<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1996 Commission File No. 001-10887
JENNY CRAIG, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 33-0366188
(State of Incorporation) (I.R.S. Employer Identification No.)
11355 NORTH TORREY PINES ROAD, LA JOLLA, CA 92037
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (619) 812-7000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
--- ---
Number of shares of common stock, $.000000005 par value, outstanding as
of the close of business on January 31, 1997- 20,729,771.
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<PAGE> 2
JENNY CRAIG, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1996
--------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents ............................... $ 43,535 28,267
Short-term investments .................................. 7,045 6,170
Accounts receivable, net ................................ 3,668 3,363
Inventories ............................................. 17,401 20,064
Prepaid expenses and other assets ....................... 8,282 9,461
--------- --------
Total current assets .......................... 79,931 67,325
Cost of reacquired area franchise rights, net ........... 7,496 9,924
Property and equipment, net ............................. 15,474 27,397
Other assets ............................................ 1,500 1,500
--------- --------
$ 104,401 106,146
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ........................................ 20,916 17,194
Accrued liabilities ..................................... 22,415 21,801
Income taxes payable .................................... 2,102 2,244
Deferred service revenues ............................... 4,506 2,983
--------- --------
Total current liabilities .................... 49,939 44,222
Note payable -- 5,975
--------- --------
Total liabilities ....................... 49,939 50,197
Stockholders' equity:
Common stock $.000000005 par value, 100,000,000 shares
authorized; 27,574,260 shares issued; 20,856,251 and
20,729,771 shares outstanding at June 30, 1996 and
December 31, 1996, respectively ......................... -- --
Additional paid-in capital .............................. 71,478 71,584
Retained earnings ....................................... 54,230 56,896
Equity adjustment from foreign currency translation ..... 1,883 1,856
Treasury stock at cost, 6,701,089 and 6,844,489 shares
at June 30, 1996 and December 31, 1996, respectively .... (73,129) (74,387)
--------- --------
Total stockholders' equity ........................ 54,462 55,949
Commitments and contingencies
--------- --------
$ 104,401 106,146
========= ========
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 3
JENNY CRAIG, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF INCOME
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------- ----------------------
1995 1996 1995 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenues:
Company-owned operations:
Product sales ......................... $73,236 68,785 153,381 143,173
Service revenues ...................... 4,910 5,669 11,694 11,377
------- ------- ------- -------
78,146 74,454 165,075 154,550
------- ------- ------- -------
Franchise operations:
Product sales ......................... 9,589 7,014 20,307 15,579
Royalties ............................. 1,693 1,355 3,611 2,964
Initial franchise fees ................ 25 25 80 210
------- ------- ------- -------
11,307 8,394 23,998 18,753
------- ------- ------- -------
Total revenues .................... 89,453 82,848 189,073 173,303
------- ------- ------- -------
Costs and expenses:
Company-owned operations:
Product ............................... 67,698 66,129 141,638 135,121
Service ............................... 3,160 4,055 7,498 7,911
------- ------- ------- -------
70,858 70,184 149,136 143,032
------- ------- ------- -------
Franchise operations:
Product ............................... 7,303 4,900 15,239 11,538
Other ................................. 523 381 993 906
------- ------- ------- -------
7,826 5,281 16,232 12,444
------- ------- ------- -------
10,769 7,383 23,705 17,827
General and administrative expenses ........ 6,782 7,172 13,426 14,524
------- ------- ------- -------
Operating income ................. 3,987 211 10,279 3,303
Other income, net, principally interest .... 784 450 1,594 983
------- ------- ------- -------
Income before taxes .............. 4,771 661 11,873 4,286
Provision for income taxes ................. 2,000 129 5,040 1,620
------- ------- ------- -------
Net income ....................... $ 2,771 532 6,833 2,666
======= ======= ======= =======
Net income per share ............. $ .11 .03 .27 .13
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 4
JENNY CRAIG, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
---------------------------
1995 1996
----- ----
<S> <C> <C>
Cash flows from operating activities:
Net income ........................................................... $ 6,833 2,666
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization ........................................ 3,595 3,488
Provision for doubtful accounts ...................................... (400) --
(Increase) decrease in:
Accounts receivable ........................................ 15 (427)
Inventories ................................................ 1,042 (2,356)
Prepaid expenses and other assets .......................... (463) (1,179)
Increase (decrease) in:
Accounts payable ........................................... (1,819) (4,352)
Accrued liabilities ........................................ 601 (1,615)
Income taxes payable ....................................... (3,584) 142
Deferred service revenue ................................... (126) (1,523)
-------- -------
Net cash provided by (used in) operating activities 5,694 (5,156)
-------- -------
Cash flows from investing activities:
Purchase of property and equipment .................................... (1,468) (13,944)
Purchase of short-term investments .................................... -- (5,975)
Proceeds from maturity of short-term investments ...................... 5,501 6,850
Payment for acquisition of franchised centres ......................... -- (1,803)
-------- -------
Net cash provided by (used in) investing activities 4,033 (14,872)
-------- -------
Cash flows from financing activities:
Purchase of treasury stock ............................................ (8,376) (1,258)
Proceeds from note payable ............................................ -- 5,975
Proceeds from exercise of stock options ............................... 4 106
-------- -------
Net cash provided by (used in) financing activities (8,372) 4,823
-------- -------
Effect of exchange rate changes on cash and cash equivalents ............. 402 (63)
Net increase (decrease) in cash and cash equivalents ..................... 1,757 (15,268)
Cash and cash equivalents at beginning of period ......................... 51,819 43,535
-------- -------
Cash and cash equivalents at end of period ............................... $ 53,576 28,267
======== =======
Supplemental disclosure of cash flow information:
Income taxes paid ..................................................... $ 8,623 1,478
Acquisition of franchised centres:
Cancellation of accounts receivable ................................ $ -- 732
Fair value of assets acquired ...................................... $ -- 2,362
Liabilities assumed ................................................ $ -- 1,630
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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<PAGE> 5
JENNY CRAIG, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996
1. The accompanying unaudited consolidated financial statements do not include
all of the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of management, all
adjustments, consisting only of normal recurring adjustments, considered
necessary for a fair presentation have been included. Operating results for any
interim period are not necessarily indicative of the results for any other
interim period or for the full year. These statements should be read in
conjunction with the June 30, 1996 consolidated financial statements.
2. Net income per share is computed by dividing net income by the weighted
average number of shares outstanding during the period, which were 24,636,000
and 20,794,000 for the quarters ended December 31, 1995 and 1996, respectively
and 24,852,000 and 20,822,000 for the six months ended December 31, 1995 and
1996, respectively.
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<PAGE> 6
JENNY CRAIG, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS
Forward-Looking Statements
Information provided in this Report on Form 10-Q may contain, and the
Company may from time to time disseminate material and make statements which may
contain "forward-looking" information, as that term is defined by the Private
Securities Litigation Reform Act of 1995 (the "Act"). These forward-looking
statements may relate to anticipated financial performance, business prospects
and similar matters. The words "expects", "anticipates", "believes", and similar
words generally signify a "forward-looking" statement. These cautionary
statements are being made pursuant to the provisions of the Act and with the
intention of obtaining the benefit of "safe- harbor" provisions of the Act. The
reader is cautioned that all forward-looking statements are necessarily
speculative and there are certain risks and uncertainties that could cause
actual events or results to differ materially from those referred to in such
forward-looking statements. Among the factors that could cause actual results to
differ materially are: increased competition; technological and scientific
developments, including appetite suppressants and other drugs which can be used
in weight-loss programs; increases in cost of food or services; lack of market
acceptance of additional products and services; legislative and regulatory
restrictions or actions; effectiveness of marketing and advertising programs;
prevailing domestic and foreign economic conditions; and the risk factors set
forth from time to time in the Company's annual reports and other reports and
filings with the SEC. In particular, the reader should carefully review the
cautionary statements contained under the caption "Forward-Looking Statements"
in Item 1 of the Company's Annual Report on Form 10-K for the year ended June
30, 1996.
Quarter Ended December 31, 1996 as Compared to Quarter Ended December 31, 1995
Revenues from United States Company-owned operations decreased 9% from
$68,493,000 for the quarter ended December 31, 1995 to $62,254,000 for the
quarter ended December 31, 1996. At December 31, 1995 there were 482 United
States Company-owned Centres in operation compared to 526 at December 31, 1996.
The increase in United States Company-owned Centres reflects the Company's
acquisition of 38 Centres from a franchisee in September 1996. Average revenue
per United States Company-owned Centre decreased 16% from $142,000 for the
quarter ended December 31, 1995 to $119,000 for the quarter ended December 31,
1996. Although there was a 12% decrease (19% on an average per centre basis) in
the number of new participants enrolled in the Program between the periods,
service revenues from United States Company-owned operations for the quarter
ended December 31, 1996 increased 13%, to $4,845,000 from $4,287,000 for the
comparable year earlier period. This increase in service revenues was due to an
increase in the average service fee charged per new participant. The decline in
new enrollments also resulted in a decline in the number of active participants
in the program and led to an 11% decline in product sales, which consist
primarily of food products, from United States Company- owned operations from
$64,206,000 for the quarter ended December 31, 1995 to $57,409,000 for the
quarter ended December 31, 1996. Revenues from foreign Company-owned operations
increased 26% from $9,653,000 to $12,200,000 for the quarters ended December 31,
1995 and 1996, respectively, primarily due to an increase in the number of new
enrollments in the Program in foreign Centres. There were 103 foreign
Company-owned Centres at December 31, 1995 compared to 104 at December 31, 1996.
There was a 6% weighted average increase in the Australian and Canadian
currencies in relation to the U.S. dollar between the periods.
(Continued)
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<PAGE> 7
JENNY CRAIG, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS
(Continued)
In April 1996, the United States Food and Drug Administration ("FDA")
approved dexfenfluramine, commonly referred to by its trade name Redux, for use
as a doctor-prescribed medication for the treatment of obesity. The Company
believes that the extensive publicity that accompanied the introduction of Redux
heightened the public's interest in weight loss pharmaceuticals and appears to
be responsible for the softened demand being experienced by the Company for its
products and services. During the quarter ended September 30, 1996, the Company
began test marketing, on a very limited basis, a new program incorporating
weight-loss medications along with the traditional elements of its weight
management program. In late- December 1996, following evaluation of test market
results, the Company added this new program to virtually all United States
Company-owned Centres.
Costs and expenses of United States Company-owned operations decreased
2% from $61,417,000 to $60,379,000 for the quarters ended December 31, 1995 and
1996, respectively. This decrease reflects the decreased variable costs related
to the lower level of operations, offset, in part, by increased expenses related
to a new compensation program for Centre personnel implemented in November 1996
and the costs associated with the new program component utilizing weight loss
medications. Costs and expenses of United States Company-owned operations as a
percentage of United States Company-owned revenues increased from 90% to 97%
between the periods principally due to the higher proportion of fixed costs when
compared to the reduced level of revenues and the aforementioned expenses
pertaining to the new compensation program and the new program component
utilizing weight loss medications. After including the allocable portion of
general and administrative expenses, United States Company-owned operations
incurred an operating loss of $3,271,000 for the quarter ended December 31, 1996
compared to operating income of $2,388,000 for the quarter ended December 31,
1995. Costs and expenses of foreign Company-owned operations increased 4% from
$9,441,000 to $9,805,000 for the quarters ended December 31, 1995 and 1996,
respectively, principally due to the increased variable costs related to the
higher level of operations. After including the allocable portion of general and
administrative expenses, foreign Company-owned operations had operating income
of $1,797,000 for the quarter ended December 31, 1996 compared to an operating
loss of $308,000 for the quarter ended December 31, 1995.
Revenues from franchise operations decreased 26% from $11,307,000 to
$8,394,000 for the quarters ended December 31, 1995 and 1996, respectively. This
decline was principally due to a 17% decrease in the number of franchise Centres
in operation, from 193 at December 31, 1995 to 161 at December 31, 1996, and a
decrease in the number of new participants enrolled in the Program resulting in
reduced product sales and royalties. The decrease in the number of franchise
Centres reflects the Company's acquisition of 38 Centres from a franchisee in
September 1996.
Costs and expenses of franchised operations, which consist primarily of
product costs, decreased 33% from $7,826,000 to $5,281,000 for the quarters
ended December 31, 1995 and 1996, respectively, principally because of the
reduced level of franchise operations, the timing of certain advertising
incentives granted to franchisees and reduced compensation expenses.
(Continued)
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<PAGE> 8
JENNY CRAIG, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS
(Continued)
General and administrative expenses increased 6% from $6,782,000 to
$7,172,000 principally due to an increase in consulting expenses, primarily
pertaining to information systems, and increased from 7.6% to 8.7% of total
revenues for the quarters ended December 31, 1995 and 1996, respectively.
The elements discussed above combined to result in a 95% decrease in
operating income from $3,987,000 for the quarter ended December 31, 1995
compared to $211,000 for the quarter ended December 31, 1996.
The Company and complaint counsel for the Federal Trade Commission have
entered into a proposed Consent Order settling all contested issues raised in a
complaint filed in September 1993 against the Company alleging that the Company
violated the Federal Trade Commission Act by the use and content of certain
advertisements for the Company's weight loss program featuring testimonials,
claims for the program's success and safety, and statements as to the program's
costs to participants. The proposed Consent Order does not admit any issue of
fact or law or any violation by the Company of any law or regulation, and does
not involve payment by the Company of any civil money penalty, damages, or other
financial relief. The proposed Consent Order requires certain procedures and
disclosures in connection with the Company's advertisements of its products and
services. If the full Commission accepts the proposed Consent Order it will be
published for public comment and, unless modified or withdrawn on the basis of
public comments, it thereafter will become effective. The Company does not
believe that compliance with the proposed Consent Order will have a material
adverse effect on the Company's consolidated financial statements or its current
advertising and marketing practices.
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<PAGE> 9
JENNY CRAIG, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS
Six Months Ended December 31, 1996 as Compared to Six Months Ended December 31,
1995
Revenues from United States Company-owned operations decreased 11% from
$144,862,000 for the six months ended December 31, 1995 to $128,812,000 for the
six months ended December 31, 1996. At December 31, 1995 there were 482 United
States Company-owned Centres in operation compared to 526 at December 31, 1996.
The increase in United States Company-owned Centres reflects the Company's
acquisition of 38 Centres from a franchisee in September 1996. Average revenue
per United States Company-owned Centre decreased 16% from $301,000 for the six
months ended December 31, 1995 to $254,000 for the six months ended December 31,
1996. Service revenues from United States Company-owned operations for the six
months ended December 31, 1996 decreased 8% to $9,472,000 from $10,260,000 for
the comparable year earlier period. This decrease in service revenues was
primarily due to a 27% decrease (32% on an average per centre basis) in the
number of new participants enrolled in the Program between the periods, offset
in part by an increase in the average service fee charged per new participant.
The decline in new enrollments also resulted in a decline in the number of
active participants in the Program and led to an 11% decline in product sales,
which consists primarily of food products, from United States Company-owned
operations from $134,602,000 for the six months ended December 31, 1995 to
$119,340,000 for the six months ended December 31, 1996. Revenues from foreign
Company- owned operations increased 27% from $20,213,000 to $25,738,000 for the
six months ended December 31, 1995 and 1996, respectively, primarily due to an
increase in the number of new enrollments in the Program in foreign Centres.
There was a 5% weighted average increase in the Australian and Canadian
currencies in relation to the U.S. dollar between the periods.
Costs and expenses of United States Company-owned operations decreased
6% from $129,777,000 to $122,237,000 for the six months ended December 31, 1995
and 1996, respectively. This decrease reflects the decreased variable costs
related to the lower level of operations offset, in part, by increased expenses
related to a new compensation program for Centre personnel implemented in
November 1996 and the costs associated with the new program component utilizing
weight loss medications. Costs and expenses of United States Company-owned
operations as a percentage of United States Company-owned revenues increased
from 90% to 95% between the periods principally due to the higher proportion of
fixed costs when compared to the reduced level of revenues and the
aforementioned expenses pertaining to the new compensation program and the new
program component utilizing weight loss medications. After including the
allocable portion of general and administrative expenses, United States
Company-owned operations incurred an operating loss of $3,567,000 for the six
months ended December 31, 1996 compared to operating income of $5,918,000 for
the six months ended December 31, 1995. Costs and expenses of foreign
Company-owned operations increased 7% from $19,359,000 to $20,795,000 for the
six month periods ended December 31, 1995 and 1996, respectively, principally
because of the increased variable costs related to the higher level of
operations. After including the allocable portion of general and administrative
expenses, foreign Company-owned operations had operating income of $3,735,000
for the six months ended December 31, 1996 compared to an operating loss of
$195,000 for the six months ended December 31, 1995.
Revenues from franchise operations decreased 22% from $23,998,000 to
$18,753,000 for the six months ended December 31, 1995 and 1996, respectively.
This decline was principally due to a 17% decrease in the number of franchise
Centres in operation, from 193 at December 31, 1995 to 161 at December 31, 1996
and a decrease in the number of new participants enrolled in the Program
resulting in reduced product sales and royalties. The decrease in the number of
franchise Centres reflects the Company's acquisition of 38 Centres from a
franchisee in September 1996.
(Continued)
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<PAGE> 10
JENNY CRAIG, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL RESULTS
(Continued)
Costs and expenses of franchised operations, which consist primarily of
product costs, decreased 23% from $16,232,000 to $12,444,000 for the six month
periods ended December 31, 1995 and 1996, respectively, principally because of
the reduced level of franchise operations. Franchise costs and expenses as a
percentage of franchise revenues remained relatively constant at 67.6% for the
six months ended December 31, 1995 compared to 66.1% for the six months ended
December 31, 1996.
General and administrative expenses increased 8% from $13,426,000 to
$14,524,000 principally due to an increase in consulting expenses, primarily
pertaining to information systems, and increased from 7.1% to 8.4% of total
revenues for the six months ended December 31, 1995 and 1996, respectively.
The elements discussed above combined to result in a 68% decrease in
operating income from $10,279,000 for the six months ended December 31, 1995 to
$3,303,000 for the six months ended December 31, 1996.
Financial Condition
As of December 31, 1996, the Company's cash, cash equivalents, and
short-term investments were $34,437,000, reflecting a decrease during the
quarter ended December 31, 1996 of $8,507,000. This decrease was principally due
to the purchase of property and equipment, primarily related to leasehold
improvements at the Company's executive office building and centre improvements
related to the new program component utilizing weight loss medications; the
purchase of treasury stock; an increase in inventory related to the Company's
expanded capability to store frozen products; and the timing of payment of
certain accounts payable principally related to advertising. During the quarter
ended December 31, 1996 the Company received approximately $6 million in
proceeds of a borrowing secured by the Company's executive office building
purchased in the previous quarter. The Company believes that its cash, cash
equivalents and short-term investments and its cash flow from operations are
adequate for its needs in the foreseeable future.
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<PAGE> 11
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Company's 1996 Annual Meeting of Stockholders was held on
November 6, 1996. At the meeting the stockholders of the Company
elected the seven incumbent directors for terms of one year each and
until their successors are duly elected and qualified and ratified
the appointment of KPMG Peat Marwick LLP as the independent certified
public accountants of the Company and its subsidiaries for the fiscal
year ending June 30, 1997.
The results of the vote to elect the seven directors were as follows:
<TABLE>
<CAPTION>
SHARES VOTED SHARES FOR WHICH
NAME FOR AUTHORITY WAS WITHHELD
- ------- ------------------- ----------------------
<S> <C> <C>
Sidney Craig 20,233,598 204,053
Jenny Craig 20,233,898 203,753
C. Joseph LaBonte 20,234,013 203,638
Scott Bice 20,385,213 52,438
Marvin Sears 20,233,913 203,738
Andrea Van de Kamp 20,385,198 52,453
Robert Wolf 20,385,313 52,338
</TABLE>
The results of the vote to ratify the appointment of KPMG Peat
Marwick LLP as independent certified public accountants of the Company
and its subsidiaries for the fiscal year ending June 30, 1997 were as
follows:
<TABLE>
<CAPTION>
SHARES VOTED
SHARES VOTED FOR AGAINST SHARES ABSTAINING
------------------------ ---------------- ------------------------
<S> <C> <C>
20,430,966 4,635 2,050
</TABLE>
There were no broker non-votes on any of the matters submitted to a vote of
security holders.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
10.3 Jenny Craig, Inc. Stock Option Plan, as amended
27. Financial Data Schedule
(b) No reports on Form 8-K have been filed during the quarter for
which this report is filed.
- 11 -
<PAGE> 12
SIGNATURE
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.
JENNY CRAIG, INC.
By: /S/ Michael L. Jeub
---------------------------
Michael L. Jeub
Sr. Vice President
and Chief Financial Officer
Date: February 12, 1997
- 12 -
<PAGE> 1
Exhibit 10.3
Page 1
JENNY CRAIG, INC.
AMENDED AND RESTATED 1991 STOCK OPTION PLAN
1. Purposes
The purposes of the Jenny Craig, Inc. 1991 Stock Option Plan (the "Plan")
are to enable Jenny Craig, Inc. ("Jenny Craig") and its subsidiaries to attract,
retain and motivate the best qualified personnel and to create a long-term
mutuality of interest between the key personnel and the shareholders of Jenny
Craig by granting them options to purchase Jenny Craig stock.
2. Definitions
Unless the context requires otherwise, the following words as used in the
Plan shall have the meanings ascribed to each below, it being understood that
masculine, feminine and neuter pronouns are used interchangeably, and that each
comprehends the others.
(a) "Advisory Board" shall mean the Advisory Board of Jenny Craig.
(b) "Board" shall mean the Board of Directors of Jenny Craig.
(c) "Committee" shall mean such committee, if any, appointed by the Board
to administer the Plan, consisting of such directors as may be appointed by the
Board, provided that, with respect to grants of Options to non-employee
directors and any action hereunder relating to Options held by non-employee
directors, Committee shall mean the Board, and provided further, if the Board
does not appoint a committee to administer the Plan, "Committee" shall mean the
Board.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "Common Stock" shall mean the common stock of Jenny Craig, par value
$.000000005, any common stock into which such common stock may be changed and
any common stock resulting from any reclassification of such common stock.
(f) "Company" shall mean Jenny Craig and its subsidiaries any of whose
employees are Participants (as hereinafter defined) in this Plan.
(g) "Fair Market Value" shall mean the value of a share of Common Stock
on a particular date, determined as follows:
(i) If the Common Stock is listed or admitted to trading on such
date on the New York Stock Exchange, the mean of the high and low sales
prices of a Share on such date as reported in the principal consolidated
transaction reporting system with respect to securities listed or
admitted to trading on the New York Stock Exchange; or
(ii) If the Common Stock is not listed or admitted to trading on
the New York Stock Exchange but is listed or admitted to trading on
another national exchange, the mean of the high and low sales prices of a
Share on such date as reported in the principal
<PAGE> 2
Page 2
consolidated transaction reporting system with respect to securities
listed or admitted to trading on such national exchange; or
(iii) If the Common Stock is not listed or admitted to trading on
any national exchange, the mean of the closing bid and asked prices (or,
if available, the high and low sales prices) of a Share on such date in
the over-the-counter market, as reported by the National Association of
Securities Dealers, Inc. Automatic Quotation System, the National
Quotation Bureau or such other system then in use with regard to the
Common Stock or, if on such date the stock of the Company is publicly
traded but not quoted by any such system, the mean of the closing bid and
asked prices of a Share on such date as furnished by a professional market
maker making a market in the Common Stock;
(iv) If in (i), (ii) or (iii) above, as applicable, there were no
sales on such date reported as provided above, the respective prices on
the most recent prior day on which a sale of a Share took place; or
(v) If the Common Stock is not publicly traded, such amount set by
the Committee in good faith.
(h) "Minimum Exercise Price" shall mean one hundred percent (100%) of the
Fair Market Value of a Share at the time of the grant of the Option, or the par
value of a Share, whichever is greater.
(i) "Option" shall mean the right to purchase one Share at a prescribed
purchase price on the terms specified in the Plan.
(j) "Participant" shall mean a key employee of the Company (who may be,
but need not be, an officer, director and/or member of the Advisory Board of
Jenny Craig), a non-employee director, an Advisory Board member or a consultant
to the Company, who has been granted Options under the Plan.
(k) "Share" shall mean a share of Common Stock.
Effective Date
The effective date of the Plan shall be October 1, 1991.
4. Administration
(a) The Plan shall be administered by the Committee. The Committee shall
have full authority to interpret the Plan and all Options granted hereunder; to
establish, amend, and rescind rules for carrying out the Plan; to administer the
Plan; to select employees, directors, consultants and Advisory Board members to
participate in the Plan; to grant Options under the Plan; to determine the
terms, exercise price and form of exercise payment for each Option granted under
the Plan; to determine whether each Option granted under the Plan shall be
intended to qualify as an "incentive stock option" under Section 422A of the
Code; and to make all other determinations and to take all such steps in
connection with the Plan and the Options as the Committee deems necessary or
desirable, all of which shall be in the Committee's sole
<PAGE> 3
Page 3
discretion. The Committee shall not be bound to any standards of uniformity or
similarity of action, interpretation or conduct in the discharge of its duties
hereunder, regardless of the apparent similarity of the matters coming before
it. Its determination shall be binding on all parties.
(b) Any Participant may hold more than one Option under the Plan and
under any other plan pursuant to which stock options, Shares or other incentives
may be granted, issued or paid.
(c) The Committee may designate the Secretary of Jenny Craig, other
employees of Jenny Craig or competent professional advisors to assist the
Committee in the administration of the Plan, and may grant authority to such
persons to execute agreements or other documents on behalf of the Committee. The
Committee may employ such legal counsel, consultants and agents as it may deem
desirable for the administration of the Plan, and may rely upon any opinion
received from any such counsel or consultant and any computation received from
any such consultant or agent. Expenses incurred by the Committee in the
engagement of such counsel, consultant or agent shall be paid by Jenny Craig.
(d) No member or former member of the Committee or of the Board shall be
liable for any action or determination made in good faith with respect to the
Plan or any Option granted under it. To the maximum extent permitted by
applicable law, each member or former member of the Committee or of the Board
shall be indemnified and held harmless by Jenny Craig against any cost or
expense (including counsel fees) or liability (including any sum paid in
settlement of a claim with the approval of Jenny Craig) arising out of any act
or omission to act in connection with the Plan unless arising out of such
member's or former member's own fraud or bad faith. Such indemnification shall
be in addition to any rights of indemnification the members or former members
may have as directors under applicable law or under the certificate of
incorporation or by-laws of Jenny Craig.
(e) The Committee shall select one of its members as a Chairman and shall
adopt such rules and regulations as it shall deem appropriate concerning the
holding of its meetings and the transaction of its business. Any member of the
Committee may be removed at any time either with or without cause by resolution
adopted by the Board, and any vacancy on the Committee may at any time be filled
by resolution adopted by the Board.
(f) All determinations by the Committee shall be made by the affirmative
vote of a majority of its members. Any such determination may be made at a
meeting duly called and held at which a majority of the members of the Committee
were in attendance in person or through telephonic communication. Any
determination set forth in writing and signed by all of the members of the
Committee shall be as fully effective as if it had been made by a majority vote
of the members at a meeting duly called and held.
5. Shares; Adjustment Upon Certain Events
(a) Shares to be issued under the Plan shall be made available, at the
discretion of the Board, either from authorized but unissued Shares or from
issued Shares reacquired by Jenny Craig.
(b) Except as provided in this Section 5, the aggregate number
of Shares that may be
<PAGE> 4
Page 4
issued under the Plan shall not exceed 2,500,000 shares. If Options are for any
reason cancelled, or expire or terminate unexercised, the Shares covered by such
Options shall again be available for the grant of Options, subject to the limit
provided by the preceding sentence.
(c) No fractional Shares will be issued or transferred in the exercise of
any Option. In lieu thereof, Jenny Craig shall pay a cash adjustment equal to
the same fraction of the Fair Market Value of one Share on the date of exercise.
(d) The existence of the Plan and the Options granted hereunder shall not
affect in any way the right or power of the Board or the stockholders of Jenny
Craig to make or authorize any adjustment, recapitalization, reorganization or
other change in Jenny Craig's capital structure or its business, any merger or
consolidation of Jenny Craig, any issue of bonds, debentures, preferred or prior
preference stocks ahead of or affecting Common Stock, the dissolution or
liquidation of Jenny Craig or any sale or transfer of all or part of its assets
or business, or any other corporate act or proceeding, in which case the
provisions of this Section 5 shall govern outstanding Options.
(e) The Shares with respect to which Options may be granted are Shares of
Common Stock as presently constituted, but, if and whenever, prior to the
expiration of an Option theretofore granted, Jenny Craig shall effect a
subdivision, recapitalization or consolidation of Shares or the payment of a
stock dividend on Shares without receipt of consideration, the purchase price
per Share and the number and class of Shares and/or other securities with
respect to which such Option thereafter may be exercised, and the total number
and class of Shares and/or other securities that may be issued under this Plan,
shall be proportionately adjusted.
(f) If Jenny Craig merges or consolidates with one or more corporations,
then from and after the effective date of such merger or consolidation, upon
exercise of an Option theretofore granted the Participant shall be entitled to
purchase under such Option, in lieu of the number of Shares as to which such
Option shall then be exercisable but on the same terms and conditions of
exercise set forth in such Option, the number and class of Shares and/or other
securities or property (including cash) to which the Participant would have been
entitled pursuant to the terms of the agreement of merger or consolidation if,
immediately prior to such merger or consolidation, the Participant had been the
holder of record of the total number of Shares receivable upon exercise of such
Option (whether or not then exercisable) had such merger or consolidation not
occurred.
(g) If, as a result of any adjustment made pursuant to the preceding
paragraphs of this Section 5, any Participant shall become entitled upon
exercise of an Option to receive any securities other than Common Stock, then
the number and class of securities so receivable thereafter shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Common Stock set forth in this
Section 5.
(h) Except as hereinbefore expressly provided, the issuance by Jenny
Craig of shares of stock of any class, or securities convertible into shares of
stock of any class, for cash, property, labor or services, upon direct sale,
upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of shares or other securities, and in any case whether or not for
fair value, shall not affect, and no adjustment by reason thereof shall be made
with respect to, the number and class of Shares and/or other securities or
property subject to Options theretofore granted
<PAGE> 5
Page 5
or the purchase price per Share.
(i) Notwithstanding any provision of this Section 5 to the contrary, if
authorized but previously unissued Shares are issued under the Plan, such Shares
shall not be issued for a consideration less than their par value.
6. Awards and Terms of Options
(a) Grant. The Committee may grant Options not intended to be "incentive
stock options" within the meaning of section 422A of the Code to key employees,
Advisory Board members and consultants to the Company, and may grant "incentive
stock options" to key employees. The Board may grant Options not intended to be
"incentive stock options" within the meaning of Section 422A of the Code to
non-employee directors. Additionally, without further action by the Board, the
Committee or the stockholders of Jenny Craig, each non-employee director on the
date immediately prior to the effective date of Jenny Craig's initial public
offering of its common stock, and each person who becomes a non-employee
director thereafter and prior to November 1, 1996 shall automatically receive,
(x) a one-time grant, effective on the date immediately prior to the effective
date of such public offering or, if later, on the date of such person becoming a
director, of Options to purchase 5,000 Shares, and (y) an annual grant, on each
anniversary of the initial grant for so long as such person continues to be a
director, of Options to purchase 500 Shares. Options shall be evidenced by
Option agreements in such form not inconsistent with the Plan as the Committee
shall approve from time to time, which agreements shall contain in substance the
following terms and conditions:
(i) Exercise Price. The purchase price per Share deliverable upon
the exercise of an Option shall be determined by the Committee, but shall
not be less than the Minimum Exercise Price. For Options received by
non-employee directors pursuant to the second sentence of Section 6(a),
the purchase price per Share deliverable upon the exercise of an Option
shall be the Minimum Exercise Price.
(ii) Number of Shares. The Option agreement shall specify the
number of Options granted to the Participant, as determined by the
Committee or as set forth in the second sentence of this Section 6(a) with
respect to options granted pursuant to such sentence. The maximum number
of Options that may be granted under the Plan during any calendar year to
any Participant shall not exceed 200,000 Options, provided however that if
the Company grants to any Participant during any calendar year less than
200,000 Options or does not grant any Options during any calendar year to
such Participant, then the amount of such shortfall shall be carried
forward and added to the maximum number of Options which may be granted in
a subsequent year to such Participant. If some of the Options held by a
Participant are exercised, any unexercised Options held by such
Participant shall remain outstanding and shall be or become exercisable
according to their respective terms.
(iii) Period of Exercisability. Except as otherwise provided in the
Plan or as otherwise determined by the Committee, no Option granted under
the Plan shall become exercisable earlier than the expiration of six (6)
months after the date of grant and each Option shall be exercisable after
the expiration of such period. The Committee may prescribe shorter or
longer time periods, periods of partial exercisability and additional
requirements or conditions with respect to the exercise of Options in the
Option agreement and may provide, either at the time of grant or
thereafter, for the acceleration of an Option;
<PAGE> 6
Page 6
provided, however, that no Option shall be exercisable after the
expiration of ten (10) years from the date of grant. Except as hereinafter
provided, or as provided in the Participant's Option agreement, or as may
be determined by the Committee, Options granted to any Participant may be
exercised only during the continuance of that Participant's employment by
the Company, service on the Board or Advisory Board or service as a
consultant to the Company.
(b) Procedure for Exercise. A Participant electing to exercise one or
more Options shall give written notice to the Chief Financial Officer of Jenny
Craig of such election and of the number of Options the Participant has elected
to exercise. Shares purchased pursuant to the exercise of Options shall be paid
for at the time of exercise in cash, by the delivery of unencumbered Shares
owned by the Participant (provided that such Shares have been owned by the
Participant for such period as is required by applicable accounting standards to
avoid a charge to earnings), or on such other terms and conditions as may be
acceptable to the Committee and in accordance with Delaware law. Upon receipt of
payment, Jenny Craig shall deliver to the Participant as soon as practicable a
certificate or certificates for the Shares then purchased.
(c) Expiration and Cancellation. If not previously exercised, each Option
shall expire upon the tenth (10th) anniversary of the date of the grant thereof
or upon the earlier termination of the Participant's employment by the Company,
service on the Board or Advisory Board or service as a consultant to the
Company, except as otherwise provided by Section 7 of the Plan.
7. Effect of Termination of Employment or Other Service
(a) By Reason of the Participant's Death. Except as otherwise provided in
the Participant's Option agreement, if the Participant dies while an employee of
the Company or while serving as a consultant to the Company, all outstanding
Options not exercised by the Participant prior to death shall become immediately
exercisable by the Participant's estate or by the person given authority to
exercise such Options by the Participant's will or by operation of law. Unless
otherwise specified in the Option Agreement, such Options shall remain
exercisable for a period of one (1) year from the date of the Participant's
death; provided, however, that no Option may be exercised more than ten (10)
years from the date of grant.
(b) By Reason of the Participant's Retirement or Disability. Except as
otherwise provided in the Participant's Option agreement, if a Participant
retires at or after age 65 (or, with the consent of the Committee, before age
65), or if a Participant's employment with, or service as a consultant to, the
Company terminates due to disability (within the meaning of section 105(d)(4) of
the Code), all outstanding Options not exercised by the Participant prior to the
termination of his employment or service as a consultant shall immediately
become exercisable. Unless otherwise specified in the Option agreement, all such
Options shall remain exercisable for a period of one (1) year from the date of
termination of the Participant's employment or service as a consultant, except
that Options intended to qualify as incentive stock options may be exercised
only for a period of three (3) months after termination of employment due to
retirement; provided, however, that no Option may be exercised more than ten
(10) years after the date of the grant thereof.
(c) By Reason of Other Separation from Service. Except as otherwise
provided in the Participant's Option agreement, if a Participant's employment or
service as a consultant is
<PAGE> 7
Page 7
terminated for cause (as hereinafter defined) or is terminated by the
Participant in violation of an agreement between the Participant and the
Company, or if it is discovered after his separation from service that he had
engaged in conduct that would have justified termination of his employment or
service as a consultant for cause, all unexercised and outstanding Options held
by the Participant shall immediately be cancelled. Termination shall be deemed
to be for "cause" if (i) the Participant shall have committed fraud or any
felony in connection with the Participant's duties as an employee of, or
consultant to, the Company, or willful misconduct or the commission of any other
act which causes or may reasonably be expected to cause substantial economic or
reputational injury to the Company, or (ii) such termination is or would be
deemed to be for cause under any employment or consulting agreement between the
Company and the Participant. Unless otherwise specified in the Option agreement,
upon any termination of employment, or service as a consultant, not governed by
the preceding portion of this Section 7(c) or by Sections 7(a) or 7(b) hereof,
all outstanding Options not exercised by the Participant prior to the
termination of his employment, or service as a consultant, shall remain
exercisable (to the extent exercisable by him immediately before such
separation) for a period of three (3) months after such separation; provided,
however, that (i) except as otherwise provided in the Participant's Option
Agreement, or as otherwise determined by the Committee, no Options that were not
exercisable during the period of the Participant's employment, or service as a
consultant, shall thereafter become exercisable and (ii) no such Option may be
exercised more than ten (10) years after the date of the grant.
(d) Termination of Other Service. If a non-employee Participant's service
as a member of the Board or the Advisory Board is terminated because of death,
retirement, disability or other reason, any outstanding Options not exercised by
the Participant prior to such termination shall become immediately exercisable
by the Participant (or, in the case of death, by the Participant's estate or by
the person given authority to exercise such Options by the Participant's will or
by operation of law), and such Options shall remain exercisable for a period of
one (1) year from the date of termination of service; provided, however, that no
Option may be exercised more than ten (10) years from the date of grant.
8. Nontransferability of Options
No Option shall be transferable by the Participant otherwise than by will
or under applicable laws of descent and distribution. In addition, no Option
shall be assigned, negotiated, pledged, or hypothecated in any way (whether by
operation of law or otherwise), and no Option shall be subject to execution,
attachment or similar process. Upon any transfer, assignment, negotiation,
pledge or hypothecation of any Option, or in the event of any levy upon any
Option by reason of any execution, attachment or similar process, contrary to
the provisions hereof, such Option shall immediately become null and void.
9. Rights as a Stockholder
A Participant (or a permitted transferee of an Option) shall have no
rights as a stockholder with respect to any Shares covered by his Option until
he shall have become the holder of record of such Share(s), and no adjustments
shall be made for dividends in cash or other property or distributions or other
rights in respect to any such Shares, except as otherwise specifically provided
for in this Plan.
<PAGE> 8
Page 8
10. Determinations
Each determination, interpretation or other action made or taken pursuant
to the provisions of this Plan by the Board or Committee shall be final and
binding for all purposes and upon all persons, including, without limitation,
the Participants, the Company, the directors, officers, employees and members of
the Advisory Board of the Company, and their respective heirs, executors,
administrators, personal representatives and other successors in interest.
11. Termination, Amendment and Modification
(a) The Plan shall terminate at the close of business on August 28, 2001,
unless terminated sooner as hereinafter provided, and no Option shall be granted
under the Plan thereafter. The termination of the Plan shall not terminate any
outstanding Options which by their terms continue beyond the termination date of
the Plan. At any time prior to that date, the Board may terminate the Plan or
suspend the Plan in whole or in part, or amend the Plan. Notwithstanding the
foregoing, however, no such action may, without the approval of the stockholders
of Jenny Craig, increase the total number of Shares which may be acquired upon
exercise of Options granted under the Plan; reduce the Minimum Exercise Price at
which any Option may be exercised below the Minimum Exercise Price; change the
class of persons eligible to be Participants; or, unless no longer required as a
condition of compliance with the requirements of Rule 16b-3, change the number
of Options to be granted to non-employee directors, or materially increase the
benefits accruing to non-employee directors hereunder.
(b) Nothing contained in this Section 11 shall be deemed to prevent the
Board or the Committee from authorizing amendments of outstanding Options of
Participants including, without limitation, the reduction of the exercise price
specified therein (or the granting or issuance of new Options at a lower
exercise price upon cancellation of outstanding Options), so long as all Options
outstanding at any one time shall not call for issuance of more Shares than the
remaining number provided for under the Plan and so long as the provisions of
any amended Options would have been permissible under the Plan if such Option
had been originally granted or issued as of the date of such amendment with such
amended terms. Notwithstanding anything to the contrary contained in this
Section 11, no termination, amendment, or modification of the Plan may, without
the consent of the Participant or the transferee of his Option, alter or impair
the rights and obligations arising under any then outstanding Option.
12. Non-Exclusivity
Neither the adoption of the Plan by the Board nor the submission of the
Plan to the stockholders of Jenny Craig for approval shall be construed as
creating any limitations on the power of the Board to adopt such other incentive
arrangements as it may deem desirable, including, without limitation, the
granting or issuance of Options, Shares and/or other incentives otherwise than
under the Plan, and such arrangements may be either generally applicable or
limited in application.
13. Use of Proceeds
<PAGE> 9
Page 9
The proceeds of the sale of Shares subject to Options under the Plan are
to be added to the general funds of Jenny Craig and used for its general
corporate purposes as the Board shall determine.
14. General Provisions
(a) The Plan shall not impose any obligations on the Company to continue
the employment of, or retain in any other capacity, any Participant, nor shall
it impose any obligation on the part of any Participant to remain in the employ
of, or in any other capacity with the Company.
(b) If the Board determines that the law so requires, the holder of an
Option granted hereunder shall, upon any exercise or conversion thereof, execute
and deliver to Jenny Craig a written statement, in form satisfactory to Jenny
Craig, representing and warranting that he is purchasing or accepting the Shares
then acquired for his own account and not with a view to the resale or
distribution thereof, that any subsequent offer for sale or sale of any such
Shares shall be made either pursuant to (i) a Registration Statement on an
appropriate form under the Securities Act of 1933, as amended, which
Registration Statement shall have become effective and shall be current with
respect to the Shares being offered and sold, or (ii) a specific exemption from
the registration requirements of said Act, and that in claiming such exemption
the holder will, prior to any offer for sale or sale of such Shares, obtain a
favorable written opinion from counsel approved by Jenny Craig as to the
availability of such exception.
(c) Nothing contained in the Plan and no action taken pursuant to the
Plan (including, without limitation, the grant of any Option thereunder) shall
create or be construed to create a trust of any kind, or a fiduciary
relationship, between the Company and any Participant or the executor,
administrator or other personal representative, or designated beneficiary of
such Participant, or any other persons. If and to the extent that any
Participant or his executor, administrator, or other personal representative, as
the case may be, acquires a right to receive any payment from the Company
pursuant to the Plan, such right shall be no greater than the right of an
unsecured general creditor of the Company.
15. Issuance of Stock Certificates, Legends and Payment of Expenses
(a) Upon any exercise of an Option and payment of the exercise price as
provided in such Option, a certificate or certificates for the Shares as to
which such Option has been exercised shall be issued by Jenny Craig in the name
of the person or persons exercising such Option and shall be delivered to or
upon the order of such person or persons.
(b) Certificates for Shares issued upon exercise of an Option shall bear
such legend or legends as the Board, in its discretion, determines to be
necessary or appropriate to prevent a violation of, or to perfect an exemption
from, the registration requirements of the Securities Act of 1933, as amended,
or to implement the provisions of any agreements between the Company and the
Participant with respect to such Shares.
(c) Jenny Craig shall pay all issue or transfer taxes with respect to the
issuance or transfer of Shares, as well as all fees and expenses necessarily
incurred by Jenny Craig in connection
<PAGE> 10
Page 10
with such issuance or transfer and with the administration of the Plan.
16. Listing of Shares and Related Matters
If at any time the Board shall determine in its sole discretion that the
listing, registration or qualification of the Shares covered by the Plan upon
any national securities exchange or under any state or federal law, or the
consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the award or sale of Shares
under the Plan, no Shares will be delivered unless and until such listing,
registration, qualification, consent or approval shall have been effected or
obtained, or otherwise provided for, free of any conditions not acceptable to
the Board.
17. Withholding Taxes
The Company shall have the right to deduct withholding taxes from any
payments made pursuant to the Plan, or to make such other provisions as it deems
necessary or appropriate to satisfy its obligations to withhold federal, state
or local income or other taxes incurred by reason of the exercise of Options or
the issuance of Shares or payments under the Plan, including requiring a
Participant exercising an Option granted hereunder to reimburse the Company for
any taxes required to be withheld or otherwise deducted and paid by the Company
in respect of the Option exercise or the issuance of Shares pursuant thereto. In
lieu thereof, the Company shall have the right to withhold the amount of such
taxes from any other sums due or to become due from the Company to the
Participant upon such terms and conditions as the Company may prescribe.
18. Notices
Each Participant shall be responsible for furnishing the Committee with
the current and proper address for the mailing to him of notices and the
delivery to him of agreements, Shares and payments. Any notices required or
permitted to be given shall be deemed given if directed to the person to whom
addressed at such address and mailed by regular United States mail, first-class
and prepaid. If any item mailed to such address is returned as undeliverable to
the addressee, mailing will be suspended until the Participant furnishes the
proper address.
19. Severability of Provisions
If any provisions of the Plan shall be held invalid or unenforceable, such
invalidity or unenforceability shall not affect any other provisions of the
Plan, and the Plan shall be construed and enforced as if such provisions had not
been included.
20. Payment to Minors and Others, Etc.
Any benefit payable to or for the benefit of a minor, an incompetent
person or other person incapable of receipting therefor shall be deemed paid
when paid to such person's guardian or to the party providing or reasonably
appearing to provide for the care of such person, and such
<PAGE> 11
Page 11
payment shall fully discharge the Committee, the Company and their employees,
agents and representatives with respect thereto.
21. Headings and Captions
The headings and captions herein are provided for reference and
convenience only. They shall not be considered part of the Plan and shall not be
employed in the construction of the Plan.
22. Controlling Law
The Plan shall be construed and enforced according to the laws of the
State of California.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF INCOME FOR THE SIX
MONTHS ENDED DECEMBER 31, 1996 INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE
QUARTER ENDED DECEMBER 31, 1996 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> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> DEC-31-1996
<CASH> 28,267
<SECURITIES> 6,170
<RECEIVABLES> 3,363<F1>
<ALLOWANCES> 0
<INVENTORY> 20,064
<CURRENT-ASSETS> 67,325
<PP&E> 27,397<F1>
<DEPRECIATION> 0
<TOTAL-ASSETS> 106,146
<CURRENT-LIABILITIES> 44,222
<BONDS> 5,975
0
0
<COMMON> 0
<OTHER-SE> 55,949
<TOTAL-LIABILITY-AND-EQUITY> 106,146
<SALES> 158,752
<TOTAL-REVENUES> 173,303
<CGS> 146,659
<TOTAL-COSTS> 155,476
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 75
<INCOME-PRETAX> 4,286
<INCOME-TAX> 1,620
<INCOME-CONTINUING> 2,666
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,666
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
<FN>
<F1>THE ASSET VALUES FOR RECEIVABLES AND PP&E REPRESENT AMOUNTS NET OF
ALLOWANCES AND DEPRECIATION, RESPECTIVELY.
</FN>
</TABLE>
