<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 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 March 28, 1998
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.
(Exact name of registrant as specified in its charter)
Delaware 34-1589514
(State of incorporation) (I.R.S. Employer Identification No.)
2104 West Southern Avenue, Tempe, Arizona 85282
(Address of principal executive offices) (Zip Code)
(602) 438-1330
(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: 4,872,436 (as of May 1, 1998)
<PAGE> 2
NEW WEST EYEWORKS, INC.
INDEX Page
PART I -- FINANCIAL INFORMATION............................................ 3
Item 1. Financial Statements.............................................. 3
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations......................................7
Item 3. Quantitative and Qualitative Disclosures about Market Risk....... 12
PART II -- OTHER INFORMATION...............................................12
Item 1. Legal Proceedings.................................................12
2
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NEW WEST EYEWORKS, INC.
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
ASSETS MARCH 28, DECEMBER 27,
1998 1997
----------- ------------
(Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 172,000 $ 577,000
Accounts receivable, net 2,347,000 1,741,000
Inventory 4,486,000 3,519,000
Deferred tax assets 363,000 579,000
Other current assets 255,000 400,000
----------- -----------
Total current assets 7,623,000 6,816,000
Property and equipment, net 10,053,000 9,108,000
Goodwill 394,000 416,000
Other assets 12,000 12,000
----------- -----------
Total assets $18,082,000 $16,352,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable $ 4,888,000 $ 4,022,000
Accrued expenses 1,918,000 1,948,000
Line of credit 666,000 30,000
Deferred warranty revenues 287,000 271,000
Notes payable and capital lease obligations, current portion 291,000 338,000
------------ ------------
Total current liabilities 8,050,000 6,609,000
Notes payable and capital lease obligations 240,000 291,000
------------ ------------
Total liabilities 8,290,000 6,900,000
------------ ------------
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, 25,000,000 shares authorized,
4,870,436 and 4,868,436 issued and outstanding at March 28, 1998
and December 27, 1997, respectively 49,000 49,000
Paid-in capital 15,641,000 15,630,000
Accumulated deficit (11,358,000) (11,687,000)
------------ ------------
Total stockholders' equity 9,792,000 9,452,000
------------ ------------
Total liabilities and stockholders' equity $ 18,082,000 $ 16,352,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
3
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CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------
(Unaudited)
MARCH 28, MARCH 29,
1998 1997
-------------- -------------
<S> <C> <C>
Net sales $13,727,000 $12,791,000
Cost of sales 6,638,000 6,122,000
----------- -----------
Gross profit 7,089,000 6,669,000
Selling, general and administrative expenses 6,436,000 5,976,000
----------- -----------
Operating income 653,000 693,000
Interest income 13,000
Interest expense 27,000 53,000
----------- -----------
Income before income tax expense 626,000 653,000
Income tax expense 216,000 20,000
----------- -----------
Net income 410,000 633,000
Preferred stock dividends 81,000 81,000
----------- -----------
Net income applicable to common shares $ 329,000 $ 552,000
=========== ===========
Basic and diluted income per share $ 0.07 $ 0.13
=========== ===========
Weighted average shares outstanding - Basic 4,870,000 4,262,000
Weighted average shares outstanding - Diluted 4,979,000 4,304,000
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
4
<PAGE> 5
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------
(Unaudited)
MARCH 28, MARCH 29,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM (USED IN) OPERATING ACTIVITIES:
Net income $ 410,000 $ 633,000
Adjustments to reconcile net income to
net cash from (used in) operating activities:
Depreciation and amortization 472,000 378,000
Deferred income taxes 216,000
Loss on disposal of fixed assets 10,000
Changes in assets and liabilities:
Accounts receivable (606,000) (210,000)
Inventory (967,000) (627,000)
Other current assets 145,000 256,000
Accounts payable 866,000 (1,405,000)
Accrued expenses (30,000) 327,000
Deferred warranty revenues 16,000 (6,000)
Other assets and liabilities 15,000
------------ -----------
Net cash from (used in) operating activities 532,000 (639,000)
------------ -----------
CASH FLOWS FROM (USED IN) INVESTING ACTIVITIES:
Purchase of property and equipment (1,405,000) (388,000)
------------ -----------
Net cash used in investing activities (1,405,000) (388,000)
------------ -----------
CASH FLOWS FROM (USED IN) FINANCING ACTIVITIES:
Proceeds from revolving line of credit 14,134,000 5,126,000
Payments on revolving line of credit (13,498,000) (7,094,000)
Payment of bridge loan (358,000)
Payment of capital leases (98,000) (78,000)
Payment of preferred stock dividends (81,000) (83,000)
Net proceeds from common stock offering 5,583,000
Exercise of stock options 11,000
------------ -----------
Net cash from financing activities 468,000 3,096,000
------------ -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (405,000) 2,069,000
------------ -----------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 577,000 256,000
------------ -----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 172,000 $ 2,325,000
============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
5
<PAGE> 6
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 27, 1997. 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 March 28, 1998 are not
necessarily indicative of the results to be expected for the full year.
3. In 1997, the Company adopted Statement of Financial Accounting Standards
No. 128, Earnings per Share (SFAS No. 128). Basic earnings per share is
computed by dividing income applicable to common shares by the weighted
average number of common shares outstanding for the year. Diluted
earnings per share is similar to basic earnings per share except that the
denominator is increased to include the number of additional common
shares that would have been outstanding if potentially dilutive common
shares (i.e., stock options and warrants) had been issued using the
treasury stock method.
In March 1998, the Accounting Standards Executive Committee (AcSEC)
issued Statement of Position (SOP) 98-1, Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use. SOP 98-1, which
must be adopted no later than January 1, 1999, requires that preliminary
project costs and post implementation costs be expensed as incurred
while costs incurred in application development should be capitalized and
amortized over the application's estimated useful life. The Company does
not believe that the implementation of SOP 98-1 will have a significant
impact on its financial position or results of operations.
In April 1998, AcSEC also issued SOP 98-5, Reporting on the Costs of
Start-up Activities, which requires that all costs incurred in start-up
activities be expensed as incurred. The implementation of SOP 98-5, which
is also required no later than January 1, 1999, will not impact the
Company's financial position or results of operations due to its
long-standing policy of expensing such costs, including new store opening
costs, as incurred.
4. In February 1997, the Company completed a public offering (the
"Offering") of 1,505,400 shares of its common stock, including shares
sold upon the exercise of the underwriters' over allotment option. Gross
proceeds, direct costs, and net proceeds of this Offering totaled
approximately $6,626,000, $1,085,000, and $5,541,000, respectively. Of
the shares sold, 400,000 shares were sold by selling stockholders. The
Company did not receive any proceeds from the sale of shares by the
selling stockholders.
6
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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 first quarter
of 1998 and 1997 relate to the periods ended March 28, 1998 and March 29, 1997.
OVERVIEW
The Company's everyday value-pricing strategy features its "signature"
price point for a wide selection of quality, brand name eyeglasses (including
frame and lenses) offered at attractive, convenient locations with professional
service. The Company focuses on opening new stores, primarily in malls and strip
shopping centers, entering new geographic markets, improving its operating
efficiency, expanding its managed optical care business and establishing the
informational and operational infrastructure necessary for further expansion.
The Company believes that the success of its value-pricing strategy is
demonstrated by (1) its 25 consecutive quarters of positive comparable store
sales growth, (2) a significant amount of repeat customers and referral
business, and (3) the generation of operating income in 1996, 1997, and the
first quarter of 1998. As of May 1, 1998, the Company operated 170 stores in 13
states.
In the first quarter of 1998, the Company opened six stores in Florida
malls, one store in a Washington mall, and one store in a Washington Fred Meyer,
Inc. ("Fred Meyer") host store. The Company also closed two stores in Washington
malls. As a part of the Company's strategy to expand into new geographic
markets, approximately 16 of the 20 to 25 stores planned to open in 1998 will be
in Florida, a new market for the Company. Opening stores in new markets,
including Florida, may adversely impact profitability in the short-term. Opening
new stores in markets already served by the Company may adversely impact
existing store profitability and reduce comparable store sales, although the
Company believes that such new stores will lead to increased sales and
profitability in such markets.
The Company believes that as incremental sales occur, from both
existing stores and new stores, the operating leverage provided by its optical
laboratory fixed cost structure will enhance operating margins. However, because
it is the Company's accounting policy to expense opening costs as they are
incurred, the Company expects that, in the short-term, its operating margins may
be adversely affected by increased operating costs associated with new store
openings. Costs relating to the opening of eight new stores during the first
quarter of 1998 totaled $164,000, while opening costs associated with the three
new stores opened during the first quarter of 1997 totaled $37,000.
The Company's managed optical care business, Vista Eyecare Network,
LLC, a wholly owned subsidiary of the Company ("Vista Eyecare Network"), is an
increasingly important component of its overall business. In the first quarter
of 1998, net sales generated by the Vista Eyecare Network were $3.9 million (or
approximately 28.8% of net sales), a 6.3% increase over the first quarter of
1997. Vista Eyecare Network sales have a negative impact on the Company's gross
profit margin because they are generally transacted at a small discount from the
Company's
7
<PAGE> 8
everyday value prices, and the Company expects this negative impact to continue.
There is no assurance that sales generated under Vista Eyecare Network will
continue to increase at all or at the historical rates experienced by the
Company.
YEAR 2000 COMPLIANCE
Based on a preliminary study by management, the Company does not expect
that material costs will be required to modify its computer information and
manufacturing systems to enable proper processing of transactions relating to
the year 2000 and beyond. However, the Company continues to evaluate the extent
to which, if any, corrective action will be necessary. There was no amount
incurred in the first quarter of 1998 for year 2000 technology.
RESULTS OF OPERATIONS
FIRST QUARTER 1998 COMPARED TO FIRST QUARTER 1997
Net sales increased $936,000 or 7.3% to $13.7 million during the first
quarter of 1998 from $12.8 million during the first quarter of 1997. The net
sales increase in the first quarter of 1998 was primarily attributable to the
addition of 18 net new stores since the first quarter of 1997 coupled with an
increase of 1.0% in comparable store sales.
Gross profit increased $420,000 to $7.1 million during the first
quarter of 1998, a 6.3% increase over gross profit of $6.7 million during the
first quarter of 1997. The gross profit margin decreased to 51.6% in the first
quarter of 1998 from 52.1% in the first quarter of 1997. The decrease was
primarily due to increased store occupancy costs, partially offset by an
improvement related to a price increase implemented in January 1998.
Selling, general and administrative expenses increased to $6.4 million
during the first quarter of 1998 compared to $6.0 million in the first quarter
of 1997. As a percentage of sales, these expenses increased slightly to 46.9%
during the first quarter of 1998, from 46.7% during the first quarter of 1997.
This increase was primarily due to the increased costs associated with opening
eight new stores in the first quarter of 1998 compared to three new stores in
the first quarter of 1997.
Interest income decreased from $13,000 in 1997 to no interest income in
1998 due to the decreased cash balances.
Interest expense decreased by $26,000 to $27,000 in the first quarter
of 1998 from $53,000 in the first quarter of 1997, as a result of reduced
indebtedness subsequent to the Offering which occurred in the first quarter of
1997.
Income tax expense increased by $196,000 to $216,000 in the first
quarter of 1998 compared to income tax expense of $20,000 in the first quarter
of 1997. The effective income tax rate of 3.1% in the first quarter of 1997 was
unusually low as the Company was able to substantially offset taxable income
generated by reduction of a portion of the valuation allowance relating to its
deferred tax assets. See "Net Operating Loss Carryforwards".
8
<PAGE> 9
As a result of the foregoing, net income decreased by $223,000 to
$410,000 in the first quarter of 1998 from net income of $633,000 in the first
quarter of 1997.
Dividends were accrued and paid on the Company's Series A and Series B
6% cumulative convertible preferred stock in the aggregate amount of $81,000 in
the first quarter of 1998 and the first quarter of 1997.
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, bank loans, lease financing of equipment, and vendor trade
credit.
In early 1997, the Company completed the Offering. Net proceeds to the
Company from the Offering were $5.5 million. Of the shares sold in the Offering,
400,000 shares were sold by selling stockholders. The Company did not receive
any proceeds from the sale of the shares by the selling stockholders. With the
proceeds, the Company accelerated its store expansion program, remodeled two
stores, reduced the amount outstanding on the Company's then-existing revolving
line of credit by approximately $2.0 million and retired a $350,000 bridge loan
from the Second National Bank of Warren (Ohio). The line of credit matured on
May 31, 1997.
The Company entered into a new $3.0 million revolving line of credit
agreement and a $2.0 million term loan agreement with a major national bank in
August 1997. The revolving line of credit matures on August 1, 1999, and is
secured by the Company's inventory, accounts receivable, and general
intangibles. The revolving line of credit bears interest at a rate of prime plus
one-eighth percent (8.625% at March 28, 1998) or, at the Company's option, a
rate equal to the then current London Interbank Offered Rate ("LIBOR") for the
term selected by the Company plus 2.35% on any principal outstanding; interest
is payable on a monthly basis. The Company may request advances on the term loan
until August 1, 1998, at which time the balance will be amortized over a 48
month period. The term loan is secured by the Company's property and equipment,
and bears interest at a rate of prime plus one-half percent or, at the Company's
option, a rate equal to LIBOR for the term selected by the Company plus 2.75% on
any principal outstanding. At March 28, 1998, $666,000 was outstanding on the
revolving line of credit while no amounts were outstanding under the term loan.
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. 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.
9
<PAGE> 10
The Company leases all of its retail space and its optical laboratory
and distribution facility near Portland, Oregon. The Company owns its executive
offices and optical laboratory and distribution facility in Tempe, Arizona.
Net cash from operating activities was $532,000 in the first quarter of
1998 compared to net cash used in operating activities of $639,000 in the first
quarter of 1997. This fluctuation is primarily attributable to an increase in
accounts payable of $866,000 in the first quarter of 1998 compared to a decrease
of $1.4 million in the first quarter of 1997, partially offset by an increase in
accounts receivable of $606,000 in the first quarter of 1998 compared to an
increase of $210,000 in the first quarter of 1997, an increase of inventory of
$967,000 in the first quarter of 1998 compared to an increase of $627,000 in the
first quarter of 1997, and a decrease in accrued expenses of $30,000 in the
first quarter of 1998 compared to an increase of $327,000 in the first quarter
of 1997.
Cash flows used in investing activities, primarily for store expansion,
renovation and relocation, were $1.4 million in the first quarter of 1998
compared to $388,000 in the first quarter of 1997. The increase is primarily
attributable to opening eight new stores in the first quarter of 1998 compared
to three new stores in the first quarter 1997.
Cash flows from financing activities were $468,000 in the first quarter
of 1998 compared to $3.1 million in the first quarter of 1997. Cash flows from
financing activities in the first quarter of 1998 primarily reflect $636,000 of
net proceeds from the revolving credit facility, partially offset by payment of
capital leases of $98,000 and payment of preferred stock dividends of $81,000.
Cash flows from financing activities in the first quarter of 1997 reflect net
proceeds from the Offering of $5.5 million, partially offset by repayment of the
Company's previous revolving line of credit of $2.0 million, repayment of other
debt of $358,000 and payment of preferred stock dividends of $83,000.
The Company currently anticipates opening approximately 20 to 25 new
stores in 1998. Assuming the Company opens 25 new stores in 1998, including 24
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 these new stores,
including furniture, fixtures, leasehold improvements, inventory and optometry
equipment, will be approximately $3.5 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 to opening
new stores, the Company may relocate stores within a mall or strip shopping
center if sites become available with better traffic patterns and better
merchandising opportunities. In 1998, the Company plans to remodel four of its
mall and strip shopping center stores at an estimated cost of approximately
$600,000.
The Company believes that the cash flow from operations, funds
available from the revolving line of credit and term loan, and existing capital
lease financing will be sufficient to fund its working capital needs and store
expansion and renovation program for at least the next 12 months. However, the
Company may seek additional equity or debt financing if it determines
10
<PAGE> 11
that such financing is necessary. There is no assurance that the Company would
be able to obtain such financing on terms that are acceptable to the Company.
NET OPERATING LOSS CARRYFORWARDS
The Company experienced operating losses prior to 1996 and as a result,
established a 100% valuation allowance against its deferred tax assets,
including its net operating loss (NOL) carryforwards, as of December 30, 1995.
The Company generated taxable income in 1996 which it was able to
substantially offset with NOL carryforwards. As the related deferred tax assets
had been fully reserved, the Company's effective income tax rate in 1996 was
unusually low as expected income tax expense was substantially offset by the
reversal of a portion of the valuation allowance. Due to the lack of sustained
profitability, the Company maintained the 100% valuation allowance against its
remaining deferred tax assets as of December 28, 1996.
The Company also generated taxable income in 1997 which it was able to
substantially offset with NOL carryforwards. Utilization of the related deferred
tax assets which had been fully reserved served to reduce the Company's
effective income tax rate in 1997 to an unusually low rate. The Company's
effective income tax rate was also impacted by the reversal in the fourth
quarter of 1997 of $579,000 of the valuation allowance relating to a portion of
the Company's remaining deferred tax assets as of December 27, 1997 as the
Company anticipated that the related tax benefits will be realized.
The Company will consider further reductions to or elimination of the
remaining valuation allowance as profitable operations continue. As the
valuation allowance is reduced or eliminated, it is anticipated that the
Company's effective income tax rate will return to more normalized levels.
As of December 27, 1997, the Company had net operating loss
carryforwards of $5.7 million and $4.9 million for regular tax and alternative
minimum tax purposes, respectively, which begin to expire in 2006.
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 may continue to incur net losses and lower net sales
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, including bad weather. The addition of a large number of new
stores can therefore significantly affect quarterly results of operations.
11
<PAGE> 12
FORWARD-LOOKING STATEMENTS
Statements that are not historical facts, including statements about
the Company's confidence in its prospects and strategies and its expectations
about expansion into new markets, including Florida, growth in existing markets,
comparable store sales and the Company's ability to attract new sources of
financing, are forward-looking statements that involve risks and uncertainties.
These risks and uncertainties include, but are not limited to, (1) the effect of
the price point increase which occurred in January 1998; (2) market acceptance
risks, including whether or not the Company will be able to successfully
implement its value-pricing concept in new geographic markets, most of which
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; (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) laboratory capacity and supply constraints,
including whether or not as the Company expands into new geographic markets
whether it will be able to successfully integrate its new markets into its
existing eyewear laboratory manufacturing and distribution system; (5) the
negative impact of an accelerated store expansion program on the Company's
profitability and operating margins; (6) the Company's ability to attract and
retain qualified optometrists; (7) 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 (8) the impact of government
regulations on the opticians employed by the Company and on the Company's
advertising, locations and design of stores, and products sold, which
regulations are subject to frequent change and vary widely throughout the states
in which the Company operates. These risks and others that are detailed in this
Quarterly Report on Form 10-Q must be considered by any investor or potential
investor in the Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
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.
12
<PAGE> 13
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: May 12, 1998 By: /s/ Barry J. Feld
------------------
Barry J. Feld
President and Chief Executive Officer
Date: May 12, 1998 By: /s/ Darius J. DiTallo
----------------------
Darius J. DiTallo
Vice President of Finance and Administration
Chief Financial Officer
13
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S.DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1998
<PERIOD-START> DEC-28-1997
<PERIOD-END> MAR-28-1998
<EXCHANGE-RATE> 1
<CASH> 172,000
<SECURITIES> 0
<RECEIVABLES> 2,579,000
<ALLOWANCES> 232,000
<INVENTORY> 4,486,000
<CURRENT-ASSETS> 618,000
<PP&E> 20,939,000
<DEPRECIATION> 10,885,000
<TOTAL-ASSETS> 18,082,000
<CURRENT-LIABILITIES> 8,050,000
<BONDS> 531,000
0
5,460,000
<COMMON> 49,000
<OTHER-SE> 4,283,000
<TOTAL-LIABILITY-AND-EQUITY> 18,082,000
<SALES> 13,727,000
<TOTAL-REVENUES> 0
<CGS> 6,638,000
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 6,436,000
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,000
<INCOME-PRETAX> 626,000
<INCOME-TAX> 216,000
<INCOME-CONTINUING> 0
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<NET-INCOME> 410,000
<EPS-PRIMARY> .07
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</TABLE>
