As Filed with the SEC on January 7, 1998
FORM 10-Q
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 23, 1997
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: 0-14394
TOWN & COUNTRY CORPORATION
(Exact name of Registrant as specified in its charter)
Massachusetts 04-2384321
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
25 Union Street, Chelsea, Massachusetts 02150
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (617) 884-8500
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
-
On December 15, 1997, the Registrant had outstanding 23,684,948 shares of Class
A Common Stock, $.01 par value and 2,664,927 shares of Class B Common Stock,
$.01 par value. The Registrant also had 1,263,741 shares of Convertible
Preferred Stock, $1 par value, outstanding on December 15, 1997. These shares
are immediately convertible into 2,527,482 shares of Class A Common Stock.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
CONSOLIDATED BALANCE SHEETS
November 23, February 23,
1997 1997
------------- --------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 826,000 $ 10,431,911
Restricted cash 245 107,090
Accounts receivable--
Less allowances for doubtful
accounts of $1,926,000 and $1,243,000 at
November 23, 1997 and February 23, 1997,
respectively 41,466,531 22,247,826
Inventories (Note 5) 51,489,052 42,752,801
Prepaid expenses and other
current assets 2,743,541 1,956,587
------------- --------------
Total current assets 96,525,369 77,496,215
------------- --------------
PROPERTY, PLANT & EQUIPMENT, at cost 38,477,299 56,215,045
Less - Accumulated depreciation 24,378,777 33,242,256
------------- --------------
14,098,522 22,972,789
------------- --------------
INVESTMENT IN SOLOMON BROTHERS, LIMITED (Note 8) - 13,734,000
------------- --------------
OTHER ASSETS 3,245,026 7,109,012
------------- --------------
$ 113,868,917 $ 121,312,016
============= ==============
The accompanying notes are an integral part of these
consolidated financial statements.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 3
CONSOLIDATED BALANCE SHEETS (Continued)
November 23, February 23,
1997 1997
------------- -------------
(Unaudited)
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES NOT SUBJECT TO COMPROMISE:
Notes payable to banks (Note 3) $ 26,035,084 $ -
Senior Secured Notes (Note 3) 10,861,000 13,254,000
Accounts payable 15,646,675 9,537,829
Accrued expenses 6,783,122 16,934,445
Accrued taxes 409,735 614,202
------------- -------------
Total liabilities not subject to compromise
(current liabilities) 59,735,616 40,340,476
------------- -------------
LONG TERM DEBT, LESS CURRENT PORTION - 78,090,054
LIABILITIES SUBJECT TO COMPROMISE (Note 1) 82,017,891 -
------------- -------------
Total liabilities 141,753,507 118,430,530
COMMITMENTS AND CONTINGENCIES
MINORITY INTEREST (Note 7) 209,819 4,996,770
------------- -------------
EXCHANGEABLE PREFERRED STOCK, $1.00
par value--$14.59 preference value-
Authorized--200,000 shares
Issued and outstanding--127,217 and 152,217
shares, respectively 2,038,546 2,373,654
------------- -------------
STOCKHOLDERS' EQUITY (DEFICIT)
Preferred stock, $1.00 par value-
Authorized and unissued--800,000 shares - -
Convertible preferred stock, $1.00 par
value, $6.50 preference value
Authorized--4,000,000 shares
Issued and outstanding--1,263,741 shares and
1,302,673 shares, respectively 1,263,741 1,302,673
Class A Common Stock, $ .01 par value-
Authorized--40,000,000 shares
Issued and outstanding--23,683,647
and 23,508,096 shares, respectively 236,836 235,081
Class B Common Stock, $.01 par value-
Authorized--8,000,000 shares
Issued and outstanding--2,664,927 shares 26,649 26,649
Additional paid-in capital 76,204,597 75,797,457
Retained deficit (107,864,778) (81,850,798)
------------- -------------
Total stockholders' equity (deficit) (30,132,955) (4,488,938)
------------- -------------
$ 113,868,917 $ 121,312,016
============= =============
The accompanying notes are an integral part of these
consolidated financial statements.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 4
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended For the Nine Months Ended
--------------------------------- --------------------------------
November 23, November 24, November 23, November 24,
1997 1996 1997 1996
------------- ------------- ------------- -------------
NET SALES $ 41,745,093 $ 80,527,978 $ 97,482,703 $ 181,984,187
COST OF SALES 35,941,014 55,154,612 80,819,519 123,536,397
INVENTORY CHARGE (Note 4) - - - 35,521,000
------------- ------------- ------------- -------------
Gross profit $ 5,804,079 $ 25,373,366 $ 16,663,184 $ 22,926,790
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 6,456,293 19,419,199 21,586,196 58,892,003
------------- ------------- ------------- -------------
Income (loss) from operations $ (652,214) $ 5,954,167 $ (4,923,012) $ (35,965,213)
INTEREST EXPENSE, net (contractual
interest $3,566,941 and $9,155,654
respectively) (3,414,575) (4,023,964) (9,003,288) (11,607,065)
NET LOSS ON SALES OF REAL ESTATE (226,053) (742,330) (40,186) (742,330)
NET INVESTMENT LOSS (Note 8) (10,589,877) - (10,667,468) -
GAIN ON SALE OF GL
ASSETS (Note 8) 1,096,096 - 1,096,096 -
MINORITY INTEREST - (91,999) 59,833 49,311
------------- ------------- ------------- -------------
Income (loss) before reorganization items
and income taxes $ (13,786,623) $ 1,095,874 $ (23,478,025) $ (48,265,297)
REORGANIZATION ITEMS (Note 1) (1,884,568) - (1,884,568) -
------------- ------------- ------------- -------------
Income (loss) before income taxes $ (15,671,191) $ 1,095,874 $ (25,362,593) $ (48,265,297)
PROVISION FOR INCOME TAXES 63,000 60,000 189,000 200,025
------------- ------------- ------------- -------------
Net Income (loss) $ (15,734,191) $ 1,035,874 $ (25,551,593) $ (48,465,322)
------------- ------------- ------------- -------------
ACCRETION OF DISCOUNT AND
DIVIDENDS ON PREFERRED STOCKS 150,234 232,890 462,387 575,050
------------- ------------- ------------- -------------
Income (loss) attributable to common
stockholders $ (15,884,425) $ 802,984 $ (26,013,980) $ (49,040,372)
------------- ------------- ------------- -------------
INCOME (LOSS) PER COMMON SHARE
(Note 6): $ (0.60) $ 0.03 $ (0.99) $ (1.94)
============= ============= ============== =============
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING (Note 6): 26,346,916 25,966,119 26,319,784 25,330,088
============= ============= ============== =============
The accompanying notes are an integral part of these
consolidated financial statements.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 5
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
For the Nine Months Ended
----------------------------------
November 23, November 24,
1997 1996
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (25,551,593) $ (48,465,322)
Adjustments to reconcile net loss
to net cash used in operating activities-
Depreciation and amortization 821,607 2,428,956
Minority interest (59,833) (49,311)
Net loss on sales of assets and investments 9,611,558 742,330
Inventory charge - 35,521,000
Receivable charge - 5,471,000
Change in assets and liabilities--
Decrease (increase) in accounts
receivable (20,883,073) (23,710,061)
Decrease (increase) in inventory (9,203,181) 8,688,255
Decrease (increase) in prepaid
expenses and other current assets (840,340) (3,148,465)
Decrease (increase) in other assets 491,372 385,629
Increase (decrease) in accounts
payable 6,108,846 2,473,671
Increase (decrease) in accrued
expenses (2,499,878) (2,073,669)
Increase (decrease) in accrued taxes 24,246 (13,646)
Increase (decrease) in other
liabilities - (59,531)
-------------- --------------
Net cash used in operating
activities $ (41,980,269) $ (21,809,164)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures $ (1,843,392) $ (2,307,208)
Proceeds from sale of certain assets of subsidiary 8,683,667 -
Proceeds from sale of investments 3,804,863 -
Investment in affiliates (3,445,993) (1,481,103)
Proceeds from sale of fixed assets 1,489,070 5,135,955
-------------- --------------
Net cash provided by investing activities $ 8,688,215 $ 1,347,644
-------------- --------------
The accompanying notes are an integral part of these
consolidated financial statements.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 6
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
(Unaudited)
For the Nine Months Ended
-----------------------------------
November 23, November 24,
1997 1996
-------------- --------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments on revolving credit facilities $ (83,411,173) $ (160,742,252)
Proceeds from borrowings under
revolving credit facilities 109,446,257 177,096,717
Payments on long-term debt (15,647,000) (211,755)
Proceeds from issuance of debt 13,254,000 -
Proceeds from issuance of common stock 3,839 40,989
Payment of dividend (66,625) (131,042)
Decrease (increase) in restricted cash 106,845 (3,293)
-------------- --------------
Net cash provided by financing activities $ 23,686,143 $ 16,049,364
-------------- --------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS $ (9,605,911) $ (4,412,156)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 10,431,911 5,151,929
-------------- --------------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 826,000 $ 739,773
============== ==============
SUPPLEMENTAL CASH FLOW DATA:
Cash paid during the period for:
Interest $ 6,712,136 $ 12,572,804
Income taxes 174,332 258,600
Reorganization expenses (Note 1) 1,884,568 -
NON-CASH ACTIVITIES:
Transfer of 13% Senior Subordinated Notes due May 1998,
13% Senior Subordinated Notes due December 1998, accrued
interest and other claims (Note 1) $ 82,017,891 $ -
The accompanying notes are an integral part of these
consolidated financial statements.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 7
PART I - FINANCIAL INFORMATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 23, 1997
(1) Chapter 11 Bankruptcy Filing
On November 17, 1997, Town & Country Corporation (the "Debtor") filed a
voluntary petition for relief under Chapter 11 of the federal bankruptcy laws in
the United States Bankruptcy Court for the District of Massachusetts. Under
Chapter 11, certain claims against the Debtor in existence prior to the filing
of the petition for relief under the federal bankruptcy laws are stayed while
the Debtor continues business operations as a Debtor-in-Possession. These claims
are reflected in the November 23, 1997, consolidated balance sheet as
"Liabilities Subject to Compromise." Additional claims (liabilities subject to
compromise) may arise subsequent to the filing date resulting from the rejection
of executory contracts, including leases, and from the determination by the
court (or agreed to by parties in interest) of allowed claims for contingencies
and other disputed amounts. The subsidiaries of the Debtor are not parties to
the filing and their assets and liabilities are treated as unaffected by the
filing.
The Debtor believes, after a preliminary review that there is sufficient
collateral to cover the interest portion of scheduled payments on its
pre-petition debt obligations represented by the 15% Senior Secured Notes due
February 1998. However, the Debtor has determined that there is insufficient
collateral to cover the interest portion of scheduled payments on its
pre-petition debt obligations represented by the 13% Senior Subordinated Notes
due May 1998 and the 13% Senior Subordinated Notes due December 1998.
Contractual interest on the 13% Notes due in May and December 1998 amounts to
$6.1 million in the aggregate, which is $0.2 million in excess of reported
interest expense (net of amortization) included in the three and nine month
periods ended November 23, 1997; therefore, the Debtor has discontinued accruing
interest on these obligations. Refer to Note 3 for a discussion of the
modifications to the Debtor's credit arrangements entered into as a consequence
of the Chapter 11 filing.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 8
Liabilities subject to compromise consist of the following (000's):
13% Senior Subordinated Notes due May, 1998, net $ 69,829
Accrued Interest 5,074
13% Senior Subordinated Notes due December, 1998, net 6,886
Priority tax claims 229
-----------
Total third party liabilities 82,018
Intercompany claims 14,653
-----------
$ 96,671
===========
CONDENSED CONSOLIDATING FINANCIAL STATEMENTS
November 23, 1997 (000's)
--------------------------------------------------------
Parent
Company
CONSOLIDATING STATEMENT (Debtor-in-
OF OPERATIONS Possession) Subsidiaries Eliminations Consolidated
- ----------------------- ---------- ------------ ------------ ------------
NET SALES $ - $ 97,483 $ - $ 97,483
COST OF SALES - 80,820 - 80,820
---------- -------- ---- --------
Gross profit - 16,663 - 16,663
SELLING, GENERAL &
ADMINISTRATIVE EXPENSES 14 21,572 - 21,586
---------- -------- ---- --------
Income (loss) from operations (14) (4,909) - (4,923)
INTEREST EXPENSE, net (8,161) (842) - (9,003)
GAIN (LOSS) ON SALES OF ASSETS
AND INVESTMENTS, net (10,557) 946 - (9,611)
MINORITY INTEREST - - 60 60
---------- -------- ---- --------
Income (loss) before reorganization
items and income taxes (18,732) (4,805) 60 (23,477)
REORGANIZATION ITEMS (1,885) - - (1,885)
---------- -------- ---- --------
Income (loss) before income taxes (20,617) (4,805) 60 (25,362)
PROVISION FOR INCOME TAXES 20 169 - 189
---------- -------- ---- --------
Net income (loss) $ (20,637) $ (4,974) $ 60 $(25,551)
========== ======== ==== ========
TOWN & COUNTRY CORPORATION Form 10-Q
Page 9
November 23, 1997 (000's)
------------------------------------------------------
CONSOLIDATING BALANCE SHEET Parent
- --------------------------- Company
(Debtor-in-
ASSETS Possession) Subsidiaries Eliminations Consolidated
- ------ ----------- ------------ ------------ ------------
CURRENT ASSETS $ (19) $ 96,544 $ - $ 96,525
PROPERTY, PLANT &
EQUIPMENT, net - 15,380 (1,281) 14,099
INTERCOMPANY RECEIVABLES 7,794 14,656 (22,450) -
INVESTMENT IN SUBSIDIARIES 74,934 - (74,934) -
OTHER ASSETS 659 2,586 - 3,245
-------- --------- --------- ---------
Total Assets $ 83,368 $ 129,166 $ (98,665) $ 113,869
======== ========= ========= =========
November 23, 1997 (000's)
---------------------------------------------------------
Parent
Company
LIABILITIES AND STOCKHOLDERS' (Debtor-in-
EQUITY (DEFICIT) Possession) Subsidiaries Eliminations Consolidated
- ---------------- ----------- ------------ ------------ ------------
LIABILITIES NOT SUBJECT TO COMPROMISE:
Notes payable $ - $ 26,035 $ - $ 26,035
Senior Secured Notes 10,861 - - 10,861
Accounts payable - 15,647 - 15,647
Accrued expenses 160 6,623 - 6,783
Accrued income taxes - 410 - 410
---------- --------- -------- --------
Total liabilities not subject to compromise
(current liabilities) 11,021 48,715 - 59,736
---------- --------- -------- --------
LIABILITIES SUBJECT TO COMPROMISE
Intercompany payables 14,656 7,794 (22,450) -
Other liabilities 82,018 - - 82,018
---------- --------- -------- --------
Total liabilities subject to compromise 96,674 7,794 (22,450) 82,018
MINORITY INTEREST - - 210 210
EXCHANGEABLE PREFERRED STOCK 2,038 - 2,038
STOCKHOLDERS' EQUITY (DEFICIT) (26,365) 72,657 (76,425) (30,133)
---------- --------- -------- --------
(24,327) 72,657 (76,215) (27,885)
Total Liabilities and Stockholders Equity (Deficit) $ 83,368 $ 129,166 $ (98,665) $ 113,869
========== ========= ========= =========
TOWN & COUNTRY CORPORATION Form 10-Q
Page 10
CONSOLIDATING STATEMENT November 23, 1997 (000's)
OF CASH FLOWS --------------------------------------------------------------
- ------------- Parent
Company
(Debtor-in-
Possession) Subsidiaries Eliminations Consolidated
----------- ------------ ------------ ------------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES $ (24,629) $ (29,686) $ 12,335 $ (41,980)
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES 862 7,826 - 8,688
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 16,057 19,964 (12,335) 23,686
---------- ---------- --------- ---------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS $ (7,710) $ (1,896) $ - $ (9,606)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 7,715 2,717 - 10,432
---------- ---------- --------- ---------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 5 $ 821 $ - $ 826
========== ========== ========== ==========
(2) Significant Accounting Policies
The unaudited consolidated financial statements presented herein have been
prepared by Town & Country Corporation (collectively with its consolidated
subsidiaries the "Company") and contain all adjustments (consisting of normal
recurring adjustments) necessary to present fairly and on a basis consistent
with the consolidated financial statements for the year ended February 23, 1997,
and those required to meet the disclosure standards for companies reporting
while in Chapter 11, the Company's financial position as of November 23, 1997,
and the results of its operations for the three and nine month periods ended
November 23, 1997, and November 24, 1996, and cash flows for the nine month
periods ended November 23, 1997, and November 24, 1996.
On December 16, 1996, the Company sold certain assets and liabilities of its
Balfour subsidiary. On April 18, 1997, the Company sold certain assets of its
Gold Lance ("GL") subsidiary. The comparability of the accompanying financial
statements is affected by these transactions as described in Note 8.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 11
The results of operations for the nine months ended November 23, 1997, are not
necessarily indicative of the results to be expected for the year due to the
seasonal nature of the Company's operations.
The significant accounting policies followed by the Company are set forth in
Note (2) of the Company's consolidated financial statements for the year ended
February 23, 1997, which have been included in the Annual Report on Form 10-K,
Commission File Number 0-14394, for the fiscal year ended February 23, 1997. The
Company has made no change in these policies during the nine months ended
November 23, 1997.
Certain reclassifications have been made to the prior period's financial
statements to conform with the presentation of the fiscal 1998 financial
statements.
(3) Loan Arrangements
To facilitate the ability of the Town & Country Corporation's (individually
"TCC") domestic operating subsidiaries to continue to utilize their credit
facility with Foothill Capital Corporation ("Foothill") without disruption while
TCC reorganizes, Foothill, TCC, and TCC's domestic operating subsidiaries, in
November 1997, entered into an amendment to the Foothill Agreement pursuant to
which TCC agreed to guaranty the obligations of its domestic operating
subsidiaries to Foothill during the pendency of TCC's bankruptcy case, and
Foothill waived the event of default otherwise occasioned by TCC's bankruptcy
case. The effect of the amendment and guaranty is to convert TCC from a
co-borrower of Foothill into a guarantor of TCC's subsidiaries' obligations to
Foothill during the bankruptcy case. Foothill's claim under the guaranty is part
of the Foothill bankruptcy claim, and is secured by a lien on property of the
estate of TCC (other than avoiding power recoveries) of the same scope and
priority as existed pre-petition. The current intent is that TCC revert to
co-borrower status upon the effective date of the plan of reorganization. TCC's
intent is that Foothill's secured status be preserved during the case, and
neither improved nor diminished.
To facilitate the ability of TCC's domestic operating subsidiaries to continue
to utilize their precious metals consignment facility with Fleet Precious
Metals, Inc. ("Fleet") without disruption while TCC reorganizes, Fleet, TCC, and
TCC's domestic operating subsidiaries, in November 1997, entered into an
amendment of the Gold Agreement pursuant to which TCC agreed to guaranty the
obligations of its domestic operating subsidiaries to Fleet during the pendency
of TCC's bankruptcy case, and Fleet waived the event of default otherwise
occasioned by TCC's bankruptcy case. The effect of the amendment and guaranty is
to convert TCC from a co-consignee of Fleet into a guarantor of TCC's
subsidiaries' obligations to Fleet during the bankruptcy case. Fleet's claim
under the guaranty is part of the Fleet bankruptcy claim, and is secured by a
lien on property of the estate of TCC (other than avoiding power recoveries) of
the same scope and priority as existed pre-petition. The current intent is that
TCC revert to co-consignee status upon the effective date of the plan of
reorganization. TCC's intent is that Fleet's secured status be preserved during
the case, and neither improved nor diminished.
At maturity on September 15, 1997, the Company repaid $13.3 million of 11-1/2%
Senior Secured Notes. This debt was repaid with the issuance of new Senior
Secured Notes
TOWN & COUNTRY CORPORATION Form 10-Q
Page 12
("New Notes") which bear interest at a rate of 15% per annum, pay interest
monthly and have a maturity date of February 15, 1998. The New Notes have
essentially the same terms as the 11 1/2% Senior Secured Notes. The Company's
loan agreement with Foothill and the Collateral Agency and Intercreditor
Agreement with Foothill, Fleet, Bankers Trust and the Collateral Agent were
amended on September 15, 1997, to provide for the New Notes. In October 1997,
$0.1 million of the New Notes were redeemed. In November 1997, $2.3 million in
New Notes were redeemed with proceeds realized on the sale of the Company's
investment in Solomon Brothers Limited (see Note 8).
On May 30, 1997, the Company completed an amendment (the "Amended Agreement") to
its July 3, 1996, credit agreement (the "Agreement") with Foothill to reflect
changes which have taken place in the Company. The Amended Agreement provides
senior secured financing consisting of a revolving credit facility and a letter
of credit in support of a Gold Consignment Facility provided by Fleet. The
aggregate amount of the combined facilities, which may be outstanding at any
date, is $55 million.
The revolving credit facility has a maximum amount of $40 million from February
through November and $45 million from December through January. The letter of
credit has a maximum amount of $20 million from February through November and
$15 million from December through January. The Agreement is for a period of two
years and provides Foothill with an option to renew for three additional years.
The loans bear interest at a rate per annum equal to the greater of (a) 2% above
the reference rate announced by an identified group of major banks selected by
Foothill or (b) 8%. The Amended Agreement contains standard covenants for
facilities of this type including financial covenants relating to interest
coverage ratio, minimum net worth, debt to EBITDA ratio and limitations on
dividends, distributions and capital expenditures, as defined. Advances under
the credit line are based on eligible accounts receivables and inventory.
Foothill has first priority security interest in receivables, inventory and
substantially all real estate and fixed assets owned by the Company and its
domestic subsidiaries subject to Fleet's first position as gold consignor,
supported by the letter of credit.
As of November 23, 1997, approximately $25.8 million was outstanding under the
Company's revolving credit agreement with Foothill and approximately 41,000
ounces of gold, valued at approximately $12.3 million, were on consignment under
the Company's domestic gold consignment facility.
The Company made a semiannual cash interest payment of approximately $4.5
million on May 15, 1997, on the 13% Senior Subordinated Notes, due May 31, 1998.
At November 23, 1997, a foreign subsidiary of the Company had an agreement with
a gold supplier to provide secured gold consignment availability of
approximately 4,800 troy ounces. As of November 23, 1997, approximately 3,000
ounces of gold, valued at approximately $1.0 million, were on consignment under
this gold consignment facility. Subsequent to the end of the quarter the term of
the credit facility supporting this agreement expired and the facility was not
renewed. This subsidiary has credit facilities which currently provide
approximately $2.1 million commercial financing with approximately $0.2 million
outstanding at November 23, 1997.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 13
(4) Inventory Charge
During the second quarter of fiscal 1997, the Company implemented a program to
recycle approximately $44 million of inventory to recover gold and diamonds to
meet immediate production requirements. The Company also sold, for approximately
$2 million, inventory with an original cost basis of approximately $5 million.
The Company charged second quarter operations approximately $35.5 million.
These actions were taken when access to cash and gold under the Company's
working capital facility and gold leasing agreement became constrained near the
end of the second quarter and on a more pronounced basis in the third quarter,
and also because of the Company's commitment to meet its customers' delivery
requirements.
(5) Inventories
Inventories consisted of the following:
November 23, February 23,
1997 1997
------------ ------------
Raw Materials $ 7,673,688 $ 8,547,459
Work-in-Process 8,051,795 5,643,042
Finished Goods 35,763,569 28,562,300
------------ ------------
$ 51,489,052 $ 42,752,801
============ ============
(6) Income (Loss) Per Common Share
Income (loss) per common share is computed by adjusting the Company's net income
(loss) for the accretion of discount and dividends on preferred stocks and
dividing by the weighted average number of common shares outstanding during each
period.
(7) Essex Privatization
During fiscal 1997, the Company began the process of purchasing the
approximately 1.6 million outstanding shares of its Essex subsidiary. The cost
to repurchase these shares was approximately $3.4 million and the process was
completed during the second quarter of fiscal 1998. The repurchase resulted in
the elimination of approximately $4.7 million in Minority Interest liability
creating a deferred benefit of $1.3 million. On a preliminary basis, this
deferred benefit is being accounted for as a reduction in the basis of Essex's
Property, Plant and Equipment. The Company continues to analyze the valuation of
Essex's long-term assets and will finalize the accounting of this deferred
benefit by the end of fiscal 1998.
(8) Sales of Assets
L.G. Balfour Company, Inc.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 14
On December 16, 1996, the Company sold certain assets and liabilities of its
Balfour subsidiary constituting substantially all of the operations of Balfour
to Commemorative Brands, Inc. ("CBI"), a new company formed by Castle Harlan
Partners II, L.P. (the "Balfour Sale").
On April 24, 1997, a settlement was reached in which the Company paid CBI $1.1
million to resolve certain items and finalize the purchase price (the "Purchase
Price Adjustment"). Such amount was included in accrued expenses in the
accompanying consolidated balance sheet as of February 23, 1997, and was
included as a component of the net gain of approximately $10.5 million recorded
in the fourth quarter of fiscal 1997.
The Balfour Sale did not include any real property. The prime component of real
property owned by Balfour was a facility in Attleboro, Massachusetts, which had
a net book value of approximately $2.3 million and a fair value of approximately
$1.4 million. A $1.1 million impairment of the carrying value of the facility
was recognized in association with this transaction and is included as a
component of the gain recognized on the sale in the fourth quarter of fiscal
1997 and reduced the carrying value of the facility included in property, plant
and equipment in the accompanying consolidated balance sheet as of February 23,
1997. In November 1997, this property was sold. Net proceeds of approximately
$1.2 million were used to partially repay Foothill.
The Balfour Sale did not include the assumption of a lease facility in North
Attleboro, Massachusetts. On April 24, 1997, the lease was amended, reducing the
amount of space and the period of time for which the Company is obligated. The
Company's future lease obligation for this facility is until July 31, 1999, at
an annual cost of approximately $0.2 million. The Company has been subleasing
the remaining space to CBI on a temporary basis. The Company had assumed that
the facility would remain vacant after CBI vacated for the remainder of the
lease term and accrued approximately $0.4 million which is included in accrued
expenses in the accompanying consolidated balance sheet as of February 23, 1997.
However, CBI has decided to remain in this facility and, effective January 1,
1998, the lease has been assigned to CBI and there will be no further liability.
The accompanying consolidated balance sheets as of February 23, 1997, and
November 23, 1997, include assets of Balfour consisting primarily of real estate
and their associated liabilities discussed above. The Purchase Price Adjustment
was included in accrued expenses as of February 23, 1997, and was paid in the
first quarter of fiscal 1998. Other remaining assets and liabilities are not
material to the financial position of the Company as of February 23, 1997, and
November 23, 1997.
The accompanying consolidated statement of operations includes the following
amounts associated with Balfour:
TOWN & COUNTRY CORPORATION Form 10-Q
Page 15
For the Three For the Nine
Months Ended Months Ended
November 24, 1996 November 24, 1996
----------------- -----------------
Net sales $ 19,534,498 $ 55,520,590
Cost of sales 8,761,742 27,021,311
------------- -------------
Gross profit $ 10,772,756 $ 28,499,279
Selling, general and
administrative expenses 10,445,695 27,594,931
------------- -------------
Income from operations $ 327,061 $ 904,348
============= =============
GL, Inc.
On April 18, 1997, the Company sold certain assets of its GL subsidiary to
Jostens, Inc. (the "GL Sale"). Prior to or at closing, on April 18, 1997, the
Company received cash equal to the purchase price of approximately $10.8
million, less $2.5 million (the "Contingent Payment"), the payment of which was
contingent on the operating performance of GL during a transition period between
April 18, 1997, and July 31, 1997 (the "Transition Period"). The Company
recorded a loss in the fourth quarter of fiscal 1997 of $5.0 million on the GL
Sale. On November 14, 1997, the Company agreed to a settlement with regard to
the Contingent Payment. Under the terms of the settlement Jostens paid the
Company $1 million which is recognized as a gain on sale of GL assets and was
used to partially repay Foothill.
The GL Sale did not include any real property. The prime component of real
property owned by GL is a facility in Houston, Texas, which had a net book value
of approximately $1.5 million and a fair value of approximately $0.7 million. A
$0.8 million impairment of the carrying value of the facility has been
recognized in association with this sale and is included as a component of the
$5.0 million loss recognized on the sale. The carrying value of the facility
included in property, plant and equipment in the accompanying consolidated
balance sheets reflects such impairment as of February 23, 1997, and November
23, 1997. The Company operated the property during the Transition Period. It is
possible that the Company will be required to hold the facility for an
unspecified amount of time before being able to complete a sale.
The accompanying consolidated balance sheet as of February 23, 1997, includes
the assets and liabilities of GL. The assets consist primarily of approximately
$2.1 million in accounts receivable, $6.9 million of property, plant and
equipment, net and $2.1 million in other assets primarily related to goodwill
and samples. The liabilities consist primarily of $0.5 million in accounts
payable and $4.5 million in accruals. Approximately $4.2 million of losses
accrued as part of the sale are included in accrued expenses of which
approximately $1.3 million relates to financial advisor, legal and other
transaction costs associated with the sale. As of November 23, 1997, significant
remaining assets and liabilities of GL consist primarily of the real estate
discussed above, extinguishment of transaction costs, accounts payable and the
accrued liabilities in the ordinary course and contingencies associated with the
Transition Period.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 16
The accompanying consolidated statements of operations include the following
amounts associated with GL:
For the three months ended For the nine months ended
November 23, November 24, November 23, November 24,
1997 1996 1997 1996
------------ ------------ ------------ ------------
Net sales $ - $4,373,223 $ 5,150,217 $ 10,342,943
Cost of sales 3,877 2,789,542 3,490,451 6,856,837
--------- ---------- ------------ ------------
Gross profit (loss) $ (3,877) $1,583,681 $ 1,659,766 $ 3,486,106
Selling, general and
administrative expenses 85,709 1,601,033 2,225,556 4,176,883
--------- ---------- ------------ ------------
Loss from operations $ (89,586) $ (17,352) $ (565,790) $ (690,777)
========= ========== ============ ============
Solomon Brothers Limited
In November 1997, the Company sold 327,000 shares of preferred stock in Solomon
Brothers Limited, a Bahamian retailer, for the approximate sum of $2.8 million
(the "proceeds"). Included in net investment loss in the accompanying statements
of operations is a loss of approximately $11.0 million associated with this
sale. The holders of the New Notes had a first security interest in the proceeds
and approximately $2.3 million of the net proceeds from such sales were used to
partially redeem New Notes. The holders of the New Notes released the remaining
$0.5 million of such proceeds to the Company.
Little Switzerland, Inc.
During the third quarter, the Company sold 166,745 shares of common stock of
Little Switzerland, Inc. for approximately $1.0 million. As a result of the sale
and the exchange of 25,000 shares of Exchangable Preferred Stock, the Company
recorded a gain on the sale of investments of approximately $0.4 million, which
is included in loss on sales of investments, net, in the accompanying
consolidated statements of operations for the three and nine months ended
November 23, 1997.
Sale of Real Estate
On November 14, 1996, the Company sold its building in New York City for a gross
sale price of $6.2 million, of which $5.3 million was paid at closing. The
remaining $0.9 million was paid on January 15, 1997. In the interest of
generating cash on the sale of the property as quickly as possible, management
accepted an offer for less than the net book value of the property. As a result,
the Company sustained a loss of approximately $0.8 million on the sale which is
reflected in the accompanying consolidated statements of operations.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 17
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Forward-Looking Statements
The Company occasionally may make statements regarding its business and markets,
such as projections of future performance, statements of management's plans and
objectives, forecasts of market trends and other matters. To the extent such
statements are not historical fact, they may constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Statements containing the words or phrases "will likely result," "are
expected to," "will continue," "is anticipated," "believe," "estimate,"
projected," or similar expressions are intended to identify forward-looking
statements. Such forward-looking statements may appear in this document or other
documents, reports, press releases and written or oral presentations made by
officers of the Company to shareholders, analysts, news organizations or others.
All such forward-looking statements speak only as of the date on which such
statement is made. No assurance can be given that the results in any
forward-looking statement will be achieved and actual results could be affected
by one or more factors, which could cause the results to differ materially.
Therefore, all forward-looking statements are qualified in their entirety by
such factors, including the factors listed below. Such factors may be more fully
discussed periodically in the Company's subsequent filings with the Securities
and Exchange Commission.
Any change in the following factors may impact the achievement of results in
forward-looking statements: the outcome of the Company's proceeding in Chapter
11; the price of gold; the seasonality of the Company's business; fashion and
demographic trends; the general economy, especially during peak buying seasons
for the Company's products and services; competitive pricing; the ability of the
Company to respond to customer delivery schedules and improve operating
efficiencies.
The foregoing factors are not exhaustive and new factors may emerge or changes
to the foregoing factors may occur that would impact the Company's business.
CHAPTER 11 BANKRUPTCY FILING
On November 17, 1997, Town & Country Corporation (the "Debtor") filed a
voluntary petition for relief under Chapter 11 of the federal bankruptcy laws in
the United States Bankruptcy Court for the District of Massachusetts. Under
Chapter 11, certain claims against the Debtor in existence prior to the filing
of the petition for relief under the federal bankruptcy laws are stayed while
the Debtor continues business operations as a Debtor-in-Possession. These claims
are reflected in the November 23, 1997, consolidated balance sheet as
"Liabilities Subject to Compromise." Additional claims (liabilities subject to
compromise) may arise subsequent to the filing date resulting from the rejection
of executory contracts, including leases, and from the determination by the
court (or agreed to by parties in interest) of allowed claims for contingencies
and other disputed amounts. The subsidiaries of the Debtor are not parties to
the filing and their assets and liabilities are treated as unaffected by the
filing.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 18
The Debtor believes, after a preliminary review that there is sufficient
collateral to cover the interest portion of scheduled payments on its
pre-petition debt obligations represented by the 15% Senior Secured Notes due
February 1998. However, the Debtor has determined that there is insufficient
collateral to cover the interest portion of scheduled payments on its
pre-petition debt obligations represented by the 13% Senior Subordinated Notes
due May 1998 and the 13% Senior Subordinated Notes due December 1998.
Contractual interest on the 13% Notes due in May and December 1998 amounts to
$6.1 million in the aggregate, which is $0.2 million in excess of reported
interest expense (net of amortization) included in the three and nine month
periods ended November 23, 1997; therefore, the Debtor has discontinued accruing
interest on these obligations. Refer to Note 3 for a discussion of the
modifications to the Debtor's credit arrangements entered into as a consequence
of the Chapter 11 filing.
AMERICAN STOCK EXCHANGE DELISTING
On December 8, 1997, as a result of non-compliance by the Company with the
guidelines for listing, the American Stock Exchange removed the Company's Class
A Common Stock from listing and registration on the exchange. The non-compliance
items included recurring losses, shareholders' and working capital deficits, the
Company's February 23, 1997 qualified audit opinion and TCC's recent filing
under Chapter 11 of the United States Bankruptcy Code.
FINANCIAL CONDITION
To facilitate the ability of the Town & Country Corporation's (individually
"TCC") domestic operating subsidiaries to continue to utilize their credit
facility with Foothill Capital Corporation ("Foothill") without disruption while
TCC reorganizes, Foothill, TCC, and TCC's domestic operating subsidiaries, in
November 1997, entered into an amendment to the Foothill Agreement pursuant to
which TCC agreed to guaranty the obligations of its domestic operating
subsidiaries to Foothill during the pendency of TCC's bankruptcy case, and
Foothill waived the event of default otherwise occasioned by TCC's bankruptcy
case. The effect of the amendment and guaranty is to convert TCC from a
co-borrower of Foothill into a guarantor of TCC's subsidiaries' obligations to
Foothill during the bankruptcy case. Foothill's claim under the guaranty is part
of the Foothill bankruptcy claim, and is secured by a lien on property of the
estate of TCC (other than avoiding power recoveries) of the same scope and
priority as existed pre-petition. The current intent is that TCC revert to
co-borrower status upon the effective date of the plan of reorganization. TCC's
intent is that Foothill's secured status be preserved during the case, and
neither improved nor diminished.
To facilitate the ability of TCC's domestic operating subsidiaries to continue
to utilize their precious metals consignment facility with Fleet Precious
Metals, Inc. ("Fleet") without disruption while TCC reorganizes, Fleet, TCC, and
TCC's domestic operating subsidiaries, in November 1997, entered into an
amendment of the Gold Agreement pursuant to which TCC agreed to guaranty the
obligations of its domestic operating subsidiaries to Fleet during the pendency
of TCC's bankruptcy case, and Fleet waived the event of default otherwise
occasioned by TCC's bankruptcy case. The effect of the amendment and guaranty is
to convert TCC from a co-consignee of Fleet into a guarantor of TCC's
subsidiaries' obligations to Fleet during the bankruptcy case. Fleet's
TOWN & COUNTRY CORPORATION Form 10-Q
Page 19
claim under the guaranty is part of the Fleet bankruptcy claim, and is secured
by a lien on property of the estate of TCC (other than avoiding power
recoveries) of the same scope and priority as existed pre-petition. The current
intent is that TCC revert to co-consignee status upon the effective date of the
plan of reorganization. TCC's intent is that Fleet's secured status be preserved
during the case, and neither improved nor diminished.
At maturity on September 15, 1997, the Company repaid $13.3 million of 11-1/2%
Senior Secured Notes. This debt was repaid with the issuance of new Senior
Secured Notes ("New Notes") which bear interest at a rate of 15% per annum, pay
interest monthly and have a maturity date of February 15, 1998. The New Notes
have essentially the same terms as the 11 1/2% Senior Secured Notes. The
Company's loan agreement with Foothill and the Collateral Agency and
Intercreditor Agreement with Foothill, Fleet, Bankers Trust and the Collateral
Agent were amended on September 15, 1997, to provide for the New Notes. In
October 1997, $0.1 million of the New Notes were redeemed. In November 1997,
$2.3 million in New Notes were redeemed with proceeds realized on the sale of
the Company's investment in Solomon Brothers Limited (see Note 8).
On May 30, 1997, the Company completed an amendment (the "Amended Agreement") to
its July 3, 1996 credit agreement (the "Agreement") with Foothill to reflect
changes which have taken place in the Company. The Amended Agreement provides
senior secured financing consisting of a revolving credit facility and a letter
of credit in support of Gold Consignment Facility provided by Fleet. The
aggregate amount of the combined facilities, which may be outstanding at any
date, is $55 million.
The revolving credit facility has a maximum amount of $40 million from February
through November and $45 million from December through January. The letter of
credit has a maximum amount of $20 million from February through November and
$15 million from December through January. The Agreement is for a period of two
years and provides Foothill with an option to renew for three additional years.
The loans bear interest at a rate per annum equal to the greater of (a) 2% above
the reference rate announced by an identified group of major banks selected by
Foothill or (b) 8%. The Amended Agreement contains standard covenants for
facilities of this type including financial covenants relating to interest
coverage ratio, minimum net worth, debt to EBITDA ratio and limitations on
dividends, distributions and capital expenditures, as defined. Advances under
the credit line are based on eligible accounts receivables and inventory.
Foothill has first priority security interest in the receivables, inventory and
substantially all real estate and fixed assets owned by the Company and its
domestic subsidiaries subject to Fleet's first position as gold consignor,
supported by the letter of credit.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 20
Results of Operations for the Nine Months Ended November 23, 1997 Compared to
the Nine Months Ended November 24, 1996
Gross profit and Selling, General and Administrative ("SG&A") expense
comparisons exclude the effect of the $35.5 million inventory charge and $5.5
million accounts receivable charge recorded in the second quarter of fiscal year
ended February 23, 1997 ("Fiscal 1997").
Consolidated net sales for the nine months ended November 23, 1997, decreased
$84.5 million or 46.4% from $182.0 million for the nine months ended November
24, 1996, to $97.5 million for the nine months ended November 23, 1997.
Consolidated gross profit for the nine months ended November 23, 1997, was $16.7
million compared with $58.4 million for the nine months ended November 24, 1996.
Consolidated gross profit margin decreased from 32.1% for the nine months ended
November 24, 1996, to 17.1% for the nine months ended November 23,1997.
Consolidated SG&A expenses decreased from $53.4 million for the nine months
ended November 24, 1996, to $21.6 million for the nine months ended November 23,
1997. As a percentage of consolidated net sales, consolidated SG&A expenses
decreased from 29.3% for the nine months ended November 24, 1996, to 22.1% for
the nine months ended November 23, 1997.
On December 16, 1996, the Company sold certain assets and liabilities of its
Balfour subsidiary. The accompanying consolidated statement of operations for
the nine months ended November 24, 1996, includes net sales of $55.5 million,
gross profit of $28.5 million and SG&A expenses of $27.6 million associated with
Balfour.
On April 18, 1997, the Company sold certain assets of its Gold Lance subsidiary.
The accompanying consolidated statement of operations for the nine months ended
November 23, 1997, includes net sales of $5.2 million, gross profit of $1.7
million and SG&A expenses of $2.2 million associated with Gold Lance. The
accompanying consolidated statement of operations for the nine months ended
November 24, 1996, includes net sales of $10.3 million, gross profit of $3.5
million and SG&A expenses of $4.2 million.
Comparison of operating results for the Company's on-going business (the "Fine
Jewelry" business) for the first nine months of fiscal 1998 to the first nine
months of fiscal 1997 follows.
Sales of Fine Jewelry decreased $23.9 million or 20.5% from $116.2 million for
the nine months ended November 24, 1996, to $92.3 million for the nine months
ended November 23, 1997. The decrease is primarily attributable to relative
softness in the wholesale jewelry marketplace and some perceived impact of the
Company's financial difficulties. The sales mix has also become more
concentrated in lower price point categories which are particularly sensitive to
decreases in the price of gold.
Gross profit on Fine Jewelry sales decreased from $26.4 million for the nine
months ended November 24, 1996, to $15.0 million for the nine months ended
November 23, 1997. Gross profit margin on Fine Jewelry sales decreased from
22.8% for the nine
TOWN & COUNTRY CORPORATION Form 10-Q
Page 21
months ended November 24, 1996, to 16.3% for the nine months ended November 23,
1997. These decreases are primarily the result of the underabsorption of fixed
costs due to lower sales volume.
Fine Jewelry SG&A expenses decreased from $21.6 million for the first nine
months of fiscal 1997 to $19.3 million the first nine months of fiscal 1998.
Fine Jewelry SG&A expenses as a percentage of Fine Jewelry net sales increased
from 18.6% for the nine months ended November 24, 1996, to 20.9% for the nine
months ended November 23, 1997. The percentage increase is the result of the
decrease in sales.
Net interest expense decreased $2.6 million from $11.6 for the nine months ended
November 24, 1996, to $9.0 million for the nine months ended November 23, 1997.
The Company's average borrowings for the nine months ended November 23, 1997,
decreased $20.5 million from $118.0 million for the nine months ended November
24, 1996, to $97.5 million for the nine months ended November 23, 1997. The
weighted average interest rate was approximately 11.2% for the first nine months
of fiscal 1997 and approximately 10.8% for the first nine months of fiscal 1998.
Net interest expense includes bank and gold fees of $2.4 million for the first
nine months of fiscal 1997 and $1.3 million for the first nine months of fiscal
1998.
On November 14, 1997, the Company agreed to a settlement with Jostens with
regard to the contingent purchase price related to the sale of Gold Lance
assets. Under the terms of the settlement Jostens paid the Company $1 million
which is recognized as a gain on sale of Gold Lance assets and was used to pay
Foothill.
The Company was the owner of 327,000 shares of preferred stock in Solomon
Brothers Limited, a Bahamian retailer, which shares it sold in November 1997 for
the approximate sum of $2.8 million (the "proceeds"). Included in net investment
loss in the accompanying statements of operations is a loss of approximately
$11.0 million associated with this sale. The holders of the New Notes have the
benefit of a first security interest in the proceeds and approximately $2.3
million of the net proceeds from such sales were used to redeem New Notes. The
holders of the New Notes released the other $0.5 million of such proceeds to the
Company.
The Company was the owner of 318,962 shares of common stock of Little
Switzerland, Inc. Of these shares 152,217 were held by a trust for the benefit
of the holders of the Exchangeable Preferred Stock. During the third quarter,
the Company sold all of the shares under its control. Proceeds from the sale
were approximately $1.0 million. As a result of the sale and the exchange of
25,000 shares of Exchangable Preferred Stock, the Company recorded a gain on the
sale of investments of approximately $0.4 million.
During the third quarter, the Company incurred approximately $1.9 million in
professional costs related to the Chapter 11 bankruptcy filing.
Although the Company had a taxable loss for the nine months ended November 23,
1997, the Company recorded a tax provision of approximately $189,000. The tax
provision was primarily due to the Company's inability to fully recognize the
tax benefits of operating losses in certain jurisdictions as well as due to
state and foreign income taxes.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 22
Liquidity and Working Capital
Cash used in operating activities during the nine months ended November 23,
1997, was $42.0 million compared with $21.8 million for the nine months ended
November 24, 1996. The increase is primarily a result of the relative
deterioration in operating performance from year to year and the non-recurring
cash benefit from the fiscal 1997 inventory recycling. The Company also used
approximately $1.9 million to pay various professional costs related to the
Chapter 11 filing.
Cash provided by investing activities for the nine months ended November 23,
1997, was $8.7 million compared to $1.3 million for the nine months ended
November 24, 1996. In the current year, the Company benefited from the net
proceeds related to the sale of certain assets of its Gold Lance subsidiary of
$8.7 million. During the period, the Company paid approximately $3.4 million to
acquire the shares of its Essex subsidiary which had been owned by minority
shareholders. The Company also generated approximately $3.8 million from the
sale of its investment in Little Switzerland, Inc. and Solomon Brothers,
Limited.
Cash provided by financing activities was approximately $23.7 million for the
nine months ended November 23, 1997, compared with the $16.0 million for the
nine months ended November 24, 1996. The change in cash provided by financing
activities is the result of higher net borrowings on the Company's revolving
credit facility and the pay down of approximately $2.4 million of Senior Secured
Notes..
The Company's net cash position decreased from $10.4 million at February 23,
1997, to $0.8 million at November 23, 1997.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Chapter 11 Bankruptcy Filing
See "Management Discussion and Analysis of Financial Condition and
Results of Operations", Chapter 11 Bankruptcy Filing.
Item 5. Other Events
Recently, it became apparent that Francis Correra, President of Town &
Country Fine Jewelry Group, Inc., and a member of the Company's Board
of Directors, would likely not be able to resume his responsibilities
at the Company for medical reasons.
The Board of Directors has hired Ronald Stengel of R.F. Stengel &
Company, Inc. as interim Chief Executive Office of the Town & Country
Corporation. He has been elected to the Board of Directors. Mr. Stengel
is one of the foremost turnaround managers in the Country and recently
completed a similar assignment as Chief Executive Officer of Smith
Corona.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
99 Waivers of Events of Default with respect to the
Non-Compliance Items
11 Earnings Per Share Computations
27 Financial Data Schedule
10.1 Amendment Number Four to Loan Agreement between the Company
and Foothill Capital Corporation
10.2 Amendment Number Five to Loan Agreement between the Company
and Foothill Capital Corporation
10.3 General Continuing Guaranty by Town & Country Corporation in
favor of Fleet Precious Metals Inc.
10.4 Amendment Number One to Second Amended and Restated
Consignment Agreement between Town & Country Corporation,
Town & Country Fine Jewelry Group, Inc., GL, Inc., L.G.
Balfour Company, Inc. and Fleet Precious Metals Inc.
(b) Reports on Form 8-K
On November 25, 1997, the Company filed a Form 8-K reporting the
sale of the Company's investment in Solomon Brothers, Limited and
the Company's filing for Bankruptcy under Chapter 11.
TOWN & COUNTRY CORPORATION Form 10-Q
Page 24
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.
TOWN & COUNTRY CORPORATION
(Registrant)
Date: January 12, 1998 /s/ Veronica M. Zsolcsak
---------------------------------
Veronica M. Zsolcsak
Chief Financial Officer and
Treasurer