<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
- ---------- Exchange Act of 1934
For the Quarter ended June 30, 1996
or
Transition Report Pursuant to Section 13 or 15(d) of the
- ---------- Securities Exchange Act of 1934
For the Transition Period from ________________ to ____________________________
Commission file number 0-19533
----------------
SUPERCUTS, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 68-0141288
- --------------------- -------------------------------------------------
(State of incorporation) (I.R.S. Employer Identification No.)
550 California Street, San Francisco, California 94104
- ------------------------------------------------------------ --------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (415) 693-4700
---------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required 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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at August 1, 1996
- ------------------------------- ----------------------------------------
Common Stock $.01 par value 11,225,312 Shares
----------------------------------------
<PAGE>
SUPERCUTS, INC. AND SUBSIDIARIES
PART I
FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
Consolidated Balance Sheets 3
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6
Notes to Unaudited Consolidated Financial Statements 7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 11
PART II
OTHER INFORMATION
-----------------
ITEM 1. LEGAL PROCEEDINGS 16
ITEM 2. CHANGES IN SECURITIES 16
ITEM 3-4. NOT APPLICABLE
ITEM 5. OTHER INFORMATION 17
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Index to Exhibits 18
Report on Form 8-K 18
2
<PAGE>
PART I - FINANCIAL INFORMATION
SUPERCUTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
JUNE 30, DECEMBER 31,
1996 1995
----------- -------------
(Unaudited) (Audited)
CURRENT ASSETS
Cash and short-term investments $ 2,043 $ 2,054
Accounts receivable, net of allowance for doubtful
accounts of $124 and $47, respectively 3,622 3,255
Prepaid expenses and other assets 2,254 2,059
Deferred tax assets 6,150 6,600
Income taxes receivable 655 2,493
Inventories 1,809 1,885
--------- ---------
TOTAL CURRENT ASSETS 16,533 18,346
NON-CURRENT RECEIVABLES 14,680 13,917
PROPERTY AND EQUIPMENT, NET 27,617 28,891
OTHER ASSETS
Intangible assets, net 38,063 35,600
Deferred charges and other assets 833 612
--------- ---------
TOTAL OTHER ASSETS 38,896 36,212
--------- ---------
TOTAL ASSETS $ 97,726 $ 97,366
--------- ---------
--------- ---------
See accompanying notes to the unaudited consolidated
financial statements.
3
<PAGE>
SUPERCUTS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
LIABILITES AND STOCKHOLDERS' EQUITY
JUNE 30, DECEMBER 31,
1996 1995
----------- -------------
(Unaudited) (Audited)
CURRENT LIABILITIES
Accounts payable $ 5,444 $ 7,380
Accrued liabilities 7,517 6,408
Deferred franchise fees and other liabilities 1,693 1,489
Current portion of revolving line of credit 21,200 --
Current portion of other debt 1,088 371
Restructuring liabilities 9,259 11,965
------- -------
TOTAL CURRENT LIABILITIES 46,201 27,613
LONG-TERM LIABILITIES
Revolving line of credit -- 25,300
Other secured debt 4,050 --
Deferred income taxes 3,558 3,408
Other 2,125 2,479
------- -------
TOTAL LONG-TERM LIABILITIES 9,733 31,187
------- -------
TOTAL LIABILITIES 55,934 58,800
STOCKHOLDERS' EQUITY
Common stock $0.01 par value - 30,000,000
shares authorized; 11,996,513 and 11,982,385
issued at June 30, 1996 and December 31, 1995,
respectively 120 120
Additional paid-in capital 30,000 29,889
Retained earnings 16,313 13,198
Less 806,840 shares at June 30, 1996 and
December 31, 1995 in treasury at cost (4,641) (4,641)
------- -------
TOTAL STOCKHOLDERS' EQUITY 41,792 38,566
------- -------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $ 97,726 $ 97,366
------- -------
------- -------
See accompanying notes to the unaudited consolidated financial statements.
4
<PAGE>
SUPERCUTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED FOR THE SIX MONTHS ENDED
June 30, June 30, June 30, June 30,
1996 1995 1996 1995
---- ---- ---- ----
REVENUES
<S> <C> <C> <C> <C>
Company-owned Store Sales $ 21,696 $ 19,576 $ 41,088 $ 37,208
Franchised and Managed Stores Revenues 6,114 6,399 12,444 12,290
----------- ----------- ----------- -----------
Total Revenues 27,810 25,975 53,532 49,498
COSTS AND EXPENSES
Company-owned Store Expense
Salaries and Benefits 10,165 9,678 20,180 19,359
Other Store Expense 7,160 7,397 13,718 13,894
----------- ----------- ----------- -----------
Total Store Expense 17,325 17,075 33,898 33,253
Field Management and Support 4,332 3,509 8,419 7,141
----------- ----------- ----------- -----------
Total Costs and Expenses 21,657 20,584 42,317 40,394
Corporate General & Administrative Expenses 1,517 1,485 3,169 2,875
Depreciation and Amortization 1,608 1,359 3,142 2,579
----------- ----------- ----------- -----------
INCOME FROM OPERATIONS 3,028 2,547 4,904 3,650
Interest (income) (360) (304) (711) (587)
Interest expense 761 597 1,336 1,146
Other (income), net of expenses (357) (293) (582) (550)
----------- ----------- ----------- -----------
INCOME BEFORE PROVISION FOR INCOME TAXES 2,984 2,547 4,861 3,641
PROVISION FOR INCOME TAXES 1,083 880 1,746 1,237
----------- ----------- ----------- -----------
NET INCOME $ 1,901 $ 1,667 $ 3,115 $ 2,404
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
NET INCOME PER COMMON SHARE $ 0.17 $ 0.15 $ 0.28 $ 0.22
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SYSTEM-WIDE SALES $ 80,295 $ 75,378 $156,476 $144,717
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See Exhibit 11 for computation of earnings per share.
See accompanying notes to the unaudited consolidated financial statements.
5
<PAGE>
SUPERCUTS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(IN THOUSANDS)
(UNAUDITED)
FOR THE SIX MONTHS ENDED JUNE 30,
----------------------------------
1996 1995
--------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 3,115 $ 2,404
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,142 2,579
Change in deferred income taxes 2,438 513
Changes in assets and liabilities:
Accounts receivable, net (367) 581
Accounts payable and accrued liabilities (1,227) 1,086
Restructuring liabilities (2,208) --
Other assets and liabilities (1,056) (2,116)
-------- ---------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 3,837 5,047
CASH FLOWS FROM INVESTING ACTIVITIES:
Non-current receivables (3,096) 1,243
Capital expenditures (1,098) (3,110)
Acquisition of stores, net of cash acquired (450) (940)
-------- --------
NET CASH (USED) IN INVESTING ACTIVITIES (4,644) (2,807)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments on revolving line of credit (4,100) (2,600)
Increase in other secured debt 5,040 --
Issuance of common stock 111 157
Repayment of debt (275) --
Other 20 268
-------- --------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 796 (2,175)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
SHORT-TERM INVESTMENTS (11) 65
CASH AND SHORT-TERM INVESTMENTS,
BEGINNING OF PERIOD 2,054 1,504
-------- --------
CASH AND SHORT-TERM INVESTMENTS,
END OF PERIOD $ 2,043 $ 1,569
-------- --------
-------- ---------
SUPPLEMENTAL DISCLOSURES OF CASH
FLOW INFORMATION
Interest Paid $ 1,329 $ 1,146
Income taxes paid (refunded) (750) 869
Liabilities assumed from acquisitions 692 19
See accompanying notes to the unaudited consolidated financial statements.
6
<PAGE>
SUPERCUTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1.
The accompanying unaudited consolidated financial statements have been prepared
from the records of Supercuts, Inc. and its subsidiaries (the "Company") and, in
the opinion of management, include all adjustments necessary to present fairly
the financial position as of June 30, 1996, and the results of operations and
cash flows for the six months ended June 30, 1996 and 1995. The balance sheet
as of December 31, 1995 has been prepared from the audited financial statements
of the Company.
Certain information and footnote disclosures normally included in the annual
financial statements prepared in accordance with generally accepted accounting
principles have been omitted from these interim financial statements. It is
suggested that these consolidated financial statements be read in conjunction
with the consolidated financial statements and the notes thereto included in the
Company's 1995 Annual Report on Form 10-K.
Management believes the Company's business does not experience any material
seasonality. The Company's quarterly results of operations, however, may
fluctuate as a result of a number of factors, including the timing of new store
openings. The results of operations for the six months ended June 30, 1996 are
not necessarily indicative of the operating results that may be expected for the
year ending December 31, 1996.
NOTE 2.
In 1996, the Company organized its operations management on a geographic basis,
incorporating franchise and Company-owned stores. The Company believes this
will provide better support for its growth in the future. The income statements
for the three and six months ended June 30, 1995 have been reclassified to
reflect this new organization.
NOTE 3.
In December 1993, the Company entered into an agreement ("Credit Agreement")
with a syndicated bank group ("Banks") for a $30 million revolving line of
credit. The credit agreement was composed of two facilities, a facility which
has a maximum availability of $5 million, expiring in December 1996 and a
facility which had a maximum availability of $22 million through December 1994,
increased to $25 million through September 1996 and decreasing thereafter by $2
million to $3 million quarterly, expiring in December 1998. The Credit
Agreement provides for a variety of covenants, including that the Company
maintain certain levels of tangible net worth, EBITDA and financial ratios.
Borrowings have been used to finance the growth of the Company's new stores
program. At June 30, 1996 and December 31, 1995, there were $21.2 million and
$25.3 million of borrowings outstanding under this line, respectively.
7
<PAGE>
SUPERCUTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
Interest on borrowings under this agreement is payable in arrears at each
interest payment date at the base rate, as defined, or at the offshore rate, as
defined, plus in each case, an applicable margin, as well as certain commitment
fees. The weighted average interest rate on the line of credit was 8.7% and
7.7% at June 30, 1996 and December 31, 1995, respectively.
On March 29, 1996, the Company and the Banks reached an agreement to amend its
$30 million revolving line of credit, which cured any possible default under the
previous covenants. The significant terms are as follows:
1) Facility A is eliminated in the Credit Agreement and Facility B will
have a maximum availability of $29.3 million. Expiration of Facility
B has been changed from December 31, 1998 to March 31, 1997.
2) Facility B requires a reduction in the maximum availability on the
following dates:
DATE MAXIMUM AVAILABILITY
------------------ ------------------------
October 15, 1996 $ 28,325,000
November 15, 1996 27,325,000
December 31, 1996 26,800,000
January 31, 1997 25,800,000
February 28,1997 24,800,000
3) The Banks receive a security interest in all the assets of the
Company.
4) The Company may purchase stores from investor/franchisee stores for
only up to $2 million to be paid over the term of the amendment.
5) The Company is limited in the amount of its receivable balance with
the investor/franchisees.
The Company entered into a Loan and Security Agreement ("Loan") as of
February 1, 1996, with Prime Leasing, Inc., under which the Company borrowed
$5.0 million. The terms of the Loan provide for 60 monthly payments of
principal and interest of approximately $104,000 and a final payment of
$580,000. The Loan is secured by certain store equipment and leasehold
improvements.
8
<PAGE>
SUPERCUTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
NOTE 4.
In late 1995, a majority of the Board of Directors concluded that it was
appropriate to modify the Company's expansion plans and to replace its Chairman
of the Board and Chief Executive Officer. Future expansion efforts will focus on
expanding with existing franchisees in existing franchise markets. Additionally,
because of the significant operating losses and negative cash flow from
Supercuts New York, Inc. and managed store expansion programs, stores in certain
markets, including metropolitan New York, will be closed or sold to franchisees
or other third parties. The restructuring costs related to these activities,
together with the costs relating to the management transition described above,
total $18.9 million before income taxes, of which $8.0 million relates to non-
cash items. This charge was recorded in the fourth quarter of 1995.
During the six months ended June 30, 1996, total charges incurred by the Company
related to these restructuring activities were $2.7 million, of which $498
thousand related to non-cash items. Primarily, the amounts incurred related to
professional fees, severance and costs related to the disposition of assets.
NOTE 5.
On April 2, 1996, the Company's Board of Directors ("Board") adopted a
Shareholder Rights Plan ("Rights Plan"). The Rights Plan provides for the
distribution of preferred stock purchase rights ("Rights") as a dividend at the
rate of one Right for each share of the Company's common stock held as of the
close of business on April 15, 1996. The Rights will expire on April 15, 2006.
The Rights Plan is intended to protect the interests of the Company's
shareholders in the event the Company is confronted with coercive or unfair
takeover tactics. It is not intended to prevent an acquisition of the Company on
terms considered favorable by its Board, and fair to, and in the best interests
of, all shareholders. The Rights Plan will not prevent this in the future,
but is intended to allow the Board to fully represent shareholders' interests
in the event of a third party takeover action.
The Rights Plan establishes a new class of Preferred Stock, Class A, with par
value of $.01 per share and 12,000 shares authorized. Each share will be
comprised of 1,000 units. These Rights were issued to shareholders as a
dividend on April 15, 1996. One Right is redeemable for one unit of the Class A
Preferred Stock at an exercise price of $40.00 upon the occurrence of certain
events.
9
<PAGE>
SUPERCUTS, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1996
If any person (other than Heartland Advisors, Inc. and its affiliates and
associates) becomes the beneficial owner of 15 percent or more of the Company's
common stock, then each Right not owned by a 15 percent or more stockholder
or certain related parties will entitle its holder to purchase, at the
Right's then-current exercise price, shares of common stock (or, in certain
circumstances as determined by the Board, cash, other property, or other
securities) having a value of twice the Right's exercise price. Since the Board
understands that Heartland beneficially owns more than 15 percent of the
Company's common stock, the rights not owned by Heartland and its affiliates
will be entitled to the foregoing entitlements if the level of beneficial
ownership of Heartland and its affiliates exceeds 20.3 percent. In addition,
if, after any person has become a 15 percent or more stockholder (or after
Heartland and its affiliates have become a holder of 20.3 percent or more of the
Company's common stock), the Company is involved in a merger or other business
combination transaction with another person in which its common stock is changed
or converted, or sells 50 percent or more of its assets or earning power to
another person, each right will entitle its holder to purchase, at the Right's
then-current exercise price, shares of common stock of such other person having
a value of twice the Rights exercise price.
The Company will generally be entitled to redeem the Rights at $.01 per Right at
any time until the tenth day following public disclosure that a person or group
has become the beneficial owner of 15 percent or more (or after Heartland and
its affiliates have become a beneficial owner of 20.3 percent or more), of the
Company's common stock.
On July 14, 1996, the Company amended the Rights Plan making it inapplicable to
the merger agreement discussed below in Note 6.
NOTE 6.
On July 14, 1996, the Company signed a merger agreement with Regis Corporation,
a Minneapolis-based owner and operator of 1,950 hair and retail product salons.
The merger, which is subject to shareholder approval of both companies and is
anticipated to be completed in late 1996, would be a stock-for-stock
transaction. The transaction would be accounted for as a pooling-of-interests.
Terms of the agreement call for each shareholder of the Company to receive 0.4
of one share of Regis common stock (approximately 4.6 million shares) for each
share of the Company's common stock, representing a fully diluted ownership
interest of approximately 19.65 percent of the combined companies.
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
In 1996, the Company organized its operations management on a geographic basis,
incorporating franchise and Company-owned stores. The Company believes this
will provide better support for its growth in the future. The income statements
for the three and six months ended June 30, 1996 have been reclassified to
reflect this new organization.
REVENUES. Total revenues increased 7.1% to $27.8 million for the three months
ended June 30, 1996 from $26 million for the three months ended June 30, 1995.
Total revenues increased 8.1% to $53.5 million for the six months ended June 30,
1996 from $49.5 million for the same period ended June 30, 1995.
Revenues from Company-owned store sales increased 11% to $21.7 million for the
three months ended June 30, 1996 from $19.6 million for the three months ended
June 30, 1995. Revenues from Company-owned store sales increased 10% to $41.1
million for the six months ended June 30, 1996 from $37.2 million for the six
months ended June 30, 1995. The revenue increase is primarily the result of an
increase to 386 Company-owned stores at June 30, 1996, compared to 346 Company-
owned stores at June 30, 1995.
Franchised and managed store revenues decreased 4.5% to $6.1 million for the
three months ended June 30, 1996 from $6.4 million for the same period ended
June 30, 1995. Franchised and managed store revenues increased 1.3% to $12.4
million for the six months ended June 30, 1996 from $12.3 million for the same
period ended June 30, 1995. The increase for the six month period is
attributable to an increase in Franchise stores to 661 at June 30, 1996 compared
to 629 Franchise stores at June 30, 1995. This increase in Franchise and
managed store revenue is offset in the second quarter by a decrease in
revenues due to 18 fewer new store openings (14 Investor/franchisee and 4
Franchisee) in the second quarter of 1996 as compared to the second quarter
of 1995.
System-wide sales increased 6.5% and 8.1% for the three and six months ended
June 30, 1996, respectively, increasing from $75.4 million to $80.3 million
for the three months ended June 30, 1995, and 1996, respectively, and from
$144.7 million to $156.5 million for the six months ended June 30, 1995, and
1996, respectively. This increase in System-wide sales is the result of the
total number of stores in the system increasing from 1,093 at June 30, 1995
to 1,168 at June 30, 1996. System-wide comparative store sales for the six
months ended June 30, 1996 increased 3%.
COSTS AND EXPENSES. Costs and expenses for Company-owned stores include all
in-store operating expenses. Costs and expenses for Company-owned stores
increased 1.5% to $17.3 million for the three months ended June 30, 1996 from
$17.1 million for the same period in 1995. Costs and expenses for
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
Company-owned stores increased 1.9% to $33.9 million for the six months ended
June 30, 1996 from $33.3 million for the same period in 1995. The increases
were due primarily to the 40 additional Company-owned stores in operation
in 1996. However, Company-owned store expenses decreased as a percentage of
sales to 79.9% from 87.2% for the three months ended June 30, 1996 and 1995,
respectively, and to 82.5% from 89.4% for the six months ended June 30, 1996,
and 1995, respectively. This represents a 7.3 and 6.9 point decline for these
two comparative periods, respectively. This was due primarily to controlling
store costs, especially salaries and benefits, relative to the increase in
Company-owned store sales.
Costs and expenses for Field management and support include training, marketing
and administrative expenses related to supporting stores system-wide. These
costs and expenses increased 23% from $3.5 million for the three months ended
June 30, 1995 to $4.3 million for the same period in 1996. These costs and
expenses increased 18% from $7.1 million for the six months ended June 30,
1995 to $8.4 million for the same period in 1996. This increase was primarily
the result of an increased level of field support necessitated by the net
addition of 132 stores to the system since December 1994.
Corporate general & administrative expenses remained $1.5 million for the each
of the three month periods ended June 30, 1996 and 1995. These expenses
increased 10% from $2.9 million for the six months ended June 30, 1995 to $3.2
million for the same period in 1996. This increase was due to increases in
professional and consulting fees that the Company incurred during the first
quarter change in its organization.
Income from operations increased 19% to $3.0 million for the three months
ended June 30, 1996 from $2.5 million for the three months ended June 30, 1995.
Income from operations increased 34% to $4.9 million for the six months ended
June 30, 1996 from $3.7 million for the six months ended June 30, 1995.
DEPRECIATION AND AMORTIZATION EXPENSE. For the three and six months ended
June 30, 1996 depreciation and amortization expense was $1.6 million and $3.1
million, respectively, and increase of 18% and 23%, respectively, over the
comparable periods in 1995. This was due to additional stores owned by the
Company from June 1995 to June 1996.
INTEREST INCOME. Interest income increased from $304 thousand and $587
thousand for the three and six months ended June 30, 1995, respectively, to $360
thousand and $711 thousand for the comparable periods in 1996, respectively.
This was due primarily to an increase in the notes receivable balances due to
the Company from the investor/franchise stores.
INTEREST EXPENSE. Interest expense increased 27% from $597 thousand for the
three months ended June 30, 1995 to $761 thousand for the same period in 1996.
Interest expense increased 17% from $1.1 million for the six months ended
June 30, 1995 to $1.3 million for the same period in 1996. This increase is
primarily the result of higher debt balances carried by the Company during the
first six months of 1996 as compared to the same period in 1995.
12
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
INCOME TAXES. The effective tax rate of 35.9% for the six months ended June
30, 1996 increased 1.9 percentage points from the 34.0% tax rate for the six
months ended June 30, 1995. The increase is primarily attributable to the
impact that smaller losses incurred by Supercuts New York, Inc. had on this
rate.
NET INCOME. Net income increased 14% to $1.9 million for the three months
ended June 30, 1996 when compared to the three months ended June 30, 1995 and
increased 30% to $3.1 million for the six months ended June 30, 1996 when
compared to the six months ended June 30, 1995 for the reasons noted above.
LIQUIDITY AND CAPITAL RESOURCES
Cash generated by operating activities for the six months ended June 30,1996
totaled $3.8 million while cash generated by operating activities totaled
$5.0 million for the six months ended June 30, 1995, as the Company pursues
its restructuring plans which reduced cash generated by operating activities
by $2.2 million. Capital expenditures for the same periods totaled $1.1
million and $3.1 million, respectively.
In December 1993, the Company entered into an agreement ("Credit Agreement")
with a syndicated bank group ("Banks") for a $30 million revolving line of
credit. The credit agreement was composed of two facilities, a facility which
hads a maximum availability of $5 million, expiring in December 1996 and a
facility which had a maximum availability of $22 million through December 1994,
increasinged to $25 million through September 1996 and decreasing thereafter by
$2 million to $3 million quarterly, expiring in December 1998.
The Credit Agreement provides for a variety of covenants, including that the
Company maintain certain levels of tangible net worth, EBITDA and financial
ratios. Borrowings have been used to finance the growth of the Company's new
stores program. At June 30, 1996 and December 31, 1995, there were $21.2
million and $25.3 million of borrowings outstanding under this line,
respectively. Interest on borrowings under this agreement is payable in arrears
at each interest payment date at the base rate, as defined, or at the offshore
rate, as defined, plus in each case, an applicable margin, as well as certain
commitment fees. The weighted average interest rate on the line of credit was
8.7% and 7.7% at June 30, 1996 and December 31, 1995, respectively.
On March 29, 1996, the Company and the Banks reached an agreement to amend its
$30 million revolving line of credit, which cured any possible default under the
previous covenants. The significant terms are as follows:
1) Facility A is eliminated in the Credit Agreement and Facility B will
have a maximum availability of $29.3 million. Expiration of Facility
B has been changed from December 31, 1998 to March 31, 1997.
2) Facility B requires a reduction in the maximum availability on the
following dates:
DATE MAXIMUM AVAILABILITY
------------------ ------------------------
October 15, 1996 $ 28,325,000
November 15, 1996 27,325,000
December 31, 1996 26,800,000
January 31, 1997 25,800,000
February 28,1997 24,800,000
3) The Banks receive a security interest in all the assets of the
Company.
4) The Company may purchase stores from investor/franchisee stores for
only up to $2 million to be paid over the term of the amendment.
5) The Company is limited in the amount of its receivable balance with
the investor/franchisees.
The Company entered into a Loan and Security Agreement ("Loan") as of
February 1, 1996, with Prime Leasing, Inc., under which the Company borrowed
$5.0 million. The terms of the Loan provide for 60 monthly payments of
principal and interest of approximately $104,000 and a final payment of
$580,000. The Loan is secured by certain store equipment and leasehold
improvements.
13
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED)
The Company believes cash flow from operations and available borrowings will
be sufficient to meet its operating expense and capital expenditure
requirements through March 31, 1997. The Company is exploring long-range
financing oppotunities with several banks and financing institutions.
The following table shows the number of stores in the Supercuts system for the
dates shown and the change in stores during the six months ended June 30, 1996:
<TABLE>
<CAPTION>
STORE COUNT
Investor/Franchisee
Company/owned Stores Managed Franchise
Stores by the Company Stores Total
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
June 30, 1995 346 118 629 1,093
--------- --------- --------- ---------
--------- --------- --------- ---------
December 31, 1995 369 141 653 1,163
Openings 5 -- 10 15
Acquisitions 18 (18) -- 0
Closed (6) (2) (2) (10)
--------- --------- --------- ---------
June 30, 1996 386 121 661 1,168
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
14
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On March 13, 1996, Mr. David E. Lipson and DEL Holding Corporation ("DEL"), a
Nevada corporation, which the Company believes is wholly owned by Mr. Lipson,
brought legal action against the Company and certain of its directors and
officers. The lawsuit sought payment of $3 million, allegedly due to DEL
pursuant to a Consulting Agreement dated as of August 22, 1995, between the
Company and DEL. The lawsuit also sought unspecified damages allegedly sustained
by Mr. Lipson as a result of a delay in his ability to sell 1,508,220 shares of
the Company's common stock, which were sold by him between February 20 and
February 28, 1996, because of the Company's refusal to remove restrictive
legends from certificates representing such stock. According to his lawsuit, Mr.
Lipson sold the number of shares noted for an aggregate of $7.8 million, or a
reported average price of $5.20 per share. The Company's common stock price
range for the month of February 1996 was a high of 7-3/8, a low of 5-1/8 and a
close of 5-1/8. At the current time, these claims are not pending but Mr. Lipson
and/or DEL may seek to reassert them. In the opinion of management, the
outcome of the litigation will not have a material adverse effect on the
Company's financial position or its results of operations.
Mr. Lipson has filed a claim against the Company in the Circuit Court of Cook
County, Illinois alleging that the Company has defamed him. Mr. Lipson
requests a judgment "in excess of $200 million." The Company believes the
claim is without merit and will defend the claim vigorously.
Mr. Lipson has also filed suit against the Company in the Court of Chancery
of the State of Delaware seeking advancement of expenses incurred by him in
certain litigation and other proceedings. The Company is defending the suit
and does not expect it to have a material adverse effect on the Company.
ITEM 2. CHANGES IN SECURITIES
On April 2, 1996, the Company's Board of Directors adopted a Shareholder Rights
Plan ("Rights Plan"). The Rights Plan provides for the distribution of
preferred stock purchase rights ("Rights") as a dividend at the rate of one
Right for each share of the Company's common stock held as of the close of
business on April 15, 1996. The Rights will expire on April 15, 2006.
The Rights Plan is intended to protect the interests of the Company's
shareholders in the event the Company is confronted with coercive or unfair
takeover tactics. It is not intended to prevent an acquisition of the Company on
terms considered favorable by its Board, and fair to, and in the best interests
of, all shareholders. The Rights Plan will not prevent this in the future,
but is intended to allow the Board to fully represent shareholders' interests
in the event of a third party takeover action.
The Rights Plan establishes a new class of Preferred Stock, Class A, with par
value of $.01 per share and 12,000 shares authorized. Each share will be
comprised of 1,000 units. These Rights were issued to shareholders as a dividend
on April 15, 1996. One Right is redeemable for one unit of the Class A
Preferred Stock at an exercise price of $40.00 upon the occurrence of certain
events.
If any person (other than Heartland Advisors, Inc. and its affiliates and
associates) becomes the beneficial owner of 15 percent or more of the Company's
common stock, then each Right not owned by a 15 percent or more stockholder
or certain related parties will entitle its holder to purchase, at the
Right's then-current exercise price, shares of common stock (or, in certain
circumstances as determined by the Board, cash, other property, or other
securities) having a value of twice the Right's exercise price. Since the Board
understands that Heartland beneficially owns more than 15 percent of the
Company's common stock, the rights not owned by Heartland and its affiliates
will be entitled to the foregoing entitlements if the level of beneficial
ownership of
15
<PAGE>
CHANGES IN SECURITIES - CONTINUED
Heartland and its affiliates exceeds 20.3 percent. In addition, if, after any
person has become a 15 percent or more stockholder (or after Heartland and its
affiliates have become a holder of 20.3 percent or more of the Company's common
stock), the Company is involved in a merger or other business combination
transaction with another person in which its common stock is changed or
converted, or sells 50 percent or more of its assets or earning power to another
person, each right will entitle its holder to purchase, at the Right's then-
current exercise price, shares of common stock of such other person having a
value of twice the Rights exercise price.
The Company will generally be entitled to redeem the Rights at $.01 per Right at
any time until the tenth day following public disclosure that a person or group
has become the beneficial owner of 15 percent or more (or after Heartland and
its affiliates have become a beneficial owner of 20.3 percent or more), of the
Company's common stock. On July 14, 1996, the Company amended the Rights Plan
making it inapplicable to the merger agreement discussed below in Item 5.
ITEM 5. OTHER INFORMATION
On July 14, 1996, the Company signed a merger agreement with Regis
Corporation, a Minneapolis-based owner and operator of 1,950 hair and retail
product salons. The merger, which is subject to a shareholder approval of
both companies and is anticipated to be completed in late 1996, would be a
stock-for-stock transaction. The transaction would be accounted for as a
pooling-of-interests. Terms of the agreement call for each shareholder of the
Company to receive 0.4 of one share of Regis common stock (approximately 4.6
million shares) for each share of the Company's common stock representing a
fully diluted ownership interest of approximately 19.65 percent of the
combined companies. Refer to Form 8-K dated July 14, 1996, for additional
information on proposed merger between the Company and Regis Corporation.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
INDEX TO EXHIBITS
EXHIBIT
NO. DESCRIPTION
- ----------- ------------------------------------------------------------------
2.46 Amendment to Rights Agreement, dated July 14, 1996, between
Supercuts, Inc., a Delaware Corporation, and U.S. Stock Transfer
Corporation
10.39 Consulting Agreement, dated July 13, 1996, between Supercuts,
Inc., a Delaware Corporation, and Thomas L. Gregory
11 Computation of Earnings per Share.
REPORT ON FORM 8-K
The Company filed one Form 8-K as follows:
- - Dated July 14, 1996, the announcement that Supercuts, Inc., and Regis
Corporation had signed an agreement to merge.
17
<PAGE>
EXHIBIT 2.46
AMENDMENT TO RIGHTS AGREEMENT
THIS AMENDMENT, dated as of July 14, 1996, is between Supercuts, Inc., a
Delaware corporation (the "Company"), and U.S. Stock Transfer corporation (the
"Rights Agent").
Recitals
--------
A. The Company and the Rights Agent are parties to a Rights
Agreement, dated as of April 2, 1996, between the Company and the Rights Agent
(the "Rights Agreement").
B. Pursuant to Section 26 of the Rights Agreement, the Company and
the Rights Agent desire to amend the Rights Agreement as set forth below.
Accordingly, the parties agree as follows:
1. Amendment of Section 1(a). Section 1(a) is amended by the
addition of the following:
"Notwithstanding anything in this Agreement to the contrary, neither
Regis Corporation, a Minnesota corporation, ("Buyer") nor any of its
respective Affiliates shall be deemed to be an Acquiring Person solely as a
result of (i) the approval, execution or delivery of the Merger Agreement,
or (ii) the consummation of the Merger (as defined in the Merger
Agreement)."
2. Amendment of Section 1(kk). Section 1(kk) is amended by the
addition of the following:
"Notwithstanding anything in this Agreement to the contrary, a Stock
Acquisition Date shall not be deemed to have occurred solely as the result
of (i) the approval, execution or delivery of the Merger Agreement, or,
(ii) the consummation of the Merger pursuant to the Merger Agreement."
<PAGE>
3. Amendment of Section 1(qq). Section 1(qq) of the Rights Agreement
is amended by the addition of the following:
"Notwithstanding anything in this Agreement to the contrary, a
Triggering Event shall not be deemed to have occurred solely as the result
of (i) the approval, execution or delivery of the Merger Agreement, or (ii)
the consummation of the Merger pursuant to the Merger Agreement."
4. Amendment of Section 1. Section 1 of the Rights Agreement is
amended by the addition of the following Section 1(ss):
(1)(ss)(i) "Buyer" means Regis Corporation, a corporation organized
under the laws of Minnesota.
(1)(ss)(ii) "Merger Agreement" shall mean the Agreement and Plan of
Merger dated as of July 14, 1996, among Buyer and the Company, as amended
from time to time.
(1)(ss)(iii) "Merger" shall have the meaning set forth in the Merger
Agreement.
5. Amendment of Section 3(a). Section 3(a) is amended by the
addition of the following:
"Notwithstanding anything in this Agreement to the contrary, a
Distribution Date shall not be deemed to have occurred solely as the result
of (A) the approval, execution or delivery of the Merger Agreement, or (B)
the consummation of the Merger pursuant to the Merger Agreement."
6. Effectiveness. This Amendment shall be deemed effective July 14,
1996. Except as amended hereby, the Rights Agreement shall remain in full force
and effect and shall be otherwise unaffected hereby.
7. Miscellaneous. This Amendment shall be deemed to be a contract
made under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such state applicable
to contracts to be made and performed entirely within such state. This
Amendment may be executed in any number of counterparts, each of such
counterparts shall for all purposes be deemed an original and all such
counterparts shall together constitute but one and the same instrument. If any
provision, covenant or restriction of this Amendment is held by a court of
competent jurisdiction or other authority to be invalid, illegal or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Amendment shall remain in full force and effect and shall
in no way be affected, impaired or invalidated.
<PAGE>
EXECUTED as of the date set forth above.
Attest: Supercuts, Inc.
/s/ Lawrence D. Imber
- ------------------------------------ ------------------------------------
Name: Name: Lawrence D. Imber
Title: Title: Senior Vice President &
Secretary
Attest: U.S. Stock Transfer Corporation
/s/ Carter McIntyre
- ------------------------------------ ------------------------------------
Name: Name: Carter McIntyre
Title: Title: Vice President
<PAGE>
CONSULTING AGREEMENT
CONSULTING AGREEMENT dated as of July 13, 1996 between Thomas L. Gregory
("Consultant") and Supercuts, Inc. (the "Corporation").
WHEREAS, the Corporation deems it advisable to retain Consultant to provide
consulting and advisory services and Consultant is willing to provide such
services to the Corporation,
IT IS, THEREFORE, AGREED:
1. CONSULTING PERIOD. The "Consulting Period" shall mean the period
beginning upon the later to occur (the "Effective Date") of (i) the Consultant's
resignation or termination as Chairman of the Board of Directors of the
Corporation; and (ii) a change in control (as defined herein) of the
Corporation, and ending forty-eight months from the Effective Date. For the
purposes of this Agreement a change of control ("Change in Control") means a
change in control of the Corporation which shall be deemed to have occurred in
any one of the following circumstances: (i) there shall have occurred an event
required to be reported with respect to the Corporation in response to Item 6(e)
of Schedule 14A of Regulation 14A (or in response to any similar item or any
similar schedule or form) promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), whether or not the Corporation is then subject
to such
<PAGE>
reporting requirement; (ii) any "person" (as such term is used in Sections 13(d)
and 14(d) of the Exchange Act) shall have become the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Corporation representing more than 50% of the combined voting
power of the Corporation's then outstanding voting securities without prior
approval of at least two-thirds of the members of the Board of Directors in
office immediately prior to such persons attaining such percentage interest;
(iii) the Corporation is a party to a merger, consolidation, sale of assets or
other reorganization, or a proxy contest, as a consequence of which members of
the Board of Directors in office immediately prior to such transaction or event
constitute less than a majority of the Board of Directors thereafter; or (iv)
during any period of two consecutive years, individuals who at the beginning of
such period constituted the Board of Directors (including, for this purpose, any
new director whose election or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds of the directors then
still in office who were directors at the beginning of such period) cease for
any reason to constitute at least a majority of the Board of Directors.
2. CONSULTING SERVICES AND RELATIONSHIP
(a) SERVICES. During the Consulting Period, Consultant shall provide
consulting and advisory services to the Corporation with respect to the
coordination of the Corporation's business
<PAGE>
activities. Consultant shall be required to spend no more than twenty hours
during each month of the Consulting Period in the discharge of the services to
be rendered by him hereunder. In providing services under this Agreement, the
Corporation shall not require Consultant to travel more than fifty miles from
his home for meetings or other assignments. Consultant shall use commercially
reasonable efforts to perform faithfully and efficiently the responsibilities
and duties assigned to him under this Agreement.
(b) RELATIONSHIP. Consultant shall be a consultant, and not an employee
of the Corporation, within the meaning of all federal, state and local laws and
regulations governing employment insurance, workers' compensation, industrial
accident, labor and taxes. During the Consulting Period, Consultant shall have
the right to (i) participate in any 401(k) or other similar retirement savings
plan available to executive officers of the Corporation to the extent permitted
by law, and (ii) receive full healthcare benefits for himself and his dependents
of the type and to the extent available to executive officers of the Corporation
or if such healthcare benefits cannot be provided by the Corporation, the
Corporation will reimburse Consultant for the costs of purchasing comparable
benefits on his own.
<PAGE>
3. COMPENSATION, EXPENSES AND INDEMNIFICATION
(a) On the Effective Date, the Corporation will pay Consultant $400,000 by
wire transfer to an account designated by Consultant.
(b) During the Consulting Period, the Corporation shall pay Consultant the
sum (the "Consulting Fee") of $8,333.33 per month, payable monthly.
(c) The Corporation shall promptly reimburse Consultant for all reasonable
expenses incurred by Consultant during the Consulting Period in the performance
of his duties hereunder in accordance with the expense reimbursement policy of
the Corporation applicable to its own employees.
(d) The Corporation shall reimburse Consultant for tax preparation
expenses of up to $5,000 per year for each year of the Consulting Period.
(e) Consultant is entitled to receive indemnification from the Corporation
for all acts performed by Consultant in his capacity as Consultant to the
Corporation. Such indemnification shall be provided to the fullest extent
permitted by applicable law and the Corporation's charter, and in any event,
consistent with the indemnification rights afforded by the Corporation to
members of the Corporation's Board of Directors.
<PAGE>
4. EVENTS OF TERMINATION.
(a) DEATH OR DISABILITY. The Consulting Period shall terminate
automatically upon the death or disability of Consultant, subject to the
provisions of Section 5.
(b) BY CONSULTANT. The Consulting Period may be terminated by Consultant
for any reason upon at least thirty days' written notice to the Corporation.
(c) BY THE CORPORATION FOR CAUSE. The Corporation may terminate the
Consulting Period only with "Cause" (as defined below) and only upon at least
thirty days' written notice to Consultant. For purposes of the preceding
sentence, "Cause" shall mean (i) Consultant's willful and continued refusal to
perform his services hereunder, which refusal continues after written notice
thereof is given to Consultant by the Corporation or, (ii) Consultant's being
convicted of, or pleading guilty or no contest to, a felony involving moral
turpitude.
5. OBLIGATION UPON DEATH, DISABILITY OR TERMINATION. In the event of the
death or disability of Consultant, the Corporation's obligations under Section
3(b) shall terminate upon the occurrence of such event, or in the event the
Corporation breaches this Agreement or terminates the Consulting Period without
Cause, the Corporation's obligations under Section 3(b) shall accelerate and all
monthly payments of the Consulting Fee then remaining through to the end of the
Consulting Period shall
<PAGE>
be immediately paid to Consultant or Consultant's estate, as applicable.
6. NON-COMPETITION. During the Consulting Period, Consultant shall not
perform any other remunerated services of a professional or business nature to
any person or business that engages in substantially the same type of business
as the Corporation or any of its subsidiaries, including, but not limited to,
the production, sale and distribution of salon and hair care products or
services. The foregoing covenant shall apply for the entire Consulting Period
notwithstanding any earlier termination of this Agreement.
7. CONFIDENTIAL INFORMATION. Consultant shall hold in a fiduciary
capacity for the benefit of the Corporation all secret or confidential
information, knowledge or data relating to the Corporation or any of its
subsidiaries or affiliated companies and their respective businesses which shall
have been obtained by Consultant during the Consulting Period and which is not
public knowledge or which becomes public knowledge solely by acts of Consultant
in violation of this Agreement. After expiration of the Consulting Period,
Consultant shall not, without prior written consent of the Corporation,
communicate or divulge any such information, knowledge or data to anyone other
than the Corporation and those designated by it.
<PAGE>
8. SUCCESSORS.
(a) This Agreement is personal to Consultant and shall not be assignable
by Consultant without prior written consent of the Corporation.
(b) This Agreement shall be binding upon the Corporation and its
successors or assigns. The Corporation shall expressly require any successor to
the business or assets of the Corporation, whether by sale, merger,
consolidation or otherwise, to expressly assume in writing and perform the
obligations of the Corporation hereunder.
All notices and other communications hereto shall be in writing and shall be
given by hand delivery to the other party or by registered or certified mail,
return receipt requested, or via facsimile, as follows: If to the Consultant,
at his home address shown on the Corporation's records; and if to the
Corporation, at its principal executive offices at 550 California Street, San
Francisco, CA, Attn: General Counsel, or to such other address as either party
shall have furnished to the other in accordance herewith. Notices and
communications shall be effective when actually received by the addressee.
(c) The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement.
(d) The failure of the Corporation or Consultant at any time to enforce
performance by the other of any provisions of
<PAGE>
this Agreement shall in no way affect the Corporation's or Consultant's (as
applicable) rights thereafter to enforce the same, nor shall the waiver by the
Corporation or Consultant of any breach of any provision hereof be held to be a
waiver by such party of any other breach of the same or any other provision.
(e) This Agreement contains the entire understanding of the Corporation
and Consultant with respect to the subject matter hereof, and supersedes and
renders null and void any previous agreements between them with respect thereto.
(f) This Agreement establishes contract rights which shall be binding
upon, and shall inure to the benefit of, the successors, assigns, heirs, and
legal representatives of the parties hereto.
IN WITNESS WHEREOF, Consultant has hereunto set his hand and the
Corporation has caused these presents to be duly executed in its name on its
behalf, all as of the day and year first above written.
/s/ Thomas L. Gregory
------------------------------
Thomas L. Gregory
SUPERCUTS, INC.
By: /s/ Lawrence D. Imber
---------------------------
Lawrence D. Imber
Senior Vice President, General Counsel and
Secretary
<PAGE>
SUPERCUTS, INC. AND SUBSIDIARIES
EXHIBIT 11
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(UNAUDITED)
FOR THE FOR THE
THREE MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, JUNE 30,
--------------------- ----------------------
1996 1995 1996 1995
--------- --------- ---------- ----------
Net Earnings $ 1,901 $ 1,667 $ 3,115 $ 2,404
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Weighted average number of
outstanding shares 11,190 11,158 11,189 11,157
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Earnings per common share $ 0.17 $ 0.15 $ 0.28 $ 0.22
--------- --------- ---------- ----------
--------- --------- ---------- ----------
Common stock equivalents are considered immaterial for the periods
presented.
<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.
SUPERCUTS, INC.
--------------------------------
Registrant
Date: August 14, 1996 ________________________________
John R. Conlisk, Jr.
Senior Vice President and
Chief Financial Officer
(Duly authorized officer and
principal financial officer
of the registrant.)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF SUPERCUTS, INC., AND
SUBSIDIARIES, AS OF JUNE 30, 1996 AND FOR THE SIX MONTHS THEN ENDED AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,043
<SECURITIES> 0
<RECEIVABLES> 3,746
<ALLOWANCES> 124
<INVENTORY> 1,809
<CURRENT-ASSETS> 16,533
<PP&E> 42,542
<DEPRECIATION> 14,925
<TOTAL-ASSETS> 97,726
<CURRENT-LIABILITIES> 46,201
<BONDS> 0
0
0
<COMMON> 120
<OTHER-SE> 41,672
<TOTAL-LIABILITY-AND-EQUITY> 41,792
<SALES> 4,451
<TOTAL-REVENUES> 53,532
<CGS> 2,639
<TOTAL-COSTS> 42,317
<OTHER-EXPENSES> 6,311
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,336
<INCOME-PRETAX> 4,861
<INCOME-TAX> 1,746
<INCOME-CONTINUING> 3,115
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,115
<EPS-PRIMARY> 0.28
<EPS-DILUTED> 0.28
</TABLE>
