FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For quarterly period ended June 27, 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: 0-10345
CACHE, INC.
- ---------------------------------------------------------------------
(Exact name of registrant as specified in its Charter)
Florida 59-1588181
- ------------------------------- --------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
1460 Broadway, New York, New York 10036
- --------------------------------------------------------------------
(Address of principal executive offices) (zip code)
212-575-3200
----------------------------------------------------
(Registrant's telephone number, including area code)
---------
- ---------------------------------------------------------------
(Former name, address and former fiscal year, if changed since
last report)
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 ISSUERS:
Indicate the number of shares outstanding of each issuer's classes
of common stock, as of the latest practicable date.
Common Stock, $.01 9,091,338
- -------------------------- ----------------------------
Class of Stock Outstanding Outstanding at July 31, 1998
CACHE, INC. AND SUBSIDIARIES
INDEX
PAGE
CONSOLIDATED FINANCIAL STATEMENTS
BALANCE SHEETS, JUNE 27, 1998
AND DECEMBER 27, 1997 3
STATEMENTS OF OPERATIONS
TWENTY-SIX WEEKS ENDED JUNE 27, 1998
AND JUNE 28, 1997 4
THIRTEEN WEEKS ENDED JUNE 27, 1998
AND JUNE 28, 1997 5
STATEMENTS OF CASH FLOWS
TWENTY-SIX WEEKS ENDED JUNE 27, 1998
AND JUNE 28, 1997 6
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 7-9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS 10-13
OTHER INFORMATION:
EXHIBIT INDEX AND REPORTS ON FORM 8-K 14
SIGNATURES 15
2
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 27, December 27,
ASSETS 1998 1997
---------------- -----------------
Current assets:
Cash and cash equivalents $ 4,257,000 $ 5,892,000
Receivables 1,430,000 1,573,000
Notes receivable from related parties 299,000 250,000
Inventories 18,157,000 18,219,000
Deferred income taxes and other assets 220,000 220,000
Prepaid expenses 596,000 528,000
---------------- -----------------
Total current assets 24,959,000 26,682,000
Property and equipment, net 14,967,000 15,869,000
Other assets 257,000 211,000
Deferred income taxes 715,000 746,000
---------------- -----------------
$ 40,898,000 $ 43,508,000
================ =================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 8,285,000 $ 10,737,000
Income taxes payable 58,000 359,000
Accrued compensation 682,000 742,000
Accrued liabilities 2,871,000 3,862,000
---------------- -----------------
Total current liabilities 11,896,000 15,700,000
Subordinated indebtedness to related party 2,000,000 2,000,000
Other liabilities 1,780,000 1,847,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock, par value $.01; authorized, 20,000,000
shares; issued and outstanding 9,091,338 shares
at June 27, 1998 and December 27, 1997 91,000 91,000
Additional paid-in capital 19,564,000 19,564,000
Retained earnings 5,567,000 4,306,000
---------------- -----------------
Total stockholders' equity 25,222,000 23,961,000
---------------- -----------------
$ 40,898,000 $ 43,508,000
================ =================
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these balance sheets.
</FN>
3
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE TWENTY-SIX WEEKS ENDED
(Unaudited)
June 27, June 28,
1998 1997
---------------- --------------
Net sales $ 67,854,000 $ 64,417,000
---------------- --------------
Costs and expenses
Cost of sales, including occupancy and buying costs 44,321,000 41,942,000
Selling, general and administrative expenses 21,405,000 21,188,000
---------------- --------------
65,726,000 63,130,000
---------------- --------------
Operating income 2,128,000 1,287,000
---------------- --------------
Interest expense
Related party (70,000) (70,000)
Other (14,000) (52,000)
---------------- --------------
(84,000) (122,000)
---------------- --------------
Interest income 93,000 9,000
---------------- --------------
Income before income taxes 2,137,000 1,174,000
Income tax provision 876,000 481,000
---------------- --------------
Net income $ 1,261,000 $ 693,000
================ ==============
Basic and diluted earnings per share $ .14 $ .08
================ ==============
Weighted average number of shares and
share equivalents outstanding 9,173,000 9,100,000
================ ==============
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
4
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED
(Unaudited)
June 27, June 28,
1998 1997
-------------- -------------
Net sales $ 36,520,000 $ 34,111,000
-------------- -------------
Costs and expenses
Cost of sales, including occupancy and buying costs 23,542,000 21,891,000
Selling, general and administrative expenses 10,961,000 10,808,000
-------------- -------------
34,503,000 32,699,000
-------------- -------------
Operating income 2,017,000 1,412,000
-------------- -------------
Interest expense
Related party (35,000) (35,000)
Other (2,000) (17,000)
-------------- -------------
(37,000) (52,000)
-------------- -------------
Interest income 60,000 3,000
-------------- -------------
Income before income taxes 2,040,000 1,363,000
Income tax provision 836,000 559,000
-------------- -------------
Net income $ 1,204,000 $ 804,000
============== =============
Basic and diluted earnings per share $ .13 $ .09
============== =============
Weighted average number of shares and
share equivalents outstanding 9,177,000 9,096,000
============== =============
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
(/TABLE>
5
CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE TWENTY-SIX WEEKS ENDED
(Unaudited)
June 27, June 28,
1998 1997
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,261,000 $ 693,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,012,000 1,857,000
Deferred income taxes 31,000 14,000
Accrual (reversal) of future rent escalations (34,000) 18,000
Change in assets and liabilities:
Decrease in receivables 143,000 271,000
Increase in notes receivable from related parties (49,000) ---
Decrease (increase) in inventories 62,000 (581,000)
(Increase) decrease in prepaid expenses (68,000) 145,000
Decrease in accounts payable (2,452,000) (2,925,000)
Decrease in income taxes payable (301,000) ---
Decrease in accrued liabilities
and accrued compensation (1,084,000) (498,000)
-------------- --------------
Total changes in assets and liabilities (3,749,000) (3,588,000)
-------------- --------------
Net cash used in operating activities (479,000) (1,006,000)
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from property and equipment disposals 23,000 ---
Payments for property and equipment (1,130,000) (1,667,000)
-------------- --------------
Net cash used in investing activities (1,107,000) (1,667,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term bank debt 550,000 20,000,000
Repayment of long-term bank debt (550,000) (18,850,000)
Other, net (49,000) (10,000)
-------------- --------------
Net cash (used in)/provided by financing activities (49,000) 1,140,000
-------------- --------------
Net decrease in cash and cash equivalents (1,635,000) (1,533,000)
Cash and cash equivalents, at beginning of period 5,892,000 2,160,000
-------------- --------------
Cash and cash equivalents, at end of period $ 4,257,000 $ 627,000
============== ==============
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
</FN>
6
CACHE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
---------------------
In the opinion of the Company, the accompanying consolidated
financial statements include all adjustments necessary, which are
considered normal and recurring to present fairly the financial
position of the Company at June 27, 1998 and December 27, 1997, and the
results of operations for the twenty-six and thirteen week periods
ended June 27, 1998 and June 28, 1997 and consolidated statements of
cash flows for the twenty-six weeks then ended.
Certain financial information which is normally included in
financial statements prepared in accordance with generally accepted
accounting principles, but which is not required for interim reporting
purposes, has been condensed or omitted. The accompanying consolidated
financial statements should be read in conjunction with the Financial
Statements and notes thereto included in the Company's latest annual
report on Form 10-K for the fiscal year ended December 27, 1997.
Certain amounts reflected in Fiscal 1997 financial statements have been
reclassified to conform with the presentation of similar items in
Fiscal 1998.
Net income includes all sources of comprehensive income. There
were no adjustments for foreign currency translation, unrealized
gains(losses)on investments or deferred compensation expense incurred
in Fiscal 1998 or Fiscal 1997 results.
2. BASIC AND DILUTED EARNINGS
--------------------------
Basic and diluted earnings per share has been computed based on
the weighted average number of shares of common stock outstanding for
the twenty-six and thirteen weeks ended June 27, 1998 and June 28,
1997.
The approximate number of shares used in the computations of basic
and diluted earnings per share were 9,173,000 and 9,100,000, for the
twenty-six week periods and 9,177,000 and 9,096,000 for the thirteen
week periods ended June 27, 1998 and June 28, 1997, respectively.
7
3. PROPERTY AND EQUIPMENT
-----------------------
June 27, December 27,
1998 1997
------------ ------------
Leasehold improvements $16,686,000 $16,242,000
Furniture, fixtures and
equipment 18,944,000 18,335,000
------------ ------------
35,630,000 34,577,000
Less: accumulated depreciation
and amortization 20,663,000 18,708,000
------------ ------------
$14,967,000 $15,869,000
============ ============
4. ACCRUED LIABILITIES
-------------------
June 27, December 27,
1998 1997
------------ ------------
Operating Expenses $ 881,000 $1,119,000
Taxes, other than income taxes 671,000 1,141,000
Leasehold additions --- 160,000
Other customer deposits 1,319,000 1,442,000
------------ ------------
$2,871,000 $3,862,000
============ ============
5. BANK DEBT
----------
During August 1996, the Company reached an agreement with its
bank to extend the maturity of the Amended Revolving Credit Facility
until January 31, 2000. Pursuant to the Amended Revolving Credit
Facility $12,000,000 is available until expiration at January 31,
2000. The amounts outstanding thereunder bear interest at a maximum
per annum rate up to .50% above the bank's prime rate. The agreement
contains selected financial and other covenants including covenants to
maintain a minimum current ratio, a maximum debt to equity and total
equity ratio, a maximum capital expenditure covenant, a minimum
earnings to bank interest coverage ratio and certain restrictions on
the repayment of principal amounts due to related parties. The
agreement prohibits the payment of any dividends on the Company's
common stock. Effective upon the occurrence of an Event of Default
under the Revolving Credit Facility, the Company grants to the bank a
security interest in the Company's inventory and certain receivables.
There was no outstanding balance on the line of credit at June
27, 1998, and December 27, 1997. The related party debt is
subordinated to the bank debt and repayment is subject to terms of the
Amended Revolving Credit Facility. The Company is currently in
compliance with all covenant requirements.
8
NOTE 6. INDEBTEDNESS TO/FROM RELATED PARTIES
------------------------------------
As of June 27, 1998 and December 27, 1997 the Company had outstanding,
(i) a $250,000 long-term loan from a major stockholder bearing interest
payable quarterly with principal due upon demand at any time after January
31, 2000; and (ii) a $1,750,000 loan made by the same stockholder bearing
interest payable quarterly with principal due upon demand at any time after
January 31, 2000. Interest on both notes accrue at 7% per year through
January 31, 2000. The Company may make a loan repayment on December 31, 1998,
subject to the Tangible Net Worth covenant contained in the Amended Revolving
Credit Facility.
On April 27, 1998, the Company loaned an executive $50,000, which is to
be repaid in 60 monthly payments. The loan has a stated interest rate of
8.00%. All repayments are current at June 27, 1998.
7. INCOME TAXES
------------
The effective tax rates for Fiscal 1998 and 1997 are 41.0%. At June
27, 1998 and December 27, 1997, the Company's deferred tax assets were
$935,000 and $966,000, respectively, also, there was no deferred tax
liability. The major components of the Company's net deferred taxes at June
27, 1998 are as follows:
June 27, December 27,
1998 1997
------------ -------------
Net operating loss carryforwards ("NOL'S") and
alternative minimum
tax carryforwards.............................. $ 92,000 $ 92,000
Deferred rent................................... 839,000 853,000
Inventory cost capitalization................... 128,000 128,000
Other........................................... ( 124,000) ( 107,000)
------------ -------------
$ 935,000 $ 966,000
============ =============
8. CONTINGENCIES
-------------
The Company is exposed to a number of asserted and unasserted potential
claims. In the opinion of management, the resolution of these matters is not
presently expected to have a material adverse effect upon the Company's
financial position and results of operations.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
STATEMENT REGARDING FORWARD LOOKING STATEMENTS
- ----------------------------------------------
Except for the historical information and current statements contained
in this Form 10-Q, certain matters discussed herein, including, without
limitation, "Management's Discussion and Analysis of Financial Condition and
Results of Operations" are forward looking statements that involve risks and
uncertainties, including, without limitation, the effect of economic and
market conditions and competition, the ability to open new stores and expand
into new markets, and risks relating to foreign importing operations, which
would cause actual results to differ materially.
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Company's primary need for capital is to finance new store
merchandise inventories, as well as the construction of new stores. During
the twenty-six weeks ended June 27, 1998, the Company used cash ($1,635,000)
and cash flow from non-cash depreciation expenses ($2,012,000) to repay
accounts payable ($2,452,000), and to fund the Company's store expansion and
remodeling program ($1,130,000). The Company has reduced bank borrowings
during Fiscal 1998, as a result of improved earnings and reduced store
openings.
The Company plans to open approximately five to seven new stores during
1998. The Company opened two new stores in March 1998. The remaining stores
are expected to be opened during the second half of 1998. After deducting
construction allowances paid to the Company by its landlords, the Company has
spent $1,130,000 through June 27, 1998 and expects to spend an additional
$1,500,000 in 1998 for both new store and existing store construction and
remodeling. The Company closed one store on June 30, 1998, the closure had
no material impact on earnings.
The Company is conducting a comprehensive review of its computer systems
to identify the systems that could be affected by the "Year 2000" issue and
is developing an implementation plan to resolve the issue. The Company
presently believes that, with modifications to existing software and
converting to new software, where necessary, the Year 2000 problem will not
pose significant operational problems for the Company's computer systems as
so modified and converted.
10
Management believes that the Company's internally generated cash flows
will be sufficient to meet anticipated requirements for operations and planned
expansion during Fiscal 1998. Inventory levels, which are below last year's
per store levels, now contains a greater proportion of go-forward fall
merchandise, as compared to last year. The Company's current ratio at June 27,
1998 was 2.1 : 1.00; with cash on hand at $4.3 million and no bank borrowings
as compared to bank debt of $1.2 million at June 28, 1997. The Company's cash
flow from operations is primarily driven by improved earnings and non-cash
depreciation charges of $2.0 million for the six month period.
RESULTS OF OPERATIONS
- ---------------------
For the twenty-six and thirteen weeks ended June 27, 1998, the 3% increase
and 5% increase, respectively in comparative store sales and reductions in
several operating expense categories, was partially offset by lower gross
margins and slightly higher occupancy costs, resulting in an increase in net
income in Fiscal 1998 as compared to Fiscal 1997. The increase in selling,
general and administrative expenses was partially offset by reductions in net
interest expense, and higher interest income.
Certain financial data concerning the Company's results of operations for
the twenty-six and thirteen week periods ended June 27, 1998 and June 28, 1997,
expressed as a percentage of net sales, are as follows:
Twenty-six Weeks Ended Thirteen Weeks Ended
---------------------- ---------------------
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
-------- -------- -------- --------
Sales 100.0% 100.0% 100.0% 100.0%
Cost of sales, including
occupancy and buying expenses 65.3% 65.1% 64.5% 64.2%
Selling, general and
administrative expenses 31.5% 32.9% 30.0% 31.7%
Income before taxes 3.1% 1.8% 5.6% 4.0%
Income tax provision 1.3% 0.7% 2.3% 1.6%
Net income 1.8% 1.1% 3.3% 2.4%
Sales
- -----
Net sales increased $3,437,000 or 5.3% and $2,409,000 or 7.1%,
respectively, during the twenty-six and thirteen week periods ended June 27,
1998, versus the comparable periods in 1997. The increases were primarily due
to the comparable store sales increases during the 1998 periods. Comparable
store sales increased 3% and 5%, respectively, for the twenty-six and thirteen
week periods in 1998, as compared to the comparable periods in 1997.
11
Historically, sales at new stores do not achieve the same levels as
existing, established stores. New stores generally begin to perform as well as
existing stores during their second and third year of operation. Sales on a
weighted average basis for the twenty-six and thirteen week periods ended June
27, 1998 and June 28, 1997 were as follows:
Twenty-six Weeks Ended Thirteen Weeks Ended
------------------------ ------------------------
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
----------- ----------- ----------- -----------
Sales $67,854,000 $64,417,000 $36,520,000 $34,111,000
Weighted Average Stores
Open During Period 170.0 163.3 170.8 164.8
Net Sales Per Weighted
Average Number of Stores $ 399,000 $ 394,000 $ 214,000 $ 207,000
Net Weighted Average Sales
per square foot $ 192.19 $ 190.27 $ 103.00 $ 99.93
Stores Open at End
of Period 171 165 171 165
Costs and expenses
- ------------------
Cost of sales, including occupancy and buying costs, increased $2,379,000
or 5.7% for the twenty-six weeks ended June 27, 1998, versus the similar period
in 1997. The increase was primarily due to the increase in sales and the
related cost of merchandise for those sales, as well as a $388,000 increase in
occupancy expenses, primarily due to the additional stores in operation during
the 1998 versus 1997. As a percentage of sales, cost of sales, including the
occupancy expenses, increased 0.2%, (65.3% versus 65.1%) for the twenty-six week
period ended June 27, 1998, versus the comparable period in 1997. The increase
was primarily due to higher markdowns in 1998, as a percent of sales. The
Company takes markdowns for several reasons such as; changes in customer
preference, seasonal adaptation, changes in style or if it is determined
merchandise in stock will not sell at its currently marked price.
Cost of sales, including occupancy and buying costs, increased $1,651,000
or 7.5% for the thirteen weeks ended June 27, 1998, versus the similar 1997
period. The increase was primarily due to the increase in sales and the related
cost of the merchandise for those sales, and a $170,000 increase in occupancy,
due to the additional stores in operation during 1998 versus 1997. As a
percentage of sales, cost of sales, including occupancy and buying expenses,
increased 0.3% (64.5% versus 64.2%) for the thirteen weeks ended June 27, 1998,
versus the comparable period in 1997. The increase was primarily due to higher
markdowns, as a percent of sales, versus the comparable period in 1997.
12
Selling, general and administrative expenses
- --------------------------------------------
Selling, general and administrative expenses ("S,G&A") increased $217,000
or 1.0% during the twenty-six week period ended June 27, 1998 versus the
comparable period in 1997. The increase was primarily due to greater payroll
and payroll taxes ($309,000), credit card fees ($47,000), depreciation
($157,000) and licenses and taxes ($59,000), and was partially offset by a
reduction in freight expense ($212,000), telephone expense ($56,000), insurance
expense ($64,000), and store petty cash ($76,000). As a percentage of sales,
these expenses decreased 1.4% (31.5% versus 32.9%) for the twenty-six weeks
ended June 27, 1998 versus the similar 1997 period. The decrease was due
primarily to the effect of higher comparable store sales, experienced in the
current twenty-six week period, upon S,G&A expenses, which are relatively fixed
in nature, as well as management's efforts to contain S,G&A expenses.
Selling, general and administrative expenses increased $153,000 or 1.4%
during the thirteen weeks ended June 27, 1998, versus the comparable period in
1997. The increase was due to greater payroll and payroll taxes ($176,000),
credit card fees($60,000)and depreciation($108,000), and was partially offset
by a reduction in freight expense ($123,000), telephone expense ($37,000) and
store petty cash ($30,000). As a percentage of sales, these expenses decreased
1.7% (30.0% versus 31.7%) for the thirteen weeks ended June 27, 1998 versus the
similar 1997 period. The decrease was due primarily to the effect of higher
comparable store sales, experienced in the current thirteen week period, upon
S,G&A expenses, which are relatively fixed in nature, as well as management's
efforts to contain S,G&A expenses.
Interest expense
- -----------------
Interest expense decreased $38,000 (31.1%) and $15,000 (28.8%),
respectively, for the twenty-six and thirteen week periods ended June 27, 1998
versus the comparable period in 1997, primarily due to reduced bank borrowing
and improved earnings in 1998.
Interest income
- ---------------
Interest income increased to $93,000 from $9,000 for the twenty-six week
period, as well as increasing to $60,000 from $3,000 for the thirteen week
period. The increase is primarily due to the higher cash flow levels the
Company is currently generating.
Income taxes
- ------------
The Company's effective tax rate is approximately 41%, for Fiscal 1998 and
1997, respectively.
13
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
NONE
(b) Reports on Form 8-K
NONE
14
Signature
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CACHE, INC.
(Registrant)
July 31, 1998 BY: /s/ Thomas E. Reinckens
----------------------------
Thomas E. Reinckens
On behalf of Cache, Inc.
and in his capacity as
Executive Vice President and
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
15
EXHIBIT 11.1
CALCULATION OF BASIC AND DILUTED EARNINGS PER SHARE
(In thousands except per share data)
TWENTY-SIX THIRTEEN
WEEKS ENDED WEEKS ENDED
----------------------------- -------------------------------
June 27, June 28, June 27, June 28,
1998 1997 1998 1997
----------------------------- -------------------------------
EARNINGS
- --------
Net Income Applicable
to Common Stockholders $ 1,261,000 $ 693,000 $ 1,204,000 $ 804,000
============================= ===============================
BASIC EARNINGS PER SHARE
------------------------
Weighted Average Number of
Common Shares Outstanding 9,091,000 9,091,000 9,091,000 9,091,000
Assuming Conversion of
Outstanding Stock Options
and Stock Warrants --- --- --- ---
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method --- --- --- ---
----------------------------- -------------------------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,091,000 9,091,000 9,091,000 9,091,000
============================= ===============================
Basic Earnings Per Share $0.14 $0.08 $0.13 $0.09
============================= ===============================
DILUTED EARNINGS PER SHARE
--------------------------
Weighted Average Number of
Common Shares Outstanding 9,091,000 9,091,000 9,091,000 9,091,000
Assuming Conversion of
Outstanding Stock Options
and Stock Warrants 476,000 150,000 476,000 150,000
Less Assumed Repurchase
of Common Stock Pursuant
to the Treasury Stock Method (394,000) (141,000) (390,000) (145,000)
----------------------------- -------------------------------
Weighted Average Number of
Common Shares Outstanding
As Adjusted 9,173,000 9,100,000 9,177,000 9,096,000
============================= ===============================
Diluted Earnings Per Share $0.14 $0.08 $0.13 $0.09
============================= ===============================
16