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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934 For the fiscal year ended December 31, 1994
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the transition period from to
Commission file number 1-6081
THE LORI CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 25-1095978
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
500 Central Avenue, Northfield, IL 60093
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 441-7300
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on Which Registered
Common stock, $.01 par value American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None.
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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
State the aggregate market value of the voting stock held by nonaffiliates of
the registrant at February 28, 1995: $2,449,000.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at February 28, 1995
Common stock, $.01 par value 3,165,004
Documents Incorporated by Reference: None
Item 1. Business
The Lori Corporation ("Lori" or "the Company"), a Delaware Corporation
incorporated in 1969, operates in one industry segment (a designer and
distributor of popular-priced fashion costume jewelry). During 1994, Lori's
operations were conducted through its wholly-owned subsidiaries:
Lawrence Jewelry Corporation ("Lawrence")
Rosecraft, Inc. ("Rosecraft")
New Dimensions Accessories, Ltd. ("New Dimensions"), formerly R. N. Koch, Inc.
On February 8, 1985, the Company acquired all of the capital stock of New
Dimensions. On June 4, 1986, Lori acquired all of the capital stock of
Rosecraft. Finally on October 22, 1986, Lori acquired all of the capital stock
of Lawrence.
ARTRA GROUP Incorporated ("ARTRA"), a public company whose shares are traded on
the New York Stock Exchange, owns, through a wholly-owned subsidiary,
approximately 66.4% of the outstanding common stock of Lori and Lori's entire
preferred stock issue. At December 31, 1994, ARTRA's interest in Lori common
stock and Lori preferred stock was pledged as collateral for a bank loan to a
wholly-owned ARTRA subsidiary that is the parent of Lori.
The fashion jewelry business is highly competitive. The Company competes
primarily with other fashion jewelry designers and distributors. Sales of
fashion jewelry have not returned to the levels experienced prior to the general
economic recession in the United States in 1990-1991. Despite the broad-based
recovery in the United States economy which has been evident at least since the
third quarter of 1993, sales of fashion jewelry products have not returned to
pre-recession levels. Although the fashion jewelry industry has traditionally
been regarded as cyclical, the failure of fashion jewelry sales to rebound with
the economy suggests that the current industry conditions reflect a fundamental
adverse change in the industry rather than merely the trough in a cycle. Among
the factors which have been identified as contributing to the recession in the
fashion jewelry industry are (i) current fashion, which favors a minimum of
jewelry and adornment; (ii) the general trend in the United States toward more
casual attire in office and evening wear, with which attire no jewelry or a
minimum of jewelry is worn; and (iii) the recessionary environment in the fine
jewelry industry, which has resulted in fine jewelry manufacturers and
distributors lowering prices and making available lower cost items, such as 10
karat gold jewelry, to increase market share at the expense of fashion jewelry
distributors.
The continuing recession in the fashion jewelry industry has resulted in a
number of competitors ceasing operations (in what is commonly referred to as a
"shake out" in the industry). Many of the remaining competitors have taken steps
designed to strengthen their positions in the markets or, in certain instances,
simply to enable them to survive. These steps include improving operating
efficiencies in the manufacturing or sourcing of goods, reducing staff,
pressuring suppliers to lower costs or identifying new suppliers willing to do
so, and accepting lower profit margins or increasing the use of service programs
under which goods unsold by the retailer are accepted for return (or,
alternatively, increasing the guaranteed profit margins of the retailers). The
implementation of these steps by various competitors has resulted in
significantly heightened competition in the fashion jewelry industry.
Competitive pressure has also been introduced in the industry by national
discount department store chains. Tactics employed by these increasingly
powerful chains have included (i) direct sourcing of "knock-offs" of the most
successful lines or items sold, (ii) pressuring distributors such as Lori's
operating subsidiaries to accept returns of unsold goods, (iii) delaying or
withholding payments on other orders, threatening to suspend future business or
unilaterally terminating other orders, and (iv) selling competitors' jewelry
lines side-by-side. As these national chains continue to capture market share
and drive regional chains and independently-owned stores out of business, their
buying departments will have an increasing ability to dictate pricing in the
fashion jewelry industry.
Due to the conditions noted above, in recent years, the Company has
suffered significant operating losses. No assurances can be given that either
the business and operations of Lori or the market conditions in the fashion
jewelry industry generally will improve in the immediate future. These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Since December 31, 1993 and during 1994, Lori and its operating subsidiaries
were not in compliance with certain provisions of their respective bank loan
agreements. As discussed in Item 7. "Management's Discussion and Analysis of
Financial Condition and Results of Operations," on August 18, 1994, as amended
December 23, 1994, ARTRA, Lori's parent, Fill-Mor Holding, Inc. ("Fill-Mor"),
Lori and Lori's operating subsidiaries entered into an agreement with Lori's
bank lender to settle obligations due the bank under terms of the bank loan
agreements of Lori and its operating subsidiaries
and Fill-Mor. Under terms of the amended settlement agreement, as partial
consideration, the bank lender received all of the assets of New Dimensions and
New Dimensions ceased operations effective December 27, 1994. The operations of
the Company's other subsidiaries, Lawrence and Rosecraft, are continuing as
discussed below.
Operating Subsidiaries
Each of the Lori operating subsidiaries is a distributor of fashion jewelry. The
Lori operating subsidiaries contract with outside sources for the manufacture of
the jewelry it sells. Management believes that the loss of any one of its
suppliers would not have a material adverse effect on its business because an
adequate number of other suppliers are available. This jewelry is manufactured
from readily available materials, which include gold, brass, steel, copper,
zinc, plastics, glass stones, lacquer and enamel. Management believes that there
is currently an ample supply of the raw materials needed by its suppliers to
manufacture its jewelry and that multiple sources of supply exist.
Lawrence
Lawrence is engaged in the distribution and sale of a full line of
popular-priced fashion costume jewelry and fashion accessories to mass
merchandise retailers, department stores and specialty stores throughout the
United States. Lawrence's sales are subject to seasonal fluctuations with peak
selling seasons consisting of Spring (March/April), Back-to-School and Christmas
(October/November).
A majority of Lawrence's annual sales involve the sale of fashion costume
jewelry. Lawrence markets over 3,500 different styles of costume jewelry items
annually.
Approximately 95% of Lawrence's products are marketed though its full service
sales program, designed to provide customers with a continuous flow of
merchandise. Services provided under this program include packaging, price
pre-ticketing, stocking, merchandise display and inventory control.
Lawrence has approximately 20 customers with approximately 2,500 retail outlets
in the United States. Among them are department stores, mass merchandisers,
chain stores, specialty stores, boutiques, children's stores and gift stores.
Lawrence sells all of its products directly to its customers who, on a limited
basis, may be offered extended payment terms beyond 30 days depending upon their
trade practices and financial strength. Lawrence does not have sales contracts
with its customers.
Lawrence believes it is one of a number of significant costume jewelry
companies. Some of these, however, are national suppliers which have greater
financial resources than Lawrence. Lawrence competes largely through the ability
of its full time staff of professional marketing and service representatives to
meet customers' needs for continuity and timeliness of service and through the
ability of its staff to identify fashion trends and develop appropriate
products.
Lawrence has recently expanded its business to include outside retail support
services to non-jewelry companies. Lawrence views this relatively new market as
a potentially significant source of additional revenue.
Rosecraft
Rosecraft is a creator, designer, importer and distributor on a direct basis of
popular-priced fashion costume jewelry and related accessories for children
which is sold in junior specialty chains, department and specialty stores and
mass merchandise retailers throughout the United States. Rosecraft offers over
1,700 styles of earrings, necklaces, bracelets, hair and other fashion
accessories. Many items are sold under the trademark "Rosecraft Kids", which is
a recognized name in children's fashion jewelry and related accessories.
Rosecraft employs designers to develop fashion costume jewelry and accessories
to satisfy consumer demand and is responsible for creating items to provide new
merchandise for Rosecraft's customers. Approximately 80% of Rosecraft's products
are imported from the Far East with the remaining 20% of its products purchased
from domestic manufacturers. Rosecraft believes that multiple sources of supply
exist for its line of children's fashion costume jewelry and accessories.
Rosecraft has approximately 275 active customers with approximately 4,000 retail
outlets in the United States. Rosecraft sells all of its products directly to
its customers who, on a limited basis, may be offered extended payment terms
beyond 30 days depending upon their trade practices and financial strength.
Rosecraft does not have sales contracts with its customers.
Rosecraft believes that it competes in a fragmented industry with many regional
suppliers and a few national suppliers, some of whom have greater financial
resources than Rosecraft. Rosecraft competes on the basis of design, price,
quality, delivery time and customer service.
In June, 1992, Rosecraft closed its Ladies line of fashion costume jewelry in
order to concentrate on its higher margin Children's line of fashion costume
jewelry and accessories. During the year ended December 31, 1992, the Ladies
line accounted for approximately 16% of Rosecraft's sales. The closing of
Rosecraft's Ladies line resulted in a charge to operations of $900,000. The
restructuring charge included inventory liquidation costs, lease termination
costs and employee severance costs.
New Dimensions
As discussed above, under terms of the amended settlement agreement, Lori's bank
lender received all of the assets of New Dimensions and New Dimensions ceased
operations effective December 27, 1994. Previously, New Dimensions was
principally engaged in the design, distribution and sale of popular-priced
fashion costume jewelry and key chains to mass merchandise retailers throughout
the United States. New Dimensions' operations were conducted principally through
its service program in which New Dimensions provided product, packaging, price
pre-ticketing, stocking, merchandise display and inventory control of the
costume jewelry sold through its customers' retail outlets.
Major Customers
Two major customers, Target Stores and Wal-Mart, accounted for sales of
approximately $12,700,000 and $11,300,000, respectively, in 1994. The Company
believes it has developed a strong relationship with Target Stores and that its
service program has historically generated significant profits for this
customer. Nevertheless, there can be no assurance that Target Stores will
continue its business relationships with the Company. Termination of this
relationship would have a material adverse effect on the Company's sales and
earnings if the Company was not able to replace sales to this customer on a
timely basis. During the fourth quarter of 1994, New Dimensions lost its account
with Wal-Mart, which accounted for the principal portion of the Company's sales
to Wal-Mart (although Wal-Mart remains a Rosecraft customer). The loss of the
Wal-Mart account contributed to management's decision to assign all of the
assets of New Dimensions as consideration for the agreement with Lori's bank
lender to settle obligations due the bank under terms of the bank loan
agreements of Lori and its operating subsidiaries as discussed in Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and Note 4 to the Company's Consolidated Financial Statements.
Accordingly, New Dimensions ceased operations effective December 27, 1994.
Employees
At December 31, 1994, the Company employed approximately 600 persons, including
approximately 350 part-time service representatives engaged by the Lawrence
subsidiary. The Company considers its relationships with its employees to be
good.
Item 2. Properties
The following table sets forth a brief description of the properties of the
Company and its subsidiaries. Lori and its subsidiaries believe that all of
their facilities are adequate for their present and reasonably anticipated
future business requirements.
Location General Description Ownership
Lori and Rosecraft:
Woonsocket, RI Headquarters (Lori and Rosecraft) Leased, expiring in 1996
and distribution facility of
approximately 86,200 sq. ft.
New York, NY Showroom of approximately 4,300 sq. ft. Leased, expiring in 1996
Lawrence:
Eden Prairie, MN Headquarters and distribution facility Leased, expiring in 1995
of approximately 42,000 sq. ft.
Item 3. Legal Proceedings.
On February 5, 1993, New Dimensions filed a petition for reorganization under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York (Case No. 93 B 40653). On April 9, 1993, New
Dimensions' reorganization plan was confirmed by an order of the Bankruptcy
Court. On May 3, 1993, the consummation date of the reorganization, New
Dimensions emerged from Chapter 11 bankruptcy court protection. See Note 5 to
the Company's Consolidated Financial Statements for a discussion of the terms of
New Dimensions' plan of reorganization.
As a result of the time required to complete the restructuring of New Dimensions
and the financial significance to Lori of the restructuring, Lori did not timely
file its Form 10-K for the year ended December 31, 1992 and its Form 10-Q for
the quarter ended March 31, 1993 and has also been late in previous annual and
quarterly filings with the Securities and Exchange Commission ("SEC"). As a
result of discussions with the SEC, in June, 1993, Lori readily consented to a
Final Judgment of Permanent Injunction to file with the SEC Form 10-K for the
year ended December 31, 1992 and Form 10-Q for the quarter ended March 31, 1993
by late July and to meet future filing requirement deadlines.
Lori and its subsidiaries are parties in various business related litigation
which, in the opinion of management, will not have a material adverse effect on
the Company's financial position and results of operations.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
PART II
Item 5. Market For the Registrant's Common Equity and Related Shareholder
Matters.
The Company's common stock, $.01 par value, is traded on the American Stock
Exchange ("AMEX"). The Company currently does not meet certain of the
requirements for maintaining its listing on the AMEX and the AMEX is reviewing
the status of the Company's listing on the exchange.
The high and low sales prices for Lori's common stock, as reported by the AMEX
during the past two years, were as follows:
1994 1993
--------------------- ---------------------
High Low High Low
------- ------- ------- -------
First quarter .............................. 6 5 2 - 1/8 3/4
Second quarter ............................. 7 - 1/8 3 - 1/8 3 2
Third quarter .............................. 8 - 1/8 5 - 1/4 5 - 3/4 2 - 3/8
Fourth quarter ............................. 6 - 3/8 1 - 7/8 8 - 1/2 5 - 3/8
No dividends were paid in 1994 or 1993, nor are any anticipated in 1995. In
recent years the Company was prohibited from paying dividends to its
stockholders pursuant to the terms of its bank loan agreement. In addition, the
Company's operating subsidiaries were prohibited from or restricted in paying
dividends or making distributions to Lori under their respective bank loan
agreements (except for limited overhead allocations payable to the parent
entity). Accordingly, even if Lori were permitted to pay dividends to its
stockholders, the restrictions or limitations on its operating subsidiaries in
upstreaming payments had prohibited the payment of dividends by Lori. Due to
current working capital restraints, the payment of dividends to Lori's
stockholders in the foreseeable future is considered unlikely. See Item 7.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for a discussion of the loan agreements of the Company and its
operating subsidiaries.
As of March 31, 1995 and December 31, 1994, there were approximately 5,600
shareholders of record.
Item 6. Selected Financial Data.
Following is a consolidated summary of selected financial data of the Company
for the five years ended December 31, 1994.
1994 1993 1992 1991 1990
--------- --------- --------- --------- --------
(in thousands, except per share data)
Net sales ...................................... $ 34,431 $ 46,054 $ 75,484 $ 106,834 $ 114,604
Earnings (loss)
before extraordinary credits (A) ............ (18,502) (1,672) (34,619) (7,099) 1,651
Extraordinary credits (B) ...................... 8,965 22,057 -- -- 35
Net earnings (loss) ............................ (9,537) 20,385 (34,619) (7,099) 1,686
Earnings (loss) per share:
Earnings (loss)
before extraordinary credits .............. (5.80) (.45) (10.99) (2.25) .53
Extraordinary credits ....................... 2.81 6.03 -- -- .01
Net earnings (loss) ......................... (2.99) 5.58 (10.99) (2.25) .54
Total assets (C) ............................... 18,704 40,174 42,818 66,877 78,942
Long-term debt ................................. -- -- 6,105 23,548 22,862
Due to ARTRA (D) ............................... 289 -- 16,025 15,981 17,902
Liabilities subject to compromise .............. -- -- 41,500 -- --
Debt subsequently discharged ................... 7,105 -- -- -- --
Cash dividends ................................. -- -- -- -- --
(A) The loss from continuing operations for the year ended December 31,
1994 includes a charge to operations of $10,800,000 representing a
write-off of New Dimensions goodwill December 31, 1994. See Note 4 to
the Company's Consolidated Financial Statements. The loss from
continuing operations for the year ended December 31, 1992 includes
charges to operations of $8,664,000 representing an impairment of
goodwill at December 31, 1992 and $8,500,000 representing increased
reserves for markdowns allowances and inventory valuation.
(B) The 1994 extraordinary credit represents a gain from a net discharge of
indebtedness under terms of the Company's debt settlement agreement
with its bank. See Note 4 to the Company's Consolidated Financial
Statements. The 1993 extraordinary credit represents a gain from a net
discharge of indebtedness due to the reorganization of the Company's
New Dimensions subsidiary. See Note 5 to the Company's Consolidated
Financial Statements. The 1990 extraordinary credit represent gains on
purchases of New Dimensions senior notes at market prices lower than
face value.
(C) As partial consideration for the debt settlement agreement, in
December, 1994 the Company's bank lender received all of the assets of
New Dimensions. See Note 4 to the Company's Consolidated Financial
Statements.
(D) In February, 1993, ARTRA transferred all of its notes to Lori's capital
account. In 1994, ARTRA made additional advances to Lori. Effective
December 29, 1994, ARTRA exchanged $2,242,000 of its notes and advances
for additional Lori preferred stock. See Note 14 to the Company's
Consolidated Financial Statements.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
General
On February 8, 1985, Lori entered into the fashion costume jewelry business
through the acquisition of all of the outstanding shares of New Dimensions.
During 1986 the Company expanded the jewelry segment by acquiring Rosecraft and
Lawrence.
As discussed below in the "Liquidity and Capital Resources" section, on February
5, 1993 the Company's New Dimensions subsidiary filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code in the United States
Bankruptcy Court for the Southern District of New York (Case No. 93 B 40653). On
April 9, 1993, New Dimensions' reorganization plan was confirmed by an order of
the Bankruptcy Court. On May 3, 1993, the consummation date of the
reorganization, New Dimensions emerged from Chapter 11 bankruptcy court
protection. As discussed below, under terms of a debt settlement agreement,
Lori's bank lender received all of the assets of New Dimensions and New
Dimensions ceased operations effective December 27, 1994.
In recent years, the Company suffered significant operating losses and since
December 31, 1993 Lori and its operating subsidiaries were not in compliance
with certain provisions of their respective bank loan agreements. On August 18,
1994, as amended December 23, 1994, ARTRA, Lori's parent, Fill-Mor, Lori and
Lori's operating subsidiaries entered into and agreement with Lori's bank lender
to settle obligations due the bank under terms of the bank loan agreements of
Lori and its operating subsidiaries and Fill-Mor. See Note 4 to the Consolidated
Financial Statements and discussion below in "Liquidity and Capital Resources."
Liquidity and Capital Resources
Cash and cash equivalents increased $243,000 during the year ended December 31,
1994. Cash flows from financing activities of $4,701,000 exceeded cash flows
used by operating activities of $3,211,000 and cash flows used by investing
activities of approximately $1,247,000. Cash flows from financing activities
were attributable to funds provided by ARTRA through advances and a contribution
of capital and to a net overall increase in borrowings. Cash flows used by
operating activities were principally attributable to the Company's loss from
operations, before the effect of depreciation and amortization and other noncash
operating expenses. Expenditures for warehouse and office equipment and retail
fixtures during the year ended December 31, 1994 were $697,000.
During the year ended December 31, 1994, the Company's working capital
deficiency decreased by $16,879,000 to $846,000. The decrease in working capital
deficiency is principally attributable to a net discharge of indebtedness under
terms of the Company's debt restructuring agreement with its bank lender as
discussed below and in Note 4 to the Company's Consolidated Financial
Statements.
In recent years, the Company has suffered significant operating losses,
principally at its New Dimensions subsidiary. As a result of the significant
operating loss incurred in 1992, on February 5, 1993, New Dimensions filed a
petition for reorganization under Chapter 11 of the Bankruptcy Code. On April 9,
1993, New Dimensions' reorganization plan was confirmed by an order of the
Bankruptcy Court and on May 3, 1993, the consummation date of the
reorganization, New Dimensions emerged from Chapter 11 bankruptcy court
protection. The plan, among other things, provided for New Dimensions' bank
lender to have the right to receive all of the issued and outstanding shares or
assets of New Dimensions immediately prior to the consummation date. The bank
then assigned its rights to receive the New Dimensions stock to a newly formed
Lori subsidiary, which was then merged into New Dimensions, for consideration of
$2,500,000, evidenced by New Dimensions' term loan note originally scheduled to
be payable in varying quarterly installments, commencing March 31, 1994 through
December 31, 1996. Lori assumed and guaranteed the balance of New Dimensions'
pre-bankruptcy loans payable to the bank, amounting to $12,036,000, including
accrued interest, which included the New Dimensions former line of credit and
the New Dimensions former term loan, net of New Dimensions' direct obligation
payable to the bank of $2,500,000 as noted above. The bank also provided New
Dimensions with a revolving line of credit, including a letter of credit
facility. Borrowings were limited to the lesser of $1,600,000 or a calculated
borrowing base.
On February 5, 1993, Lawrence entered into a credit agreement with Lori's bank
that provided for a revolving line of credit, which includes a letter of credit
facility. Borrowings were limited to the lesser of $2,100,000 or a calculated
borrowing base.
Effective March 31, 1993 Rosecraft entered into agreements with a bank that
provided for a term loan of $2,977,000 and a revolving line of credit. The
revolving line of credit provided for borrowings, including a letter of credit
facility. Borrowings were limited to the lesser of $1,000,000 or a calculated
borrowing base, less outstanding letters of credit. In addition to the revolving
line of credit, the bank has provided an overadvance credit commitment of
$1,200,000.
Since December 31, 1993, Lori and its operating subsidiaries were not in
compliance with certain provisions of their respective bank loan agreements. At
December 31, 1993, borrowings under the bank loan agreements of Lori and its
operating subsidiaries totaled $21,952,000. In addition to scheduled
maturitities of $2,833,000 under the bank loan agreements of Lori and its
operating subsidiaries, the remaining borrowings of $19,119,000 under the bank
loan agreements of Lori and its operating subsidiaries were reclassified as
currently payable at December 31, 1993.
Effective August 18, 1994, Lori and Lori's operating subsidiaries (collectively,
the "Borrowers"), ARTRA and Fill-Mor entered into an agreement with Lori's bank
lender to settle obligations due the bank under terms of the bank loan
agreements of Lori and its operating subsidiaries. On December 13, 1994, Lori
and Lori's operating subsidiaries were notified by the bank of certain defaults
under the Settlement Agreement, including but not limited to a $1,115,000
payment due the bank on December 8, 1994. Prior to receipt of the default notice
and thereafter, ARTRA and Lori entered into negotiations with the bank to amend
or restructure the terms of the August 18, 1994 Settlement Agreement.
Effective December 23, 1994, the Borrowers, ARTRA and Fill-Mor and the bank
entered into an amendment to the August 18, 1994 Settlement Agreement ("Amended
Settlement Agreement"). Per terms of the Amended Settlement Agreement,
borrowings due the bank under the loan agreements of the Borrowers and Fill-Mor
(approximately $25,000,000 as of December 23, 1994), plus amounts due the bank
for accrued interest and fees were reduced to $10,500,000 (of which $7,855,000
pertained to Lori's obligation to the bank and $2,645,000 pertained to
Fill-Mor's obligation to the bank). Upon the satisfaction of certain conditions
of the Amended Settlement Agreement in 1995, as discussed below, the balance of
this indebtedness was discharged.
In conjunction with the Amended Settlement Agreement, ARTRA entered into a
$1,850,000 short-term loan agreement with a non-affiliated corporation, the
proceeds of which were used to fund amounts due the bank as discussed below. The
loan, due June 30, 1995, with interest payable monthly at 10%, is collateralized
by 100,000 shares of Lori common stock. These 100,000 Lori common shares were
originally issued to the bank under terms of the August 18, 1994 Settlement
Agreement.
In exchange for the reduction of amounts due the bank, and as additional
consideration for the $1,850,000 short-term loan agreement from the
non-affiliated corporation, the Borrowers, ARTRA and Fill-Mor agreed to pay the
following consideration, which supersedes the consideration agreed to under
terms of the August 18, 1994 Settlement Agreement:
A) A cash payment to the bank of $1,900,000, which was
made prior to consummation of the Amended Settlement
Agreement.
B) 400,000 shares of ARTRA common stock. These 400,000 ARTRA
common shares were originally issued to the bank under terms
of the August 18, 1994 Settlement Agreement. The bank retained
100,000 shares and the non-affiliated corporation received
300,000 shares as additional consideration for its short-term
loan.
C) Assignment to the bank of all of the assets of Lori's
New Dimensions subsidiary.
D) A $750,000 note payable to the bank due March 31, 1995.
Among other things, ARTRA has agreed to register the ARTRA shares issued in
order to enable the ARTRA shares issued to be freely tradeable without
restriction on or before July 31, 1995. Additionally, ARTRA advanced $400,000 to
Lori to be used to fund the installment payment due December 31, 1994 for
unsecured claims arising from the May 3, 1993 reorganization of New Dimensions.
The August 18, 1994 settlement agreement required ARTRA to contribute cash of
$1,500,000 to Lori for working capital. ARTRA's cash contribution was funded by
private placements of ARTRA common stock. An officer/director of Lori
participated in the private placement of ARTRA common stock purchasing $150,000
of ARTRA common stock (37,500 shares), subject to the same terms and conditions
as the other outside investors.
Lori recognized an extraordinary gain of $8,965,000 ($2.81 per share) in
December 1994 as a result of the reduction of amounts due the bank under the
loan agreements of the Borrowers and Fill-Mor to $10,500,000 (of which
$7,855,000 pertained to Lori's obligation to the bank and $2,645,000 pertained
to Fill-Mor's obligation to the bank) as of December 23, 1994. Lori also
recorded a charge against operations of $10,800,000 in December 1994 to
write-off New Dimensions' remaining goodwill.
On March 31, 1995 the $750,000 note due the bank was paid and the remaining
indebtedness of Lori and Fill-Mor was discharged, resulting in an additional
extraordinary gain to Lori of approximately $7,000,000 in 1995. Among other
things, ARTRA has agreed to register the ARTRA shares issued in order to enable
the ARTRA shares to be freely tradeable without restriction on or before July
31, 1995. In the event the shares are not registered by July 31, 1995, the bank
has the right to put the 100,000 ARTRA shares back to ARTRA for an exercise
price of $500,000. The $750,000 note payment was funded with the proceeds of a
$850,000 short-term loan from a director of Lori. The loan provides for interest
at the prime rate plus 1% and, as additional consideration, the director
received 150,000 Lori common shares valued at $337,500 ($2.25 per share) based
upon Lori's closing market value on March 30, 1995.
In recent years, New Dimensions has experienced a pattern of operating losses
primarily due to a shift in the buying patterns of its major customers (i.e.
certain mass merchandisers) from participation in the New Dimension's service
program to purchases of costume jewelry and accessories directly from
manufacturers. In the fourth quarter of 1994, New Dimensions' largest customer,
Wal-Mart, ended its participation in New Dimension's service program.
Accordingly, the assignment to the Company's bank lender of all of the assets of
the New Dimensions subsidiary in accordance with terms of the Amended Settlement
Agreement, resulted in New Dimensions ceasing its operations effective December
27, 1994. New Dimensions cessation of operations is not expected to have a
material adverse effect on the financial condition, liquidity or results of
operations of the Company in the immediate future.
Lori anticipates that the successful completion of the restructuring of its
debt, plus additional working capital borrowings either from ARTRA or external
sources will permit it to fund its capital requirements in 1995. In addition,
the Company continues to restructure its operations and is attempting to
increase sales such that operating results will improve. If Lori is unable to
obtain working capital borrowings to fund its operations in 1995 and improve the
results of operations, it may be forced to liquidate its assets or file for
protection under the Bankruptcy Code.
Lori's 1995 business plan is based on the continued dependence upon certain
major customers.
The common stock and virtually all the assets of the Company and its operating
subsidiaries have been pledged as collateral for the Company's and its operating
subsidiaries' bank borrowings. Under its debt agreements the Company is limited
in the amounts it can withdraw from its operating subsidiaries. At December 31,
1994 substantially all cash and equivalents on the Company's consolidated
balance sheet were restricted to use by and for the Company's operating
subsidiaries. Due to the limited ability of the Company to receive funds from
its operating subsidiaries, effective July 1, 1989, ARTRA placed a moratorium on
the accrual of interest and the declaration and accrual of dividends on its Lori
note and preferred stock, respectively. The moratorium has been extended
indefinitely. Additionally, Lori has not paid dividends on its common stock in
recent years and no dividend payments are anticipated in the immediate future.
During 1994, ARTRA made net advances to Lori of $2,531,000. The advances
consisted of a $1,850,000 short-term note with interest at 10%, the proceeds of
which were used to fund the $1,900,000 cash payment to the bank in conjunction
with the Amended Settlement Agreement with Lori's bank lender, and certain
non-interest bearing advances used to fund Lori working capital requirements.
Effective December 29, 1994 ARTRA exchanged $2,242,000 of its notes and advances
for additional Lori Series C preferred stock. Additionally, the August 18, 1994
Settlement Agreement required ARTRA to contribute cash of $1,500,000 and ARTRA
common stock with a fair market value of $2,500,000 to Lori's capital account.
In February, 1993, ARTRA transferred all of its notes (with a principal value of
$15,990,000) to Lori's capital account.
Rosecraft, Lawrence and Lori's corporate entity have no material commitments for
capital expenditures.
Results of Operations
1994 vs 1993
Net sales of approximately $34,400,000 for the year ended December 31, 1994 were
approximately $11,600,000, or 25.2%, lower than net sales for the year ended
December 31, 1993. The 1994 results of operations include New Dimensions net
sales of approximately $13,700,000 and operating loss of approximately
$2,100,000 before a write-off of goodwill. The 1994 sales decrease is
principally attributable to the combination of a soft retail environment, a
planned reduction of in-store inventory levels by certain major customers in
1994 and a shift in the buying patterns of certain mass merchandisers from
participation in the Company's service program to purchases of costume jewelry
and accessories directly from manufacturers.
The Company's cost of sales of approximately $21,100,000 for the year ended
December 31, 1994 decreased approximately $3,700,000 as compared to the year
ended December 31, 1993. Cost of sales in the year ended December 31, 1994 was
61.2% of net sales compared to a cost of sales percentage of 58.3% for the year
ended December 31, 1993. The 1994 cost of sales decrease is principally
attributable to the decrease in sales volume as noted above. The cost of sales
percentage increase of 3.9% is primarily attributable to a soft retail
environment that resulted in depressed operating margins.
Selling, general and administrative expenses in the year ended December 31, 1994
decreased approximately $1,500,000 as compared to the year ended December 31,
1993. Selling, general and administrative expenses were 50.2% of net sales in
the year ended December 31, 1994 as compared to 40.8% of net sales in the year
ended December 31, 1993. The decrease in selling, general and administrative
expenses is attributable to the decrease in sales volume. The increase in
selling, general and administrative expenses as a percentage of net sales is
attributable to the semi-fixed nature of these expenses.
As partial consideration per the terms of its debt settlement agreement with its
bank lender the Company assigned the bank all of the assets of it's New
Dimensions subsidiary. Accordingly, the Company recorded a charge against
operations of $10,800,000 in December 1994 representing a write-off of New
Dimensions' remaining goodwill.
Operating loss in the year ended December 31, 1994 was approximately $16,200,000
as compared to operating earnings of approximately $900,000 in the year ended
December 31, 1993. The 1994 operating loss is principally attributable to the
write-off of New Dimensions goodwill, plus the combination of a soft retail
environment, a planned reduction of in-store inventory levels by certain major
customers in 1994 and a shift in the buying patterns of certain mass
merchandisers from participation in the Company's service program to purchases
of costume jewelry and accessories directly from manufacturers.
Interest expense in the year ended December 31, 1994 increased approximately
$400,000 as compared to the year ended December 31, 1993. The 1994 increase is
principally due the effect of an increase in the prime rate.
Due to the Company's tax loss carryforwards and the uncertainty of future
taxable income, no income tax benefit was recognized in connection with the
Company's 1994 and 1993 pre-tax losses from continuing operations. The 1994 and
1993 extraordinary credits represent net gains from discharge of indebtedness.
No income tax expense is reflected in the Company's financial statements
resulting from the extraordinary credits due to the utilization of the Company's
tax loss carryforwards.
1993 vs 1992
Net sales of approximately $46,100,000 for the year ended December 31, 1993 were
approximately $29,400,000, or 38.9%, lower than net sales for the year ended
December 31, 1992. The 1993 sales decrease is primarily attributable to the New
Dimensions reorganization which resulted in a reduction of New Dimensions'
operating focus to certain product lines which management believes will permit
New Dimensions to continue its ongoing operations. In early 1993, Wal-Mart ended
its participation in New Dimensions' "Contempra" service program, although
Wal-Mart continued to be a significant customer for New Dimensions' "Sarah
Coventry" line of ladies costume jewelry and Trilko key chains through New
Dimensions' service program. Due primarily to the discontinuance of the
"Contempra" service program with Wal-Mart and other New Dimensions customers, in
conjunction with its Chapter 11 reorganization, New Dimensions terminated its
in-house service staff early in 1993 and contracted with the Lori's Lawrence
subsidiary to conduct its remaining service program. Additionally, in June, 1992
Rosecraft closed its Ladies line of fashion costume jewelry in order to
concentrate on its higher margin Children's line of fashion costume jewelry and
accessories.
The Company's cost of sales of approximately $24,800,000 for the year ended
December 31, 1993 decreased approximately $29,500,000 as compared to the year
ended December 31, 1992. Cost of sales in the year ended December 31, 1993 was
53.8% of net sales compared to a cost of sales percentage of 72.0% for the year
ended December 31, 1992. The 1993 cost of sales decrease is principally
attributable to the decrease in sales volume as noted above. The cost of sales
percentage decrease of approximately 18.2% is primarily attributable to
management's efforts to concentrate on higher margin lines of jewelry and
accessories in 1993, and to costs incurred in 1992 related to discontinued lines
of business.
Selling, general and administrative expenses in the year ended December 31, 1993
decreased approximately $19,300,000 as compared to the year ended December 31,
1992. Selling, general and administrative expenses were 40.8% of net sales in
the year ended December 31, 1993 as compared to 50.4% of net sales in the year
ended December 31, 1992. The decrease in selling, general and administrative
expenses is primarily attributable to a combination of the 1993 decrease in
sales volume and to management's aggressive cutting of fixed overhead costs that
began in the second half of 1992.
Depreciation and amortization expense decreased approximately $600,000 in the
year ended December 31, 1993 as compared to the year ended December 31, 1992.
The decrease is primarily attributable to the New Dimensions reorganization.
As of December 31, 1992, the Company's New Dimensions subsidiary recorded a
charge to operations of $8,664,000 representing an impairment of goodwill at
December 31, 1992.
During 1992 the Company's subsidiaries incurred restructuring costs aggregating
$1,575,000. In June, 1992, Lori's Rosecraft subsidiary closed its Ladies line of
fashion costume jewelry in order to concentrate on its higher margin Children's
line of fashion costume jewelry and accessories. The closing of Rosecraft's
Ladies line resulted in a charge to operations of $900,000 representing
principally inventory liquidation costs, lease termination costs and employee
severance costs. In the fourth quarter of 1992, Lori's New Dimensions subsidiary
closed certain of its "Whims" retail outlet stores and made the decision to
close additional "Whims" retail outlet stores and its New York City sales and
executive office in 1993. The closing of the "Whims" retail outlet stores and
the New York City sales and executive office resulted in a charge to operations
of $675,000 representing principally inventory liquidation costs, lease
termination costs and employee severance costs.
Operating earnings in the year ended December 30, 1993 were approximately
$900,000 as compared to an operating loss of approximately $29,200,000 in the
year ended December 31, 1992. The 1993 operating earnings are principally
attributable to the New Dimensions reorganization which resulted in a reduction
of New Dimensions' operating focus to certain product lines which management
believed would be better received in the market than discontinued lines and to
costs incurred in 1992 related to discontinued lines of business.
Due to the Company's tax loss carryforwards and the uncertainty of future
taxable income, no income tax benefit was recognized in connection with the
Company's 1993 pre-tax loss from continuing operations. The 1993 extraordinary
credit represents a gain from a net discharge of indebtedness at Lori's New
Dimensions subsidiary. No income tax expense is reflected in the Company's
financial statements resulting from the extraordinary credit due to the
utilization of Lori's tax loss carryforwards. Due to the Company's tax loss
carryforwards, no income tax benefit was recognized in connection with the
Company's 1992 pre-tax loss.
Seasonality
Retail sales of the Company's products are higher during the Spring (February
through April) and Christmas (September through November) seasons. As a result
of these seasonal factors, the Company's inventories of finished goods reach
peak levels just prior to these periods and are generally lower during the
balance of the year.
Impact of Inflation and Changing Prices
Inflation has become a less significant factor in our economy; however, to the
extent permitted by competition, the Company generally passes increased costs to
its customers by increasing sales prices over time.
Item 8. Financial Statements and Supplementary Data.
Financial Statements and Schedules as listed on Page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
The information required by Part III will be filed as an amendment to Form 10-K.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) 1. Financial Statements as listed on Page F-1.
2. Financial Statement Schedules as listed on Page F-1.
3. Exhibits as listed on Page E-1.
(b) Reports on Form 8-K.
On January 3, 1995 the Company filed Form 8-K to report the
December 13, 1994 notification of certain defaults by the
Company and its operating subsidiaries under the August Debt
Settlement Agreement with a bank. Effective December 23,
1994, the parties entered into an Amended Settlement
Agreement to discharge certain indebtedness due the bank.
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
THE LORI CORPORATION
By: JOHN HARVEY
---------------------
John Harvey
Chairman and Director
Dated: April 12, 1995 Principal Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons, on behalf of the
registrant, in the capacities and on the dates indicated.
JOHN HARVEY Chairman and Director April 12, 1995
-----------------
John Harvey Principal Executive Officer
AUSTIN A. IODICE Vice Chairman, President April 12, 1995
-----------------
Austin A. Iodice and Director
JAMES D. DOERING Vice President and April 12, 1995
-----------------
James D. Doering Chief Financial Officer
PETER R. HARVEY Director April 12, 1995
-----------------
Peter R. Harvey
ALEXANDER VERDE Director April 12, 1995
-----------------
Alexander Verde
LAWRENCE D. LEVIN Controller April 12, 1995
-----------------
Lawrence D. Levin
INDEX TO FINANCIAL STATEMENTS
THE LORI CORPORATION AND SUBSIDIARIES
Page
----
Report of Independent Accountants ....................................... F-2
Financial Statements:
Consolidated Balance Sheets as December 31, 1994 and 1993 ........... F-3
Consolidated Statements of Operations
for the years ended December 31, 1994, 1993 and 1992 ........... F-5
Consolidated Statements of Changes in Shareholders' Equity (Deficit)
for the years ended December 31, 1994, 1993 and 1992 ........... F-6
Consolidated Statements of Cash Flows
for the years ended December 31, 1994, 1993 and 1992 ........... F-7
Notes to Consolidated Financial Statements .......................... F-8
Schedules:
I.Condensed Financial Information of Registrant ............... F-22
II.Valuation and Qualifying Accounts ........................... F-26
Schedules other than those listed are omitted as they are not applicable or
required or equivalent information has been included in the financial statements
or notes thereto.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors
The Lori Corporation
We have audited the consolidated financial statements and the financial
statement schedules of The Lori Corporation and Subsidiaries as listed in the
index on page F-1 of this Form 10-K. These financial statements and financial
statement schedules are the responsibility of The Lori Corporation's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of The
Lori Corporation and Subsidiaries as of December 31, 1994 and 1993, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1994 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 to the
consolidated financial statements, the Company has suffered recurring losses
from operations, has a deficiency of working capital and does not have financing
facilities in place for the coming year. These conditions raise substantial
doubt about the Company's ability to continue as a going concern. Management's'
plans in regard to these matters are also described in Note 1. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
COOPERS & LYBRAND L.L.P.
Chicago, Illinois
April 12, 1995
THE LORI CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
December 31, December 31,
1994 1993
------- -------
ASSETS
Current assets:
Cash and equivalents ...................................................................... $ 783 $ 540
Restricted cash and equivalents ........................................................... 550
Receivables, less allowance for doubtful accounts
and markdowns of $1,338 in 1994 and $2,931 in 1993 ..................................... 814 4,097
Inventories ............................................................................... 2,105 5,938
Other ..................................................................................... 260 461
------- -------
4,512 11,036
------- -------
Property, plant and equipment:
Land ...................................................................................... 350
Buildings and improvements ................................................................ 187 3,365
Machinery and equipment ................................................................... 1,376 4,754
------- -------
1,563 8,469
Less accumulated depreciation and amortization ............................................... 1,119 5,077
------- -------
444 3,392
------- -------
Other assets:
Excess of cost over net assets acquired, net of
accumulated amortization of $3,415 in 1994 and $17,790 in 1993 ......................... 13,140 24,957
Other ..................................................................................... 608 789
------- -------
13,748 25,746
------- -------
$18,704 $40,174
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
THE LORI CORPORATION
CONSOLIDATED BALANCE SHEET
(In thousands)
December 31, December 31,
1994 1993
------- -------
LIABILITIES
Current liabilities:
Current maturities of long-term debt ........................................................ $ 750 $ 2,833
Long-term debt reclassified as current ...................................................... 19,119
Notes payable ............................................................................... 138
Accounts payable ............................................................................ 3,414 3,334
Accrued expenses ............................................................................ 905 3,337
Due to ARTRA ................................................................................ 289
------- -------
5,358 28,761
------- -------
Debt subsequently discharged ................................................................... 7,105
-------
Other noncurrent liabilities ................................................................... 963 2,853
------- -------
Commitments and contingencies
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, $.01 value; authorized 1,000 shares, all series; Series C,
issued 10 shares in 1994 and 7 shares in 1993,
including accrued dividends ................................................................. 19,515 17,273
Common stock, $.01 par value; authorzed 10,000 shares;
issued 3,265 shares in 1994 and 3,163 shares in 1993 ........................................ 32 31
Less restricted common stock (100 shares), at cost ............................................. (700)
Additional paid-in capital ..................................................................... 65,392 60,680
Accumulated deficit ............................................................................ (78,961) (69,424)
------- -------
5,278 8,560
------- -------
$18,704 $40,174
======= =======
The accompanying notes are an integral part of the consolidated financial
statements.
THE LORI CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
for the years ended December 31, 1994, 1993 and 1992
(In thousands, except per share data)
1994 1993 1992
-------- -------- --------
Net sales .................................................................... $ 34,431 $ 46,054 $ 75,484
Costs and expenses:
Cost of goods sold, exclusive of depreciation and amortization ............ 21,087 24,795 54,334
Selling, general and administrative ....................................... 17,281 18,811 38,051
Depreciation and amortization ............................................. 1,456 1,521 2,102
Impairment of goodwill ................................................... 10,800 8,664
Restructuring costs ....................................................... 1,575
-------- -------- --------
50,624 45,127 104,726
-------- -------- --------
Operating earnings (loss) .................................................... (16,193) 927 (29,242)
-------- -------- --------
Other income (expense):
Interest expense .......................................................... (2,302) (1,936) (4,590)
Other income, net ......................................................... 3 137 (101)
Reorganization and debt renegotiation costs ............................... (767) (700)
-------- -------- --------
(2,299) (2,566) (5,391)
-------- -------- --------
Loss before income taxes and extraordinary credits ........................... (18,492) (1,639) (34,633)
(Provision) credit for income taxes .......................................... (10) (33) 14
-------- -------- --------
Loss before extraordinary credits ............................................ (18,502) (1,672) (34,619)
Extraordinary credits, net discharge of indebtedness ......................... 8,965 22,057
-------- -------- --------
Net earnings (loss) .......................................................... $ (9,537) $ 20,385 $ (34,619)
======== ======== ========
Earnings (loss) per share:
Loss before extraordinary credits ......................................... $ (5.80) $ (.45) $ (10.99)
Extraordinary credits ..................................................... 2.81 6.03
----- ----- -----
Net earnings (loss) ........................................... $ (2.99) $ 5.58 $ (10.99)
===== ===== =====
Weighted average number of shares of common stock and
common stock equivalents outstanding ...................................... 3,195 3,656 3,149
====== ====== ======
The accompanying notes are an integral part of the consolidated financial
statements.
THE LORI CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT) for
the years ended December 31, 1994, 1993 and 1992
(In thousands of dollars, except share data)
Total
Restricted Additional Shareholders'
Preferred Stock Common Stock Common Stock Paid-in Accumulated Equity
Shares Dollars Shares Dollars Shares Dollars Capital (Deficit) (Deficit)
-------- ------- --------- ------- ------- ------ ------- ------- -------
Balance at December 31, 1991 . 7,459 $ 17,273 3,148,632 $ 31 $ 44,630 ($55,190) $ 6,744
Net loss .................... (34,619) (34,619)
Fractional shares purchased . (106) (4) (4)
------- ------- -------- ------- ------- ------- -------
Balance at December 31, 1992 . 7,459 17,273 3,148,526 31 44,626 (89,809) (27,879)
Net earnings ................. 20,385 20,385
Transfer of notes payable
to ARTRA to Lori's
capital account ........... 15,990 15,990
Exercise of stock
options and warrants ...... 9,250 38 38
to pay liabilities ......... 5,532 32 32
Fractional shares purchased . (536) (6) (6)
Balance at December 31, 1993 . 7,459 17,273 3 ,162,772 31 60,680 (69,424) 8,560
Net loss .................... (9,537) (9,537)
ARTRA capital contributions . 4,000 4,000
Lori preferred stock issued in
exchange for ARTRA
notes and advances ........ 2,242 2,242 2,242
Common stock issued
under terms of
debt settlement agreement . 100,000 1 699 700
Restricted common stock ..... 100,000 ($700) (700)
Exercise of stock
options and warrants ..... 2,500 13 13
Fractional shares purchased . (253)
------- ------- -------- ------- ------- ----- ------- ------- -------
Balance at December 31, 1994 . 9,701 $ 19,515 3,265,019 $ 32 100,000 ($700) $ 65,392 ($78,961) $ 5,278
===== ======== ========= ===== ======= ===== ======== ======== =======
The accompanying notes are an integral part of the consolidated financial
statements.
THE LORI CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
for the years ended December 31, 1994, 1993 and 1992
(In thousands)
1994 1993 1992
------- ------- -------
Cash flows from operating activities:
Net earnings (loss) ................................................................ $ (9,537) $ 20,385 $(34,619)
Adjustments to reconcile net earnings (loss)
to cash flows from operating activities:
Extraordinary gain from net discharge of indebtedness ........................ (8,965) (22,057)
Depreciation of property, plant and equipment ................................ 438 503 972
Amortization of excess of cost over net assets acquired ...................... 1,018 1,018 1,130
Impairment of goodwill ....................................................... 10,800 8,664
Amortization of other assets ................................................. 648 217 881
Loss on sale of property, plant and equipment ................................ 365
Inventory valuation reserve .................................................. 4,900
Changes in assets and liabilities:
(Increase) decrease in receivables ............................................ 2,117 (1,503) 4,644
Decrease in inventories ....................................................... 1,098 1,453 2,052
Decrease in other current and noncurrent assets ............................... 153 574 871
Increase (decrease) in payables and accrued expenses .......................... (513) (616) 2,071
Decrease in other current and noncurrent liabilities .......................... (468) (521) (38)
------ ------ -----
Net cash flows used by operating activities ........................................... (3,211) (547) (8,107)
------ ------ -----
Cash flows from investing activities:
Additions to property, plant and equipment ......................................... (32) (108) (619)
Retail fixtures .................................................................... (665) (951)
Restricted cash .................................................................... (550)
------ ------ -----
Net cash flows used by investing activities ........................................... (1,247) (1,059) (619)
------ ------ -----
Cash flows from financing activities:
Net increase (decrease) in short-term debt ......................................... (138) (12) 9,300
Proceeds from long-term borrowings ................................................. 1,241 4,863 1,318
Reduction of long-term debt ........................................................ (444) (3,587) (1,303)
ARTRA capital contribution ......................................................... 1,500
Notes and advances due to ARTRA .................................................... 2,531
Other .............................................................................. 11 49 (4)
------ ------ -----
Net cash flows from financing activities .............................................. 4,701 1,313 9,311
------ ------ -----
Increase (decrease) in cash and cash equivalents ...................................... 243 (293) 585
Cash and equivalents, beginning of year ............................................... 540 833 248
------ ------ -----
Cash and equivalents, end of year ..................................................... $ 783 $ 540 $ 833
====== ====== =====
Supplemental cash flow information:
Cash paid during the year for:
Interest ....................................................................... $ 435 $ 1,421 $ 1,704
Income taxes paid, net ......................................................... 24 12 21
Supplemental schedule of noncash investing and financing activities:
ARTRA common stock issued to Lori's bank lender
under terms of the debt settlement agreement ................................... 2,500
Transfer New Dimensions assets, net of cash of $674,
to Lori's bank lender under terms of the debt settlement agreement ............. 6,475
Lori preferred stock issued in exchange for ARTRA notes and advances .............. 2,242
Notes payable to ARTRA transferred to Lori's capital account ...................... 15,990
Debt refinanced ................................................................... 6,105
Reclassification of liabilities subject to compromise ............................. 41,500
The accompanying notes are an integral part of the consolidated financial
statements.
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
ARTRA GROUP Incorporated ("ARTRA"), a public company whose shares are traded on
the New York Stock Exchange, owns, through a wholly-owned subsidiary,
approximately 66.4% of The Lori Corporation's ("Lori" or the "Company")
outstanding common stock and all of Lori's outstanding preferred stock. At
December 31, 1994, ARTRA's interest in Lori common stock and Lori preferred
stock was pledged as collateral for a bank loan to a wholly-owned ARTRA
subsidiary that is the parent of Lori.
The accompanying consolidated financial statements are presented on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred losses
from continuing operations of $18,502,000 in 1994, $1,672,000 in 1993 and
$34,619,000 in 1992, respectively. The Company has a deficiency of working
capital of $846,000 at December 31, 1994 and no financing in place for the
coming year. No assurances can be given that either the business and operations
of Lori or the market conditions in the fashion jewelry industry generally will
improve in the immediate future. These conditions raise substantial doubt about
the Company's ability to continue as a going concern. The financial statements
do not include any adjustments that might result from the outcome of this
uncertainty.
Lori anticipates that the successful completion of the restructuring of its debt
(see Note 4), plus additional working capital borrowings either from ARTRA or
external sources will permit it to fund its capital requirements in 1995. In
addition, the Company continues to restructure its operations and is attempting
to increase sales such that operating results will improve. If Lori is unable to
obtain working capital borrowings to fund its operations in 1995 and improve the
results of operations, it may be forced to liquidate its assets or file for
protection under the Bankruptcy Code.
Lori's 1995 business plan is based on the continued dependence upon certain
major customers.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries, all of which are wholly-owned. Intercompany accounts and
transactions are eliminated.
B. Cash Equivalents
Short-term investments with an initial maturity of less than ninety days are
considered cash equivalents.
As required under terms of it debt settlement agreement (see Note 4), at
December 31, 1994, Lori maintained a deposit in trust of $550,000 to fund the
installment payment due December 31, 1994 for unsecured claims arising from the
May 3, 1993 reorganization of New Dimensions. The installment payment was made
in January, 1995.
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
C. Inventories
Inventories are stated at the lower of cost or market, with cost determined by
the first-in, first-out (FIFO) method.
D. Property, Plant and Equipment
Property, plant and equipment are stated at cost. Expenditures for maintenance
and repairs are charged to operations as incurred and expenditures for major
renovations are capitalized. Depreciation is computed on the basis of estimated
useful lives principally by the straight line method for financial statement
purposes and principally by accelerated methods for tax purposes. Leasehold
improvements are amortized over the shorter of the estimated useful life of the
asset or the period covered by the lease.
The costs of property retired or otherwise disposed of are applied against the
related accumulated depreciation to the extent thereof, and any profit or loss
on the disposition is recognized in earnings.
E. Intangible Assets and Other Assets
The net assets of a purchased business are recorded at their fair value at the
date of acquisition. The excess of purchase price over the fair value of net
assets acquired (goodwill) is reflected as intangible assets and amortized on a
straight-line basis principally over a period of 40 years.
The Company assesses the recoverability of this intangible asset by determining
whether the amortization of the goodwill balance (for each operating company)
over its remaining life can be recovered through forecasted future operations.
The charge to operations of $10,800,000 represents the write-off of all of New
Dimensions' goodwill.
At December 31, 1992, the Company recognized an impairment of goodwill at the
New Dimensions subsidiary due to the significant operating loss incurred in 1992
which resulted in the Chapter 11 reorganization of New Dimensions as discussed
in Note 5. The Company adjusted the carrying value of New Dimensions' goodwill
to its estimated value based upon New Dimensions' expected level of future
operations and reduced the amortization period of the remaining New Dimensions
goodwill to a twenty year period beginning January 1, 1993.
Retail displays, classified in other assets, are amortized on a straight-line
basis over their estimated lives.
F. Revenue Recognition
Sales to customers are recorded at the time of shipment net of estimated
markdowns and merchandise credits.
G. Income Taxes
Income taxes are accounted for as prescribed in Statement of Financial
Accounting Standards No. 109 - Accounting for Income Taxes. Under the asset and
liability method of Statement No. 109, deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between
the financial statement carrying amounts of existing assets and liabilities, and
their respective tax bases. Deferred tax assets and liabilities are measured
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
using enacted tax rates expected to apply to taxable income in the years those
temporary differences are expected to recovered or settled. Prior to January 1,
1991, the Company followed Statement of Financial Accounting Standards No. 96 -
Accounting for Income Taxes. The adoption of Statement No. 109 did not have a
material impact upon the Company's financial statements.
3. INVENTORIES
Inventories at December 31, (in thousands)consist of:
1994 1993
------ ------
Raw materials and supplies ....................... $ 115 $ 278
Work in process .................................. 19 16
Finished goods ................................... 1,971 5,644
------ ------
$2,105 $5,938
====== ======
4. DEBT RESTRUCTURING
Effective August 18, 1994, Lori and Lori's operating subsidiaries (collectively,
the "Borrowers"), ARTRA and Fill-Mor (a wholly-owned subsidiary of ARTRA)
entered into an agreement with Lori's bank lender to settle obligations due the
bank under terms of the bank loan agreements of Lori and its operating
subsidiaries. On December 13, 1994, Lori and Lori's operating subsidiaries were
notified by the bank of certain defaults under the Settlement Agreement,
including but not limited to a $1,115,000 payment due the bank on December 8,
1994. Prior to receipt of the default notice and thereafter, ARTRA and Lori
entered into negotiations with the bank to amend or restructure the terms of the
August 18, 1994 Settlement Agreement.
Effective December 23, 1994, the Borrowers, ARTRA and Fill-Mor and the bank
entered into an amendment to the August 18, 1994 Settlement Agreement ("Amended
Settlement Agreement"). Per terms of the Amended Settlement Agreement,
borrowings due the bank under the loan agreements of the Borrowers and Fill-Mor
(approximately $25,000,000 as of December 23, 1994), plus amounts due the bank
for accrued interest and fees were reduced to $10,500,000 (of which $7,855,000
pertained to Lori's obligation to the bank and $2,645,000 pertained to
Fill-Mor's obligation to the bank). Upon the satisfaction of certain conditions
of the Amended Settlement Agreement in 1995, as discussed below, the bank lender
has agreed to discharge the balance of this indebtedness.
In conjunction with the Amended Settlement Agreement, ARTRA entered into a
$1,850,000 short-term loan agreement with a non-affiliated corporation, the
proceeds of which were used to fund amounts due the bank as discussed below. The
loan, due June 30, 1995, with interest payable monthly at 10%, is collateralized
by 100,000 shares of Lori common stock. These 100,000 Lori common shares,
originally issued to the bank under terms of the August 18, 1994 Settlement
Agreement, are carried in the Company's Consolidated Balance Sheet as restricted
common stock. Upon payment of the loan, these shares will revert to treasury
stock.
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
In exchange for the reduction of amounts due the bank, and as additional
consideration for the $1,850,000 short-term loan agreement from the
non-affiliated corporation, the Borrowers, ARTRA and Fill-Mor agreed to pay the
following consideration, which supersedes the consideration agreed to under
terms of the August 18, 1994 Settlement Agreement:
A) A cash payment to the bank of $1,900,000, which was made
prior to consummation of the Amended Settlement Agreement.
B) 400,000 shares of ARTRA common stock. These 400,000 ARTRA
common shares were originally issued to the bank under terms
of the August 18, 1994 Settlement Agreement. The bank retained
100,000 shares and the non-affiliated corporation received
300,000 shares as additional consideration for its short-term
loan.
C) Assignment to the bank of all of the assets of Lori's New
Dimensions subsidiary.
D) A $750,000 note payable to the bank due March 31, 1995.
Among other things, ARTRA has agreed to register the ARTRA shares issued in
order to enable the ARTRA shares issued to be freely tradeable without
restriction on or before July 31, 1995. Additionally, ARTRA advanced $400,000 to
Lori to be used to fund the installment payment due December 31, 1994 for
unsecured claims arising from the May 3, 1993 reorganization of New Dimensions.
The August 18, 1994 settlement agreement required ARTRA to contribute cash of
$1,500,000 to Lori for working capital. ARTRA's cash contribution was funded by
private placements of ARTRA common stock. An officer/director of Lori
participated in the private placement of ARTRA common stock purchasing $150,000
of ARTRA common stock (37,500 shares), subject to the same terms and conditions
as the other outside investors.
Lori recognized an extraordinary gain of $8,965,000 ($2.81 per share) in
December 1994 as a result of the reduction of amounts due the bank under the
loan agreements of the Borrowers and Fill-Mor to $10,500,000 (of which
$7,855,000 pertained to Lori's obligation to the bank and $2,645,000 pertained
to Fill-Mor's obligation to the bank) as of December 23, 1994 calculated (in
thousands) as follows:
Amounts due the bank under loan agreements
of Lori and its operating subsidiaries $ 22,749
Less amounts due the bank (7,855)
------
Bank debt discharged 14,894
Accrued interest and fees discharged 3,635
Other liabilities discharged 1,985
Less consideration to the bank per terms of the
amended settlement agreement
Cash (1,900)
ARTRA common stock (2,500)
New Dimensions assets assigned to the bank (7,149)
------
Net extraordinary gain $ 8,965
======
Lori also recorded a charge against operations in December 1994 to
write-off New Dimensions' goodwill, which had a book value of $10,800,000.
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
On March 31, 1995 the $750,000 note due the bank was paid and the remaining
indebtedness of Lori and Fill-Mor was discharged resulting in an additional
extraordinary gain to Lori of approximately $7,000,000 in 1995. Among other
things, ARTRA has agreed to register the ARTRA shares issued in order to enable
the ARTRA shares issued to be freely tradeable without restriction on or before
July 31, 1995. In the event the shares are not registered by July 31, 1995, the
bank has the right to put the 100,000 ARTRA shares back to ARTRA for an exercise
price of $500,000. The $750,000 note payment was funded with the proceeds of a
$850,000 short-term loan from a director of Lori. The loan provides for interest
at the prime rate plus 1% and, as additional consideration, the director
received 150,000 Lori common shares valued at $337,500 ($2.25 per share) based
upon Lori's closing market value on March 30, 1995.
5. NEW DIMENSIONS 1993 RESTRUCTURING
On February 5, 1993, New Dimensions filed a petition for reorganization under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York (Case No. 93 B 40653). On April 9, 1993, New
Dimensions' reorganization plan was confirmed by an order of the Bankruptcy
Court and on May 3, 1993, the consummation date, New Dimensions emerged from
Chapter 11 bankruptcy court protection, New Dimensions' bank lender provided
long-term working capital financing and Lori guaranteed and assumed certain New
Dimensions' debt obligations.
Lori's ownership of 100% of the common stock of New Dimensions was not affected
by the reorganization of New Dimensions. Accordingly, the principles of fresh
start reporting in accordance with the American Institute of Certified Public
Accountants Statement of Position 90-7, "Financial Reporting by Entities in
Reorganization under the Bankruptcy Code", were not applicable to the New
Dimensions reorganization and no adjustments were made to the carrying value of
New Dimensions assets and liabilities, except to reflect terms of the plan of
reorganization.
The reorganization of New Dimensions resulted in an extraordinary gain of
$22,057,000 ($6.03 per share) from a net discharge of indebtedness calculated
(in thousands) as follows:
Amount due on New Dimensions' 12.75% Senior Notes,
including accrued interest $ 22,822
Trade liabilities and accrued expenses 3,231
------
Total unsecured claims 26,053
Less present value of payments due to unsecured creditors (2,725)
Less present value of bank restructuring loan fee (1,271)
------
Net extraordinary gain $ 22,057
======
Additionally, during 1993 New Dimensions incurred reorganization expenses of
$767,000 related to the bankruptcy process, which are classified as
non-operating expenses.
Due to the reduction of sales volume and resulting operating losses incurred in
1992 that culminated in the February, 1993 Chapter 11 filing, at December 31,
1992 New Dimensions recorded a charge to operations of $8,664,000 ($2.75 per
share) representing the excess of net book value of New Dimensions goodwill over
its estimated recoverable value. Effective January 1, 1993, New Dimensions began
amortizing the remaining goodwill over twenty years.
At December 31, 1992, due to the reduction in sales volume and resulting
operating losses incurred in 1992 that culminated in the February, 1993 Chapter
11 filing, New Dimensions discontinued several lines of fashion costume jewelry
and recorded a charge to operations of $4,900,000 ($1.34 per share) to
write-down the remaining inventory to estimated net realizable value.
THE LORI CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (continued)
6. LONG-TERM DEBT
Long-term debt (in thousands) consists of:
December 31, December 31,
1994 1993
-------- --------
Amounts due Lori's bank lender
under terms of a debt settlement agreement ............................... $ 7,855
New Dimensions bank term loan,
interest at the prime rate plus 1% ....................................... $ 2,500
New Dimensions bank line of credit,
interest at the prime rate plus 1% ....................................... 350
Lori bank term loan,
interest at the prime rate plus 1% ....................................... 11,899
Lawrence bank line of credit,
interest at the prime rate plus 1.75% .................................... 2,099
Rosecraft bank credit agreement,
interest at the prime rate plus 2% ....................................... 5,104
-------- --------
7,855 21,952
Current maturities ........................................................... (750) (2,833)
Debt subsequently discharged ................................................. (7,105) --
Long-term debt reclassified as current ....................................... (19,119)
-------- --------
$ - $ -
======== ========
As discussed in Note 5, on February 5, 1993, New Dimensions filed a petition for
reorganization under Chapter 11 of the Bankruptcy Code. On April 9, 1993, New
Dimensions' reorganization plan was confirmed by an order of the Bankruptcy
Court and on May 3, 1993, the consummation date of the reorganization, New
Dimensions emerged from Chapter 11 bankruptcy court protection. The plan, among
other things, provided for New Dimensions' bank lender to have the right to
receive all of the issued and outstanding shares or assets of New Dimensions
immediately prior to the consummation date. The bank then assigned its rights to
receive the New Dimensions stock to a newly formed Lori subsidiary, which was
then merged into New Dimensions, for consideration of $2,500,000, evidenced by
New Dimensions' term loan note originally scheduled to be payable in varying
quarterly installments, commencing March 31, 1994 through December 31, 1996.
Interest on the term note was at the prime rate plus 1%. Lori assumed and
guaranteed the balance of New Dimensions' pre-bankruptcy loans payable to the
bank, amounting to $12,036,000, including accrued interest, which included the
New Dimensions former line of credit discussed and the New Dimensions former
term loan, net of New Dimensions' direct obligation payable to the bank of
$2,500,000 as noted above. The bank also provided New Dimensions with a
revolving line of credit, including a letter of credit facility. Borrowings,
limited to the lesser of $1,600,000 or a calculated borrowing base. The credit
agreement was scheduled to mature on April 30, 1996.
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - (continued)
On February 5, 1993, Lawrence entered into a credit agreement with Lori's bank
that provided for a revolving line of credit, which included a letter of credit
facility. Borrowings were limited to the lesser of $2,100,000 or a calculated
borrowing base, less outstanding letters of credit. The loan provided for
interest at the prime rate plus 1.75%.
Effective March 31, 1993 Rosecraft entered into agreements with a bank that
provided for a term loan of $2,977,000 and a revolving line of credit, both with
interest at the prime rate plus 2%. The term loan was payable in varying monthly
installments commencing January 31, 1994, with the final monthly installment
originally scheduled to be payable November 30, 1997. The revolving line of
credit provided for borrowings, including a letter of credit facility.
Borrowings were limited to the lesser of $1,000,000 or a calculated borrowing
base, less outstanding letters of credit. In addition to the revolving line of
credit, the bank has provided an overadvance credit commitment of $1,200,000.
The revolving line of credit was scheduled to mature December 31, 1997.
Since December 31, 1993 and during 1994, Lori and its operating subsidiaries
were not in compliance with certain provisions of their respective bank loan
agreements. At December 31, 1993, borrowings under the bank loan agreements of
Lori and its operating subsidiaries totaled $21,952,000. In addition to
scheduled maturitities of $2,833,000 under the bank loan agreements of Lori and
its operating subsidiaries, the remaining borrowings of $19,119,000 under the
bank loan agreements of Lori and its operating subsidiaries were reclassified as
currently payable at December 31, 1993.
As discussed in Note 4, effective August 18, 1994, as amended effective December
23, 1994, ARTRA, Fill-Mor, Lori and Lori's operating subsidiaries entered into
an agreement with Lori's bank lender to settle obligations due the bank under
terms of the bank loan agreements of Lori and its operating subsidiaries and
Fill-Mor. Per terms of the Amended Settlement Agreement, borrowings due the bank
under the loan agreements of Lori and its operating subsidiaries and Lori's
parent, Fill-Mor, plus amounts due the bank for accrued interest and fees were
reduced to $10,500,000 (of which $7,855,000 pertained to Lori's obligation to
the bank and $2,645,000 pertained to Fill-Mor's obligation to the bank).
On March 31, 1995 the $750,000 note due the bank was paid and the remaining
indebtedness of Lori and Fill-Mor was discharged, resulting in an additional
extraordinary gain to Lori of approximately $7,000,000 in 1995 (See Note 4).
At December 31, 1994, the common stock and virtually all the assets of Lori's
subsidiaries were pledged as collateral for Lori's and its subsidiaries'
borrowings. Under its debt agreements the Company is limited in the amounts it
can withdraw from its operating subsidiaries. At December 31, 1994 and 1993
substantially all cash and equivalents on the Company's consolidated balance
sheet are restricted to use by and for the Company's operating subsidiaries.
7. PREFERRED STOCK
The Series C cumulative preferred stock, owned in its entirety by ARTRA, accrues
dividends at the rate of 13% per annum on its liquidation value. Accumulated
dividends were $7,011,000 at December 31, 1993 and 1992. Due to restrictions on
the ability of the Company to receive funds from its operating subsidiaries (see
Note 6), effective July 1, 1989 ARTRA placed a moratorium on the declaration and
accrual of dividends on its Lori preferred stock. The moratorium has been
extended indefinitely.
The Series C preferred stock is redeemable at Lori's option at prices based upon
the principal amount paid plus accumulated dividends and a redemption premium
that increases each year until 1995.
Effective December 29, 1994 ARTRA exchanged $2,242,000 of its notes and advances
for additional Lori Series C preferred stock.
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
8. STOCK OPTIONS AND WARRANTS
Long-Term Stock Investment Plan
On December 16, 1993 Lori's stockholders approved the Long-Term Stock Investment
Plan (the "1993 Plan"), effective January 1, 1993, which authorizes the grant of
options to purchase the Company's common stock to executives, key employees and
non-employee consultants and agents of the Company and its subsidiaries. The
1993 Plan authorizes the awarding of Stock Options, Incentive Stock Options and
Alternative Appreciation Rights. The 1993 Plan reserved 1,500,000 shares of the
Company's common stock for grant on or before December 31, 2002.
As of March 16, 1993, the Company's Board of Directors approved the issuance of
non-qualified options to purchase an aggregate of 555,628 shares of Lori common
stock at an exercise price of $1.125 per share (the closing price of Lori common
stock on March 15, 1993) to a corporation controlled by Austin Iodice, the Vice
Chairman , President and director of the Company and to an agent of the Company.
The options were granted in connection with management agreements entered into
with them pursuant to which they agreed to provide managerial and supervisory
services to the Company and its subsidiaries. Additionally, as of March 16,
1993, the Company's Board of Directors approved the issuance of options to
purchase an aggregate of 368,500 shares of Lori common stock at an exercise
price of $1.125 per share (the closing price of Lori common stock on March 15,
1993) to certain executives, key employees, agents and a director of the
Company. The options were granted under the Company's 1982 Stock Option Plan
(the "1982 Plan"), subject to stockholder approval of the amendment of the 1982
Plan. Subsequent thereto, counsel to the Company advised the Board that the 1982
Plan, which had expired, could not be amended and extended.
Accordingly, on October 12, 1993, the Board of Directors of Lori approved a
proposed Long-Term Stock Investment Plan of the Company (the "Plan" or the
"Option Plan") which authorizes the grant of options to purchase the Company's
common stock to executives, key employees and agents of the Company and its
subsidiaries. In connection with this approval, the Board approved the issuance
under the Plan (subject to the approval and adoption of the Plan by the
stockholders) of options on the same terms as the original March 16, 1993
options which it had previously authorized under the 1982 Plan. The Plan was
approved by the stockholders at the December 16, 1993 annual meeting, effective
as of January 1, 1993.
On August 25, 1993, the Board of Directors approved the grant to various key
employees of Lori and its subsidiaries of options to purchase 154,000 shares in
the aggregate of its common stock at an exercise price of $3.125 per share, the
market price of the stock at the original date of grant. One third of these
options are to vest on each of the first three anniversary dates of the date of
grant to each employee who has remained continuously employed by the Company (or
the subsidiary) through the anniversary date.
Incentive Stock Option Plan
Options to purchase common shares of the Company have been granted to certain
officers and key employees under the 1982 Incentive Stock Option Plan ("the
plan"), which initially reserved 250,000 shares of the Company's common stock.
On December 19, 1990, Lori's stockholders approved an increase in the number of
shares available for grant under the plan to 500,000. The plan expired in 1992.
On June 9, 1988, the Company granted options under the plan to various officers
and key employees of Rosecraft and Lawrence at the then fair market value ($5.00
per share). At December 31, 1993, options to purchase 8,250 shares of the
Company's common stock at $5.00 per share were outstanding. The options expire
June 9, 1998.
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Summary of Options
A summary of stock option transactions for the years ended December 31
is as follows:
1994 1993 1992
------ ------ ------
Outstanding at January 1:
Shares ................................................ 1,097,044 19,416 92,916
$ 1.125 $ 5.00 $ 5.00
Prices ................................................ to to to
$ 12.19 $ 12.19 $ 12.30
Options granted:
Shares ................................................ 1,078,128
$ 1.125
Prices ................................................ to
$ 3.125
Options exercised:
Shares ................................................ (2,500) (500)
Price ................................................. $ 5.00 $ 5.00
Options canceled:
Shares ................................................ (136,666) (73,500)
$ 3.125 $ 5.00
Prices ................................................ to to
$ 12.19 $ 12.30
Outstanding at December 31:
Shares ................................................ 957,878 1,097,044 19,416
======= ========= ======
$ 3.125 $ 1.125 $ 5.00
Prices ................................................ to to to
$ 5.00 $ 12.19 $ 12.19
Options exercisable at December 31 ........................ 939,210 18,916 19,416
======= ====== ======
Options available for future grant
at December 31 ........................................ 1,472,000 1,346,000 432,950
========= ========= =======
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
Warrants
On November 23, 1988, Lori issued warrants to purchase 25,000 of its common
shares, at $4.00 per share, to an investment banker as additional compensation
for certain financial and advisory services. During 1993, the warrant holder
exercised warrants to purchase 8,750 shares of Lori common stock. At December
31, 1994, warrants to purchase 16,250 shares of Lori's common stock at $4.00 per
share remained outstanding.
9. COMMITMENTS AND CONTINGENCIES
The Company and its subsidiaries lease certain office and warehouse facilities
used to conduct its distribution operations. At December 31, 1994, future
minimum lease payments under operating leases that have an initial or remaining
noncancelable term of more than one year are $271,000 in 1995 and $98,000 in
1996.
Rental expense of continuing operations was $927,000, $1,008,000 and
$1,831,000 in 1994, 1993 and 1992,respectively, net of sublease income of
$73,000 in 1992.
In 1993, the Company entered into management agreements, for a three year period
ending March 31, 1996, with a corporation controlled by Austin Iodice, the Vice
Chairman, President and director of the Company, and with an individual to
provide managerial and supervisory services to the Company and its subsidiaries.
The agreements provide for minimum salary levels, as well as for incentive
bonuses which are payable if certain management goals are attained.
Additionally, the agreements called for the issuance of non-qualified options to
purchase an aggregate of 555,628 shares of Lori common stock, pursuant to the
Company's Long-Term Stock Investment Plan, at a price of $1.125 per share as
discussed in Note 8. The aggregate commitment for future salaries at December
31, 1994, excluding bonuses, during the remaining term of all management and
employment agreements is approximately $600,000.
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10. INCOME TAXES
A summary of the provision (credit) for income taxes relating to operations is
as follows (in thousands):
1994 1993 1992
---- ---- ----
Continuing operations:
State ............................ $ 10 $ 33 $(14)
==== ==== ====
The 1994 extraordinary credit represents a net gain from discharge of bank
indebtedness under the loan agreements of Lori and its operating subsidiaries.
The 1993 extraordinary credit represents a gain from a net discharge of
indebtedness at the Company's New Dimensions subsidiary. No income tax expense
is reflected in the Company's financial statements resulting from the
extraordinary credits due to the utilization of tax loss carryforwards.
No income tax benefit was recognized in connection with the Company's 1992
pre-tax loss due to the Company's tax loss carryforwards.
The difference between the statutory Federal income tax rate and the effective
income tax rate is reconciled as follows:
% of Earnings (Loss) Before Income Taxes
----------------------------------------
1994 1993 1992
------ ------ ------
Statutory Federal tax rate Provision (Benefit) ................................. (34.0)% 35.0 % (34.0) %
State and local taxes,
net of Federal benefit ...................................................... .1 .2 (.1)
Current year tax loss not utilized ............................................. 24.4
Amortization of goodwill ....................................................... 3.6 .8 1.1
Impairment of goodwill ......................................................... 38.6 8.5
Previously unrecognized benefit from
utilizing tax loss carryforwards ............................................. (8.2) (35.8)
---- ---- ----
.1 % .2 % (.1) %
==== ==== ====
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
10. INCOME TAXES, Continued
The types of temporary differences between the tax bases of assets and
liabilities and their financial reporting amounts that give rise to the deferred
tax liabilities and deferred tax assets at December 31, 1994 and 1993 and their
approximate tax effects (in thousands) are as follows:
1994 1993
------------------------ ------------------------
Temporary Tax Temporary Tax
Difference Difference Difference Difference
---------- ---------- ---------- ----------
Trade accounts receivable ................................ $ 1,300 $ 500 $ 3,100 $ 1,200
Inventories .............................................. 300 100 5,600 2,200
Accrued other ............................................ 400 200 1,300 500
Net operating loss ....................................... 54,000 21,100 48,000 18,700
------ ------
Total deferred tax asset ....................... 21,900 22,600
------ ------
Machinery and equipment ..................................
(400) (200) (800) (300)
Total deferred tax liability ................... ------ ------
(200) (300)
------ ------
Valuation allowance ............................ (21,700) (22,300)
------ ------
Net deferred tax asset ......................... $ - $ -
====== ======
The Company has recorded a valuation allowance with respect to future tax
benefits and the net operating loss reflected in the deferred tax assets as a
result of the uncertainty of their ultimate realization.
As of December 31, 1994, the Company has Federal income tax operating loss
carryforwards of approximately $54,000,000, expiring as follows (in thousands):
Year
----
1995 ............................................ $13,000
1996 ............................................ 1,000
1997 ............................................ --
1998 ............................................ 3,000
1999 ............................................ 1,000
After 1999 ...................................... 36,000
------
$54,000
======
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
11. EMPLOYEE BENEFIT PLANS
The Company's operating subsidiaries have defined contribution benefit plans
covering eligible employees. Both employee and employer contributions are
generally determined as a percentage of the covered employee's annual
compensation. The total expense relating to continuing operations from all plans
amounted to $8,000, $27,000 and $121,000 in 1994, 1993 and 1992, respectively.
The Company typically does not offer the types of benefit programs that fall
under the guidelines of Statement of Financial Accounting Standards No. 106 -
Employers Accounting for Post Retirement Benefits Other Than Pensions and
Statement of Financial Accounting Standards No. 112 - Employers Accounting for
Post Employment Benefits.
12. RESTRUCTURING COSTS
In the fourth quarter of 1992, the Company's New Dimensions subsidiary closed
certain of its "Whims" retail outlet stores and made the decision to close
additional "Whims" retail outlet stores and its New York City sales and
executive office in 1993. The closing of the "Whims" retail outlet stores and
the New York City sales and executive office resulted in a charge to operations
in the fourth quarter of 1992 of $675,000. The restructuring charge includes
inventory liquidation costs, lease termination costs and employee severance
costs which were expended principally in the first quarter of 1993.
In June, 1992, the Company's Rosecraft subsidiary closed its Ladies line of
fashion costume jewelry in order to concentrate on its higher margin Children's
line of fashion costume jewelry and accessories. The closing of Rosecraft's
Ladies line resulted in a charge to operations of $900,000. The restructuring
charge includes inventory liquidation costs, lease termination costs and
employee severance costs.
13. EARNINGS PER SHARE
Earnings (loss) per share is computed by dividing net earnings (loss), after
deduction for the annual preferred dividend requirement, if applicable, by the
weighted average number of shares of common stock and common stock equivalents
(options and warrants), unless anti-dilutive, outstanding during the year. Fully
diluted earnings per share is not presented since the result is equivalent to
primary earnings per share.
14. RELATED PARTY TRANSACTIONS
During 1994, ARTRA made net advances to Lori of $2,531,000. The advances
consisted of a $1,850,000 short-term note with interest at 10%, the proceeds of
which were used to fund the $1,900,000 cash payment to the bank in conjunction
with the Amended Settlement Agreement with Lori's bank lender, and certain
non-interest bearing advances used to fund Lori working capital requirements.
Effective December 29, 1994 ARTRA exchanged $2,242,000 of its notes and advances
for additional Lori Series C preferred stock. Additionally, the August 18, 1994
Settlement Agreement required ARTRA to contribute cash of $1,500,000 and ARTRA
common stock with a fair market value of $2,500,000 to Lori's capital account.
In February, 1993, ARTRA transferred all of its notes (with a principal value of
$15,990,000) to Lori's capital account.
THE LORI CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
ARTRA provides certain financial, accounting and administrative services for the
Company's corporate entity. Additionally, the Company's corporate entity leases
its administrative office space from ARTRA. During 1994, 1993 and 1992 fees for
these services amounted to $151,000, $115,000 and $307,000, respectively. Prior
to February, 1993, these fees were added to the Company's note to ARTRA. During
1993 and 1992 the Company made net payments (borrowings) on the ARTRA note of
$35,000 and $(44,000), respectively. In February, 1993, ARTRA contributed its
notes to Lori's capital. Subsequent to February, 1993, the Company made net
payments to ARTRA of $139,000 and $115,000 in 1994 and 1993, respectively, for
administrative services.
In January, 1993, the Company's New Dimensions subsidiary made payments totaling
$155,000 to a corporation controlled by Austin Iodice, the Vice Chairman,
President and director of the Company for managerial and supervisory services
performed in 1992.
15. INDUSTRY SEGMENT INFORMATION
The Company operates within the U.S. in one industry segment in which it designs
and distributes popular-priced fashion costume jewelry. The Company's customers
are primarily mass merchandisers and others engaged in the retail industry.
Two major customers, Target Stores and Wal-Mart, accounted for sales of
approximately $12,700,000 and $11,300,000, respectively, in 1994. During the
fourth quarter of 1994, New Dimensions lost its account with Wal-Mart, which
accounted for the principal portion of the Company's sales to Wal-Mart (although
Wal-Mart remains a Rosecraft customer). Two major customers, Wal-Mart and Target
Stores, accounted for sales of approximately $15,500,000 and $14,800,000 in
1993, respectively. In 1992 three major customers, Wal-Mart, Target Stores and
Kmart, accounted for sales of approximately $21,600,000, $11,600,000 and
$9,200,000, respectively.
16. LITIGATION
On February 5, 1993, New Dimensions filed a petition for reorganization under
Chapter 11 of the Bankruptcy Code in the United States Bankruptcy Court for the
Southern District of New York (Case No. 93 B 40653). On April 9, 1993, New
Dimensions' reorganization plan was confirmed by an order of the Bankruptcy
Court and on May 3, 1993, the consummation date, New Dimensions emerged from
Chapter 11 bankruptcy court protection, New Dimensions' bank lender provided
long-term working capital financing and Lori guaranteed and assumed certain New
Dimensions debt obligations. See Note 5 for a discussion of the terms of New
Dimensions' plan of reorganization.
As a result of the time required to complete the restructuring of New Dimensions
and the financial significance to Lori of the restructuring, Lori did not timely
file Form 10-K for the year ended December 31, 1992 and its Form 10-Q for the
quarter ended March 31, 1993 and has also been late in previous annual and
quarterly filings with the Securities and Exchange Commission ("SEC"). As a
result of discussions with the SEC, in June, 1993, Lori readily consented to a
Final Judgment of Permanent Injunction to file with the SEC Form 10-K for the
year ended December 31, 1992 and Form 10-Q for the quarter ended March 31, 1993
by late July and to meet future filing requirement deadlines.
Lori and its subsidiaries are parties in various business related litigation
which, in the opinion of management, will not have a material adverse effect on
the Company's financial position and results of operations.
THE LORI CORPORATION AND SUBSIDIARIES
SCHEDULE I. CONDENSED FINANCIAL INFORMATION OF REGISTRANT
THE LORI CORPORATION
BALANCE SHEETS
December 31, 1994 and 1993
(Registrant Only In Thousands)
1994 1993
------ ------
ASSETS
Current assets:
Cash .......................................................................... $ 15
Restricted cash ............................................................... 550
Other current assets .......................................................... 1 $ 26
------ ------
566 26
------ ------
Other assets:
Investments in and advances to affiliates ..................................... 15,156 24,447
------ ------
15,156 24,447
------ ------
$ 15,722 $ 24,473
====== ======
LIABILITIES
Current liabilities:
Notes payable and current maturities of long-term debt ........................ $ 7,855 $ 1,400
Long-term debt reclassified as current ........................................ 10,499
Accounts payable .............................................................. 1,156 631
Accrued expenses .............................................................. 216 774
Due to ARTRA .................................................................. 289
------ ------
9,516 13,304
------ ------
Other noncurrent liabilities ..................................................... 928 2,609
------ ------
SHAREHOLDERS' EQUITY (DEFICIT)
Preferred stock, Series C ........................................................ 19,515 17,273
Common stock ..................................................................... 32 31
Less restricted common stock ..................................................... (700)
------ ------
Additional paid-in capital ....................................................... 65,392 60,680
Accumulated deficit .............................................................. (78,961) (69,424)
------ ------
5,278 8,560
------ ------
$ 15,722 $ 24,473
====== ======
The accompanying notes are an integral part of the condensed financial
information.
THE LORI CORPORATION AND SUBSIDIARIES
SCHEDULE I. CONDENSED FINANCIAL INFORMATION OF REGISTRANT
THE LORI CORPORATION
STATEMENTS OF OPERATIONS
for the years ended December 31, 1994, 1993 and 1992
(Registrant Only In Thousands)
1994 1993 1992
------ ------ ------
Selling, general and administrative expenses ........................... $ 967 $ 701 $ 441
Interest expense ....................................................... 1,315 754
Equity in loss of affiliates ........................................... 17,061 1,595 30,814
Allocated corporate overhead ........................................... (1,040) (1,310)
Other expense (income), net ............................................ 7 8 (13)
------ ------ ------
Loss before income taxes and extraordinary credit ...................... (18,310) (1,748) (31,242)
Benefit (charge) equivalent to income taxes ........................... (192) 76 (3,377)
------ ------ ------
Loss before extraordinary credit ....................................... (18,502) (1,672) (34,619)
Extraordinary credit, net discharge of indebtedness .................... 8,965 22,057
------ ------ ------
Net earnings (loss) .................................................... $ (9,537) $ 20,385 $(34,619)
====== ====== ======
The accompanying notes are an integral part of the condensed financial
information.
THE LORI CORPORATION AND SUBSIDIARIES
SCHEDULE I. CONDENSED FINANCIAL INFORMATION OF REGISTRANT
THE LORI CORPORATION
STATEMENTS OF CASHFLOWS
for the years ended December 31, 1994, 1993 and 1992
(Registrant Only In Thousands)
1994 1993 1992
------ ------ ------
Cash flows from operating activities:
Net earnings (loss) ............................................................ $ (9,537) $ 20,385 $(34,619)
Adjustments to reconcile net loss
to cash flows from operating activities:
Extraordinary gain from net discharge of indebtedness ..................... (8,965) (22,057)
Equity in (earnings) loss of affiliates ................................... 17,061 1,595 30,814
Amortization of excess of cost over net assets acquired ................... 7 7 7
Benefit (charge) equivalent to income taxes .............................. 192 (76) 3,377
Changes in assets and liabilities:
Increase (decrease) in other current and noncurrent assets ............ 25 (18) (8)
Increase (decrease) in other current and noncurrent liabilities ....... (2,030) (1,008) 62
------ ------ ------
Net cash flows used by operating activities ....................................... (3,247) (1,172) (367)
------ ------ ------
Cash flows from investing activities:
Restricted cash ................................................................ (550)
Net dividends from (advances) to subsidiaries .................................. (176) 1,279 327
------ ------ ------
Net cash flows from (used by) investing activities ................................ (726) 1,279 327
------ ------ ------
Cash flows from financing activities:
Proceeds from long-term borrowings ............................................. 519
Reduction of long-term borrowings .............................................. (43) (172) (475)
ARTRA capital contribution ..................................................... 1,500
Notes and advances due to ARTRA ................................................ 2,531
Other, net ..................................................................... 64 (4)
------ ------ ------
Net cash flows from (used by) financing activities ................................ 3,988 (108) 40
------ ------ ------
Net increase (decrease) in cash ................................................... 15 (1)
Cash balance beginning of year .................................................... 1 1
------ ------ ------
Cash balance end of year .......................................................... $ 15 $ - $ 1
====== ====== ======
Supplemental schedule of noncash investing and financing activities:
ARTRA common stock issued to Lori's bank lender
under terms of the debt settlement agreement ............................... $ 2,500
Notes and advances payable to ARTRA
transferred to Lori's capital account ...................................... $ 15,990
Lori preferred stock issued in exchange for ARTRA notes and advances ........... 2,242
Transfer New Dimensions assets, net of cash,
to Lori's bank lender under terms of the debt settlement agreement ......... 6,475
The accompanying notes are an integral part of the condensed financial
information.
THE LORI CORPORATION AND SUBSIDIARIES
SCHEDULE I. CONDENSED FINANCIAL INFORMATION OF REGISTRANT- (Cont.)
LORI CORPORATION
NOTES TO FINANCIAL INFORMATION
(Registrant Only)
1. Presentation
The condensed financial information of the Registrant has been prepared in
accordance with the instructions for Schedule I to Form 10-K. The Registrant's
investments in subsidiaries and affiliates are presented on the equity method.
2. Commitments and Contingencies
See Note 9 of the consolidated financial statements.
3. Restricted Assets
The terms of several debt agreements place certain restrictions on the net
assets of certain operating subsidiaries. See Note 6 of the consolidated
financial statements for additional information.
4. Long-Term Debt
See Note 6 of the consolidated financial statements.
5. Income Taxes
The Registrant files a consolidated income tax return with its subsidiaries. For
financial reporting purposes, the Registrant's charge or benefit equivalent to
income tax represents the difference between the aggregate of income taxes
computed on a separate return basis for each of the subsidiaries and the income
taxes computed on a consolidated basis.
THE LORI CORPORATION AND SUBSIDIARIES
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
for the years ended December 31, 1994, 1993 and 1992
(in thousands)
Column A Column B Column C Column D Column E
-------- -------- --------------------- ----------- ------------
(1) (2)
Balance at Charged to Charged Balance at
Beginning of Costs and to Other End of
Description Period Expenses Accounts Deductions Period
------------------------- ---------- --------- ---------- ---------- -----------
For the year ended December 31, 1994:
Deducted from assets to which they apply:
Allowance for inventory valuation ................ $ 4,150 $ 218 $ 4,161 (A) $ 207
======= ====== ====== ======
Allowance for markdowns .......................... $ 2,499 $ 4,799 $ 6,463 (B) $ 835
Allowance for doubtful accounts .................. 432 269 198 (C) 503
------- ------- ------ ------
$ 2,931 $ 5,068 $ 6,661 $ 1,338
======= ======= ====== ======
For the year ended December 31, 1993:
Deducted from assets to which they apply:
Allowance for inventory valuation ................ $ 4,900 $ 172 $ 922 (A) $ 4,150
======= ======= ====== ======
Allowance for markdowns .......................... $ 5,280 $ 5,722 $ 8,503 (B) $ 2,499
Allowance for doubtful accounts .................. 557 335 460 (C) 432
------- ------- ------- ------
$ 5,837 $ 6,057 $ 8,963 $ 2,931
======= ======= ======= =======
For the year ended December 31, 1992:
Deducted from assets to which they apply:
Allowance for inventory valuation ................ $ 4,900 $ 4,900
======
Allowance for markdowns .......................... $ 5,125 $21,051 $ 20,896 (B) $ 5,280
Allowance for doubtful accounts .................. 562 209 214 (C) 557
------- ------- ------- -------
$ 5,687 $21,260 $ 21,110 $ 5,837
======= ======= ======= =======
(A) Principally inventory written off, net of recoveries. (B) Principally
markdowns taken. (C) Principally uncollectible accounts written off, net
of recoveries.
INDEX OF EXHIBITS
(A) Exhibits included herein:
EXHIBIT 10 Material contracts
10.1 ASSIGNMENT AGREEMENT, dated and effective March 31,
1995, by and among IBJ Schroder Bank & Trust Company,
The Lori Corporation, Lawrence Jewelry Co., Lawrence
Jewelry Corporation, New Dimensions Accessories Ltd.,
Rosecraft, Inc., Fill-Mor Holding, Inc., ARTRA GROUP
Incorporated and Alexander Verde.
10.2 REGISTRATION AND SETTLEMENT AGREEMENT dated as of
March 31, 1995 by and between ARTRA GROUP
Incorporated and IBJ Schroder Bank & Trust Company.
EXHIBIT 11 Computation of earnings per share and equivalent
share of common stock for the three years ended
December 31, 1994.
EXHIBIT 21 Subsidiaries
(B) Exhibits incorporated herein by reference:
EXHIBIT 3 Articles of Incorporation and By-laws
3.1 Restated Certificate of Incorporation of the Company
(incorporated by reference to Exhibit 4(a)(1) to the
Company's Registration Statement on Form S-2
(Registration No. 2-98628) filed.
3.2 Certificate of Amendment of Certificate of
Incorporation of the Company filed with the Delaware
Secretary of State February 12, 1991 (incorporated by
reference to Exhibit 3.1 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1990).
3.3 Statement of Designation of the rights and
preferences of the Company's Series C Preferred Stock
(incorporated by reference to Exhibit 3(iii) to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1990).
3.4 Bylaws of the Company, as amended and restated
effective December 19, 1990 (incorporated by
reference to Exhibit 3(ii) to the Company's Annual
Report on Form 10-K for the year ended December 31,
1990).
EXHIBIT 10 Material contracts
10.1 AMENDED SETTLEMENT AGREEMENT by and among THE LORI
CORPORATION, LAWRENCE JEWELRY CO., LAWRENCE JEWELRY
CORPORATION, NEW DIMENSIONS ACCESSORIES LTD.
(formerly known as R.N. Koch, Inc.), ROSECRAFT, INC.,
FILL-MOR HOLDING, INC., ARTRA GROUP INCORPORATED
AND IBJ SCHRODER BANK & TRUST COMPANY, dated as of
December 23, 1994 filed as an exhibit to Registrant's
Form 8-K, dated January 3, 1995.
10.2 Loan Agreement, dated as of December 23, 1994, by and
among ARTRA GROUP Incorporated and McGOODWIN JAMES &
CO filed as an exhibit to Registrant's Form 8-K,
dated January 3, 1995.
10.3 Settlement Agreement dated August 18, 1994 by among
The Lori Corporation, Lawrence Jewelry Co., Lawrence
Jewelry Corporation, New Dimensions Accessories,
Ltd., Rosecraft, Inc., Fill-Mor Holding, Inc., ARTRA
GROUP Incorporated and IBJ Schroder Bank & Trust
Company, dated as of August 18,1994 filed as an
exhibit to Registrant's Form 10-Q for the quarterly
period ended June 30, 1994, dated August 19, 1994.
10.4 Pledge and Security Agreement between The Lori
Corporation and IBJ Schroder Bank & Trust Company
dated as of August 18, 1994 filed as an exhibit to
Registrant's Form 10-Q for the quarterly period ended
June 30, 1994, dated August 19, 1994.
10.5 Pledge and Security Agreement between Lawrence
Jewelry Co. and IBJ Schroder Bank & Trust Company
dated as of August 18, 1994 filed as an exhibit to
Registrant's Form 10-Q for the quarterly period ended
June 30, 1994, dated August 19, 1994.
10.6 Pledge and Security Agreement between Lawrence
Jewelry Corporation and IBJ Schroder Bank & Trust
Company dated as of August 18, 1994 filed as an
exhibit to Registrant's Form 10-Q for the quarterly
period ended June 30, 1994, dated August 19, 1994.
10.7 Pledge and Security Agreement between New Dimensions
Accessories, Ltd and IBJ Schroder Bank & Trust
Company dated as of August 18, 1994 filed as an
exhibit to Registrant's Form 10-Q for the quarterly
period ended June 30, 1994, dated August 19, 1994.
10.8 Pledge and Security Agreement between Rosecraft,
Inc. and IBJ Schroder Bank & Trust Company dated
as of August 18, 1994 filed as an exhibit to
Registrant's Form 10-Q for the quarterly period ended
10.9 Pledge and Security Agreement between Fill-Mor
Holding, Inc. and IBJ Schroder Bank & Trust Company
dated as of August 18, 1994 filed as an exhibit to
Registrant's Form 10-Q for the quarterly period ended
June 30, 1994, dated August 19, 1994.
10.10 Term Loan Agreement dated as of May 3, 1993 between
New Dimensions Accessories, Ltd. and IBJ Schroder
Bank & Trust Company (incorporated by reference to
Exhibit 10.1 to the Company's Annual Report on Form
10-K for the year ended December 31, 1992).
10.12 Credit Agreement dated as of May 3, 1993 between New
Dimensions Accessories, Ltd. and IBJ Schroder Bank &
Trust Company (incorporated by reference to Exhibit
10.2 to the Company's Annual Report on Form 10-K for
the year ended December 31, 1992).
10.13 Term Loan Agreement dated as of March 31, 1993
between Rosecraft, Inc. and IBJ Schroder Bank & Trust
Company (incorporated by reference to Exhibit 10.3 to
the Company's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.14 Credit Agreement dated as of March 31, 1993 between
Rosecraft, Inc. and IBJ Schroder Bank & Trust Company
(incorporated by reference to Exhibit 10.4 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.15 Management Agreement dated as of April 9, 1993
between the Company and Nitsua, Ltd. (incorporated by
reference to Exhibit 10.5 to the Company's Annual
Report on Form 10-K for the year ended December 31,
1992).
10.16 Management Agreement dated as of April 9, 1993
between the Company and Anthony J. Giglio
(incorporated by reference to Exhibit 10.6 to the
Company's Annual Report on Form 10-K for the year
ended December 31, 1992).
10.17 Amended and Restated Guarantee Agreement dated as of
March 31, 1993 by the Company in favor IBJ Schroder
Bank & Trust Company (incorporated by reference to
Exhibit 10.7 to the Company's Annual Report on Form
10-K for the year ended December 31, 1992).
10.18 Voluntary Petition of New Dimensions Accessories,
Ltd. for reorganization under Chapter 11 of the
Bankruptcy Code filed February 5, 1993 in the United
States Bankruptcy Court for the Southern District of
New York (incorporated by reference to Exhibit 28.1
to the Company's Current Report on Form 8-K dated
February 18, 1993).
10.19 Debtor's Amended Chapter 11 Plan of New Dimensions
Accessories, Ltd. filed on February 16, 1993 in the
United States Bankruptcy Court for the Southern
District of New York (incorporated by reference to
Exhibit 2.1 to the Company's Current Report on Form
8-K dated February 18, 1993).
10.20 Debtor's Amended Chapter 11 Plan, as modified, of New
Dimensions Accessories, Ltd. dated March 9, 1993 with
Proposed Modifications dated March 26, 1993, as filed
in the United States Bankruptcy Court for the
Southern District of New York (incorporated by
reference to Exhibit 2.1 to the Company's Current
Report on Form 8-K dated May 17, 1993).
10.21 Amended Disclosure Statement dated as February 16,
1993, of New Dimensions Accessories, Ltd. pursuant
to Section 1125 of the Bankruptcy Code (incorporated
by reference to Exhibit 28.2 to the Company's Current
Report on Form 8-K dated
February 18, 1993).
10.22 Second Amended Disclosure Statement Pursuant to
Section 1125 of the Bankruptcy Code of New Dimensions
Accessories, Ltd. (incorporated by reference to
Exhibit 28.1 to the Company's Current Report on Form
8-K dated May 17, 1993).
10.23 Notice of Entry of Order Confirming Second Amended
Plan of Reorganization as Modified dated April 9,
1993 (incorporated by reference to Exhibit 28.2 to
the Company's Current Report on Form 8-K dated May
17, 1993).
10.24 Credit Agreement dated as February 5, 1993 between
Lawrence Jewelry Co. and IBJ Schroder Bank & Trust
Company (incorporated by reference to Exhibit 28.3 to
the Company's Current Report on Form 8-K dated
February 18, 1993).
10.25 Amended and Restated License Agreement Dated as of
July 20, 1988 between Lifestyle Brands, Ltd. and New
Dimensions Accessories, Ltd. (incorporated
by reference to Exhibit 10 to the Company's Current
Report on Form 8-K dated May 17, 1993).
10.26 The Company's Long-Term Stock Investment Plan
(incorporated by reference to Appendix A to the
Company's Proxy Statement dated November 2, 1993
(filed with the Commission on November 2, 1993).