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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended December 31, 1999 Commission File No. 001-10887
JENNY CRAIG, INC.
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(Exact name of registrant as specified in its charter)
DELAWARE 33-0366188
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(State of Incorporation) (I.R.S. Employer Identification No.)
11355 NORTH TORREY PINES ROAD, LA JOLLA, CA 92037
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code(858) 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, $.000000005 par value, outstanding as
of the close of business on February 10, 2000- 20,688,971.
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This filing is being made solely to correct the presentation of Note 5 of Notes
to Unaudited Consolidated Financial Statements on Page 6 of Form 10-Q for the
quarter ended December 31, 1999. Due to an error in the conversion of the table
to EDGAR format, certain amounts in the table were presented in incorrect
columns.
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ITEM 1. FINANCIAL STATEMENTS
JENNY CRAIG, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
($ in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1999
-------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Cash and cash equivalents ...................................... $ 38,864 28,772
Short-term investments ......................................... 3,150 3,651
Accounts receivable, net ....................................... 1,925 2,099
Inventories .................................................... 18,036 18,250
Prepaid expenses and other assets .............................. 4,795 2,347
-------- -------
Total current assets .................................. 66,770 55,119
Deferred tax assets ............................................ 13,406 23,216
Cost of reacquired area franchise rights, net .................. 8,078 7,578
Property and equipment, net .................................... 24,360 26,196
-------- -------
$112,614 112,109
======== =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable ............................................... $ 16,393 18,657
Accrued liabilities ............................................ 15,110 21,350
Accrual for litigation judgment ................................ 8,203 9,211
Deferred service revenue ....................................... 10,075 8,539
-------- -------
Total current liabilities ............................. 49,781 57,757
Note payable ................................................... 5,336 5,242
Obligation under capital lease ................................. -- 2,029
-------- -------
Total liabilities ..................................... 55,117 65,028
-------- -------
Stockholders' equity:
Common stock $.000000005 par value, 100,000,000 shares
authorized; 27,580,260 shares issued; 20,688,971 shares
outstanding at June 30, 1999 and December 31, 1999 ........... -- --
Additional paid-in capital ..................................... 71,622 71,622
Retained earnings .............................................. 56,507 45,115
Accumulated other comprehensive income ......................... 4,130 5,106
Treasury stock, at cost; 6,891,289 shares at June 30, 1999
and December 31, 1999 ........................................ (74,762) (74,762)
-------- -------
Total stockholders' equity ............................ 57,497 47,081
Commitments and contingencies ..................................
======== =======
$112,614 112,109
======== =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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JENNY CRAIG, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
($ in thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
----------------------- ----------------------
1998 1999 1998 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Company-owned operations:
Product sales ................................ $64,193 53,008 139,185 114,509
Service revenue .............................. 3,869 4,123 7,951 8,276
------- ------- ------- -------
68,062 57,131 147,136 122,785
------- ------- ------- -------
Franchise operations:
Product sales ................................ 5,235 4,327 10,961 9,372
Royalties .................................... 951 674 1,777 1,476
Initial franchise fees ....................... 5 25 5 35
------- ------- ------- -------
6,191 5,026 12,743 10,883
------- ------- ------- -------
Total revenues ........................... 74,253 62,157 159,879 133,668
------- ------- ------- -------
Costs and expenses:
Company-owned operations:
Product ...................................... 62,394 53,822 131,274 117,782
Service ...................................... 2,786 3,172 5,526 6,228
------- ------- ------- -------
65,180 56,994 136,800 124,010
------- ------- ------- -------
Franchise operations:
Product ...................................... 3,652 3,144 7,715 6,633
Other ........................................ 398 361 816 780
------- ------- ------- -------
4,050 3,505 8,531 7,413
------- ------- ------- -------
5,023 1,658 14,548 2,245
General and administrative expenses .............. 6,176 6,512 12,134 12,798
Litigation judgment .............................. -- 219 -- 1,008
Restructuring charge ............................. -- 7,512 -- 7,512
------- ------- ------- -------
Operating income (loss) ................... (1,153) (12,585) 2,414 (19,073)
Other income, net, principally interest .......... 466 308 931 695
------- ------- ------- -------
Income (loss) before taxes ................ (687) (12,277) 3,345 (18,378)
Income taxes (benefit) ........................... (270) (4,667) 1,272 (6,986)
------- ------- ------- -------
Net income (loss) .......................... $ (417) (7,610) 2,073 (11,392)
======= ======= ======= =======
Basic and diluted net income (loss) per
share .................................. $ (.02) (.37) .10 (.55)
======= ======= ======= =======
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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JENNY CRAIG, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
($ in thousands)
<TABLE>
<CAPTION>
Six Months Ended
December 31,
-----------------------
1998 1999
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ................................................ $ 2,073 (11,392)
Adjustments to reconcile net income (loss) to net cash
used in operating activities:
Depreciation and amortization .................................... 2,701 2,902
Non-cash portion of restructuring charge ......................... -- 1,303
Provision for deferred income taxes (benefit) .................... (4,802) (9,810)
Loss on write-off of cost of reacquired area franchise rights .... -- 96
Loss on disposal of property and equipment ....................... 203 1,349
(Increase) decrease in:
Accounts receivable .................................... (26) (174)
Inventories ............................................ (2,855) (214)
Prepaid expenses and other assets ...................... 2,264 2,448
Increase (decrease) in:
Accounts payable ....................................... 4,327 2,264
Accrued liabilities .................................... (3,068) 4,310
Accrual for litigation judgment ........................ -- 1,008
Deferred service revenue ............................... (1,501) (1,536)
------- -------
Net cash used in operating activities ......... (684) (7,446)
------- -------
Cash flows from investing activities:
Purchase of property and equipment ................................ (1,805) (2,957)
Purchase of short-term investments ................................. (4,295) (3,375)
Proceeds from maturity of short-term investments ................... 3,042 2,874
------- -------
Net cash used in investing activities ......... (3,058) (3,458)
------- -------
Cash flows from financing activities-
Principal payments on note payable and capital lease obligation.... (95) (164)
------- -------
Effect of exchange rate changes on cash and cash ..................... 15 976
equivalents
------- -------
Net decrease in cash and cash equivalents ............................ (3,822) (10,092)
Cash and cash equivalents at beginning of period ..................... 42,124 38,864
------ -------
Cash and cash equivalents at end of period ........................... $38,302 28,772
======= =======
Supplemental disclosure of cash flow information:
Income taxes paid ................................................. $ 3,832 1,464
Supplemental disclosure of investing activities:
Equipment acquired under capital lease ............................ $ -- 2,726
</TABLE>
See accompanying notes to unaudited consolidated financial statements.
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JENNY CRAIG, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
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, 1999 consolidated financial statements.
2. The weighted average number of shares used to calculate basic net income
(loss) per share was 20,688,971 for all periods presented. The impact of
outstanding stock options during the periods presented did not create a
difference between calculated basic net income (loss) per share and diluted net
income (loss) per share. Stock options had the effect of increasing the number
of shares used in the diluted net income per share calculation by application of
the treasury stock method by 5,584 shares for the six months ended December 31,
1998. The effect of 2,389,800 and 2,938,500 stock options have been excluded
from the calculation of diluted net loss per share for the quarter ended
December 31, 1998 and the quarter and six month period ended December 31, 1999,
respectively, as inclusion of the effect of the stock options would have been
antidilutive.
3. Comprehensive income (loss) for the quarters and six months ended December
31, 1998 and 1999 presented below includes foreign currency translation items.
There was no tax expense or tax benefit associated with the foreign currency
items.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
-------------------- --------------------
1998 1999 1998 1999
----- ------ ----- -------
<S> <C> <C> <C> <C>
Net income (loss) $(417) (7,610) 2,073 (11,392)
Foreign currency translation
adjustments 512 497 15 976
----- ------ ----- -------
Comprehensive income (loss) $ 95 (7,113) 2,088 (10,416)
===== ====== ===== =======
</TABLE>
4. In November 1999, the Company announced a restructuring plan to reduce
annual operating expenses. The plan included the closure of 86 underperforming
Company-owned centres in the United States, which represented 16% of the total
United States Company-owned centres, and a staff reduction of approximately 15%
at the Company's corporate headquarters. All employees were notified in early
November and the centres were closed by November 30, 1999. A charge of
$7,512,000 was recorded in the quarter ended December 31, 1999 in connection
with this restructuring. The charge was comprised of $3,882,000 for lease
termination costs at the 86 centres, $1,563,000 for severance payments to
terminated employees, $1,303,000 for the write-off of fixed assets at the closed
centres, $291,000 for refunds to program participants at the closed centres, and
$473,000 for other closure costs which include sign removals and demolition of
leasehold improvements. The Company does not believe that there will be any
material sub-lease income available with respect to the closed centres due to
the relatively short remaining lease terms on the respective centres, nor does
the Company believe that there will be any material salvage value of the fixed
assets, which consist substantially of leasehold improvements. Of the total
charge of $7,512,000, approximately $6,209,000 will require cash payments and
$1,303,000 represents the non-cash write-off of fixed assets. As of December 31,
1999, the Company had made cash payments of $685,000 for lease termination
costs, $547,000 for severance to terminated employees, $68,000 for refunds to
program participants, and $11,000 for other closure costs. The Company estimates
that the remaining cash payments of approximately $4,898,000, which is the
principal reason for the increase in accrued liabilities on the accompanying
balance sheet at December 31, 1999, will be substantially incurred by June 30,
2000.
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JENNY CRAIG, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
5. The Company operates in the weight management industry. Substantially all
revenue results from the sale of weight management products and services,
whether the centre is operated by the Company or its franchisees. The Company's
reportable segments consist of Company-owned operations and franchise
operations, further segmented by geographic area. The following presents
information about the respective reportable segments ($ in thousands):
<TABLE>
<CAPTION>
Three Months Six Months
Ended December 31, Ended December 31,
------------------------ -----------------------
1998 1999 1998 1999
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenue:
Company-owned operations:
United States ............. $ 56,238 44,702 123,725 96,731
Foreign ................... 11,824 12,429 23,411 26,054
Franchise operations:
United States ............. 4,888 3,328 9,989 6,874
Foreign ................... 1,303 1,698 2,754 4,009
Operating income (loss):
Company-owned operations:
United States ............. (4,069) (14,615) (2,995) (24,668)
Foreign ................... 1,796 1,580 3,217 4,107
Franchise operations:
United States ............. 920 109 1,521 290
Foreign ................... 200 341 671 1,198
Identifiable assets:
United States ................ 95,501 97,132 95,501 97,132
Foreign ...................... 12,494 14,977 12,494 14,977
</TABLE>
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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/ James S. Kelly
---------------------------------
James S. Kelly
Vice President and
Chief Financial Officer
Date: March 14, 2000
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