SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
----
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
----
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED OCTOBER 29, 1995
----
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: 0-8550
PCA INTERNATIONAL, INC.
---------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-0888429
- - --------------------------------- ---------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
815 MATTHEWS-MINT HILL ROAD
MATTHEWS, NORTH CAROLINA 28105
(Address of principal executive offices)
(Zip Code)
(704) 847-8011
--------------------------------------------------------
(Registrant's telephone number, including area code)
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 report), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO____
Indicate the number of shares outstanding of each of the issuer's classes of
Common Stock, as of the latest practicable date.
COMMON STOCK, $0.20 PAR VALUE 7,481,871
- - ---------------------------------- -----------------------------------
CLASS OUTSTANDING AT DECEMBER 1, 1995
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
I N D E X
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION: PAGE NO.
ITEM 1. FINANCIAL STATEMENTS:
<S> <C> <C>
Consolidated Balance Sheets - October 29, 1995, and
January 29, 1995................................... 1
Consolidated Statements of Income - Three Months and Nine Months
Ended October 29, 1995 and October 30, 1994.................... 2
Consolidated Statement of Changes in Shareholders' Equity - Nine
Months Ended October 29, 1995................................... 3
Consolidated Statements of Cash Flows - Nine Months Ended
October 29, 1995 and October 30, 1994....................... 4
Condensed Notes to Consolidated Financial Statements............ 5-6
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations....................................... 7-9
PART II. OTHER INFORMATION:
ITEM 6. Exhibits and Reports on Form 8-K................................ 10
SIGNATURES ................................................................ 10
EXHIBIT INDEX ................................................................ 11-12
EXHIBIT 11 ................................................................ 13
EXHIBIT 27 ................................................................ 14
</TABLE>
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
- - ---------------------------------------------------------------------------------------
OCTOBER 29, January 29,
ASSETS 1995 1995
- - ---------------------------------------------------------------------------------------
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents......................... $ 496,275 $ 311,759
Accounts receivable (net of allowance for
doubtful accounts of $1,765,022 and $845,843):
Due from licensor stores and customers........ 13,399,524 6,408,629
Other, including employee advances............ 318,484 1,263,681
Inventories....................................... 3,163,405 3,243,571
Deferred income taxes............................. 2,583,874 1,952,293
Prepaid expenses.................................. 591,623 636,907
--------------- ---------------
TOTAL CURRENT ASSETS.......................... 20,553,185 13,816,840
--------------- ---------------
PROPERTY:
Land and improvements............................. 1,169,495 1,169,495
Building and improvements......................... 7,679,071 7,630,427
Photographic and sales equipment.................. 42,894,216 40,884,594
Photographic finishing equipment.................. 12,133,745 12,076,064
Furniture and equipment........................... 9,908,600 9,475,787
Transportation equipment.......................... 206,807 205,664
Leasehold improvements............................ 11,787,347 10,408,620
Construction in progress.......................... 2,171,360 1,629,026
--------------- ---------------
Total......................................... 87,950,641 83,479,677
Less: Accumulated depreciation and amortization.. 43,532,198 37,752,137
--------------- ---------------
PROPERTY, NET................................. 44,418,443 45,727,540
--------------- ---------------
OTHER ASSETS......................................... 26,269 12,569
--------------- ---------------
TOTAL ASSETS......................................... $64,997,897 $59,556,949
=============== ===============
- - ----------------------------------------------------------------------------------------------
OCTOBER 29, January 29,
1995 1995
LIABILITIES AND SHAREHOLDERS' EQUITY
- - ----------------------------------------------------------------------------------------------
CURRENT LIABILITIES:
Short-term borrowings.................................. $ 8,959,175 $ 974,215
Accounts payable-trade................................. 11,496,830 11,418,568
Accrued and withheld sales and payroll taxes........... 315,257 332,432
Accrued income taxes................................... 643,750 1,492,427
Accrued compensation................................... 3,789,242 3,015,943
Other accrued liabilities.............................. 5,828,460 3,279,824
---------------- ----------------
TOTAL CURRENT LIABILITIES.......................... 31,032,714 20,513,409
---------------- ----------------
DEFERRED INCOME TAXES..................................... 3,990,532 3,083,062
---------------- ----------------
OTHER LIABILITIES......................................... 3,060,474 2,928,023
---------------- ----------------
SHAREHOLDERS' EQUITY:
Preferred stock, $10.00 par value
(authorized-2,000,000 shares; outstanding-none)....... -- --
Common Stock, $0.20 par value (authorized-20,000,000
shares; issued-7,481,871 shares and 8,160,171 shares).
1,496,375 1,632,035
Additional paid-in capital............................. 5,044,629 12,204,069
Retained earnings...................................... 20,552,243 19,444,035
Cumulative foreign currency translation adjustments.... (179,070) (215,087)
---------------- ----------------
Total.............................................. 26,914,177 33,065,052
Less: Unearned compensation............................ -- 32,597
---------------- ----------------
TOTAL SHAREHOLDERS' EQUITY......................... 26,914,177 33,032,455
---------------- ----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY................ $64,997,897 $59,556,949
================ ================
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
1
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
------------------------------ ---------------------------------
OCTOBER 29, October 30, OCTOBER 29, October 30,
1995 1994 1995 1994
-------------- ------------- --------------- -------------
<S> <C> <C> <C> <C>
SALES $36,890,845 $38,695,847 $98,129,089 $99,737,100
-------------- ------------- --------------- -------------
COSTS AND EXPENSES:
Advertising and promotional costs....................... 4,194,123 6,367,690 11,127,541 15,091,149
Costs of photographic sales............................. 12,536,703 12,828,303 33,463,609 36,232,491
Store commissions and selling costs..................... 11,452,713 11,535,672 31,214,335 30,931,904
General and administrative expenses..................... 5,690,289 6,004,057 17,235,289 16,132,859
-------------
-------------- ------------- ---------------
Total costs and expenses............................. 33,873,828 36,735,722 93,040,774 98,388,403
-------------- ------------- --------------- -------------
INCOME FROM OPERATIONS..................................... 3,017,017 1,960,125 5,088,315 1,348,697
Interest expense, net................................... 178,188 118,164 443,733 373,117
-------------- ------------- --------------- -------------
INCOME FROM CONTINUING OPERATIONS BEFORE INCOME TAXES......
2,838,829 1,841,961 4,644,582 975,580
INCOME TAX PROVISION....................................... 1,161,360 747,358 1,917,610 396,864
-------------- ------------- --------------- -------------
INCOME FROM CONTINUING OPERATIONS.......................... 1,677,469 1,094,603 2,726,972 578,716
INCOME FROM DISCONTINUED OPERATIONS (NET OF INCOME TAXES)..
-- -- -- 412,406
-------------- ------------- --------------- -------------
NET INCOME................................................. $ 1,677,469 $ 1,094,603 $ 2,726,972 $ 991,122
============== ============= =============== =============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Primary................................................. 8,030,550 8,589,844 8,149,227 8,554,272
============== ============= =============== =============
Fully Diluted........................................... 8,030,710 8,622,658 8,236,618 8,608,844
============== ============= =============== =============
PRIMARY AND FULLY DILUTED EARNINGS PER COMMON SHARE:
Income from continuing operations....................... $ 0.21 $ 0.13 $ 0.33 $ 0.07
Discontinued operations................................. -- -- -- 0.05
-------------- ------------- --------------- -------------
Net income.............................................. $ 0.21 $ 0.13 $ 0.33 $ 0.12
============== ============= =============== =============
CASH DIVIDENDS PER COMMON SHARE............................ $ 0.07 $ 0.07 $ 0.21 $ 0.21
============== ============= =============== =============
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
2
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED OCTOBER 29, 1995
(UNAUDITED)
<TABLE>
<CAPTION>
CUMULATIVE
FOREIGN
ADDITIONAL CURRENCY
COMMON STOCK PAID-IN RETAINED TRANSLATION UNEARNED
----------------------------
SHARES AMOUNT CAPITAL EARNINGS ADJUSTMENTS COMPENSATION
------------ ------------ -------------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JANUARY 29,1995:.......... 8,160,171 $1,632,035 $12,204,069 $19,444,035 $(215,087) $(32,597)
Net income......................... 2,726,972
Exercise of stock options.......... 66,000 13,200 414,584
Dividends.......................... (1,618,764)
Acquisition of Company stock....... (744,300) (148,860) (7,565,092)
Compensatory stock options......... 23,665
Canceled compensatory stock options
(8,932) 8,932
Foreign currency translation
adjustment...................... 36,017
------------ ------------ -------------- ------------- -------------- -------------
BALANCE, OCTOBER 29, 1995:......... 7,481,871 $1,496,375 $ 5,044,629 $20,552,243 $(179,070) $ 0
============ ============ ============== ============= ============== =============
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
3
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-------------------------------
OCTOBER 29, October 30,
1995 1994
-------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income.......................................................... $2,726,972 $ 991,122
Adjustments to reconcile net income to net cash provided from
operating
activities:
Depreciation.................................................... 6,259,425 5,514,385
Increase in allowance for doubtful accounts..................... 917,930 882,386
Provision for deferred income taxes............................. 275,889 382,181
Loss from disposal of fixed assets.............................. 112,089 68,988
Compensatory stock option expense............................... 23,665 170,130
Increase in other liabilities................................... 132,451 80,804
(Increase) decrease in other noncurrent assets.................. (13,700) 82,362
Changes in operating assets and liabilities:
Increase in accounts receivable............................... (6,982,071) (9,616,883)
Decrease in inventories....................................... 81,571 306,965
Increase in deferred costs applicable to unsold portraits..... -- (64,957)
Decrease in prepaid expenses.................................. 45,533 44,904
Increase in accounts payable.................................. 70,276 1,898,313
Increase (decrease) in accrued expenses....................... 2,452,206 (455,938)
-------------- -------------
NET CASH PROVIDED FROM OPERATING ACTIVITIES......................... 6,102,236 284,762
-------------- -------------
INVESTING ACTIVITIES:
Purchase of property................................................ (5,066,579) (13,770,754)
Proceeds from sale of fixed assets.................................. 47,311 70,883
-------------- -------------
NET CASH USED IN INVESTING ACTIVITIES............................... (5,019,268) (13,699,871)
-------------- -------------
FINANCING ACTIVITIES:
Increase in short-term borrowings................................... 7,984,960 10,860,026
Exercise of stock options........................................... 427,784 68,956
Acquisition of company stock........................................ (7,713,952) --
Cash dividends...................................................... (1,618,764) (1,710,528)
-------------- -------------
NET CASH (USED IN) PROVIDED FROM FINANCING ACTIVITIES............... (919,972) 9,218,454
-------------- -------------
Effect of exchange rate changes on cash............................. 21,520 80,356
-------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................... 184,516 (4,116,299)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD....................... 311,759 5,118,896
-------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD............................. $ 496,275 $1,002,597
============== =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Flow Data:
Interest paid..................................................... $ 269,060 $ 335,891
============== =============
Income taxes paid................................................. $2,375,920 $ 482,520
============== =============
Schedule of Non-cash Financial Activities:
Stock options canceled and unearned compensation credited......... $ 8,932 $ 69,665
============== =============
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
4
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
With respect to the significant accounting policies of PCA
International, Inc., and its subsidiaries (the "Company"), which are
wholly-owned, reference is made to note 1 of the financial statements in the
Company's Form 10-K filed for the fiscal year ended January 29, 1995. The
interim financial statements reflect all adjustments (consisting of normal
recurring accruals) which are, in the opinion of management, necessary for a
fair statement of the results for the interim periods presented.
2. OTHER ACCRUED LIABILITIES:
<TABLE>
<CAPTION>
OCTOBER 29, January 29,
1995 1995
----------------- ----------------
<S> <C> <C>
Costs accrued to complete church
directories.............................. $1,063,486 $1,081,271
Accrued insurance............................ 2,398,169 727,125
Accrued expenses............................. 984,488 893,897
Other........................................ 1,382,317 577,531
----------------- ----------------
$5,828,460 $3,279,824
================= ================
</TABLE>
3. STOCK OPTIONS:
The Company's 1990 Non-Qualified Stock Option Plan (the "1990 Plan")
provides for the grant of up to 1,425,000 non-qualified stock options to key
employees and non-employee Directors. As of October 29, 1995, options for
approximately 462,850 shares were exercisable and in-the-money; options for
225,600 shares were exercisable and out-of-the-money; and options for 10,850
shares were available for future grant under the 1990 Plan. As of October 30,
1994, options for 359,600 shares were exercisable and in-the-money and options
for 153,250 shares were exercisable and out-of-the-money.
The Company's 1992 Non-Qualified Stock Option Plan (the "1992 Plan")
provides for the grant of 1,725,000 non-qualified stock options to key employees
and non-employee Directors of the Company. As of October 29, 1995, options for
128,300 shares were exercisable and in-the-money; options for 201,500 shares
were exercisable and out-of-the-money; and options for 793,700 shares were
available for future grant under the 1992 Plan. As of October 30, 1994, options
for 216,500 shares were exercisable and out-of-the-money.
5
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The following table summarizes all stock option activity for the nine
months ended October 29, 1995 and the prior year nine months ended October 30,
1994:
<TABLE>
<CAPTION>
NUMBER OF SHARES OPTION
PRICE
----------------- ---- -------------------
<S> <C> <C>
OPTIONS OUTSTANDING JANUARY 29, 1995...................... 1,880,550 $ 1.67-$17.00
EXERCISED...................................... (66,000) $ 1.67-$10.00
CANCELED....................................... (99,700) $ 1.67-$16.33
GRANTED........................................ 196,800 $ 10.13-$12.88
=================
OPTIONS OUTSTANDING OCTOBER 29, 1995...................... 1,911,650 $ 1.67-$17.00
=================
OPTIONS OUTSTANDING JANUARY 30, 1994...................... 1,787,750 $ 1.67-$20.25
EXERCISED...................................... (17,300) $ 1.67
CANCELED....................................... (82,100) $ 1.67-$16.33
GRANTED........................................ 216,500 $ 9.50-$10.25
-----------------
OPTIONS OUTSTANDING OCTOBER 30, 1994...................... 1,904,850 $ 1.67-$20.25
-----------------
</TABLE>
4. COMMON STOCK:
On March 8, 1995, the Company's Board of Directors increased the number
of shares authorized for repurchase by 754,490, bringing the total number of
shares authorized for repurchase to 1,000,000. During the first nine months, the
Company purchased, in various transactions, 744,300 shares. The average purchase
price per share was $10.36.
6
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
The Company provides portrait photography services, primarily in
permanent studios operated in Kmart stores, throughout the United States,
Canada, Mexico, Puerto Rico, and the Virgin Islands. In its Institutional
Division, the Company also provides portrait services to church congregations
through traveling promotions. The Company's Kmart Store Division accounted for
approximately 95% of sales during the third quarter and the first nine months of
fiscal 1995.
The Company completed the phase-out of its Kmart traveling photography
promotions in July 1994. Prior to August 1994, the Company operated one-week
traveling promotions on a seven-week rotating cycle in Kmart stores that did not
have a permanent studio. Traveling promotion sales in Kmart stores were $3.3
million for the first nine months of fiscal 1994.
The Company completed the conversion in all of its Kmart studio
locations to its new Digital Imaging System technology in July 1994. The new
Digital Imaging System allows customers to approve each portrait during the
photography session as each pose is displayed on a video monitor. With this
technology, the Company no longer relies on the production of portraits on a
speculative basis, but produces only those custom portraits that the customer
purchased. The conversion to digital technology has resulted in very significant
changes in the Company's operations, increasing the emphasis on higher-quality
portraits and service and allowing the Company to improve its per-customer sales
average. The Company also has benefited from lower production costs primarily
through the elimination of waste from speculative portrait production.
During the second quarter of 1995, Kmart Corporation announced the
closing of 72 stores. The Company had portrait studios in 34 of those stores.
The Company discontinued operating in these 34 locations in the second quarter
and reassigned the assets to new locations in the second and third quarters of
fiscal 1995. (In January 1995, Kmart Corporation closed 110 stores, including 24
in which the Company operated studios.) During the third quarter, the Company
opened 61 new studios and at October 29, 1995, the Company was operating 1,496
Kmart permanent studios, a net increase of 79 studios for the first nine months
of 1995, after giving effect to the Kmart store closings noted above. In the
U.S., the Company currently operates portrait studios in 1,385 of Kmart's
approximately 2,150 discount stores. Kmart Corporation has announced preliminary
plans to close approximately 70 stores in 1996. The Company does not know which
Kmart stores will be closed, thus cannot predict how many portrait studios will
be effected. There can be no assurance, however, that Kmart Corporation will not
close additional stores in the future or that the Company will be able to
reallocate studio assets to new studios in the event of additional studio
closings.
During the last half of fiscal 1994, the Company restructured the
management of day-to-day operations. The new management structure has allowed
the President more time to explore ways to leverage PCA's technology and
expertise through diversification. As part of the
7
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Company's diversification activities, the first phase of a permanent pet
photography studio test program with PETsMART began in the second quarter. The
pilot program will run through January 1996.
SEASONALITY
The Company's portrait photography business is seasonal, with the
greatest sales volume occurring in the fourth fiscal quarter during the
Thanksgiving and Christmas holiday seasons. The fourth quarters of fiscal 1994
and 1993 contributed approximately 31% and 35%, respectively, of annual sales
and 79% and 93%, respectively, of earnings for such years. The Company's
operations can also be adversely affected by inclement weather.
RESULTS OF OPERATIONS
The table below presents the percentage of sales represented by the
following line items from the Company's statements of income for the periods
indicated:
<TABLE>
<CAPTION>
- - ----------------------------------------------- ----------------------------------- -- ---------------------------------
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------------------- -- ---------------------------------
OCTOBER 29, OCTOBER 30, OCTOBER 29, OCTOBER 30,
1995 1994 1995 1994
--------------- -- ---------------- -- -------------- -- ---------------
<S> <C> <C> <C> <C>
SALES 100.0% 100.0% 100.0% 100.0%
COSTS AND EXPENSES 91.8 94.9 94.8 98.6
--------------- ---------------- -------------- ---------------
INCOME FROM OPERATIONS 8.2 5.1 5.2 1.4
INTEREST EXPENSE 0.5 0.3 0.5 0.4
--------------- ---------------- -------------- ---------------
INCOME FROM CONTINUING OPERATIONS BEFORE
INCOME TAXES 7.7 4.8 4.7 1.0
INCOME TAX PROVISION 3.2 2.0 1.9 0.4
--------------- ---------------- -------------- ---------------
INCOME FROM CONTINUING OPERATIONS 4.5 2.8 2.8 0.6
INCOME FROM DISCONTINUED OPERATIONS (NET
OF INCOME TAXES) -- -- -- 0.4
=============== ================ ============== ===============
NET INCOME 4.5% 2.8% 2.8% 1.0%
=============== ================ ============== ===============
- - ----------------------------------------------- --------------- -- ---------------- -- -------------- -- --------------- --
</TABLE>
Sales for the Company's 1995 third quarter were $36.9 million, a
decrease of 5% from the third quarter of 1994. For the nine months, 1995 sales
decreased approximately 2%, to $98.1 million. The reduction in third quarter
sales reflects a $1.8 million decline, or 5%, in sales from Kmart portrait
studios, and a decrease of $0.2 million, or 8%, in Institutional Division sales.
The lower Kmart sales reflect a 6% decline in the number of customers
photographed, which the Company attributes to an increase in the number of
competitive portrait studios. The average customer purchase increased slightly
during the 1995 third quarter, and the Company achieved some sales increase from
its expanded PETsMART test.
8
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS, CONTINUED
Despite the reduction in sales, income from continuing operations, as a
percentage of sales, increased from 2.8% to 4.5%, as a result of the reduction
in costs and expenses, as a percentage of sales, from 94.9% to 91.8%. The
improvement reflects the elimination of introductory advertising expense
incurred in fiscal 1994 to introduce the Company's new Digital Imaging System,
as well as administrative cost savings principally attributable to savings in
national meeting expenses. Production costs were higher, in proportion to the
larger average portrait packages purchased, and expenses related to the PETsMART
pilot program reduced net income by approximately $0.02 per share.
For the first nine months of fiscal 1995, sales decreased by 2% to
$98.1 million, principally as the result of the termination of Kmart traveling
promotions. Costs and expenses, as a percentage of sales, decreased from 98.6%
to 94.8%, as the result of lower advertising expense. Net income as a percentage
of sales improved for the nine months from 1% to 2.8%, even though the 1994
period included a one-time gain of 0.4% from the discontinuance of department
store operations.
The income tax provision for the first nine months of fiscal 1995 was
$1.9 million. This resulted in an effective tax rate of 41.3% for fiscal 1995.
For the first nine months of fiscal 1994, the Company had a tax provision of
$0.4 million.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of working capital are cash from
operations and the Company's revolving line of credit. On October 29, 1995, the
Company had $9.0 million in short-term debt outstanding and $0.5 million in cash
and cash equivalents. The Company has a $16.0 million revolving line of credit
with NationsBank of North Carolina, N.A., ("NationsBank") to meet seasonal
capital requirements.
During August, September, and October of 1995 (the third quarter of
fiscal 1995), the Company had property additions of $3.0 million, principally
for materials and equipment for the Company's Kmart permanent studios. Operating
activities provided $3.9 million in cash to the Company.
Shareholder's equity increased by $1.2 million to $26.9 million
in the third quarter of fiscal 1995. Net income for the quarter was $1.7
million. Dividends paid in the quarter totaled $0.5 million.
The Company believes, based on its short- and long-term business plans,
that it has the ability to adequately fund its operating and capital expenditure
needs for fiscal 1995 from operations, augmented by borrowings under its line of
credit for seasonal credit needs. Due to the seasonality of the Company's
operations, cash is generally consumed during the first fiscal quarter. During
the remaining fiscal quarters, operating activities usually generate cash.
9
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
11 Computation of Primary and Fully Diluted Earnings Per
Common Share
27 Financial Data Schedule
(b) Reports on Form 8-K
None
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.
PCA INTERNATIONAL, INC.
-----------------------------------------------
(Registrant)
Date: December 8, 1995 /s/ John Grosso
-----------------------------------------------
John Grosso
President
(Principal Executive Officer)
Date: December 8, 1995 /s/ Bruce A. Fisher
-----------------------------------------------
Bruce A. Fisher
Senior Vice President
(Principal Accounting Officer)
10
<PAGE>
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE NUMBER
<S> <C> <C>
4 Instruments defining the rights of security holders, incorporated by reference
to Exhibit 4 to the Company's Quarterly Report on Form 10-Q for the quarter
ended May 3, 1992.
10(a) Amendment dated as of June 1, 1994, to Loan Agreement between
PCA International, Inc., Photo Corporation of America, PCA
National, Inc., and PCA Photo Corporation of Canada, Inc., PCA
Mexico, S.A. de C.V. and NationsBank of North Carolina, N.A.,
incorporated by reference to Exhibit 10(a) to the Company's
Quarterly Report on Form 10-Q for the quarter ended July 31,
1994.
10(b) Revised Exclusive License Agreement dated July 1, 1994,
between Kmart Corporation and PCA International, Inc.,
incorporated by reference to Exhibit 10(b) to the Company's
Amendment No. 1 on Form 10-Q/A to its Quarterly Report on Form
10-Q for the quarter ended July 31, 1994.
10(c) New Sales Contract dated August 11, 1994, between PCA
International, Inc., and Agfa Division of Miles, Inc.,
incorporated by reference to Exhibit 10(c) to the Company's
Amendment No. 1 on Form 10-Q/A to its Quarterly Report on Form
10-Q for the quarter ended July 31, 1994.
10(d) The 1990 Non-Qualified Stock Option Plan, incorporated by
reference to Exhibit 4 to the Company's Registration Statement
on Form S-8 (Registration No.
33-36793).
10(e) The 1992 Non-Qualified Stock Option Plan, as amended and
restated, incorporated by reference to Exhibit 10(e) to the
Company's Quarterly Report on Form 10-Q for the quarter ended
April 30, 1995.
10(f) Loan Agreement dated September 8, 1992, between PCA
International, Inc., Photo Corporation of America, PCA
National, Inc., and PCA Photo Corporation of Canada, Inc., and
NationsBank of North Carolina, N.A., incorporated by reference
to Exhibit 10(o) to the Company's Quarterly Report on Form
10-Q for the quarter ended August 2, 1992 (Commission File No.
0-8550).
10(g) Amendment dated as of September 14, 1993, to Loan Agreement
between PCA International, Inc., Photo Corporation of America,
PCA National, Inc., PCA Photo Corporation of Canada, Inc., and
NationsBank of North Carolina, N.A., incorporated by reference
to Exhibit 10(g) to the Company's Quarterly Report on Form
10-Q for the quarter ended July 31, 1994.
11
<PAGE>
10(h) Amendment dated as of March 31, 1995, to Loan Agreement
between PCA International, Inc., Photo Corporation of America,
PCA National, Inc., PCA Photo Corporation of Canada, Inc., and
PCA Mexico, S.A. de C.V. and NationsBank of North Carolina,
N.A., incorporated by reference to Exhibit 10(h) to the
Company's Annual Report on Form 10-K for the year ended
January 29, 1995.
11 Computation of Primary and Fully Diluted Earnings Per Common Share
27 Financial Data Schedule
12
</TABLE>
<PAGE>
EXHIBIT 11
PCA INTERNATIONAL, INC., AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY DILUTED
EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
--------------------------------- -----------------------
OCTOBER 29, October 30, OCTOBER 29, October 30,
1995 1994 1995 1994
------------ ----------- ------------- ---------------
<S> <C> <C> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE:
EARNINGS APPLICABLE TO COMMON STOCK:
Income from continuing operations........................... $1,677,469 $1,094,603 $2,726,972 $ 578,716
Discontinued operations..................................... -- -- -- 412,406
--------------- -------------- ------------- ------------
Net income.................................................. $1,677,469 $1,094,603 $2,726,972 $ 991,122
=============== ============== ============= ============
COMPUTATION OF COMMON SHARES AND
COMMON EQUIVALENT SHARES:
Weighted average number of common shares.................. 7,476,683 8,151,030 7,680,476 8,146,464
Dilutive effect of stock options.......................... 553,867 438,814 468,751 407,808
--------------- -------------- ------------- ------------
Weighted average number of common shares after
dilutive effect.................................. 8,030,550 8,589,844 8,149,227 8,554,272
=============== ============== ============= ============
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARE:
Income from continuing operations......................... $ 0.21 $ 0.13 $0.33 $0.07
=============== ============== ============= ============
Net income................................................ $ 0.21 $ 0.13 $0.33 $0.12
=============== ============== ============= ============
FULLY DILUTED EARNINGS PER COMMON SHARE:
EARNINGS APPLICABLE TO COMMON STOCK:
Income from continuing operations......................... $1,677,469 $1,094,603 $2,726,972 $ 578,716
Discontinued operations................................... -- -- -- 412,406
--------------- -------------- ------------- ------------
Net income................................................ $1,677,469 $1,094,603 $2,726,972 $ 991,122
=============== ============== ============= ============
COMPUTATION OF COMMON SHARES AND
COMMON EQUIVALENT SHARES:
Weighted average number of common shares outstanding...... 7,476,683 8,151,030 7,680,476 8,146,464
Dilutive effect of stock options.......................... 554,027 471,628 556,142 462,380
--------------- -------------- ------------- ------------
Weighted average number of common shares after
dilutive effect.................................... 8,030,710 8,622,658 8,236,618 8,608,844
=============== ============== ============= ============
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARE ASSUMING FULL DILUTION:
Income from continuing operations......................... $ 0.21 $ 0.13 $ 0.33 $ 0.07
=============== ============== ============= ============
Net income................................................ $ 0.21 $ 0.13 $ 0.33 $ 0.12
=============== ============== ============= ============
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-28-1996
<PERIOD-START> JAN-30-1995
<PERIOD-END> OCT-29-1995
<CASH> 496,275
<SECURITIES> 0
<RECEIVABLES> 15,483,030
<ALLOWANCES> 1,765,022
<INVENTORY> 3,163,405
<CURRENT-ASSETS> 20,553,185
<PP&E> 87,950,641
<DEPRECIATION> 43,532,198
<TOTAL-ASSETS> 64,997,897
<CURRENT-LIABILITIES> 31,032,714
<BONDS> 0
<COMMON> 1,496,375
0
0
<OTHER-SE> 25,417,802
<TOTAL-LIABILITY-AND-EQUITY> 64,997,897
<SALES> 98,129,089
<TOTAL-REVENUES> 98,129,089
<CGS> 75,805,485
<TOTAL-COSTS> 75,805,485
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 443,733
<INCOME-PRETAX> 4,644,582
<INCOME-TAX> 1,917,610
<INCOME-CONTINUING> 2,726,972
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,726,972
<EPS-PRIMARY> 0.33
<EPS-DILUTED> 0.33
</TABLE>
