1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter ended August 4, 2001
Commission file number: 015230
MICHAEL ANTHONY JEWELERS, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 13-2910285
(State of Incorporation) (I.R.S. Employer Identification No.)
115 South MacQuesten Parkway
Mount Vernon, New York 10550-1724
(Address of principal executive offices)
Registrant's telephone number, including area code:
(914) 699-0000
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 .
--- ---
CLASS
----- Number of Shares
Common Stock, Par Value $.001 Outstanding as of
August 29, 2001
---------------
6,198,383
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
INDEX
-----
PAGE
----
PART I FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
Consolidated Condensed Balance Sheets,
August 4, 2001 (Unaudited) and
January 27, 2001................................................................................ 3
Consolidated Condensed Statements of Operations
Three-Month and Six-Month Periods Ended
August 4, 2001 and July 29, 2000 (Unaudited) .................................................. 4
Consolidated Condensed Statement of Changes in
Stockholders' Equity, Six-Month Period Ended
August 4, 2001 (Unaudited)...................................................................... 5
Consolidated Condensed Statements of Cash Flows,
Six-Month Period Ended
August 4, 2001 and July 29, 2000 (Unaudited).................................................... 6
Notes to Consolidated Condensed Financial
Statements........................................................................................ 7-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS..................................................................................... 10-16
PART II OTHER INFORMATION:
Item 1 Through Item 6 .............................................................................. 17
Signature Page...................................................................................... 18
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MICHAEL ANTHONY JEWELERS, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
August 4, January 27,
2001 2001
-------- --------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and equivalents $ 14 $ 4,114
Accounts receivable:
Trade (less allowances of $1,481 and $2,536, respectively) 21,317 15,105
Other 192 224
Inventories 27,374 20,496
Prepaid expenses and other current assets 1,388 1,424
Deferred taxes 1,186 1,186
-------- --------
Total current assets 51,471 45,549
PROPERTY, PLANT AND EQUIPMENT - net 18,823 19,675
INTANGIBLES - net - 62
OTHER ASSETS 866 1,049
-------- --------
$ 71,160 $ 63,335
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable - trade $ 3,505 $ 3,302
Line of credit 9,950 -
Current portion of long-term debt and lease liability 1,757 1,696
Taxes payable 242 529
Accrued expenses 3,337 3,791
-------- --------
Total current liabilities 18,791 9,318
-------- --------
LONG-TERM DEBT 10,092 10,987
-------- --------
DEFERRED TAXES 349 349
-------- --------
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock - par value $1.00 per share;
1,000,000 shares authorized; none issued - -
Common stock - par value $.001 per share;
20,000,000 shares authorized; 8,329,000
and 8,317,000 shares issued and outstanding
as of August 4, 2001 and January 27, 2001 8 8
Additional paid-in capital 32,221 32,196
Retained earnings 16,232 16,802
Accumulated other comprehensive income (128) -
Treasury stock, 2,133,000 and 2,095,000 shares,
respectively (6,405) (6,325)
-------- --------
Total stockholders' equity 41,928 42,681
-------- --------
$ 71,160 $ 63,335
======== ========
See accompanying notes to the consolidated condensed financial statements.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
Three Months Ended Six Months Ended
---------------------- ----------------------
August 4, July 29, August 4, July 29,
2001 2000 2001 2000
-------- -------- -------- --------
NET SALES $ 28,210 $ 24,905 $ 57,386 $ 50,732
COST OF GOODS SOLD 22,633 20,147 46,553 40,258
-------- -------- -------- --------
GROSS PROFIT ON SALES 5,577 4,758 10,833 10,474
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,531 5,905 10,650 11,987
-------- -------- -------- --------
OPERATING INCOME/(LOSS) 46 (1,147) 183 (1,513)
OTHER INCOME/(EXPENSE):
Gold consignment fee (407) (246) (657) (468)
Interest expense (275) (244) (522) (493)
Interest income 9 20 43 110
Other income 27 16 34 30
-------- -------- -------- --------
Total Other Expense (646) (454) (1,102) (821)
-------- -------- -------- --------
LOSS BEFORE INCOME TAXES (600) (1,601) (919) (2,334)
INCOME TAX BENEFIT (234) (608) (349) (887)
-------- -------- -------- --------
NET LOSS $ (366) $ (993) $ (570) $ (1,447)
======== ======== ======== ========
LOSS PER SHARE
- BASIC AND DILUTED $ (.06) $ (.16) $ (.09) $ (.23)
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER
OF SHARES 6,198 6,336 6,209 6,338
======== ======== ======== ========
See accompanying notes to the consolidated condensed financial statements.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(UNAUDITED)
(IN THOUSANDS)
Accumulated
Common Stock Additional Other Treasury Stock
------------------- Paid-In Retained Comprehensive --------------
Shares Dollars Capital Earnings Income Shares Dollars Total
-------- -------- -------- -------- -------- -------- -------- --------
Balance -
January 27, 2001 8,317 $ 8 $ 32,196 $ 16,802 - (2,095) $ (6,325) $ 42,681
Purchase of treasury stock - - - - - (38) (80) (80)
Change in fair value of cash flow
Hedges - - - - (128) - - (128)
Issuance of stock 12 - 25 - - - - 25
Net loss - - - (570) - - - (570)
-------- -------- -------- -------- -------- -------- -------- --------
Balance -
August 4, 2001 8,329 $ 8 $ 32,221 $ 16,232 (128) (2,133) $ (6,405) $ 41,928
======== ======== ======== ======== ======== ======== ======== ========
See accompanying notes to the consolidated condensed financial statements.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
Six Months Ended
----------------
August 4, July 29,
2001 2000
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (570) $ (1,447)
Adjustments to reconcile net loss
to net cash provided by operating activities:
Depreciation and amortization 1,763 1,676
Provision for accounts receivable (229) 29
Provision for sales returns (826) 348
Issuance of stock 25 25
(Increase)/decrease in operating assets:
Accounts receivable (5,125) 7,054
Inventories (6,878) (6,364)
Prepaid expenses and other current assets 36 (320)
Other assets 183 109
Increase/(decrease) in operating liabilities:
Accounts payable 203 2,991
Accrued expenses (582) (1,374)
Taxes payable (287) (1,974)
-------- --------
Net cash (used in)/provided by operating activities (12,287) 753
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment - net (849) (1,728)
-------- --------
Net cash used in investing activities (849) (1,728)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt
and capital lease liabilities (834) (842)
Proceeds from line of credit 9,950 -
Purchase of treasury stock (80) (73)
-------- --------
Net cash provided by/(used) in financing activities 9,036 (915)
-------- --------
DECREASE IN CASH AND EQUIVALENTS (4,100) (1,890)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 4,114 2,580
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 14 $ 690
======== ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest and gold consignment fees $ 1,142 $ 1,224
Taxes $ - $ 1,441
SUPPLEMENTAL DISCLOSURE OF
NON-CASH INVESTING ACTIVITY:
Change in fair value of cash flow hedges $ 128 $ -
See accompanying notes to the consolidated condensed financial statements.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED AUGUST 4, 2001
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 27 2001 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The unaudited condensed consolidated financial statements as of August 4,
2001 and related notes have been prepared pursuant to the rules and
regulations of the Securities and Exchange Commission. Accordingly, certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted pursuant to such rules and regulations. The
accompanying unaudited interim consolidated condensed financial statements
and related notes should be read in conjunction with the financial
statements and related notes included in the 2001 Annual Report to
Stockholders of Michael Anthony Jewelers, Inc. (the "Company").
The information furnished reflects, in the opinion of the management of the
Company, all adjustments, consisting of normal recurring accruals, which
are necessary to present a fair statement of the results for the interim
periods presented.
The interim figures are not necessarily indicative of the results to be
expected for the fiscal year due to the seasonal nature of the business.
Reclassifications
-----------------
Certain reclassifications were made to the prior year's financial
statements to conform to the current year's presentation.
Effect of Recently Issued Accounting Standards
----------------------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 141, "Business
Combinations" (SFAS 141), which supersedes APB Opinion No. 16, "Business
Combinations". SFAS No. 141 eliminates the pooling-of-interests method of
accounting for business combinations and modifies the application of the
purchase accounting method. The elimination of the pooling-of-interests
method is effective for transactions initiated after June 30, 2001. The
remaining provisions of SFAS No. 141 will be effective for transactions
accounted for using the purchase method that are completed after June 30,
2001. The Company is currently reviewing the statement, but does not
anticipate the new standard will have any effect on its financial
statements.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED AUGUST 4, 2001
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 27 2001 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
------------------------------------------
Effect of Recently Issued Accounting Standards (Continued)
----------------------------------------------
In July 2001, the FASB also issued Statement of Financial Accounting
Standards No. 142, "Goodwill and Intangible Assets" (SFAS No. 142), which
supersedes APB Opinion No. 17, "Intangible Assets". SFAS No. 142 eliminates
the current requirement to amortize goodwill and indefinite-lived
intangible assets, addresses the amortization of intangible assets with a
defined life and addresses the impairment testing and recognition for
goodwill and intangible assets. SFAS 142 will apply to goodwill and
intangible assets arising from transactions completed before and after the
Statement's effective date. SFAS No. 142 is effective for fiscal 2002. The
Company is currently reviewing the statement and has not yet determined the
impact adoption of SFAS No. 142 will have on its financial statements.
2. PRODUCT PRICING
---------------
The Company's products, the principal component of which is gold, are
generally sold at prices which are based on the market price of gold on the
date merchandise is ordered or shipped to the customer, therefore, the
Company's sales volume is significantly influenced by the market price of
gold. The selling prices for certain customers may be fixed for a specific
period of time. In such cases, the Company is able to shift a substantial
portion of the risks of gold price fluctuation by hedging against changes
in the price of gold by entering into forward contracts or purchasing
futures or options on futures.
The Company has recorded a $128,000 loss as a component of other
comprehensive income related to the gold price hedge.
The Company's consigned gold inventory is hedged against the effects of
price fluctuations. The Company has entered into arrangements with certain
gold lenders (the "Gold Lenders") pursuant to which the Company does not
purchase gold from the Gold Lenders until receipt of a purchase order from,
or shipment of jewelry to, its customers. These arrangements permit the
Company to match the sales price of the product with the price the Company
pays for the gold.
The average selling price of gold in the current quarter was $272 per ounce
compared to $287 per ounce for the quarter ended July 29, 2000.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
-----------------------------------------------
FORM 10-Q FOR QUARTER ENDED AUGUST 4, 2001
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 27, 2001 IS UNAUDITED)
3. INVENTORIES
Inventories consist of:
August 4, January 27,
2001 2001
---------- --------
(Unaudited)
(In thousands)
Finished goods $44,260 $32,837
Work in process 27,939 14,636
Raw materials 6,443 3,741
------- --------
78,642 51,214
Less:
Consigned gold 51,268 30,718
------- -------
$27,374 $20,496
======= =======
Inventories as of August 4, 2001 and January 27, 2001 excluded
approximately 191,000 and 117,000 ounces of gold on consignment,
respectively.
4. STOCK REPURCHASE PROGRAM
------------------------
In December 1995, the Company announced a Common Stock repurchase program
pursuant to which the Company may repurchase up to 750,000 shares of Common
Stock. On April 4, 1997, the Board of Directors authorized an increase of
an additional 500,000 shares of Common Stock that the Company may
repurchase under the Stock Repurchase Plan. On May 26, 1998, the Board of
Directors authorized an increase of up to an additional 1,000,000 shares of
common stock that the Company may repurchase under the Stock Repurchase
Plan.
As of August 29, 2001, the Company had purchased a total of 2,133,000
shares on the open market for an aggregate cost of approximately
$6,405,000, of which 60,000 shares have been retired.
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ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 2001 IS UNAUDITED)
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED
- ------------------------------------------------
AUGUST 4, 2001 AND JULY 29, 2000
- --------------------------------
Net sales for the three months ended August 4, 2001 were approximately
$28,210,000, an increase of 13.3% from net sales of approximately $24,905,000
for the comparable period last year. The increase in sales was primarily due to
a 14-week-period this year compared to last year's 13 weeks, and to an increase
in earring shipments resulting from the Company's affiliation with the Almond
Jewelry Group.
Gross profit margin increased to approximately 19.8% of net sales for the three
months ended August 4, 2001 compared to approximately 19.1% for the comparable
period last year, primarily due to a change in the product and customer mix.
Selling, general and administrative expenses for the three months ended August
4, 2001 were approximately $5,531,000, a decrease of $374,000 or 6.3% from
approximately $5,905,000 for the comparable period last year. The decrease is
primarily attributable to decreases in payroll and payroll related expenses and
product and packaging supplies.
Interest expense and gold consignment fees for the three months ended August 4,
2001 were approximately $682,000, an increase of $192,000 or 39.3% compared to
approximately $490,000 for the comparable period last year. The increase was
primarily due to higher consignment rates and higher consignment levels.
As a result of the above factors, the Company had a net loss for the three
months ended August 4, 2001 of $366,000 or $.06 per share on 6,198,000 weighted
average shares outstanding compared to a net loss of $993,000 or $.16 per share
on 6,336,000 weighted average shares outstanding for the comparable period last
year.
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ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 2001 IS UNAUDITED)
RESULTS OF OPERATIONS FOR THE SIX MONTHS ENDED
- ----------------------------------------------
AUGUST 4, 2001 AND JULY 29, 2000
- --------------------------------
Net sales for the six months ended August 4, 2001 were approximately
$57,386,000, an increase of 13.1% from net sales of approximately $50,732,000
for the comparable period last year. The increase in sales was primarily due a
27-week period this year compared to last year's 26 weeks, and to an increase in
earring shipments resulting from the Company's affiliation with the Almond
Jewelry Group.
Gross profit margin decreased to approximately 18.9% of net sales for the six
months ended August 4, 2001 compared to approximately 20.6% for the comparable
period last year, primarily due to a change in the product and customer mix.
Selling, general and administrative expenses for the six months ended August 4,
2001 were approximately $10,650,000, a decrease of $1,337,000 or 11.2% from
approximately $11,987,000 for the comparable period last year. The decrease is
primarily attributable to decreases in payroll and payroll related expenses and
advertising expenses.
Interest expense and gold consignment fees for the six months ended August 4,
2001 were approximately $1,179,000, an increase of $218,000 or 22.7% compared to
approximately $961,000 for the comparable period last year. The increase was
primarily due to higher consignment rates and higher consignment levels.
As a result of the above factors, the Company had a net loss for the six months
ended August 4, 2001 of $570,000 or $.09 per share on 6,209,000 weighted average
shares outstanding compared to a net loss of $1,447,000 or $.23 per share on
6,338,000 weighted average shares outstanding for the comparable period last
year.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
-----------------------------------------------
FORM 10-Q FOR QUARTER ENDED AUGUST 4, 2001
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO JANUARY 27, 2001 IS UNAUDITED)
Liquidity and Capital Resources
- -------------------------------
The Company relies on a gold consignment program, short-term and long-term
borrowings and internally generated funds to finance its operations. The Company
fills most of its gold supply needs through gold consignment arrangements with
the Gold Lenders. Under the terms of those arrangements, the Company is entitled
to lease the lesser of (i) an aggregate of 255,000 ounces of fine gold or (ii)
consigned gold with an aggregate value equal to $85,000,000.
The consigned gold is secured by certain property of the Company including
inventory and machinery and equipment. The Company pays the Gold Lenders a
consignment fee based on the dollar value of ounces of gold outstanding under
their respective agreements, which value is based on the daily Second London
Gold Fix.
The Company believes that its financing rate under the consignment arrangements
is substantially similar to the financing rates charged to gold consignees
similarly situated to the Company. As of August 4, 2001, the Company held
approximately 191,000 ounces of gold on consignment with a market value of
approximately $51,268,000.
The consignment agreements contain certain restrictive covenants relating to
maximum usage, net worth, working capital and other financial ratios and each of
the agreements requires the Company to own a specific amount of gold at all
times. At August 4, 2001, the Company was in compliance with the covenants in
its consignment agreements and the Company's owned gold inventory was valued at
approximately $5,392,000. Management believes that the supply of gold available
through the Company's gold consignment arrangements, in conjunction with the
Company's owned gold, is sufficient to meet the Company's requirements.
The consignment agreements are terminable by the Company or the respective Gold
Lenders upon 30 days notice. If any Gold Lender were to terminate its existing
gold consignment arrangement, the Company does not believe it would experience
an interruption of its gold supply that would materially adversely affect its
business. The Company believes that other consignors would be willing to enter
into similar arrangements if any Gold Lender terminates its relationship with
the Company.
Consigned gold is not included in the Company's inventory, and there is no
related liability recorded. As a result of these consignment arrangements, the
Company is able to shift a substantial portion of the risk of market
fluctuations in the price of gold to the Gold Lenders, since the Company does
not purchase gold from the Gold Lenders until receipt of a purchase order,
projection, or shipment of jewelry to, its customers.
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ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 2001 IS UNAUDITED)
Liquidity and Capital Resources (Continued)
- -------------------------------
The Company then either establishes the selling price of the jewelry to its
customers concurrently with the required purchase of gold from the Gold Lenders
or hedges against changes in the price of gold by entering into forward
contracts or purchasing futures or options on futures that are listed on the
COMEX.
While the Company believes its supply of gold is relatively secure, significant
increases or rapid fluctuations in the cost of gold may result in reduced demand
for the Company's products. From January 27, 2001 until August 4, 2001, the
closing price of gold according to the Second London Gold Fix ranged from a low
of $256 per ounce to a high of nearly $292 per ounce. There can be no assurances
that fluctuations in the precious metals and credit markets would not result in
an interruption of the Company's gold supply or the credit arrangements
necessary to allow the Company to support its accounts receivable and continue
the use of consigned gold.
On January 27, 1999, the Company repaid its long-term debt with the insurance
companies by obtaining a loan from a new lender in the amount of $10,444,000. As
collateral for the loan, the Company granted the lender a lien on the Company's
machinery and equipment. The loan has an eight-year term and will accrue
interest at 6.85%. The loan does not contain any restrictive financial
covenants. At August 4, 2001, $8,606,000 of principal remained outstanding under
the loan.
On February 10, 1999, Michael Anthony obtained a loan in the amount of $937,500.
As collateral for the loan, the Company granted the lender a first mortgage on
one of its manufacturing facilities. The mortgage has a fifteen-year term and
accrues interest at an annual rate of 7.05%. At August 4, 2001, $844,000 of
principal remained outstanding under the loan.
In October 1995, the Company obtained a loan from a bank in the amount of
$2,500,000. As collateral for the loan, the Company granted the bank a first
mortgage on the Company's corporate headquarters. The mortgage has a ten-year
term and interest on the mortgage accrues at 8% per annum. In addition, the
mortgage contains certain restrictive financial covenants. At August 4, 2001,
the Company was in compliance with the covenants and $1,855,000 of principal
remained outstanding under the mortgage.
On September 16, 1999, the Company acquired two buildings which house two
manufacturing facilities, located at 70 and 60 South MacQuesten Parkway, Mount
Vernon, NY from MacQuesten Realty Company for a price of $2,450,000. The Company
incurred $929,000 of long term debt, which has a four-year term and accrues
interest at an annual rate of 7.50%, and paid the balance with cash from its
operations. At August 4, 2001, $542,000 of principal remained outstanding under
the loan.
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ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 2001 IS UNAUDITED)
Liquidity and Capital Resources (Continued)
- -------------------------------
The Company has a line of credit arrangement with a commercial bank which varies
seasonally from $10,000,000 to $18,350,000 (the "Line of Credit"). The Line of
Credit is secured by certain assets of the Company, including accounts
receivable and inventory. As of August 4, 2001 $9,950,000 was outstanding under
the Line of Credit.
During the six months ended August 4, 2001, cash used in operating activities
was $12,287,000. The increase compared to last year is primarily due to an
increase in inventory and accounts receivable. During the comparable period of
the prior year, the Company provided $753,000 of cash in operating activities,
primarily due to the decreased accounts receivable.
Cash of $849,000 was used in investing activities as compared to $1,728,000 used
during the comparable six-month period last year. The decrease is primarily due
to decreases in the Company's purchase of machinery and equipment.
Cash of $9,036,000 was provided by financing activities during the six-month
period, compared to $915,000 used in the comparable period of the prior year.
The increase was primarily due to the Company's borrowings on its line of
credit.
For the balance of fiscal 2002, the Company projects capital expenditures of
approximately $500,000.
The Company believes that its long-term debt and existing lines of credit
provide sufficient funding for the Company's operations. In the event that the
Company requires additional financing during fiscal 2002, it will be necessary
to fund this requirement through expanded credit facilities with its existing or
other lenders. The Company believes that such additional financing can be
arranged.
Forward Looking Statements
- --------------------------
This Quarterly Report on Form 10-Q contains certain forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934. These
forward-looking statements include the words "believe," "expect," "plans" or
similar words and are based in part on the Company's reasonable expectations and
are subject to a number of factors and risks, many of which are beyond the
Company's control. Actual results could differ materially from those discussed
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations," and "Year 2000 Compliance" as a result of any of the following
factors:
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ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 2001 IS UNAUDITED)
Forward Looking Statements (Cont'd)
- ---------------------------
a) general economic conditions and their impact on the retail environment;
b) fluctuations in the price of gold and other metals used to manufacture the
Company's jewelry;
c) risks related to the concentration of the Company's customers, particularly
the operations of any of its top customers;
d) increased competition from outside the United States where labor costs are
substantially lower;
e) variability of customer requirements and the nature of customers'
commitments on projections and orders; and
f) the extent to which the Company is able to attract and retain key
personnel.
In light of these uncertainties and risks, there can be no assurance that the
forward-looking statements in this Quarterly Report on Form 10-Q will occur or
continue in the future. Except for its required, periodic filings under the
Securities Exchange Act of 1934, the Company undertakes no obligations to
release publicly any revisions to these forward looking statements that may
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
Effect of Recently Issued Accounting Standards.
- -----------------------------------------------
In July 2001, the Financial Accounting Standards Board ("FASB") issued Statement
of Financial Accounting Standards No. 141, "Business Combinations" (SFAS 141),
which supersedes APB Opinion No. 16, "Business Combinations". SFAS No. 141
eliminates the pooling-of-interests method of accounting for business
combinations and modifies the application of the purchase accounting method. The
elimination of the pooling-of-interests method is effective for transactions
initiated after June 30, 2001. The remaining provisions of SFAS No. 141 will be
effective for transactions accounted for using the purchase method that are
completed after June 30, 2001. The Company is currently reviewing the statement,
but does not anticipate the new standard will have any effect on its financial
statements.
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ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(INFORMATION SUBSEQUENT TO JANUARY 27, 2001 IS UNAUDITED)
Effect of Recently Issued Accounting Standards (Continued)
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In July 2001, the FASB also issued Statement of Financial Accounting Standards
No. 142, "Goodwill and Intangible Assets" (SFAS No. 142), which supersedes APB
Opinion No. 17, "Intangible Assets". SFAS No. 142 eliminates the current
requirement to amortize goodwill and indefinite-lived intangible assets,
addresses the amortization of intangible assets with a defined life and
addresses the impairment testing and recognition for goodwill and intangible
assets. SFAS 142 will apply to goodwill and intangible assets arising from
transactions completed before and after the Statement's effective date. SFAS No.
142 is effective for fiscal 2002. The Company is currently reviewing the
statement and has not yet determined the impact adoption of SFAS No. 142 will
have on its financial statements.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 and 2
Not applicable.
Item 3.
Quantitative and Qualitative Disclosure about Market Risk
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The carrying amounts of financial instruments, including cash and cash
equivalents, accounts receivable, accounts payable and accrued liabilities,
approximate fair value because of the current nature of these instruments.
The carrying amount reported for revolving credit and long-term debt
approximate fair value because of the interest rates on these instruments
approximate current market rates. Because the interest rates on our long
term debt is fixed and our revolving debt is utilized seasonally we do not
hedge against interest rate increases.
Consigned gold is not included in the Company's inventory, and there is no
related liability recorded. As a result of these consignment arrangements,
the Company is able to shift a substantial portion of the risk of market
fluctuations in the price of gold to the Gold Lenders, since the Company
does not purchase gold from the Gold Lenders until receipt of a purchase
order form, or shipment of jewelry to, its customers. The Company then
either locks in the selling price of the jewelry to its customers
concurrently with the required purchase of gold from the Gold Lenders or
hedges against changes in the price of gold by entering into forward
contracts or purchasing futures or options on futures that are listed on the
COMEX. While the Company believes its supply of gold is relatively secure,
significant increases or rapid fluctuations in the cost of gold may result
in reduced demand for the Company's products.
All of our revenues are realized in U.S. dollars and all of our revenues are
from customers in the United States. Therefore, we do not believe we face
significant direct foreign currency exchange rate risk. We do not hedge
against foreign currency exchange rate changes.
Item 4 and 5
Not applicable
Item 6.
(a) Reports on Form 8-K
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Not applicable.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
SIGNATURES
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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.
MICHAEL ANTHONY JEWELERS, INC.
Dated: August 30, 2001 By: /s/ Allan Corn
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Allan Corn
Senior Vice President and
Chief Financial Officer
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