SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[ x ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 29, 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: 0-20510
AMERICAN STUDIOS, INC.
(Exact name of registrant as specified in its charter)
North Carolina 56-1758321
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
11001 Park Charlotte Boulevard, Charlotte, NC 28273
(Address of principal executive office)
(Zip Code)
(704) 588-4351
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
APPLICABLE ONLY TO CORPORATE ISSUES:
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 September 29, 1996
Common Stock, $.001 par value 21,433,160
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements Page No.
Consolidated Balance Sheets -
September 29, 1996 and December 31, 1995 1
Consolidated Statements of Operations -
Thirteen Weeks Ended and Thirty-Nine Weeks Ended
September 29, 1996 and October 1, 1995 2
Consolidated Statements of Shareholders' Equity -
Thirty-Nine Weeks Ended
September 29, 1996 and October 1, 1995 3
Consolidated Statements of Cash Flows -
Thirty-Nine Weeks Ended
September 29, 1996 and October 1, 1995 4
Condensed Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 7
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 12
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
September 29, December 31,
ASSETS 1996 1995
--------------------- ---------------------
<S> <C> <C>
CURRENT ASSETS:
Cash $763 $1,681
Accounts receivable:
Trade 655 809
Employees, principally travel advances 69 183
Income tax receivable 0 1,365
Inventories 2,247 3,027
Prepaid expenses and other 749 491
--------------------- ---------------------
Total current assets 4,483 7,556
PROPERTY, PLANT AND EQUIPMENT, NET 25,271 30,010
NON-COMPETE AGREEMENTS AND OTHER INTANGIBLE ASSETS 4,000 4,485
DEFERRED TAX ASSET 1,301 1,301
OTHER ASSETS 548 478
--------------------- ---------------------
TOTAL $35,603 $43,830
===================== =====================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term obligations $9,495 $7,240
Trade accounts payable 4,606 4,324
Commissions payable to Wal-Mart Stores, Inc. 924 2,232
Salaries, commissions and bonuses 1,600 1,809
Taxes (other than income) 1,478 1,974
Income Tax payable 1,097 -
Self-insurance reserves 2,883 2,447
Other 938 753
--------------------- ---------------------
Total current liabilities 23,021 20,779
--------------------- ---------------------
LONG TERM DEBT 5,038 10,380
SHAREHOLDERS' EQUITY:
Preferred stock - $1.00 par value (authorized 1,000,000 shares; no
shares issued) - -
Common stock - $.001 par value (authorized 70,000,000 shares;
outstanding 21,433,160 shares) 21 21
Additional paid-in capital 12,794 12,794
Retained deficit (5,348) (223)
Cumulative foreign currency translation adjustments 77 79
--------------------- ---------------------
Total shareholders' equity 7,544 12,671
--------------------- ---------------------
TOTAL $35,603 $43,830
===================== =====================
</TABLE>
See condensed notes to consolidated financial statements.
1
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN THIRTY-NINE
WEEKS ENDED WEEKS-ENDED
------------------------------------------------------------------------
September 29, October 1, September 29, October 1,
1996 1995 1996 1995
-------------- --------------- ----------------- -----------
<S> <C> <C> <C> <C>
NET SALES $24,771 $23,312 $68,686 $66,659
COST OF SALES 21,411 24,038 60,716 62,215
-------------- -------------- ----------- ---------
GROSS PROFIT (LOSS) 3,360 (726) 7,970 4,444
GENERAL AND ADMINISTRATIVE EXPENSES 3,388 4,953 11,398 13,920
AMORTIZATION OF NON-COMPETE AGREEMENTS
AND OTHER INTANGIBLE ASSETS 163 169 487 508
FOREIGN EXCHANGE LOSSES (GAINS) 6 21 - 70
-------------- -------------- ----------- ----------
LOSS BEFORE INTEREST (197) (5,869) (3,915) (10,054)
INTEREST 372 233 1,210 265
-------------- -------------- ----------- ----------
LOSS BEFORE INCOME TAXES (569) (6,102) (5,125) (10,319)
INCOME TAX BENEFIT - (2,251) - (4,023)
-------------- -------------- ----------- ----------
NET LOSS ($569) ($3,851) ($5,125) ($6,296)
============== ============== =========== ==========
NET LOSS PER COMMON SHARE ($0.03) ($0.18) ($0.24) ($0.29)
============== ============== =========== ==========
CASH DIVIDEND PER COMMON SHARE - - - -
============== ============== =========== ==========
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING
AND COMMON STOCK EQUIVALENTS 21,433,160 21,397,885 21,433,160 21,399,674
============== ============== =========== ===========
</TABLE>
See condensed notes to consolidated financial statements.
2
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
FOR THE THIRTY-NINE WEEKS ENDED
-----------------------------------------------------------------------------------------
REETAINED CUMULATIVE TOTAL
COMMON STOCK ADDITIONAL EARNINGS TRANSLATION SHAREHOLDERS'
-------------------------
SHARES AMOUNT PAID-IN CAPITAL (DEFICIT) ADJUSTMENTS EQUITY
-------------- --------- -------------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1994 21,426,465 $21 $12,871 $6,626 $7 $19,525
NET LOSS (6,296) (6,296)
ISSUANCE OF COMMON STOCK UNDER THE
THE EMPLOYEE STOCK PURCHASE PLAN 25,420 49 49
CASH DIVIDEND DECLARED ($.04
PER SHARE) (856) (856)
ACQUISITION OF COMPANY STOCK (54,000) (161) (161)
FOREIGN CURRENCY TRANSLATION
ADJUSTMENT 39 39
============== ========= ============= ============ =========== ==========
BALANCE AT OCTOBER 1, 1995 21,397,885 $21 $12,759 ($526) $46 $12,300
============== ========= ============= ============ =========== ==========
BALANCE AT DECEMBER 31, 1995 21,433,160 $21 $12,794 ($223) $79 $12,671
NET LOSS (5,125) (5,125)
FOREIGN CURRENCY TRANSALATION
ADJUSTMENT (2) (2)
============== ========= ============= ============ =========== ==========
BALANCE AT SEPTEMBER 29, 1996 21,433,160 $21 $12,794 ($5,348) $77 $7,544
============== ========= ============= ============ =========== ==========
</TABLE>
See condensed notes to consolidated financial statements.
3
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
THIRTY-NINE
WEEKS ENDED
------------------------------
September 29, October 1,
1996 1995
-------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($5,125) ($6,296)
-------------- -------------
Adjustments to reconcile net loss to net cash used by operating activities
Deferred income tax benefit 0 (656)
Depreciation of property, plant and equipment 4,993 2,475
Amortization of intangible assets 487 508
Foreign exchange losses (gains) (6) 70
Increase in valuation allowance 100 -
Other 230 -
Change in operating assets and liabilities net of effects from purchase of
CVS, Inc.:
Decrease (increase) in accounts receivable 1,633 (2,247)
Decrease (increase) in inventories 780 (432)
Decrease (increase) in prepaid expenses and other assets (328) 70
Increase (decrease) in accounts payable and accrued liabilities (13) 309
-------------- -------------
Total adjustments 7,876 97
-------------- -------------
Net cash provided by (used in) operating activities 2,751 (6,199)
-------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures, net (584) (7,425)
Payment for purchase of CVS, Inc. - (460)
-------------- -------------
Net cash used in investing activities (584) (7,885)
-------------- -------------
CASH FLOWS FROM FINANCING ACTIVITES:
Net borrowings under revolving credit facility 1,864 6,921
Principal payments under notes payable (4,217) (533)
Principal payments under capital lease obligations (734) (56)
Dividends paid - (856)
Issuance of common stock under the employee stock purchase plan - 49
Acquisition of company stock - (161)
-------------- -------------
Net cash provided by (used in) financing activities (3,087) 5,364
-------------- -------------
EFFECT OF EXCHANGE RATE ON CASH 2 (70)
-------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (918) (8,790)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 1,681 9,058
-------------- -------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $763 $268
============== =============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for income taxes $5 $1,239
============== =============
Cash paid during the period for interest $1,236 $173
============== =============
SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
Capital lease obligations inclurred when the Company entered into
a lease for new property plant and equipment $6,817
=============
Note payable obligations incurred when the Company entered into
a note payable for new property plant and equipment $2,834
=============
</TABLE>
4
<PAGE>
AMERICAN STUDIOS, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
With respect to the significant accounting policies of American Studios, Inc.
(the "Company"), reference is made to Note 1 of the financial statements in the
Company's Form 10-K for the year ended December 31, 1995. These financial
statements should be read in conjunction with the financial statements and notes
thereto included in such Form 10-K.
In the opinion of the Company's management, the accompanying unaudited interim
financial statements reflect all adjustments, consisting of normal recurring
adjustments, necessary for a fair presentation of the results for the interim
periods presented. Interim results are not necessarily indicative of results for
the entire year.
Principles of Consolidation - The accompanying financial statements include the
accounts of the Company, its wholly owned subsidiary, ASI Distribution, Inc.
(presently inactive) and its 99.99% owned subsidiary American Studios de Mexico,
S.A. de C.V. All significant intercompany transactions have been eliminated.
5
<PAGE>
NOTE 2 - LONG TERM DEBT AND CAPITAL LEASES
Long-term debt and capital leases obligations are summarized as follows (in
000's):
<TABLE>
<CAPTION>
Long-term debt: 1996 1995
-------- ----------
<S> <C> <C>
Revolving credit facility due January 31, 1997, bearing interest
at lender's prime rate, which at September 29, 1996 was 8.25% $ 5,560 $ 3,696
Collateralized note payable, 8.00%, due in monthly installments
of $41,438, including interest through 1998 881 1,191
Collateralized note payable, 8.00%, due in monthly installments
of $54,945, including interest through 1998 1,215 1,623
Notes payable, at prime, in one installment, due on
December 31, 1996 500 500
Collateralized note payable, at prime, due in monthly installments
of $500,000 through 1996 670 4,169
Capital lease obligations:
Leases of certain digital imaging technology systems and sales/portrait
order entry stations with lease periods expiring
through 2000, at interest of 7.69% 3,932 4,781
Leases of certain digital imaging technology systems with lease
periods expiring through 1999, at interest of 8.5% 1,701 1,660
Lease of certain copier equipment with lease period expiring in 2001 46
Lease of certain film processing equipment with lease period
expiring in 1998 28 -
------ -------
Total debt 14,533 17,620
Less current portion due within one year 9,495 7,240
------ -------
Long-term debt and capital loan obligation, net of current portion $ 5,038 $ 10,380
====== =======
</TABLE>
Aggregate principal payments for the next five years are as follows:
1996 $ 9,495
1997 2,847
1998 2,007
1999 174
2000 10
-------
Total $ 14,533
========
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
Of Operations.
Results of Operations
Overview
American Studios, Inc.'s net loss for the third quarter, ending September 29,
1996, of $569,000 was a 85.2% improvement over the third quarter of 1995's net
loss of $3.9 million. Sales increased 6.3% to $24.8 million as compared to $23.3
million in 1995. The improvement in operating results is due primarily to
increased gross margin in the Permanent Studio operations, increased efficiency
in portrait processing which reduced costs, along with reduced general and
administrative expenses.
The Company incurred a net loss of $5.1 million for the first three quarters of
1996, a $1.1 million improvement over $6.3 million net loss for the same period
in 1995. Net sales increased 3.0% to $68.7 million as compared to $66.7 million
for the same period in 1995. The reduction in the net loss is due to improved
gross margin in Permanent Studios and Fashion Photography, increased portrait
processing efficiency and reduced general and administrative expenses. The
increase in net sales was due to an increase in Fashion Photography and
Permanent Studio operations being partially offset by lower sales in Traveling
Studio operations.
Permanent Studio Operations
For the third quarter of 1996 in permanent studio operations, gross margin
improved due to improved labor productivity, lower promotion expenses, and
decreased product costs due to the implementation of the Company's digital
imaging system. These improvements were partially offset by a 15.1% decline in
customers per promotion and higher depreciation expense associated with the
digital imaging systems and sales/portrait order systems. Net sales were up 5.6%
due to a 4.1% increase in average sales per customer and a 19.2% increase in the
number of promotions which was partially offset by the decrease in customers per
promotion. Cost of sales per customer decreased 8.6% in the second quarter of
1996 as compared to the third quarter of 1995.
Traveling Studio Operations
For the third quarter of 1996 in traveling studio operations, gross margin
increased 26.8% as compared to the third quarter of 1995 principally due to
improved labor productivity and reduced promotion costs. Net sales decreased
5.2% principally due to 7.8% decline in customers per promotion partially offset
by a 2.9% increase in promotions. The average sales per customer were
approximately the same in the third quarter of 1996 and the third quarter of
1995. Cost of sales per customer decreased 4.1% in the third quarter of 1996
versus the third quarter of 1995. The cost reductions were achieved by lower
promotion expenses, improved labor productivity, and reduced studio costs.
Fashion Photography Operations
For the third quarter of 1996, fashion photography operations gross margin
improved 558.9% as compared to the third quarter of 1995 due to a 26.9% increase
in promotions and a 23.7%
7
<PAGE>
increase in sales average per customer being partially
offset by a 1.4% decline in customers per promotion. Cost of sales per customer
increased 12% due to reduced labor efficiency, higher promotion costs, and
increased studio costs related to conversion of our fashion operations to
digital imaging technology.
General Operations - During the third quarter, Wal*Mart began a test with
another portrait photography company in 15 of ASI's existing permanent studio
locations in the western United States. The Company's traveling children's and
fashion photography operations in this region are not involved in the test.
These locations were obtained by ASI in October 1995 from Associated Family
Photographers. In October 1996, the Company was notified by Wal*Mart that its
seven portrait studios in Puerto Rico would be given to another vendor while ASI
was awarded four new studio locations in Mexico. These decisions are consistent
with Wal*Mart's corporate policy of having two suppliers for all vendor
services.
General and Administrative Expenses - General and administrative expenses were
$3.4 million, or 13.7% of net sales for the third quarter of 1996 as compared to
$5.0 million, or 21.2% of net sales for the third quarter of 1995. The decrease
in general and administrative expenses is principally due to (i) the Company's
restructuring of field and corporate management, (ii) reduced communications
costs, and (iii) lower insurance costs.
Interest Expense - Interest expense was $372,000 for the third quarter of 1996,
as compared to $233,000 for the same period in 1995. The increase in interest
expense for the third quarter of 1996 is primarily due to borrowings on the
Company's revolving credit facility to support working capital needs, and
long-term capital lease and note obligations to finance the Company's digital
imaging and electronic order entry systems.
Income Tax Benefit - During the third quarter of 1995, the Company recognized
income tax benefits totaling approximately $2.2 million relating principally to
operating losses incurred during the period. Historically, during quarters in
which the Company experiences a loss, the Company has recognized income tax
benefits at an effective tax rate of 40%; however, during the third quarter of
1996, there was no income tax benefit due to the Company's utilization of net
operating loss carrybacks as a result of the 1995 net loss.
Seasonality
Like the business of many retailers, the Company's business is seasonal, with
its highest sales historically occurring in the fourth quarter and its lowest
sales historically occurring in the first quarter. The fourth quarter accounted
for approximately 35% of the Company's net sales in 1995 and the first quarter
accounted for approximately 18% of the Company's net sales in 1995.
Liquidity and Capital Resources
Net working capital at September 29, 1996 was a negative $18.5 million; cash was
$763,000. During the third quarter of 1996, net working capital increased
$368,000 over the second quarter of 1996 due to an increase in cash, an increase
in prepaid expenses, a decrease in the current portion of long term debt, and a
reduction in commissions payable to Wal*Mart. These increases were partially
offset by an increase in trade accounts payable, a reduction in inventories, an
increase in accrued taxes (other than income), and larger self-insurance
reserves.
8
<PAGE>
The Company believes that cash flow from operations and borrowings under its
existing revolving credit facility will be adequate to fund the Company's
operating requirements for 1996. The Company plans to continue to examine
appropriate cost cutting measures, its method of operating in certain Wal*Mart
stores, non-profitable areas of its operations and ways to continue to improve
its operating and portrait processing efficiency. However, the Company's ability
to meet its liquidity needs for 1996 will depend principally on the success of
management's efforts to increase sales and reduce cost.
On November 1, 1995, the Company obtained a new secured revolving credit
facility that expires on January 31, 1997 from its commercial bank lender. The
Company and the commercial bank amended this facility on March 26, 1996 to,
among other things, modify certain financial covenants to facilitate the
Company's compliance therewith and to reduce the maximum amount available
thereunder. The maximum amount available under this facility, as amended,
including amounts available for letters of credit issued in connection with the
Company's worker's compensation insurance arrangements, is $14.5 million through
March 31, 1996, $13.5 million from April 1, 1996 through May 31, 1996, $13.0
million from June 1, 1996 through July 31, 1996, $11.5 million from August 1,
1996 through October 31, 1996, $9.5 million from November 1, 1996 through
November 30, 1996 and $8.5 million from December 1, 1996 until maturity. As of
September 29, 1996, the Company had obligations of approximately $5.6 million
under this facility and the bank had issued letters of credit under this
facility in the aggregate amount of approximately $2.3 million in connection
with the Company's worker's compensation insurance arrangements. The Company's
obligations under the facility are secured by a first priority security interest
in all of the Company's assets (other than certain equipment used in the
Company's digital imaging systems with regard to which the Company had granted a
first security interest to a vendor prior to obtaining the facility), including
any federal and state tax refunds.
The interest rate under the facility is the bank's prime rate. The Company has
agreed to deposit all of its funds into an account with the bank. The facility
contains certain financial covenants of the Company relating to minimum tangible
net worth and debt to tangible net worth and interest coverage ratios. In
addition, the facility contains covenants of the Company that, among other
things, prohibit capital expenditures or acquisitions without the bank's
consent, limit operating lease expense, restrict the Company's ability to incur
additional debt or liens and require the Company to maintain a majority of its
senior management. At September 29, 1996, the Company was in compliance with the
covenants under the facility.
The Company obtained several long-term leases and secured long-term notes
totaling $9.7 million from several vendors to finance certain equipment
associated with the Company's digital imaging systems and sales/portrait order
entry stations during 1995. At September 29, 1996, the Company had obligations
of approximately $7.7 million under such arrangements discussed above.
In November 1995, the Company entered into a short-term note financing
arrangement with its primary supplier evidenced by a promissory note in the
principal amount of $4.1 million and a security agreement pursuant to which the
Company's obligations under such note are secured by a security interest in all
inventories of supplies sold by such supplier to the Company. The principal
amount of the note is payable in monthly payments of $500,000 beginning March
1996 until paid, together with monthly payments of interest at Citibank's prime
rate on the outstanding principal balance. At September 29, 1996, the Company
had obligations of approximately $670,000 under the short-term financing
arrangement.
At the end of the third quarter of 1996, total net capital expenditures to date
were approximately $584,000. The Company's present expectation is that these and
other capital expenditures will be
9
<PAGE>
approximately $775,000 for 1996. This estimate does not include any
expenditures by the Company for any additional digital imaging systems.
The Company's 1991 and 1992 federal income tax returns are presently being
examined by the Internal Revenue Service. Although the results of such
examination cannot be predicted with certainty, management believes that
additional assessments, if any, arising from this examination will not have a
material effect on the Company's financial position or future results of
operations.
The statements herein as to the Company's beliefs concerning, and plans for, the
future are forward-looking statements that are subject to a number of risks and
uncertainties. In addition to the other factors, any uncertainties specifically
identified in the text related to such statements, among other factors that
could cause actual results to differ materially from those contemplated in such
forward-looking statements are the following (i) the Company's inability to
increase net sales, (ii) the Company's inability to attract customers in a
sufficient number and/or achieve a sufficient sales average to enable the
Company to offset the costs associated with its operations, (iii) the Company's
inability to control the variable costs of its operations, (iv) the Company's
inability to maintain satisfactory portrait processing operations in terms of
costs and quality, (v) the adverse impact on the Company of strategies pursued
by its competitors, (vi) the unsatisfactory resolution of the claims,
investigations and lawsuits and the examination discussed herein, and (vii) any
decision by Wal*Mart to authorize another portrait photography company to
provide services in a material number of Wal*Mart stores presently serviced by
the Company. Other factors that could cause actual results to differ materially
from those set forth in such forward-looking statements include the risks and
uncertainties detailed in the Company's most recent Form 10-K and other filings
with the Securities and Exchange Commission. All such factors could have an
adverse effect on the Company's results of operations and liquidity needs for
1996.
10
<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.
AMERICAN STUDIOS, INC.
Date: November 13, 1996 By: /s/ J. Robert Wren, Jr.
----------------------------------
J. Robert Wren, Jr.
Chief Executive Officer
Date: November 13, 1996 By: /s/ Shawn W. Poole
-------------------------------------
Shawn W. Poole
Executive Vice President/Chief
Financial Officer (Principal Financial
Officer and Accounting Officer)
11
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 10(a) Second Amendment to Employment and Non-compete
Agreement with J. Robert Wren, Jr. dated September 14, 1996.
Exhibit 10(b) First Amendment to Employment and Non-compete
Agreement by and between the Company and James O. Mattox
dated September 14, 1996.
(b) None
12
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS EMPLOYMENT AND NONCOMPETE AGREEMENT ("Agreement"), made and
entered into as of the 14th day of September, 1996, by and between James O.
Mattox, an individual resident of Charlotte, North Carolina ("Employee"), and
AMERICAN STUDIOS, INC., a North Carolina corporation with its principal
executive offices located in Charlotte, North Carolina (the "Company").
W I T N E S S E T H
WHEREAS, the Company desires to employ Employee as an Executive Vice
President - Operations and Employee desires to be employed by the Company in
this position.
NOW, THEREFORE, in consideration of the promises and the mutual
covenants contained herein and specifically the increase in severance pursuant
to section 5, below, over that provided in Employee's prior Agreement with the
Company, the parties hereto agree as follows:
1. Employment. Subject to the terms and conditions stated herein, and
in consideration of Employee's obligations and covenants, including without
limitation, those obligations and covenants set forth in Section 9 hereof, the
Company agrees to employ Employee on an active and full-time basis, and Employee
accepts such employment, as Executive Vice President - Operations, subject to
the order, supervision and direction of the Board of Directors of the Company
(the "Board of Directors") and the Chief Executive Officer of the Company (the
"CEO").
2. Duties. Employee shall serve the Company as Executive Vice President
- - - Operations and shall devote his full business time, skill and best efforts to
the business of the Company and faithfully perform such executive,
administrative and supervisory duties as may be prescribed by the Board of
Directors or the CEO. Employee shall act at all times in compliance, in all
material respects, with all policies, rules and decisions adopted from time to
time by the Board of Directors of which Employee shall have received written
notice. The Board of Directors and the CEO shall deal with the Employee in good
faith and shall not require that Employee be required to relocate his residence,
travel to the extent that he must spend more nights away from home than are
reasonably required to further the Company's business, or perform tasks which
would be demeaning or degrading to one in his position.
3. Term of Employment. The term of Employee's employment by the Company
hereunder shall commence as of the date hereof and shall continue for a period
of three (3) years after such commencement date (the "Term of Employment").
<PAGE>
4. Base Compensation. The base annual compensation rate to be paid to
Employee for the services to be rendered hereunder ("Base Rate") throughout the
Term of Employment, except to the extent adjusted as provided below, shall be
One Hundred and Twenty-Five Thousand Dollars ($125,000.00), payable in equal
biweekly installments, subject to applicable federal and state income and social
security tax withholding requirements. Employee's Base Rate may be reviewed from
time to time by the CEO and the Board of Directors or a committee thereof and
adjusted upward as Employee's performance, the performance of the Company and
other pertinent factors warrant.
5. Termination Without Cause. The Board of Directors or the CEO may
terminate Employee's employment at any time, without cause, but in the event of
a termination other than a Termination for Cause, as hereinafter defined, the
Company will pay, either in a lump sum or in 26 equal bi-weekly payments, at the
option of the Company, an amount equal to the then Base Rate to Employee as
additional compensation. In the event the Company does not offer to renew this
Agreement at the end of the Term of Employment upon the same or better terms and
conditions, such termination of this Agreement and Employee's employment shall
be deemed a termination other than a Termination for Cause.
If Employee's employment with ASI is terminated within two years following a
Change in Control Event, as defined below, or if Employee's employment by ASI is
terminated prior to a Change in Control Event at the request of any individual
or entity acquiring ownership and control of ASI, Employee shall be entitled to
receive, in a lump sum payable within ten (10) days of such termination, two (2)
times the Employee's then Base Rate as additional compensation.
Each of the following events shall constitute a Change in Control Event:
o Any person or entity of whatsoever nature, including without
limitation an individual, corporation, partnership, limited liability
company or trust, either singly or together with that person's or
entity's affiliates or associates (as "affiliate" or "associate" are
defined in connection with Rule 12b-2 of the Securities Exchange Act of
1934) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of
securities of ASI representing fifty percent or more of the then
outstanding securities entitled to vote in the election of directors of
ASI and in any filing made under Section 13(d) of the Securities
Exchange Act of 1934 or otherwise states an intention to acquire or
exercise
2
<PAGE>
control of ASI or to otherwise influence management.
o A public announcement is made of a tender or exchange offer by any
person or entity, including without limitation an individual, company,
corporation, partnership, limited liability company or trust, for fifty
percent or more of the outstanding shares of ASI entitled to vote in
the election of directors, and the Board of Directors approves or fails
to oppose that tender or exchange offer in its statements in Schedule
14D-9 under the Exchange Act.
o The stockholders of ASI approve a merger or consolidation of ASI with
any other corporation or partnership (or, if no such approval is
required, the consummation of such a merger or consolidation of ASI),
other than a merger or consolidation that would result in the
securities of ASI entitled to vote in the election of directors
outstanding immediately before the consummation thereof continuing to
represent (either by remaining outstanding or by being converted into
voting shares of the surviving entity or of a parent of the surviving
entity) fifty percent or more of the combined voting power of the
voting shares of the surviving entity (or its parent) outstanding
immediately after that merger or consolidation.
6. Termination for Cause.
(a) The Board of Directors or the CEO shall have the right at
any time, without advance notice, to terminate Employee's employment for cause,
as hereinafter defined ("Termination for Cause").
(b) Termination for Cause shall mean termination because of
Employee's death, inability to perform his duties hereunder, theft from the
Company, embezzlement of the Company's funds, falsification of the Company's
records, fraud committed against the Company, commission of a felonious criminal
act involving the Company or while engaged in conduct of the Company's business,
incompetence due to the use of or reporting to work under the influence of
alcohol, narcotics, other unlawful drugs or controlled substances, legal
incapacity, insanity, act or acts involving dishonesty or misconduct which have
or may reasonably be expected to have a material adverse effect on the business
or reputation of the Company, breach of fiduciary duty to the Company, willful
and substantial failure to perform stated duties or lawful directives of the
Board of Directors, the CEO or other officer of the Company designated by the
CEO, or material breach of any provision of this Agreement, including without
limitation voluntary termination of this Agreement.
3
<PAGE>
(c) In the event of a Termination for Cause, Employee shall
have no right thereafter to receive any compensation or other benefits from the
Company, except for COBRA, rights under stock option grants.
(d) The provisions of Section 9 hereof shall continue to be
binding on the parties hereto notwithstanding the termination without cause or
Termination for Cause of Employee.
7. Fringe Benefits. Employee shall be entitled to receive such fringe
benefits, including vacation and employee benefit plans, if any, as are set
forth on Exhibit A hereto.
8. Expenses. The Company shall reimburse Employee for those expenses
that are incurred by him in connection with the performance of his duties under
this Agreement, are reasonably related to the business of the Company and have
been approved, generally or specifically, verbally or in writing, by the CEO.
9. Noncompetition, Secrecy and Inventions.
(a) Employee specifically acknowledges and agrees that his
employment with the Company will bring him in personal contact with accounts and
customers of the Company, and will enable him to acquire valuable information as
to the nature and character of the business of the Company and the requirements
of the accounts and customers of the Company. Employee acknowledges and agrees
that in the event he were to become employed by some other employer or enter the
same or similar business as the Company on his own or in conjunction with others
in competition with the Company, such personal contacts with the customers and
accounts of the Company and the knowledge of such valuable information would
give to Employee an unfair competitive advantage.
Throughout the Term of Employment and for a period of two (2)
years thereafter (Employee's Term of Employment and the two-year period
thereafter, together, the "Term of the Covenants"), Employee shall not, directly
or indirectly, as principal, agent, manager, employee, partner, shareholder,
director, officer, consultant or otherwise, participate in or engage in the
Lines of Business, as hereinafter defined; provided, however, that Employee may
own up to one percent (1%) of the outstanding securities of any corporation
which is engaged in the Lines of Business, so long as such securities are traded
on a national securities exchange or are included in the National Association of
Securities Dealers Quotation System. "Lines of Business" for purposes of this
Section 9 shall mean the provision of portrait photography services through
itinerant or traveling
4
<PAGE>
operations or permanent studios or any other portrait
photography service, the processing or developing of photographic film in
connection with such provision and any other lines of business in which the
Company may engage during the Term of Employment.
(b) In performing the covenants set forth in this Section 9
(all of the covenants of Employee set forth in this Section 9, together, the
"Covenants Not to Compete"), Employee shall not, without limitation, during the
Term of the Covenants engage in the Lines of Business with any of the following:
1. any client, account or customer of the Company, or any subsidiary or
affiliate of the Company, that has done business with the Company or
such affiliate or subsidiary within two (2) years of the date of any
alleged competitive act by Employee;
2. any client, account or customer of the Company, or any subsidiary or
any affiliate of the Company, that has transacted any business with
the Company within the twelve months preceding the date of this
Agreement;
3. Wal-Mart Stores, Inc.;
4. any affiliate of Wal-Mart Stores, Inc., including without limitation
Sam's Wholesale Club, HYPERMART*USA and Wal-Mart SuperCenters
("Wal-Mart Affiliate");
5. PCA International, Inc.;
6. CPI Corp.;
7. Lifetouch National School Studios, Inc.;
8. any Wal-Mart Stores, Inc. store that does business with the Company
during the Term of the Covenants;
9. any Wal-Mart Affiliate store that does business with the Company
during the Term of the Covenants;
10. any Wal-Mart Stores, Inc. store with which the Board of Directors
reasonably expects to do business during the Term of the Covenants;
11. any Wal-Mart Affiliate store with which the Board of Directors
reasonably expects to do business during the Term of the Covenants;
12. the Wal-Mart Stores, Inc. stores and Wal-Mart Affiliate stores with
which the Company is doing business as of the date of this Agreement;
13. Cifra, S.A. de C.V.;
14. Aurrera, S.A. de C.V., a subsidiary of Cifra, S.A. de C.V.;
15. any other subsidiary of Cifra, S.A. de C.V.;
16. any employee or former employee of the Company, whose employment with
the Company terminated less than two (2) years prior to Employee's
association with such employee or former employee, within a ten-mile
radius of any Wal-Mart Stores, Inc. store or
5
<PAGE>
any store in which the Company has engaged in the Lines of Business
within six (6) months prior to Employee's engaging in the Lines of
Business; or
17. any person or entity in the geographic areas listed in paragraph 10(c)
hereinbelow.
(c) In performing the Covenants Not to Compete, Employee shall
not, without limitation, during the Term of the Covenants engage in the Lines of
Business in any of the following geographic areas:
1. The United States of America;
2. The State of Alabama;
3. The State of Arizona;
4. The State of Arkansas;
5. The State of California;
6. The State of Colorado;
7. The State of Connecticut;
8. The State of Delaware;
9. The District of Columbia;
10. The State of Florida;
11. The State of Georgia;
12. The State of Idaho
13. The State of Illinois;
14. The State of Indiana;
15. The State of Iowa;
16. The State of Kansas;
17. The State of Kentucky;
18. The State of Louisiana;
19. The State of Maine;
20. The State of Maryland;
21. The State of Massachusetts;
22. The State of Michigan;
23. The State of Minnesota;
24. The State of Mississippi;
25. The State of Missouri;
26. The State of Montana
27. The State of Nebraska;
28. The State of Nevada
29. The State of New Hampshire;
30. The State of New Jersey;
31. The State of New Mexico
32. The State of New York;
33. The State of North Carolina;
34. The State of North Dakota;
35. The State of Ohio;
36. The State of Oklahoma;
37. The State of Oregon;
38. The State of Pennsylvania;
39. The Commonwealth of Puerto Rico;
40. The State of Rhode Island;
6
<PAGE>
41. The State of South Carolina;
42. The State of South Dakota;
43. The State of Tennessee;
44. The State of Texas;
45. The State of Utah
46. The State of Vermont;
47. The State of Virginia;
48. The State of Washington;
49. The State of West Virginia;
50. The State of Wisconsin;
51. The State of Wyoming;
52. Mexico; or
53. Counties in each State of the United States where the
Company has customers.
(d) As applied to the categories of persons, firms and
entities and geographic areas covered by the Covenants Not to Compete, the
provisions of paragraphs 10(b) and 10(c), respectively, shall be completely
severable and independent, and any invalidity or unenforceability thereof as
applied to any of such persons, firms or entities or geographic areas shall not
affect the validity or enforceability thereof as applied to any one or more of
the other persons, firms or entities or geographic areas.
(e) Throughout the Term of the Covenants, Employee shall not
directly or indirectly cause or attempt to cause any supplier or customer of the
Company, or any of its subsidiaries or affiliates, or any governmental body or
public agency, not to do business with the Company or such subsidiary or
affiliate or to transfer all or part of its business from the Company, or such
subsidiary or affiliate, or otherwise interfere or attempt to interfere with any
business relationship between the Company, or any of its subsidiaries or
affiliates, and any of such suppliers, customers, government bodies or public
agencies, unless directed by the Board of Directors of the Company to so do.
(f) Employee acknowledges that irreparable injury will result
to the Company from any breach of the Covenants Not to Compete and there is no
adequate remedy at law to redress a breach or threatened breach of the Covenants
Not to Compete. As a result of the foregoing, Employee agrees that the parties
seeking to enforce any of such provisions shall be entitled to an injunction or
other equitable relief against Employee to restrain him from such breach, and
Employee waives any claim or defense that the Company has an adequate remedy at
law for any such breach; provided, however, that nothing contained herein shall
prohibit the Company, or any subsidiary or affiliate of the Company, from
pursuing any other remedy it may have, including without limiting the generality
of the foregoing the recovery of
7
<PAGE>
damages.
(g) If any court determines that any provision of this Section
9, or any part thereof, is invalid or unenforceable, the remainder of this
Section 9 shall not thereby be affected and shall be given full effect, without
regard to the invalid portions. If any court determines that any provision of
this Section 9, or any part thereof, is unenforceable because of the duration or
geographic scope of such provision, the parties agree that such court shall have
the power to reduce the duration or scope of such provision, as the case may be,
and the parties agree to request the court to exercise such power, and, in its
reduced form, such provision shall then be enforceable and shall be enforced.
The provisions of this Section 9 shall survive the termination of this
Agreement, for whatever reason.
(h) At all times, both during and after the termination of his
employment, Employee shall keep and retain in confidence and shall not, without
the prior written consent of the Company, disclose to any persons, firm or
corporation or otherwise use for his own benefit or the benefit of another any
of the proprietary, confidential or secret information or trade secrets of the
Company. Further, Employee and the Company agree to keep confidential the terms
and conditions of this Agreement except for such disclosure as may be required
(i) in the event of a breach of this Agreement, (ii) compulsion by law or court
order, or (iii) as may be required by any applicable provision of law.
(i) In consideration of employment, and the compensation paid
to Employee as an employee of the Company, Employee hereby recognizes as the
exclusive property of, and assigns, transfers and conveys to, the Company
without further consideration each invention, discovery or improvement
(hereinafter collectively referred to as "inventions") made, conceived,
developed or first reduced to practice by Employee (whether alone or jointly
with others) during the Term of Employment or within one (1) year thereafter
which relates in any way to Employee's work at the Company or any of its
subsidiaries or affiliates. Employee will communicate to the Company current
written records of all such inventions, which records shall be and remain the
property of the Company. Upon request by the Company, Employee will at any time
execute documents assigning to the Company, or its designees, any such invention
or any patent application or patent granted therefor, and will execute any
papers relating thereto. Employee also will give all reasonable assistance to
the Company, or its designee, regarding any litigation or controversy in
connection with his inventions, patent applications, or patents, all expenses
incident thereto to be assumed by the Company.
8
<PAGE>
10. Governing Law. This Agreement shall be construed and governed under
the laws of the State of North Carolina.
11. Binding Nature. Except as expressly provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective heirs, successors and assigns. The obligations and covenants of
Employee are personal in nature and, as such, are not assignable by him.
12. Entire Agreement; Prior Oral Agreement; Amendment. This Agreement
contains the entire agreement of the parties with respect to the matters set
forth herein and supersedes all prior written and prior or contemporaneous oral
agreements or understandings of the parties hereto. This Agreement confirms and
sets forth the prior oral agreement of the parties as to the terms and
conditions of Employee's employment by the Company stated herein, including
without limitation, the obligations and covenants of Employee set forth in
Section 9 hereof, and Employee's agreement to enter into a written employment
agreement with the Company, as of the date his employment by the Company
commenced, stating such terms and conditions. This Agreement may be changed or
amended only by an agreement in writing signed by both parties hereto.
13. Severability, Invalidity or Unenforceability. The severability,
invalidity or unenforceability of any paragraph or part of any paragraph herein
shall not in any way affect the validity or enforceability of any other
paragraph or any part of any other paragraph.
14. Prior Agreements and Covenants of Employee. Employee hereby
warrants and represents that he is not a party to any agreement or binding
obligation, oral or written, that would prevent his employment by the Company,
and Employee's execution of this Agreement and his fulfillment of his duties and
obligations hereunder do not and will not violate the provisions of any
agreement, contract, loan document or other binding written or oral obligation.
15. Notices. Any notice, offer, acceptance or other document required
or permitted to be given pursuant to any provisions of this Agreement shall be
in writing, signed by or on behalf of the person giving the same, and (as
elected by the person giving such notice) delivered by hand or mailed to the
parties at the following addresses by registered or certified mail, postage
prepaid, return receipt requested, or by a third party company or governmental
entity providing delivery services in the ordinary course of business, which
guarantees delivery on a specified date:
9
<PAGE>
If to Employee: James O. Mattox
2200 Trapper court
Charlotte, NC 28270
If to the Company: American Studios, Inc.
11001 Park Charlotte Blvd.
Charlotte, North Carolina 28273
Attention: J. Robert Wren, Jr.
With copies to: Elizabeth G. Wren
PETREE STOCKTON, L.L.P.
3500 One First Union Center
Charlotte, North Carolina 28202
or to such other address as any party hereto may designate by complying with the
provisions of this Section 15.
Such notice shall be deemed given (i) as of the date of written
acknowledgment by Employee or an officer of the Company if delivered by hand,
(ii) seventy-two (72) hours after deposit in United States mail if sent by
registered or certified mail or (iii) on the delivery date guaranteed by the
third party delivery service if sent by such service.
Rejection or other refusal to accept or inability to deliver because of
changed address of which no notice has been received shall not affect the date
upon which the notice is deemed to have been given pursuant hereto.
Notwithstanding the foregoing, no notice of change of address shall be effective
until the date of receipt hereof.
IN WITNESS WHEREOF, James O. Mattox has set his hand and seal hereto
and American Studios, Inc. has caused this Agreement to be executed and sealed
in its name by its duly authorized officials as of the day and year first above
written.
Employee:
/s/ James O. Mattox (SEAL)
-------------------------------
JAMES O. MATTOX
Company:
AMERICAN STUDIOS, INC.
By: /s/ J. Robert Wren, Jr.
-----------------------------
J. Robert Wren, Jr.
CEO
10
<PAGE>
EXHIBIT A
FRINGE BENEFITS
1. Employee shall be entitled to twenty (20) days paid vacation during
the first year of employment and twenty (20) days paid vacation each year of
employment thereafter. Vacation time is not cumulative.
2. Employee shall be entitled to sick leave in accordance with the
plans and procedures established by the Board of Directors.
3. Employee shall be entitled to such life insurance and disability
insurance or other disability benefits, if any, as are provided by the Company
to its employees from time to time.
4. Employee shall be entitled to receive benefits as are afforded to
other similarly situated employees.
SECOND AMENDMENT TO
EMPLOYMENT AND NONCOMPETE AGREEMENT
THIS SECOND AMENDMENT TO EMPLOYMENT AND NONCOMPETE AGREEMENT ("Second
Amendment") , effective as of the 14th day of September, 1996, by and between J.
ROBERT WREN, JR., an individual resident of Gastonia, North Carolina
("Employee") , and AMERICAN STUDIOS, INC., a North Carolina corporation with its
principal executive offices in Charlotte, North Carolina ("ASI").
Background Statement
Employee and ASI are parties to an Employment and Noncompete Agreement
dated as of January 20, 1993 and the First Amendment To Employment and
Noncompete Agreement dated as of November 1, 1995 (collectively, the "Employment
Agreement"). The Employment Agreement provides, among other things, for certain
severance payments to Employee in the event of Employee's termination of
employment without cause. ASI and the Employee now desire to amend the
Employment Agreement to provide for certain severance payments to be made to
Employee in the event a termination of employment either precedes or follows a
change in the control of ASI.
Statement of Amendment
In consideration of the premises and of the mutual covenants and
conditions contained herein, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, the parties hereto,
intending to be legally bound, agree for themselves, their successors and
assigns as follows:
1. Definitions. In the Employment Agreement or in this Second Amendment, the use
of the word "Agreement" or the term "Employment Agreement" shall mean the
Employment Agreement as amended by this Second Amendment, and references to
particular section numbers or paragraph numbers or the use of terms such as
"this section" or "this paragraph" shall refer to appropriate sections or
paragraphs of the Employment Agreement as amended by this Second Amendment.
Defined terms used in the Employment Agreement that are redefined in
this Second Amendment shall have the meanings given to them in this Second
Amendment. Defined terms used, but not defined, in this Second Amendment shall
have the meanings given to them in the Employment Agreement.
2. Termination Without Cause. Section 5, Termination Without Cause, is hereby
amended as follows:
The Board of Directors may terminate Employee's employment at any
time, without cause. In the event of a termination other than a Termination for
Cause, as herein defined, or in the event the Company fails or refuses to renew
this Employment Agreement for any reason at the end of the
<PAGE>
term of employment, the Company will pay Employee the higher of (i) $314,000
or (ii) his Base Rate at the time of termination as set under Paragraph
4 above as additional compensation for twelve months following such
termination or failure to renew.
If Employee's employment with ASI is terminated at any time following a Change
in Control Event, as defined below, or if Employee's employment by ASI is
terminated prior to a Change in Control Event at the request of any individual
or entity acquiring ownership and control of ASI, Employee shall be entitled to
receive, either in a lump sum or in 26 equal bi-weekly payments, at the option
of the Company, two (2) times the Employee's then Base Rate as additional
compensation.
Each of the following events shall constitute a Change in Control Event:
o Any person or entity of whatsoever nature, including without
limitation an individual, corporation, partnership, limited liability
company or trust, either singly or together with that person's or
entity's affiliates or associates (as "affiliate" or "associate" are
defined in connection with Rule 12b-2 of the Securities Exchange Act
of 1934) is or becomes the beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934), directly or indirectly, of
securities of ASI representing fifty percent or more of the then
outstanding securities entitled to vote in the election of directors
of ASI and in any filing made under Section 13(d) of the Securities
Exchange Act of 1934 or otherwise states an intention to acquire or
exercise control of ASI or to otherwise influence management.
o A public announcement is made of a tender or exchange offer by any
person or entity, including without limitation an individual, company,
corporation, partnership, limited liability company or trust, for fifty
percent or more of the outstanding shares of ASI entitled to vote in
the election of directors, and the Board of Directors approves or fails
to oppose that tender or exchange offer in its statements in Schedule
14D-9 under the Exchange Act.
o The stockholders of ASI approve a merger or consolidation of ASI with
any other corporation or partnership (or, if no such approval is
required, the consummation of such a merger or consolidation of ASI),
other than a merger or consolidation that would result in the
securities of ASI entitled to vote in the election of directors
outstanding immediately before the consummation thereof continuing to
represent (either by remaining outstanding or by being converted into
voting shares of the surviving entity or of a parent of the surviving
entity) fifty percent or more of the combined voting power of the
voting shares of the surviving entity (or its parent) outstanding
immediately after that merger or consolidation.
3. Miscellaneous. ASI and Employee reaffirm the Employment Agreement, and all
provisions thereof not expressly amended hereby shall remain in full force and
effect.
<PAGE>
IN WITNESS WHEREOF, J. Robert Wren, Jr. has set his hand and seal hereto and
American Studios, Inc. has caused this Second Amendment to Employment and
Noncompete Agreement to be sealed and executed in its name by its duly
authorized officials effective as of the day and year first above written.
Employee:
/s/James Robert Wren, Jr. (SEAL)
--------------------------------------
James Robert Wren, Jr.
American Studios, Inc.
/s/R. Kent Smith
---------------------------------------
By: R. Kent Smith
President
[CORPORATE SEAL]
ATTEST:
/s/ Shawn W. Poole
- - -------------------------------
Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000883032
<NAME> AMERICAN STUDIOS, INC.
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1996
<PERIOD-END> SEP-29-1996 SEP-29-1996
<CASH> 763 763
<SECURITIES> 0 0
<RECEIVABLES> 724 724
<ALLOWANCES> 0 0
<INVENTORY> 2,247 2,247
<CURRENT-ASSETS> 4,483 4,483
<PP&E> 41,204 41,204
<DEPRECIATION> 15,933 15,933
<TOTAL-ASSETS> 35,603 35,603
<CURRENT-LIABILITIES> 23,021 23,021
<BONDS> 5,038 5,038
0 0
0 0
<COMMON> 21 21
<OTHER-SE> 7,523 7,523
<TOTAL-LIABILITY-AND-EQUITY> 35,603 35,603
<SALES> 24,771 68,686
<TOTAL-REVENUES> 24,771 68,686
<CGS> 21,411 60,716
<TOTAL-COSTS> 21,411 60,716
<OTHER-EXPENSES> 3,557 3,557
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 372 1,210
<INCOME-PRETAX> (569) (5,125)
<INCOME-TAX> 0 0
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<EXTRAORDINARY> 0 0
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<NET-INCOME> (569) (5,125)
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