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 MAY 4, 1997
[ ] 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 (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
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 7,745,429
- - ----------------------------------- ---------------------------------
CLASS OUTSTANDING AT JUNE 1, 1997
================================================================================
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
I N D E X
PART I. FINANCIAL INFORMATION: PAGE NO.
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets - May 4, 1997 and February
2, 1997............................................ 1
Consolidated Statements of Income - Three Months
Ended May 4, 1997 and April 28, 1996................. 2
Consolidated Statement of Changes in Shareholders'
Equity - Three Months Ended May 4, 1997.............. 3
Consolidated Statements of Cash Flows - Three Months
Ended May 4, 1997 and April 28, 1996................ 4
Condensed Notes to Consolidated Financial Statements.... 5
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 5-7
PART II. OTHER INFORMATION:
ITEM 4. Submission of Matters to Vote of Security Holders....... 7-8
ITEM 6. Exhibits and Reports on Form 8-K........................ 8
SIGNATURES ........................................................ 9
EXHIBIT INDEX ........................................................ 10-11
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
May 4, February 2,
ASSETS 1997 1997
Current Assets:
<S> <C> <C>
Cash and cash equivalents................................. $ 3,734,654 $1,536,234
Accounts receivable (net of allowance for
doubtful accounts of $841,588 and $867,961):
Due from licensor stores and customers............... 7,686,523 6,702,335
Other, including employee advances................... 542,892 602,349
Inventories................................................ 8,113,141 9,814,682
Deferred income taxes...................................... 6,869,728 6,853,985
Prepaid expenses........................................... 1,153,187 1,490,918
--------------- ------------
Total Current Assets................................ 28,100,125 27,000,503
--------------- ------------
Property:
Land and improvements..................................... 2,380,984 2,443,939
Building and improvements................................. 12,278,939 12,883,962
Photographic and sales equipment.......................... 53,913,527 61,902,588
Photographic finishing equipment.......................... 15,329,052 18,660,080
Furniture and equipment................................... 11,742,348 14,188,792
Transportation equipment.................................. 280,735 477,073
Leasehold improvements.................................... 15,883,323 17,935,712
Construction in progress.................................. 3,178,290 1,120,788
--------------- ------------
Total Property...................................... 114,987,198 129,612,934
Less: Accumulated depreciation and
amortization........................................... 56,709,683 71,348,374
--------------- ------------
Property, net....................................... 58,277,515 58,264,560
--------------- ------------
Intangible Assets............................................. 62,290,985 60,256,854
Other Assets.................................................. 2,639,084 1,139,305
--------------- ------------
Total Assets.................................................. $151,307,709 $ 146,661,222
=============== =============
May 4, February 2,
LIABILITIES AND SHAREHOLDERS' EQUITY 1997 1997
Current Liabilities:
Short-term borrowings.................................... $2,000,000 $ 0
Current portion of long-term debt........................ 1,250,000 0
Accounts payable-trade................................... 16,382,405 19,799,067
Accrued insurance........................................ 8,320,495 6,705,199
Accrued income taxes..................................... 887,230 1,643,816
Accrued compensation..................................... 6,373,405 5,924,407
Other accrued liabilities................................ 13,086,957 15,399,563
---------- -----------
Total Current Liabilities......................... 48,300,492 49,472,052
---------- -----------
Long-term debt................................................ 63,228,450 58,679,770
---------- -----------
Other Liabilities............................................. 4,593,529 4,609,510
---------- -----------
Minority Interests............................................ 23,842 259,150
---------- -----------
Shareholders' Equity:
Preferred stock, $10.00 par value (authorized--
2,000,000 shares; outstanding--none)................. 0 0
Common Stock, $0.20 par value (authorized--
20,000,000 shares; issued--7,674,929 shares and
7,607,129 shares).................................... 1,534,986 1,521,426
Additional paid-in capital............................... 6,787,692 5,838,131
Retained earnings........................................ 26,978,318 26,334,992
Cumulative foreign currency translation
adjustments......................................... (139,600) (53,809)
------------ ------------
Total Shareholders' Equity........................ 35,161,396 33,640,740
------------ ------------
Total Liabilities and Shareholders' Equity.................... $151,307,709 $146,661,222
============ ============
</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
----------------------------------------------
May 4, April 28,
1997 1996
------------------- -----------------
<S> <C> <C>
SALES.......................................... $58,691,809 $36,087,986
------------------- -----------------
COSTS AND EXPENSES:
Advertising and promotional costs............ 4,313,900 3,633,789
Costs of photographic sales.................. 21,794,658 11,904,402
Store commissions and selling costs.......... 18,892,362 11,747,366
General and administrative expenses.......... 10,176,412 6,791,240
Amortization of intangibles.................. 455,738 -
------------------- -----------------
Total costs and expenses................... 55,633,070 34,076,797
------------------- -----------------
INCOME FROM OPERATIONS......................... 3,058,739 2,011,189
Interest expense, net........................ 1,619,383 18,547
------------------- -----------------
INCOME BEFORE INCOME TAXES..................... 1,439,356 1,992,642
INCOME TAX PROVISION........................... 796,030 853,864
------------------- -----------------
NET INCOME..................................... $643,326 $1,138,778
=================== =================
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Primary...................................... 8,133,965 7,868,479
=================== =================
Fully Diluted................................ 8,134,028 8,032,229
=================== =================
PRIMARY AND FULLY DILUTED EARNINGS PER
COMMON SHARE:
Net Income............................ $0.08 $0.14
=================== =================
CASH DIVIDENDS PER COMMON SHARE................ $0.00 $0.07
=================== =================
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED MAY 4, 1997
(Unaudited)
<TABLE>
<CAPTION>
Cumulative
Foreign
Common Stock Additional Currency
-------------------------------- Paid-In Retained Translation
Shares Amount Capital Earnings Adjustments
------------ -------------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C>
BALANCE, FEBRUARY 2, 1997............ 7,607,129 $1,521,426 $5,838,131 $26,334,992 ($53,809)
Net income........................... 643,326
Exercise of stock options............ 67,800 13,560 949,561
Foreign currency translation
adjustment...................... (85,791)
==============================================================================================
BALANCE, MAY 4, 1997................. 7,674,929 $1,534,986 $6,787,692 $26,978,318 ($139,600)
==============================================================================================
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------------
May 4, April 28,
1997 1996
-------------------- -------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income................................................................. $643,326 $1,138,778
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization ............................................ 3,741,882 2,265,217
(Decrease) increase in allowance for doubtful accounts.................... (25,679) 385,483
Provision for deferred income taxes....................................... (15,743) 85,273
Loss on disposal of property.............................................. 4,283 207,374
Decrease in other liabilities............................................. (275,131) (7,186)
Increase in other noncurrent assets....................................... (1,499,779) (14,686)
Changes in operating assets and liabilities:
Increase in accounts receivable........................................... (902,267) (3,449,141)
Decrease (increase) in inventories........................................ 1,700,347 (489,551)
Decrease in prepaid expenses.............................................. 360,276 82,477
(Decrease) increase in accounts payable................................... (3,412,559) 616,932
(Decrease) increase in accrued expenses................................... (992,566) 775,489
-------------------- -------------------
NET CASH (USED IN) PROVIDED FROM OPERATING ACTIVITIES..................... (673,610) 1,596,459
-------------------- -------------------
INVESTING ACTIVITIES:
Purchase of property....................................................... (3,363,219) (1,703,118)
Purchase of Canadian assets................................................ - (1,169,078)
Purchase of American Studios, Inc.......................................... (2,516,646)
Proceeds from sale of fixed assets......................................... 1,200 3,619
-------------------- -------------------
NET CASH USED IN INVESTING ACTIVITIES (5,878,665) (2,868,577)
-------------------- --------------------
FINANCING ACTIVITIES:
Increase in borrowings..................................................... 7,798,680 -
Exercise of stock options.................................................. 963,121 839,105
Acquisition of Company stock............................................... - (2,304,610)
Cash dividends............................................................. - (523,745)
-------------------- -------------------
NET CASH PROVIDED FROM (USED IN) FINANCING ACTIVITIES........................ 8,761,801 (1,989,250)
-------------------- -------------------
Effect of exchange rate changes on cash.................................... (11,106) 186,442
-------------------- -------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS............................. 2,198,420 (3,074,926)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............................. 1,536,234 3,914,513
-------------------- -------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD................................... $3,734,654 $839,587
==================== ===================
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash Flow Data:
Interest paid............................................................ $3,736,171 $45,196
==================== ===================
Income taxes paid........................................................ $1,219,348 $1,529,895
==================== ===================
</TABLE>
See Condensed Notes to Consolidated Financial Statements.
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 February 2, 1997. 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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company is engaged, through its subsidiaries, in the sale of
photographic color portraits of children, adults, and families. The Company
operates primarily in the discount retail segment through more than 2,000
permanent portrait studios within Kmart and Wal-Mart stores. The Company
operates approximately 1,000 portrait studios in Kmart in the United States and
Puerto Rico. In Wal-Mart stores, the Company operates approximately 1,000
permanent portrait studios in the United States, Canada, Puerto Rico, Mexico,
and in South America, and services an additional 1,350 locations with traveling
promotions. The Company also operates 114 permanent studios as part of a pilot
program for pet photography in PETsMART stores in the United States and Canada.
In its Institutional Division, the Company provides portrait services to church
congregations and day care facilities through traveling promotions.
Sales in the discount retail studio portion of the Company's business,
comprising Kmart and Wal-Mart retail channels, were $55.5 million, or 94.6% of
total sales, during the first quarter of fiscal 1997. PCA's fiscal 1997 results
include the operations of American Studios acquired on January 23, 1997.
During the first quarter of fiscal 1997, the Company focused on several
merger-related strategic initiatives, principally, the integration and
consolidation of American Studios' general and administrative functions, field
organization, and lab operations.
The Company utilizes a proprietary digital imaging system
which was designed and engineered in-house by the Company's technology and
manufacturing staff, ensuring complete control of all aspects of the system. The
system allows customers to view a digital proof of each pose on a color
monitor as it is photographed and select only the highest quality and most
pleasing poses for further consideration. Following the photography session, the
customer customizes the selection of portraits for purchase, consisting of
the exact poses to be produced in the specific portrait sizes
and quantities desired. The digital imaging system is integrated with the
Company's automated production facility. The Company plans to leverage the
benefits of its digital imaging system over an expanded Wal-Mart customer base.
Of the 850 permanent Wal-Mart studios acquired with the merger of American
Studios, 250 employ digital technology while 600 studios are non-digital and
operate in a speculative mode (portraits are printed before customers make a
final selection for purchase.) During the 1997 second quarter, the Company will
complete the conversion of the 600 non-digital studios to its digital imaging
technology. With these 600 studios converted, the Company believes it will
realize benefits in terms of increased average customer purchase, improved
customer satisfaction, and lower production costs resulting from the elimination
of waste from speculative portrait production.
SEASONALITY
The Company's portrait photography business is seasonal, with the
greatest sales volume occurring in the fourth quarter during the Thanksgiving
and Christmas holiday seasons. The fourth quarters of fiscal 1996 and 1995
contributed approximately 33.2% and 32.2%, respectively, of annual sales and
32.8% and 64.2%, respectively, of earnings for those years. The 1996 fourth
quarter earnings would have accounted for 69.5% of annual earnings before giving
effect to a $3.6 million charge after tax for studio closure costs.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
RESULTS OF OPERATIONS
PCA's fiscal 1997 first quarter results include the operations of
American Studios acquired on January 23, 1997. The Company's consolidated sales
for the first quarter were $58.7 million, an increase of 62.6% compared with
sales of $36.1 million in the first quarter of 1996. The increase in sales on a
consolidated basis was due to two primary factors: a 67.2% increase in customers
photographed resulting principally from the acquisition of American Studios'
Wal-Mart business and higher customer sales average in the discount retail
portion of the business.
The following table presents the percentage of sales represented by the
following line items from the Company's statements of income for the periods
indicated:
THREE MONTHS ENDED
----------------------------
MAY 4, APRIL 28,
1997 1996
------------ -----------
Sales....................................... 100.0% 100.0%
Costs and expenses.......................... 94.8 94.4
------------ -----------
Income from operations...................... 5.2 5.6
Interest expense............................ 2.8 0.1
------------ -----------
Income before income taxes.................. 2.4 5.5
Income tax provision........................ 1.3 2.3
============ ===========
Net income.................................. 1.1% 3.2%
============ ===========
During the quarter, income from operations increased 52% to $3.1
million, compared to $2.0 million in the 1996 first quarter. As a percentage of
sales, income from operations declined slightly to 5.2% of sales compared to
5.6% of sales, principally due to the $0.5 million amortization expense for
intangible assets.
Notably, certain expense items as a percentage of sales have shifted on
a quarter-to-quarter basis resulting from the integration of the American
Studios' operations. Advertising and promotional expenses declined to 7.4% of
sales from 10.1% of sales in the 1996 first quarter due, in part, to a lessening
of the promotional environment experienced in the retail portrait industry. Cost
of photographic sales increased to 37.1% of sales from 33.0% of sales in the
year-ago quarter principally due to the integration of the American Studios'
processing facility and 600 Wal-Mart studios which operate in a speculative
production mode. General and administrative expenses declined as a percentage of
sales to 17.3% versus 18.8% as a result of cost savings and other synergistic
benefits realized from the integration and consolidation of American Studios'
general and administrative functions and field organization.
The income tax provision for the first quarter of 1997 was $0.8
million. This resulted in an effective tax rate of 55.3% compared to 42.8% in
the first quarter of last year. The increase in effective tax rate in the 1997
period is attributable to the amortization of intangible assets expense of $0.5
million which does not provide any tax benefit.
Net income declined 43.5% to $0.64 million compared to $1.14 million in
the year-ago quarter, substantially due to an increase in interest expense in
the 1997 first quarter of $1.6 million and amortization of intangible assets of
$0.5 million, relating to the American Studios' acquisition. Earnings per share
for the 1997 first quarter were $0.08 compared to $0.14 in the same quarter last
year. For the 1997 first quarter, there were 8,134,028 fully diluted shares of
common stock, a 1.3% increase over the prior year.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal sources of working capital are cash from operations and
the Company's $25 million revolving line of credit. As of May 4, 1997, the
Company had $3.7 million in cash and cash equivalents and $3.25 million in
short-term borrowings and current portion of long-term debt. The Company has a
$25 million revolving line of credit to meet seasonal capital requirements.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS, CONTINUED
During the quarter, the Company had property additions of $3.4 million,
principally for materials and equipment for the planned conversion of 600
Wal-Mart portrait studios to PCA's digital imaging technology, the addition of
new permanent portrait studios, and the upgrading of certain processing
equipment in the Company's lab and processing facility. The Company was able to
fund its capital expenditures from cash on hand and its revolving line of
credit. Currently, the Company estimates capital expenditures for fiscal 1997
will be approximately $12 million to convert the acquired Wal-Mart studios and
to open 150 - 200 new portrait studios throughout the year.
Shareholders' equity increased by $1.5 million to $35.2 million,
principally due to the exercise of options. Options exercised in the first
quarter increased shareholders' equity by $1.0 million. Net income was $0.6
million. There were no dividends paid in the quarter. The Board of Directors of
the Company voted to reinstate payment of a $0.07 per share quarterly cash
dividend on May 28, 1997. The dividend will be payable on July 2, 1997, for
shareholders of record as of June 11, 1997.
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 1997 from operations, cash on hand, and its revolving line of
credit. As of May 4, 1997, $23.0 million was available under the Company's
revolving credit facility. On May 28, 1997, the Company's Board of Directors
authorized a $10 million prepayment of the Company's term loan, which was funded
from cash on hand and its revolving line of credit. The prepayment was made on
May 29, 1997, at which time the Company had $55.0 million remaining on its term
loan.
INFLATION
Over the past few years, inflation has not had a significant impact on
the Company's financial condition or results of operations.
NOTE REGARDING PRIVATE SECURITIES LITIGATION REFORM ACT: Statements
made by the Company which are not historical facts are forward looking
statements that involve risks and uncertainties. Actual results could differ
materially from those expressed or implied in forward looking statements. All
such forward looking statements are subject to the safe harbor created by the
Private Securities Litigation Reform Act of 1995. Important factors that could
cause financial performance to differ materially from past results and from
those expressed or implied in this document include, without limitation, the
risks of acquisition of businesses (including limited knowledge of the
businesses acquired and misrepresentations by sellers), new store openings,
availability of financing, competition, management's ability to manage growth,
loss of customers, and a variety of other factors.
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
(a) The Annual Meeting was held on May 28 1997.
(b) Pursuant to Instruction 3 to Item 4, this paragraph need not be
answered.
(c) At the Annual Meeting of Shareholders held on May 28, 1997, the
following three matters were voted upon and passed. The
tabulation of votes was:
7
<PAGE>
(1) The election of nine directors to serve until the 1998
Annual Meeting of Shareholders:
<PAGE>
<TABLE>
<CAPTION>
VOTES IN FAVOR WITHHOLD AUTHORITY
----------------------------------- -----------------------------------
IN PERSON AS PROXY IN PERSON AS PROXY
---------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C>
R. Stuart Dickson 6,525,505 150,576
---------------- --------------- --------------- ---------------
Peter B. Foreman 6,525,505 150,576
---------------- --------------- --------------- ---------------
George Friedman 6,525,355 150,726
---------------- --------------- --------------- ---------------
Donald P. Greenberg 6,525,492 150,589
---------------- --------------- --------------- ---------------
John Grosso 6,525,205 150,876
---------------- --------------- --------------- ---------------
Charlotte H. Mason 6,525,505 150,576
---------------- --------------- --------------- ---------------
Joseph H. Reich 6,525,505 150,576
---------------- --------------- --------------- ---------------
Albert F. Sloan 6,525,505 150,576
---------------- --------------- --------------- ---------------
Stanley Tulchin 6,525,342 150,739
---------------- --------------- --------------- ---------------
</TABLE>
(2) Approval of an amendment to the Company's Amended and
Restated 1996 Omnibus Long-Term Compensation Plan:
<TABLE>
<CAPTION>
VOTES IN FAVOR VOTES AGAINST ABSTENTIONS
- - ---------------------------------------------------------------------------------------------------
IN PERSON AS PROXY IN PERSON AS PROXY IN PERSON AS PROXY
- - ------------------------------------------------------------------- ---------------- --------------
<S> <C> <C> <C> <C> <C> <C>
0 6,026,458 0 312,923 0 336,700
- - ------------------------------------------------------------------- ---------------- --------------
(3) Ratification of the proposal to select KPMG Peat Marwick LLP
to continue as Independent Auditors for the 1997 fiscal year:
VOTES IN FAVOR VOTES AGAINST ABSTENTIONS
- - --------------------------------------------------------------------------------------------------
IN PERSON AS PROXY IN PERSON AS PROXY IN PERSON AS PROXY
- - --------------------------------- -------------------------------- --------------- --------------
0 6,675,908 0 173 0 0
- - --------------------------------- -------------------------------- --------------- --------------
</TABLE>
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
8
<PAGE>
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: June 11, 1997 /s/ John Grosso
------------------------------------------------
John Grosso
President
(Principal Executive Officer)
Date: June 11, 1997 /s/ Bruce A. Fisher
------------------------------------------------
Bruce A. Fisher
Senior Vice President
(Principal Accounting Officer)
9
<PAGE>
PCA INTERNATIONAL, INC.
INDEX TO EXHIBITS
INDEX NO. DESCRIPTION PAGE NO.
3(a) Restated Charter, as amended to date.
3(b) Bylaws of PCA International, Inc. as amended to date, incorporated by
reference to Exhibit 3.4 to the Company's Quarterly Report on Form
10-Q, Commission File No. 0-8550, for the quarter ended May 3, 1992.
4 Instruments defining the rights of security holders, incorporated by
reference to Exhibit 4 to the Company's Quarterly Report on Form 10-Q,
Commission File No. 0-8550, for the quarter ended May 3, 1992.
10(a) License Agreement dated July 29, 1992, between Wal-Mart Corporation
and American Studios, Inc., incorporated by reference to Exhibit 10.1
to American Studios, Inc. 1992 Form S-1 (Registration No. 33-58958).
10(b) License Agreement dated May 10, 1996, between Kmart Corporation and
PCA International, Inc., incorporated by reference to Exhibit 10(b) to
the Company's Quarterly Report on Form 10-Q for the quarter ended
April 28, 1996.
10(c) 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, incorporated by
reference to Exhibit 4 to the Company's Registration Statement on Form
S-8 (Registration No. 33-51458).
10(f) Loan Agreement dated January 27, 1997, between PCA International,
Inc., PCA Photo Corporation of Canada, Inc., PCA Specialty Retail
Photo Corporation, Inc., Photo Corporation of America, PCA National,
Inc., ASI Acquisition Corp., and NationsBank, N.A., as Agent,
incorporated by reference to the Company's Schedule 14D-1 and Schedule
13-D, Amendment No. 3, dated January 27, 1997.
10(g) Loan Agreement dated February 28, 1997, between PCA International,
Inc., PCA Photo Corporation of Canada, Inc., PCA Specialty Retail
Photo Corporation, Inc., Photo Corporation of America, PCA National,
Inc., ASI Acquisition Corp., and NationsBank, N.A., as Agent,
incorporated by reference to Exhibit 10(g) to the Company's Annual
Report on Form 10-K for the year ended February 2, 1997.
10(h) Sales Contract dated September 1, 1993, between Agfa Division of
Miles, Inc., and American Studios, Inc., incorporated by reference to
Exhibit 10.93 to American Studios, Inc. Form 10-K for fiscal 1993,
Commission File No. 0-20510.
10(i) Merger Agreement dated December 17, 1996, between PCA International,
Inc., ASI Acquisition Corp., and American Studios, Inc., incorporated
by reference to the Company's Form 8-K dated January 23, 1997.
10(j) 1996 Omnibus Long-Term Compensation Plan, incorporated by reference to
Exhibit 10(j) to the Company's Quarterly Report on Form 10-Q for the
Quarter ended April 28, 1996.
10(l)* Employment and Non-Compete Agreement dated December 17, 1996, between
Randy J. Bates and PCA International, Inc., incorporated by reference
to Exhibit 10(l) to the Company's Annual Report on Form 10-K for the
year ended February 2, 1997.
10(m)* Employment and Non-Compete Agreement dated December 17, 1996, between
Robert Kent Smith and PCA International, Inc., incorporated by
reference to Exhibit 10(m) to the Company's Annual Report on Form 10-K
for the year ended February 2, 1997.
10
<PAGE>
10(n)* Employment and Non-Compete Agreement dated December 17, 1996, between
J. Robert Wren, Jr., and PCA International, Inc., incorporated by
reference to Exhibit 10(n) to the Company's Annual Report on Form 10-K
for the year ended February 2, 1997.
11 Computation of Primary and Fully Diluted Earnings per Common Share.
21 Subsidiaries of the Registrant.
27 Financial Data Schedule.
*Management contract or compensatory plan or arrangement required to
be filed as an exhibit.
11
<PAGE>
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
COMPUTATION OF PRIMARY AND FULLY DILUTED
EARNINGS PER COMMON SHARE
<TABLE>
<CAPTION>
Three Months Ended
----------------------------------------
MAY 4, April 28,
1997 1996
---------------- --------------
<S> <C> <C>
PRIMARY EARNINGS PER COMMON SHARE:
EARNINGS APPLICABLE TO COMMON STOCK:
Net income........................................................... $643,326 $1,138,778
================ ==============
COMPUTATION OF COMMON SHARES AND
COMMON EQUIVALENT SHARES:
Weighted average number of common shares.......................... 7,631,209 7,468,386
Dilutive effect of stock options.................................. 502,756 400,093
---------------- --------------
Weighted average number of common shares after
dilutive effect............................................... 8,133,965 7,868,479
================ ==============
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARE:
Net income........................................................ $0.08 $0.14
================ ==============
FULLY DILUTED EARNINGS PER COMMON SHARE:
EARNINGS APPLICABLE TO COMMON STOCK:
Net income........................................................... $643,326 $1,138,778
================ ==============
COMPUTATION OF COMMON SHARES AND
COMMON EQUIVALENT SHARES:
Weighted average number of common shares outstanding.............. 7,631,209 7,468,386
Dilutive effect of stock options.................................. 502,819 563,843
---------------- --------------
Weighted average number of common shares after
dilutive effect............................................... 8,134,028 8,032,229
================ ==============
EARNINGS PER COMMON SHARE AND COMMON
EQUIVALENT SHARE ASSUMING FULL DILUTION:
Net income........................................................ $0.08 $0.14
================ ==============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> FEB-01-1998
<PERIOD-START> FEB-03-1997
<PERIOD-END> MAY-4-1997
<CASH> 3,734,654
<SECURITIES> 0
<RECEIVABLES> 9,071,003
<ALLOWANCES> 841,588
<INVENTORY> 8,113,141
<CURRENT-ASSETS> 28,100,125
<PP&E> 114,987,198
<DEPRECIATION> 56,709,683
<TOTAL-ASSETS> 151,307,709
<CURRENT-LIABILITIES> 48,300,492
<BONDS> 0
0
0
<COMMON> 1,534,986
<OTHER-SE> 35,161,396
<TOTAL-LIABILITY-AND-EQUITY> 151,307,709
<SALES> 58,691,809
<TOTAL-REVENUES> 58,691,809
<CGS> 45,000,920
<TOTAL-COSTS> 45,000,920
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,619,383
<INCOME-PRETAX> 1,439,356
<INCOME-TAX> 796,030
<INCOME-CONTINUING> 643,326
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 643,326
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
