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 2, 1997
Commission file number: 015230
MICHAEL ANTHONY JEWELERS, INC.
(Exact name of registrant as specified in its charter)
Delaware No. 132910285
(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
September 10, 1997
------------------
7,704,385
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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 2, 1997 (Unaudited) and
February 1, 1997........................................ 3
Consolidated Condensed Statements of Operations
Three-Month and Six-Month Periods Ended
August 2, 1997 and July 27, 1996 (Unaudited) ........... 4
Consolidated Condensed Statement of Changes in
Stockholders' Equity, Six-Month Period Ended
August 2, 1997 (Unaudited).............................. 5
Consolidated Condensed Statements of Cash Flows,
Six-Month Periods Ended
August 2, 1997 and July 27, 1996 (Unaudited)............ 6
Notes to Consolidated Condensed Financial
Statements................................................ 7-9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS............................................. 10-14
PART II OTHER INFORMATION:
Item 1 Through Item 6 ...................................... 15
Signature Page.............................................. 16
3
MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS (Unaudited)
- ------ August 2, February 1,
1997 1997
---- ----
CURRENT ASSETS:
Cash and equivalents $ 4,944 $ 10,430
Accounts receivable:
Trade (less allowances of $1,600 and $1,404, respectively) 18,461 21,500
Other 223 91
Inventories 20,271 18,903
Prepaid expenses and other current assets 2,096 885
Deferred taxes 578 578
-------- --------
Total current assets 46,573 52,387
PROPERTY, PLANT AND EQUIPMENT - net 19,324 18,621
INTANGIBLES - net 686 916
OTHER ASSETS 888 825
-------- --------
$ 67,471 $ 72,749
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES:
Accounts payable - trade $ 3,037 $ 3,141
Current portion of long-term debt
and lease liability 3,175 3,402
Accrued expenses 2,880 3,217
Taxes payable -- 585
-------- --------
Total current liabilities 9,092 10,345
-------- --------
LONG-TERM DEBT 12,673 13,946
-------- --------
CAPITAL LEASE LIABILITY 342 348
-------- --------
DEFERRED TAXES 1,068 1,068
-------- --------
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; 8,279,000
shares issued and outstanding as of
August 2, 1997 and February 1, 1997, respectively 8 8
Additional paid-in capital 31,732 31,732
Retained earnings 14,406 16,096
Treasury stock, 578,000 and 250,000 shares as of August 2, 1997
and February 1, 1997, respectively (1,850) (794)
-------- --------
Total stockholders' equity 44,296 47,042
-------- --------
$ 67,471 $ 72,749
======== ========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT LOSS PER SHARE)
Three Months Ended Six Months Ended
------------------ ----------------
August 2, July 27, August 2, July 27,
1997 1996 1997 1996
------- -------- -------- --------
NET SALES $ 22,618 $ 27,706 $ 50,224 $ 56,909
COST OF GOODS SOLD 18,967 23,641 41,511 47,891
-------- -------- -------- --------
GROSS PROFIT 3,651 4,065 8,713 9,018
SELLING, GENERAL AND
ADMINISTRATIVE EXPENSES 5,845 4,482 11,097 8,817
-------- -------- -------- --------
OPERATING (LOSS)/INCOME (2,194) (417) (2,384) 201
OTHER INCOME/(EXPENSES):
Gold consignment fee, net (347) (312) (607) (663)
Interest expense (304) (410) (685) (839)
Interest income 113 125 238 285
Other income 643 6 667 20
-------- -------- -------- --------
Total other income/(expense) 105 (591) (387) (1,197)
-------- -------- -------- --------
LOSS BEFORE INCOME TAX BENEFIT (2,089) (1,008) (2,771) (996)
INCOME TAX BENEFIT (822) (383) (1,081) (379)
-------- -------- -------- --------
NET LOSS $ (1,267) $ (625) $ (1,690) $ (617)
======== ======== ======== ========
LOSS PER SHARE $ (0.16) $ (0.08) $ (0.22) $ (0.08)
======== ======== ======== ========
WEIGHTED AVERAGE NUMBER
OF SHARES 7,706 8,256 7,787 8,265
======== ======== ======== ========
The accompanying notes are an integral part of these 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)
Common Stock Additional Treasury Stock
-------------------- Paid-In Retained --------------
Shares Dollars Capital Earnings Shares Dollars Total
------ ------- ----------- -------- ------ -------- -------
Balance -
February 1, 1997 8,279 $ 8 $ 31,732 $ 16,096 (250) $ (794) $ 47,042
Purchase of treasury stock -- -- -- -- (328) (1,056) (1,056)
Net loss -- -- -- (1,690) -- -- (1,690)
-------- -------- -------- -------- -------- -------- --------
Balance -
August 2, 1997 8,279 $ 8 $ 31,732 $ 14,406 (578) $ (1,850) $ 44,296
======== ======== ======== ======== ======== ======== ========
The accompanying notes are an integral part of these 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 2, July 27,
1997 1996
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (1,690) $ (617)
Adjustments to reconcile net loss
to net cash used in operating activities:
Depreciation and amortization 2,013 1,917
Provision for accounts receivable 343 70
Provision for sales returns (147) (187)
Asset write-off 259 --
(Increase)/decrease in operating assets:
Accounts receivable 2,711 12,335
Inventories (1,368) (1,500)
Prepaid expenses and other current assets (1,211) (23)
Other assets (163) (508)
Intangibles 127 (118)
Increase/(decrease) in operating liabilities:
Accounts payable (104) (2,327)
Accrued expenses (337) (1,149)
Taxes payable (585) (379)
-------- --------
Net cash (used in)/provided by operating activities (152) 7,514
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment - net (2,772) (1,535)
-------- --------
Net cash used in investing activities (2,772) (1,535)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments of long-term debt
and capital lease liabilities (1,506) (2,990)
Purchase of treasury stock (1,056) (80)
-------- --------
Net cash used in financing activities (2,562) (3,070)
-------- --------
(DECREASE)/INCREASE IN CASH AND EQUIVALENTS (5,486) 2,909
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 10,430 6,673
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD $ 4,944 $ 9,582
======== ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION:
Cash paid during the period for:
Interest and gold consignment fees $ 1,219 $ 1,676
Taxes $ 67 $ --
The accompanying notes are an integral part of these consolidated condensed
financial statements.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED AUGUST 2, 1997
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO FEBRUARY 1, 1997 IS UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
------------------------------------------
The unaudited interim consolidated condensed balance sheet as of August 2,
1997 and the unaudited consolidated condensed statements of operations for
the six months ended August 2, 1997 and July 27, 1996, and the unaudited
consolidated condensed statements of cash flows for the six months ended
August 2, 1997 and July 27, 1996, 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 1997 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.
Earnings Per Share
------------------
Earnings per share for all periods presented were computed on a primary
basis using the weighted average number of shares of common stock
outstanding. Options and warrants outstanding were not materially
dilutive.
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per Share,
which established new standards for computing and presenting net income
per common share and replaced the standards previously found in Accounting
Principles Board Opinion No. 15, Earnings Per Share. The Company will
begin reporting net income per common share and net income per common
share assuming dilution according to this new standard in the fourth
quarter of fiscal year ending 1998. Net income per common share amounts,
for the second quarter of 1998 and all prior periods, computed under the
new standard approximate the net income per common share amounts reported
under the previous standard.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED AUGUST 2, 1997
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO FEBRUARY 1, 1997 IS UNAUDITED)
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 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'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 price of gold in the current quarter was $340 per ounce as
compared to $396 per ounce for the quarter ended July 27, 1996.
3. INVENTORIES
-----------
Inventories consist of:
August 2, February 1,
1997 1997
---- ----
(Unaudited)
(In thousands)
Finished goods $42,223 $37,020
Work in process 25,702 14,597
Raw materials 6,334 7,568
------- -------
74,259 59,185
Less:
Consigned gold 53,988 40,282
------- -------
$20,271 $18,903
======= =======
Inventories as of August 2, 1997 and February 1, 1997 excluded 166,600 and
116,600 ounces of gold on consignment, respectively.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
FORM 10-Q FOR QUARTER ENDED AUGUST 2, 1997
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(INFORMATION SUBSEQUENT TO FEBRUARY 1, 1997 IS UNAUDITED)
4. OTHER INCOME
------------
Other income for the three-month and six-month periods ended August 2,
1997 includes a gain of approximately $625,000 on the sale of an asset.
5. 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. As of August 2, 1997, the
Company had repurchased a total of 638,000 shares on the open market for
an aggregate price of approximately $1,978,000, of which 60,000 shares
have been retired.
-9-
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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 FEBRUARY 1, 1997 IS UNAUDITED)
SUMMARY OF RESULTS OF OPERATIONS FOR THE THREE MONTHS
- -----------------------------------------------------
ENDED AUGUST 2, 1997 AND JULY 27, 1996
- --------------------------------------
Net sales for the three months ended August 2, 1997, were approximately
$22,618,000, a decrease of 18.4% compared to net sales of approximately
$27,706,000 for the comparable period last year. The decrease in sales was
primarily a result of lower sales volume as well as a 14% decrease in the
average gold price. The average gold price for the quarter ended August 2, 1997
was $340 compared to $400 per ounce in the comparable period last year, which
represented approximately $2,233,000 of the decrease in sales.
Gross profit margin increased to approximately 16.1% of net sales for the three
months ended August 2, 1997, compared to approximately 14.7% for the comparable
period last year due to the lower average gold price.
Selling, general and administrative expenses for the three months ended August
2, 1997, were approximately $5,845,000, an increase of $1,363,000 or 30.4% from
approximately $4,482,000 for the comparable period last year. As a percentage of
net sales, adjusted for the gold price difference of $2,233,000 discussed above,
selling, general and administrative expenses increased to 23.5% for the three
months ended August 2, 1997, from 16.2% for the comparable period of the prior
year. Included in selling, general and administrative expenses for the three
months ended August 2, 1997 was $200,000 of costs related to the termination of
merger negotiations. The remaining increase of $1,163,000 is primarily
attributable to increases in (i) payroll and payroll related expenses, (ii) the
provision for bad debts, (iii) product and packaging supplies, (iv) and product
software development costs.
Other income for the three months ended August 2, 1997, was approximately
$643,000, an increase of $637,000 compared to approximately $6,000, for the
comparable period last year. The increase was primarily due to a gain of
$625,000 for the Company's sale of an asset in May 1997.
Interest expense and gold consignment fees for the three months ended August 2,
1997, were approximately $651,000, a decrease of $71,000 or 9.8% compared to
approximately $722,000, for the comparable period last year. The decrease was
primarily due to the Company's higher consignment interest rate and level of
consignment inventory.
As a result of the above factors the Company had a net loss for the three months
ended August 2, 1997 of approximately $1,267,000 or $.16 loss per share on
7,706,000 weighted average shares outstanding, compared to a net loss of
$625,000 or $.08 loss per share on 8,256,000 weighted average shares outstanding
for the comparable period last year.
-10-
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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 FEBRUARY 1, 1997 IS UNAUDITED)
SUMMARY OF RESULTS OF OPERATIONS FOR THE SIX MONTHS
- ---------------------------------------------------
ENDED AUGUST 2, 1997 AND JULY 27, 1996
- --------------------------------------
Net sales for the six months ended August 2, 1997, were approximately
$50,224,000, a decrease of 11.7% compared to net sales of approximately
$56,909,000 for the comparable period last year. The decrease in sales was
primarily a result of the decrease in the average gold price of 15% and lower
sales volume. The average gold price per ounce for the six months ended August
2, 1997 was $340 compared to $400 per ounce in the comparable period last year,
which represented approximately $5,547,000 of the decrease in sales.
Gross profit margin increased to approximately 17.4% of net sales for the six
months ended August 2, 1997, compared to approximately 15.9% for the comparable
period last year, due to the lower average gold price.
Selling, general and administrative expenses for the six months ended August 2,
1997, were approximately $11,097,000, an increase of $2,280,000 or 25.8% from
approximately $8,817,000 for the comparable period last year. As a percentage of
net sales, adjusted for the gold price difference of $5,547,000 discussed above,
selling, general and administrative expenses increased to 19.9% for the six
months ended August 2, 1997, from 15.5% for the comparable period of the prior
year. Included in selling, general and administrative expenses for the six
months ended August 2, 1997 was $200,000 of costs related to the termination of
merger negotiations. The remaining increase of $2,080,000 is primarily
attributable to increases in (i) product software development costs, (ii)
payroll and payroll related expenses, (iii) advertising expenses (iv) the
provision for bad debts and (v) product and packaging supplies.
Other income for the six months ended August 2, 1997, was approximately
$667,000, an increase of $647,000 compared to approximately $20,000, for the
comparable period last year. The increase was primarily due to a gain of
$625,000 for the Company's sale of an asset in May 1997.
Interest expense and gold consignment fees for the six months ended August 2,
1997, were approximately $1,292,000, a decrease of $210,000 or 14% compared to
approximately $1,502,000, for the comparable period last year. The decrease was
primarily due to lower gold prices compared to last year.
As a result of the above factors the Company had a net loss for the six months
ended August 2, 1997 of approximately $1,690,000 or $.22 loss per share on
7,787,000 weighted average shares outstanding, compared to a net loss of
$617,000 or $.08 loss per share on 8,265,000 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 FEBRUARY 1, 1997 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 250,000 ounces of fine gold or (ii)
consigned gold with an aggregate value equal to $106,695,000. 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 2, 1997, the Company held 166,600 ounces of gold on
consignment with a market value of $53,988,000.
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 2, 1997, the Company was in compliance with the covenants in
its consignment agreements and the Company's owned gold inventory was valued at
approximately $4,943,000. 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 from,
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.
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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 FEBRUARY 1, 1997 IS UNAUDITED)
Liquidity and Capital Resources (Continued)
- -------------------------------------------
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 February 1, 1997 until August 2, 1997, the
closing price of gold according to the Second London Gold Fix ranged from a low
of $317 per ounce to a high of nearly $362 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.
In each of 1987 and 1992, the Company issued $10,000,000 principal amount of
senior secured notes with various insurance companies, which accrue interest at
10.5% and 8.61% per annum, respectively. In February 1995, the Company issued an
additional $6,000,000 principal amount of senior secured notes with various
insurance companies, which currently accrue interest at 7.31% per annum. The
various insurance company lenders are collectively referred to as the "Senior
Note Holders". These notes are secured by the Company's accounts receivable,
machinery and equipment, inventory (secondary lien to the Gold Lenders) and
proceeds. In addition, the note purchase agreements contain certain restrictive
financial covenants and restrict the payment of dividends. At August 2, 1997,
the Company was in compliance with the covenants and $13,306,000 of principal
remained outstanding under the notes issued in 1987, 1992 and 1995.
On October 6, 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 2, 1997,
the Company was in compliance with the covenants and $2,334,000 of principal
remained outstanding under the mortgage.
The Company has a line of credit arrangement with a commercial bank (the "Line
of Credit"), under which the Company may borrow up to $15,000,000. The Line of
Credit is secured by certain assets of the Company, including accounts
receivable and inventory. As of August 2, 1997, there was no amount outstanding
under the Line of Credit. The Line of Credit currently expires on July 31, 1998,
subject to annual renewal.
Cash and cash equivalents decreased from $10,430,000 at February 1, 1997 to
$4,944,000 at August 2, 1997. This decrease was primarily due to the Company's
seasonal increase in inventory, purchase of a building and equipment, and
repurchases of stock and debt payments.
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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 FEBRUARY 1, 1997 IS UNAUDITED)
Liquidity and Capital Resources (Continued)
- -------------------------------------------
During the six months ended August 2, 1997, the Company used $152,000 of cash
from operations primarily for its higher inventory level and increased prepaid
expenses. During the comparable period of the prior year cash provided from
operations was $7,514,000, primarily due to timing of accounts receivable
collections.
Cash of $2,772,000 was used for investing activities, for a building and
equipment purchases, as compared to $1,535,000 used for equipment purchases
during the comparable six-month period last year. The increase is primarily due
to the purchase of one of Company's the manufacturing facility buildings. Cash
of $2,562,000 was used for financing activities during the six-month period, for
repurchases of stock and the repayment of borrowings.
As part of its long-term strategic planning, the Company recently acquired one
of its manufacturing facilities from MacQuesten Realty Company, a general
partnership owned by Michael and Anthony Paolercio ("MRC") for a purchase price
of $1,150,000. As part of the transaction, the Company obtained an exclusive,
two-year option to acquire from MRC the two remaining manufacturing and
distribution facilities that are currently being leased from MRC (the "Leased
Properties"). In the event the Company acquires any of such properties, the
Company may incur or assume additional long-term indebtedness in order to
finance their purchase.
For the balance of fiscal 1998, the Company projects capital expenditures of
approximately $1,000,000, which includes certain improvements on its leased and
owned properties, but does not include any other costs related to the possible
acquisition of the Leased Properties.
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 1998, 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.
New Accounting Standard
- -----------------------
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 131, Disclosures about Segments of an
Enterprise and Related Information, which will be effective for fiscal years
beginning after December 15, 1997. SFAS No. 131 redefines how operating segments
are determined and requires expanded quantitative and qualitative disclosures
relating to a company's operating segments. The Company anticipates that the
adoption of SFAS No. 131 will not have a material impact on current disclosures.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1 through Item 5
Not applicable.
Item 6.
(a) Exhibits
--------
10 Promissory Note issued to Chase Bank N.A.
27 Financial Data Schedule
(b) Reports on Form 8-K
-------------------
Not applicable.
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MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES
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.
MICHAEL ANTHONY JEWELERS, INC.
Dated: September 11, 1997 By:/s/Allan Corn
-------------------------
Allan Corn
Senior Vice President and
Chief Financial Officer
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EXHIBIT INDEX
TO
FORM 10-Q FOR QUARTER ENDED AUGUST 2, 1997
Exhibit No. Page No.
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10 Promissory Note issed to Chase Bank N.A. 18
27 Financial Data Schedule 25
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