<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED
SEPTEMBER 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM
________ TO ________
Commission File Number 1-13066
MIKASA, INC.
(Exact name of Registrant as specified in its charter)
Delaware 33-0099676
-------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Mikasa Drive, Secaucus, New Jersey 07096
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(Address of principal executive offices) (Zip Code)
(201) 867-9210
--------------
Registrant's telephone number, including area code
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
As of September 30, 2000, a total of 16,998,095 shares of the
Registrant's Common Stock, $0.01 par value, were outstanding.
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MIKASA, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets as of 3
September 30, 2000 and December 31, 1999
Consolidated Statements of Income 4
for the three months ended September 30,
2000 and 1999, and nine months ended
September 30, 2000 and 1999
Consolidated Statements of Cash Flows 5
for the nine months ended September 30,
2000 and 1999
Notes to Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis 9
of Financial Condition and Results of
Operations
Item 3. Quantitative and Qualitative Disclosures About
Market Risks 14
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MIKASA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
--------- ---------
(Unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 4,190 $ 45,650
Trade accounts receivable, net 38,064 29,684
Inventories 172,500 155,204
Deferred income taxes 4,333 4,375
Prepaid expenses and other current assets 3,445 3,129
--------- ---------
Total current assets 222,532 238,042
Property and equipment, net 123,524 127,665
Intangible assets, net 4,489 4,740
Other assets 831 956
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Total assets $ 351,376 $ 371,403
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term borrowings $ 11,205 $ 11,514
Accounts payable 10,132 18,113
Other current liabilities 30,025 33,314
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Total current liabilities 51,362 62,941
Deferred income taxes 5,977 5,977
Notes payable 80,000 90,000
--------- ---------
Total liabilities 137,339 158,918
Preferred stock, undesignated, $0.01 par value; authorized
20,000 shares; none issued and outstanding -- --
Common stock, $0.01 par value; authorized 80,000
shares; issued and outstanding 16,998 and 17,179 shares
at September 30, 2000 and December 31, 1999, respectively 50,107 49,937
Cumulative translation adjustment (333) 748
Retained earnings 219,614 215,265
--------- ---------
269,388 265,950
Less treasury stock, 5,334 and 5,141 shares at September 30,
2000 and December 31, 1999, respectively, at cost (55,351) (53,465)
--------- ---------
Total stockholders' equity 214,037 212,485
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Total liabilities and stockholders' equity $ 351,376 $ 371,403
========= =========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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MIKASA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share data)
<TABLE>
<CAPTION>
For The Three Months Ended For The Nine Months Ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales $103,526 $107,594 $267,765 $274,748
Cost of sales 51,586 57,506 136,225 147,190
-------- -------- -------- --------
Gross profit 51,940 50,088 131,540 127,558
Selling, general and administrative expenses 40,702 39,769 115,984 115,710
-------- -------- -------- --------
Income from operations 11,238 10,319 15,556 11,848
Interest expense, net 1,517 1,708 4,365 4,859
-------- -------- -------- --------
Income before income taxes 9,721 8,611 11,191 6,989
Income tax provision 3,741 3,378 4,307 2,744
-------- -------- -------- --------
Net income $ 5,980 $ 5,233 $ 6,884 $ 4,245
======== ======== ======== ========
Basic and diluted net income per
share of common stock $ 0.35 $ 0.30 $ 0.40 $ 0.24
======== ======== ======== ========
Weighted average number of shares
of common stock outstanding
and diluted shares 17,125 17,659 17,062 17,713
======== ======== ======== ========
Cash dividends per share of
Common stock $ 0.05 $ 0.05 $ 0.15 $ 0.15
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
4
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MIKASA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
For The Nine Months Ended
September 30,
-----------------------------
2000 1999
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<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,884 $ 4,245
Adjustments to reconcile net income to net
cash used in operating activities:
Depreciation and amortization 9,939 9,366
Net changes in operating assets and liabilities (37,748) (28,848)
-------- --------
Net cash used in operating activities (20,925) (15,237)
Cash flows from investing activities:
Capital expenditures (5,778) (6,291)
-------- --------
Cash flows from financing activities:
Repayments under long-term note agreements (10,000) (10,000)
Net payments of short-term borrowings (309) (119)
Purchase of treasury stock (1,886) (5,325)
Sale of common stock from exercise of stock options 170 218
Dividends paid (2,560) (2,637)
-------- --------
Net cash used in financing activities (14,585) (17,863)
Effect of exchange rate changes on cash
and cash equivalents (172) 152
-------- --------
Net decrease in cash and cash equivalents (41,460) (39,239)
Cash and cash equivalents, beginning of period 45,650 39,792
-------- --------
Cash and cash equivalents, end of period $ 4,190 $ 553
======== ========
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements.
5
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MIKASA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except per share data)
1. MERGER WITH J.G. DURAND INDUSTRIES, S.A.:
On September 11, 2000, Mikasa, Inc. ("Mikasa" or the "Company") announced that
it signed an agreement and plan of merger with J.G. Durand Industries, S.A., a
French glass and crystal manufacturer and distributor, and certain stockholders
of Mikasa. The agreement provides for the merger of Mikasa with a subsidiary of
J.G. Durand Industries. In the merger, each share of Mikasa common stock (other
than a certain number of shares held by certain stockholders who will own an
interest in the Company after merger) will be converted into the right to
receive $16.50 in cash. Following completion of the transaction, Mikasa will be
operated as a privately held subsidiary. Completion of the transaction is
subject to customary closing conditions, including stockholder approval and
receipt of regulatory and other approvals.
2. INTERIM FINANCIAL STATEMENTS:
The accompanying consolidated financial statements of Mikasa include
its wholly-owned and majority-owned subsidiaries. In the opinion of
management, all adjustments (consisting of normal, recurring adjustments)
considered necessary for a fair presentation have been included. Operating
results for the three and nine months ended September 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
3. INCOME TAXES:
For the nine months ended September 30, 2000, income taxes were provided
at an estimated annual rate of 38.5% of income before income taxes. For the nine
months ended September 30, 1999, the income tax provision was estimated using an
annual rate of 39.3% of income before income taxes.
4. TRADE ACCOUNTS RECEIVABLE:
Trade accounts receivable are net of allowances for uncollectible accounts
of $1,201 at September 30, 2000 and $774 at December 31, 1999.
5. PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost and are net of accumulated
depreciation of $61,499 at September 30, 2000 and $51,824 at December 31, 1999.
6. INTANGIBLE ASSETS:
Intangible assets are net of accumulated amortization of $3,248 at
September 30, 2000 and $2,984 at December 31, 1999.
7. DECLARATION OF DIVIDEND:
On September 25, 2000, the Company declared a quarterly cash dividend of
$0.05 per share or $850 on its common stock to stockholders of record on October
6, 2000, payable on October 17, 2000.
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MIKASA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except per share data)
8. SEGMENT INFORMATION:
The Company's reportable segments are based on channels of distribution
and geographic operations. Certain of the information reported herein is
reported on the basis of the Company's internal management reporting systems
rather than under generally accepted accounting principles. Specifically, if the
Company were to adjust its accounting to generally accepted accounting
principles, the result would be to increase cost of sales for its Retail
Accounts Group and decrease cost of sales by the identical amount for its Direct
to Consumers Group to adjust for inter-company profits (i.e., for internal
reporting and management purposes, amounts related to all inter-company
inventory profit eliminations result in a higher cost of sales to the Direct to
Consumers Group). Furthermore, since part of the mission of the Company's Direct
to Consumers Group is to liquidate slow moving or out of season products within
the Company's inventories, the allocation of related mark downs for this
activity is inherently subjective and virtually impossible to account for on the
basis of generally accepted accounting principles within segments. The Company
evaluates the performance of its operating segments based on direct operating
income or losses. Each segment records direct expenses related and allocable to
its employees and its operations.
Summarized financial information concerning the Company's reportable
segments for the periods ended September 30 are shown in the following table:
<TABLE>
<CAPTION>
For The Three Months For The Nine Months
Ended Ended
September 30, September 30,
---------------------------- ----------------------------
2000 1999 2000 1999
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales:
Direct to Consumers $ 55,673 $ 55,513 $148,527 $151,365
Retail Accounts 38,905 42,211 91,909 98,250
-------- -------- -------- --------
Total U.S. 94,578 97,724 240,436 249,615
International 8,948 9,870 27,329 25,133
-------- -------- -------- --------
Consolidated $103,526 $107,594 $267,765 $274,748
======== ======== ======== ========
Direct operating income:
Direct to Consumers $ 9,476 $ 6,644 $ 17,060 $ 12,650
Retail Accounts 8,651 9,675 17,258 18,140
-------- -------- -------- --------
Total U.S. 18,127 16,319 34,318 30,790
International 1,472 791 3,892 2,110
-------- -------- -------- --------
Consolidated 19,599 17,110 38,210 32,900
U.S. corporate overhead expenses 8,361 6,791 22,654 21,052
-------- -------- -------- --------
Income from operations 11,238 10,319 15,556 11,848
Interest expense, net 1,517 1,708 4,365 4,859
-------- -------- -------- --------
Income before income taxes $ 9,721 $ 8,611 $ 11,191 $ 6,989
======== ======== ======== ========
</TABLE>
7
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MIKASA, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(In thousands, except per share data)
9. COMPREHENSIVE INCOME:
Total comprehensive income for the three and nine months ended September
30, 2000 and 1999 is as follows:
<TABLE>
<CAPTION>
For The Three Months For The Nine Months
Ended Ended
September 30, September 30,
-------------------------- --------------------------
2000 1999 2000 1999
------- ------ ------- ------
<S> <C> <C> <C> <C>
Net income $ 5,980 $5,233 $ 6,884 $4,245
Other comprehensive income (loss):
Foreign currency translation adjustment (434) 454 (1,081) 615
------- ------ ------- ------
Comprehensive income $ 5,546 $5,687 $ 5,803 $4,860
======= ====== ======= ======
</TABLE>
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth certain financial and operations data for
the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
September 30,
--------------------------------
2000 1999
--------- ---------
(In thousands, except operations data)
<S> <C> <C>
NET SALES BY CHANNEL OF DISTRIBUTION:
Direct to consumers $ 55,673 $ 55,513
Retail accounts 38,905 42,211
International 8,948 9,870
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Total $ 103,526 $ 107,594
========= =========
OPERATIONS DATA:
Stores open at beginning of period 167 160
U.S. Stores opened during period 1 1
Stores closed during period (4) (1)
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Stores open at end of period (1) 164 160
========= =========
(1) Stores in Canada open at end of period were 6
in 2000 and 1999
Percentage (decrease) increase in comparable store
net sales (3.6)% 0.1%
</TABLE>
<TABLE>
<CAPTION>
As Of September 30,
-------------------------
2000 1999
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<S> <C> <C>
Total U.S. store gross square footage 1,524,000 1,498,700
</TABLE>
Three Months Ended September 30, 2000 Compared to Three Months Ended
September 30, 1999
Net Sales. Net sales for the three months ended September 30, 2000 (the
"current period") were $103.5 million, a decrease of $4.1 million or 3.8% lower
than net sales of $107.6 million for the three months ended September 30, 1999
(the "prior period"). This decrease in net sales in the current period was
attributable to a combination of factors. First, the Company's retail accounts
channel of distribution provided a decrease of $3.3 million from the prior
period. Second, the Company's direct to consumers channel of distribution, where
sales are generally consummated at higher price levels than in the retail
accounts channel, provided an increase of $0.1 million of sales from the prior
period. Sales through the international channel of distribution decreased by
$0.9 million.
Gross Profit. Gross profit for the current period was $51.9 million, an
increase of $1.9 million or 3.7% over the prior period's gross profit of $50.1
million. Gross profit as a percentage of net sales increased to 50.2% in the
current period from 46.6% in the prior period. The gross profit increase as a
percentage of net sales was primarily due to improved margins from our direct to
consumer distribution channel.
9
<PAGE> 10
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in the current period were $40.7 million, an increase of
$0.9 million or 2.3% compared to $39.8 million in the prior period. As a
percentage of net sales, such expenses increased to 39.3% in the current period
from 37.0% in the prior period. During the current period, $1.6 million in
expenses were added for ongoing operating expenses of the new stores opened in
the United States during the last twelve months and for certain pre-opening
expenses for these stores and other stores expected to open in 2000. It is the
Company's practice to expense all costs associated with new store openings as
incurred.
Income from Operations. Income from operations in the current period was
$11.2 million, an increase of $0.9 million or 8.9% from the prior period's $10.3
million. As a percentage of net sales, this represented an increase to 10.9% in
the current period from 9.6% in the prior period.
Interest Expense, Net. Net interest expense was $1.5 million in the
current period, a decrease of $0.2 million from the prior period of $1.7
million. The decrease is attributable to the Company's ability to make loan
repayments using cash provided by operations without borrowing additional
amounts at today's potentially higher interest rates.
Nine Months Ended September 30, 2000 Compared to Nine Months Ended September
30, 1999
Net Sales. Net sales for the nine months ended September 30, 2000 (the
"current period") were $267.8 million, a decrease of $7.0 million or 2.5% from
net sales of $274.8 million for the nine months ended September 30, 1999 (the
"prior period"). This decrease in net sales in the current period was
attributable to a combination of factors. First, the Company's retail accounts
channel of distribution provided a decrease of $6.3 million from the prior
period. Second, the Company's direct to consumers channel of distribution, where
sales are generally consummated at higher price levels than in the retail
accounts channel, provided a decrease of $2.8 million of sales from the prior
period. This decrease is primarily attributable to sales foregone in the current
period of $2.8 million from stores closed, while the decline in comparable store
sales was offset by new store sales. The decrease in domestic sales was
partially offset by an increase in sales through the international channel of
distribution of $2.2 million.
Gross Profit. Gross profit for the current period was $131.5 million, an
increase of $4.0 million or 3.1% over the prior period's gross profit of $127.5
million. Gross profit as a percentage of net sales increased to 49.1% in the
current period from 46.4% in the prior period. The gross profit increase as a
percentage of net sales was primarily due to improved margins from the direct to
consumer distribution channel.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses in the current period were $116.0 million, an increase
of $0.3 million or 0.2% compared to the prior period of $115.7 million. As a
percentage of net sales, such expenses increased to 43.3% in the current period
from 42.1% in the prior period. During the current period, $5.0 million in
expenses were added for ongoing operating expenses of the new stores opened in
the United States during the last twelve months and certain pre-opening expenses
for these stores and other stores expected to open in 2000. It is the Company's
practice to expense all costs associated with new store openings as incurred.
During the current period, savings of $2.0 million in expenses were recognized
from stores closed in the last twelve months. Operating expenses also reflect
decreased expenses from the Company's Secaucus, New Jersey warehouse as it
completed its distribution function transfer to the Charleston, South Carolina
facility in March 1999.
Income from Operations. Income from operations in the current period was
$15.6 million, an increase of $3.7 million or 31.3% from the prior period's
$11.8 million. As a percentage of net sales, this represented an increase to
5.8% in the current period from 4.3% in the prior period.
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Interest Expense, Net. Net interest expense was $4.4 million in the
current period, a decrease of $0.5 million from the prior period net interest
expense of $4.9 million. The decrease is attributable to the Company's ability
to make loan repayments using cash provided by operations without borrowing
additional amounts at today's potentially higher interest rates.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company has used cash from operations, an equity
offering and debt financing to fund working capital requirements and capital
expenditures. In June 1997, the Company placed $60.0 million in unsecured,
senior notes with a group of insurance companies at an interest rate of 7.38%
per annum, payable semi-annually, which mature on June 4, 2007. Principal
payments of $15.0 million per year will be due annually commencing in June 2004.
The Company also has outstanding $30.0 million in unsecured senior notes with a
group of insurance companies which bear interest at the rate of 6.66% per annum,
payable semi-annually, which mature in May 2003. Principal payments on these
notes of $10.0 million per year are due annually in May each year until May
2003. The Company also has a $50.0 million unsecured revolving credit facility
provided by two banks. The maturity date of the revolving credit facility is May
19, 2001. As of September 30, 2000, $3.4 million had been used for letters of
credit under the revolving credit facility. The balance of $46.6 million was
unused and available at September 30, 2000. The Company's senior notes and
revolving credit agreements contain certain financial covenants, including
restrictions on cash distributions to stockholders, which could limit the
Company's future ability to pay cash dividends. In addition, the Company may be
required to offer to repurchase the senior notes maturing May 2003 and to
arrange a new bank revolving credit facility after consummation of the proposed
merger with J.G. Durand Industries, S.A.
The Company had working capital of $171.2 million at September 30, 2000
and working capital of $175.1 million at December 31, 1999. Net cash used in
operating activities were $20.9 million and $15.2 million for the nine months
ended September 30, 2000 and 1999, respectively. The increase in net cash used
in operating activities was primarily attributable to an increase in inventory
and a decrease in accounts payable and other current liabilities.
Net cash used in investing activities for capital expenditures were $5.8
million and $6.3 million in the nine months ended September 30, 2000 and 1999,
respectively. These capital expenditures consisted primarily of expenditures for
information systems, fixtures and leasehold improvements for new stores,
improvements to distribution facilities and renovation of existing retail
stores.
Pursuant to the Company's previously announced common stock repurchase
program of up to $20 million of its common stock, the Company's first stock
repurchase under this program was in January 1998 and the last repurchase was on
April 20, 2000. During this period, the Company has purchased 1,412,800 shares
at a total cost of $15.7 million. This is in addition to 3,921,300 shares
previously acquired at a cost of $39.7 million.
Certain monetary assets and liabilities of the Company are in foreign
currencies and may be subject to foreign exchange risk. Foreign currency
exchange losses have not in the past had a material effect on the Company's
financial condition since these assets and liabilities are not material to its
consolidated monetary assets and liabilities. As such, these items are not
hedged by the Company.
The Company's inventory purchases in 1999 were approximately 20% from
Japanese factories and approximately 31% from German and Austrian factories
combined. The significant portion of inventory purchases in foreign currencies
exposes the Company to foreign currency fluctuations which can affect the
Company's gross profit margin. To hedge against potential foreign currency
swings, the Company has strategies in place which are intended to minimize the
adverse impact of foreign currency fluctuations on its business. These
strategies are: (i) Currency risk sharing arrangements with the
11
<PAGE> 12
Company's Japanese suppliers; (ii) Forward exchange contract coverage on part of
its German mark related purchases; (iii) Sourcing of products from countries
other than Japan and Germany where feasible; and (iv) Converting certain
purchases from foreign currency to U.S. dollar denominations. The currency risk
sharing arrangements minimize the impact of currency swings by the equal sharing
of currency exposures against inventory purchases denominated in Japanese yen
between the suppliers and the Company. Future fluctuations of the U.S. dollar in
relation to foreign currencies can impact earnings in future periods.
The Company has two primary distribution centers in the United States,
located in Charleston, South Carolina and Long Beach, California. The Charleston
facility is owned and the Long Beach facility is leased. The Company also leases
additional off-site warehouse space in separate buildings to augment the Long
Beach facility. The Company has its corporate office facility in Secaucus, New
Jersey, which is Company owned. After transfer of the Secaucus facility's
warehouse function to the Company's Charleston distribution facility, the
warehouse portion of the facility was leased to an unrelated third party in
April 1999. The lease term is for 9 years and will provide annually in excess of
$2 million in pre-tax income. The Company's 580,000 square foot distribution
facility in Charleston, South Carolina became fully operational during the
latter part of 1998.
During the third quarter of 2000, the Company opened one new retail store
and closed four in the United States to end the quarter with 164 stores,
including six Canadian stores. The Company operates retail stores in 41 U.S.
States and in three Canadian provinces. The Company plans to continue expansion
of its retail store network in the United States and Canada. Present plans
include opening up to three new retail stores in the balance of 2000 and up to
ten new retail stores in 2001.
The Company currently estimates that its aggregate capital expenditures in
2000 and 2001 will approximate up to $20 million. This includes the expansion
and support of the Company's retail store network and expansion of its
international operations and capital expenditures for the Company's distribution
and office facilities, including system and technology enhancements. In each of
these cases, there can be no assurance that the Company's capital expenditures
will not exceed this estimated amount.
RECENT DEVELOPMENTS
On September 11, 2000, Mikasa announced that it signed an agreement and plan of
merger with J.G. Durand Industries, S.A., a French glass and crystal
manufacturer and distributor, and certain stockholders of Mikasa. The agreement
provides for the merger of Mikasa with a subsidiary of J.G. Durand Industries.
In the merger, each share of Mikasa common stock (other than a certain number
of shares held by certain stockholders who will own an interest in the Company
after merger) will be converted into the right to receive $16.50 in cash.
Following completion of the transaction, Mikasa will be operated as a privately
held subsidiary. Completion of the transaction is subject to customary closing
conditions, including stockholder approval and receipt of regulatory and other
approvals. Mikasa has filed a Schedule 14A with the Securities and Exchange
Commission, and will mail a proxy statement to holders of common stock, in
connection with the merger. Stockholders are urged to read the proxy statement
when it becomes available because it will contain important information.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 133, Accounting for
Derivative Instruments and Hedging Activities, which was amended in June 2000 by
SFAS No. 138, Accounting for Certain Derivative Instruments and Certain Hedging
Activities. These Statements establish accounting and reporting standards for
derivatives and hedging activities. In accordance with these Statements, all
derivatives must be recognized as assets or liabilities and measured at fair
value. These Statements will be effective for the Company beginning in the first
quarter of 2001. The Company is currently evaluating the requirements of SFAS
No. 133 and SFAS No. 138.
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<PAGE> 13
SEASONALITY AND QUARTERLY FLUCTUATIONS
Historically, the Company's operations have been seasonal, with higher
sales and net income occurring in the third and fourth quarters, reflecting
increased demand during the year-end holiday selling season. Since the biggest
retail selling season is the year-end holiday season, and as more of the
Company's principal department store customers adopt electronic data interchange
which allows them to defer shipments until later in the selling season, future
sales are expected to be more heavily weighted toward the third and fourth
quarters. In addition, the Company's retail stores experience a similar seasonal
selling pattern, however, sales are more heavily weighted toward the fourth
quarter. As a result, as the Company increases the number of stores, the shift
of sales volume toward the latter part of the year is expected to continue.
The Company's results of operations may also fluctuate from quarter to
quarter in the future as a result of the amount and timing of sales contributed
by, and expenses related to, the opening of new retail stores and the
integration of such stores into the operations of the Company, as well as other
factors. The addition of a significant number of retail stores, as is
anticipated with the Company's store expansion program, can therefore
significantly affect results of operations on a quarter-to-quarter basis. As the
addition of new stores continues, operating income for the first and second
quarters will be more impacted by the combination of seasonally lower sales
volumes during this period and increased operating expenses. The increase in
operating expenses is principally due to an increased percentage of fixed
expenses that relate to retail stores and the additional incremental expense
from new developing stores.
FORWARD-LOOKING INFORMATION
We believe that certain statements or assumptions contained in
Management's Discussion and Analysis constitute "forward-looking" information.
These forward-looking statements involve risks, uncertainties and other factors
that may cause our actual results, performance or achievements to vary
materially from our predicted results, performance or achievements. These risks,
uncertainties and factors include, among others, the impact on future sales and
profitability of the operation of the Company's distribution facilities, foreign
exchange and foreign purchasing risks, planned expansion of the Company's retail
store network, capital expenditure levels associated with planned projects,
future trends relating to seasonality, competition from the expansion of retail
store networks by our competitors, increased governmental quotas, tariffs or
other restrictions on products the Company imports, and various other factors
referenced in this Quarterly Report on Form 10-Q. We will not update the
forward-looking information contained herein to reflect actual results or
changes in factors affecting the forward-looking information. The
forward-looking information referred to above includes, but is not limited to:
(a) expectations regarding the Company's financial condition and liquidity, as
well as future cash flows; (b) expectations regarding capital expenditures; and
(c) expectations regarding sales growth, gross margins, and selling, general and
administrative expenses. In addition to the risks, uncertainties and other
factors referred to above which may cause the actual results, performance or
achievements to vary from predicted results, performance or achievements, these
estimated amounts are based on various factors and were derived using numerous
important assumptions, including: the Company's successful implementation of
internal plans; its ability to control inventory levels; customer changes in the
short range and long range; domestic and international competition in the
Company's product areas; successful completion of programs to improve efficiency
of the Company's distribution facilities; continued acceptance of existing
products and the development and acceptance of new products; performance of key
suppliers; changes in government import and export policies; risks related to
international transactions and hedging strategies; the ability to establish a
successful e-commerce function; the consummation of the proposed merger with by
J.G. Durand Industries, S.A.; and general economic risks and uncertainties.
13
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
None
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
(27) Financial Data Schedule
(b) Reports on Form 8-K
On September 15, 2000, Form 8-K was filed with the Securities and
Exchange Commission reporting the Agreement and Plan of Merger with J.G. Durand
Industries, S.A.
14
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MIKASA, INC.
(Registrant)
Date: November 14, 2000 /s/ Raymond B. Dingman
------------------------------------------
Raymond B. Dingman
President and Chief Executive Officer
/s/ Brenda W. Flores
------------------------------------------
Brenda W. Flores
Vice President and Chief Financial Officer
(Principal Financial and Accounting Officer)
15
<PAGE> 16
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Page
----------- ----------- ----
<S> <C> <C>
27 Financial Data Schedule 17
</TABLE>
16
