10-Q 1 l01335ae10vq.txt MICHAEL ANTHONY JEWELERS, INC. 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For Quarter ended May 3, 2003 Commission file number: 015230 MICHAEL ANTHONY JEWELERS, INC. (Exact name of registrant as specified in its charter) Delaware No. 13-2910285 (State of Incorporation) (I.R.S. Employer Identification No.) 115 South MacQuesten Parkway Mount Vernon, New York 10550-1724 (Address of principal executive offices) Registrant's telephone number, including area code: (914) 699-0000 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No . Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes No X CLASS ----------------------------- Number of Shares Outstanding as of Common Stock, Par Value $.001 June 12, 2003 ----------------- 6,244,898 -1- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES INDEX

~~August~~PAGE ~~3, February 2, 2002 2002~~ ----~~--------~~ ~~---------~~PART ~~(Unaudited)~~I ~~ASSETS~~FINANCIAL ~~CURRENT ASSETS~~INFORMATION: ~~Cash~~ITEM ~~and~~1. ~~equivalents~~FINANCIAL $STATEMENTS ~~562~~Consolidated $Condensed ~~2,129~~Balance ~~Accounts receivable: Trade (less allowances of $1~~Sheets,~~163~~ ~~and~~May $43,~~255,~~ ~~respectively~~2003 (Unaudited) ~~16,203 17,067 Other 246 153 Inventories 26,266 25,826 Prepaid expenses~~ and ~~other~~February ~~current assets 2,688~~ 1,~~544~~ ~~Deferred~~2003......................................... taxes 672 672 -------- -------- Total current assets 46,637 47,391 PROPERTY, PLANT AND EQUIPMENT - net 16,442 17,605 OTHER ASSETS 1,035 364 -------- -------- $ 64,114 $ 65,360 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable - trade $ 3~~,737~~ $Consolidated ~~2,321~~Condensed ~~Line~~Statements of ~~credit 6~~Operations,~~200~~ ~~3,300 Current portion of long~~Three-~~term~~Month ~~debt~~Period ~~and~~Ended ~~lease~~May ~~liability 1,885 1,820 Taxes payable 72 1,274 Accrued expenses 2,311~~ 3,~~952~~ ~~--------~~2003 ~~--------~~and ~~Total~~May ~~current liabilities 14~~4,~~205~~ ~~12,667~~2002 ~~--------~~(Unaudited) ~~--------~~................. ~~LONG-TERM~~4 ~~DEBT~~Consolidated ~~8,206~~Condensed ~~9,166~~Statement ~~--------~~of ~~--------~~Changes ~~DEFERRED~~in ~~TAXES 35 35 -------- -------- COMMITMENTS AND CONTINGENCIES STOCKHOLDERS~~Stockholders' ~~EQUITY:~~Equity, ~~Preferred stock~~ Three-Month ~~par~~Period ~~value~~Ended ~~$1.00~~May ~~per share; 1~~3,~~000,000~~ ~~shares~~2003 ~~authorized; none issued -- -- Common stock - par value $~~(Unaudited).~~001~~................................. ~~per~~5 ~~share;~~Consolidated ~~20,000,000~~Condensed ~~shares~~Statements ~~authorized;~~of ~~8,386,000~~Cash ~~and 8~~Flows,~~329,000~~ ~~shares~~Three-Month ~~issued~~Period ~~and~~Ended ~~outstanding~~May ~~as of August~~ 3, ~~2002~~2003 and ~~February~~May 24, 2002 8(Unaudited).................. 86 ~~Additional~~Notes ~~paid-in~~to ~~capital~~Consolidated ~~32,391~~Condensed ~~32,221~~Financial ~~Retained~~Statements................................................. ~~earnings~~7-14 ~~15,711~~ITEM ~~17,753 Accumulated other comprehensive income (13) (61) Treasury stock,~~ 2~~,143,000,~~. asMANAGEMENT'S ofDISCUSSION ~~August~~AND 3,ANALYSIS ~~2002~~OF ~~and~~FINANCIAL ~~February~~CONDITION 2,AND ~~2002,~~RESULTS ~~respectively~~OF ~~(6,429)~~OPERATIONS............................................... ~~(6,429)~~ 15-~~-------~~19 ~~--------~~PART ~~Total~~II ~~stockholders'~~OTHER ~~equity~~INFORMATION: ~~41,668~~Item ~~43,492~~1 ~~--------~~Through ~~--------~~Item $6 ~~64,114~~....................................... $20 ~~65,335~~Signature ~~========~~Page............................................... ~~========~~21

-2- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)

~~Three~~ASSETS ~~Months~~May ~~Ended~~3, ~~Six~~February ~~Months~~1, ~~Ended~~ ------ 2003 2003 ---------~~-----------~~ ---------~~---------------~~ ~~August~~(Unaudited) 3,CURRENT ~~August~~ASSETS: 4,Cash ~~August~~and 3,equivalents ~~August~~$ 4,100 ~~2002~~$ ~~2001~~1,124 ~~2002~~Accounts ~~2001~~receivable: ~~--------~~Trade ~~--------~~(less ~~--------~~allowances ~~--------~~of ~~NET~~$3,251 ~~SALES~~and $ 203,~~296~~400, $respectively) 2814,~~210~~332 ~~$ 50~~14,~~430~~173 $Other 57751 649 Inventories 25,~~386~~678 ~~COST~~25,952 OFPrepaid ~~GOODS~~expenses ~~SOLD~~and 17other current assets 3,~~135~~959 223,~~633~~095 41Assets held for sale 2,~~405~~579 462,~~553~~579 ~~--------~~Deferred ~~--------~~taxes 578 578 --------- --------- ~~GROSS~~Total ~~PROFIT~~current ONassets ~~SALES 3~~47,~~161~~977 548,~~577~~150 9PROPERTY,~~025~~ ~~10,833~~PLANT ~~SELLING, GENERAL~~ AND ~~ADMINISTRATIVE~~EQUIPMENT ~~EXPENSES~~- ~~5,467~~net 512,~~531~~940 1113,~~302~~100 ~~10,650~~INTANGIBLES -~~-------~~ net 369 419 OTHER ASSETS 354 356 DEFERRED TAXES 140 140 --------- --------- $ 61,780 $ 62,165 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable -~~-------~~ ~~OPERATING~~trade ~~(LOSS)/INCOME~~$ (24,~~306)~~975 46$ (2,~~277)~~912 ~~183~~Line ~~OTHER~~of ~~INCOME/(EXPENSE):~~credit ~~Gold~~6,500 ~~consignment~~7,000 ~~fee~~Current ~~(268)~~portion ~~(407)~~of ~~(579)~~long-term ~~(657)~~debt ~~Interest~~1,727 ~~expense~~1,697 ~~(268)~~Debt ~~(275)~~on ~~(468)~~buildings ~~(522)~~held ~~Interest~~for ~~income~~sale 5119 9183 11Taxes 43payable ~~Other~~100 ~~income~~100 8Accrued 27expenses 192,961 343,373 -------- -~~-------~~ -------- -~~-------~~ Total ~~Other~~current ~~Expense~~liabilities ~~(523) (646) (1~~16,~~017)~~382 (115,~~102)~~265 --------- --------- LONG-TERM DEBT 6,862 7,305 --------- --------- ~~LOSS~~COMMITMENTS ~~BEFORE~~AND ~~INCOME~~CONTINGENCIES ~~TAXES~~STOCKHOLDERS' ~~(2,829)~~EQUITY: ~~(600)~~Preferred ~~(3,294)~~stock ~~(919)~~- ~~INCOME~~par ~~TAX~~value ~~BENEFIT (~~$1~~,075)~~.00 ~~(234)~~per (share; 1,~~252)~~000,000 ~~(349)~~shares ~~--------~~authorized; none issued --~~------~~ --~~------~~ Common stock -~~-------~~ ~~NET~~par ~~LOSS~~value $.001 (1per share; 20,~~754)~~000,000 $shares ~~(366)~~authorized; $8,385,747 (2shares issued and outstanding as of May 3,~~042)~~ $2003 ~~(570)~~and ~~========~~February ~~========~~1, ~~========~~2003, ~~========~~respectively ~~LOSS~~8 ~~PER~~8 ~~SHARE~~Additional paid-in ~~BASIC~~capital ~~AND~~32,391 ~~DILUTED~~32,391 $Retained ~~(.28)~~earnings $12,574 ~~(.06)~~13,579 $Accumulated comprehensive (~~.33~~loss)/gain $ (~~.09~~8) ~~========~~46 ~~========~~Treasury ~~========~~stock, ~~========~~2,140,849 ~~WEIGHTED~~shares ~~AVERAGE~~as ~~NUMBER~~of OFMay ~~SHARES~~3, 62003 and February 1,~~242~~ 62003,~~198~~ respectively (6,~~239~~429) (6,~~209~~429) ~~========~~--------- ~~========~~--------- Total stockholders' equity 38,536 39,595 --------- --------- $ 61,780 $ 62,165 ========= =========

The accompanying notes are an integral part of these consolidated financial statements. -3- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT EARNINGS PER SHARE)

~~Accumulated~~Three ~~Common~~Months ~~Stock~~Ended ~~Additional Other Treasury Stock~~ ------------ ~~Paid~~-~~In Retained Comprehensive~~ ---------------- ~~Shares~~May ~~Dollars~~3, ~~Capital~~May ~~Earnings~~4, ~~Income/(Loss)~~2003 ~~Shares~~2002 ~~Dollars Total~~ -------- -------- ~~--------~~NET ~~--------~~SALES ~~-------------~~$ ~~--------~~20,619 $ 30,135 COST OF GOODS SOLD 17,010 24,270 -------- -------- ~~Balance~~GROSS -PROFIT ~~February~~ON 2,SALES ~~2002 8~~3,~~329~~609 ~~$ 8 $ 32~~5,~~221~~865 ~~$ 17~~SELLING,~~753~~ $GENERAL ~~(61)~~AND ~~(2,143)~~ADMINISTRATIVE $EXPENSES (64,~~429)~~767 ~~$ 43~~5,~~492~~685 ~~Issuance~~NON-CASH ofSTOCK ~~stock~~COMPENSATION 57 -- ~~170~~150 -- -- -- -- ~~170 Comprehensive Income: Change in fair value of Cash flow hedges~~ -- -- -- -- 48OPERATING --(LOSS)/INCOME --(1,158) 4830 ~~Net~~OTHER ~~loss~~INCOME/(EXPENSE): --Gold --consignment --fee (~~2,042~~264) --(311) --Interest --expense (~~2,042~~208) ~~--------~~(200) ~~--------~~Interest ~~--------~~income ~~--------~~3 6 Other income 6 11 -------- -------- Total Other Expense (463) (494) -------- -------- ~~Total~~LOSS ~~Comprehensive~~BEFORE ~~income~~INCOME --TAXES ~~-- --~~ (21,~~042~~621) ~~48 -- --~~ (~~1,994~~464) ~~--------~~INCOME ~~--------~~TAX ~~--------~~BENEFIT ~~--------~~(616) ~~--------~~(176) -------- -------- ~~--------~~NET ~~Balance~~LOSS ~~- August 3, 2002 8,386~~ $ ~~8 $ 32,391 $ 15,711 $~~ (~~13) (2~~1,~~143~~005) $ (~~6,429~~288) ~~$ 41,668~~ ======== ======== ~~========~~LOSS ~~========~~PER SHARE - BASIC AND DILUTED ($ .16) ($ .05) ======== ======== WEIGHTED AVERAGE NUMBER OF SHARES - BASIC AND DILUTED 6,245 6,237 ======== ========

See accompanying notes to the consolidated condensed financial statements. -4- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (UNAUDITED) (IN THOUSANDS)

~~Six~~Common ~~Months~~Stock ~~Ended~~Additional Accumulated Treasury Stock -------------------- ~~August~~Paid-In 3,Retained ~~August~~Comprehensive ~~4, 2002 2001~~ ---- -------------- ~~CASH~~Shares ~~FLOWS~~Dollars ~~FROM~~Capital ~~OPERATING~~Earnings ~~ACTIVITIES: Net loss $~~ Gain/(~~2,042~~Loss) $Shares ~~(570)~~Dollars ~~Adjustments~~Total to-------- ~~reconcile~~-------- ~~net~~-------- ~~loss~~-------- to-------- ~~net~~-------- ~~cash~~-------- ~~provided~~-------- byBalance ~~operating~~- ~~activities:~~February ~~Depreciation and amortization~~ 1,~~580~~ 12003 8,~~763~~386 ~~Provision~~$ ~~for~~8 ~~accounts~~$ ~~receivable~~32,391 88$ ~~(229)~~13,579 ~~Provision~~$ ~~for~~46 ~~sales returns~~ (2,~~951~~141) $ (~~826~~6,429) ~~Issuance~~$ of39,595 ~~stock~~Comprehensive ~~170~~Loss: 25Change ~~(Increase)/decrease~~ in ~~operating~~fair ~~assets:~~value ~~Accounts~~of ~~receivable~~Cash ~~3,634~~flow ~~(5,125)~~hedges ~~Inventories~~-- ~~(440)~~-- ~~(6,878)~~-- ~~Prepaid~~-- ~~expenses and other current assets~~ (~~1,144~~54) 36-- ~~Other~~-- ~~assets~~ (~~677~~54) ~~183~~Net ~~Increase/(decrease)~~loss in-- ~~operating~~-- ~~liabilities:~~-- ~~Accounts payable 1,416 203 Accrued expenses~~ (1,~~593~~005) ~~(582)~~-- ~~Taxes~~-- ~~payable~~-- (1,~~202~~005) ~~(287)~~ -------- -------- ~~Net cash used in operating activities (3,161) (12,287)~~ -------- -------- ~~CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property, plant and equipment~~ - ~~net (411) (849)~~ -------- -------- ~~Net cash used in investing activities (411) (849)~~ -------- -------- ~~CASH~~Total ~~FLOWS~~comprehensive ~~FROM~~Loss ~~FINANCING~~-- ~~ACTIVITIES:~~-- ~~Principal payments of long~~-~~term~~- ~~debt and capital lease liabilities~~ (~~895~~1,005) (~~834~~54) ~~Proceeds~~-- ~~from line of credit 2,900 9,950 Purchase of treasury stock~~ -- (801,059) -------- -------- ~~Net~~-------- ~~cash~~-------- ~~provided by financing activities 2,005 9,036~~ -------- -------- ~~DECREASE IN CASH AND EQUIVALENTS (1,567) (4,100) CASH AND EQUIVALENTS AT BEGINNING OF PERIOD 2,129 4,114~~ -------- -------- ~~CASH~~Balance ~~AND~~- ~~EQUIVALENTS~~May AT3, ~~END~~2003 OF8,386 ~~PERIOD~~$ 8 $ ~~562~~32,391 $ 1412,574 $ (8) (2,141) $ (6,429) $ 38,536 ======== ======== ~~SUPPLEMENTAL~~======== ~~DISCLOSURE~~======== OF======== ~~CASH~~======== ~~FLOW~~======== INFORMATION: Cash paid during the period for: Interest and gold consignment fees $ 1,089 $ 1,142 Taxes $ 581 $ -- SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING ACTIVITY: Change in fair value of cash flow hedges $ 48 $ 128========

See accompanying notes to the consolidated condensed financial statements. -5- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)

See accompanying notes to the consolidated condensed financial statements. -6- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 3, 2003 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The unaudited condensed consolidated financial statements as of May 3, 2003 and related notes have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been omitted pursuant to such rules and regulations. The accompanying unaudited interim consolidated condensed financial statements and related notes should be read in conjunction with the financial statements and related notes included in the 2003 Annual Report to Stockholders of Michael Anthony Jewelers, Inc. (the "Company"). The information furnished reflects, in the opinion of the management of the Company, all adjustments, consisting of normal recurring accruals, which are necessary to present a fair statement of the results for the interim periods presented. The interim figures are not necessarily indicative of the results to be expected for the fiscal year due to the seasonal nature of the business. Nature of Operations Michael Anthony Jewelers, Inc. ("Michael Anthony" or "the Company"), is a leading designer, marketer and manufacturer of affordable branded fine jewelry whose customers include jewelry chain stores, discount stores, department stores, television home shopping networks, and wholesalers. Basis of Consolidation and Presentation The accompanying consolidated financial statements include the accounts of Michael Anthony Jewelers, Inc. and its subsidiaries, all of which are wholly-owned. All intercompany balances and transactions have been eliminated. -7- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 3, 2003 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Inventories and Cost of Goods Sold Inventories are valued at lower of cost (first-in, first-out method) or market. The Company satisfies a majority of its gold supply needs through gold consignment agreements with financial institutions that lease gold to the Company ("gold lenders"), whereby the gold lenders have agreed to consign fine gold to the Company (see Note 3). In accordance with the terms of the agreements, the Company has the option of repaying the gold lenders in an equivalent number of ounces of fine gold or cash based upon the then quoted market price of gold. The principal component of cost of goods sold is the cost of the gold bullion and other raw materials used in the production of the Company's jewelry. Other components of cost of goods sold include direct costs incurred by the Company in its manufacturing operations, depreciation, freight and insurance. Property, Plant and Equipment Property, plant and equipment are carried at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets, five to fifteen years for machinery and equipment and thirty years for buildings. Building improvements are amortized over the lesser of the estimated life of the asset. Intangibles In June 2001, the Financial Accounting Standards Board issued Statements of Financial Accounting Standards No. 141, "Business Combinations", ("FAS 141"), and No. 142, "Goodwill and Other Intangible Assets", ("FAS 142"), effective for fiscal years beginning after December 15, 2001. Under the new standards, goodwill and intangible assets deemed to have indefinite lives are no longer amortized but are subject to annual impairment tests in accordance with FAS 142. Other intangibles with determinable lives will continue to amortized for the duration of their useful lives. The adoption of this statement in Fiscal 2003 had no material effect on the Company. Intangible assets (acquired in Fiscal 2003, in connection with an immaterial acquisition) as of February 1, 2003, consisted of a covenant-not-to-compete which is being amortized over the life of the related revenue not to exceed five years. -8- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 3, 2003 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Long-lived Assets The Company reviews certain long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In that regard, the Company assesses the recoverability of such assets based upon estimated non-discounted cash flow forecasts. If asset impairment is identified, the asset is written down to fair value based on discounted cash flow or other fair value measures. Revenue Recognition Revenue from sales to customers (other than consignment) is recognized at the time the merchandise is shipped. Merchandise sold under consignment arrangements between the Company and certain customers is not recognized as revenue by the Company until the products are sold by the consignee. In certain cases, the Company accepts payment for merchandise in gold. Credit Risk Financial instruments, which potentially subject us to concentration of credit risk, consist principally of temporary cash investments and accounts receivable. The Company performs ongoing credit evaluations of its customers' financial condition and, generally, require no collateral from our customers. The allowance for non-collections of accounts receivable is based upon the expected collectibility of all accounts receivable Allowance for Sales Returns The Company reduces gross sales by the amount of discounts and returns to determine net sales. Each month the Company estimates a reserve for returns based on historical experience and the amount of gross sales. The reserve is adjusted periodically to reflect the Company's actual return experience. Shipping and Handling Costs Shipping and handling costs billed to customers are recorded as revenue. The costs associated with shipping goods to customers are recorded as a selling expense. -9- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 3, 2003 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Advertising Expense Advertising costs are expensed as incurred. Advertising costs associated with cooperative advertising programs are accrued as the related revenues are recognized. Cash Equivalents Highly liquid investments with maturities of three months or less when purchased are classified as cash equivalents. Derivative Financial Instruments On January 28, 2001, the Company adopted Statement of Financial Accounting Standards No. 133 ("FAS 133") "Accounting for Derivative Instruments and Hedging Activities", as amended, and interpreted, which requires that all derivative instruments be recorded on the balance sheet at their fair value. SFAS 133 requires the Company to recognize all derivatives as either assets or liabilities on the balance sheet and to measure those instruments at fair value. Additionally, the fair value adjustments will affect either stockholders' equity or net income depending on whether the derivative instrument qualifies as a hedge for accounting purposes and, if so, the nature of the hedging activity. The impact of adopting FAS 133 on the Company's Statement of Income and Balance Sheet was not material. The Company uses financial instruments, including commodity futures, forwards and options on futures, to limit its exposure to fluctuations in the price of gold. The Company does not enter such contracts for speculative purposes. For derivative instruments that are designated and qualify as a fair value hedge (i.e., hedging the exposure to changes in the fair value of an asset or a liability or an identified portion thereof that is attributable to a particular risk), the gain or loss on the derivative instrument as well as the offsetting gain or loss on the hedged item attributable to the hedged risk are recognized in earnings in the current period. For derivative instruments that are designated and qualify as a cash flow hedge (i.e., hedging the exposure of variability in expected future cash flows that would be attributable to a particular risk), the effective portion of the gain or loss on the derivative instrument is reported as a component of other comprehensive loss. -10- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 3, 2003 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Stock Options The Company accounts for all transactions under which employees receive shares of stock or other equity instruments in the Company based on the price of its stock in accordance with the provisions of Accounting Principles Board Opinion No. 25 "Accounting for Stock Issued to Employees." No stock-based employee compensation cost is reflected in net loss, as all options granted under the plan had an exercise price equal to the market value of the underlying common stock on the date of grant. The following table illustrates the effect on net loss and earnings per share if the Company had applied the fair value recognition provisions of SFAS No. 123 "Accounting for Stock-Based Compensation".

-11- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 3, 2003 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Stock Options The fair value for each option granted was estimated at the date of grant using the Black-Scholes option-pricing model, one of the allowable valuation methods under SFAS 123, with the following assumptions:

Effect of Recently Issued Accounting Standards In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which changes the accounting for costs such as lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity initiated after December 31, 2002. The standard requires companies to recognize the fair value of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The implementation of this standard did not have a material effect on the results of operations. In November 2002, the FASB issued FASB Interpretation No. 45, ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". FIN 45 addresses the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees. The disclosure requirements in this Interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The implementation of this interpretation did not have an effect on the consolidated financial statements. -12- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 3, 2003 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) 1. NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Effect of Recently Issued Accounting Standards (Continued) In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). FASB Statements No. 133 "Accounting for Derivative Instruments and Hedging Activities" and No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", establish accounting and reporting standards for derivative instruments including derivatives embedded in other contracts (collectively referred to as derivatives) and for hedging activities. SFAS No. 149 amends Statement 133 for certain decisions made by the Board as part of the Derivatives Implementation Group process. This Statement contains amendments relating to FASB Concepts Statement No. 7, "Using Cash Flow Information and Present Value in Accounting Measurements", and FASB Statements No. 65, "Accounting for Certain Mortgage Banking Activities", No. 91 "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases", No. 95, "Statement of Cash Flows", and No. 126, "Exemption from Certain Required Disclosures about Financial Instruments for Certain Nonpublic Entities". The provisions of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 is not expected to have any impact on the Company's financial statements or results of operations. 2. PRODUCT PRICING The Company's products, the principal component of which is gold, are generally sold at prices which are based on the market price of gold on the date merchandise is ordered or shipped to the customer, therefore, the Company's sales volume is significantly influenced by the market price of gold. The selling prices for certain customers may be fixed for a specific period of time. In such cases, the Company is able to shift a substantial portion of the risks of gold price fluctuation by hedging against changes in the price of gold by entering into forward contracts or purchasing futures or options on futures. -13- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES FORM 10-Q FOR QUARTER ENDED MAY 3, 2003 NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) 2. PRODUCT PRICING (Continued) The Company has recorded a $54,000 loss as a component of accumulated other comprehensive (loss)/income for the three months ended May 3, 2003 related to the gold price hedge. The Company's consigned gold inventory is hedged against the effects of price fluctuations. The Company has entered into arrangements with certain gold lenders (the "Gold Lenders") pursuant to which the Company does not purchase gold from the Gold Lenders until receipt of a purchase order from, or shipment of jewelry to, its customers. These arrangements permit the Company to match the sales price of the product with the price the Company pays for the gold. The average selling price of gold in the current quarter was $351 per ounce compared to $292 per ounce for the quarter ended May 4, 2002. 3. INVENTORIES Inventories consist of:

Inventories as of May 3, 2003 and February 1, 2003 excluded approximately 125,000 and 136,000 ounces of gold on consignment, respectively. -14- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MAY 3, 2003 AND MAY 4, 2002 Net sales for the three months ended May 3, 2003 were approximately $20,619,000, a decrease of 31.6% from net sales of approximately $30,135,000 for the comparable period last year. The decrease in sales was primarily due to decreased shipments to the retail segment of our customer base and a higher reserve for returns, which were offset in part by increases in the sales prices due to an increase in the average market price of gold. Gross profit margin decreased to 17.5% of net sales for the three months ended May 3, 2003 compared to 19.5% for the comparable period last year. Excluding the effect of the increase in the average market price of gold, the gross profit margin would have been 19.5% for the three months ended May 3, 2003. Selling, general and administrative expenses for the three months ended May 3, 2003 were approximately $4,767,000, a decrease of $918,000 or 16.1% from approximately $5,685,000 for the comparable period last year. The decrease is primarily attributable to decreases in payroll and payroll related expenses. Interest expense and gold consignment fees for the three months ended May 3, 2003, were approximately $472,000, a decrease of $39,000 or 7.6% compared to approximately $511,000 for the comparable period last year. The decrease was primarily due to the Company's lower average level of consigned inventory. The effective income tax rate was approximately 38.0% for the three months ended May 3, 2003, and 37.9% for the three months ended May 4, 2002. As a result of the above factors, the Company had a net loss for the three months ended May 3, 2003 of $1,005,000 compared to a net loss of $288,000 for the comparable period last year. Basic and diluted loss per share for the three months ended May 3, 2003 was $.16 compared to $.05 for the comparable period last year. -15- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) Liquidity and Capital Resources We rely on a gold consignment program, short-term borrowings and internally generated funds to finance our working capital requirements. We fill most of our gold supply needs through gold consignment arrangements with gold lenders. Under the terms of those arrangements, we are entitled to lease the lesser of (a) an aggregate of 175,000 ounces of fine gold or (b) consigned gold with an aggregate value equal to $62,200,000. The consigned gold is secured by certain property of Michael Anthony, including inventory and accounts receivable. Michael Anthony pays the gold lenders a consignment fee based on the dollar value of ounces of gold outstanding under their respective agreements, which value is based on the daily Second London Gold Fix. We believe that our financing rate under the consignment arrangements is substantially similar to the financing rates charged to gold consignees similarly situated to Michael Anthony. As of May 3, 2003, Michael Anthony held approximately 125,000 ounces of gold on consignment with a market value of $42,401,000. The consignment agreements contain restrictive covenants relating to maximum usage, net worth, working capital and other financial ratios and the agreements requires Michael Anthony to own a specific amount of gold at all times. At May 3, 2003, Michael Anthony's owned gold inventory was valued at approximately $6,543,000. We believe that the supply of gold available through our gold consignment arrangements, together with the gold we own, is sufficient to meet our requirements. The consignment agreements are for a period of one year ending March 30, 2004. Management believes that the consignment agreements will be renewed. Consigned gold is not included in our inventory, and there is no related liability recorded. As a result of these consignment arrangements, Michael Anthony is able to shift a substantial portion of the risk of market fluctuations in the price of gold to the gold lenders, since Michael Anthony does not purchase gold from the gold lenders until receipt of a purchase order from, or shipment of jewelry to, our customers. Michael Anthony then either locks in the selling price of the jewelry to our customers at the same time as the required purchase of gold from the gold lenders or hedges against changes in the price of gold by entering into forward contracts or purchasing futures or options on futures that are listed on the COMEX. At May 3, 2003 there were 15,000 ounces on forward contracts and no options on futures outstanding. -16- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) Liquidity and Capital Resources (continued) While we believe our supply of gold is relatively secure, significant increases or rapid fluctuations in the cost of gold may impact the demand for our products. From February 2, 2003 until May 3, 2003, the closing price of gold according to the Second London Gold Fix ranged from a low of $320 per ounce to a high of nearly $383 per ounce. Fluctuations in the precious metals markets and credit may result in an interruption of our gold supply or the credit arrangements necessary to allow us to support our accounts receivable and continue the use of consigned gold. In April 2003, the Company accepted an offer for the sale of one of its buildings. The Company expects to complete this transaction in the fourth quarter of Fiscal 2004. The Company has a credit arrangement with a commercial bank which varies seasonally from $10,000,000 to $20,000,000 (the "line of credit"). The line of credit is secured by a lien on certain assets of the Company, including accounts receivable and inventory. The Company believes that the interest rate under the line of credit is substantially similar to the interest rates of other companies similarly situated to Michael Anthony. The line of credit expires on March 30, 2004 subject to annual renewal. Management believes that the line of credit will be renewed; however, if the current lender decides not to renew the line, the Company believes that other lenders would be willing to enter into a similar arrangement. At May 3, 2003, there was $6,500,000 outstanding under the line of credit. During the three months ended May 3, 2003, cash provided by operating activities was $164,000. During the comparable period of the prior year, the Company used $5,278,000 of cash in operating activities. Cash of $211,000 was used in investing activities as compared to $206,000 used during the comparable three-month period last year. Cash of $977,000 was used by financing activities during the three-month period, compared to $3,456,000 provided in the comparable period of the prior year. The decrease was primarily due to the Company's drawings on its line of credit in the comparable period of the prior year. For the balance of fiscal 2004, the Company projects capital expenditures of approximately $1,289,000. -17- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) Forward Looking Statements This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. These forward-looking statements include the words "believe," "expect," "plans" or similar words and are based in part on the Company's reasonable expectations and are subject to a number of factors and risks, many of which are beyond the Company's control. Actual results could differ materially from those discussed under "Management's Discussion and Analysis of Financial Condition and Results of Operations" as a result of any of the following factors: a) general economic conditions and their impact on the retail environment; b) fluctuations in the price of gold and other metals used to manufacture the Company's jewelry; c) risks related to the concentration of the Company's customers, particularly the operations of any of its top customers; d) increased competition from outside the United States where labor costs are substantially lower; e) variability of customer requirements and the nature of customers' commitments on projections and orders; and f) the extent to which the Company is able to attract and retain key personnel. In light of these uncertainties and risks, there can be no assurance that the forward-looking statements in this Quarterly Report on Form 10-Q will occur or continue in the future. Except for its required, periodic filings under the Securities Exchange Act of 1934, the Company undertakes no obligations to release publicly any revisions to these forward looking statements that may reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. -18- ITEM 2 MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (INFORMATION SUBSEQUENT TO FEBRUARY 1, 2003 IS UNAUDITED) Effect of Recently Issued Accounting Standards. In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated with Exit or Disposal Activities," which changes the accounting for costs such as lease termination costs and certain employee severance costs that are associated with a restructuring, discontinued operation, plant closing, or other exit or disposal activity initiated after December 31, 2002. The standard requires companies to recognize the fair value of costs associated with exit or disposal activities when they are incurred rather than at the date of a commitment to an exit or disposal plan. The implementation of this standard did not have a material effect on our results of operations. In November 2002, the FASB issued FASB Interpretation No. 45, ("FIN 45"), "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others". FIN 45 addresses the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under guarantees. The disclosure requirements in this Interpretation are effective for financial statements of interim or annual periods ending after December 15, 2002. The implementation of this interpretation did not have an effect on the consolidated financial statements. In April 2003, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 149 "Amendment of Statement 133 on Derivative Instruments and Hedging Activities" ("SFAS No. 149"). FASB Statements No. 133 "Accounting for Derivative Instruments and Hedging Activities" and No. 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities", establish accounting and reporting standards for derivative instruments including derivatives embedded in other contracts (collectively referred to as derivatives) and for hedging activities. SFAS No. 149 amends Statement 133 for certain decisions made by the Board as part of the Derivatives Implementation Group process. This Statement contains amendments relating to FASB Concepts Statement No. 7, "Using Cash Flow Information and Present Value in Accounting Measurements", and FASB Statements No. 65, "Accounting for Certain Mortgage Banking Activities", No. 91 "Accounting for Nonrefundable Fees and Costs Associated with Originating or Acquiring Loans and Initial Direct Costs of Leases", No. 95, "Statement of Cash Flows", and No. 126, "Exemption from Certain Required Disclosures about Financial Instruments for Certain Nonpublic Entities". The provisions of SFAS No. 149 are effective for contracts entered into or modified after June 30, 2003. The adoption of SFAS No. 149 is not expected to have any impact on the Company's financial statements or results of operations. -19- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES PART II - OTHER INFORMATION Item 1 and 2 Not applicable. Item 3. Quantitative and Qualitative Disclosure about Market Risk The carrying amounts of financial instruments, including cash and cash equivalents, accounts receivable, accounts payable and accrued liabilities, approximate fair value because of the current nature of these instruments. The carrying amount reported for revolving credit and long-term debt approximate fair value because of the interest rates on these instruments approximate current market rates. Because the interest rates on our long term debt is fixed and our revolving debt is utilized seasonally we do not hedge against interest rate increases. Consigned gold is not included in the Company's inventory, and there is no related liability recorded. As a result of these consignment arrangements, the Company is able to shift a substantial portion of the risk of market fluctuations in the price of gold to the Gold Lenders, since the Company does not purchase gold from the Gold Lenders until receipt of a purchase order form, or shipment of jewelry to, its customers. The Company then either locks in the selling price of the jewelry to its customers concurrently with the required purchase of gold from the Gold Lenders or hedges against changes in the price of gold by entering into forward contracts or purchasing futures or options on futures that are listed on the COMEX. While the Company believes its supply of gold is relatively secure, significant increases or rapid fluctuations in the cost of gold may result in reduced demand for the Company's products. All of our revenues are realized in U.S. dollars and all of our revenues are from customers in the United States. Therefore, we do not believe we face significant direct foreign currency exchange rate risk. We do not hedge against foreign currency exchange rate changes. Item 4 and 5 Not applicable Item 6. (a) Exhibits None (b) Reports on Form 8-K Press Release. -20- MICHAEL ANTHONY JEWELERS, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. MICHAEL ANTHONY JEWELERS, INC. Dated: June 12, 2003 By: /s/ Allan Corn --------------------------------- Allan Corn Senior Vice President and Chief Financial Officer -21- SARBANES-OXLEY SECTION 302(A) CERTIFICATIONS I, Michael W. Paolercio, Chief Executive Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Michael Anthony Jewelers, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent valuation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a) all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and -22- 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 12, 2003 /s/ Michael W. Paolercio Chief Executive Officer -23- SARBANES-OXLEY SECTION 302(A) CERTIFICATIONS I, Allan Corn, Chief Financial Officer, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Michael Anthony Jewelers, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have: a) designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; b) evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and c) presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date; 5. The registrant's other certifying officers and I have disclosed, based on our most recent valuation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent function): a. all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and -24- b. any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and 6. The registrant's other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses. Date: June 12, 2003 /s/ Allan Corn Chief Financial Officer -25-

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