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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K/A

(Amendment No. 1)

 

x	ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2011

OR

 

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from              to             

Commission File Number 1-5354

SWANK, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		04-1886990
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification Number)
90 Park Avenue New York, New York		10016
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (212) 867-2600

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Common Stock, $.10 par value

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ¨    No  x

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:  ¨

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Item 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  ¨    No:  ¨

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 the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer		¨		Accelerated filer		¨
Non-accelerated filer		¨		Smaller reporting company		x

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the shares of the Registrant’s common stock, $.10 par value per share, held by non-affiliates, based on the closing price of $3.75 as of the close of business on June 30, 2011, the last business day of our most recently completed second fiscal quarter, was $21,054,810.

The number of outstanding shares of Registrant’s common stock, $.10 par value per share, at the close of business on March 16, 2012 was 5,549,593.

DOCUMENTS INCORPORATED BY REFERENCE

None.

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EXPLANATORY NOTE

Swank, Inc. (the “Company”) is filing this Amendment No. 1 to its Annual Report on Form 10-K (this “Form 10-K/A”) to amend its Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as filed with the Securities and Exchange Commission (“SEC”) on March 30, 2012 (the “Original Form 10-K”). This Form 10-K/A is being filed solely to correct inadvertent mathematical errors in the table contained in Footnote H – Commitments and Contingencies of the Notes to Financial Statements relating to future minimum lease payments under non-cancelable operating leases as of December 31, 2011. No changes are being made to, and the corrections in Footnote H do not in any manner affect, the Company’s Balance Sheets, Statements of Income, Statements of Changes in Stockholders’ Equity and Comprehensive Income (loss), Statements of Cash Flows, the other Notes to Financial Statements, or Financial Statement Schedule II filed with the Original Form 10-K.

Rule 12b-15 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), requires that this Form 10-K/A include as exhibits the certifications required of the Company’s principal executive officer and principal financial officer under Section 302 of the Sarbanes-Oxley Act of 2002. The Company is also including certifications under Section 906 of the Sarbanes-Oxley Act of 2002.

This Form 10-K/A does not reflect events occurring after the filing of the Original Form 10-K or modify or update any disclosures affected by subsequent events. Except as noted above, this Form 10-K/A continues to speak as of the date of the Original Form 10-K, and does not modify, amend or update in any way any other item or disclosures in the Original Form 10-K. Accordingly, this Form 10-K/A should be read in conjunction with the Original Form 10-K and the Company’s other filings made with the SEC.

 

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Item 8.

Financial Statements and Supplementary Data.

INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES

 

Report of Independent Registered Public Accounting Firm			3
Financial Statements:
Balance Sheets as of December 31, 2011 and 2010			4
Statements of Income for the Years Ended December 31, 2011 and 2010			5
Statements of Changes in Stockholders’ Equity and Comprehensive Income (loss) for the Years Ended December 31, 2011 and 2010			6
Statements of Cash Flows for the Years Ended December 31, 2011 and 2010			7
Notes to Financial Statements			8-24
Financial Statement Schedule II *			25

 

*	All other schedules have been omitted because they are not applicable or not required as the required information is included in the Financial Statements of the Company or the Notes thereto.

 

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors and Stockholders

Swank, Inc.

New York, New York

We have audited the accompanying balance sheets of Swank, Inc. (the “Company”) as of December 31, 2011 and 2010 and the related statements of income, changes in stockholders’ equity and comprehensive income (loss), and cash flows for each of the two years in the period ended December 31, 2011. We have also audited the financial statement schedule listed in the accompanying index appearing under Item 15(a)(2). These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit over its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Swank, Inc. at December 31, 2011 and 2010, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2011 in conformity with accounting principles generally accepted in the United States of America.

Also, in our opinion, the schedule, listed in the index appearing under Item 15(a)(2), when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein.

BDO USA, LLP

Boston, Massachusetts

April 4, 2012

 

 

 

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Swank, Inc.

Balance Sheets as of December 31,

(Dollars in thousands except per share data)

 

		2011				2010
Assets
Current:
Cash and cash equivalents		$	287			$	3,235
Accounts receivable, less allowances of $6,637 and $7,798, respectively			23,275				20,214
Inventories, net:
Work in process			930				773
Finished goods			24,084				21,848
Total inventories, net			25,014				22,621
Deferred taxes, current			2,101				2,713
Prepaid and other current assets			1,185				1,150
Total current assets			51,862				49,933
Property, plant and equipment, at cost:
Land and buildings			29				29
Machinery, equipment and software			2,541				2,411
Leasehold improvements			955				904
Total property, plant and equipment at cost			3,525				3,344
Less accumulated depreciation			2,550				2,212
Total property, plant and equipment, net			975				1,132
Deferred taxes, noncurrent			2,258				2,118
Other assets			2,547				2,905
Total noncurrent assets			5,780				6,155
Total Assets		$	57,642			$	56,088
Liabilities
Current:
Note payable to bank		$	669			$	5,287
Current portion of long-term obligations			1,967				711
Accounts payable			4,253				4,151
Accrued employee compensation			2,564				1,748
Accrued royalties payable			1,263				1,583
Income taxes payable			772				761
Other current liabilities			1,448				1,572
Total current liabilities			12,936				15,813
Total long-term obligations, net of current portion			5,330				6,584
Total Liabilities			18,266				22,397
Commitments and contingencies (Note H)
Stockholders’ Equity
Preferred stock, par value $1.00 Authorized - 300,000 shares			—				—
Common stock, par value $.10 Authorized — 43,000,000 shares
Issued - 6,429,095 shares			642				642
Capital in excess of par value			2,858				2,605
Retained earnings			39,368				33,430
Accumulated other comprehensive loss			(907	)			(696	)
Treasury stock at cost – 874,843 and 800,350 shares, respectively			(2,585	)			(2,290	)
Total Stockholders’ Equity			39,376				33,691
Total Liabilities and Stockholders’ Equity		$	57,642			$	56,088

The accompanying notes are an integral part of the financial statements.

 

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Swank, Inc.

Statements of Income

For the Years Ended December 31,

(In thousands, except share and per share data)

 

		2011				2010
Net sales		$	138,620			$	132,702
Cost of goods sold			92,158				90,161
Costs associated with termination of Style 365 agreement			—				1,492
Total cost of goods sold			92,158				91,653
Gross profit			46,462				41,049
Selling and administrative expenses			36,323				34,541
Income from operations			10,139				6,508
Interest expense			340				422
Income before provision for income taxes			9,799				6,086
Provision for income taxes			3,861				1,912
Net income		$	5,938			$	4,174
Share and per share information:
Weighted average common shares outstanding – basic and diluted			5,602,362				5,664,236
Basic and diluted net income per common share		$	1.06			$	.74

The accompanying notes are an integral part of the financial statements.

 

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Swank, Inc.

Statements of Changes in Stockholders’ Equity and Comprehensive Income (Loss)

 

For the Years Ended December 31, 2011 and 2010		Common Stock, Par Value $.10								Capital in Excess of				Retained				Accumulated Other Comprehensive				Treasury Stock								Total Stockholders’				Comprehensive
(Dollars in thousands)		Shares				Amount				Par Value				Earnings				Income (Loss)				Shares				Amount				Equity				Income (loss)
Balance, December 31, 2009			6,418,789			$	642			$	2,322			$	29,256			$	(493	)			752,489			$	(2,143	)		$	29,584
Net income															4,174																4,174			$	4,174
Stock-based compensation expense											253																				253
Common stock repurchased																							47,861				(147	)			(147	)
Issuance of common stock in lieu of cash compensation			10,309				—				30																				30
Other comprehensive income (loss):
Minimum pension liability adjustment, net of tax of $132																			(203	)											(203	)			(203	)
Total comprehensive income																																		$	3,971
Balance, December 31, 2010			6,429,095			$	642			$	2,605			$	33,430			$	(696	)			800,350			$	(2,290	)		$	33,691
Net income															5,938																5,938			$	5,938
Stock-based compensation expense											253																				253
Common stock repurchased																							74,493				(295	)			(295	)
Other comprehensive income (loss):
Minimum pension liability adjustment, net of tax of $141																			(211	)											(211	)			(211	)
Total comprehensive income																																		$	5,727
Balance, December 31, 2011			6,429,095			$	642			$	2,858			$	39,368			$	(907	)			874,843			$	(2,585	)		$	39,376

The accompanying notes are an integral part of the financial statements.

 

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Swank, Inc.

Statements of Cash Flows

(Dollars in thousands)

For the Years Ended December 31,

 

		2011				2010
Cash flows from operating activities:
Net income		$	5,938			$	4,174
Adjustments to reconcile net income to net cash provided by (used in) operations:
Provision for (recoveries from) bad debt			(55	)			210
Depreciation and amortization			370				353
Stock-based compensation expense			253				253
Proceeds from life insurance			203				390
Decrease (increase) in deferred income tax, net of allowance			472				(447	)
Changes in assets and liabilities:
(Increase) in accounts receivable			(3,006	)			(4,101	)
(Increase) decrease in inventories			(2,393	)			1,124
Decrease in prepaid and other assets			156				37
Increase (decrease) in accounts payable, accrued and other liabilities			1,744				(4,112	)
(Decrease) Increase in other long-term obligations and deferred credits			(1,413	)			381
Net cash provided by (used in) operations			2,269				(1,738	)
Cash flows from investing activities:
Capital expenditures			(190	)			(569	)
Premiums on life insurance			(114	)			(169	)
Net cash (used in) investing activities			(304	)			(738	)
Cash flows from financing activities:
Borrowings under revolving credit agreements			75,089				86,590
Payments of revolving credit obligations			(79,707	)			(81,303	)
Treasury stock repurchased			(295	)			(147	)
Net cash (used in) provided by financing activities			(4,913	)			5,140
Net increase in cash and cash equivalents			(2,948	)			2,664
Cash and cash equivalents at beginning of year			3,235				571
Cash and cash equivalents at end of year		$	287			$	3,235
Cash paid during the year for:
Interest		$	340			$	422
Income taxes		$	3,657			$	2,874
Non-cash transactions during the period:
Issuance of common stock in lieu of cash compensation		$	—			$	30

The accompanying notes are an integral part of the financial statements.

 

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Notes to Financial Statements

 

A.	The Company

The Company is engaged in the importation, sale and distribution of men’s belts, leather accessories, suspenders, and men’s jewelry and women’s accessories, principally belts. These products are sold both domestically and internationally, principally through department stores, and also through a wide variety of specialty stores and mass merchandisers. The Company also operates two factory outlet stores primarily to distribute excess and out of line merchandise.

 

B.	Summary of Significant Accounting Policies

Basis of Presentation

The financial statements include the accounts of Swank, Inc. Amounts are in thousands except for share and per share data.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

Revenue Recognition

Net sales are generally recorded upon shipment, provided there exists persuasive evidence of an arrangement, the fee is fixed or determinable and collectability of the related receivable is reasonably assured. Allowances, including cash discounts, in-store customer allowances, cooperative advertising allowances and customer returns, which are all accounted for in accordance with ASC 605-15 (formerly Statement of Financial Accounting Standards No. 48), “Revenue Recognition When Right of Return Exists” and ASC 815-30 (formerly Emerging Issues Task Force Issue No. 01-09), “Accounting for Consideration Given by a Vendor to a Customer or Reseller of the Vendor’s Products”, are provided for at the time the revenue is recognized based upon historical experience, current trends in the retail industry and individual customer and product experience. Each spring upon the completion of processing returns from the preceding fall season, we record adjustments to net sales in the second quarter to reflect the difference between customer returns of prior year shipments actually received in the current year and the estimate used to establish the allowance for customer returns at the end of the preceding fiscal year.

Cash and Cash Equivalents

We consider all highly liquid instruments purchased with original maturities of three months or less to be cash equivalents.

Allowances for Accounts Receivable

Our allowances for receivables include cash discounts, doubtful accounts, in-store markdowns, cooperative advertising and customer returns. Provisions for doubtful accounts are reflected in selling and administrative expenses. We perform ongoing credit evaluations of our customers and maintain allowances for potential bad debt losses. We do not typically require collateral from our customers. The allowance for customer returns results from the reversal of sales for estimated returns and associated costs. Allowances for in-store markdowns and cooperative advertising reflect the estimated costs of our share of certain promotions by our retail customers. Allowances for accounts receivable are generally at

 

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their seasonal highs on December 31. Reductions of allowances occur principally in the first and second quarters when the balances are adjusted to reflect actual charges as processed. Allowances for accounts receivable are estimates made by management based on historical experience, adjusted for current conditions, and may differ from actual results. The provisions (recoveries) for bad debts in 2011 and 2010 were $(55,000) and $210,000, respectively.

Concentration of Credit Risk

We sell products primarily to major retailers within the United States. In each of fiscal 2011 and 2010, our three largest customers were Macy’s, Inc. (“Macy’s), Kohl’s Corporation (“Kohl’s”), and The TJX Companies (“TJX”). These three customers combined accounted for approximately 36% and 39% of trade receivables (gross of allowances) at December 31, 2011 and 2010, respectively.

During 2011, net sales to Macy’s, Kohl’s, and TJX accounted for approximately 18%, 14%, and 10%, respectively, of our total net sales. In fiscal 2010, Macy’s, Kohl’s, and TJX accounted for approximately 16%, 15% and 9%, respectively, of our total net sales. No other customer accounted for more than 10% of net sales during either of our last two fiscal years. Exports to foreign countries accounted for approximately 8% and 7% of net sales in fiscal year 2011 and 2010, respectively. During the normal course of business, we are exposed to interest rate change market risk with respect to borrowings under our 2004 Loan Agreement. The seasonal nature of our business typically requires that we build inventories during the course of the year in anticipation of heavy shipments to retailers during the upcoming holiday season. Accordingly, our revolving credit borrowings generally peak during the third and fourth quarters. Therefore, a sudden increase in interest rates (which under our 2004 Loan Agreement is presently the prime rate plus a margin of .25% or LIBOR plus a margin of 2.00%) may, especially during peak borrowing periods, have a negative impact on short-term results. We are also theoretically exposed to market risk with respect to changes in the global price level of certain commodities used in the production of our products.

We purchase substantially all of our small leather goods, principally wallets, from a single supplier in India. Unexpected disruption of this source of supply could have an adverse effect on our small leather goods business in the short-term depending upon our inventory position and on the seasonal shipping requirements at that time. However, we believe that alternative sources for small leather goods are available and could be utilized by us within several months. We also purchase substantially all of our finished belts and other accessories from a number of suppliers, primarily in Asia. We believe that alternative suppliers are readily available for substantially all such purchased items.

Inventories

Inventories are stated at the lower of cost (principally average cost which approximates FIFO) or market. Our inventory is somewhat fashion oriented and, as a result, is subject to risk of rapid obsolescence. Management believes that inventory has been adequately adjusted, where appropriate, and that we have adequate channels to dispose of excess and obsolete inventory.

Property Plant and Equipment

Property, plant and equipment are stated at cost. We provide for depreciation of plant and equipment by charges against income which are sufficient to write off the cost of the assets over estimated useful lives of 10-45 years for buildings and improvements and 3-12 years for machinery, equipment and software. Improvements to leased premises are amortized on a straight-line basis over the shorter of the useful life of the improvement or the term of the lease.

 

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Expenditures for maintenance and repairs and minor renewals are charged to expense; betterments and major renewals are capitalized. Upon disposition, cost and related accumulated depreciation are removed from the accounts with any related gain or loss reflected in results of operations.

We review the carrying value of our long-lived assets in accordance with ASC 360-10 (formerly Statement of Financial Accounting Standards No. 144), “Accounting for the Impairment or Disposal of Long-Lived Assets”, whenever events and circumstances indicate that the assets might be impaired and the carrying value may not be recoverable. Recoverability of these assets is measured by comparison of the carrying value of the assets to the undiscounted cash flows estimated to be generated by those assets over their remaining economic life. If such assets are considered impaired, the impairment loss is measured by comparing the fair value of the assets to their carrying values. Fair value is determined by either a quoted market price or a value determined by a discounted cash flow technique, whichever is more appropriate under the circumstances involved.

Fair Value of Financial Instruments

The carrying amounts of financial instruments, including cash and equivalents, accounts receivable, accounts payable, accrued expenses and notes payable approximated fair value as of December 31, 2011 and 2010. Included on the balance sheet in prepaid and other current assets are securities available for sale, stated at fair market value, of approximately $11,000 and $12,000 at December 31, 2011 and 2010, respectively.

Advertising Costs

We charge advertising costs to expense as they are incurred. Total expenditures charged to advertising expense during 2011 and 2010 were $2,909,000 and $3,228,000, respectively.

Shipping and Handling Costs

We include shipping and handling costs as part of selling expenses in our statement of income. Total shipping and handling costs were $6,973,000 and $6,990,000 for 2011 and 2010, respectively.

Environmental Costs

In accordance with ASC 410-30 (formerly AICPA Statement of Position 96-1), “Environmental Obligations”, environmental expenditures that relate to current operations are expensed or capitalized, as appropriate. Expenditures that relate to an existing condition caused by past operations, and which do not contribute to current or future revenue generation, are expensed. Liabilities are recorded when environmental assessments and/or remedial efforts are probable and the costs can be reasonably estimated. Generally, adjustments to these accruals coincide with the completion of a feasibility study or a commitment made by us to a formal plan of action or other appropriate benchmark (see Note H to the financial statements for additional discussion).

Income Taxes

We utilize the liability method of accounting for income taxes. Under the liability method, deferred taxes are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect in the years in which the differences are expected to reverse. Net deferred tax assets are recorded when it is more likely than not that such tax benefits will be realized. When necessary, a valuation allowance is recorded to reflect the estimated realization of the deferred tax asset.

We adopted the provisions of ASC 740-10 (formerly FASB Interpretation No. 48), “Income Taxes”, on January 1, 2007. This guidance clarifies the accounting for uncertainty in income taxes

 

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recognized in an enterprise’s financial statements in accordance with ASC 740-10. ASC 740-10 prescribes a two-step process to determine the amount of tax benefit to recognize. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon examination by a tax authority. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. If the tax position does not meet the “more-likely-than-not” threshold then it is not recognized in the financial statements. In accordance with ASC 740-10, we have elected to accrue interest and penalties, if any, related to unrecognized tax benefits as a component of income tax expense. The adoption of this guidance had no effect on our financial conditions, results of operations, or cash flow at December 31, 2011.

Share-Based Compensation

In December 2004, the FASB issued ASC 718-10 (formerly Statement of Financial Accounting Standard No. 123 (revised 2004, “SFAS 123R”)), “Share-Based Payment.” ASC 718-10 addresses the accounting for share-based payments to employees, including grants of employee stock options. We adopted ASC 718-10 under the modified prospective method effective January 1, 2006. Under that method, compensation cost is recognized for share-based payments granted prior to January 1, 2006, but not yet vested, based on the grant date fair value estimated in accordance with the provisions of ASC 718-10. No stock options were granted during either 2011 or 2010 (see Note G).

Net Income per Share

Net income per common share or basic earnings per share amounts are adjusted to include, where appropriate, shares held by our employee stock ownership plan and deemed to be allocated to participants. Net income per share assuming full dilution includes, when applicable, the effects of options and convertible securities issued by the Company. Diluted earnings per share is determined by using the weighted average number of common and dilutive common equivalent shares outstanding during the period unless the effect is anti-dilutive. Potentially dilutive common shares consist of the incremental common shares that would be issuable upon the assumed exercise of stock options and the conversion of convertible securities. The following table sets forth the computation of net income per share (in thousands, except for share and per share data):

 

		Year Ended December 31,
		2011				2010
Numerator:
Net income as reported		$	5,938			$	4,174
Denominator:
Shares used in computing basic and diluted net income per weighted average common share outstanding			5,602,362				5,664,236
Basic and diluted net income per weighted average common share outstanding		$	1.06			$	.74

As of both December 31, 2011 and 2010, options to purchase 375,000 shares were outstanding but not included in the weighted average common share calculation as the effect would have been anti-dilutive.

 

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Comprehensive Income (Loss)

Reporting comprehensive income (loss) requires that certain items recognized under accounting principles generally accepted in the United States as separate components of stockholders’ equity be reported as comprehensive income (loss) in an annual financial statement that is displayed with the same prominence as the other annual financial statements. This statement also requires that an entity classify items of other comprehensive income (loss) by their nature in an annual financial statement and display the accumulated balance of other comprehensive income separately from retained earnings and additional capital in excess of par value in the equity section of the balance sheet. Our reportable other comprehensive loss was $211,000 and $203,000 in 2011 and 2010, respectively. Comprehensive losses in these years resulted primarily from adjustments associated with unrecognized actuarial gains and losses relating to our defined benefit plan.

Recent Accounting Pronouncements

In May 2011, the FASB issued ASU No. 2011-04, “Fair Value Measurement (Topic 820) – Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS” (“ASU 2011-04”), which amends ASC 820 providing consistent guidance on fair value measurement and disclosure requirements between U.S. GAAP and International Financial Reporting Standards. ASU 2011-04 is effective prospectively for fiscal years, and interim periods within those years beginning after December 12, 2011. We do not expect the adoption of ASU 2011-04 will have a material impact on our financial condition, results of operations or cash flow.

In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income (Topic 220): Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in Accounting Standards Update No. 2011-05”. The amendments in this update defer certain provisions of ASU 2011-05, “Comprehensive Income (Topic 220): Presentation of Comprehensive Income” (“ASU 2011-05”), including the requirement to present reclassified adjustments separately with their respective components of net income and other comprehensive income. During the deferral period, the existing requirements for reclassification adjustments on the face of the financial statement in which comprehensive income is reported or disclosed in the notes to the financial statements remain applicable. The amendments in this accounting standard update are effective prospectively for fiscal years, and interim periods within those years, beginning after December 15, 2011. We do not expect the adoption of this guidance will have a material impact on our financial condition, results of operations or cash flow.

 

C.	Short-Term Borrowings

 

(Dollars in thousands)
		2011				2010
At December 31:
Total line		$	32,000			$	32,000
Weighted average interest rate			3.75	%			3.75	%
For the year:
Monthly average borrowing outstanding			6,127				8,587
Maximum borrowing outstanding at any month end			16,895				15,100
Monthly interest rate (weighted average)			3.82	%			3.81	%
Balance outstanding at December 31			669				5,287

The average amounts outstanding and weighted average interest rates during each year are based on average monthly balances outstanding under our revolving credit facility for seasonal working capital needs.

 

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The Company’s revolving credit line is provided by Wells Fargo Capital Finance, Inc. (formerly Wells Fargo Foothill, Inc.) (“WFF”) under a $32,000,000 Loan and Security Agreement signed on June 30, 2004, as amended (the “2004 Loan Agreement”). On March 7, 2012, we entered into an Eighth Amendment (the “Eighth Amendment”) to the 2004 Loan Agreement. Among other things, the Eighth Amendment reduces the interest rate payable on advances under the Loan and Security Agreement that bear interest at the prime or LIBOR rate, revises collateral reporting requirements, defines certain circumstances under which the Company is not subject to certain of the cash management control requirements of the 2004 Loan Agreement, and extends the maturity date of the 2004 Loan Agreement from June 29, 2012 to June 30, 2013. The 2004 Loan Agreement is collateralized by substantially all of our assets, including accounts receivable, inventory, and machinery and equipment. The 2004 Loan Agreement contains a $5,000,000 sublimit for the issuance of letters of credit and also prohibits us from paying dividends, imposes limits on additional indebtedness for borrowed money, and contains minimum monthly earnings before interest, taxes, depreciation, and amortization requirements. The terms of the 2004 Loan Agreement permit us to borrow against a percentage of eligible accounts receivable and eligible inventory at an interest rate based on Wells Fargo Bank, N.A.’s prime lending rate plus .25% or at WFF’s LIBOR rate plus 2.00%. We also are required to pay a monthly unused line fee of .375% of the maximum revolving credit amount (except that for the period January 1 through June 30 of each year, the amount used in the calculation of the unused line fee is $25,000,000) less the average daily balance of loans and letters of credit outstanding during the immediately preceding month. At December 31, 2011 and 2010, we had available lines of $26,004,000 and $18,577,000, respectively. As of December 31, 2011, we were in compliance with all covenants contained within the 2004 Loan Agreement.

In the ordinary course of business we may, from time to time, be contingently liable for performance under letters of credit. We had no outstanding letters of credit at December 31, 2011 or December 31, 2010. We are required to pay a quarterly fee equal to 2.0% per annum on outstanding letters of credit.

 

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D.	Income Taxes

The components of income taxes are as follows:

 

For each year ended December 31, (Dollars in thousands)
		2011				2010
Provision (benefit) for income taxes:
Currently payable:
Federal		$	2,680			$	2,329
State			709				30
Deferred:
Federal			413				(399	)
State			59				(48	)
		$	3,861			$	1,912
Deferred tax provision (benefit):
Deferred compensation		$	—			$	—
Accounts receivables reserves			588				(429	)
Inventory capitalization			(49	)			47
Deferred rent incentive			30				(130	)
Environmental costs			6				(25	)
Minimum pension adjustment			(83	)			(133	)
Postretirement benefits			(35	)			(39	)
Inventory Reserves			42				(32	)
State NOL carryforwards			9				26
Depreciation			(101	)			249
Other items			2				3
Valuation allowance			63				16
		$	472			$	(447	)
A reconciliation of the Company’s effective income tax rate is as follows:
Statutory federal income tax rate			34.0	%			34.0	%
State income taxes, net of federal tax benefit			5.2				5.4
State tax adjustments			—				(7.1	)
Valuation allowance			0.6				0.1
Other items, net			(0.4	)			(1.0	)
Effective income tax rate			39.4	%			31.4	%
Components of the net deferred tax asset:
Deferred tax assets:
Accounts receivable reserves		$	875			$	1,463
Deferred Incentive Rent			100				130
Inventory capitalization			729				680
Postretirement benefits			2,156				2,121
Inventory reserves			134				176
Workman’s compensation			—				9
State NOL carryforwards			279				288
Environmental costs			(164	)			(158	)
Minimum pension adjustment			448				365
Other			185				178
Gross deferred asset			4,742				5,252
Deferred tax liabilities:
Depreciation			(104	)			(205	)
Valuation allowance			(279	)			(216	)
Net deferred tax asset		$	4,359			$	4,831

In accordance with the criteria established in ASC 740-10 (formerly Statement of Financial Accounting Standards No. 109), “Income Taxes”, we regularly assess the status of our valuation allowance, if any, based upon a number of factors including future reversals of existing taxable temporary differences which would enable us to offset gross deferred tax assets against gross deferred tax liabilities; the availability of taxable income in carry-back prior years (if carry-back is permitted under the tax law); tax planning strategies; and projections of future taxable income exclusive of reversing temporary differences and carry-forwards. As a result of our evaluations at December 31, 2011 and 2010, we recorded valuation allowances of $279,000 and $216,000, respectively, against our deferred tax assets in connection with state net operating loss carryforwards which are not expected to be fully realized.

During 2010, we received net state income tax refunds of approximately $530,000 related to prior year tax filings which reduced the effective tax rate for 2010. At December 31, 2011, we have remaining state net operating loss carryforwards of approximately $3,625,000 which expire through 2022. These loss carryforwards are available to reduce state taxable income, if any. These loss carryforwards are subject to review and possible adjustment by the appropriate taxing authorities. As described above, at December 31, 2011 we recorded a valuation allowance of $279,000 against our deferred tax asset in connection with these state carryforwards.

We adopted the provisions of ASC 740-10 (formerly FASB Interpretation No. 48), “Income Taxes”, on January 1, 2007. ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a two-step process to determine the amount of tax benefit to recognize. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon examination by a tax authority. If the tax position is deemed “more-likely-than-not” to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50 percent likelihood of being realized upon ultimate settlement. If the tax position does not meet the “more-likely-than-not” threshold then it is not recognized in the financial statements. In accordance with ASC 740-10, we have elected to accrue interest and penalties, if any, related to

 

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unrecognized tax benefits as a component of income tax expense. Upon adoption on January 1, 2007 and as of December 31, 2011, we had no unrecognized tax benefits recorded. We do not anticipate that it is reasonably possible that unrecognized tax benefits as of December 31, 2011 will significantly change within the next 12 months.

 

E.	Long-Term Obligations

Long-term obligations at December 31 are as follows:

 

(Dollars in thousands)
		2011				2010
Postretirement benefits (See Note F)		$	5,459			$	5,370
Environmental liabilities (See Note H)			1,586				1,595
Obligation on property sublease and deferred rent			252				330
							—
Total long-term obligations, including current portion			7,297				7,295
Less current portion			(1,967	)			(711	)
Total long-term obligations		$	5,330			$	6,584

 

F.	Employee Benefits

Effective January 1, 1994, we amended and restated the Swank, Inc. Employees’ Stock Ownership Plan in a merger with the Swank, Inc. Employees’ Stock Ownership Plan No. 2 and the Swank, Inc. Savings Plan. The combined plans became The New Swank, Inc. Retirement Plan, which the Company further amended and restated as of January 1, 2011 (the “Plan”). The Plan incorporates the characteristics of the three predecessor plans, covers substantially all full time employees and reflects management’s continued desire to provide added incentives and to enable employees to acquire shares of our common stock. The cost of the Plan has been borne by the Company.

The savings (401(k)) component of the Plan provides employees an election to reduce taxable compensation through contributions to the Plan. Matching cash contributions from the Company are determined annually at the discretion of the Board of Directors. Shares of Common Stock acquired by the stock ownership component of the Plan are allocated to participating employees to the extent of contributions to the Plan, as determined annually at the discretion of the Board of Directors, and are vested on a prescribed schedule. Expenses associated with contributions to the Plan were $301,000 for both 2011 and 2010. At December 31, 2011 and 2010, the Plan held a total of 1,972,555 and 2,081,685 shares, respectively, of our outstanding common stock. There were no unallocated shares held by the Plan at December 31, 2011. From time to time, we make loans to the Plan at an interest rate equal to the Prime lending rate plus two percentage points per annum to provide the Plan with liquidity, primarily to enable the Plan to make distributions of cash rather than shares to former employees. There were no outstanding obligations due from the Plan at December 31, 2011 or December 31, 2010.

In October 1999, the Plan’s 401(k) Savings and Stock Ownership Plan Committee authorized the repurchase by the Plan of up to 600,000 shares of the Company’s common stock. Purchases are made at the discretion of the Plan’s trustees from time to time in the open market and through privately negotiated transactions, subject to general market and other conditions. Repurchases are intended to be financed by the Plan with its own funds and from any future cash contributions made by us to the Plan. Shares acquired will be used to provide benefits to employees under the terms of the Plan. Since the repurchase plan was authorized in October 1999, the Plan has repurchased 112,455 shares. The Plan purchased no shares under this purchase authorization during either 2011 or 2010.

 

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We provide postretirement life insurance, supplemental pension and medical benefits for certain groups of active and retired employees. The postretirement medical plan is contributory, with contributions adjusted annually; the death benefit is noncontributory. We recognize the cost of postretirement benefits over the period in which they are earned and amortize the transition obligation for all plan participants on a straight-line basis over a 20-year period which began in 1993.

The following table sets forth a reconciliation of the beginning and ending balances of our postretirement benefit obligations:

 

For each year ended December 31, (Dollars in thousands)
		2011				2010
Change in Benefit Obligation
Benefit obligation at beginning of year:		$	5,370			$	5,272
Service cost			12				12
Interest cost			256				277
Participants’ contributions			—				—
Amendments			—				—
Actuarial (gain) loss			346				455
Benefits paid			(525	)			(646	)
Benefit obligation at end of year (1)		$	5,459			$	5,370
Change in Plan Assets
Fair value of plan assets at beginning of year		$	—			$	—
Employer contributions			525				646
Participants’ contributions			—				—
Benefits paid			(525	)			(646	)
Fair value of Plan assets at end of year		$	—			$	—
Funded status		$	(5,459	)		$	(5,370	)
Unrecognized actuarial (gain) loss (2)			1,042				712
Unrecognized transition obligation (2)			92				211
Accrued benefit cost		$	(4,325	)		$	(4,447	)

 

(1)	Amounts totaling $532,000 and $476,000 have been included in current portion of long-term obligations as of December 31, 2011 and 2010, respectively. The remaining balance has been included in long-term obligations as set forth in Note E.

(2)	These amounts are included in accumulated other comprehensive (loss), net of tax, on the balance sheets, and have not yet been recognized as components of net periodic benefit cost.

In 2012, we expect to recognize $92,000 of the unrecognized transition obligation and $55,000 of the unrecognized actuarial loss in net periodic pension cost.

The weighted-average discount rate used in determining the accumulated benefit obligations was 4.0% and 5.0% at December 31, 2011 and 2010, respectively. For measurement purposes, a 7.5% annual rate of increase is assumed for 2011 in both the per capita cost of covered Medicare Part B health care benefits and AARP Medicare Supplemental Coverage. This rate is assumed to decrease gradually for both programs to 5.00% by 2018 and remain at that level thereafter. As of the current valuation date, all participants in the Pre-65 Continuation of Medical Coverage program are age 65 or older, therefore, no valuation is presented.

 

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Net periodic postretirement cost for fiscal 2011 and 2010 included the following components:

 

For each year ended December 31, (Dollars in thousands)
		2011				2010
Service cost		$	12			$	12
Interest cost			256				277
Recognized actuarial loss			16				—
Amortization of transition obligation			119				120
Net periodic benefit costs included in selling and administrative expenses		$	403			$	409

We have multiple health care and life insurance postretirement benefit programs which are generally available to executives. The health care plans are contributory (except for certain AARP and Medicare Part B coverage) and the life insurance plans are noncontributory. A portion of the life insurance benefits are fully insured through group life coverage and the remaining life benefits are self-insured. Life insurance contracts have been purchased on the lives of certain employees in order to fund postretirement death benefits to beneficiaries of salaried employees who reach age 60 with ten years of service. Proceeds from these contracts are expected to be adequate to fund our obligations. The cost of these contracts is included in the annual postretirement cost shown above.

Assumed health care cost trend rates have a significant effect on the amounts reported for the health care plans. A one-percentage point decrease in assumed health care cost trend rates would decrease the total of service and interest cost by $2,000 and the postretirement benefit obligation by $28,000 respectively, while a one-percentage point increase would increase the total of service and interest cost by $2,000 and the postretirement benefit obligation by $30,000.

We use loans against the policy cash values to pay part or all of the annual life insurance premiums, except for the variable life insurance policies. The life insurance policies state that we have the legal right of offset. The aggregate gross cash surrender value of all policies was approximately $3,774,000 and $4,445,000 at December 31, 2011 and 2010, respectively, which is included in other assets, net of policy loans aggregating approximately $1,227,000 and $1,553,000, respectively. We presently have no intention of repaying any policy loans and expect that they will be liquidated from future death benefits or by surrender of the policies. Interest on policy loans amounted to approximately $60,000 and $79,000 in 2011 and 2010, and is included in the net costs of the various plans described above. The weighted average interest rate on policy loans was 5.25% and 4.6% at December 31, 2011 and 2010, respectively.

No cash contributions in 2012 are expected to be made to the benefit plans other than funding current benefit payments.

The following benefit payments, which reflect future service as appropriate, are expected to be paid in connection with our postretirement benefit obligation. The benefit payments are based on the same assumptions used to measure our benefit obligations at December 31, 2011.

 

(Dollars in thousands)		Future Benefit
Fiscal year ended December 31,		Payments
2012		$	532
2013			418
2014			416
2015			412
2016			404
2017 through 2021			1,775

 

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G.	Stock Awards

In April 1998, our stockholders approved the Swank, Inc. 1998 Equity Incentive Compensation Plan (the “1998 Plan”) which replaced the Company’s prior incentive stock plans, all of which had expired by their terms. The 1998 Plan permits our Board of Directors to grant a maximum of 1,000,000 shares to key employees through stock options, stock appreciation rights, restricted stock units, performance awards and other stock-based awards. We granted options for 625,000 shares under the 1998 Plan in 2001. These shares vested immediately.

During the first quarter of 2008, we granted options for the remaining 375,000 shares under the 1998 Plan to certain of our key executives. Of the 375,000 option shares, 260,000 shares were granted at an exercise price equal to the fair market price on the date of the grant of $5.05 per share. The remaining 115,000 shares, which were issued to participants owning, in the aggregate, greater than 10% of the Company’s outstanding voting stock, were issued at an exercise price of 110% of the fair market value at the date of the grant, or $5.56 per share. The options expire five years from the date of grant and vest 25% on each of the first four anniversary dates of the grant. The fair value of the option grant was estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatility was estimated using the Company’s historical volatility, calculated on a trailing 39-month basis. We believe that the significant improvement in the Company’s financial condition during the past several years makes share prices prior to December 2004 not meaningful as indicators of expected future volatility. The expected term of the options is four years, based on the simplified method of calculating expected life pursuant to ASC 718-10 (formerly SFAS 123(R) and Staff Accounting Bulletin No. 107), “Compensation – Stock Compensation.” The risk-free rate of 2.73% is based upon the yield of a zero-coupon U.S. Treasury Note with a maturity date close to the expiration date of the expected term of the grant. ASC 718-10 requires the Company to reflect the benefits of tax deductions in excess of recognized compensation cost to be reported as both a financing cash inflow and an operating cash outflow. The Company has recognized no such tax benefits to date. The 1998 Plan expired by its terms in 2008 and no awards under that plan were granted during either 2011 or 2010.

There were no stock options exercised and the Company did not recognize any related tax benefits during 2011 or 2010. During each of 2011 and 2010, we recognized $253,000 in compensation expense related to the 2008 grant. As of December 31, 2011 and 2010, there was $43,000 and $296,000, respectively, in total unrecognized compensation cost related to outstanding options granted after the adoption of ASC 718-10 that is expected to be recognized over the remaining vesting period of the grant.

The following table summarizes stock option activity for the years 2011 and 2010:

 

		Option Shares				Weighted Average Exercise Price
Outstanding at December 31, 2009			376,667			$	5.19
Expired			1,667			$	1.60
Outstanding at December 31, 2010			375,000			$	5.21
Outstanding at December 31, 2011			375,000			$	5.21

Options outstanding as of December 31, 2011 were as follows:

 

Exercise Price		Shares				Weighted Average Life (Years)				Weighted Average Price				Shares Exercisable				Weighted Average Price
$5.05 - $5.56			375,000				1.17			$	5.21				281,250			$	5.21

 

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A summary of option activity under the stock-based compensation plans as of December 31, 2011 and changes during the year then ended is as follows:

 

		Number of Shares				Weighted Average Exercise Price				Weighted Average Remaining Contractual Term (years)				Aggregate Intrinsic Value * (000s)
Outstanding at December 31, 2010			375,000			$	5.21				2.16			$	—
Outstanding at December 31, 2011			375,000			$	5.21				1.17			$	—
Vested or expected to vest at December 31, 2011			281,250			$	5.21				1.17			$	—
Exercisable at December 31, 2011			281,250			$	5.21				1.17			$	—

 

*	The aggregate intrinsic value on this table was calculated based on the positive difference, if any, between the market value of our common stock and the exercise price of the underlying options.

During 2008, our stockholders approved the Swank, Inc. 2008 Stock Incentive Plan (the “2008 Plan”) to replace our previous plans that had expired by their terms. The 2008 Plan permits our Board of Directors to grant a maximum of 1,000,000 shares to key employees through stock options, stock appreciation rights, restricted stock units, performance awards and other stock-based awards. During 2010 and 2009, we granted aggregate stock awards of 10,306 shares and 33,410 shares (net of shares withheld in connection with income tax and other withholdings), respectively, to certain key employees in lieu of cash bonuses earned during fiscal 2009 and 2008. We recorded compensation expense of $50,000 and $60,000 representing the grant-date fair value of the awards in our 2009 and 2008 statements of income, respectively. The grant-date fair value was determined using the closing price of our common stock as quoted on yahoo.com as of the date of grant. There were no stock awards granted during 2011.

 

H.	Commitments and Contingencies

We lease certain of our warehousing, sales and office facilities, automobiles and equipment under non-cancelable long-term operating leases. Certain of the leases provide renewal options ranging from one to ten years and escalation clauses covering increases in various costs. Total rental expense amounted to $2,372,000 and $2,362,000 in 2011 and 2010, respectively.

Future minimum lease payments under non-cancelable operating leases as of December 31, 2011 are as follows:

 

(Dollars in thousands)
2012		$	2,302
2013			2,286
2014			1,484
2015			1,285
2016			1,250
Thereafter			3,020
Total minimum payments		$	11,627

We have exclusive licenses to various patents, trademarks, trade names and copyrights in the United States and, in some instances, in certain other jurisdictions. Our “Kenneth Cole”, “Tommy Hilfiger”, “Nautica”, “Geoffrey Beene”, “Tumi”, “Guess?”, “Chaps”, “Pierre Cardin”, “Donald Trump”, “Buffalo David Bitton”, and “US Polo Association” licenses collectively may be considered material to our business. At December 31, 2011, we are obligated to pay minimum royalty and advertising under certain license agreements as follows: 2012 - $10,011,000; 2013 - $9,899,000; - 2014 - $6,591,000; and 2015 - $769,000. In connection with the Merger, we entered into an amendment to our license agreement with Nautica, effective upon the completion of the Merger, pursuant to which, among other things, the

 

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Nautica license will be extended to December 31, 2016. Our license agreements generally require us to provide various forms of advertising and promotional support determined as a percentage of annual net sales of licensed merchandise and licensors generally retain audit rights for a specified period. We also pay a percentage of net sales to a consulting firm controlled by one of our directors in connection with license agreements which that firm introduced to us. Royalty payments made by us in connection with this agreement were approximately $51,000 and $98,000 for the years ended December 31, 2011 and 2010, respectively. We regularly assess the status of our license agreements and anticipate renewing those contracts expiring in 2012, subject to the negotiation of terms and conditions satisfactory to us.

On June 7, 1990, we received notice from the United States Environmental Protection Agency (“EPA”) that we, along with fifteen others, had been identified as a Potentially Responsible Party (collectively, the “PRPs”) in connection with the release of hazardous substances at the Shpack Superfund site located in Norton and Attleboro, Massachusetts (the “Site”). We, along with six other PRPs, subsequently entered into an administrative order by consent pursuant to which, inter alia, we and they undertook to conduct a remedial investigation/feasibility study (the “RI/FS”) with respect to the alleged contamination at the Site.

The RI/FS of the Site was completed and EPA prepared its record of decision. On August 15, 2006, we received a Special Notice letter from EPA indicating that EPA expected us, and others, to perform the Remedial Design/Remedial Action (“RD/RA”) for the Shpack site. A number of parties, including us, submitted a good faith offer letter to EPA in response to the Special Notice, and began discussions with EPA regarding the Site. We and twelve other parties (the “PRP Group”), along with the United States Department of Energy (“USDOE”), signed a judicial consent decree relating to the Site, which was lodged on December 9, 2008 with the United States District Court for the District of Massachusetts, Eastern Division. The PRP Group members have agreed in the consent decree, jointly and severally, to perform remediation activities at the Site in accordance with a statement of work agreed to between EPA, on the one hand, and, on the other hand, the PRP Group and USDOE. In addition, the PRP Group members have agreed on a cost sharing allocation and procedures for the funding and performance of the consent decree obligations. In accordance with this agreement, we would not be responsible for increased costs of remediation at the Site due to the presence of radiological contamination. As among the PRP Group members, certain members, but not the Company, have agreed to be responsible for the increased costs. In addition, USDOE has agreed in the consent decree to be responsible for one-half of those costs.

EPA estimates the total cost of remediation at the Site to be approximately $43,000,000, which includes two response actions at the site. The first action, managed by the U.S. Army Corps of Engineers and which is in process, is designed to remove radiological contamination. The second action, led by EPA, is designed to remove non-radioactive contamination. The PRP Group members that did not generate radioactive materials, including us, should not be responsible for participating, financially or otherwise, in the first response action. The second phase of the remediation would commence after the first phase has been completed (which we expect no earlier than the fourth quarter of 2012). Based on information we have received from the PRP Group, the expected costs to complete the RD/RA will be in the range of $13,000,000 to $18,000,000. We believe that this matter will not have a material adverse effect on our operating results, financial condition or cash flow, and that we have adequately reserved for the potential costs associated with this site. At December 31, 2011 we had accrued $1,518,000 for potential costs associated with this site.

In September 1991, we signed a judicial consent decree relating to the Western Sand and Gravel site located in Burrillville and North Smithfield, Rhode Island. The consent decree was entered on August 28, 1992 by the United States District Court for the District of Rhode Island. The most likely scenario for remediation of the ground water at this site is through natural attenuation, which will be monitored until 2017. The estimated cost of remediation by natural attenuation through 2017 is approximately $1,500,000. Based on current participation, the Company’s share of these costs is

 

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approximately $134,000 with a remaining liability of approximately $68,000 which is accrued as of December 31, 2011. We believe that the cost of remediation of this site will not have any material adverse effect on our operating results, financial condition or cash flow based on the results of periodic tests conducted at the site, and that we have adequately reserved for the potential costs associated with this site.

The estimated liability for costs associated with environmental sites is included in long-term obligations in the accompanying balance sheets (See Note E), exclusive of currently payable amounts of approximately $1,435,000 and $234,000 included in other current liabilities in 2011 and 2010, respectively. These amounts have not been discounted. We believe that the accompanying financial statements include adequate provision for environmental exposures.

In the ordinary course of business, we may, from time to time, be contingently liable for performance under letters of credit. No letters of credit were outstanding at either December 31, 2011 or December 31, 2010. We are required to pay a monthly fee presently equal to 2.0% per annum on the outstanding letter of credit.

We are also a party to employment agreements with certain of our executive officers that provide for the payment of compensation and other benefits during the term of each executive’s employment and, under certain circumstances, for a period of time following their termination.

We are subject to legal proceedings and claims which arise in the ordinary course of our business. Although there can be no assurance as to the disposition of these proceedings, we do not anticipate that these matters will have a material impact on our results of operations or financial condition.

 

I.	Promotional Expenses

Substantial expenditures for advertising and promotion are considered necessary to maintain and enhance our business and, as described in Note H to the financial statements, certain license agreements require specified levels of spending. We charge advertising costs to expense as they are incurred. Total expenditures charged to advertising and promotion expense, exclusive of cooperative advertising and display expenditures, during 2011 and 2010 were $2,909,000 and $3,228,000, respectively.

 

J.	Fair Value Measurements

In September 2006, the FASB issued ASC 820-10-65 (formerly Statement of Financial Accounting Standards No. 157), “Fair Value Measurements and Disclosures”. ASC 820-10-65 defines fair value, provides guidance for measuring fair value and requires certain disclosures. This statement applies under other accounting pronouncements that require or permit fair value measurements. The statement indicates, among other things, that a fair value measurement assumes that a transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. ASC 820-10-65 defines fair value based upon an exit price model. ASC 820-10-65 discusses valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flow), and the cost approach (cost to replace the service capacity of an asset or replacement cost). The statement utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

•

Level 1: Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

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•

Level 2: Inputs, other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.

 

•

Level 3: Unobservable inputs that reflect the reporting entity’s own assumptions.

Our cash and cash equivalents consist of cash on deposit at various financial institutions. Included on the balance sheet in prepaid and other current assets are securities available for sale, stated at fair market value, of approximately $11,000 and $12,000 at December 31, 2011 and 2010, respectively.

 

K.	Disclosures About Segments of an Enterprise and Related Information

We follow ASC 280-10 (formerly SFAS No. 131), “Segment Reporting”, which establishes standards for the way that public business enterprises report information about operating segments. Operating segments are defined as components of a company for which separate financial information is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and to assess financial performance. We are engaged in one business, the sale of men’s and women’s accessories consisting of belts, wallets and other small leather goods, suspenders and jewelry. Our company and our customer relationships are organized around this one business segment. Our products are sold principally through department stores and to a lesser extent, through specialty stores and mass merchandisers.

 

L.	Quarterly Financial Data (unaudited)

We believe that the results of operations are more meaningful on a seasonal basis (approximately January-June and July-December) than on a quarterly basis. The timing of shipments can be affected by the availability of materials, retail sales and fashion trends. These factors may shift volume and related earnings between quarters within a season differently in one year than in another.

 

(Dollars in thousands except per share data)		Quarter ending
		Mar 31				Jun 30				Sep 30				Dec 31
2011
Net sales		$	26,084			$	32,162			$	33,415			$	46,959
Gross profit			8,229				10,975				10,486				16,772
Net income (loss)			32				1,449				1,018				3,439
Net income (loss) per common share – basic			.01				.26				.18				.61
Net income (loss) per common share – diluted			.01				.26				.18				.61
2010
Net sales		$	25,655			$	29,420			$	32,595			$	45,032
Gross profit			6,773				8,636				10,228				15,412
Net income (loss)			(457	)			(61	)			1,129				3,563
Net income (loss) per common share – basic			(.08	)			(.01	)			.20				.63
Net income (loss) per common share – diluted			(.08	)			(.01	)			.20				.63

 

M.	Related Party Transactions

John Tulin, our Chairman and Chief Executive Officer, has three family members who are employed by us in various positions and are compensated for services rendered by them to us.

We also pay a percentage of net sales to a consulting firm controlled by one of our directors in connection with certain license agreements which that firm introduced to us. Royalty payments made by us in connection with this agreement were approximately $51,000 and $98,000 for the years ended December 31, 2011 and 2010, respectively.

 

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L.	Subsequent Events.

On February 3, 2012, we entered into an agreement and plan of merger (the “Merger Agreement”) with Randa Accessories Leather Goods, LLC, a Delaware limited liability company (“Randa”), Swing Acquisition LLC, a Delaware limited liability company and a wholly-owned subsidiary of Randa (“Intermediate Sub”), and Swing Merger Sub, Inc., a Delaware corporation and a wholly-owned subsidiary of Intermediate Sub (“Merger Sub”), providing for the merger (the “Merger”) of Merger Sub with and into us. If the Merger is completed, each share of our common stock, $.10 par value per share (the “Common Stock”), issued and outstanding immediately prior to the effective time of the Merger, other than treasury shares, any shares owned by Randa, Intermediate Sub, Merger Sub or any other direct or indirect subsidiary of Randa, and shares owned by stockholders who have properly demanded and not effectively withdrawn or lost appraisal rights in accordance with applicable law, will be converted into the right to receive $10.00 in cash, without interest and less any applicable withholding taxes. On March 28, 2012, we filed a revised Preliminary Proxy Statement on Schedule 14A with the SEC relating to the proposed special meeting of our stockholders to consider and vote on a proposal to adopt the Merger Agreement.

The consummation of the Merger is subject to certain conditions, including, without limitation, (i) the adoption of the Merger Agreement by the affirmative vote of a majority of the outstanding shares of Common Stock entitled to vote thereon; (ii) the holders of not more than 15% of the Common Stock outstanding have properly exercised (and not withdrawn) appraisal rights in accordance with applicable law; (iii) the termination of the Rights Agreement, dated as of November 11, 2009, between the Company and American Stock Transfer and Trust Company LLC; (iv) since the date of the Merger Agreement a Material Adverse Effect (as defined in the Merger Agreement) has not occurred; (v) certain schedules to the Merger Agreement have been updated by us; and (vi) the absence of any law or order prohibiting or otherwise making illegal the Merger, the transactions contemplated by the Merger Agreement, or the debt financing in connection with the Merger and any alternative financing in connection with the Merger. Moreover, each party’s obligation to consummate the Merger is subject to certain other conditions, including, without limitation, (a) the accuracy of the representations and warranties made by the other party to the Merger Agreement, subject to customary materiality qualifiers, and (b) the compliance by the other party with its obligations and pre-closing covenants thereunder, subject to customary materiality qualifiers.

Under the terms of the Merger Agreement, we and our representatives had the right to solicit and encourage alternative acquisition proposals from third parties until 11:59 p.m., New York City time, on March 9, 2012, a period of 35 calendar days after the execution of the Merger Agreement. During the “go-shop” period, at the direction of our board of directors, representatives of Financo, Inc., our financial advisor (“Financo”), contacted a total of 76 potential acquirers, composed of 28 strategic parties and 48 financial parties, that we and Financo believed might have been interested in a possible alternative transaction to the Merger. As a result of these efforts, we received an alternative acquisition proposal from a third party to acquire all of the outstanding shares of our Common Stock (the “Acquisition Proposal”). Our board of directors has determined in good faith, after consultation with our outside financial and legal advisors, that the Acquisition Proposal is reasonably likely to result in a “Superior Proposal,” as such term is defined in the Merger Agreement, and the third party which submitted the Acquisition Proposal has qualified as an “Excluded Party,” as such term is defined in the Merger Agreement. By determining that the third party that submitted the Acquisition Proposal is an Excluded Party, we may, subject to certain conditions, continue to furnish information and engage in further discussions and negotiations with such party. The Acquisition Proposal is subject to several conditions, including completion of due diligence and the negotiation of a mutually acceptable definitive agreement. Accordingly, there can be no assurance that the Acquisition Proposal will ultimately lead to a Superior

 

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Proposal as discussions and negotiations with the Excluded Party could terminate at any time. Our board of directors has not determined that the Acquisition Proposal constitutes a Superior Proposal under the Merger Agreement and our board of directors has not changed its recommendation with respect to the Merger with Randa pursuant to the Merger Agreement.

If the Merger Agreement is terminated under specified circumstances, the Company may be required to pay Randa a termination fee of $2,000,000 (or, if the Merger Agreement is terminated by the Company in order to enter into a definitive agreement in connection with the “go shop” process, $1,720,000).

The Company’s revolving credit line is provided by the 2004 Loan Agreement as more fully described above in Note C. On March 7, 2012, we entered into an Eighth Amendment dated as of March 7, 2012 (the “Eighth Amendment”) to the 2004 Loan Agreement. Among other things, the Eighth Amendment reduces the interest rate payable on advances under the 2004 Loan Agreement that bear interest at the prime or LIBOR rate, revises collateral reporting requirements, defines certain circumstances under which the Company is not subject to certain of the cash management control requirements of the 2004 Loan Agreement, and extends the maturity date of the 2004 Loan Agreement from June 29, 2012 to June 30, 2013.

 

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Swank, Inc.

Schedule II — Valuation and Qualifying Accounts

 

Column A		Column B				Column C						Column D						Column E
		Balance at Beginning of Period				Additions Charged to Expense						Deductions						Balance at End of Period
For the year ended December 31, 2011
Reserve for Receivables
Allowance for doubtful accounts		$	750,000			$	—			(G)		$	150,000			(A) (I)		$	600,000
Allowance for cash discounts			25,000				110,000			(H)			110,000			(B)			25,000
Allowance for customer returns			2,930,000				2,218,000			(F)			3,559,000			(C)			1,589,000
Allowance for cooperative advertising			370,000				1,907,000			(H)			1,669,000			(D)			608,000
Allowance for in-store markdowns			3,723,000				8,360,000			(H)			8,268,000			(E)			3,815,000
Total		$	7,798,000			$	12,595,000					$	13,756,000					$	6,637,000
For the year ended December 31, 2010
Reserve for Receivables
Allowance for doubtful accounts		$	650,000			$	210,000			(G)		$	110,000			(A) (I)		$	750,000
Allowance for cash discounts			20,000				81,000			(H)			76,000			(B)			25,000
Allowance for customer returns			1,948,000				3,712,000			(F)			2,730,000			(C)			2,930,000
Allowance for cooperative advertising			444,000				1,349,000			(H)			1,423,000			(D)			370,000
Allowance for in-store markdowns			3,075,000				9,372,000			(H)			8,724,000			(E)			3,723,000
Total		$	6,137,000			$	14,724,000					$	13,063,000					$	7,798,000

 

(A)	Bad debts charged off as uncollectable

(B)	Cash discounts taken by customers.

(C)	Customer returns.

(D)	Credits issued to customers for cooperative advertising.

(E)	Credits issued to customers for in-store markdowns.

(F)	Net reduction in sales and cost of sales.

(G)	Recorded in selling and administrative.

(H)	Recorded against net sales.

(I)	Includes accounts receivable recoveries in excess of charge-offs.

(J)	Recorded in restructuring expenses.

(K)	Payments made to beneficiaries.

 

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SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

Date: April 4, 2012				SWANK, INC.
				(Registrant)
				By:		/s/ Jerold R. Kassner
						Jerold R. Kassner, Executive Vice President, Chief Financial Officer, Treasurer and Secretary

 

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EXHIBIT INDEX

 

Exhibit No.		Description
2.01		Agreement and Plan of Merger dated as of February 3, 2012 among Randa Accessories Leather Goods LLC, Swing Acquisition LLC, Swing Merger Sub, Inc. and the Company. (Exhibit 2.1 to the Company’s Current Report on Form 8-K dated February 3, 2012, File No. 1-5354, is incorporated herein by reference.)
3.01		Restated Certificate of Incorporation of the Company dated May 1, 1987, as amended to date. (Exhibit 3.01 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1999, File No. 1-5354, is incorporated herein by reference.)
3.02		Amended and Restated By-laws of the Company. (Exhibit 3.02 to the Company’s Current Report on Form 8-K dated March 27, 2007, File No. 1-5354, is incorporated herein by reference.)
4.01.01		Rights Agreement dated as of November 11, 2009 between the Company and American Stock Transfer & Trust Company, as Rights Agent. (Exhibit 1 to the Company’s Registration Statement on Form 8-A dated November 12, 1999, File No. 1-5354, is incorporated herein by reference.)
4.01.02		First Amendment to Rights Agreement dated as of February 3, 2012 and between the Company and American Stock Transfer & Trust Company LLC (Exhibit 4.1 to the Company’s Current Report on Form 8-K dated February 3, 2012, File No. 1-5354, is incorporated herein by reference.)
4.02.01		Loan and Security Agreement dated as of June 30, 2004 between the Company and Wells Fargo Foothill, Inc. (Exhibit 4.02.01 to the Company’s Annual Report on Form 10-K/A for the fiscal year ended December 31, 2010, File No. 1-5354, is incorporated herein by reference.)
4.02.02		First Amendment dated August 31, 2004 to Loan and Security Agreement dated as of June 30, 2004 between the Company and Wells Fargo Foothill, Inc. (Exhibit 4.02.02 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, File No. 1-5354, is incorporated herein by reference.)
4.02.03		Second Amendment dated January 31, 2005 to Loan and Security Agreement dated as of June 30, 2004 between the Company and Wells Fargo Foothill, Inc. (Exhibit 4.02.03 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, File No. 1-5354, is incorporated herein by reference.)
4.02.04		Third Amendment dated September 31, 2005 to Loan and Security Agreement dated as of June 30, 2004 between the Company and Wells Fargo Foothill, Inc. (Exhibit 4.02.04 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, File No. 1-5354, is incorporated herein by reference.)
4.02.05		Fourth Amendment dated April 19, 2006 to Loan and Security Agreement dated as of June 30, 2004 between the Company and Wells Fargo Foothill, Inc. (Exhibit 4.02.05 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2006, File No. 1-5354, is incorporated herein by reference.)

 

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4.02.06		Fifth Amendment dated August 28, 2006 to Loan and Security Agreement dated as of June 30, 2004 between the Company and Wells Fargo Foothill, Inc. (Exhibit 10.01 to the Company’s Current Report on Form 8-K dated August 31, 2006, File No. 1-5354, is incorporated herein by reference.)
4.02.07		Sixth Amendment dated July 2, 2007 to Loan and Security Agreement dated as of June 30, 2004 between the Company and Wells Fargo Foothill, Inc. (Exhibit 10.01 to the Company’s Current Report on Form 8-K dated July 6, 2007, File No. 1-5354, is incorporated herein by reference.)
4.02.08		Seventh Amendment dated November 20, 2008 to Loan and Security Agreement dated as of June 30, 2004 between the Company and Wells Fargo Foothill, Inc. (Exhibit 10.01 to the Company’s Current Report on Form 8-K dated November 20, 2008, File No. 1-5354, is incorporated herein by reference.)
4.02.09		Eighth Amendment dated March 7, 2012 to Loan and Security Agreement dated as of June 30, 2004 between the Company and Wells Fargo Foothill, Inc. (Exhibit 10.01 to the Company’s Current Report on Form 8-K dated March 7, 2012, File No. 1-5354, is incorporated herein by reference.)
10.01.01		Amended and Restated Employment Agreement dated as of January 10, 2008 between the Company and John Tulin (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 14, 2008, File No. 1-5354, is incorporated herein by reference.)+
10.01.02		Amendment and Release Agreement dated as of February 3, 2012 by and between the Company and John Tulin (Exhibit 10.2 to the Company’s Current Report on Form 8-K dated February 3, 2012, File No. 1-5354, is incorporated herein by reference.)+
10.02.01		Amended and Restated Employment Agreement dated as of January 10, 2008 between the Company and James E. Tulin (Exhibit 10.2 to the Company’s Current Report on Form 8-K dated January 14, 2008, File No. 1-5354, is incorporated herein by reference.)+
10.02.02		Letter Agreement dated as of January 1, 2010 between the Company and James E. Tulin (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 12, 2010, File No. 1-5354, is incorporated herein by reference.)+
10.02.03		Letter Agreement dated as of January 1, 2011 between the Company and James E. Tulin (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated January 4, 2012, File No. 1-5354, is incorporated herein by reference.)+
10.02.03		Amendment and Release Agreement dated as of February 3, 2012 by and between the Company and James E. Tulin (Exhibit 10.4 to the Company’s Current Report on Form 8-K dated February 3, 2012, File No. 1-5354, is incorporated herein by reference.)+
10.03.01		Amended and Restated Employment Agreement dated as of January 10, 2008 between the Company and Eric P. Luft (Exhibit 10.3 to the Company’s Current Report on Form 8-K dated January 14, 2008, File No. 1-5354, is incorporated herein by reference.)+

 

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10.03.02		Amendment and Release Agreement dated as of February 3, 2012 by and between the Company and Eric P. Luft (Exhibit 10.3 to the Company’s Current Report on Form 8-K dated February 3, 2012, File No. 1-5354, is incorporated herein by reference.)+
10.04		Form of Termination Agreement effective as of November 1, 2008 between the Company and each of the Company’s officers listed on Schedule A thereto. (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated November 20, 2008, File No. 1-5354, is incorporated herein by reference.)+
10.05		Deferred Compensation Plan of the Company dated as of January 1, 1987. (Exhibit 10.12 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1988, File No. 1-5354, is incorporated herein by reference.)+
10.06		The New Swank, Inc. Retirement Plan Trust-ESOP Component dated February 3, 2012 between the Company and Reliance Trust Company (Exhibit 2 to Amendment No. 20 to Schedule 13D dated February 3, 2012 of The New Swank, Inc. Retirement Plan, John Tulin, James E. Tulin and Reliance Trust Company is incorporated herein by reference.)
10.07		The New Swank, Inc. Retirement Plan Trust-401(k)/Profit Sharing Component dated February 3, 2012 among the Company and each of John Tulin, James E. Tulin and Jerold R. Kassner (Exhibit 3 to Amendment No. 20 to Schedule 13D dated February 3, 2012 of The New Swank, Inc. Retirement Plan, John Tulin, James E. Tulin and Reliance Trust Company is incorporated herein by reference.)
10.08		The New Swank, Inc. Retirement Plan as amended and restated, effective January 1, 2011. (Exhibit 10.08 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2010, File No. 1-5354, is incorporated herein by reference.)
10.09		Letter Agreement effective August 1, 1996 between the Company and John J. Macht. (Exhibit 10.18 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1996, File No. 1-5354, is incorporated herein by reference.)+
10.10		Letter Agreement effective August 1, 1998 between the Company and The Macht Group. (Exhibit 10.14 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-5354, is incorporated herein by reference.)+
10.11		Letter Agreement effective May 1, 2000 between the Company and The Macht Group. (Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2000, File No. 1-5354, is incorporated herein by reference.)+
10.12		Swank, Inc. 1998 Equity Incentive Compensation Plan (Exhibit 10.01 to the Company’s Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1998, File No. 1-5354, is incorporated herein by reference.)+
10.13		Lease dated December 31, 1990, as amended to date, between the Company and Gamma Realty Group, L.L.C. (Exhibit 10.17 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-5354, is incorporated herein by reference.)

 

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10.14		Incentive Stock Option Contract dated February 28, 2008 between the Company and John Tulin (Exhibit 99.1 to the Company’s Current Report on Form 8-K dated March 3, 2008, File No. 1-5354, is incorporated herein by reference.).+
10.15		Incentive Stock Option Contract dated February 28, 2008 between the Company and Eric P. Luft (Exhibit 99.3 to the Company’s Current Report on Form 8-K dated March 3, 2008, File No. 1-5354, is incorporated herein by reference.).+
10.16		Incentive Stock Option Contract dated February 28, 2008 between the Company and Melvin Goldfeder (Exhibit 99.4 to the Company’s Current Report on Form 8-K dated March 3, 2008, File No. 1-5354, is incorporated herein by reference.).+
10.17.01		Stockholders Agreement dated March 1, 2006 among the Company, John Tulin and James Tulin (Exhibit A to Amendment No. 15 to Schedule 13D dated March 6, 2006 of The New Swank, Inc. Retirement Plan, John Tulin and Raymond Vise is incorporated herein by reference).
10.17.02		Letter Agreement dated February 3, 2012 among the Company, John Tulin and James Tulin.**
10.18		Swank, Inc. 2008 Stock Incentive Plan. (Exhibit 10.21 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2008, File No. 1-5354, is incorporated herein by reference.).+
10.18.01		Stock Award Agreement dated March 11, 2009 between the Company and John Tulin (Exhibit 10.1 to the Company’s Current Report on Form 8-K dated March 13, 2009, File No. 1-5354, is incorporated herein by reference.)+
10.18.02		Stock Award Agreement dated March 10, 2010 between the Company and John Tulin. (Exhibit 10.2 to the Company’s Current Report on Form 8-K dated March 12, 2010, File No. 1-5354, is incorporated herein by reference.)+
10.19		Form of Stock Option Cancellation Agreement entered into by and between the Company and each of John Tulin, Eric P. Luft, James E. Tulin and Jerold R. Kassner (Exhibit 10.6 to the Company’s Current Report on Form 8-K dated February 3, 2012, File No. 1-5354, is incorporated herein by reference.)+
10.20		Form of Voting and Support Agreement entered into among Randa Accessories Leather Goods LLC, Swing Acquisition LLC, Swing Merger Sub, Inc. and each of John Tulin, Wendy Tulin, James E. Tulin, Eric P. Luft, Melvin Goldfeder, Paul Duckett and Jerold R. Kassner Exhibit 10.1 to the Company’s Current Report on Form 8-K dated February 3, 2012, File No. 1-5354, is incorporated herein by reference.)
14.01		Code of Ethics for Finance Professionals of the Company (Exhibit 14.01 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003, File No. 1-5354, is incorporated herein by reference.)
21.01		Subsidiaries of the Company. (Exhibit 21.01 to the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 1998, File No. 1-5354, is incorporated herein by reference.)
31.01		Rule 13a-14(a) Certification of John Tulin, Chief Executive Officer of the Company.*

 

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31.02		Rule 13a-14(a) Certification of Jerold R. Kassner, Principal Financial Officer of the Company.*
32.01		Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.*
101.INS		XBRL Instance Document*
101.SCH		XBRL Taxonomy Extension Schema*
101.CAL		XBRL Taxonomy Extension Calculation Linkbase*
101.LAB		XBRL Taxonomy Extension Label Linkbase*
101.PRE		XBRL Taxonomy Extension Presentation Linkbase*

 

*	Filed herewith.

**	Filed with the Annual Report on Form 10-K for the fiscal year ended December 31, 2011, File No. 1-5354, filed on March 30, 2012.

+	Management contract or compensatory plan or arrangement.

 

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