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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
FOR THE FISCAL YEAR ENDED JUNE 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 001-10887
JENNY CRAIG, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0366188
(STATE OR OTHER JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER IDENTIFICATION NO.)
ORGANIZATION)
11355 NORTH TORREY PINES ROAD, LA JOLLA, CALIFORNIA 92037
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (619) 812-7000
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
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COMMON STOCK, $.000000005 NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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 by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
As of August 29, 1997, there were 20,687,771 shares of the registrant's
common stock outstanding, par value $.000000005, which is the only class of
common or voting stock of the registrant. As of that date, the aggregate market
value of the shares of common stock held by non-affiliates of the registrant
(based on the closing price for the common stock on the New York Stock Exchange
on August 29, 1997) was approximately $45,327,000.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's Annual Report to Shareholders for the fiscal
year ended June 30, 1997 are incorporated by reference into Part II. The
information called for by Part III is incorporated by reference from the
definitive Proxy Statement of the Registrant which will be filed with the
Securities and Exchange Commission not later than 120 days after June 30, 1997.
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JENNY CRAIG, INC.
1997 FORM 10-K
TABLE OF CONTENTS
PAGE
----
ITEM 1. BUSINESS................................................................ 1
ITEM 1a. EXECUTIVE OFFICERS OF THE REGISTRANT.................................... 8
ITEM 2. PROPERTIES.............................................................. 9
ITEM 3. LEGAL PROCEEDINGS....................................................... 9
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS..................... 10
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.... 10
ITEM 6. SELECTED FINANCIAL DATA................................................. 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS........................................................... 10
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............................. 10
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.................................................... 11
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT...................... 11
ITEM 11. EXECUTIVE COMPENSATION.................................................. 11
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.......... 11
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......................... 11
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K........ 11
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PART I
ITEM 1. BUSINESS
GENERAL BUSINESS DESCRIPTION
Jenny Craig, Inc. (the "Company") provides a comprehensive weight
management program (the "Program") through a chain of Company-owned and
franchised weight loss Centres operating under the name JENNY CRAIG WEIGHT LOSS
CENTRES ("Centres"). As of August 29, 1997, there were 554 Company-owned and 104
franchised weight loss Centres throughout the United States, and 106
Company-owned and 36 franchised Centres in Australia, New Zealand and Canada.
Through these Centres the Company sells JENNY CRAIG CUISINE, its portion and
calorie controlled food products ("Jenny's Cuisine"), to participants in the
Program. As of August 29, 1997, there were approximately 90,000 active
participants in the Program in the United States, and 22,000 active participants
in foreign markets.
FORWARD-LOOKING STATEMENTS
Information provided herein may contain, and the Company may from time to
time disseminate material and make statements which may contain
"forward-looking" information, as that term is defined by the Private Securities
Litigation Reform Act of 1996 (the "Act"). The words "expects," "anticipates,"
"believes" and similar words generally signify a "forward-looking" statement.
The cautionary statements below are being made pursuant to the provisions of the
Act and with the intention of obtaining the benefit of the "safe harbor"
provisions of the Act. The reader is cautioned that all forward-looking
statements are necessarily speculative and there are certain risks and
uncertainties that could cause actual events or results to differ materially
from those referred to in such forward-looking statements. The discussion below,
together with portions of the discussion elsewhere in this Report, highlight
some of the more important risks identified by management of the Company but
should not be assumed to be the only things that could affect future financial
performance of the Company. Certain risk factors may also be identified by the
Company from time to time in other filings with the Securities and Exchange
Commission, press releases and other communications.
Competition; Technological and Scientific Developments. The weight loss
business is highly competitive and the Company competes against a large number
of companies of various sizes, some of which may have greater financial
resources than the Company. The Company competes against self-administered
weight loss regimens, doctors, nutritionists, dietitians, the pharmaceutical
industry and certain government agencies and non-profit groups which offer
weight control help by means of medication, diets, exercise and weight loss
drugs. The Company also competes against food manufacturers and distributors
which are developing and marketing low-calorie and diet products to
weight-conscious consumers. In addition, new or different products or methods of
weight control are continually being introduced. Such competition and any
increase in competition, including new pharmaceuticals and other technological
and scientific developments in weight control, may have a material adverse
impact on the Company.
From time to time, medical and health professionals have identified health
risks associated with weight loss. Weight loss pharmaceuticals are not risk-free
and side effects and potential health problems for certain users have been
identified. In September 1997, the United States Food and Drug Administration
requested the withdrawal of fenfluramine (one of the pharmaceuticals used in a
combination commonly known as "phen-fen") and dexfenfluramine, commonly referred
to by its trade name Redux, from the U.S. market based upon potential health
risks. The manufacturer and distributor of these pharmacueticals agreed to an
immediate recall of these drugs. Medical and scientific developments or public
announcements associating a health risk with weight loss could have a material
adverse effect on the Company. See "Competition."
Legislative and Regulatory Restrictions; Litigation. The Company is subject
to a number of laws and regulations regarding its advertising, food products,
franchise operations and relations with consumers. See "Regulation." The Federal
Trade Commission ("FTC") and certain states regulate advertising, disclosures to
consumers and franchisees, and other consumer matters and the Food and Drug
Administration and the United States Department of Agriculture specify quality
standards for foods. The Company's customers may file actions on their own
behalf, as a class or otherwise, and may file complaints with the FTC or state
or local
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consumer affairs offices and these agencies may take action on their own
initiative or on a referral from consumers or others. See "Item 3. Legal
Proceedings" for information regarding the current status of an FTC proceeding
relating to the advertising practices of the Company, and a class action
litigation commenced in Alabama against the Company, other weight loss programs,
and certain pharmaceutical companies relating to the distribution and sale of
weight loss pharmaceuticals. Remedies sought in such actions may include the
refund of amounts paid by the complaining customer, refunds to an entire class
of participants, other damages, as well as changes in the Centres' method of
doing business. A complaint because of a practice at one Centre, whether or not
that practice is authorized by the Company, could result in an order affecting
some or all Centres in the particular state, and an order in one state could
influence courts or government agencies in other states considering similar
matters. Proceedings resulting from complaints may result in significant defense
costs, settlement payments or judgments and could have a material adverse effect
on the Company.
Future legislation or regulations including, without limitation,
legislation or regulations affecting the Company's marketing and advertising
practices, relations with consumers or franchisees or its food products, could
have a material adverse impact on the Company.
The Company's foreign operations and franchises are also generally subject
to regulations of the applicable country regarding the offer and sale of
franchises, the content of advertising, the labeling and packaging of food, and
promotion of diet products and programs. Although the Company is not currently
subject to any government-imposed restriction on the withdrawal of funds from
any foreign country, if Australia or any foreign country in which the Company
operates were to impose currency restrictions, the Company's business could be
materially adversely affected.
Effectiveness of Marketing and Advertising Program. The Company's business
is marketing intensive. Its success depends upon its ability to attract new
participants to the program. The effectiveness of the Company's marketing
practices, in particular its advertising campaigns, is important to the
Company's financial performance. If the Company's marketing and advertising
programs do not generate sufficient "leads" and "sales," the Company's results
of operations will be materially adversely affected.
Market Acceptance of New Products and Services. The Company's future
success will depend on its ability to enhance its existing products and services
and to develop and market new products and services on a timely basis that
respond to new and evolving customer demands, achieve market acceptance and keep
pace with new technological and scientific developments. There can be no
assurance that the Company will be successful in developing, introducing on a
timely basis and marketing such new products and services, or that any such new
products or services will be accepted by the market. The failure of such
products and services to be accepted by the market could have a material adverse
impact on the Company.
Cost of Food and Services. As a large percentage of the Company's revenues
are derived from sales of the Company's food products, increases in the cost of
food and food services could have a material adverse impact on the Company.
Fluctuations In Quarterly Operating Results; Seasonality. The Company has
experienced and expects to continue to experience fluctuations in its quarterly
results of operations. The Company's revenues are affected by a number of
factors, including the volume and timing of customer leads, success of marketing
and advertising programs, success of introductions of new services and products,
activities of competitors and the ability of the Company to penetrate new
markets. The Company's business is seasonal with revenues generally decreasing
in the quarter ended December 31 and during the summer months. The Company may
also choose to reduce prices or to increase spending in response to competition
or to pursue new market opportunities, all or any of which may materially
adversely affect the Company's results of operations.
General Economy. The Company's future success will depend on the general
strength of the economy in the regions where the Company's Centres are located,
both within and outside the United States . Any weakness in the general economy
of such areas may have a material adverse impact on the Company's results of
operations.
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THE PROGRAM
The Program offers a comprehensive, competitively priced approach to the
problem of losing and maintaining weight, combining a calorie controlled,
nutritionally balanced diet with education and motivation that assists
participants in achieving their weight loss needs. The Program features
individual counseling and group lifestyle classes to assist participants in
identifying and modifying their eating habits to reach and maintain their
desired weight. A cornerstone of the Program is the purchase by participants of
Jenny's Cuisine. These food products, which are sold only at Centres to
participants in the Program, are manufactured by the Company's suppliers to
specifications approved by registered dietitians employed by the Company and are
designed to provide nutritionally balanced and good tasting low calorie foods to
facilitate weight loss. The Program recommends mild exercise to participants,
and the Company offers weight maintenance assistance after completion of the
Program. The Program is used by men and women, and to a much lesser extent by
adolescents, although most participants in the Program are women of all ages and
income levels who wish to lose in excess of 30 pounds. During fiscal 1997, the
Company introduced an adjunct to its traditional weight loss program which
incorporated weight loss pharmaceuticals for qualified participants. This
program adjunct utilized independently-contracted physicians to examine clients
and prescribe Redux (the trade name for dexfenfluramine, a medication for
obesity approved by the U.S. Food and Drug Administration in April 1996) and a
combination of two other medications commonly known as "phen-fen" to
participants who met the appropriate medical criteria for these medications. In
August 1997, the Company ceased offering a weight loss medication adjunct to its
Program following reports from the medical community as to possible health risks
associated with the use of Redux and phen-fen.
Each prospective participant in the Program meets with a Program Director
at the Centre, where statistical information regarding height, weight, activity
patterns, and related information is obtained. This information is analyzed
using standards fixed by the Company to assist the prospective participant in
establishing a weight loss goal and the Program Director then explains the
Program. After enrollment, the participant is referred to a Weight Loss
Counselor to begin the Program and purchase the first week's supply of Jenny's
Cuisine. Other than in connection with the now terminated program adjunct which
offered weight loss medications to qualified participants, the Company does not
engage physicians to examine or monitor the progress of participants, nor does
it undertake a medical examination of new participants. However, prior to
commencing the Program each new participant is asked to complete a health
questionnaire to disclose any current medical treatment and medical history in
order to determine whether participation in the Program is inadvisable or should
be monitored by the participant's personal physician.
For the first half of the Program, participants are encouraged to eat
Jenny's Cuisine for every meal along with fresh fruits, vegetables and dairy
products. During this initial period, participants are expected to visit the
Centre twice a week. One visit is for a private counseling session with a Weight
Loss Counselor during which the participant's progress is discussed, meal plans
are selected and the participant purchases Jenny's Cuisine. At the second
semi-weekly visit participants attend lifestyle classes covering five general
subjects: Nutrition, Physical Activity, Social Situations, Emotional Eating, and
Eating Style. These lifestyle classes, all of which involve proprietary
videotape presentations and discussions led by a lifestyle counselor, are
conducted by Centre personnel. The classes are designed to teach participants
how to develop sound eating habits and weight management strategies.
After the initial period of the Program, participants are advised to eat
Jenny's Cuisine five days a week from various menus furnished by the Centre, and
are given guidelines for their own food preparations two days a week, continuing
on this regimen until their weight loss goal is achieved. Throughout the course
of the Program participants continue their individual counseling sessions.
Each participant is allowed to utilize the Centre's facilities and
personnel until the participant's weight loss goal has been achieved. During the
course of the Program a participant loses an average of 1 to 1.5 pounds per
week. While the length of time a participant remains on the weight loss portion
of the Program varies with the amount of desired weight loss and how long a
participant chooses to continue on the Program, an average participant remains
on the Program for approximately four months.
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Participants in the Program pay a fixed service fee which covers all
aspects of the Program other than the purchase of Jenny's Cuisine (and, while it
was being offered, certain fees associated with the weight loss medication
program adjunct). For the year ended June 30, 1997, the initial service fee for
the basic program in Company-owned Centres ranged from $10 to $149. As of August
29, 1997, the initial service fee in Company-owned Centres was $99. In addition,
the Company may offer special limited introductory programs for a lower fee.
During the weight loss portion of the Program, participants pay an average of
between $50 and $75 per week for Jenny's Cuisine. The Company also offers a
Success Program which includes a weight maintenance module and a walking program
for a fee which was $199 as of August 29, 1997. A significant number of
participants who enroll in the Program purchase a Success Plus Program for a
fixed fee which was $349 at August 29, 1997. The Success Plus Program includes a
walking program, a weight maintenance module, Program return privileges and
lifestyle video and audio cassette tapes, as well as an ability to obtain a
refund of a portion of the service fee if certain criteria are met. Fees charged
for the service portion of the Program are generally paid at commencement. In
some states participants have the legal right to withdraw from the Program
within specified periods following purchase and to receive a refund of the fees.
Even when not so required, the Company's policy is to refund a pro rata portion
of the fees upon request.
JENNY CRAIG CUISINE
Jenny's Cuisine is portion and calorie controlled and consists of a
nutritionally balanced variety of foods. The Company employs registered
dietitians to assist it in developing its meal plans and food products.
The Company believes that its healthful, high quality and good tasting food
products have contributed in large part to the Company's success. Currently, the
Company supplies its Centres with approximately 70 different breakfast, lunch,
dinner and snack food items for use in the Program, including prepackaged frozen
meals, shelf-stable and canned foods, snacks, and dried products. The Company
believes that its prepackaged frozen meals give it a strong competitive
advantage. The Company generally updates its menu once per year. Current food
items include such entrees as Blueberry Waffles, French Toast with Berries,
Stuffed Shells, Baked Turkey, Fish Festiva, Chicken Breast Golden Gate, Chicken
Fajitas, Teriyaki Beefsteak, Pasta Primavera, and Chili Con Carne.
Product sales, principally comprised of Jenny's Cuisine, accounted for 91%
and 92% of the Company's revenues in fiscal 1996 and 1997, respectively. For the
year ended June 30, 1997, the Company's gross revenues from the product sales
were $333,917,000 compared to $368,166,000 for the year ended June 30, 1996.
The Company purchases its food products from various companies which
manufacture the products to specifications approved by the Company. The
Company's major food suppliers are Overhill Farms and ZB Industries, Inc., which
supply frozen foods, Truitt Bros., which supplies shelf-stable food products,
Campbell's Soup Company and Nestle Food Company, which supply canned food, and
Natural Alternatives, Inc., which supplies vitamin supplements. The Company
believes that alternative sources for all of its food products are available
without material disruption of its operations.
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HISTORICAL GROWTH
The Company commenced operations in Australia in 1983 and became one of the
largest weight loss companies in that country with 69 Company-owned and
franchised Centres by the end of fiscal 1985. Following its success in the
Australian market, and recognizing the opportunities to market the Program
successfully in the United States, the Company expanded its operations to the
United States by initially opening 13 Company-owned Centres in the Los Angeles
metropolitan area in February 1985 and six Centres in the Chicago metropolitan
area in September 1985. The Company's growth through August 29, 1997 as measured
by the number of Centres operating is shown in the following table:
AT JUNE 30, AT
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1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1997
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Company-owned
United States.......... 65 151 273 326 370 476 502 478 485 542 554
Foreign................ 73 70 84 86 88 103 106 102 103 106 106
---- ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
138... 221 357 412 458 579 608 580 588 648 660
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Franchise
United States.......... 10 47 126 186 199 176 159 154 159 113 104
Foreign................ 39 37 29 30 37 39 43 43 36 36 36
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49.. 84 155 216 236 215 202 197 195 149 140
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Total.......... 187 305 512 628 694 794 810 777 783 797 800
==== ==== ==== ==== ==== ==== ==== ==== ==== ==== ====
The number of franchise Centres owned by affiliates at June 30, 1997 and
August 29, 1997 was 16.
The increase in United States Company-owned Centres and the decrease in
United States franchise Centres in 1997 reflects the Company's acquisition of 51
Centres from three franchisees during fiscal 1997. In fiscal 1997, the Company
opened 9 United States Company-owned Centres and closed 3 United States
Company-owned Centres. Also during fiscal 1997, 9 United States franchise
Centres were opened and 4 United States franchise Centres were closed. In July
1997, the Company acquired 6 additional centres from a franchisee.
MARKETING
The Company's business is marketing intensive, because both maintaining its
market position and continued growth depend upon the Company's ability to
attract new participants for the Program. The Company conducts ongoing research
to better understand the prospective weight loss customer and needs of existing
clients. The data obtained is then utilized in the improvement and development
of the Company's products and services and the Company's marketing activities.
The Company also researches each prospective market to determine the appropriate
number and distribution of Centres for that market. This determination is a
significant factor in developing leads, improving client convenience and
maximizing return on advertising investment.
The Company's advertising is designed to make the customer aware of the
Company's and the Program's attributes. The Company's advertising presents a
company which is caring, supportive, and understanding of the problems of being
overweight, and through the person of Jenny Craig, is differentiated from other
generic sounding weight loss companies. Testimonial advertising, featuring
participants in the Program, demonstrates the success of the Program on a
personal level. The Company's advertising contains a state-of-the-art 800
telephone number (800-97JENNY) that connects the caller directly to the nearest
Centre in every market in the United States.
The Company presently spends more than 10% of gross revenues on advertising
to generate leads, advertising extensively in each local market where it owns
and operates Centres. The majority of this amount is spent on television
advertising, with the balance allocated to print advertising and radio
advertisements. The size of the Company's advertising budget, coupled with the
television spot media buying power of its agency enables the Company to
advertise on a low cost-per-spot basis. Franchise agreements generally require
that
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franchisees spend the greater of 10% of gross receipts or $1,000 per Centre per
week for local advertising to promote the Program. Franchisees may elect to use
the Company's advertising, which the Company makes available to franchisees,
rather than generate their own advertising. In addition to its consumer
endorsements, the Company occasionally uses celebrity endorsements among its
other advertising campaigns. As is common in the weight loss industry, the
Company regularly utilizes various sales promotion campaigns, including a
reduction of the service fee for the Program.
One of the Company's most valuable assets is the participants who have
already joined the Program. Information on participants is maintained in the
Company's data base and is utilized in the Company's direct marketing programs
to existing and former participants. The Company encourages participants in the
Program to introduce other individuals to the Program by giving food discounts
and other incentives, and the Company believes that such referrals are an
important source of revenues.
FRANCHISE OPERATIONS
The Company's strategy is to have predominantly Company-owned Centres. The
Company's general practice concerning franchising, with some exceptions, is to
offer franchised Centres in smaller markets. However, from time to time
franchises have been granted to enable the Company to enter a large market more
quickly. Franchising frequently gives the Company the benefit of obtaining
franchisees who are more familiar with a local market than the Company, and also
enables the Company to expand its business without increasing the number of
employees by using franchisee management.
The Company believes that one of the factors contributing to its success
has been its strong commitment to franchisee relationships. The Company seeks
franchisees who demonstrate the management skills, experience and financial
capability to develop multiple Centres. In particular, the Company seeks
franchisees who demonstrate experience in businesses that are similar to or have
characteristics similar to the Company.
Franchised Centres are required to adhere to the Company's policies and
procedures with respect to the operation of the Centres and the implementation
of the Program. Although the franchise agreements do not require them to do so,
present owners of franchises have actively participated in the operation of the
Centres. Franchisees are required to undergo training at a Company training
facility. To date, all franchisees have purchased their food from the Company,
although franchisees are not required to do so under the terms of the franchise
agreement.
As of August 29, 1997, the Company had 140 Centres operating pursuant to
franchise agreements, of which 104 were located throughout the United States, 16
in Australia, 16 in New Zealand and 4 in Canada. During fiscal 1997, the Company
acquired 51 Centres from three franchisees.
TRADE NAMES AND TRADEMARKS
The Company believes the names it uses are important to its business and
that its business could be harmed if others used the names. JENNY CRAIG WEIGHT
LOSS CENTRES is a registered service mark and JENNY'S CUISINE is a registered
trademark of the Company under the laws of the United States. The registration
of JENNY CRAIG WEIGHT LOSS CENTRES and JENNY'S CUISINE will expire in the United
States in October 2006 and in January 2008, respectively, if not renewed by the
Company. The Company has obtained registrations or filed applications under
applicable trademark and service mark laws in Australia, New Zealand, Canada,
Mexico and in various other countries to protect its use of JENNY CRAIG WEIGHT
LOSS CENTRES and JENNY'S CUISINE.
COMPETITION
The weight loss business is highly competitive and the Company competes
against a number of companies of various sizes, some of which may have greater
financial resources than the Company. The Company's principal direct competitors
are national chains such as Nutri/System, Inc. ("Nutri/System"), Weight Watchers
International and Diet Center, Inc. as well as regional and local weight loss
businesses, some of which include supervision by or consultation with doctors or
nurses. The Company also competes
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against self-administered weight loss regimens, doctors, nutritionists,
dietitians, the pharmaceutical industry and certain government agencies and
non-profit groups which offer weight control help by means of medication, diets,
exercise and weight loss drugs. The Company also competes against food
manufacturers and distributors which are developing and marketing low-calorie
and diet products to weight-conscious consumers. In addition, new or different
products or methods of weight control are continually being introduced. Such
competition and any increase in competition, including new pharmaceuticals and
other technological and scientific developments in weight control, may have a
materially adverse impact on the Company.
The Company believes that it competes on the basis of the effectiveness of
the Program, its competitive pricing, the quality of Jenny's Cuisine, and the
marketing and management skills of its management and franchisees.
REGULATION
The Federal Trade Commission (the "FTC"), and certain states, regulates
advertising and other consumer matters. The Company's customers may file actions
on their own behalf, as a class or otherwise, and may file complaints with the
FTC or state or local consumer affairs offices and these agencies may take
action on their own initiative or on a referral from consumers or others.
Remedies sought in such actions may include the refund of amounts paid by the
complaining consumer, refunds to an entire class of participants, other damages,
as well as changes in the Centres' method of doing business. A complaint because
of a practice at one Centre, whether or not that practice is authorized by the
Company, could result in an order affecting some or all Centres in the
particular state, and an order in one state could influence courts or government
agencies in other states considering similar matters. See "Item 3. Legal
Proceedings" for information regarding the current status of an FTC proceeding
relating to the advertising practices of the Company, and a class action
litigation commenced in Alabama against the Company, other weight loss programs,
and certain pharmaceutical companies relating to the distribution and sale of
weight loss pharmaceuticals. Proceedings resulting from complaints may result in
significant defense costs, settlement payments or judgements and could have a
material adverse effect on the Company.
The Company is subject to certain United States laws and regulations in
connection with its food products. The Food, Drug and Cosmetic Act prohibits
adulteration and misbranding and provides for penalties and other remedies such
as seizure of products. The Food and Drug Administration ("FDA") enforces the
Food, Drug and Cosmetic Act, including specifying quality standards for foods
and, as do many states, regulating food labeling.
Those foods which contain 2% or more meat or poultry products, and the
plants which manufacture them, are subject to regulation (including labeling
requirements) and continuous inspection by the United States Department of
Agriculture ("USDA"). Although the FDA and the USDA require the manufacturers of
the Company's food products to obtain appropriate governmental approvals and to
comply with applicable regulations, the Company has responsibility for the
quality and labeling of food and for compliance with FDA and USDA regulations.
Prior to offering franchises in the United States, the Company, as is
generally the case with franchisors, is required under regulations of the
Federal Trade Commission to furnish potential franchisees with a disclosure
document describing the Company, the franchise agreement and related matters.
Some states require their own version of the disclosure document. In addition,
state franchise laws may require the Company to furnish a bond, escrow monies,
submit annual reports and meet other conditions.
Many states have statutes which may be applicable to the Company and
require that a written contract be provided to the participant, and that
participants be permitted to cancel their contract within specified periods
following purchase and receive a refund of the service fee.
The Company's foreign operations and franchises are also generally subject
to regulations of the applicable country regarding the offer and sale of
franchises, the content of advertising, the labeling and packaging of food, and
promotion of diet products and programs.
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EMPLOYEES
As of August 29, 1997 the Company had approximately 4,230 employees, of
which 3,570 were located in the United States, 530 were located in Australia,
and 130 were located in Canada. None of the Company's workers in the United
States are represented by a labor union. The Company has never had a strike or
lockout and considers its employee relations to be excellent.
ITEM 1A. EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with respect to the
executive officers of the Company:
NAME OF EXECUTIVE
OFFICER AGE POSITION(S) HELD
- --------------------- --- ------------------------------------------------------
Sidney Craig 65 Chairman of the Board and Director
Jenny Craig 65 Vice-Chairman and Director
C. Joseph LaBonte 58 President, Chief Executive Officer and Director
Michael L. Jeub Senior Vice President, Chief Financial Officer and
54 Treasurer
Janet Rheault 36 Senior Vice President, Operations
Leslie Koll 46 Senior Vice President, Marketing
Sunil Dewan 43 Vice President, Franchise Operations
William K. Dix 41 Vice President, General Counsel
Alan V. Dobies 49 Vice President, Corporate Services
Stuart Gaiber 48 Vice President, Information Services
Marvin Sears 70 Secretary and Director
Sidney Craig has been Chairman of the Company or its predecessors since
1983 and served as Chief Executive Officer from 1983 through April 1994.
Jenny Craig has served as Vice-Chairman of the Company since September
1991, as President and Chief Operating Officer of the Company or its
predecessors from 1983 to August 1991 and a director of the Company or its
predecessors from 1983 to date. Sidney Craig and Jenny Craig are husband and
wife.
C. Joseph LaBonte became the Company's President and Chief Executive
Officer in April 1994 having served as a director of the Company since December
1992. Mr. LaBonte is the Chairman of The Vantage Group, an investment and
financial advisory firm which he founded in 1983. From 1987 through 1990, Mr.
LaBonte was President, Chief Operating Officer and a Director of Reebok
International Ltd. and from 1979 through 1983 he was the President, Chief
Operating Officer and a Director of 20th Century Fox Film Corporation. Mr.
LaBonte is a director of Successories, Inc. and an investor in and a director of
various privately owned enterprises.
Michael L. Jeub has served as Senior Vice President, Chief Financial
Officer and Treasurer since July 1994. From July 1993 to July 1994, Mr. Jeub was
Chief Financial Officer, Executive Vice President and Treasurer of National
Health Laboratories, Inc., a publicly held clinical laboratory chain. From June
1991 to April 1993, Mr. Jeub served as President and Chief Operating Officer of
Medical Imaging Centers of America, Inc., a publicly held chain of high
technology imaging centers. Mr. Jeub was a private investor from 1988 to 1991.
Janet Rheault has served as Senior Vice President, Operations since April
1996. Ms. Rheault, who joined the Company in 1988, served in various operating
capacities, most recently as Divisional Supervisor, prior to her current
position.
Leslie Koll has served as Senior Vice President, Marketing since November
1994. From 1991 to 1994 Mr. Koll was managing partner with Pelletier, Koll and
Weil, a marketing and business development firm, which he founded in 1987. Mr.
Koll was Vice President, Marketing of Hanna-Barbera Productions, Inc. from 1989
to 1991.
Sunil Dewan has served as Vice President, Franchising since June 1997. From
January 1996 to June 1997 Mr. Dewan was Vice President and Managing Director,
International for Orion Food Systems, a privately held
8
11
vertically integrated branded food company. From 1993 through 1995, Mr. Dewan
served as President of NOEC Corporation, a privately held diversified company
based in Taipei. From 1987 to 1993 Mr. Dewan was Vice President and Managing
Director in charge of international business for Metromedia Steakhouses Company.
William K. Dix has served as Vice President, General Counsel since May
1996. From March 1994 to May 1996 Mr. Dix was Counsel for Aetna Health Plans,
Inc. From 1989 through March 1994 Mr. Dix was Corporate Counsel for Science
Applications International Corporation, a high technology research and
development company.
Stuart Gaiber has served as Vice President, Information Systems since June
1997. From April 1995 to June 1997 Mr. Gaiber was Director of Information
Technology for KCET, a public television station in Los Angeles, California.
From October 1989 through April 1995, Mr. Gaiber served as Director of MIS for
Avery Dennison, an office products company.
Alan V. Dobies has served as Vice President, Corporate Services since June
1990. From July 1988 to May 1990, Mr. Dobies was Vice President, Operations of
Joico International, a manufacturer of professional hair-care products.
Marvin Sears, a director of the Company since July 1989, has served as the
Secretary of the Company since June 1991, and as Assistant Secretary of the
Company from August 1985 to June 1991. Mr. Sears is a practicing attorney in Los
Angeles, California where, since May 1989, he has been a partner in the law firm
of Proskauer Rose LLP, counsel to the Company during fiscal 1997 and currently.
From June 1960 until May 1989, Mr. Sears was a senior partner of the Los Angeles
law firm of Pacht, Ross, Warne, Bernhard & Sears, Inc. and its successor, Shea &
Gould. Mr. Sears is a member of the Board of various privately-owned business
enterprises.
Executive officers are elected to serve until their successors are elected
and qualified.
ITEM 2. PROPERTIES
At August 29, 1997, there were 660 Company-owned Centres, all of which are
in leased premises, of which 554 were in the United States, 81 were in
Australia, and 25 were in Canada. A majority of the leases for Company-owned
Centres were entered into for an initial period of five years. The leases
require fixed monthly rental payments which are subject to various adjustments.
The Centres are generally located in retail shopping areas on major commercial
thoroughfares and generally occupy approximately 2000 to 2500 square feet of
space consisting of a reception area, individual counseling rooms, classrooms
and food storage space.
In July 1996 the Company purchased a 75,000 square foot office building
located in La Jolla, California in which its executive offices are located. The
total purchase price was $8.36 million. The Company leases a warehouse in Rancho
Cucamonga, California for its food and non-food inventory. The Company's
executive offices in Australia are leased and are located in Melbourne, and the
Company also owns a warehouse in Sunshine, Australia.
The Company believes that its executive office and warehouse space is
adequate for its current needs and that additional space will be available at
reasonable costs as needed.
ITEM 3. LEGAL PROCEEDINGS
The Company and the Federal Trade Commission have entered into a proposed
Consent Order settling all contested issues raised in a complaint filed in
September 1993 against the Company alleging that the Company violated the
Federal Trade Commission Act by the use and content of certain advertisements
for the Company's weight loss Program featuring testimonials, claims for the
Program's success and safety, and statements as to the Program's costs to
participants. The proposed Consent Order does not admit any issue of fact or law
or any violation by the Company of any law or regulation, and does not involve
payment by the Company of any civil money penalty, damages, or other financial
relief. The proposed Consent Order requires certain procedures and disclosures
in connection with the Company's advertisements of its products and
9
12
services. The full Commission accepted the proposed Consent Order and it was
published for public comment. Unless modified or withdrawn on the basis of
public comment, it will become effective upon service of notice to the Company
by the Commission. The Company does not believe that compliance with the
proposed Consent Order will have a material adverse effect on the Company's
consolidated financial position or results of operations or its current
advertising and marketing practices.
The Company along with other weight loss programs and certain
pharmaceutical companies has been named as a defendant in an action filed in the
Circuit Court for the Eleventh Judicial Circuit in Pickens County, Alabama. The
action was commenced in August, 1997 by three plaintiffs who are seeking to
maintain the action as a class action on behalf of all persons in the United
States and United States Territories who have suffered or may in the future
suffer injury due to the administration of phentermine, fenfluramine (commonly
known as "phen-fen" when taken together) and/or dexfenfluramine (tradename
"Redux"), which were manufactured or sold by the defendants. The complaint
includes claims against the Company and other defendants, acting separately and
in concert, for alleged unlawful and tortious acts, including sale of allegedly
dangerous and defective products, negligent marketing and distribution, failure
to warn of the risks associated with the weight loss medications, breach of
warranty, fraud, and negligent misrepresentation. The complaint seeks
compensatory and punitive damages in unspecified amounts and equitable relief
including the establishment of a medical fund to cover future medical expenses
resulting from the use of the weight loss medications, and a requirement that
the defendants adequately warn the public of the risks associated with the use
of the weight loss medications. The Company has tendered this matter to its
insurance carriers. The Company has also asserted its idemnification rights
under its agreement with the company which provided the physicians who
prescribed the weight loss medications in the Company's centres. The claim has
not progressed sufficiently for the Company to estimate a range of possible
loss, if any. The Company intends to defend the matter vigorously.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS
Material appearing under the caption "Common Stock Data" on page 32 of the
Annual Report to Shareholders of Jenny Craig, Inc. for the fiscal year ended
June 30, 1997 ("1997 Annual Report") is hereby incorporated by this reference.
ITEM 6. SELECTED FINANCIAL DATA
Material appearing under the caption "Selected Financial Data" on page 8 of
the Company's 1997 Annual Report is hereby incorporated by this reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Material appearing under the caption "Management's Discussion and Analysis
of Financial Condition and Results of Operations" on pages 9 through 16 of the
Company's 1997 Annual Report is hereby incorporated by this reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements of the Company and subsidiaries,
related notes to consolidated financial statements, and material appearing under
the caption "Independent Auditors' Report" on pages 17 through 30 of the
Company's 1997 Annual Report are hereby incorporated by this reference. Material
10
13
appearing under the caption "Selected Quarterly Financial Information" on page
31 of the Company's 1997 Annual Report is hereby incorporated by this reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information required by this Item is incorporated by reference from the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission not later than 120 days after June 30, 1997. Information
regarding executive officers of the Registrant is set forth under the caption
"Executive Officers of the Registrant" in Item 1a hereof.
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item is incorporated by reference from the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission not later than 120 days after June 30, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this Item is incorporated by reference from the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission not later than 120 days after June 30, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by this Item is incorporated by reference from the
Company's definitive Proxy Statement to be filed with the Securities and
Exchange Commission not later than 120 days after June 30, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
A. FINANCIAL STATEMENTS, SCHEDULES AND EXHIBITS
FINANCIAL STATEMENTS
The following appear in the 1997 Annual Report at the pages indicated below
and are incorporated into Part II by reference:
(1) Independent Auditors' Report....................................... Page 30
(2) Consolidated Balance Sheets as of June 30, 1996 and 1997........... Page 17
(3) Consolidated Statements of Income for the Years Ended June 30, Page 18
1995, 1996 and 1997................................................
(4) Consolidated Statements of Stockholders' Equity for the Years Ended Page 19
June 30, 1995, 1996 and 1997.......................................
(5) Consolidated Statements of Cash Flows for the Years Ended June 30, Page 20
1995, 1996 and 1997................................................
(6) Notes to Consolidated Financial Statements......................... Pages 21 through 29
11
14
SCHEDULES
The following financial statement schedule appears on page 16 of this
report:
II. Valuation and Qualifying Accounts
Schedules other than the schedule listed above are omitted because they are
either not required or not applicable.
EXHIBITS
EXHIBIT DESCRIPTION
------- -----------
3.1 Amended and Restated Certificate of Incorporation of Registrant.
3.4 Restated By-laws of Registrant.(1)
10.1 Jenny Craig, Inc. Management Deferred Bonus Program.(1)(2)
10.2 Executive Employment Agreement between Jenny Craig, Inc. and C. Joseph
LaBonte. (Incorporated herein by reference to Exhibit 10.2 to the Report on
Form 10-K of the Company for the fiscal year ended June 30, 1994.)(3)
10.3 Jenny Craig, Inc. Stock Option Plan, as amended. (Incorporated herein by
reference to Exhibit 10.3 to the Report on Form 10-K of the Company for the
fiscal year ended June 30, 1996.)(2)
10.4 Executive Employment Agreement between Jenny Craig, Inc. and Jenny Craig. See
Exhibit 10.30 for Amendment thereto.(1)(3)
10.5 Executive Employment Agreement between Jenny Craig, Inc. and Sid Craig. See
Exhibit 10.29 for Amendment thereto.(1)(3)
10.6 Employment Agreement between Jenny Craig, Inc. and Michael L. Jeub.
(Incorporated herein by reference to Exhibit 10.6 to the Report on Form 10-K
of the Company for the fiscal year ended June 30, 1994.)(3)
10.7 Settlement Agreement among Class Plaintiffs, Jenny Craig, Inc. and Jenny Craig
International, Inc. (Incorporated herein by reference to Exhibit 10.7 to the
Report on Form 10-K of the Company for the fiscal year ended June 30, 1994.)
10.8 Agreement dated as of March 27, 1997 between Jenny Craig, Inc. and Sunil
Dewan. (Incorporated herein by reference to Exhibit 10.1 to the Company's
Report on Form 10-Q for the three month period ended March 31, 1997.)(3)
10.9 Standard Form of Franchise Agreement of Jenny Craig International, Inc.(1)
10.10 Agreement dated as of April 21, 1997 between Jenny Craig, Inc. and Stewart
Gaiber.(3)
10.11 Office Building Lease between Jenny Craig Weight Loss Centres, Inc. and JLRB
Associates dated September 15, 1988.(1)
10.11.1 Amendment to Office Building Lease between Jenny Craig Weight Loss Centres,
Inc. and JLRB Associates, undated.(1)
10.11.2 Amendment to Office Building Lease between Jenny Craig Weight Loss Centres,
Inc. and JLRB Associates, undated.(1)
10.11.3 Amendment to Office Building Lease between Jenny Craig Weight Loss Centres,
Inc. and JLRB Associates, dated February 21, 1991.(1)
10.11.4 Amendment to Office Building Lease between Jenny Craig Weight Loss Centres,
Inc. and JLRB Associates, undated.(1)
10.11.5 Amendment to Office Building Lease between Jenny Craig Weight Loss Centres,
Inc. and JLRB Associates, undated. (Incorporated herein by reference to
Exhibit 10.11.5 to the Report on Form 10-K of the Company for the fiscal year
ended June 30, 1993.)
12
15
EXHIBIT DESCRIPTION
------- -----------
10.12 Lease between Jenny Craig Distributing Pty. Ltd. and Indalia Pty. Ltd. dated
November 16, 1990.(1)
10.13 Agreement dated as of June 4, 1997 between Jenny Craig, Inc. and Eileen
Piersa.(3)
10.14 Standard Form Lease dated May 14, 1996 between Jenny Craig Products, Inc. and
RCDC Associates Limited Partnership.
10.16 Tax Allocation and Indemnity Agreement among New York Life Insurance Company
et al, Security Pacific National Bank individually and as Agent, Jenny Craig,
Inc., Jenny Craig Weight Loss Centres, Inc., Craig Enterprises, Inc., SJF
Enterprises, Inc., Sid Craig and Jenny Craig dated as of June 30, 1989, as
amended.(1)
10.17 Shareholders Agreement among Sid Craig, Jenny Craig, W. James Mallen, New York
Life Insurance Company, et al., Security Pacific National Bank individually
and as Agent, Craig Enterprises, Inc., SJF Enterprises, Inc. and Jenny Craig,
Inc. dated as of June 30, 1989.(1)
10.18 Supply Agreement between Jenny Craig Weight Loss Centres, Inc. and IBM Foods,
d/b/a Overhill Farms, dated September 22, 1988, with amendments.(1)
10.20 Supply Agreement between Jenny Craig Weight Loss Centres, Inc. and Campbell
Soup Company, dated June 1, 1991.(1)
10.21 Metropolitan Insurance and Annuity Company Key Man Life Insurance Policy
Relating to Jenny Craig.(1)
10.23 Prudential Insurance Company of America Key Man Life Insurance Policy Relating
to Jenny Craig.(1)
10.29 Agreement dated as of September 14, 1994 between Sidney Craig and Jenny Craig,
Inc., amending Exhibit 10.5. (Incorporated herein by reference to Exhibit 10.2
to the Report on Form 10-Q of the Company for the three month period ended
September 30, 1994.)(3)
10.30 Agreement dated as of September 14, 1994 between Jenny Craig and Jenny Craig,
Inc. amending Exhibit 10.4. (Incorporated herein by reference to Exhibit 10.3
to the Report on Form 10-Q of the Company for the three month period ended
September 30, 1994)(3)
10.32 Agreement dated as of November 10, 1994 between Leslie Alan Koll and Jenny
Craig, Inc. (Incorporated herein by reference to Exhibit 10.1 to the Report on
Form 10-Q of the Company for the three month period ended December 31,
1994.)(3)
10.33 Settlement Agreement dated March 29, 1996 with respect to the settlement of a
series of class actions collectively entitled In Re Jenny Craig Securities
Litigation. (Incorporated herein by reference to Exhibit 10.33 to the Report
on Form 10-K of the Company for the fiscal year ended June 30, 1995.)
10.34 Agreement dated as of April 11, 1996 between Janet Rheault and Jenny Craig,
Inc. (Incorporated herein by reference to Exhibit 10.1 to the Report on Form
10-Q of the Company for the three month period ended March 31, 1996.)(3)
10.35 Agreement dated as of April 26, 1996 between William K. Dix and Jenny Craig,
Inc. (Incorporated herein by reference to Exhibit 10.35 to the Company's
Report on Form 10-K for the fiscal year ended June 30, 1996.)(3)
10.36 Amended and Restated Agreement dated as of August 20, 1996 between Marvin
Sears and Jenny Craig, Inc. (Incorporated herein by reference to Exhibit 10.36
to the Company's Report on Form 10-K for the fiscal year ended June 30,
1996.)(2)
13
16
EXHIBIT DESCRIPTION
------- -----------
10.37 Asset Purchase Agreement dated as of August 12, 1996 among Rose Enterprises,
Inc., Rose Enterprises, Inc. NJ, Rose Enterprises of Connecticut, Inc., Chris
Lin Enterprises, Inc. Chris Lin Enterprises New York, Inc. Audrey Sedita,
Bradley Morley and Jenny Craig Operations, Inc. (Incorporated herein by
reference to Exhibit 10.37 to the Company's Report on Form 10-K for the fiscal
year ended June 30, 1996.)
10.38 Purchase and Sale Agreement dated as of May 22, 1997 between Jenny Craig
Management, Inc. and M&S Balanced Property Fund, L.P. (Incorporated herein by
reference to Exhibit 10.38 to the Company's Report on Form 10-K for the fiscal
year ended June 30, 1996.)
13. Portions of the Annual Report to Shareholders with respect to the fiscal year
ended June 30, 1997 which are incorporated by reference in this Form 10-K.
18. Preferability Letter from KPMG Peat Marwick LLP with respect to change in
accounting method.
22. List of Subsidiaries.
23. Independent Auditors' Consent.
27. Financial Data Schedule.
- ---------------
(1) Incorporated herein by reference to Registrant's Registration Statement on
Form S-1 filed October 29, 1991, Registration No. 33-42564. Each of the
exhibits so incorporated by reference bears the same exhibit number in
Registration Statement No. 33-42564.
(2) Compensatory Plan.
(3) Management contract.
B. REPORTS ON FORM 8-K
There were no reports on Form 8-K filed by the Company during the last
quarter of the period covered by this report.
14
17
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Jenny Craig, Inc.:
Under date of August 20, 1997, we reported on the consolidated balance
sheets of Jenny Craig, Inc. and subsidiaries as of June 30, 1996 and 1997, and
the related consolidated statements of income, stockholders' equity, and cash
flows for each of the years in the three-year period ended June 30, 1997, as
contained in the 1997 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year ended June 30, 1997. In connection with
our audits of the aforementioned consolidated financial statements, we also
audited the related consolidated financial statement schedule as listed in Item
14. This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth therein.
KPMG PEAT MARWICK LLP
San Diego, California
August 20, 1997
15
18
SCHEDULE II
JENNY CRAIG, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
FOR THE YEARS ENDED JUNE 30, 1995, 1996 AND 1997
($ IN THOUSANDS)
CHARGED CHARGED CHARGED
TO CHARGED TO CHARGED TO
BALANCE COSTS TO BALANCE COSTS TO BALANCE COSTS
AT AND OTHER WRITE AT AND OTHER WRITE AT AND
DESCRIPTION 6/30/94 EXPENSES ACCOUNTS OFFS 6/30/95 EXPENSES ACCOUNTS OFFS 6/30/96 EXPENSES
- --------------------------- ------- -------- -------- ----- ------- -------- -------- ------ ------- --------
Allowance for Doubtful
Accounts.................. 5,620 -- -- -- 5,620 (900) -- (3,256) 1,464 --
Accumulated Amortization --
Reacquired Area Franchise
Rights................... 1,899 842 (33) -- 2,708 837 160 -- 3,705 1,015
Accumulated Amortization --
Computer Software........ 747 266 -- -- 1,013 272 -- -- 1,285 75
CHARGED
TO BALANCE
OTHER WRITE AT
DESCRIPTION ACCOUNTS OFFS 6/30/97
- --------------------------- -------- ----- -------
Allowance for Doubtful
Accounts.................. -- (274) 1,190
Accumulated Amortization --
Reacquired Area Franchise
Rights................... (122) -- 4,598
Accumulated Amortization --
Computer Software........ -- -- 1,360
- ---------------
See accompanying Independent Auditors' Report.
16
19
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Date: September 25, 1997 JENNY CRAIG, INC.
By: /s/ SIDNEY CRAIG
------------------------------------
Sidney Craig
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- --------------------------------------------- ------------------------- ---------------------
/s/ SIDNEY CRAIG Chairman of the Board September 25, 1997
- ---------------------------------------------
Sidney Craig
/s/ JENNY CRAIG Vice Chairman and September 25, 1997
- --------------------------------------------- Director
Jenny Craig
/s/ C. JOSEPH LABONTE President, Chief September 25, 1997
- --------------------------------------------- Executive
C. Joseph LaBonte Officer and Director
(Principal Executive
Officer)
/s/ MICHAEL L. JEUB Senior Vice President, September 25, 1997
- --------------------------------------------- Chief Financial Officer
Michael L. Jeub and Treasurer
(Principal Financial and
Accounting
Officer)
/s/ SCOTT BICE Director September 25, 1997
- ---------------------------------------------
Scott Bice
/s/ MARVIN SEARS Director September 25, 1997
- ---------------------------------------------
Marvin Sears
/s/ ANDREA VAN DE KAMP Director September 25, 1997
- ---------------------------------------------
Andrea Van de Kamp
/s/ ROBERT WOLF Director September 25, 1997
- ---------------------------------------------
Robert Wolf
17
20
EXHIBIT INDEX
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------- ------------
3.1 Amended and Restated Certificate of Incorporation of Registrant..........
3.4 Restated By-laws of Registrant.(1).......................................
10.1 Jenny Craig, Inc. Management Deferred Bonus Program.(1)(2)...............
10.2 Executive Employment Agreement between Jenny Craig, Inc. and C. Joseph
LaBonte. (Incorporated herein by reference to Exhibit 10.2 to the Report
on Form 10-K of the Company for the fiscal year ended June 30,
1994.)(3)................................................................
10.3 Jenny Craig, Inc. Stock Option Plan, as amended. (Incorporated herein by
reference to Exhibit 10.3 to the Report on Form 10-K of the Company for
the fiscal year ended June 30, 1996.)(2).................................
10.4 Executive Employment Agreement between Jenny Craig, Inc. and Jenny Craig.
See Exhibit 10.30 for Amendment thereto.(1)(3)...........................
10.5 Executive Employment Agreement between Jenny Craig, Inc. and Sid Craig.
See Exhibit 10.29 for Amendment thereto.(1)(3)...........................
10.6 Employment Agreement between Jenny Craig, Inc. and Michael L. Jeub.
(Incorporated herein by reference to Exhibit 10.6 to the Report on Form
10-K of the Company for the fiscal year ended June 30, 1994.)(3).........
10.7 Settlement Agreement among Class Plaintiffs, Jenny Craig, Inc. and Jenny
Craig International, Inc. (Incorporated herein by reference to Exhibit
10.7 to the Report on Form 10-K of the Company for the fiscal year ended
June 30, 1994.)..........................................................
10.8 Agreement dated as of March 27, 1997 between Jenny Craig, Inc. an d Sunil
Dewan. (Incorporated herein by reference to Exhibit 10.1 to the Company's
Report on Form 10-Q for the three month period ended March 31,
1997.)(3)................................................................
10.9 Standard Form of Franchise Agreement of Jenny Craig International,
Inc.(1)..................................................................
10.10 Agreement dated as of April 21, 1997 between Jenny Craig, Inc. and
Stewart Gaiber.(3).......................................................
10.11 Office Building Lease between Jenny Craig Weight Loss Centres, Inc. and
JLRB Associates dated September 15, 1988.(1).............................
10.11.1 Amendment to Office Building Lease between Jenny Craig Weight Loss
Centres, Inc. and JLRB Associates, undated.(1)...........................
10.11.2 Amendment to Office Building Lease between Jenny Craig Weight Loss
Centres, Inc. and JLRB Associates, undated.(1)...........................
10.11.3 Amendment to Office Building Lease between Jenny Craig Weight Loss
Centres, Inc. and JLRB Associates, dated February 21, 1991.(1)...........
10.11.4 Amendment to Office Building Lease between Jenny Craig Weight Loss
Centres, Inc. and JLRB Associates, undated.(1)...........................
10.11.5 Amendment to Office Building Lease between Jenny Craig Weight Loss
Centres, Inc. and JLRB Associates, undated. (Incorporated herein by
reference to Exhibit 10.11.5 to the Report on Form 10-K of the Company
for the fiscal year ended June 30, 1993.)................................
10.12 Lease between Jenny Craig Distributing Pty. Ltd. and Indalia Pty. Ltd.
dated November 16, 1990.(1)..............................................
10.13 Agreement dated as of June 4, 1997 between Jenny Craig, Inc. and Eileen
Piersa.(3)...............................................................
10.14 Standard Form Lease dated May 14, 1996 between Jenny Craig Products, Inc.
and RCDC Associates Limited Partnership..................................
21
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------- ------------
10.16 Tax Allocation and Indemnity Agreement among New York Life Insurance
Company et al, Security Pacific National Bank individually and as Agent,
Jenny Craig, Inc., Jenny Craig Weight Loss Centres, Inc., Craig
Enterprises, Inc., SJF Enterprises, Inc., Sid Craig and Jenny Craig dated
as of June 30, 1989, as amended.(1)......................................
10.17 Shareholders Agreement among Sid Craig, Jenny Craig, W. SJames Mallen,
New York Life Insurance Company, et al., Security Pacific National Bank
individually and as Agent, Craig Enterprises, Inc., SJF Enterprises, Inc.
and Jenny Craig, Inc. dated as of June 30, 1989.(1)......................
10.18 Supply Agreement between Jenny Craig Weight Loss Centres, Inc. and IBM
Foods, d/b/a Overhill Farms, dated September 22, 1988, with
amendments.(1)...........................................................
10.20 Supply Agreement between Jenny Craig Weight Loss Centres, Inc. and
Campbell Soup Company, dated June 1, 1991.(1)............................
10.21 Metropolitan Insurance and Annuity Company Key Man Life Insurance Policy
Relating to Jenny Craig.(1)..............................................
10.23 Prudential Insurance Company of America Key Man Life Insurance Policy
Relating to Jenny Craig.(1)..............................................
10.29 Agreement dated as of September 14, 1994 between Sidney Craig and Jenny
Craig, Inc., amending Exhibit 10.5. (Incorporated herein by reference to
Exhibit 10.2 to the Report on Form 10-Q of the Company for the three
month period ended September 30, 1994.)(3)...............................
10.30 Agreement dated as of September 14, 1994 between Jenny Craig and Jenny
Craig, Inc. amending Exhibit 10.4. (Incorporated herein by reference to
Exhibit 10.3 to the Report on Form 10-Q of the Company for the three
month period ended September 30, 1994)(3)................................
10.32 Agreement dated as of November 10, 1994 between Leslie Alan Koll and
Jenny Craig, Inc. (Incorporated herein by reference to Exhibit 10.1 to
the Report on Form 10-Q of the Company for the three month period ended
December 31, 1994.)(3)...................................................
10.33 Settlement Agreement dated March 29, 1996 with respect to the settlement
of a series of class actions collectively entitled In Re Jenny Craig
Securities Litigation. (Incorporated herein by reference to Exhibit 10.33
to the Report on Form 10-K of the Company for the fiscal year ended June
30, 1995.)...............................................................
10.34 Agreement dated as of April 11, 1996 between Janet Rheault and Jenny
Craig, Inc. (Incorporated herein by reference to Exhibit 10.1 to the
Report on Form 10-Q of the Company for the three month period ended March
31, 1996.)(3)............................................................
10.35 Agreement dated as of April 26, 1996 between William K. Dix and Jenny
Craig, Inc. (Incorporated herein by reference to Exhibit 10.35 to the
Company's Report on Form 10-K for the fiscal year ended June 30,
1996.)(3)................................................................
10.36 Amended and Restated Agreement dated as of August 20, 1996 between Marvin
Sears and Jenny Craig, Inc. (Incorporated herein by reference to Exhibit
10.36 to the Company's Report on Form 10-K for the fiscal year ended June
30, 1996.)(2)............................................................
10.37 Asset Purchase Agreement dated as of August 12, 1996 among Rose
Enterprises, Inc., Rose Enterprises, Inc. NJ, Rose Enterprises of
Connecticut, Inc., Chris Lin Enterprises, Inc. Chris Lin Enterprises New
York, Inc. Audrey Sedita, Bradley Morley and Jenny Craig Operations, Inc.
(Incorporated herein by reference to Exhibit 10.37 to the Company's
Report on Form 10-K for the fiscal year ended June 30, 1996.)............
22
SEQUENTIALLY
NUMBERED
EXHIBIT DESCRIPTION PAGE NO.
- ------- ------------------------------------------------------------------------- ------------
10.38 Purchase and Sale Agreement dated as of May 22, 1997 between Jenny Craig
Management, Inc. and M&S Balanced Property Fund, L.P. (Incorporated
herein by reference to Exhibit 10.38 to the Company's Report on Form 10-K
for the fiscal year ended June 30, 1996.)................................
13. Portions of the Annual Report to Shareholders with respect to the fiscal
year ended June 30, 1997 which are incorporated by reference in this Form
10-K.....................................................................
18. Preferability Letter from KPMG Peat Marwick LLP with respect to change in
accounting method........................................................
22. List of Subsidiaries.....................................................
23. Independent Auditors' Consent............................................
27. Financial Data Schedule..................................................
- ---------------
(1) Incorporated herein by reference to Registrant's Registration Statement on
Form S-1 filed October 29, 1991, Registration No. 33-42564. Each of the
exhibits so incorporated by reference bears the same exhibit number in
Registration Statement No. 33-42564.
(2) Compensatory Plan.
(3) Management contract.