SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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, 1996
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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 1-5354
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SWANK, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 04-1886990
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS employer
incorporation or organization) identification Number)
6 Hazel Street, Attleboro, Massachusetts 02703
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code 508-222-3400
--------------
Former name, former address and former fiscal year, if changed since last
report.
Indicate by X 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 [_]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court: Yes ___ No ___
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the latest practicable date:
Title of Class Shares Outstanding on October 25, 1996
-------------- --------------------------------------
Common stock, $.10 par value 16,509,523
<PAGE>
PART I - FINANCIAL STATEMENTS
Item 1. Financial Statements. CONDENSED CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------
(UNAUDITED)
-----------
(Dollars in thousands)
<TABLE>
<CAPTION>
ASSETS SEPTEMBER 30, 1996 DECEMBER 31, 1995
---------------------- -----------------------
Current:
<S> <C> <C> <C> <C>
Cash and temporary cash investments $ 924 $ 1,121
Accounts receivable, less allowances
of $6,491 and $9,907 16,006 10,704
Inventories, at the lower of cost
or market
Raw materials $ 5,324 $ 5,092
Work-in-process 7,269 6,476
Finished goods 14,968 27,561 17,602 29,170
--------- ---------
Recoverable income taxes 1,665
Deferred income taxes 1,890 1,890
Prepaid and other 1,735 1,218
--------- ---------
Total current assets 48,116 45,768
Property, plant and equipment, at cost 22,764 22,472
Obligations under capital lease 1,404 1,466
Less accumulated depreciation
and amortization (17,234) 6,934 (16,481) 7,457
--------- ---------
Deferred income taxes 399 399
Other assets 2,965 3,700
--------- ---------
Total Assets $58,414 $57,324
========= =========
LIABILITIES
Current:
Notes payable to banks $19,472 $14,800
Current portion of long-term
obligations 235 235
Accounts payable, trade 4,299 5,870
Accrued employee compensation 1,075 1,408
Other liabilities 9,578 8,696
--------- ---------
Total current liabilities 34,659 31,009
Long-term obligations 5,557 5,782
--------- ---------
Total liabilities 40,216 36,791
--------- ---------
STOCKHOLDERS' EQUITY
Preferred stock, par value $1.00
Authorized 1,000,000 shares
Common stock, par value $.10:
Authorized 43,000,000 shares
Issued 16,843,042 and 16,843,042 1,684 1,684
Capital in excess of par value 852 852
Retained earnings 17,576 20,112 19,477 22,013
--------- ---------
Deferred employees' benefits,
1,167,617 and 664,461 shares 1,205 771
Treasury stock, at cost 333,519
and 333,519 shares 709 709
--------- ---------
Total stockholders' equity 18,198 20,533
--------- ---------
Total liabilities and stockholders' equity $58,414 $57,324
========= =========
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-2-
<PAGE>
SWANK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
(Dollars in thousands)
----------------
1996 1995
------------ ------------
Net Sales $ 31,630 $ 35,320
Cost of goods sold 18,673 22,457
------------ ------------
Gross profit 12,957 12,863
Selling and administrative expenses 12,846 14,323
------------ ------------
Income (loss) from operations 111 (1,460)
Interest charges 471 689
------------ ------------
Loss before income taxes (360) (2,149)
Benefit for income taxes (90) (774)
------------ ------------
Net loss $ (270) $ (1,375)
------------ ------------
Share and per share information:
Weighted average common shares outstanding 15,776,448 15,957,024
Net loss per share $ (.02) $ (.09)
------------ ------------
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-3-
<PAGE>
SWANK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Dollars in thousands)
----------------
1996 1995
------------ ------------
Net Sales $ 91,587 $ 93,539
Cost of goods sold 54,148 57,726
------------ ------------
Gross profit 37,439 35,813
Selling and administrative expenses 38,537 43,144
------------ ------------
Loss from operations (1,098) (7,331)
Interest charges 1,437 1,432
------------ ------------
Loss before income taxes (2,535) (8,763)
Benefit for income taxes (634) (3,155)
------------ ------------
Net loss $ (1,901) $ (5,608)
------------ ------------
Share and per share information:
Weighted average common shares outstanding 15,688,155 16,210,222
Net loss per share $ (.12) $ (.35)
------------ ------------
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-4-
<PAGE>
SWANK, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
(Dollars in thousands)
----------
<TABLE>
<CAPTION>
1994 1995
-------- --------
<S> <C> <C>
Cash flow from operating activities:
Net loss $ (1,901) $ (5,608)
Adjustments to reconcile net loss to operating cash flows:
Increase in post-retirement benefits 264 203
Depreciation and amortization 1,026 842
Loss on disposals of fixed assets 55
Decrease in receivable reserves (2,606) (2,681)
Change in assets and liabilities
Decrease in accounts receivable (2,695) (2,420)
Decrease (increase) in inventory 1,609 (6,591)
Decrease (increase) in prepaid and other 2,188 (4,398)
Decrease in accounts payable and accrued other (1,622) (48)
-------- --------
Net cash used in operating activities (3,682) (20,701)
-------- --------
Cash flow from investing activities:
Capital expenditures, net of proceeds (558) (602)
-------- --------
Net cash used in investing activities (558) (602)
-------- --------
Cash flow from financing activities:
Borrowing under revolving credit agreements 55,482 35,350
Payments of revolving credit agreements (50,810) (11,750)
Principal payments of long-term debt -- (2,920)
Payments of capital lease obligations (194)
Advance to employees stock ownership trust (435) (678)
Proceeds from exercise of employee's options stock options -- 30
-------- --------
Net cash provided by financing activities 4,043 20,032
-------- --------
Net decrease in cash and equivalents (197) (1,271)
Cash and equivalents at beginning of period 1,121 2,153
-------- --------
Cash and equivalents at end of period $ 924 $ 882
-------- --------
</TABLE>
The accompanying notes are an integral part of the
condensed consolidated financial statements.
-5-
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS.
---------------------------------------------------------------
(1)The unaudited information furnished herein reflects all adjustments
(consisting only of normal recurring adjustments) which are, in the opinion of
management, necessary to present a fair statement of the results for the periods
ended September 30, 1996 and 1995. The financial information contained herein
represents condensed financial data and, therefore, does not include all
footnote disclosures required to be included in financial statements prepared in
conformity with generally accepted accounting principles. Footnote information
was included in the Company's annual report on Form 10-K for the fiscal year
ended December 31, 1995; the condensed financial data included herein should be
read in conjunction with the information in the annual report.
(2) During the nine month period ended September 30, 1996, the Company has not
incurred any material changes in the commitments and contingencies as previously
referenced in Footnote I of the 1995 annual report.
(3)The Health Insurance and Accountability Act of 1996 (the "Act") eliminates
the deduction of interest on policy loans on a significant portion of the
Company's corporate owned life insurance by 1999 and, therefore, substantially
increases the after tax cost of maintaining these policies. The Company and its
advisers are currently assessing the implications of the Act and analyzing the
Company's options. The Company has not yet made a determination whether the
policies should remain in force. If a decision is made to terminate the policies
the Company will, at that time, recognize a deferred income tax liability,
currently estimated at up to $3,000,000, for the previously untaxed accumulation
in policy values. However, if such a decision is made during 1996, the Company
anticipates no change to its effective 1996 tax rate from the potential impact
of the Act's provisions because the amount of estimated additional deferred tax
liability does not exceed the valuation allowance previously recorded against
the Company's deferred tax assets. In the event that the policies are actually
surrendered, the additional taxable income will be recognized for tax return
purposes ratably over a four year period beginning with the year of surrender.
(4) On May 24, 1996 the Company obtained new working capital financing from IBJ
Schroder Bank & Trust Company, as agent for the lenders thereunder (the "New
Lenders"), for up to $25,000,000, with a sublimit of $3,000,000 in letters of
credit (the "New Agreement"). The proceeds of the New Agreement were used, in
part, to repay all but $4 million of the outstanding balance under the previous
facility.
The New Agreement is available through April 1999 and is collateralized
by all of the Company's assets. The New Lenders have a senior lien position on
all assets other than real property, improvements and certain fixtures, in which
the Company's other institutional lenders maintain a senior position to
collateralize a $4,000,000 term loan, as described below, and in which the New
Lenders have a subordinate lien. The New Agreement permits the Company to borrow
against a percentage of eligible accounts receivable and inventory and its loans
bear an interest rate of 1.5% over the New Lenders' prime lending rate. The New
Agreement also contains a facility fee of 1/2% per annum on the unused portion
of the revolving credit facility.
The terms of the New Agreement include covenants requiring the Company
to maintain certain financial ratios for the nine months ended September 30,
1996. These include a maximum leverage ratio of 4.0 to 1 and an inventory
turnover of at least 2 times. As of September 30, 1996 the Company was in
compliance with these covenants. The New Agreement also includes covenants
pertaining to profitability, limiting capital expenditures and additional
indebtedness. The Company believes the inventory turnover covenant to be the
most restrictive, requiring a minimum inventory turnover as high as 2.25 times
during the term of the New Agreement. The New Agreement also prohibits the
payment of dividends. Management believes this credit facility will meet its
working capital needs until May 1999.
-6-
<PAGE>
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued).
---------------------------------------------------------------------------
In connection with the refinancing, The Chase Manhattan Bank, N.A. and
Fleet National Bank (the "Banks") amended and restated the existing credit
facility to provide the Company with a $4,000,000 term loan (the "Term Loan") in
lieu of a like amount of revolving debt. The Term Loan will be repaid in
$200,000 quarterly increments starting in June 1997 with a final payment of
$2,600,000 due May 1999. The Term Loan bears interest at 2.5% over the Banks'
prime lending rate and is collaterialized by a senior lien on real property,
improvements and certain fixtures, and a subordinate lien on all other assets.
The Term Loan also contains an annual facility fee of 2% of the term loan and a
maximum success fee of $450,000 payable as follows; $225,000 on final maturity
with the balance payable subsequently in six equal monthly installments of
$37,500. The annual facility fee and success fee are being included in selling
and administrative expenses over the life of the loan.
The financing agreements include provisions specifying that a material
adverse effect, as determined by the lenders, in the financial position or
results of operations of the Company is an event of default. As such, the Term
Loan, which would otherwise be classified as long-term, has been classified as
current on the balance sheet at September 30, 1996.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
- ---------------------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
Results of Operations
- ---------------------
As is customary in the fashion accessories industry, the Company makes
modifications to its lines coinciding with the Spring (January - June) and Fall
(July - December) seasons. The Company believes that results of operations are
more meaningful on a seasonal basis (six months) than on a quarterly basis as
the timing of sales (deliveries) and related income between quarters can be
affected by the availability of materials, retail sales and fashion trends.
These factors may affect the shift of volume between quarters within a season
differently in one year than another.
Net Sales
- ---------
Net sales for the quarter and for the nine months ended September 30,
1996 were $31,630,000 and $91,587,000, a decrease of $3,690,000, or 10%, and
$1,952,000, or 2%, from the quarter and nine months ended September 30, 1995,
respectively.
Men's and Women's Jewelry net sales decreased $1,718,000, or 12%, and
$2,168,000, or 5%, for the quarter and for the nine months ended September 30,
1996, respectively. Men's Leather Accessories' net sales decreased $1,316,000,
or 7%, for the quarter ended September 30, 1996, but remain ahead $889,000, or
2%, for the nine months ended September 30, 1996. Other Product Lines' net sales
decreased $656,000, or 41%, and $673,000, or 20% for the quarter and nine months
ended September 30, 1996.
-7-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
- ---------------------------------------------------------------------------
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
Included in net sales are adjustments relating to customer returns. Net
sales for the nine months ended September 30, 1996 were favorably impacted as a
result of actual customer return activity in 1996 being lower than anticipated,
primarily due to the Company's efforts, initiated during 1995, to adjust its
women's jewelry stock at the store level to more competitively priced, career
oriented products. During the comparable period in 1995, actual returns exceeded
anticipated returns. The following table quantifies these adjustments, all of
which were recorded through June 30, for the nine months ended September 30,
1996 and for the comparable period in fiscal 1995:
(in thousands)
1996 1995 Variance
------ ------- --------
Men's & Women's Jewelry $1,059 ($1,642) $2,701
Men's Leather Accessories 188 (37) 225
Other Product Lines 138 (312) 450
------ ------- ------
Increase (decrease) in Net Sales $1,385 ($1,991) $3,376
====== ======= ======
The decline in net sales for the quarter in each of the Company's lines
reflects a continuing lackluster retail environment for fashion accessories.
Also, improved management of inventories by retailers has impacted, to some
degree, the timing of both the receipt of orders and subsequent shipments.
However, the Company does not expect that orders received during the fourth
quarter will be sufficient to fully offset the effects of the lower rate of
sales which it is currently experiencing.
Net sales at the Company's factory outlets, which are included in the
net sales figures above, decreased 36% and 24% for the quarter and for the nine
months ended September 30, 1996, respectively. Sales decreased principally as a
result of the closure of thirteen unprofitable store locations in 1996 (four in
the first quarter and nine in the second quarter). The Company believes the
factory outlets are still a valuable distribution channel for the disposition of
excess inventory and continues to assess each store location in an effort to
maintain a smaller, more profitable presence in this market.
Gross Profit
- ------------
Gross profit for the quarter and for the nine months ended September
30, 1996 increased $94,000, or 1%, and $1,626,000, or 5%, respectively. Gross
profit expressed as a percentage of net sales increased to 41% from 36% and 41%
from 38% for the quarter and nine months ended September 30,1996, respectively.
For the quarter, these increased margins are attributable to reductions in
product costs. As part of an effort to reduce overhead, enhance margins and
respond to the competitive price pressures in the fashion goods industry, the
Company has increased its utilization of off shore and domestic manufacturing
suppliers for sourcing its products. For the year to date, increased margins are
attributable to reductions in product costs and lower costs associated with a
reduced level of customer returns.
Men's and Women's Jewelry gross profit decreased $791,000, or 13%, and
$1,155,000, or 6%, for the quarter and nine months ended September 30, 1996,
respectively, primarily as a result of decreased sales. Men's Leather
Accessories gross profit increased $901,000, or 14%, and $2,178,000, or 13%, for
the quarter and nine months ended September 30, 1996, respectively, primarily
due to reductions in product costs. Other Product Lines' gross profit, which
includes residual sales of items in the Company's discontinued gift lines,
decreased $16,000, or 3%, for the quarter ended September 30, 1996, but
increased $603,000, or 78%, for the nine months ended September 30, 1996.
-8-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
- ---------------------------------------------------------------------------
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
Included in gross profit are adjustments relating to customer returns
which, as noted above, reflect the difference in anticipated and actual returns.
The following table quantifies these adjustments, all of which were recorded
through June 30, for the period ended September 30, 1996 and the comparable
period in fiscal 1995:
(in thousands)
1996 1995 Variance
------ ------- --------
Men's & Women's Jewelry $ 674 ($ 990) $1,664
Men's Leather Accessories 72 2 70
Other Product Lines 310 (172) 482
------ ------- ------
Increase (decrease) in Gross Profit $1,056 ($1,160) $2,216
====== ======= ======
Selling and Administrative Expenses
- -----------------------------------
Selling and administrative expenses decreased $1,477,000, or 10%, and
$4,607,000, or 11%, for the quarter and for the nine months ended September 30,
1996, respectively. The decreased costs were primarily attributable to
reductions in compensation costs and related fringe benefits, including
personnel reductions and lower commission rates, and the effects of the
Company's cost reduction programs.
Interest Expense
- ----------------
Interest expense decreased $218,000, or 32%, for the quarter ended
September 30, 1996, reflecting lower third quarter borrowing levels in 1996. The
higher borrowings and interest rates experienced in the first quarter of 1996
relative to last year substantially offset this improvement so that interest
expense increased $5,000 for the nine months ended September 30, 1996, versus
last year.
Provision for Income Taxes
- --------------------------
The Company recognized a tax benefit at an effective tax rate of 25%
for the quarter and nine months ended September 30, 1996, which is below the
federal statutory rate of 34%, to reflect an anticipated alternative minimum tax
for the year. The Company established a valuation allowance in the fourth
quarter of 1995 to reduce deferred tax assets to a level management believes
more likely than not will be realized. The current year rate reflects no change
in the valuation allowance since year end.
The Health Insurance and Accountability Act of 1996 (the "Act")
eliminates the deduction of interest on policy loans on a significant portion of
the Company's corporate owned life insurance by 1999 and, therefore,
substantially increases the after tax cost of maintaining these policies. The
Company and its advisers are currently assessing the implications of the Act and
analyzing the Company's options. The Company has not yet made a determination
whether the policies should remain in force. If a decision is made to terminate
the policies the Company will, at that time, recognize a deferred income tax
liability, currently estimated at up to $3,000,000, for the previously untaxed
accumulation in policy values. However, if such a decision is made during 1996,
the Company anticipates no change to its effective 1996 tax rate from the
potential impact of the Act's provisions because the amount of estimated
additional deferred tax liability does not exceed the valuation allowance
previously recorded against the Company's deferred tax assets. In the event that
the policies are actually surrendered, the additional taxable income will be
recognized for tax return purposes ratably over a four year period beginning
with the year of surrender.
-9-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
- ---------------------------------------------------------------------------
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
Earning (Loss) Per Share
- ------------------------
Average shares outstanding used to compute earnings (loss) per share
are adjusted to include shares held by the Company's employee stock ownership
plan deemed to be allocated to participants in accordance with Statement of
Position 93-6 "Accounting for Employee Stock Ownership Plans".
Liquidity and Capital Resources
- -------------------------------
The Company's working capital decreased $1,302,000 during the nine
months ended September 30, 1996.
As is customary in the fashion accessories industry, substantial
percentages of the Company's sales and earnings occur in the months of
September, October and November, during which the Company makes significant
shipments of its products to retailers for sale during the holiday season. As a
result, receivables increase during the year and peak in the fourth quarter. The
Company generally builds its inventory during the first three quarters of the
year to meet the demand for the holiday season. Cash required is provided by a
revolving credit facility.
The Company has implemented a plan designed to enhance the overall
competitiveness, productivity and efficiency through reduction in overhead costs
and better inventory management. Inventory levels decreased $1,609,000, or 6%,
from December 31, 1995, primarily as a result of improved management to more
closely align inventories with sales, increased sales of excess inventory,
discontinuing the sale and distribution of the men's accessories product line,
and the reduction in the number of retail outlets. The 1996 results through
September reflect a significant ($17 million) reduction in cash used in
operations versus the prior year and reduced borrowings.
Cash used in operations for the nine months totaled $3,682,000,
consisting primarily of the net loss, decreased accounts payable and other
accrued items, collections of accounts receivable, offset, in part, by improved
inventory management and state and federal tax refunds generated from the 1995
net operating loss. Cash used in investing activities was $558,000 for
replacement of used machinery and equipment. Cash provided by financing
activities totaled $4,043,000 consisting primarily of borrowings under revolving
credit agreements, offset by repayments under the revolving credit agreements
and advances to the employees' stock ownership plan.
The reductions of the accounts receivable reserves since year end
result from the net effect of reductions for actual charges processed for cash
discounts, doubtful accounts, in-store markdowns, cooperative advertising and
gross profit on returns and accruals associated with current period activity.
On May 24, 1996 the Company obtained new working capital financing from
IBJ Schroder Bank & Trust Company, as agent for the lenders thereunder (the "New
Lenders"), for up to $25,000,000, with a sublimit of $3,000,000 in letters of
credit (the "New Agreement"). The proceeds of the New Agreement were used, in
part, to repay all but $4 million of the outstanding balance under the previous
facility.
The New Agreement is available through April 1999 and is collateralized
by all of the Company's assets. The New Lenders have a senior lien position on
all assets other than real property, improvements and certain fixtures, in which
the Company's other institutional lenders maintain a senior position to
collateralize a $4,000,000 term loan, as described below, and in which the New
Lenders have a subordinate lien. The New Agreement permits the Company to borrow
against a percentage of eligible accounts receivable and inventory and its loans
bear an interest rate of 1.5% over the New Lenders' prime lending rate. The New
Agreement also contains a facility fee of 1/2% per annum on the unused portion
of the revolving credit facility.
-10-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE FINANCIAL CONDITION AND
- ---------------------------------------------------------------------------
RESULTS OF OPERATIONS (CONTINUED)
---------------------------------
The terms of the New Agreement include covenants requiring the Company
to maintain certain financial ratios for the nine months ended September 30,
1996. These include a leverage ratio and inventory turnovers of 4.0 to 1 and 2
times, respectively. As of September 30, 1996 the Company was in compliance with
these covenants. The New Agreement also includes covenants pertaining to
profitability, limiting capital expenditures and additional indebtedness. The
Company believes the inventory turnover covenant to be the most restrictive,
requiring minimum inventory turnovers as high as 2.25 times annually. The New
Agreement also prohibits the payment of dividends. Management believes this
credit facility will meet its working capital needs until May 1999.
In connection with the refinancing, The Chase Manhattan Bank, N.A. and
Fleet National Bank (the "Banks") amended and restated the existing credit
facility to provide the Company with a $4,000,000 term loan (the "Term Loan") in
lieu of a like amount of revolving debt. The Term Loan will be repaid in
$200,000 quarterly increments starting in June 1997 with a final payment of
$2,600,000 due May 1999. The Term Loan bears interest at 2.5% over the Banks'
prime lending rate and is collaterialized by a senior lien on real property,
improvements and certain fixtures, and a subordinate lien on all other assets.
The Term Loan also contains an annual facility fee of 2% of the term loan and a
maximum success fee of $450,000 payable as follows; $225,000 on final maturity
with the balance payable subsequently in six equal monthly installments of
$37,500 and are being included in selling and administrative expenses over the
life of the loan.
The financing agreements include provisions specifying that a material
adverse effect, as determined by the lenders, in the financial position or
results of operations of the Company is an event of default. As such, the Term
Loan, which would otherwise be classified as long-term, has been classified as
current on the balance sheet at September 30, 1996.
-11-
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
27.0 Financial data schedule.
(b) Reports on Form 8-K - none
- --------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
SWANK, INC.
Registrant
/s/ Christopher F. Wolf
--------------------------------
Christopher F. Wolf
Senior Vice President, Treasurer
and Chief Financial Officer
Dated: November 12, 1996
------------------
-12-
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000095779
<NAME> SWANK, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 924
<SECURITIES> 0
<RECEIVABLES> 22,497
<ALLOWANCES> (6,491)
<INVENTORY> 27,561
<CURRENT-ASSETS> 48,116
<PP&E> 24,168
<DEPRECIATION> (17,234)
<TOTAL-ASSETS> 58,414
<CURRENT-LIABILITIES> 34,659
<BONDS> 0
0
0
<COMMON> 1,684
<OTHER-SE> 16,514
<TOTAL-LIABILITY-AND-EQUITY> 58,414
<SALES> 91,587
<TOTAL-REVENUES> 91,587
<CGS> 54,148
<TOTAL-COSTS> 54,148
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,437
<INCOME-PRETAX> (2,535)
<INCOME-TAX> (634)
<INCOME-CONTINUING> (1,901)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,901)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
