Amendment No. 1
to the Company's Registration Statement on Form
S-1, Registration No. 33-40907, files with the
Securities and Exchange Commission on July 10,
1992 ("Amendment No. 1 to the Form S-1").
3.2 The Amended and Restated By-Laws of the Company are
incorporated herein by reference to Exhibit 3.4 to
Amendment No. 1 to the Form S-1 and the First
Amendment to the Amended and Restated By-laws of the
Company is incorporated herein by reference to the
Current Report on Form 8-K filed with the Securities
and Exchange Commission on November 12, 1997.
(b) Reports on Form 8-K during the quarter ended November 29, 1997
1. On October 9, 1997 the Company filed a Current
Report on Form 8-K announcing the record date and
annual meeting date for its regular annual meeting
of Shareholders.
2. On November 12, 1997 the Company filed a Current
Report on Form 8-K announcing an amendment to is
Amended and Restated By-laws.
<PAGE>
FORM 10-Q
Page 18
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
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.
LITTLE SWITZERLAND, INC.
Date: January 13, 1998 /s/ Thomas S. Liston
Thomas S. Liston
Chief Financial Officer,
Vice President and Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-30-1998
<PERIOD-START> JUN-1-1997
<PERIOD-END> NOV-29-1997
<CASH> 4,416
<SECURITIES> 0
<RECEIVABLES> 3,288
<ALLOWANCES> 0
<INVENTORY> 52,075
<CURRENT-ASSETS> 63,577
<PP&E> 39,147
<DEPRECIATION> 16,483
<TOTAL-ASSETS> 89,403
<CURRENT-LIABILITIES> 33,359
<BONDS> 5,281
0
0
<COMMON> 85
<OTHER-SE> 48,873
<TOTAL-LIABILITY-AND-EQUITY> 89,320
<SALES> 41,404
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<INCOME-PRETAX> (408)
<INCOME-TAX> (82)
<INCOME-CONTINUING> (326)
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<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (326)
<EPS-PRIMARY> (0.04)
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</TABLE>
