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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 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 1-12740
NEW WEST EYEWORKS, INC.
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(Exact name of registrant as specified in its charter)
Delaware 34-1589514
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(State of incorporation) (I.R.S. Employer
Identification No.)
2104 West Southern Avenue, Tempe, Arizona 85282
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(Address of principal executive offices) (Zip Code)
(602) 438-1330
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(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
---- ----
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $0.01 par value: 3,763,036 (as of June 29, 1996)
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NEW WEST EYEWORKS, INC.
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INDEX Page
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PART I - FINANCIAL INFORMATION.......................................... 3
Item 1. Financial Statements........................................... 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations..................................... 8
PART II - OTHER INFORMATION............................................. 14
Item 1. Legal Proceedings.............................................. 14
Item 4. Submission of Matters to a Vote of Security Holders............ 14
Item 6. Exhibits and Reports on Form 8-K............................... 14
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NEW WEST EYEWORKS, INC.
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PART I-FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
NEW WEST EYEWORKS, INC.
CONSOLIDATED BALANCE SHEET
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June 29, December 30,
1996 1995
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(Unaudited)
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ASSETS
Current Assets:
Cash and cash equivalents $ 149,000 $ 241,000
Accounts receivable 1,234,000 999,000
Inventory 3,234,000 3,132,000
Other current assets 162,000 78,000
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Total current assets 4,779,000 4,450,000
Property and equipment, net 7,072,000 6,656,000
Goodwill 551,000 596,000
Other assets 58,000 32,000
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Total assets $ 12,460,000 $ 11,734,000
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LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 5,359,000 $ 5,755,000
Accrued expenses 2,136,000 3,096,000
Deferred warranty revenues 305,000 348,000
Notes payable and capital lease obligations,
current portion 2,025,000 235,000
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Total current liabilities 9,825,000 9,434,000
Liability for closed store leases 29,000 57,000
Notes payable and capital lease obligations 223,000 321,000
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Total liabilities 10,077,000 9,812,000
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Stockholders' Equity:
Series A 6% Cumulative Convertible Preferred
Stock, $1,000 par value, 3,960 shares
authorized, issued and outstanding 3,960,000 3,960,000
Series B 6% Cumulative Convertible Preferred
Stock, $1,000 par value, 1,500 shares
authorized, issued and outstanding 1,500,000 1,500,000
Common stock, $0.01 par value, 5,000,000
shares authorized, 3,763,036 shares issued
and outstanding 38,000 38,000
Paid-in capital 10,100,000 10,070,000
Accumulated deficit (13,215,000) (13,646,000)
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Total stockholders' equity 2,383,000 1,922,000
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Total liabilities and stockholders' equity 12,460,000 $ 11,734,000
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The accompanying notes are an integral part of these consolidated financial statements.
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NEW WEST EYEWORKS, INC.
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NEW WEST EYEWORKS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
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Three Months Ended Six Months Ended
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(Unaudited) (Unaudited)
June 29, July 1, June 29, July 1,
1996 1995 1996 1995
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Net Sales $ 10,866,000 $ 10,127,000 $ 22,369,000 $ 20,942,000
Cost of sales 5,430,000 4,974,000 11,229,000 10,239,000
------------ ------------ ------------ ------------
Gross profit 5,436,000 5,153,000 11,140,000 10,703,000
Selling, general and
administrative expenses 5,216,000 5,267,000 10,337,000 10,351,000
------------ ------------ ------------ ------------
Operating income (loss) 220,000 (114,000) 803,000 352,000
Interest income 1,000 5,000
Interest expense 46,000 7,000 82,000 15,000
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Income (loss) before income
taxes 174,000 (120,000) 721,000 342,000
Income tax expense (benefit) 22,000 (55,000) 126,000 78,000
------------ ------------ ------------ ------------
Net income (loss) 152,000 (65,000) 595,000 264,000
Preferred stock dividends (81,000) (83,000) (162,000) (164,000)
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Net income (loss) applicable
to holders of common stock $ 71,000 $ (148,000) $ 433,000 $ 100,000
============ ============ ============ ============
Net income (loss) per common
and common equivalent share $ 0.02 $ (0.04) $ 0.12 $ 0.03
============ ============ ============ ============
Weighted average number of
common and common equivalent
shares outstanding 3,763,000 3,763,000 3,763,000 3,763,000
The accompanying notes are an integral part of these consolidated financial statements.
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NEW WEST EYEWORKS, INC.
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NEW WEST EYEWORKS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
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Six Months Ended
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(Unaudited)
June 29, July 1,
1996 1995
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CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income $ 595,000 $ 264,000
Adjustments to reconcile net income to
net cash from (used in) operating activities:
Depreciation and amortization 602,000 517,000
Changes in assets and liabilities:
Accounts receivable (235,000) (111,000)
Inventory (102,000) (533,000)
Other current assets (84,000) (69,000)
Accounts payable (396,000) 986,000
Accrued expenses (960,000) (292,000)
Deferred warranty revenues (43,000) (140,000)
Other assets and liabilities (28,000) (50,000)
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Net cash from (used in) operating activities (651,000) 572,000
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CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment (971,000) (992,000)
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Net cash used in investing activities (971,000) (992,000)
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CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from revolving line of credit 1,839,000
Proceeds from bridge loan 700,000
Payment of bridge loan (700,000)
Payment of debt (147,000) (76,000)
Payment of preferred stock dividends (162,000) (164,000)
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Net cash from (used in) financing activities 1,530,000 (240,000)
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NET INCREASE (DECREASE) IN CASH and CASH
EQUIVALENTS: (92,000) (660,000)
CASH and CASH EQUIVALENTS, beginning of period 241,000 1,000,000
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CASH and CASH EQUIVALENTS, end of period $ 149,000 $ 340,000
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NEW WEST EYEWORKS, INC.
NOTES TO CONSOLIDATED FINANCIAL INFORMATION
1. The unaudited consolidated financial information presented herein has been
prepared in accordance with the instructions to Form 10-Q and Regulation
S-X and does not include all of the information and note disclosures
required by generally accepted accounting principles. Therefore, this
information should be read in conjunction with the consolidated financial
statements and notes thereto included in the Form 10-K of New West
Eyeworks, Inc. (the "Company") for the year ended December 30, 1995. This
information reflects all adjustments that are, in the opinion of
management, necessary for a fair statement of the results for the interim
periods reported. These adjustments are of a normal and recurring nature.
2. The results of operations for the period ended June 29, 1996 are not
necessarily indicative of the results to be expected for the full year.
3. Income per common and common equivalent share is computed using the
weighted average number of common and common equivalent shares outstanding
during the period. Fully diluted earnings per share, assuming the
conversion of the Company's Series A and B 6% Cumulative Convertible
Preferred Stock as of the beginning of the period, have not been presented,
as the impact of such conversion is insignificant in 1995 and 1996.
4. In early 1996, to fund the Company's expansion and advertising needs, the
Company entered into two bridge loans with Mesirow Capital Partners VI, a
common and preferred stockholder, and Ronald E. Weinberg, Chairman of the
Board, totaling $700,000. The loans bore interest at an annual rate of 15%
and were secured by a deed of trust on the Company's executive office
building and optical laboratory facility in Tempe, Arizona. The bridge
loans were retired with the proceeds of the revolving line of credit
described below.
To fund the Company's expansion and working capital needs, the Company
entered into a $2.0 million revolving line of credit agreement with a bank
in June, 1996. The loan matures on May 31, 1997, and is secured by
substantially all of the Company's assets, including the Company's
executive office building and optical laboratory in Tempe, Arizona, but
excluding furniture, fixtures, and equipment. The loan bears interest on
the principal balance outstanding from time to time at a rate equal to the
lending bank's prime rate plus 2.0% per annum, and is due and payable
monthly. The loan is also secured by guarantees from Mesirow Capital
Partners V, a preferred stockholder, Mesirow Capital Partners VI, and Mr.
Weinberg. Barry J. Feld, President and Chief Executive Officer, agreed to
share in the obligations of the guarantors.
In exchange for the guarantee of the Company's obligations under its line
of credit by such officers and shareholders, the Company issued warrants to
them to purchase, in the aggregate, 50,000 shares of the Company's common
stock at a price per share of $6.11, subject to customary anti-dilution
adjustments. The value of the warrants, which was determined by independent
valuation to be $0.57 per share, is reflected on the June 29, 1996 balance
sheet in other assets and paid in capital and will be amortized over the
life of the loan.
6
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The Company was not in compliance with one financial covenant contained in
the line of credit agreement at June 29, 1996 and accordingly, has received
waivers and amendments with respect to such covenant from the bank for
periods up to and including September 30, 1996. There can be no assurance
that the Company will not require additional waivers in the future or, if
required, that the lenders will grant them.
5. As a result of the settlement agreement entered into between the Company
and Saatchi & Saatchi North America, Inc., the Company agreed to pay
Saatchi & Saatchi $1.0 million, $250,000 of which was paid in February
1996. The balance of $750,000 is being paid in seven installments of
$107,000. Three installments were paid in the Company's second quarter and
the remaining installments are payable on or before July 31, August 30,
September 30, and October 31, 1996. The Saatchi and Saatchi costs were
recorded as being incurred by the Company in 1995, and the remaining
installments are reflected in accounts payable in the accompanying
consolidated balance sheet as of June 29, 1996.
7
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Unless otherwise stated, references in this report to the second quarter
of 1996 and 1995 relate to the periods ended June 29, 1996 and July 1, 1995.
OVERVIEW
Since the hiring of new management in 1991, New West Eyeworks, Inc. (the
"Company") has redirected its business by implementing a new merchandising
strategy, improving its operating efficiency, expanding its managed optical care
program and successfully entering new markets. The Company has achieved 18
consecutive quarters of positive comparable store sales growth including a 6.7%
increase in the first six months of 1996 compared to the first six months of
1995.
The Company opened nine stores and closed 20 unprofitable or
underperforming stores, mostly in host locations, in 1995. The Company
anticipates opening 10 stores in 1996. In the first six months of 1996, the
Company opened six stores in malls in Iowa, one mall store in Illinois, one
store in a strip center in Arizona, and one store in a Fred Meyer, Inc. ("Fred
Meyer") host store in Oregon. The Iowa and Illinois stores represent the
Company's first entry into the Midwestern United States. The Company also closed
two stores located in strip centers in Oregon and one store located in a Fred
Meyer host store in Alaska, bringing the number of stores to 145 as of June 29,
1996. In addition, the Company remodeled and relocated seven stores.
It is the Company's accounting policy to expense advertising costs to
support new stores and other store pre-opening expenses as they are incurred.
Consequently, the Company expects that its operating margins may initially be
adversely affected by increased operating costs associated with new store
openings.
RESULTS OF OPERATIONS
Second Quarter 1996 Compared to Second Quarter 1995
Net sales increased $739,000 or 7.3% to $10.9 million during the second
quarter of 1996 from $10.1 million during the second quarter of 1995. Revenues
during the second quarter of 1995 included $206,000 in sales from unprofitable
or underperforming host stores which were closed during 1995. If prior-year
sales from these closed retail outlets were excluded from 1995 revenues, the
Company would have posted a 10.1% second quarter improvement in net sales ($10.9
million compared to $9.9 million). The net sales increase in the second quarter
of 1996 was primarily attributable to an increase of 5.1% in comparable store
sales. The comparable store sales increase was primarily due to increases in
units sold and sales generated under the Alexis Vision Plan, the Company's
managed optical care division. The comparable store sales increase in the second
quarter of 1996 at the Company's stores in malls and strip shopping centers was
partially offset by a lower rate of comparable store sales growth in the
Company's host stores.
8
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Gross profit increased $283,000 to $5.4 million during the second quarter
of 1996, a 5.5% increase over gross profit of $5.2 million during the second
quarter of 1995. The gross profit margin decreased to 50.0% in the second
quarter of 1996 from 50.9% in the second quarter of 1995. This decrease was
primarily due to increased sales under the Alexis Vision Plan, which sales,
consistent with the Company's practice, are generally at a discount from the
Company's everyday value prices.
Selling, general and administrative expenses decreased slightly to $5.2
million during the second quarter of 1996 compared to $5.3 million during the
second quarter of 1995. As a percentage of sales, these expenses decreased to
48.0% during the second quarter of 1996, from 52.0% during the second quarter of
1995. This decrease was primarily due to reduced advertising expenditures
resulting from the Company's changing to a different advertising agency in the
fourth quarter of 1995.
Interest expense increased by $39,000 to $46,000 in the second quarter of
1996 from $7,000 in the second quarter of 1995 as a result of increased capital
lease obligations, interest payments on the two bridge loans from Mesirow
Capital Partners VI, a common and preferred stockholder, and Ronald E. Weinberg,
Chairman of the Board, and a common and preferred stockholder, and to a lesser
extent, interest on the line of credit executed in June, 1996.
Income tax expense increased by $77,000 to $22,000 in the second quarter
of 1996 over the income tax benefit of $55,000 in the second quarter of 1995, as
a result of the Company's pre- tax income in the second quarter of 1996 compared
to a pre-tax loss in the second quarter of 1995. The income tax expense for the
Company is lower than what the Company would have to pay if it did not have
significant net operating loss carryforwards.
As a result of the foregoing, net income increased by $217,000 to $152,000
in the second quarter of 1996 over a net loss of $65,000 in the second quarter
of 1995.
Dividends were accrued and paid on the Company's convertible 6% cumulative
preferred stock, Series A, par value $1,000 per share, and the Company's
convertible 6% cumulative preferred stock, Series B, par value $1,000 per share,
in the aggregate amount of $81,000 in the second quarter of 1996 and $83,000 in
the second quarter of 1995.
First Six Months of 1996 Compared to First Six Months 1995
Net sales increased $1.4 million or 6.8% to $22.4 million during the first
six months of 1996 from $20.9 million during the first six months of 1995.
Revenues during the first six months of 1995 included $827,000 in sales from
unprofitable or underperforming host stores which were closed during 1995. If
prior-year sales from these closed retail outlets were excluded from 1995
revenues, the Company would have posted an 11.2% year-to-date improvement in net
sales ($22.4 million compared to $20.1 million). The net sales increase in the
first six months of 1996 was primarily attributable to an increase of 6.7% in
comparable store sales. The comparable store sales increase was primarily due to
increases in units sold and sales generated under the Alexis Vision Plan, the
Company's managed optical care division. The comparable store sales increase in
the first six months of 1996 at the Company's stores in malls and strip shopping
centers was partially offset by a lower rate of comparable store sales growth in
the Company's host stores.
9
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Gross profit increased $437,000 to $11.1 million during the first six
months of 1996, a 4.1% increase over gross profit of $10.7 million during the
first six months of 1995. The gross profit margin decreased to 49.8% in the
first six months of 1996 from 51.1% in the first six months of 1995. This
decrease was primarily due to increased sales under the Alexis Vision Plan,
which sales, consistent with the Company's practice, are generally at a discount
from the Company's everyday value prices.
Selling, general and administrative expenses decreased slightly to $10.3
million during the first six months of 1996 compared to $10.4 million during the
first six months of 1995. As a percentage of sales, these expenses decreased to
46.2% during the first six months of 1996, from 49.4% during the first six
months of 1995. This decrease was primarily due to reduced advertising
expenditures resulting from the Company's changing to a different advertising
agency in the fourth quarter of 1995.
Interest expense increased by $67,000 to $82,000 in the first six months
of 1996 from $15,000 in the first six months of 1995 as a result of increased
capital lease obligations, interest payments on the two bridge loans from
Mesirow Capital Partners VI and Mr. Weinberg, and to a lesser extent, interest
on the line of credit executed in June, 1996.
Income tax expense increased by $48,000 to $126,000 in the first six
months of 1996 over income tax expense of $78,000 in the first six months of
1995, as a result of increased pre- tax income. The income tax expense for the
Company is lower than what the Company would have to pay if it did not have
significant net operating loss carryforwards.
As a result of the foregoing, net income increased by $331,000 to $595,000
in the first six months of 1996 over net income of $264,000 in the first six
months of 1995.
Dividends were accrued and paid on the Company's convertible 6% cumulative
preferred stock, Series A, par value $1,000 per share, and the Company's
convertible 6% cumulative preferred stock, Series B, par value $1,000 per share,
in the aggregate amount of $162,000 in the first six months of 1996 and $164,000
in the first six months of 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires liquidity and working capital primarily for
operations and the opening of new stores, and, to a lesser extent, management
information systems and optical laboratory equipment to support store growth and
improve operating efficiencies. The Company's primary sources of funds are cash
flow from operations, lease financing of equipment, vendor trade credit,
shareholder loans, and bank loans.
In early 1996, to fund the Company's expansion and advertising needs, the
Company entered into two bridge loans with Mesirow Capital Partners VI and Mr.
Weinberg, totaling $700,000. The loans bore interest at an annual rate of 15%
and were secured by a deed of trust on the Company's executive office building
and optical laboratory facility in Tempe, Arizona. The bridge loans were retired
with the proceeds of the revolving line of credit described below.
10
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To fund the Company's expansion and working capital needs, the Company
entered into a $2.0 million revolving line of credit in June, 1996. The loan
matures on May 31, 1997, and is secured by substantially all of the Company's
assets, including the Company's executive office building and optical laboratory
in Tempe, Arizona, but excluding furniture, fixtures, and equipment. The loan
bears interest on the principal balance outstanding from time to time at a rate
equal to the lending bank's prime rate plus 2.0% per annum, and is due and
payable monthly. The interest rate may be reduced to the lending bank's prime
rate plus 1.0% per annum if certain financial covenants are met at year end 1996
and at the end of February 1997. The loan is also secured by guarantees from
Mesirow Capital Partners V, a preferred stockholder, Mesirow Capital Partners
VI, and Mr.Weinberg, Chairman of the Board. Barry J. Feld, President and Chief
Executive Officer, agreed to share in the obligations of the guarantors.
In exchange for the guarantee of the Company's obligations under its line
of credit by such officers and shareholders, the Company issued warrants to them
to purchase, in the aggregate, 50,000 shares of the Company's common stock at a
price per share of $6.11, subject to customary anti-dilution adjustments. The
value of the warrants, which was determined by independent valuation to be $0.57
per share, is reflected on the June 29, 1996 balance sheet in other assets and
paid in capital and will be amortized over the life of the loan.
The Company was not in compliance with one financial covenant contained in
the line of credit agreement at June 29, 1996 and accordingly, has received
waivers and amendments with respect to such covenant from the bank for periods
up to and including September 30, 1996. There can be no assurance that the
Company will not require additional waivers in the future or, if required, that
the lenders will grant them.
Short-term trade credit represents a significant source of financing for
inventory. Trade credit arises from the willingness of the Company's vendors to
grant payment terms for inventory purchases. Inventory levels increased $102,000
from December 30, 1995 to June 29, 1996, as a result of the opening of a net of
six new stores in the first six months of 1996. Although the Company has
negotiated what it believes to be favorable payment terms from its primary
vendors, there is no assurance that the Company will obtain such terms in the
future.
The Company leases all of its retail space and the optical laboratory and
distribution facility near Portland, Oregon. The Company owns its executive
offices and optical laboratory and distribution facility in Tempe, Arizona.
The Company anticipates opening 10 new stores in 1996. Assuming the
Company opens 10 new stores in 1996, including nine new stores in malls and
strip shopping centers and one new store within a Fred Meyer host store, the
Company expects that the costs of the new stores, including furniture, fixtures,
leasehold improvements, inventory and optometric equipment, will be
approximately $1.1 million. Actual costs will vary based upon, among other
factors, geographic location, the size of the store and the extent of the
build-out required at the selected site. In addition, the Company also plans to
spend approximately $250,000 to remodel certain of its existing locations.
Additionally, the Company anticipates upgrading its manufacturing and
distribution equipment in both manufacturing facilities at an expected cost of
$380,000.
11
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Net cash used in operating activities was $651,000 in the first six months
of 1996 compared to net cash from operating activities of $572,000 in the first
six months of 1995. The decrease was primarily attributable to a $396,000
decrease in accounts payable in the first six months of 1996 compared to a
$986,000 increase in accounts payable during the same period in 1995, and a
$960,000 decrease in accrued expenses in the first six months of 1996 compared
to a $292,000 decrease in accrued expenses during the same period in 1995.
Cash flows used in investing activities, primarily for store expansion and
renovation, were $971,000 in the first six months of 1996 compared to $992,000
in the first six months of 1995.
Cash flows from financing activities were $1.5 million in the second
quarter of 1996 compared to cash flows used in financing activities of $240,000
in the second quarter of 1995. Cash flows from financing activities in the
second quarter of 1996 reflect the establishment of the line of credit facility.
The Company believes that cash flow from operations, lease financing and
the line of credit facility will be sufficient to fund its working capital needs
and store expansion program for the next twelve months.
NET OPERATING LOSS CARRYFORWARDS
As of December 30, 1995, the Company had net operating loss carryforwards
of $7.7 million and $6.9 million for regular tax and alternative minimum tax
purposes, respectively, which begin to expire in 2006. The Company's initial
public offering in 1993 caused the Company to experience an ownership change as
defined by Section 382(g) of the Internal Revenue Code. As a result, there will
be an annual limitation of approximately $1.0 million on the amount of net
operating loss carryforwards generated prior to the ownership change which can
be utilized to offset the Company's future taxable income. Additionally, capital
share transactions among existing shareholders during 1995 may further limit the
Company's ability to utilize its operating loss carryforwards. Future
transactions involving the Company's stock (or rights to acquire such stock)
could also cause an ownership change resulting in additional restrictions on the
Company's ability to utilize its net operating loss carryforwards after the date
of such ownership change.
SEASONALITY AND QUARTERLY RESULTS
Historically, the Company's operations have been seasonal, with the
highest sales in a given year occurring first in February, March and April and
then in August, September and, to a lesser extent, in October. The Company has
historically incurred and anticipates that it may continue to incur lower net
sales and net losses during the Company's fourth quarter because of reduced
demand for eyewear during the holiday season.
The Company's results of operations may also fluctuate from quarter to
quarter as a result of the amount and timing of sales contributed by new stores
and the integration of new stores into the operations of the Company, as well as
other factors. The addition of a large number of new stores can therefore
significantly affect quarterly results of operations.
12
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FORWARD-LOOKING STATEMENTS
Statements that are not historical facts, including statements about
management's confidence in the Company's prospects and strategies and its
expectations about the Company's expansion into new markets, growth in existing
markets, and acceleration of the growth in comparable-store sales, are
forward-looking statements that involve risks and uncertainties. These risks and
uncertainties include, but are not limited to: (1) market acceptance risks,
including whether or not the Company will be able to successfully implement its
value-pricing strategy in new geographic markets, most of which markets include
competitors of the Company that have financial and other resources substantially
greater than that of the Company, and whether or not the Company will be able to
conduct a successful advertising campaign in new and existing markets against
better-financed competitors; (2) laboratory capacity and supply constraints,
including whether or not, as the Company expands into new geographic markets, it
will be able to successfully integrate its new markets into its existing eyewear
laboratory manufacturing and distribution system; (3) a slowdown in the growth
of managed care in the eyewear industry or in the Company's share of such
business, including whether or not federal or state health-care legislation will
have an adverse impact on managed care; (4) the ability of the Company to comply
with the financial covenants in its line of credit facility; (5) the ability of
the Company to restore sales and comparable-store sales increases in its
locations in Fred Meyer, Inc. host stores to levels comparable to those prior to
the 1994 strike against Fred Meyer; (6) leasing risks, including whether or not
the Company will be able to lease prime mall and strip-shopping center locations
at attractive rates for its expansion into new markets and to fill out its store
locations in the Company's existing markets; and (7) the impact of government
regulation on the Company's advertising, location and design of stores, and
products sold, on the opticians employed by the Company, and on the relationship
between independent optometrists and the Company, which regulations vary widely
throughout the states in which the Company operates and are subject to frequent
change. These risks and others that are detailed in this Form 10-Q must be
considered by an investor or potential investor in the Company.
13
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PART II-OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is also involved in legal matters which are
incidental to its operations. In the opinion of management, the ultimate
resolution of these matters is not anticipated to have a material adverse effect
on the Company's financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 17, 1996, the Company held its annual Stockholder's Meeting.
The first matter voted on was the election of Ronald E. Weinberg, Chairman of
the Board, and Larry I. Pollock. Mr. Weinberg and Mr. Pollock were each
re-elected as a Director of the Company for a term expiring in 1999, each
receiving 3,178,429 votes for election, no votes withheld or against, and
1,400 abstentions. The following individuals also continue as Directors of
the Company: (1) Byron S. Krantz, Secretary (whose terms expires in 1997);
(2) Barry J. Feld, President and Chief Executive Officer and Norman C.
Harbert (whose terms expire in 1998); and (3) Donald M. Gleklen and William
P. Sutter, Jr. (who are elected by the holders of the Company's Series A and
B 6% Cumulative Convertible Preferred Stock).
The second proposal was for the ratification of the amendments to the
Company's 1993 Stock Option Plan. The proposal was approved with 2,422,018 votes
in favor of the amendments, 18,100 votes against, 209,397 abstentions, and
530,314 broker non-votes.
The third proposal was for the ratification of the selection of Price
Waterhouse LLP as independent accountants. The proposal was approved with
3,165,829 votes in favor of the appointment, 10,000 votes against and 4,000
abstentions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
27 Financial Data Schedule for Commercial and Industrial Companies
(b) REPORTS ON FORM 8-K
On June 18, 1996, the Company filed a Form 8-K with the Securities and
Exchange Commission to report that the Company had (1) entered into a $2.0
million revolving line of credit, (2) issued to Messrs. Weinberg and Feld,
Mesirow Capital Partners V and Mesirow Capital Partners VI warrants to purchase,
in the aggregate, 50,000 shares of the Company's common stock at a price of
$6.11, subject to customary anti-dilution adjustments, and (3) with the proceeds
of the revolving line of credit, retired the two bridge loans from Mr. Weinberg
and Mesirow Capital Partners VI.
14
<PAGE> 15
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.
NEW WEST EYEWORKS, INC.
Date: August 12, 1996 By: /s/ Barry J. Feld
----------------------------------------------
Barry J. Feld
President and Chief Executive Officer
Date: August 12, 1996 By: /s/ Robert W. Regas
----------------------------------------------
Robert W. Regas
Vice President-Finance and Administration
15
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