<PAGE> 1
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
------------
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED MARCH 30, 1996 COMMISSION FILE NUMBER 0-22480
DM MANAGEMENT COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 04-2973769
(State or other jurisdiction (I.R.S. Employer Identification No.)
incorporation or organization)
25 RECREATION PARK DRIVE, SUITE 200
HINGHAM, MA 02043
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 740-2718
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.
Class
-----
Common stock, $0.01 par value 4,292,168 shares outstanding at May 8, 1996
Total number of pages 40
The Exhibit Index is located on Page 14
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<PAGE> 2
DM MANAGEMENT COMPANY & SUBSIDIARY
<TABLE>
INDEX TO FORM 10-Q
<CAPTION>
PART I - FINANCIAL INFORMATION PAGE NO.
- ------------------------------ --------
<S> <C>
Item 1. Consolidated Financial Statements................................................................... 3-8
Consolidated Balance Sheets at March 30, 1996, March 25, 1995 and June 24, 1995 .................... 3
Consolidated Statements of Operations for the three months and the nine months ended
March 30, 1996 and March 25, 1995 ......................................................... 4
Consolidated Statements of Cash Flows for the nine months ended March 30, 1996 and
March 25, 1995 ............................................................................ 5
Notes to Consolidated Financial Statements.......................................................... 6-8
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations............... 9-11
PART II - OTHER INFORMATION
- ---------------------------
Item 4. Submission of Matters to a Vote of Security Holders ................................................ 12
Item 6. Exhibits and Reports on Form 8-K.................................................................... 12
Signature.................................................................................................... 13
Exhibit Index................................................................................................ 14
</TABLE>
2
<PAGE> 3
<TABLE>
DM MANAGEMENT COMPANY & SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(AMOUNTS IN THOUSANDS, EXCEPT SHARE DATA)
(UNAUDITED)
<CAPTION>
March 30, March 25, June 24,
ASSETS: 1996 1995 1995
--------- --------- --------
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents ............................................ $ 166 $ 183 $ 231
Accounts receivable .................................................. 1,413 1,324 22
Marketable securities, net of unrealized depreciation of $110 at
March 30, 1996 .................................................. 3,884 -- --
Inventory ............................................................ 11,401 11,939 10,604
Prepaid catalog expenses ............................................. 4,999 4,540 4,833
Other current assets ................................................. 693 538 557
-------- -------- --------
Total current assets ............................................ 22,556 18,524 16,247
Marketable securities, net of unrealized depreciation of $124 and $51 at
March 25, 1995 and June 24, 1995, respectively ....................... -- 3,876 3,949
Property and equipment, net ............................................... 6,859 6,920 6,986
Intangible assets, net .................................................... 5,411 5,099 5,235
-------- -------- --------
Total assets ......................................................... $ 34,826 $ 34,419 $ 32,417
======== ======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable ..................................................... $ 5,696 $ 5,656 $ 6,642
Accrued expenses ..................................................... 1,798 2,262 1,736
Accrued customer returns ............................................. 2,122 1,842 1,275
Short-term borrowings ................................................ 1,475 100 --
Current portion of mortgage note and other long-term debt ............ 289 288 279
-------- -------- --------
Total current liabilities ....................................... 11,380 10,148 9,932
Mortgage note ............................................................. 1,393 1,503 1,476
Other long-term debt ...................................................... 4,055 4,232 2,158
Commitments
Stockholders' equity:
Special preferred stock (par value $0.01), 1,000,000 shares authorized -- -- --
Common stock (par value $0.01) 15,000,000 shares authorized,
4,292,168, 4,248,035 and 4,261,058 shares issued (4,292,168,
4,241,369 and 4,261,058 shares outstanding) at March 30, 1996,
March 25, 1995 and June 24, 1995, respectively .................. 43 42 42
Additional paid-in capital ........................................... 39,868 39,736 39,827
Unrealized loss on marketable securities ............................. (110) (124) (51)
Accumulated deficit .................................................. (21,803) (21,118) (20,967)
-------- -------- --------
Total stockholders' equity ...................................... 17,998 18,536 18,851
-------- -------- --------
Total liabilities and stockholders' equity ...................... $ 34,826 $ 34,419 $ 32,417
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
<TABLE>
DM MANAGEMENT COMPANY & SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
------------------- --------------------
March 30, March 25, March 30, March 25,
1996 1995 1996 1995
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Net sales ........................................ $23,719 $21,496 $68,996 $54,922
Cost of goods sold ............................... 13,692 12,385 41,113 31,539
------- ------- ------- -------
Gross profit ................................ 10,027 9,111 27,883 23,383
Selling, general and administrative expenses ..... 9,611 8,900 28,561 22,724
------- ------- ------- -------
Income (loss) from operations ............... 416 211 (678) 659
Interest (income) expense, net ................... 124 71 251 (32)
------- ------- ------- -------
Income (loss) before income taxes ........... 292 140 (929) 691
Provision (benefit) for income taxes ............. 29 14 (93) 69
------- ------- ------- -------
Net income (loss) ........................... $ 263 $ 126 $ (836) $ 622
======= ======= ======= =======
Net income (loss) per common and common
equivalent share ....................... $ 0.06 $ 0.03 $ (0.20) $ 0.13
======= ======= ======= =======
Weighted average common and common equivalent
shares outstanding ..................... 4,503 4,584 4,270 4,634
======= ======= ======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
<TABLE>
DM MANAGEMENT COMPANY AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
<CAPTION>
Nine Months Ended
------------------------------
March 30, 1996 March 25, 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ..................................................................... $ (836) $ 622
Adjustments to reconcile net income (loss) to net cash used by operating activities:
Depreciation and amortization ...................................................... 992 592
Changes in assets and liabilities:
Increase in accounts receivable .................................................... (1,391) (950)
Increase in inventory .............................................................. (797) (2,284)
Increase in prepaid catalog expenses ............................................... (166) (1,485)
Increase in other current assets ................................................... (136) (230)
Decrease in accounts payable and accrued expenses .................................. (492) (1,017)
Increase in accrued customer returns ............................................... 847 814
------- -------
Net cash used by operating activities .................................................. (1,979) (3,938)
Cash flows from investing activities:
Proceeds from sale of marketable securities ........................................ 6 4,130
Additions to property and equipment ................................................ (526) (2,378)
Payments for purchase of Carroll Reed .............................................. (907) (4,124)
------- -------
Net cash used by investing activities ................................................. (1,427) (2,372)
Cash flows from financing activities:
Borrowings under debt agreements ................................................... 23,785 12,445
Payments of borrowings ............................................................. (20,368) (6,731)
Principal payments on capital lease obligations .................................... (118) (121)
Proceeds from stock transactions ................................................... 42 62
------- -------
Net cash provided by financing activities ............................................. 3,341 5,655
Net decrease in cash and cash equivalents ............................................. (65) (655)
Cash and cash equivalents at:
Beginning of period ................................................................ 231 838
------- -------
End of period ...................................................................... $ 166 $ 183
======= =======
Supplemental cash flow information:
Non-cash financing activities:
Increase in capital lease obligations ........................................... $ - $ 115
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
DM MANAGEMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The financial statements included herein have been prepared by DM
Management Company (the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission, and in the opinion of
management contain all adjustments (consisting of only normal recurring
adjustments) necessary to present fairly the financial position, results of
operations and cash flows for the interim periods presented. The results of
operations for such interim periods are not necessarily indicative of the
results to be expected for the full year. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
rules and regulations. Accordingly, although the Company believes that the
disclosures are adequate to make the information presented not misleading, these
financial statements should be read in conjunction with the consolidated
financial statements and the notes thereto included in the Company's Annual
Report to Stockholders for the fiscal year ended June 24, 1995, and the
Company's quarterly reports for the three months ended September 30, 1995 and
the three months ended December 30, 1995, on Form 10-Q.
A. DEBT
The Company's credit facilities at March 30, 1996 consisted of (i) a
$1,650,000 mortgage note, payments on which are due monthly based on a fifteen
year amortization, with the remaining balance payable in full on August 31,
1999; (ii) a $4,000,000 revolving line of credit (the "$4,000,000 Revolver")
which expires on October 31, 1996, with an option to convert to a five-year term
loan at that time; (iii) a $3,000,000 revolving line of credit (the "$3,000,000
Revolver") which expires on November 30, 1996; and, (iv) a $3,000,000 revolving
line of credit (the "Temporary $3,000,000 Revolver") which expired on April 15,
1996.
<TABLE>
A summary of the Company's revolving lines of credit at March 30, 1996
follows:
<CAPTION>
Maximum
Available Outstanding
--------- -----------
<S> <C> <C>
$3,000,000 Revolver $ 3,000,000 $1,475,000
Temporary $3,000,000 Revolver 3,000,000 -
$4,000,000 Revolver 4,000,000 4,000,000
----------- ----------
Total revolving lines of credit $10,000,000 $5,475,000
=========== ==========
</TABLE>
Currently, the Company's credit facilities are collateralized by the
Company's marketable securities. The mortgage note is also collateralized by a
first mortgage on the Company's office and distribution facility. The terms of
the Company's financing arrangements contain various lending conditions and
covenants, including restrictions on permitted liens, limitations on capital
expenditures and dividends, and compliance with certain financial coverage
ratios.
B. MARKETABLE SECURITIES
During third quarter fiscal 1996, the Company determined that it may choose
not to hold its marketable securities for a period longer than one year. As a
result, the Company has reclassified its marketable securities as current in the
accompanying consolidated balance sheet at March 30, 1996. The marketable
securities continue to be categorized as available-for-sale and are carried at
fair value in the accompanying consolidated balance sheets.
C. INVENTORY
Inventory, consisting of merchandise for sale, is stated at the lower of
cost or market, with cost determined using the first-in, first-out method.
6
<PAGE> 7
DM MANAGEMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
D. NET INCOME (LOSS) PER SHARE
Net income (loss) per common and common equivalent share is computed by
dividing net income (loss) by the weighted average number of shares of common
stock and common stock equivalents outstanding during the period. Common stock
equivalents consist of common stock issuable on the exercise of outstanding
stock options and are calculated using the treasury method. Fully diluted net
income (loss) per share has not been presented because the amount would not
differ significantly from that presented.
E. RECLASSIFICATIONS
Certain financial statement amounts have been reclassified to be consistent
with current period presentation.
F. FISCAL YEAR
The Company's fiscal year is comprised of 52-53 weeks. Fiscal 1995 ended on
June 24, 1995 and included 52 weeks. Fiscal 1996 will be a 53-week year ending
on June 29, 1996. The additional week was added in the first quarter of fiscal
1996.
G. SUPPLEMENTAL CASH FLOW INFORMATION
During fiscal 1995, the Company purchased certain assets and assumed
certain liabilities of Carroll Reed, Inc. and Carroll Reed International Limited
("CRIL"). At the time of acquisition, the Company paid $4,124,000 in connection
with the purchase of the Carroll Reed assets, inclusive of ancillary costs, and
established certain accruals totaling $1,180,000. During third quarter fiscal
1996, the Company made a final payment to CRIL equal to ten percent (10%) of the
net sales (as defined in the purchase agreement) during calendar 1995 from the
Carroll Reed catalog. This payment, totaling $907,000, increased the total
purchase price of the acquisition to $6,211,000 and was accrued and capitalized
to intangible assets as such net sales were realized.
This acquisition is being accounted for under the purchase method of
accounting. The cost of the acquisition, including ancillary costs, has been
allocated to net tangible assets acquired on the basis of the estimated fair
market value of the tangible assets acquired, approximately $257,000, and the
liabilities assumed. The excess of such costs over the fair value of the net
tangible assets acquired, approximately $5,954,000, has been allocated to the
Carroll Reed trademark, service mark and customer list.
H. SEGMENT OF BUSINESS REPORTING
The operations of the Company are divided into the following business
segments for financial reporting purposes:
HISTORIC CORE BUSINESS SEGMENT
The historic core business segment markets classic apparel
designed to appeal to the affluent, well-educated woman. This segment
is characterized by disposable income and net worth significantly
above the national average. This segment markets its products
nationally through three catalog concepts: The Very Thing!, Nicole
Summers and J. Jill, Ltd.
CARROLL REED SEGMENT
The Carroll Reed segment markets fitted apparel designed to
appeal to a younger, more price-conscious consumer. This segment
markets its products nationally through the Carroll Reed catalog
concept.
7
<PAGE> 8
<TABLE>
DM MANAGEMENT COMPANY AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(CONCLUDED)
(UNAUDITED)
Net sales, income (loss) before income taxes, identifiable assets, capital
expenditures and depreciation and amortization pertaining to the business
segments in which the Company operates are presented below (in thousands):
<CAPTION>
Three Months Ended Nine Months Ended
------------------------- -------------------------
March 30, March 25, March 30, March 25,
1996 1995 1996 1995
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Net sales
Historic core business $19,733 $19,704 $58,973 $53,130
Carroll Reed 3,986 1,792 10,023 1,792
------- ------- ------- -------
$23,719 $21,496 $68,996 $54,922
======= ======= ======= =======
Income (loss) before income taxes
Historic core business $ 1,348 $ 883 $ 2,039 $ 2,363
Carroll Reed (229) (117) (1,010) (117)
Unallocated corporate expenses (a) (703) (555) (1,707) (1,587)
Interest income (expense), net (124) (71) (251) 32
------- ------- ------- -------
$ 292 $ 140 $ (929) $ 691
======= ======= ======= =======
Identifiable assets
Historic core business $22,690 $23,950 $22,690 $23,950
Carroll Reed 8,252 6,593 8,252 6,593
General corporate assets (b) 3,884 3,876 3,884 3,876
------- ------- ------- -------
$34,826 $34,419 $34,826 $34,419
======= ======= ======= =======
Capital expenditures
Historic core business $ 408 $ 110 $ 526 $ 2,378
Carroll Reed -- -- -- --
------- ------- ------- -------
$ 408 $ 110 $ 526 $ 2,378
======= ======= ======= =======
Depreciation and amortization
Historic core business $ 221 $ 189 $ 653 $ 491
Carroll Reed 113 101 339 101
------- ------- ------- -------
$ 334 $ 290 $ 992 $ 592
======= ======= ======= =======
<FN>
(a) Unallocated corporate expenses include corporate management costs and
administrative expenses.
(b) General corporate assets are the Company's marketable securities, net of
unrealized depreciation.
</TABLE>
8
<PAGE> 9
DM MANAGEMENT COMPANY AND SUBSIDIARY
FORM 10-Q
FOR QUARTER ENDED MARCH 30, 1996
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
A. RESULTS OF OPERATIONS
QUARTERLY OVERVIEW
Net income for the three months ended March 30, 1996 ("third
quarter fiscal 1996") was $263,000 or $0.06 per share as compared to
net income of $126,000 or $0.03 per share for the three months ended
March 25, 1995 ("third quarter fiscal 1995"). Increased catalog
productivity and higher response rates associated with management's
revised circulation strategy were responsible for the improvement in
third quarter fiscal 1996 results as compared to the prior year.
COMPARISON OF THREE MONTHS ENDED MARCH 30, 1996 WITH THREE MONTHS
ENDED MARCH 25, 1995.
The operations of the Company are divided into two segments for
financial reporting purposes - the historic core business segment and
the Carroll Reed segment. The historic core business segment markets
classic apparel designed to appeal to the affluent, well-educated
woman. This segment is characterized by disposable income and net
worth significantly above the national average. This segment markets
its products nationally through three catalog concepts: The Very
Thing!, Nicole Summers and J. Jill, Ltd. The Carroll Reed segment
markets fitted apparel designed to appeal to a younger, more
price-conscious consumer. This segment markets its products nationally
through the Carroll Reed catalog concept.
Sales and circulation. Net sales for third quarter fiscal 1996
increased 10.3% to $23.7 million from $21.5 million for third quarter
fiscal 1995. Carroll Reed segment net sales for third quarter fiscal
1996 increased 122.4% to $4.0 million from $1.8 million for third
quarter fiscal 1995, accounting for substantially all of the increase
in total net sales between periods. The Company's third quarter fiscal
1996 circulation decreased 5.7% as compared to third quarter fiscal
1995. The decline is attributable to the Company's more targeted
circulation strategy and to later mailings of its Spring season
catalogs to better match the timing of the mailings with consumer
needs. The Company's Carroll Reed segment circulation increased 35.0%
as compared to third quarter fiscal 1995, primarily due to the
addition of a sale book and another Spring season catalog in third
quarter fiscal 1996. Circulation of the Company's historic core
business segment declined 11.2% as compared to third quarter fiscal
1995. Response rates and average revenue per order increased during
third quarter fiscal 1996 compared to third quarter fiscal 1995.
Gross profit. Gross profit as a percentage of net sales was 42.3%
in third quarter fiscal 1996, as compared to 42.4% in third quarter
fiscal 1995. The historic core business segment positively affected
the total gross profit percentage as the Company's less aggressive
inventory purchasing strategy resulted in fewer overstocks compared to
the prior year. The Carroll Reed segment's gross profit percentage for
third quarter fiscal 1996 declined compared to third quarter fiscal
1995. The Carroll Reed segment's prior year product costs were lower
due to inventory procured in connection with the Carroll Reed
acquisition.
Selling, general and administrative expenses. Selling, general
and administrative expenses were $9.6 million or 40.5% of net sales in
third quarter fiscal 1996, compared to $8.9 million or 41.4% of net
sales in third quarter fiscal 1995. Third quarter fiscal 1996 selling,
general and administrative expenses for the Carroll Reed segment
increased $0.8 million over third quarter fiscal 1995 levels.
Increased catalog productivity during third quarter fiscal 1996
resulted in decreased selling, general and administrative costs as a
percentage of net sales as compared to third quarter fiscal 1996.
Interest (income) expense. Interest income decreased slightly to
$55,000 in third quarter fiscal 1996 as compared to $65,000 in third
quarter fiscal 1995. Interest expense increased to $179,000 in third
quarter fiscal 1996 as compared to $136,000 in third quarter fiscal
1995, due to the Company's increased use of its revolving credit
facilities.
9
<PAGE> 10
DM MANAGEMENT COMPANY AND SUBSIDIARY
FORM 10-Q
FOR QUARTER ENDED MARCH 30, 1996
Income taxes. The Company's effective tax rate was 10% for third
quarter fiscal 1996 and third quarter fiscal 1995. The effective rate
reflects the full tax rate at the state level where operating loss
carryforwards have been fully utilized and are no longer available, as
well as the impact of the federal alternative minimum tax.
COMPARISON OF NINE MONTHS ENDED MARCH 30, 1996 WITH NINE MONTHS ENDED
MARCH 25, 1995.
The Company's fiscal year is comprised of 52-53 weeks. Fiscal
1996 will be a 53-week year ending June 29, 1996. The additional
week was added in the first quarter of fiscal 1996. Accordingly, all
comparisons of the nine months ended March 30, 1996 to the nine months
ended March 25, 1995 are comparisons of a 40-week period to a 39-week
period.
Sales and circulation. Net sales for the nine months ending March
30, 1996 increased 25.6% to $69.0 million from $54.9 million for the
nine months ending March 25, 1995. The Company's Carroll Reed segment
accounted for $8.2 million of the $14.1 million increase between
periods. Carroll Reed segment mailings accounted for the majority of
the 16.5% circulation increase between periods. Response rates and
average revenue per order increased during the first nine months of
fiscal 1996 compared to the first nine months of fiscal 1995.
Gross profit. Gross profit as a percentage of net sales was 40.4%
for the nine months ending March 30, 1996 as compared to 42.6% for the
nine months ending March 25, 1995. The highly competitive pricing
environment in the apparel market, an increase in the Company's off
price and Carroll Reed segment sales volume, and the corresponding
loss of operational leverage during the first nine months of fiscal
1996 as compared to the first nine months of fiscal 1995 resulted in
the decline in the gross profit percentage.
Selling, general and administrative expenses. Selling, general
and administrative expenses were $28.6 million for the nine months
ending March 30, 1996, compared to $22.7 million for the nine months
ending March 25, 1995 or 41.4% of net sales for both nine-month
periods. The Company's Carroll Reed segment accounted for $3.8 million
of the increase between periods. Paper price increases and U.S. Postal
Service rate increases announced in January 1995 dramatically
increased the cost of producing and mailing a catalog during the first
nine months of fiscal 1996 as compared to the first nine months of
fiscal 1995. Increased response rates and sales volume mitigated the
effects of these cost increases during the first nine months of fiscal
1996.
Interest (income) expense. Interest income decreased to $158,000
for the nine months ending March 30, 1996 as compared to $216,000 for
the nine months ending March 25, 1995, primarily as a result of lower
invested balances during the first nine months of fiscal 1996.
Interest expense increased to $409,000 for the nine months ending
March 30, 1996 as compared to $184,000 for the nine months ending
March 25, 1995, due to the Company's increased use of its revolving
credit facilities and the $1,650,000 mortgage loan on the Company's
office and distribution center.
Income taxes. The Company's effective tax rate was 10% for the
nine months ending March 30, 1996 and March 25, 1995. The effective
rate reflects the full tax rate at the state level where operating
loss carryforwards have been fully utilized and are no longer
available, as well as the impact of the federal alternative minimum
tax.
B. LIQUIDITY AND CAPITAL RESOURCES
The Company has two selling seasons which correspond to the
fashion seasons. The Fall season begins in July and ends in December.
The Spring season begins in January and ends in early July. In
connection with each selling season, the Company incurs significant
costs in advance of revenue generation. These expenditures consist
primarily of inventory acquisition costs and catalog development,
production and mailing costs. The Company's primary working capital
need is to support these costs. During the first nine months of 1996,
the Company satisfied its working capital requirements through funds
generated from operations and through use of its credit facilities.
10
<PAGE> 11
DM MANAGEMENT COMPANY AND SUBSIDIARY
FORM 10-Q
FOR QUARTER ENDED MARCH 30, 1996
Inventory levels at March 30, 1996 were 4.5% lower than at March
25, 1995. Inventory levels declined compared to the prior year due to
the successful implementation of a less aggressive inventory
purchasing strategy during the nine months ended March 30, 1996.
Prepaid catalog expenses at March 30, 1996 were 10.1% higher than at
March 25, 1995. Catalog costs attributable to increased Carroll Reed
catalog circulation were primarily responsible for the increase.
The Company's credit facilities at March 30, 1996 consisted of
(i) a $1,650,000 mortgage note, payments on which are due monthly
based on a fifteen year amortization, with the remaining balance
payable in full on August 31, 1999; (ii) a $4,000,000 revolving line
of credit which expires on October 31, 1996, with an option to convert
to a five-year term loan at that time; (iii) a $3,000,000 revolving
line of credit which expires on November 30, 1996; and, (iv) a
$3,000,000 revolving line of credit which expired on April 15, 1996.
Currently, the Company's credit facilities are collateralized by
the Company's marketable securities. The mortgage note is also
collateralized by a first mortgage on the Company's office and
distribution facility. The terms of the Company's financing
arrangements contain various lending conditions and covenants,
including restrictions on permitted liens, limitations on capital
expenditures and dividends, and compliance with certain financial
coverage ratios.
During third quarter fiscal 1996, the Company determined that it
may choose not to hold its marketable securities for a period longer
than one year. As a result, the Company has reclassified its
marketable securities as current in the accompanying consolidated
balance sheet at March 30, 1996.
The Company's existing credit facilities and those anticipated to
be available in the future, its marketable securities and its cash
flows from operations are expected to provide the capital resources
necessary to support the Company's operating needs for the foreseeable
future.
11
<PAGE> 12
DM MANAGEMENT COMPANY AND SUBSIDIARY
FORM 10-Q
FOR QUARTER ENDED MARCH 30, 1996
PART II. OTHER INFORMATION.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held a Special Meeting of Stockholders on April 25, 1996. At
the Special Meeting, the stockholders of the Company voted to approve the
following actions by the following votes:
<TABLE>
1. To increase the number of shares of common stock that may be issued
pursuant to the options granted under the 1993 Incentive and
Nonqualified Stock Option Plan from 300,000 to 700,000.
<CAPTION>
Number of Shares
----------------
<S> <C>
For 2,333,392
Against 254,634
Abstain 3,500
Broker non-votes 501,693
</TABLE>
<TABLE>
2. To provide for additional formula stock option grants under the 1993
Incentive and Nonqualified Stock Option Plan to members of the
Company's Board of Directors who are not employees of the Company or
any parent or subsidiary of the Company.
<CAPTION>
Number of Shares
----------------
<S> <C>
For 2,945,994
Against 144,046
Abstain 3,449
Broker non-votes 0
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
EXHIBITS
Certificate of Incorporation and By-Laws
- ----------------------------------------
3.1 Restated Certificate of Incorporation of the Company (included as Exhibit
4.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended
September 25, 1993, File No. 0-22480, and incorporated herein by
reference)
3.2 Amended and Restated By-Laws of the Company (included as Exhibit 4.2 to
the Company's Quarterly Report on Form 10-Q for the quarter ended
March 26, 1994, File No. 0-22480, and incorporated herein by reference)
Material Contracts
- ------------------
10.1 1993 Incentive and Nonqualified Stock Option Plan, as amended
27 Financial Data Schedule
Per Share Earnings
- ------------------
11.1 Statement re: computation of per share earnings
REPORTS ON 8-K
As previously reported in the Company's Form 10-Q for the quarter ended
December 30, 1995, the Company filed a report on Form 8-K dated January 3, 1996,
with the Securities and Exchange Commission in connection with the announcement
that Gordon R. Cooke had been named President, Chief Executive Officer and a
Director, and that Samuel L. Shanaman had become Chief Operating Officer and
would continue as a director.
12
<PAGE> 13
SIGNATURE
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.
DM MANAGEMENT COMPANY
Dated: May 13, 1996 By: /s/ Samuel L. Shanaman
----------------------
Samuel L. Shanaman
Authorized Officer
Executive Vice President, Chief Operating Officer
and Chief Financial Officer (Principal Financial
Officer)
13
<PAGE> 14
DM MANAGEMENT COMPANY AND SUBSIDIARY
FORM 10-Q
FOR QUARTER ENDED MARCH 30, 1996
EXHIBIT INDEX
Exhibit No. Description Page
- ----------- ----------- ----
3.1 Restated Certificate of Incorporation of the Company *
3.2 Amended and Restated By-Laws of the Company *
10.1 1993 Incentive and Nonqualified Stock Option Plan, as amended 15
11.1 Statement re: computation of per share earnings 37
27 Financial Data Schedule 39
* Incorporated by reference
14
<PAGE> 1
DM MANAGEMENT COMPANY
1993 INCENTIVE AND NONQUALIFIED STOCK OPTION PLAN
-------------------------------------------------
SECTION 1. PURPOSE
This Amended and Restated 1993 Incentive and Nonqualified Stock Option Plan
(the "Plan") of DM Management Company (the "Company"), is designed to provide
additional incentive to executives and other key employees of the Company, and
any parent or subsidiary of the Company, and for certain other individuals
providing services to or acting as directors of the Company or any such parent
or subsidiary. The Company intends that this purpose will be effected by the
granting of incentive stock options ("Incentive Stock Options") as defined in
Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"), and
nonqualified stock options ("Nonqualified Options") under the Plan which afford
such executives, key employees or other individuals an opportunity to acquire or
increase their proprietary interest in the Company through the acquisition of
shares of its Common Stock. The Company intends that Incentive Stock Options
issued under the Plan will qualify as "incentive stock options" as defined in
Section 422 of the Code and the terms of the Plan shall be interpreted in
accordance with this intention. The terms "parent" and "subsidiary" shall have
the respective meanings set forth in Section 424 of the Code.
<PAGE> 2
SECTION 2. ADMINISTRATION
2.1 THE COMMITTEE. The Plan shall be administered by the Compensation
Committee of the Board of Directors (the "Board") or another committee
consisting of at least two members of the Company's Board (in either case, the
"Committee"). None of the members of the Committee shall be an officer or other
employee of the Company. It is the intention of the Company that the Plan shall
be administered by "disinterested persons" within the meaning of Rule 16b-3
under the Securities Exchange Act of 1934 and by "outside directors" within the
meaning of Section 162(m) of the Code and the regulations promulgated
thereunder, but the authority and validity of any act taken or not taken by the
Committee shall not be affected if any person administering the Plan is not a
"disinterested person" or "outside director." Except as specifically reserved to
the Board under the terms of the Plan, the Committee shall have full and final
authority to operate, manage and administer the Plan on behalf of the Company.
Action by the Committee shall require the affirmative vote of a majority of all
members thereof.
2.2 POWERS OF THE COMMITTEE. Subject to the terms and conditions of the
Plan, the Committee shall have the power:
(a) To determine from time to time the persons eligible to receive
options and the options to be granted to such persons under the Plan and to
prescribe the terms, conditions, restrictions, if any, and provisions
(which need not be identical) of each option granted under the Plan to such
persons;
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(b) To construe and interpret the Plan and options granted thereunder
and to establish, amend, and revoke rules and regulations for
administration of the Plan. In this connection, the Committee may correct
any defect or supply any omission, or reconcile any inconsistency in the
Plan, or in any option agreement, in the manner and to the extent it shall
deem necessary or expedient to make the Plan fully effective. All decisions
and determinations by the Committee in the exercise of this power shall be
final and binding upon the Company and optionees;
(c) To make, in its sole discretion, changes to any outstanding option
granted under the Plan, including: (i) to reduce the exercise price, (ii)
to accelerate the vesting schedule or (iii) to extend the expiration date;
and
(d) Generally, to exercise such powers and to perform such acts as are
deemed necessary or expedient to promote the best interests of the Company
with respect to the Plan.
SECTION 3. STOCK
3.1 STOCK TO BE ISSUED. The stock subject to the options granted under the
Plan shall be shares of the Company's authorized but unissued common stock, $.01
par value (the "Common Stock"), or shares of the Company's Common Stock held in
treasury. The total number of shares that may be issued pursuant to options
granted under the Plan shall not exceed an aggregate of 700,000 shares of Common
Stock; provided, however, that the class and aggregate number of shares which
may be subject to
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options granted under the Plan shall be subject to adjustment as provided in
Section 8 hereof.
3.2 EXPIRATION, CANCELLATION OR TERMINATION OF OPTION. Whenever any
outstanding option under the Plan expires, is cancelled or is otherwise
terminated (other than by exercise), the shares of Common Stock allocable to the
unexercised portion of such option may again be the subject of options under the
Plan.
3.3 LIMITATION ON GRANTS. In no event may any person be granted options
under the Plan in any calendar year to purchase more than 100,000 shares of
Common Stock. The number of shares of Common Stock issuable pursuant to an
option granted under the Plan that is subsequently forfeited, cancelled or
otherwise terminated shall continue to count toward the foregoing limitation in
the calendar year of grant. In addition, for purposes of applying the foregoing
limitation, if the exercise price of an option granted under the Plan is
subsequently reduced, the transaction shall be deemed a cancellation of the
original option and the grant of a new one.
SECTION 4. ELIGIBILITY
4.1 PERSONS ELIGIBLE. Incentive Stock Options under the Plan may be granted
only to officers and other employees of the Company or any parent or subsidiary
of the Company. Nonqualified Options may be granted to officers or other
employees of the Company or any parent or subsidiary of the Company, and to
members of the Board and consultants or other persons who render
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services to the Company or any such parent or subsidiary (regardless of whether
they are also employees), provided, however, that options may be granted to
members of the Board who are not employees of the Company or any such parent or
subsidiary ("Outside Directors") only as provided in Section 4.4.
4.2 GREATER-THAN-TEN-PERCENT STOCKHOLDERS. Except as may otherwise be
permitted by the Code or other applicable law or regulation, no Incentive Stock
Option shall be granted to an individual who, at the time the option is granted,
owns (including ownership attributed pursuant to Section 425 of the Code) more
than ten percent of the total combined voting power of all classes of stock of
the Company or any parent or subsidiary (a "greater-than-ten-percent
stockholder"), unless such Incentive Stock Option provides that (i) the purchase
price per share shall not be less than one hundred ten percent of the fair
market value of the Common Stock at the time such option is granted, and (ii)
that such option shall not be exercisable to any extent after the expiration of
five years from the date it is granted.
4.3 MAXIMUM AGGREGATE FAIR MARKET VALUE. The aggregate fair market value
(determined at the time the option is granted) of the Common Stock with respect
to which Incentive Stock Options are exercisable for the first time by any
optionee during any calendar year (under the Plan and any other plans of the
Company or any parent or subsidiary for the issuance of incentive stock options)
shall not exceed $100,000 (or such greater amount as may from time to time be
permitted with respect to incentive stock options by the Code or any other
applicable law or regulation).
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<PAGE> 6
4.4 OPTION GRANTS TO OUTSIDE DIRECTORS.
(a) Grant of Options. Each Outside Director serving on the Board at the
time of the meeting of the Company's stockholders at which this Section 4.4 in
this form is approved (the "Approval Meeting") shall automatically be granted,
on the date of the Approval Meeting, a Nonqualified Option to purchase 24,000
shares of Common Stock (in addition to the Nonqualified Option to purchase
12,000 shares of Common Stock that was previously granted to such Outside
Director automatically under this Section 4.4 in the form that was in effect
before the Approval Meeting). Such Nonqualified Option shall be immediately
vested and exercisable as to two-thirds of such shares and shall vest and become
exercisable as to the remaining one-third of such shares immediately following
the annual meeting of stockholders or special meeting in lieu thereof that is
next held after the Approval Meeting, provided that the option holder continues
to be a member of the Board immediately following such meeting. Each Outside
Director joining the Board after the Approval Meeting shall automatically be
granted, on the date such person first becomes a member of the Board, a
Nonqualified Option to purchase 24,000 shares of Common Stock. Such Nonqualified
Option shall be immediately vested and exercisable as to one-third of such
shares and shall vest and become exercisable as to the remaining two-thirds of
such shares cumulatively in two equal annual installments on the first and
second anniversaries of the date the option was granted, provided that the
option holder continues to be a member of the Board on such anniversary.
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(b) Purchase Price. The purchase price per share of Common Stock under each
Nonqualified Option granted pursuant to this Section 4.4 shall be equal to the
fair market value of the Common Stock on the date the Nonqualified Option is
granted, such fair market value to be determined in accordance with the
provisions of Section 6.3.
(c) Expiration. Each Nonqualified Option granted to an Outside Director
under this Section 4.4 shall expire on the fifth anniversary of the date of
grant.
SECTION 5. TERMINATION OF EMPLOYMENT OR DEATH OF OPTIONEE
5.1 TERMINATION OF EMPLOYMENT. Except as may be otherwise expressly
provided herein, options shall terminate on the earlier of:
(a) the date of expiration thereof;
(b) immediately upon the termination of the optionee's employment
with or performance of services for the Company (or any parent or
subsidiary of the Company) by the Company (or any such parent or subsidiary)
for cause (as determined by the Company or such parent or subsidiary); or
(c) thirty days after the date of termination of the optionee's
employment with or performance of services for the Company (or any parent or
subsidiary of the Company) by the Company (or any such parent or subsidiary)
without cause or voluntarily by the optionee;
PROVIDED, that Nonqualified Options granted to persons who are not employees of
the Company (or any parent or subsidiary of the
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Company) need not, unless the Committee determines otherwise, be subject to the
provisions set forth in clauses (b) and (c) above.
An employment relationship between the Company (or any parent or subsidiary
of the Company) and the optionee shall be deemed to exist during any period in
which the optionee is employed by the Company (or any such parent or
subsidiary). Whether authorized leave of absence, or absence on military or
government service, shall constitute termination of the employment relationship
between the Company (or any parent or subsidiary of the Company) and the
optionee shall be determined by the Committee at the time thereof.
As used herein, "cause" shall mean (x) any material breach by the optionee
of any agreement to which the optionee and the Company (or any parent or
subsidiary of the Company) are both parties, (y) any act or omission to act by
the optionee which may have a material and adverse effect on the business of the
Company (or any such parent or subsidiary) or on the optionee's ability to
perform services for the Company (or any such parent or subsidiary), including,
without limitation, the commission of any crime (other than ordinary traffic
violations), or (z) any material misconduct or material neglect of duties by the
optionee in connection with the business or affairs of the Company (or any
such parent or subsidiary) or any affiliate of the Company (or any such parent
or subsidiary).
5.2 DEATH OR RETIREMENT OF OPTIONEE. In the event of the death of the
holder of an option that is subject to clause (b) or (c) of Section 5.1 above
prior to termination of the optionee's
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employment with or performance of services for the Company (or any parent or
subsidiary of the Company) and before the date of expiration of such option,
such option shall terminate on the earlier of such date of expiration or one
year following the date of such death. After the death of the optionee, his
executors, administrators or any person or persons to whom his option may be
transferred by will or by the laws of descent and distribution, shall have the
right, at any time prior to such termination, to exercise the option to the
extent the optionee was entitled to exercise such option at the time of his
death.
If, before the date of the expiration of an option that is subject to
clause (b) or (c) of Section 5.1 above, the optionee shall be retired in good
standing from the Company for reasons of age or disability under the then
established rules of the Company, the option shall terminate on the earlier of
such date of expiration or ninety (90) days after the date of such retirement.
In the event of such retirement, the optionee shall have the right prior to the
termination of such option to exercise the option to the extent to which he was
entitled to exercise such option immediately prior to such retirement.
SECTION 6. TERMS OF THE OPTION AGREEMENTS
Each option agreement shall be in writing and shall contain such terms,
conditions, restrictions, if any, and provisions as the Committee shall from
time to time deem appropriate. Such provisions or conditions may include without
limitation restrictions on transfer, repurchase rights, or such other
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provisions as shall be determined by the Committee; PROVIDED THAT such
additional provisions shall not be inconsistent with any other term or condition
of the Plan and such additional provisions shall not cause any Incentive Stock
Option granted under the Plan to fail to qualify as an incentive option within
the meaning of Section 422 of the Code. The shares of stock issuable upon
exercise of an option by any executive officer, director or beneficial owner of
more than ten percent of the Common Stock of the Company may not be sold or
transferred (except that such shares may be issued upon exercise of such option)
by such officer, director or beneficial owner for a period of six months
following the grant of such option.
Option agreements need not be identical, but each option agreement by
appropriate language shall include the substance of all of the following
provisions:
6.1 EXPIRATION OF OPTION. Notwithstanding any other provision of the Plan
or of any option agreement, each option shall expire on the date specified in
the option agreement, which date shall not, in the case of an Incentive Stock
Option, be later than the tenth anniversary (fifth anniversary in the case of a
greater-than-ten-percent stockholder) of the date on which the option was
granted, or as specified in Section 5 of this Plan.
6.2 EXERCISE. Each option may be exercised, so long as it is valid and
outstanding, from time to time in part or as a whole, subject to any limitations
with respect to the number of shares for which the option may be exercised at a
particular time
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and to such other conditions as the Committee in its discretion may specify upon
granting the option.
6.3 PURCHASE PRICE. The purchase price per share under each option shall be
determined by the Committee at the time the option is granted; provided,
however, that the option price of any Incentive Stock Option shall not, unless
otherwise permitted by the Code or other applicable law or regulation, be less
than the fair market value of the Common Stock on the date the option is granted
(110% of the fair market value in the case of a greater-than-ten-percent
stockholder) and the option price of any Nonqualified Option shall not be less
than 85% of the fair market value of the Common Stock on the date the option is
granted. For the purpose of the Plan the fair market value of the Common Stock
shall be (i) in the case of the Non-Qualified Options granted to Outside
Directors in connection with the Company's initial public offering, the initial
public offering price and (ii) in all other cases, the closing price per share
on the date of grant of the option as reported by a nationally recognized stock
exchange, or, if the Common Stock is not listed on such an exchange, as reported
by the National Association of Securities Dealers Automated Quotation System
("Nasdaq") National Market System or, if the Common Stock is not listed on the
Nasdaq National Market System, the mean of the bid and asked prices per share
on the date of grant of the option or, if the Common Stock is not traded over
the counter, the fair market value as determined by the Committee.
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6.4 TRANSFERABILITY OF OPTIONS. Options shall not be transferable by the
optionee otherwise than by will or under the laws of descent and distribution,
and shall be exercisable, during his lifetime, only by him/her.
6.5 RIGHTS OF OPTIONEES. No optionee shall be deemed for any purpose to be
the owner of any shares of Common Stock subject to any option unless and until
the option shall have been exercised pursuant to the terms thereof, and the
Company shall have issued and delivered the shares to the optionee.
6.6 REPURCHASE RIGHT. The Committee may in its discretion provide upon the
grant of any option hereunder that the Company shall have an option to
repurchase upon such terms and conditions as determined by the Committee all or
any number of shares purchased upon exercise of such option. The repurchase
price per share payable by the Company shall be such amount or be determined by
such formula as is fixed by the Committee at the time the option for the shares
subject to repurchase is granted. In the event the Committee shall grant options
subject to the Company's repurchase option, the certificates representing the
shares purchased pursuant to such option shall carry a legend satisfactory to
counsel for the Company referring to the Company's repurchase option.
6.7 "LOCKUP" AGREEMENT. The Committee may in its discretion specify upon
granting an option that the optionee shall agree for a period of time (not to
exceed 180 days) from the effective date of any registration of securities of
the Company (upon request of the Company or the underwriters managing
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any underwritten offering of the Company's securities), not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any shares issued pursuant to the exercise of such option, without the prior
written consent of the Company or such underwriters, as the case may be.
SECTION 7. METHOD OF EXERCISE; PAYMENT OF PURCHASE PRICE
7.1 METHOD OF EXERCISE. Any option granted under the Plan may be exercised
by the optionee by delivering to the Company on any business day a written
notice specifying the number of shares of Common Stock the optionee then desires
to purchase and specifying the address to which the certificates for such shares
are to be mailed (the "Notice"), accompanied by payment for such shares.
7.2 PAYMENT OF PURCHASE PRICE. Payment for the shares of Common Stock
purchased pursuant to the exercise of an option shall be made either by (i) cash
or check equal to the option price for the number of shares specified in the
Notice, or (ii) with the consent of the Committee, other shares of Common Stock
which (a) either have been owned by the optionee for more than six (6) months on
the date of surrender or were not acquired, directly or indirectly, from the
Company, and (b) have a fair market value on the date of surrender not greater
than the aggregate option price of the shares as to which such option shall be
exercised, (iii) with the consent of the Committee, delivery of such
documentation as the Committee and the broker, if applicable, shall require to
effect an exercise of the option
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and delivery to the Company of the sale or loan proceeds required to pay the
option price, (iv) with the consent of the Committee, such other consideration
which is acceptable to the Committee and which has a fair market value equal to
the option price of such shares, or (v) with the consent of the Committee, a
combination of (i), (ii) (iii), (iv) and/or (v). For the purpose of the
preceding sentence, the fair market value per share of Common Stock so delivered
to the Company shall be determined in the manner specified in Section 6.3. As
promptly as practicable after receipt of the Notice and accompanying payment,
the Company shall deliver to the optionee certificates for the number of shares
with respect to which such option has been so exercised, issued in the
optionee's name; provided, however, that such delivery shall be deemed effected
for all purposes when the Company or a stock transfer agent of the Company shall
have deposited such certificates in the United States mail, addressed to the
optionee, at the address specified in the Notice.
SECTION 8. CHANGES IN COMPANY'S CAPITAL STRUCTURE
8.1 RIGHTS OF COMPANY. The existence of outstanding options shall not
affect in any way the right or power of the Company or its stockholders to make
or authorize, without limitation, any or all adjustments, recapitalizations,
reorganizations or other changes in the Company's capital structure or its
business, or any merger or consolidation of the Company, or any issue of Common
Stock, or any issue of bonds, debentures, preferred or prior preference stock or
other capital
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stock ahead of or affecting the Common Stock or the rights thereof, or the
dissolution or liquidation of the Company, or any sale or transfer of all or any
part of its assets or business, or any other corporate act or proceeding,
whether of a similar character or otherwise.
8.2 RECAPITALIZATION, STOCK SPLITS AND DIVIDENDS. If the Company shall
effect a subdivision or consolidation of shares or other capital readjustment,
the payment of a stock dividend, or other increase or reduction of the number of
shares of the Common Stock outstanding, in any such case without receiving
compensation therefor in money, services or property, then (i) the number,
class, and price per share of shares of stock subject to outstanding options
hereunder shall be appropriately adjusted in such a manner as to entitle an
optionee to receive upon exercise of an option, for the same aggregate cash
consideration, the same total number and class of shares as he would have
received as a result of the event requiring the adjustment had he exercised his
option in full immediately prior to such event; and (ii) the number and class of
shares set forth in Sections 3.1, 3.3 and 4.4 shall be adjusted by substituting
therefor that number and class of shares of stock that the owner of an equal
number of outstanding shares of Common Stock would own as the resultof the
event requiring the adjustment.
8.3 MERGER WITHOUT CHANGE OF CONTROL. After a merger of one or more
corporations into the Company, or after a consolidation of the Company and one
or more corporations in which (i) the Company shall be the surviving
corporation, and
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(ii) the stockholders of the Company immediately prior to such merger or
consolidation own after such merger or consolidation shares representing at
least fifty percent of the voting power of the Company, each holder of an
outstanding option shall, at no additional cost, be entitled upon exercise of
such option to receive in lieu of the number of shares as to which such option
shall then be so exercisable, the number and class of shares of stock or other
securities to which such holder would have been entitled pursuant to the terms
of the agreement of merger or consolidation if, immediately prior to such merger
or consolidation, such holder had been the holder of record of a number of
shares of Common Stock equal to the number of shares for which such option was
exercisable.
8.4 SALE OR MERGER WITH CHANGE OF CONTROL. If the Company is merged into or
consolidated with another corporation under circumstances where the Company is
not the surviving corporation, or if there is a merger or consolidation where
the Company is the surviving corporation but the stockholders of the Company
immediately prior to such merger or consolidation do not own after such merger
or consolidation shares representing at least fifty percent of the voting power
of the Company, or if the Company is liquidated, or sells or otherwise disposes
of substantially all of its assets to another corporation while unexercised
options remain outstanding under the Plan, (i) subject to the provisions of
clause (iii) below, after the effective date of such merger, consolidation,
liquidation, sale or disposition, as the case may be, each holder of an
outstanding
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option shall be entitled, upon exercise of such option, to receive, in lieu of
shares of Common Stock, shares of such stock or other securities, cash or
property as the holders of shares of Common Stock received pursuant to the terms
of the merger, consolidation, liquidation, sale or disposition; (ii) the
Committee may accelerate the time for exercise of all unexercised and unexpired
options to and after a date prior to the effective date of such merger,
consolidation, liquidation, sale or disposition, as the case may be, specified
by the Committee; or (iii) all outstanding options may be cancelled by the
Committee as of the effective date of any such merger, consolidation,
liquidation, sale or disposition provided that (x) notice of such cancellation
shall be given to each holder of an option and (y) each holder of an option
shall have the right to exercise such option to the extent that the same is then
exercisable or, if the Committee shall have accelerated the time for exercise of
all unexercised and unexpired options, in full during the 30-day period
preceding the effective date of such merger, consolidation, liquidation, sale or
disposition.
8.5 ADJUSTMENTS TO COMMON STOCK SUBJECT TO OPTIONS. Except as hereinbefore
expressly provided, the issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, for cash or property,
or for labor or services, either upon direct sale or upon the exercise of rights
or warrants to subscribe therefor, or upon conversion of shares or obligations
of the Company convertible into such shares or other securities, shall not
affect, and no adjustment by
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reason thereof shall be made with respect to, the number or price of shares of
Common Stock then subject to outstanding options.
8.6 MISCELLANEOUS. Adjustments under this Section 8 shall be determined by
the Committee, and such determinations shall be conclusive. No fractional shares
of Common Stock shall be issued under the Plan on account of any adjustment
specified above.
SECTION 9. GENERAL RESTRICTIONS
9.1 INVESTMENT REPRESENTATIONS. The Company may require any person to whom
an option is granted, as a condition of exercising such option, to give written
assurances in substance and form satisfactory to the Company to the effect that
such person is acquiring the Common Stock subject to the option for his own
account for investment and not with any present intention of selling or
otherwise distributing the same, and to such other effects as the Company deems
necessary or appropriate in order to comply with federal and applicable state
securities laws.
9.2 COMPLIANCE WITH SECURITIES LAWS. The Company shall not be required to
sell or issue any shares under any option if the issuance of such shares shall
constitute a violation by the optionee or by the Company of any provisions of
any law or regulation of any governmental authority. In addition, in connection
with the Securities Act of 1933, as now in effect or hereafter amended (the
"Act"), upon exercise of any option, the Company shall not be required to issue
such shares unless the Committee has received evidence satisfactory to it to the
effect that the holder of such option will not transfer such shares
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except pursuant to a registration statement in effect under such Act or unless
an opinion of counsel satisfactory to the Company has been received by the
Company to the effect that such registration is not required. Any determination
in this connection by the Committee shall be final, binding and conclusive. In
the event the shares issuable on exercise of an option are not registered under
the Act, the Company may imprint upon any certificate representing shares so
issued the following legend or any other legend which counsel for the Company
considers necessary or advisable to comply with the Act and with applicable
state securities laws:
The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any State and may not be sold or transferred except upon such
registration or upon receipt by the Corporation of an opinion of
counsel satisfactory to the Corporation, in form and substance
satisfactory to the Corporation, that registration is not required for
such sale or transfer.
The Company may, but shall in no event be obligated to, register any
securities covered hereby pursuant to the Act; and in the event any shares are
so registered the Company may remove any legend on certificates representing
such shares. The Company shall not be obligated to take any other affirmative
action in order to cause the exercise of an option or the issuance of shares
pursuant thereto to comply with any law or regulation of any governmental
authority.
9.3 EMPLOYMENT OBLIGATION. The granting of any option shall not impose upon
the Company (or any parent or subsidiary of
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the Company) any obligation to employ or continue to employ any optionee; and
the right of the Company (or any such parent or subsidiary) to terminate the
employment of any officer or other employee shall not be diminished or affected
by reason of the fact that an option has been granted to him/her.
9.4 WITHHOLDING TAX. Whenever under the Plan shares of Common Stock are to
be delivered upon exercise of an option, the Company shall be entitled to
require as a condition of delivery that the optionee remit an amount sufficient
to satisfy all federal, state and other governmental withholding tax
requirements related thereto.
SECTION 10. AMENDMENT OR TERMINATION OF THE PLAN
The Board of Directors may modify, revise or terminate this Plan at any
time and from time to time, except that (i) the class of persons eligible to
receive options and the aggregate number of shares issuable pursuant to this
Plan shall not be changed or increased, other than by operation of Section 8
hereof, without the consent of the stockholders of the Company and (ii) the
provisions of Section 4.4 shall not be amended more than once every six (6)
months, other than to comport with changes in the Code, the Employee
Retirement Income Security Act, or the rules thereunder.
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SECTION 11. NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board of Directors nor the
submission of the Plan to the stockholders of the Company for approval shall be
construed as creating any limitations on the power of the Board of Directors to
adopt such other incentive arrangements as it may deem desirable, including,
without limitation, the granting of stock options otherwise than under the Plan,
and such arrangements may be either applicable generally or only in specific
cases.
SECTION 12. EFFECTIVE DATE AND DURATION OF PLAN
The Plan shall become effective upon its adoption by the Board of Directors
provided that the stockholders of the Company shall have approved the Plan
within twelve months prior to or following the adoption of the Plan by the
Board. No option may be granted under the Plan after the tenth anniversary of
the effective date. The Plan shall terminate (i) when the total amount of Common
Stock with respect to which options may be granted shall have been issued upon
the exercise of options or (ii) by action of the Board of Directors pursuant to
Section 10 hereof, whichever shall first occur.
* * * * * * * *
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EXHIBIT 11.1
DM MANAGEMENT COMPANY AND SUBSIDIARY
<TABLE>
FORM 10-Q
COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ --------------------------
March 30, March 25, March 30, March 25,
PRIMARY 1996 1995 1996 1995
- ------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss) .............. $ 263,000 $ 126,000 $ (836,000) $ 622,000
=========== ========== =========== ===========
Weighted average shares of
common stock outstanding during
the period ..................... 4,287,436 4,236,561 4,270,188 4,220,187
Adjustments
Assumed exercise of options . 215,798 347,173 -- 414,269
----------- ---------- ----------- -----------
4,503,234 4,583,734 4,270,188 4,634,456
=========== ========== =========== ===========
Net income (loss) per common and
common equivalent share ..... $ 0.06 $ 0.03 $ (0.20) $ 0.13
=========== ========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
------------------------ --------------------------
March 30, March 25, March 30, March 25,
FULLY DILUTED 1996 1995 1996 1995
- ------------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Net income (loss)................ $ 263,000 $ 126,000 $ (836,000) $ 622,000
=========== ========== =========== ===========
Weighted average shares of
common stock outstanding during
the period....................... 4,287,436 4,236,561 4,270,188 4,220,187
Adjustments
Assumed exercise of options... 265,554 347,173 - 414,292
----------- ---------- ----------- -----------
4,552,990 4,583,734 4,270,188 4,634,479
=========== ========== =========== ===========
Net income (loss) per common and
common equivalent share...... $ 0.06 $ 0.03 $ (0.20) $ 0.13
=========== ========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
the company's consolidated balance sheet at March 30, 1996 and from the
consolidated statement of operations for the nine months ended March 30, 1996
contained in the Company's Quarterly Report on Form 10-Q for the Quarter ended
March 30, 1996 and is qualified in its entirety by reference to such Quarterly
Report on Form 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-29-1996
<PERIOD-START> DEC-31-1995
<PERIOD-END> MAR-30-1996
<EXCHANGE-RATE> 1
<CASH> 166
<SECURITIES> 3,884
<RECEIVABLES> 1,413
<ALLOWANCES> 0
<INVENTORY> 11,401
<CURRENT-ASSETS> 22,556
<PP&E> 6,859
<DEPRECIATION> 0
<TOTAL-ASSETS> 34,826
<CURRENT-LIABILITIES> 11,380
<BONDS> 5,448
<COMMON> 43
0
0
<OTHER-SE> 17,955
<TOTAL-LIABILITY-AND-EQUITY> 34,826
<SALES> 68,996
<TOTAL-REVENUES> 68,996
<CGS> 41,113
<TOTAL-COSTS> 41,113
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 251
<INCOME-PRETAX> (929)
<INCOME-TAX> (93)
<INCOME-CONTINUING> (836)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (836)
<EPS-PRIMARY> (0.20)
<EPS-DILUTED> (0.20)
</TABLE>
