<Page>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange
Act of 1934. For the quarterly period ended February 23, 2002.
Commission File No. 0-19369
LITTLE SWITZERLAND, INC.
Delaware 66-0476514
(State of Incorporation) (I.R.S. Employer
Identification No.)
161-B Crown Bay
St. Thomas U.S.V.I. 00802
(Address of Principal Executive Offices) (Zip Code)
(340) 776-2010
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whethe
r the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
At April 5, 2002, 16,651,070 shares of $.01 par value common stock of the
registrant were outstanding.
<Page>
LITTLE SWITZERLAND, INC.
INDEX TO FORM 10-Q
Page
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements.
Consolidated Balance Sheets as of February 23, 2002
(unaudited) and May 26, 2001 3
Consolidated Statements of Operations (unaudited) for
the three and nine months ended February 23, 2002 and
February 24, 2001 4
Consolidated Statements of Cash Flows (unaudited) for the nine months
ended February 23, 2002 and February 24, 2001 5
Notes to Consolidated Financial Statements (unaudited) 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 6. Exhibits and Reports on Form 8-K 13
SIGNATURES 14
EXHIBIT INDEX 15
<Page>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<Table>
<Caption>
FEBRUARY 23, MAY 26,
ASSETS 2002 2001
(Unaudited)
-------- ---------
CURRENT ASSETS:
Cash and cash equivalents .............................. $ 835 $ 1,467
Accounts receivable, less allowances of $148 and $115 .. 1,766 806
Inventory, net ......................................... 32,666 35,424
Prepaid expenses ....................................... 342 324
-------- --------
Total current assets ................................... 35,609 38,021
-------- --------
Property and equipment, at cost ............................. 24,331 23,739
Less: Accumulated depreciation ..................... 18,034 16,970
-------- --------
Property and equipment, net ............................ 6,297 6,769
OTHER ASSETS ................................................ 667 543
-------- --------
TOTAL ASSETS ................................................ $ 42,573 $ 45,333
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABLITIES:
Book overdraft ......................................... $ 1,219 $ 1,675
Short-term debt ........................................ 3,650 --
Accounts payable ....................................... 7,397 10,039
Accrued income taxes ................................... 1,724 1,678
Other accrued expenses ................................. 3,363 3,514
-------- --------
Total current liabilities ................... 17,353 16,906
NOTE PAYABLE, net of unamortized discount ................... 1,661 1,522
LONG-TERM DEBT .............................................. 2,500 2,500
OTHER NON-CURRENT LIABILITIES ............................... 1,388 1,116
-------- --------
Total liabilities .......................................... 22,902 22,044
-------- --------
COMMITMENTS AND CONTINGENCIES (Note 9) ...................... -- --
STOCKHOLDERS' EQUITY:
Preferred stock, $.01 par value -
Authorized - 5,000 shares
Issued and outstanding - none ...................... -- --
Common stock, $.01 par value -
Authorized - 20,000 shares
Issued and outstanding - 16,526 and 16,436 shares
at February 23, 2002 and May 26, 2001, respectively 165 165
Paid In Capital ............................................. 26,841 26,681
Accumulated deficit ......................................... (7,335) (3,557)
-------- --------
Total stockholders' equity .................. 19,671 23,289
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $ 42,573 $ 45,333
======== ========
</Table>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<Page>
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS EXCEPT PER SHARE DATA)
(UNAUDITED)
<Table>
<Caption>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- -----------------------
February 23, February 24, February 23, February 24,
2002 2001 2002 2001
-------- -------- -------- --------
Net Sales .................................. $ 19,212 $ 19,186 $ 43,667 $ 40,501
Cost of Sales .............................. 10,508 11,721 24,202 23,651
-------- -------- -------- --------
Gross Profit ............................... 8,704 7,465 19,465 16,850
Selling, General and Administrative Expenses 8,361 9,540 22,703 22,276
Gain on Insurance Settlement ............... -- -- -- (1,352)
-------- -------- -------- --------
Earnings (Loss) from Operations............. 343 (2,075) (3,238) (4,074)
Interest Expense, net ...................... 128 282 390 824
-------- -------- -------- --------
Earnings (Loss) before income taxes ........ 215 (2,357) (3,628) (4,898)
Provision for Income Taxes ................. 50 -- 150 100
-------- -------- -------- --------
NET EARNINGS (LOSS) ........................ $ 165 $ (2,357) $ (3,778) $ (4,998)
======== ======== ======== ========
NET EARNINGS (LOSS) PER SHARE:
Basic ............................ $ 0.01 $( 0.27) $( 0.23) $( 0.58)
======== ========= ========= =========
Diluted .......................... $ 0.01 $( 0.27) $( 0.23) $( 0.58)
======== ========= ========= =========
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic ............................. 16,526 8,857 16,508 8,665
======== ======== ======== ========
Diluted ........................... 17,398 8,857 16,508 8,665
======== ======== ======== ========
</Table>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<Page>
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(UNAUDITED)
<Table>
<Caption>
For the nine months ended
February 23, February 24,
2002 2001
------- -------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ............................................... $(3,778) $(4,998)
Adjustments to reconcile net loss to net cash
used in operating activities --
Depreciation ....................................... 1,348 1,464
Amortization of discount on note payable ........... 139 46
Provision for uncollectible accounts ............... 33 (337)
Provision for inventories .......................... (536) 756
Loss on disposal of assets ......................... 156 --
Gain on insurance settlement ....................... -- (1,352)
Stock based compensation ........................... (55) 307
Changes in assets and liabilities:
Increase in accounts receivable .................... (993) (176)
Decrease (increase) in inventory ................... 3,294 (4,304)
Increase in prepaid expenses ....................... (18) (818)
Increase in other assets ........................... (124) (129)
(Decrease) increase in accounts payable ............ (2,643) 4,099
(Decrease) increase in other accrued expenses ...... (43) 1,179
Increase in accrued income taxes ................... 46 48
Increase in other long-term liabilities ............ 272 --
------- -------
Net cash used in operating activities .................. (2,902) (4,215)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures ................................... (1,038) (785)
Proceeds from sale of certain assets ................... 6 3,447
------- -------
Net cash (used in) provided by investing
activities ......................................... (1,032) 2,662
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
(Decrease) increase in book overdraft................... (455) 160
Repayments of secured demand notes payable ............. -- (1,406)
Proceeds from unsecured notes payable .................. -- 2,000
Proceeds from short-term debt .......................... 3,650 --
Proceeds from insurance settlement ..................... -- 1,352
Proceeds from issuance of common stock ................. 107 37
Purchase of subsidiary preferred stock ................. -- (300)
------- -------
Net cash provided by financing activities .......... 3,302 1,843
------- -------
Net (decrease) increase in cash and cash equivalents (632) 290
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD .............. 1,467 959
------- -------
CASH AND CASH EQUIVALENTS, END OF PERIOD .................... $ 835 $ 1,249
======= =======
Supplemental disclosure of cash flow information:
CASH PAID DURING THE PERIOD FOR:
Interest ............................................... $ 250 $ 816
Income Taxes ........................................... $ 104 $ 52
NON-CASH FINANCING ACTIVITIES:
Paid in Capital related to purchase of
subsidiary preferred stock ................................ $ -- $ 1,319
Paid in Capital related to discount
on note payable ........................................... $ -- $ 570
Paid in Capital related to issuance of
restricted stock .......................................... $ 128 $ --
</Table>
SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<Page>
LITTLE SWITZERLAND, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. MANAGEMENT'S PLANS AND LIQUIDITY
On March 22, 2002, Little Switzerland, Inc. ("Little Switzerland" or
the "Company") announced the closing of a 3 year, $12 million senior
collateralized credit facility with Congress Financial Corporation (Florida),
("Congress"). This credit facility, coupled with an equity investment and
working capital facility by Tiffany & Co. and its affiliate, Tiffany & Company
International, Inc. (collectively, "Tiffany"), in May 2001, has provided the
Company with the financial and operational resources necessary to complete its
restructuring. See Note 7, Credit Arrangements.
Management's financing and operating goals for fiscal 2002 included:
(1) enhancing the Company's sales performance through improving merchandise mix,
instituting selected price increases, reducing point of sale discounts and
improving product knowledge and sales training for its staff, (2) managing
operating costs to anticipated revenue levels, eliminating marketing programs
which have not supported sales growth plans and reducing corporate overhead
costs, (3) selected store expansions and new locations in cruise line markets
where the Company either has a very limited presence or no presence at all, and
(4) replacing its existing credit facility with a long-term facility on more
favorable terms. Many of these goals have been successfully implemented and/or
realized, despite the setbacks from the events of September 11, 2001.
2. CONSOLIDATED FINANCIAL STATEMENTS
The accompanying consolidated financial statements include the operations
of Little Switzerland, Inc. and its wholly owned subsidiaries, L.S. Holding,
Inc., L.S. Wholesale, Inc. and L.S. Holding (Florida), Inc. All significant
intercompany balances and transactions have been eliminated in consolidation.
The interim consolidated financial statements are unaudited and, in the opinion
of management, contain all adjustments necessary (which are of a normal
recurring nature) to present fairly the Company's financial position as of
February 23, 2002 and the results of its operations and cash flows for the
interim periods presented. The consolidated balance sheet data at May 26, 2001
are derived from the audited financial statements which are included in the
Company's report on Form 10-K for Fiscal 2001, which should be read in
connection with these financial statements. In accordance with the rules of the
Securities and Exchange Commission, these financial statements do not include
all disclosures required by generally accepted accounting principles.
The results of operations for the interim periods presented are not
necessarily indicative of the results to be expected for a full fiscal year, due
to the seasonal nature of the Company's operations.
Certain reclassifications have been made to the prior years' financial
statements to conform to classifications used in the current year.
3. USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
4. NEW ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). This
statement is effective for fiscal years beginning after December 15, 2001. The
objectives of SFAS No. 144 are to address significant issues relating to the
implementation of SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Assets to be Disposed Of," establish a single accounting model for
the disposal of long-lived assets, provide impairment criteria for all
amortizable intangible assets and eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. SFAS No. 144 extends
discontinued operations reporting to any component of an entity with operations
and cash flows that can be clearly distinguished, operationally and for
financial reporting purposes, from the rest of the entity. The Company is
currently in the process of evaluating the impact, if any, of adopting SFAS No.
144 on the financial statements for fiscal 2003.
5. COMPREHENSIVE INCOME
Comprehensive loss/income is defined as the change in net assets of a
business enterprise during an accounting period from transactions generated from
non-owner sources. It includes all changes in equity during a period except
those resulting from investments by owners and distributions to owners. The
comprehensive loss/income is equal to the net loss/income for the periods ended
February 23, 2002 and February 24, 2001.
6. STORE OPERATIONS
In late fiscal 2001, the Company opened two new stores in Alaska, one
in Skagway and one in Ketchikan. The Skagway store operated under a nine-month
lease and the Company has decided to enter into a five-year lease commitment for
this location beginning in fiscal 2002. The Ketchikan store operated under a
12-month lease commitment and the Company has decided not to extend this lease.
On June 12, 2001, the Company completed a transaction with Columbian
Emeralds, Inc. ("CEI") to sublet CEI's Key West, Florida store and acquire the
furniture and fixtures therein, and also assumed the lease of CEI's former
Perfect Time store adjacent to the Company's flagship store on Main Street in
St. Thomas, USVI. The Company paid CEI $350,000 in connection with the foregoing
transaction. The Key West store is a 4,100 sq. ft. location, which operated as a
clearance center until November 19, 2001 when it was re-opened with some of
Little Switzerland's finest timepieces as well as jewelry from renowned European
and American designers.
On July 31, 2001, the Company decided not to renew its lease at its
Gift Market store in St. Thomas and will vacate this location on or before May
31, 2002. With the recent expansion of the Company's flagship store on Main
Street in St. Thomas, the Company has successfully provided all of the premier
brands sold in the Gift Market store with Main Street frontage not available at
the Gift Market location. The Company will continue to look for opportunities to
continue to give china and crystal suppliers better positioning in existing
stores as well as new locations.
On November 19, 2001, the Company opened its second location in Key
West, Florida, an approximately 850 square foot location in the Key West Hilton
Hotel.
<Page>
On December 15, 2001, the Company opened its first Tiffany Boutique in
its store in Barbados which is approximately 1,200 square feet.
On February 2, 2002, the Company opened its third location in Key West,
Florida, an approximately 2,000 square foot location on Duval Street. This
location complements the other two Key West locations currently operated by the
Company.
On March 21, 2002, the Company completed a transaction with the David
Green Group ("DGG") to sublet DGG's Ketchikan, Alaska store and acquire the
majority of inventory remaining in this location. This Ketchikan store is an
approximate 2,900 square foot location, which was originally operated by Little
Switzerland from 1995 through 1999. Alaska is a challenging market and was
previously viewed as a distraction to the Company's turnaround efforts. New
management has made significant progress in executing the turnaround strategy
while gradually developing the Alaska market. With the Company's continued
improvements in its financial strength, management is now looking to expand into
incremental markets and the continued growth of visitors to the Alaska market
coupled with the existing presence of the Company in this market makes this a
logical growth opportunity.
7. CREDIT ARRANGEMENTS
On March 22, 2002, the Company closed a senior collateralized revolving
and term loan credit facility with Congress, which allows the Company to borrow
up to $12 million, through March 21, 2005, of which up to $8 million will be a
revolving loan and $4 million will be a term loan, at an interest rate of 2.75%
per annum above the Adjusted Eurodollar Rate or 0.75% per annum above Prime plus
customary servicing costs and unused facility fees. Amounts advanced to the
Company under this credit facility are limited to a stated borrowing base which
is calculated as a percentage of certain inventory less specific reserves (as
defined in the credit agreement). The Company's receipts will be applied
daily to the revolver component of the loan requiring the Company to borrow
daily to meet cash flow needs. The credit facility is collateralized by
substantially all of the Company's U.S. and USVI based assets, including all
the U.S. and USVI based inventory, the pledge of two-thirds of the stock of
the Company's foreign subsidiaries and a first priority leasehold mortgage
over the St. Thomas building occupied by the Company as its headquarters and
main warehouse. This credit facility became available after the Company's
quarter end of February 23, 2002, and accordingly, no borrowings under this
facility have been reflected in the accompanying financial statements.
This facility replaces the Company's previous credit arrangement with
JPMorgan Chase Bank, (formerly The Chase Manhattan Bank) ("Chase") which allowed
the Company to borrow up to $3.75 million, through June 1, 2002 with an option
to extend the facility through November 30, 2002, subject to certain conditions,
at an interest rate of 3% per annum above LIBOR. In addition, the Company issued
to Chase a warrant to purchase the number of shares of common stock equal to
0.31% of the shares of common stock outstanding (on a fully-diluted basis) on
the date of exercise for an aggregate purchase price of $50,000. The warrant
expires on February 28, 2003. As of February 23, 2002 and May 26, 2001, the
Company had utilized $3.65 million and $0 of this facility, respectively, and no
portion of the warrant had been exercised. In connection with the new credit
facility with Congress, all principal and interest owed to Chase under such
facility was paid by the Company on March 22, 2002.
The Company also maintains a credit facility with Tiffany, which allows
the Company to borrow up to $2.5 million at an interest rate of 3% per annum
above LIBOR. Interest is payable semi-annually on January 31st and July 31st of
each calendar year with principal and unpaid interest due on or before April 30,
2006. The facility is collateralized by a subordinated interest in the Company's
U.S. and USVI based inventory, as well as a subordinated pledge of two-thirds of
the stock of the Company's foreign subsidiaries. As of February 23, 2002 and May
26, 2001, the Company had utilized $2.5 million of this facility.
In addition to the above credit facilities, in November 2000, the
Company completed certain transactions with Almod Diamonds Ltd. ("Almod") (see
Note 10), which resulted in the Company receiving $2.0 million of proceeds from
the issuance of a $2.0 million non-interest bearing loan, collateralized by the
Company's Barbados inventory. A balloon payment is due on December 31, 2003. If
the Company is unable to repay such debt by the due date, Almod will have the
right to convert the preferred shares and/or its Class B Common Shares, in the
Company's Barbados subsidiary into common stock at a rate of one for one, or
purchase all or some Class A Common Shares of the Company's Barbados subsidiary,
at a price of $1 per share. As of February 23, 2002, Almod had not acquired the
preferred shares or Class B Common Shares in the Company's Barbados subsidiary
because applicable governmental approval had not yet been obtained. Government
approval was subsequently obtained on March 15, 2002 and accordingly, the
preferred and Class B Common Shares were issued to Almod. Interest on the note
payable has been imputed at an interest rate of 11.5%, which is a rate
commensurate with the Company's then current borrowings, and resulted in
$570,000 of original discount, of which $138,705 has been amortized to expense
in the nine months ended February 23, 2002.
8. EARNINGS PER SHARE
In accordance with the requirements of SFAS No. 128, "Earnings per
Share", basic earnings per share is computed by dividing net income by the
weighted average number of shares outstanding for the period. Diluted earnings
per share reflects the dilutive effect of stock options and warrants (as
calculated utilizing the treasury stock method).
The following table summarizes the reconciliation of the numerators and
denominators for the basic and diluted earnings per share ("EPS") computations
(in thousands):
<Table>
<Caption>
Three months Ended Nine months Ended
February 23, February 24, February 23, February 24,
2002 2001 2002 2001
----------- ----------- ------------ ------------
Net earnings (loss) for basic and diluted EPS ....... $ 165 $ (2,357) $ (3,778) $ (4,998)
=========== =========== ============ ============
Weighted average number of shares used in basic
earnings per share calculation .................. 16,526 8,857 16,508 8,665
Incremental shares from assumed exercise of stock
options and warrants ............................ 872 -- -- --
---------- ---------- ------------ ------------
Weighted average number of shares used in diluted
earnings per share calculation .................. 17,398 8,857 16,508 8,665
========== ========== ========== ===========
Shares under and outside of option plans and warrants
excluded in computation of diluted earnings per
share due to antidilutive effects ............... 4 1,911 1,740 1,911
========== ========== ========== ==========
</Table>
The Company's calculation of dilutive earnings per share excludes the
effect of outstanding options and warrants that are anti-dilutive.
<Page>
9. COMMITMENTS AND CONTINGENCIES
CLASS ACTION LAWSUIT
On January 7, 2002, the U.S. District Court for the District of
Delaware entered an order of final judgment and dismissal in connection with the
settlement of the class action complaint (Civil Action No. 99-176), filed on
March 22, 1999, against, among others, the Company and certain of its former
officers and directors. During the course of the litigation the plaintiffs
alleged, among other things, that the defendants violated federal securities
laws by failing to disclose that the financing commitment of Destination Retail
Holding Corporation ("DRHC") to purchase the Company's shares expired on April
30, 1998, before the Company's stockholders were scheduled to vote to approve
the then proposed merger between the Company and DRHC at the May 8, 1998 special
meeting of stockholders. The settlement amount of $1.05 million was paid from
the proceeds of the Company's existing insurance coverage.
The Company is also party to other various pending litigation, claims,
assessments and proceedings in the ordinary course of business. Management of
the Company believes that these legal proceedings and claims should not have a
material adverse effect on the Company's financial position, results of
operations or cash flows.
10. ALMOD TRANSACTION
During fiscal 2001, the Company engaged in negotiations with Almod
regarding various transactions, including the sale of the Company's Barbados
subsidiary, World Gift Imports (Barbados) Ltd. ("WGI"). Due to various issues
encountered during the negotiations with Almod regarding the potential sale of
the Company's operations in Barbados, the parties agreed in lieu of the sale of
WGI to Almod, the Company would restructure the capital of this subsidiary. The
final arrangement resulted in the Company continuing to own this Barbados
subsidiary, with Diamonds International Ltd. ("DI"), a subsidiary of Almod,
being offered a minority interest in WGI pending government approval of the
proposed changes in this subsidiary's bylaws. Such approval was obtained on June
21, 2001. As of February 23, 2002, the Company had not obtained the additional
required governmental approval to complete the funding of this transaction and
consequently, the purchase price had not been remitted to the Company.
Accordingly, no minority interest in WGI has been recognized in the accompanying
financial statements. Governmental approval was subsequently received on March
15, 2002, and the purchase price was remitted to the Company. WGI is in the
process of issuing to Almod the agreed upon number of preferred and Class B
Common shares. This subsidiary has also agreed to pay profit share in the amount
of $1.5 million by December 31, 2005, and/or enable the store located in the
Port Terminal in Barbados (the "Port store"), currently operated by DI, to share
in its net operating tax loss carry forwards ("NOL's"). If by December 31, 2005
WGI does not pay the profit sharing amount to DI, or DI has not received a tax
benefit equivalent to the agreed upon profit share plus an additional tax
benefit of $0.7 million, DI's remedies include converting the preferred shares
and/or its Class B Common Shares of WGI into common stock at a rate of one for
one, or purchase all or some Class A Common Shares of WGI at a price of $1 per
share resulting in a controlling interest of this subsidiary.
As part of the overall Barbados transaction, the Company's Barbados
subsidiary and DI entered into a Management Agreement, which provides for DI to
manage the Port store and retain all profits associated with such store as a
management fee. The Company does not include any results from the operation of
the Port store in its consolidated financial statements as of the execution of
the management agreement. The profits generated from the Port store are entitled
to be offset by the subsidiary's NOL's and the use of such NOL's may be credited
towards the profit sharing obligation of WGI as described above.
The Company sold to DI a portion of the intercompany debt owed by WGI to
L.S. Wholesale, Inc. As more fully described in Note 7, the Company received
$2.0 million and sold, assigned and transferred its receivable from WGI to
Almod, due December 31, 2003, which is collateralized by the inventory of WGI.
Additionally, if this debt is not repaid by its due date, DI will have the
option to convert its shares of WGI for a controlling interest of WGI as
described above.
11. SUBSEQUENT EVENTS
On February 15, 2002, the Company held its annual stockholders meeting,
at which meeting the stockholders approved an amendment to the Company's
certificate of incorporation increasing the number of authorized shares of
common stock from 20,000,000 to 25,000,000. The Company filed the appropriate
amended certificate of incorporation during March 2002.
12. RELATED PARTY TRANSACTIONS
As discussed in Note 7, the Company maintains a credit facility with
Tiffany which allows the Company to borrow up to $2.5 million through April 30,
2006. Interest expense on outstanding borrowings during the three and nine
months periods ended February 23, 2002 amounted to $39,375 and $132,023,
respectively. Additionally, the Company also purchased approximately
$344,500 of merchandise from Tiffany during the three and nine month
periods ended February 23, 2002.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
FORWARD-LOOKING STATEMENTS
This Quarterly Report contains certain statements that are
"forward-looking statements" within the meaning of Section 27A of the Securities
Act and Section 21E of the Securities Exchange Act of 1934, as amended. The
words "believe," "expect," "anticipate," "intend," "estimate" or similar
expressions, which are predictions of or indicate future events and trends and
which do not relate to historical matters, identify forward-looking statements.
Forward looking statements involve known and unknown risks, uncertainties and
other factors, which may cause the actual results and performance of the Company
to differ materially from anticipated future results and performance expressed
or implied by such forward-looking statements.
The future operating results and performance trends of the Company may be
affected by a number of factors, including but not limited to the Company's
ability to fund its working capital needs, the Company's relationship with its
existing lenders, the volume of tourism in the Company's markets, the Company's
relationships with its suppliers, the Company's ability to expand and add new
product lines, weather in the Company's markets, and economic conditions
<Page>
that affect the buying patterns of the Company's core customer base. In addition
to the foregoing, the Company's actual future results could differ materially
from forward-looking statements as a result of the risk factors set forth below
and changes in general economic conditions and interest and exchange rates.
RECENT EVENTS
At the Company's annual meeting, the Board of Directors appointed
Richard Sasso to the Board to serve until the Company's next annual meeting. On
March 25, 2002, Mr. Sasso accepted this appointment thereby becoming the fifth
board member of the Company and filling the existing vacancy.
On March 22, 2002, the Company closed a senior collateralized revolving
and term loan credit facility with Congress, which allows the Company to borrow
up to $12 million, through March 21, 2005, of which up to $8 million will be a
revolving loan and $4 million will be a term loan, at an interest rate of 2.75%
per annum above the Adjusted Eurodollar Rate or 0.75% per annum above Prime plus
customary servicing costs and unused facility fees. Amounts advanced to the
Company under this credit facility are limited to a stated borrowing base which
is calculated as a percentage of certain inventory less specific reserves (as
defined in the credit agreement). The Company's receipts will be applied
daily to the revolver component of the loan requiring the Company to borrow
daily to meet cash flow needs. The credit facility is collateralized by
substantially all of the Company's U.S. and USVI based assets, including all
the U.S. and USVI based inventory, the pledge of two-thirds of the stock of
the Company's foreign subsidiaries and a first priority leasehold mortgage
over the St. Thomas building occupied by the Company as its headquarters and
main warehouse. This credit facility became available after the Company's
quarter end of February 23, 2002, and accordingly, no borrowings under this
facility have been reflected in the financial statements contained in this
report.
On March 21, 2002, the Company completed a transaction with the David
Green Group ("DGG") to sublet DGG's Ketchikan, Alaska store and acquire the
majority of inventory remaining in this location. This Ketchikan store is an
approximate 2,900 square foot location, which was originally operated by Little
Switzerland from 1995 through 1999. Alaska is a challenging market and was
previously viewed as a distraction to the Company's turnaround efforts. New
management has made significant progress in executing the turnaround strategy
while gradually developing the Alaska market. With the Company's continued
improvements in its financial strength, management is now looking to expand into
incremental markets and the continued growth of visitors to the Alaska market
coupled with the existing presence of the Company in this market makes this a
logical growth opportunity.
On March 15, 2002 the Company received the final government approval
required for Almod Diamonds Ltd. ("Almod"), to remit $600,000 for the purchase
of preferred and Class B Common Shares in the Company's Barbados subsidiary,
World Gift Imports (Barbados) Ltd. ("WGI"), pursuant to the transaction with
Almod discussed in Note 10 of the Notes to Consolidated Financial Statements
included in Part I of this report. The Company received the purchase price and
is in the process of issuing the preferred and Class B Common shares to Almod.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED FEBRUARY 23, 2002
GENERAL
Little Switzerland, Inc. is a leading specialty retailer of brand name
watches, jewelry, crystal, china and accessories, operating 21 stores on five
Caribbean islands, Florida and Alaska. The Company's primary market consists of
vacationing tourists attracted by free-port pricing, duty-free allowances and a
wide variety of high quality merchandise.
NET SALES
Net sales for the three-month period ended February 23, 2002 were $19.2
million, a .1% increase from net sales of $19.2 million for the corresponding
period last year. Net sales for the nine-month period ended February 23, 2002
were $43.7 million, an increase of 7.8% from net sales of $40.5 million for the
corresponding nine-month period last fiscal year.
Net sales for comparable stores decreased approximately 8.9% for the
quarter ended February 23, 2002. Comparable store sales for the nine-months
ended February 23, 2002 decreased 1.7% compared to the corresponding nine-month
period last year.
The Company had been generating improved comparable and all store sales
results prior to the events of September 11, 2001. Comparable sales for the 16
days prior to September 11, 2001 had been increasing at a rate of approximately
26%, continuing the performance experienced in the prior quarter, which reported
a comparable sales increase of 22.4%. Since September 11, 2001, comparable store
sales have continued to be negatively impacted primarily by reduced tourist
travel due to the terrorist attacks on September 11, 2001, unseasonably warm
weather in the East coast of the United States, the sluggish U.S. economy, and
uncertainties in the financial markets.
The Company's sales were positively impacted by its three new locations
in Key West, Florida, which are part of the Eastern Caribbean cruise route which
supplement the Company's existing markets and are easily accessible by land
based travel.
GROSS PROFIT
Gross profit as a percentage of net sales was 45.3% and 44.6% for the
three and nine-month periods ended February 23, 2002, respectively, compared to
38.9% and 41.6% for the corresponding periods last year. In the three month
period ended February 24, 2001, the Company increased its reserve for slow
moving or obsolete inventory by taking a $1.0 million charge in the fiscal 2001
third quarter. Excluding this charge, the gross profit as a percentage of net
sales would have been 44.1% for both the three and nine-months ended February
24, 2001. During the three-month period ended February 23, 2002, the Company
shifted its focus towards margin and inventory management to offset weakening
top line sales, resulting in a stronger gross margin in the second half of the
quarter.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expenses ("SG&A") for the three and
nine-months ended February 23, 2002 were $8.4 million and $22.7 million, or
approximately 43.5% and 52.0% of net sales respectively, compared to $9.5
million and $20.9 million, or approximately 49.7% and 51.7% of net sales
respectively, for the corresponding periods last year.
Contributing to the decrease in SG&A expense as a percentage of net
sales for the three-month period ended February 23, 2002 were reductions in
advertising costs, insurance premiums and professional fees. In the first
quarter of the current fiscal year, the Company eliminated its participation in
the port lecturer program offered by cruise lines, which has substantially
reduced advertising costs. The Company intends not to participate in this
program under its current form and has re-deployed a percentage of the marketing
dollars saved to other sales incentives. The Company also renegotiated its
insurance program resulting in a significant reduction in premiums beginning in
July 2001. Finally, the Company incurred significant one time costs in the prior
year associated with its restructuring efforts which included a planned rights
offering, strategic investor discussions and various refinancing proposals.
<Page>
INTEREST EXPENSE
Net interest expense for the three and nine-months ended February 23,
2002 was $128,000 and $390,000, respectively, compared to $282,000 and $824,000
for the corresponding periods last year. The decrease in net interest expense
reflects the reduced levels of borrowings and reduced average borrowing rates
compared to the corresponding period last year. Included in interest expense for
the three and nine month periods ended February 23, 2002 is $46,235 and
$138,705, respectively, of amortization attributable to note payable discount.
NET EARNINGS / LOSS
As a result of the above, the Company reported net earnings of $0.2
million and a net loss of $3.8 million for the three and nine-months ended
February 23, 2002, respectively, compared to a net loss of $2.4 million and $5.0
million for the corresponding periods last year. Results for the prior year
nine-month period ended February 24, 2001 included a $1.4 million one-time gain
on the settlement of the Company's business interruption claim associated with
Hurricane Lenny. Excluding this one time gain, net loss for the prior year
nine-month period would have been $6.4 million.
LIQUIDITY AND CAPITAL RESOURCES
Currently, the Company's primary needs for working capital are to support
its inventory requirements, which fluctuate during the year due to the seasonal
nature of the Company's business, and to maintain, refurbish and remodel its
existing stores. In addition, a significant investment in inventory is required
at all times in order to meet the demands of its customers who, as tourists,
require immediate delivery of purchased goods. As a general policy, the Company
does not sell merchandise on account. Virtually all sales are paid by cash,
check or major credit card at the time of sale.
On March 22, 2002, the Company closed a senior collateralized revolving
and term loan credit facility with Congress, which allows the Company to borrow
up to $12 million, through March 21, 2005, of which up to $8 million will be a
revolving loan and $4 million will be a term loan, at an interest rate of 2.75%
per annum above the Adjusted Eurodollar Rate or 0.75% per annum above Prime,
plus customary servicing costs and unused facility fees. Amounts advanced to the
Company under this credit facility are limited to a stated borrowing base which
is calculated as a percentage of certain inventory less specific reserves (as
defined in the credit agreement). The Company's receipts will be applied
daily to the revolver component of the loan requiring the Company to borrow
daily to meet cash flow needs. The credit facility is collateralized by
substantially all of the Company's U.S. and USVI based assets, including all
the U.S. and USVI based inventory, the pledge of two-thirds of the stock of
the Company's foreign subsidiaries and a first priority leasehold mortgage
over the St. Thomas building occupied by the Company as its headquarters and
main warehouse. This credit facility became available after the Company's
quarter end of February 23, 2002, and accordingly, no borrowings under this
facility have been reflected in the financial statements contained in this
report.
This facility replaces the Company's previous credit arrangement with
Chase which allowed the Company to borrow up to $3.75 million, through June 1,
2002 with an option to extend the facility through November 30, 2002, subject to
certain conditions, at an interest rate of 3% per annum above LIBOR. In
addition, the Company issued to Chase a warrant to purchase the number of shares
of common stock equal to 0.31% of the shares of common stock outstanding (on a
fully-diluted basis) on the date of exercise for an aggregate purchase price of
$50,000. The warrant expires on February 28, 2003. As of February 23, 2002 and
May 26, 2001, the Company had utilized $3.65 million and $0 of this facility,
respectively, and no portion of the warrant had been exercised.
In May 2001, all the Company's then current collateralized indebtedness
was refinanced with the proceeds from the transaction with Tiffany which
resulted in the Company receiving approximately $8.7 million in equity, net of
associated expenses, and a $2.5 million revolving credit facility from Tiffany
(collectively, the "Tiffany Transaction"). As a result of the Tiffany
Transaction, the Company was also able to negotiate a new revolving credit
facility with Chase, which has now been replaced with the facility from
Congress.
In addition to the above credit facilities, in November 2000, the
Company completed certain transactions with Almod, which resulted in the
Company receiving $2.0 million of proceeds from the issuance of a $2.0
million non-interest bearing loan, collateralized by the Company's Barbados
inventory. A balloon payment is due on December 31, 2003. If the Company is
unable to repay such debt by the due date, Almod will have the right to
convert the preferred shares and/or its Class B Common Shares in WGI into
common stock at a rate of one for one, or repurchase all or some Class A
Common Shares of WGI, at a price of $1 per share. As of February 23, 2002,
Almod had not acquired the preferred shares or Class B Common Shares of WGI
because applicable governmental approval had not yet been obtained. Such
governmental approval was subsequently received on March 15, 2002 and the
purchase price was remitted to the Company. WGI is in the process of issuing
the agreed upon number of preferred and Class B Common shares. Interest on
the note payable has been imputed at an interest rate of 11.5%, which is a
rate commensurate with the Company's then current borrowings, and resulted in
$570,000 of original discount, of which $138,705 has been amortized to
expense in the nine-months ended February 23, 2002.
Outstanding borrowings against collateralized credit facilities totaled
$7.8 million and $4.0 million, net of unamortized discount, at February 23, 2002
and May 26, 2001, respectively. The weighted average interest rates incurred
during fiscal 2001, 2000, and 1999 were approximately 10.9%, 9.6% and 8.4%,
respectively.
Capital expenditures were approximately $1.0 million for the nine-months
ended February 23, 2002, compared to $0.8 million for the corresponding period
last year.
NEW ACCOUNTING PRONOUNCEMENTS
In October 2001, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 144, "Accounting
for the Impairment or Disposal of Long-Lived Assets" ("SFAS No. 144"). This
statement is effective for fiscal years beginning after December 15, 2001. The
objectives of SFAS No. 144 are to address significant issues relating to the
implementation of SFAS No. 121, "Accounting for the Impairment of Long-Lived
Assets and Assets to be Disposed Of," establish a single accounting model for
the disposal of long-lived assets, provide impairment criteria for all
amortizable intangible assets and eliminate the exception to consolidation for a
subsidiary for which control is likely to be temporary. SFAS No. 144 extends
discontinued operations reporting to any component of an entity with operations
and cash flows that can be clearly distinguished, operationally and for
financial reporting purposes, from the rest of the entity. The Company is
currently in the process of evaluating the impact, if any, of adopting SFAS No.
144 on the financial statements for fiscal 2003.
SEASONALITY
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The Company's business is seasonal in nature, reflecting travel
patterns to the Caribbean and Alaska. The peak selling season in the Caribbean
runs from late Fall through Spring; and the peak selling season for Alaska runs
from Spring through Summer. The third quarter of the Company's fiscal year
typically represents a proportionally greater percentage of annual sales and
cash flow. Management expects such seasonality to continue.
RISK FACTORS
You should carefully consider the risks described below and other
information in this report. The Company's business, financial condition and
operating results could be materially adversely affected if any of these risks
materialize. The trading price of the Company's common stock may also decline
due to any of these risks.
The Company Has Had Substantial Operating Losses in Recent Fiscal Years
The Company has had substantial operating losses in its recent fiscal
years. For the fiscal years ended May 26, 2001, May 27, 2000 and May 29, 1999,
the Company's net losses were $7.6 million, $15.5 million and $11.1 million,
respectively. If the Company is unable to generate sufficient revenue from
operations to cover its costs, its business, financial condition and results of
operations will be materially and adversely affected.
Short-Term Risk of Disruption in Tourism
Due to the events of September 11, 2001 and widespread concern about
continuing terrorist acts directed against United States and foreign citizens,
transportation facilities and assets, a substantial risk exists that
significantly lower numbers of tourist will be willing to fly or travel on
cruise ships during the 2001/2002 tourist season. This has impacted the
Company's sales performance for the quarter ended February 23, 2002 and thus
reduced the profitability of the quarter. It is likely that this trend will
continue at least through September 2002.
There May Be Limited Liquidity in the Company's Common Stock and Its
Price May Be Subject to Fluctuation
The Company's common stock is currently traded on the OTC Bulletin
Board. The Company can provide no assurance that it will be able to have its
common stock listed on an exchange or quoted on Nasdaq or that it will continue
to be traded on the OTC Bulletin Board. The trading volume in the Company's
common stock has historically been low. Accordingly, investments in the
Company's common stock may not be liquid, and investors in the Company's common
stock must be prepared to bear the economic risks of such investment for an
indefinite period of time.
The Company's Business Depends on Tourism
The Company's revenues depend upon tourism in the Caribbean, Alaska
and Florida. During periods of economic slowdown, armed conflict or actions by
terrorists, fewer tourist may travel to these destinations and, those who do,
may make fewer purchases of luxury items. Tourist travel to these destinations
depends upon the development of cruise ship, airline and hotel operations, the
continued attractiveness of the Caribbean, Alaska and Florida compared to other
leisure travel destinations and the efforts of local governments to promote
tourism. Other factors such as poor weather, airline strikes, political and
economic instability in the Caribbean and the availability of duty-free shopping
could also affect tourism.
The Company Depends on Its Relationships with Its Suppliers
The Company's relationships with its merchandise suppliers are an
important factor in its business and have allowed the Company to become the
exclusive retailer of certain brands of merchandise in its Caribbean, Alaskan
and Florida markets. However, the Company does not have binding written
agreements with most of its suppliers, so it can provide no assurance that it
will remain the exclusive retailer for certain brands or that it will not lose
the right to market certain brands altogether.
The Company Needs to Expand to Grow Its Business
The growth of the Company's business depends in part on the addition
of new stores, expansion into other Caribbean islands where the Company does not
have stores and the expansion of existing stores and product lines. The
Company's ability to expand depends upon many factors, including the
availability of financing, the development of tourist facilities in proposed
locations, its ability to find suitable retail space, staffing, regulatory
restrictions and establishing suppliers.
Competition May Adversely Affect the Company's Business
Competition for tourist dollars is intense. The Company's ability to
attract customers depends in large part on the location and appearance of its
stores, its selection of products and pricing. The Company also competes with
stores selling similar products in the United States or in other markets from
which tourists have traveled.
The Company's Success Depends on Key Personnel
The Company's success is dependent upon the efforts of its senior
management. Competition for qualified personnel in the retailing industry is
intense, and the Company can provide no assurance that it will be able to retain
existing personnel or attract and retain additional qualified personnel
necessary to manage its business.
Stockholders Are Unlikely to Receive Dividends for the Foreseeable
Future
The Company has not paid dividends on its common stock and the
Company believes it is highly unlikely that it will pay dividends in the near
future. This means that the potential for gain from ownership of the Company's
common stock depends on appreciation in its value.
Certain Provisions of Delaware Law May Affect the Price of the
Company's Common Stock
The Company is incorporated in the State of Delaware. Certain
provisions of Delaware law applicable to the Company, including Section 203 of
the Delaware General Corporation Law, could have the effect of delaying,
deterring or preventing a change of control in the Company and may discourage
bids for the Company's common stock at a premium over the market price of the
Company's common stock. As a result, the price of the Company's common stock may
be adversely affected.
SEC Rules Concerning Sales of Low-Priced Securities May Hinder Re-Sales
of the Company's Common Stock
Because the Company's common stock has a market price that is less
than five dollars per share, it is not listed on an exchange or quoted on Nasdaq
and is traded on the OTC Bulletin Board, brokers and dealers who handle trades
in the Company's common stock are subject to certain SEC disclosure rules when
effecting trades in the Company's common stock, including disclosure of the
following: the bid and offer prices of the Company's common stock, the
<Page>
compensation of the brokerage firm and the salesperson handling a trade and
legal remedies available to the buyer. These requirements may hinder re-sales of
the Company's common stock and may adversely affect its market price.
If any circumstances giving rise to the above risks actually occur,
there could be a material and adverse effect on the Company's business,
financial condition and results of operations.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's credit facilities have variable interest rates which
fluctuate with established market rates. The Company does not believe that such
fluctuations will have a material adverse effect on the Company's operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
Incorporated by reference from Note 9 of the Notes to Consolidated
Financial Statements included in Part I of this report.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On February 15, 2002, the Company held its annual meeting of
stockholders. The following is a report of the various matters voted on and the
associated votes cast for each matter:
<Table>
<Caption>
BROKER
FOR AGAINST ABSTAIN NON-VOTES
--- ------- ------- ---------
Proposal to amend the Company's Certificate of Incorporation to repeal Article
VII regarding elimination of the division of directors into three classes and
the establishment of a single class of directors who are elected annually 12,247,544 267,235 28,650 2,819,971
Proposal to elect Robert L. Baumgardner as a Class I Director 15,300,988 -- 62,412 --
Proposal to elect James E. Quinn as a Class I Director 15,324,988 -- 38,412 --
Proposal to amend the Company's Certificate of Incorporation
to increase the number of authorized shares of the Common
Stock from 20,000,000 to 25,000,000 15,278,613 59,187 25,600 --
Proposal to amend Article IV of the Company's Certificate of Incorporation
relating to rights of the holders of Common Stock that are duplicative of
rights already provided under the Delaware General Corporation Law and the
repeal of the designation of the Series A Junior Participating Cumulative
Preferred Stock, all the shares of which have previously been canceled 12,234,245 298,634 10,550 2,819,971
Proposal to amend the Company's Certificate of Incorporation to repeal Article V
relating to certain business combinations with interested stockholders 12,224,344 305,935 13,150 2,819,971
Proposal to amend the Company's Certificate of Incorporation
to repeal Article VI relating to stockholder action 12,231,419 301,559 10,451 2,819,971
Proposal to amend and restate Article VIII of the Company's
Certificate of Incorporation regarding limitation of liability
of the Company's directors 15,027,446 322,704 13,250 --
Proposal to amend the Company's Certificate of Incorporation to repeal Article
IX regarding standards for the Board of Directors' evaluations of mergers or
acquisition offers or proposals in respect of the Company 12,228,100 304,879 10,450 2,819,971
Proposal to amend the Company's certificate of Incorporation
to repeal Article X regarding amendment and resatement of the
By-Laws 15,031,170 321,780 10,450 --
Proposal to amend the Company's certificate of Incorporation to repeal Article
XI relating to the elimination of super- majority voting provisions for
amendment of the Certificate of Incorporation 12,230,299 302,979 10,151 2,819,971
Proposal to approve and adopt the Company's 2002 Employee
Stock Purchase Plan 15,053,216 298,534 11,650 --
Proposal to ratify the appointment of PricewaterhouseCoopers
LLP as the independent certified public accountants of the
Company for its fiscal year ending May 25, 2002 15,346,899 7,701 8,800 --
</Table>
<Page>
ITEM 6. EXHIBITS AND REPORTS OF FORM 8-K.
(a) Exhibits:
The index to exhibits appears on the page immediately
following the signature page of this report.
(b) Reports on Form 8-K during the quarter ended February 23,
2002:
On January 18, 2002, the Company filed a Current Report on
Form 8-K disclosing the settlement of the class action
lawsuit filed against the Company on March 22, 1999.
<Page>
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.
LITTLE SWITZERLAND, INC.
Date: April 8, 2002 By: /s/ Patrick J. Hopper
--------------------------------------
Patrick J. Hopper
Chief Financial Officer,
Executive Vice President and Treasurer
Authorized Officer and Principal
Financial and Accounting Officer
<Page>
INDEX OF EXHIBITS
Exhibit
Number Exhibit
(3) Articles of Incorporation and By-Laws
3.1 The Second Amended and Restated Certificate of Incorporation of the
Company.
3.2 The Third Amended and Restated By-Laws of the Company.
(10) Material Contracts
10.1 The Little Switzerland, Inc. 1991 Stock Option Plan. (1)
10.2 The Little Switzerland, Inc. 1992 Employee Stock Purchase Plan. (2)
10.3 The Little Switzerland, Inc. 1992 Non-Employee Directors' Nonqualified
Stock Option Plan. (3)
10.4 The Little Switzerland, Inc. 2002 Employee Stock Purchase Plan
10.5 Stock Purchase Agreement, dated as of May 1, 2001, between Tiffany &
Co. International and the Company. (4)
10.6 Stockholder Agreement, dated as of May 1, 2001, between Tiffany & Co.
International, Jewelcor Management, Inc., Seymour Holtzman and the
Company. (4)
10.7 Registration Rights Agreement, dated as of May 1, 2001, between Tiffany
& Co. International and the Company. (4)
10.8 Investor's Rights Agreement, dated as of May 1, 2001, between Jewelcor
Management, Inc. and the Company. (5)
10.9 Loan Agreement, dated as of May 1, 2001, among L.S. Wholesale, Inc.,
the Company, and Tiffany and Co. (5)
10.10 Loan Agreement, dated as of May 1, 2001, among L.S. Holding (USA),
Inc., the Company, L.S. Wholesale, Inc., and Tiffany and Co. (5)
10.11 Loan Agreement, dated as of May 1, 2001, among L.S. Holding, Inc., the
Company, L.S. Wholesale, Inc. and Tiffany and Co. (5)
10.12 Security, Pledge and Guaranty Agreement, dated as of May 1, 2001, among
L.S. Wholesale, Inc., the Company and Tiffany and Co. (5)
10.13 Security, Pledge and Guaranty Agreement, dated as of May 1, 2001, among
L.S. Holding (USA), Inc., the Company, L.S. Wholesale, Inc. and Tiffany
and Co. (5)
10.14 Security, Pledge and Guaranty Agreement, dated as of May 1, 2001, among
L.S. Holding, Inc., the Company, L.S. Wholesale, Inc. and Tiffany and
Co. (5)
10.15 Employment Agreement, dated as of August 17, 1999, between Robert L.
Baumgardner and the Company (the "Baumgardner Agreement"). (6)
10.16 Employment Agreement, dated as of August 17, 1999, between Patrick J.
Hopper and the Company (the "Hopper Agreement"). (6)
10.17 Amendment No. 1 to the Baumgardner Agreement, dated as of January 15,
2001. (7)
10.18 Amendment No. 1 to the Hopper Agreement, dated as of January 15, 2001.
(7)
10.19 The Little Switzerland, Inc., 2000 Stock Option Plan. (7)
10.20 Loan and Security Agreement, dated March 22, 2002, by and among L.S.
Holding, Inc., L.S. Holding (Florida), Inc., L.S. Wholesale, Inc., the
Company and Congress Financial Corporation (Florida).
10.21 Term Promissory Note, dated March 22, 2002, issued by L.S. Holding,
Inc. to Congress Financial Corporation (Florida).
10.22 Pledge and Security Agreement, dated March 22, 2002, by the Company to
and in favor of Congress Financial Corporation (Florida).
10.23 Pledge and Security Agreement, dated March 22, 2002, by L.S. Holding,
Inc. to and in favor of Congress Financial Corporation (Florida).
10.24 Guarantee, dated March 22, 2002, by the Company in favor of Congress
Financial Corporation (Florida).
10.25 Guarantee, dated March 22, 2002, by L.S. Wholesale, Inc. and L.S.
Holding (Florida) Inc. in favor of Congress Financial Corporation
(Florida).
16.1 Letter dated May 31, 2001 from Arthur Andersen LLP addressed to the
Commission. (8)
- ----------
<Page>
(1) Filed as an exhibit to Amendment No. 1 to the Company's Registration
Statement on Form S-1, Registration No. 33-40907, filed with the Commission on
July 10, 1992 and hereby incorporated by reference thereto.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K, filed with
the Commission on May 29, 1992 and hereby incorporated by reference thereto.
(3) Filed as an exhibit to the Company's Annual Report on 10-K, filed with the
Commission on May 26, 1993 and hereby incorporated by reference thereto.
(4) Filed as an exhibit to Tiffany & Co.'s Schedule 13D, filed with the
Commission on May 10, 2001 and hereby incorporated by reference thereto.
(5) Filed as an exhibit to the Company's Current Report on Form 8-K, filed with
the Commission on May 30, 2001 and hereby incorporated by reference thereto.
(6) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended May 29, 1999, filed with the Commission on September 17, 1999
and hereby incorporated by reference thereto.
(7) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q, filed
with the Commission on April 10, 2001 and hereby incorporated by reference
thereto.
(8) Filed as an exhibit to the Company's Current Report on Form 8-K, filed with
the Commission on June 1, 2001 and hereby incorporated by reference thereto.