FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 30, 1996 Commission file No. 0-15338
-------------- -------
SEATTLE FILMWORKS, INC.
------------------------
(Exact name of registrant as specified in its charter.)
Washington 91-0964899
------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1260 16th Avenue West, Seattle, WA 98119
---------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (206) 281-1390
--------------
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 the
filing requirements for the past 90 days.
Yes X No
----- -----
As of April 30, 1996, there were issued and outstanding 10,809,951
shares of common stock, par value $.01 per share.
Index to Exhibits at Page 14
Page 1 of 64
SEATTLE FILMWORKS, INC.
INDEX
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Page No.
--------
PART I -- FINANCIAL INFORMATION
Item 1 - Financial Statements 3-7
Balance Sheets as of March 30, 1996
and September 30, 1995 3-4
Statements of Income for the second quarter and six
months ended March 30, 1996 and March 25, 1995 5
Statements of Cash Flows for the six months ended
March 30, 1996 and March 25, 1995 6
Notes to Financial Statements 7
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-11
PART II -- OTHER INFORMATION
Item 4 - Submission of Matters to a Vote of Security Holders 11-12
Item 6 - Exhibits and Reports on Form 8-K 12
SIGNATURES 13
INDEX TO EXHIBITS 14
EXHIBITS 15-64
Page 2 of 64
PART I -- FINANCIAL INFORMATION
-------------------------------
ITEM 1 - FINANCIAL STATEMENTS
SEATTLE FILMWORKS, INC.
BALANCE SHEETS
(in thousands)
(UNAUDITED) (NOTE)
March 30, September 30,
ASSETS 1996 1995
=============================================================================
CURRENT ASSETS
Cash and cash equivalents $ 6,614 $ 8,560
Securities available for sale 500 1,345
Accounts receivable, net of
allowance for doubtful accounts 1,286 1,242
Inventories 6,992 4,626
Capitalized promotional expenditures 43 158
Prepaid expenses and other 546 164
Deferred income taxes 353 398
------- -------
TOTAL CURRENT ASSETS 16,334 16,493
FURNITURE, FIXTURES, AND EQUIPMENT,
at cost, less accumulated depreciation 4,329 3,200
CAPITALIZED CUSTOMER ACQUISITION EXPENDITURES 9,645 7,356
DEPOSITS AND OTHER ASSETS 245 68
NON-COMPETE AGREEMENTS,
net of accumulated amortization 939 1,127
------- -------
TOTAL ASSETS $31,492 $28,244
======= =======
Note: The September 30, 1995 balance sheet has been derived from audited
financial statements.
See notes to financial statements.
Page 3 of 64
SEATTLE FILMWORKS, INC.
BALANCE SHEETS (continued)
(in thousands, except share information)
(UNAUDITED) (NOTE)
March 30, September 30,
LIABILITIES AND SHAREHOLDERS' EQUITY 1996 1995
================================================================================
CURRENT LIABILITIES
Accounts payable $ 6,470 $ 4,782
Accrued expenses 2,257 2,364
Income taxes payable 856
------- -------
TOTAL CURRENT LIABILITIES 8,727 8,002
DEFERRED INCOME TAXES 3,126 2,310
------- -------
TOTAL LIABILITIES 11,853 10,312
SHAREHOLDERS' EQUITY
Preferred Stock, $.01 par value
authorized 2,000,000 shares, none issued.
Common Stock, $.01 par value - authorized
67,500,000
shares, issued and outstanding 10,806,988 108 107
Additional paid-in capital 1,207 955
Retained earnings 18,324 16,870
------- -------
TOTAL SHAREHOLDERS' EQUITY 19,639 17,932
------- ------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $31,492 $28,244
======= =======
Note: The September 30, 1995 balance sheet has been derived from audited
financial statements.
See notes to financial statements.
Page 4 of 64
SEATTLE FILMWORKS, INC.
STATEMENTS OF INCOME (UNAUDITED)
(in thousands, except share information)
Second Quarter Ended Six Months Ended
March 30, March 25, March 30, March 25,
1996 1995 1996 1995
================================================================================
Net revenues $17,821 $12,293 $34,510 $24,563
Cost of goods and services 10,510 8,141 20,907 15,821
------- ------- ------- -------
GROSS PROFIT 7,311 4,152 13,603 8,742
Operating expenses:
Customer acquisition costs 3,236 2,017 5,774 4,056
Other selling expenses 2,130 931 3,462 1,815
Research and development 274 94 521 211
General and administrative 1,012 661 1,780 1,281
------- ------- ------- -------
Total operating expenses 6,652 3,703 11,537 7,363
------- ------- ------- -------
INCOME FROM OPERATIONS 659 449 2,066 1,379
Other income (expense):
Interest expense (1) (1) (1) (2)
Interest income 112 57 254 117
Non operating income
(expense), net (1) (93) 3
------- ------- ------- -------
Total other income 111 55 160 118
------- ------- ------- -------
INCOME BEFORE INCOME TAXES 770 504 2,226 1,497
Provision for income taxes (267) (165) (772) (503)
------- ------- ------- -------
NET INCOME $ 503 $ 339 $ 1,454 $ 994
======= ======= ======= =======
EARNINGS PER SHARE $.04 $.03 $.12 $.09
==== ==== ==== ====
WEIGHTED AVERAGE SHARES AND
EQUIVALENTS OUTSTANDING 11,848,053 11,571,746 11,844,024 11,555,702
========== ========== ========== ==========
See notes to financial statements.
Page 5 of 64
SEATTLE FILMWORKS, INC.
STATEMENTS OF CASH FLOWS (UNAUDITED)
(in thousands)
Six Months Ended
March 30, March 25,
1996 1995
================================================================================
OPERATING ACTIVITIES:
- ---------------------
Net income $ 1,454 $ 994
Charges to income not affecting cash:
Depreciation and amortization 1,111 791
Amortization of capitalized customer
acquisition expenditures 5,124 2,579
Deferred income taxes 861 101
Loss or (gain) on disposal of equipment 88 (5)
Net change in receivables, inventories,
payables and other (2,066) (2,066)
Capitalized promotional expenditures, net 115 253
Additions to capitalized customer acquisition
expenditures (7,413) (3,066)
------- -------
NET CASH USED IN OPERATING ACTIVITIES (726) (419)
INVESTING ACTIVITIES:
- ---------------------
Purchase of furniture, fixtures, and equipment (2,320) (521)
Purchase of securities available for sale (2,350) (11)
Sales of securities available for sale 3,195 1,190
Proceeds from sale of equipment 2 17
------- -------
NET CASH FROM (USED IN) INVESTING ACTIVITIES (1,473) 675
FINANCING ACTIVITY: Proceeds from issuance of 253 181
- ------------------- ------- -------
Common Stock
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (1,946) 437
Cash and cash equivalents at beginning of period 8,560 2,711
------- -------
CASH AND CASH EQUIVALENTS
AT END OF PERIOD $ 6,614 $ 3,148
======= =======
See notes to financial statements.
Page 6 of 64
SEATTLE FILMWORKS, INC.
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
NOTE A -- BASIS OF PRESENTATION
Seattle FilmWorks, Inc. (the "Company") principally markets 35mm
photographic film, photofinishing services and related photographic products on
a direct-to-consumer mail order basis under the brand name of Seattle
FilmWorks(R). The Company also markets 35mm photographic film, single-use
cameras and photographic supplies on a wholesale basis under the brand name of
OptiColor Film and Photo(TM).
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring adjustments and changes as discussed in Note D below) considered
necessary for fair presentation of interim results have been included. The
Company follows a policy of recording its interim periods and year-end on a 5
week, 4 week and 4 week basis for comparability of results and to be consistent
with its internal weekly reporting. Operating results for the second quarter and
six months ended March 30, 1996 are not necessarily indicative of the results
that may be expected for the fiscal year ending September 28, 1996. For further
information, refer to the "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and financial statements and footnotes
thereto included in the Company's Annual Report on Form 10-K for the year ended
September 30, 1995.
NOTE B -- STOCK SPLIT
On March 15, 1996 the Company effected a three-for-two stock split by
declaring a stock dividend of one share for every two shares outstanding. All
share information and the related capital accounts in the accompanying financial
statements have been retroactively adjusted for this stock split.
NOTE C -- RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the 1996
financial statements presentation.
NOTE D -- CHANGE IN ESTIMATES
Effective as of the beginning of the second quarter of fiscal 1996, the
Company changed from twelve months to six months the period over which it
amortizes certain capitalized customer acquisition expenditures. This change in
accounting estimate was made to more accurately match incremental revenues and
expenses, and resulted in $414,000 of incremental deferred customer acquisition
costs. The Company also recorded an additional $43,000 of amortization related
to a change in estimated life of the benefit of a non-compete agreement from ten
years to five years.
Page 7 of 64
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Forward-Looking Information
- ---------------------------
Statements in this report concerning future results, performance,
achievements, expectations or trends, if any, are forward-looking statements.
Actual results, performance, achievements, events or trends could differ
materially from those expressed or implied by such forward-looking statements as
a result of known and unknown risks, uncertainties and other factors including
those described below and those identified by the Company from time to time in
other filings with the Securities and Exchange Commission, press releases and
other communications.
General
- -------
Seattle FilmWorks, Inc. (the "Company") is one of the largest direct-to-
consumer providers of photofinishing services in the United States. The Company
offers its services and products primarily on a mail order basis under the brand
name Seattle FilmWorks(R).
The Company seeks to differentiate its photofinishing services by offering
its customers the options of receiving their photographs as conventional prints
and/or slides and as digital images delivered either on floppy diskettes under
the Pictures On Disk(TM) brand name or over the Internet using the Company's
PhotoMail(TM) service. To permit viewing of digital images on personal
computers, the Company provides various versions of software under the titles
PhotoWorks(TM) and PhotoWorks Plus(TM). The Company also furnishes a variety of
reprint and enlargement services. In addition, the Company provides services,
products and photofinishing supplies on a wholesale basis to a variety of
customers who offer these services and products to their customers at their own
retail locations under their own brand names. The Company has the ability to
process virtually all 35mm color negative films, including those manufactured
for the motion picture industry. To support its direct-to-consumer business, the
Company has developed comprehensive computerized marketing models and support
systems for designing, implementing and analyzing direct response marketing
programs.
Demand for the Company's photofinishing-related services and products is
highly seasonal with the highest volume of photofinishing activity occurring
during the summer months. This seasonality, when combined with the general
growth of the Company's photofinishing business, has produced substantially
greater photofinishing revenues during the last half of the fiscal year with a
peak occurring in the fourth fiscal quarter. Net income is affected by the
seasonality of the Company's revenues due to the fixed nature of a large portion
of the Company's operating expenses, seasonal variation in sales mix and by the
Company's practice of relatively higher expenditures on marketing programs prior
to the summer months.
Page 8 of 64
Results of Operations
The following table presents information from the Company's statements of
income, expressed as a percentage of net revenues for the periods indicated.
Second Quarter Ended Six Months Ended
March 30, March 25, March 30, March 25,
1996 1995 1996 1995
================================================================================
Net revenues 100.0% 100.0% 100.0% 100.0%
Cost of goods and services 59.0 66.2 60.6 64.4
----- ----- ----- -----
GROSS PROFIT 41.0 33.8 39.4 35.6
Operating expenses:
Customer acquisition costs 18.2 16.4 16.7 16.5
Other selling expenses 11.9 7.6 10.0 7.4
Research and development 1.5 0.7 1.5 0.9
General and administrative 5.7 5.4 5.2 5.2
----- ----- ----- -----
Total operating expenses 37.3 30.1 33.4 30.0
----- ----- ----- -----
INCOME FROM OPERATIONS 3.7 3.7 6.0 5.6
Total other income 0.6 0.4 0.4 0.5
----- ----- ----- -----
INCOME BEFORE INCOME TAXES 4.3 4.1 6.4 6.1
Provision for income taxes 1.5 1.3 2.2 2.1
----- ----- ----- -----
NET INCOME 2.8% 2.8% 4.2% 4.0%
===== ===== ===== =====
The Company's net revenues for the second quarter of fiscal 1996 increased
45.0% to $17,821,000 compared to net revenues of $12,293,000 in the second
quarter of fiscal 1995. For the six months ended March 30, 1996, net revenues
increased 40.5% to $34,510,000 compared to $24,563,000 for the same period of
fiscal 1995. The increased revenues in fiscal 1996 are primarily due to
expanded customer acquisition activities and marketing to existing customers
during fiscal year 1995 and the first two quarters of fiscal 1996 which have
resulted in increased net revenues from photofinishing services and products.
The quarter ending March 30, 1996, marks the fourth consecutive quarter of
expanded customer acquisition efforts. Management also believes that its
Seattle FilmWorks(R) branded business has benefited from the Company's entry
into the home computer market with its PhotoWorks(TM) and Pictures On Disk(TM)
products, which were first introduced in January 1994.
Cost of goods and services consist of labor, postage and supplies related
to the Company's services and products. Gross profit in the second quarter of
fiscal 1996 increased to 41.0% of net revenue compared to 33.8% in the second
quarter of fiscal 1995. For the first six months of fiscal 1996, gross profit
increased to 39.4% compared to 35.6% for the same period of fiscal 1995. The
increases in fiscal 1996 periods were due primarily to a product mix containing
a higher percentage of the Company's Seattle FilmWorks(R) branded products,
which carry a higher gross profit margin than the Company's other lines of
business. Gross profit was also favorably impacted in the second quarter of
fiscal 1996 by the reversal of $227,000 of state tax reserves upon the
resolution of uncertainties related to a recent state tax examination.
Fluctuations in gross profit will occur in future periods due to the seasonal
nature of revenues, mix of product sales, intensity of promotional activities
and other factors.
Page 9 of 64
Total operating expenses in the second quarter of fiscal 1996 increased to
37.3% of net revenue compared to 30.1% in the second quarter of fiscal 1995.
For the first six months of fiscal 1996 total operating expenses increased to
33.4% of net revenue compared to 30.0% for the same period of fiscal 1995. The
increase in total operating expenses for the quarter was due primarily to an
increase in customer acquisition and other selling activities. The Company's
principal technique for acquiring new customers is its Introductory Offer of two
rolls of 35 mm film for $2.00 or less. Customer acquisition costs are comprised
of the costs of generating a lead and the direct acquisition costs associated
with acquiring the customer. Costs of generating a lead include all
advertising, direct response media and other costs associated with developing
target customer lists. Direct acquisition costs include film and printed
material costs associated with mailings to new and existing customers. A
significant portion of the direct acquisition costs, including the cost of film
and printed materials, but excluding advertising costs, are initially
capitalized as assets on the Company's balance sheet. These deferred costs are
amortized over a period of up to three years, based on statistical analyses of
historical photofinishing volumes. Effective at the beginning of the second
quarter of fiscal 1996 the Company reduced from twelve months to six months the
amortization period for certain marketing activities to specific groups of
existing customers. This change in accounting estimate resulted in incremental
amortization of $414,000 of previously deferred customer acquisition costs..
The Company capitalized $4,417,000 and $2,996,000 of customer acquisition costs
in the first and second quarters of fiscal 1996, respectively, compared to
$1,688,000 and $1,378,000 for the first and second quarters of fiscal 1995,
respectively. Capitalized customer acquisition costs as of March 30, 1996,
increased to $9,645,000 compared to $7,356,000 as of September 30, 1995.
Management believes this increased investment in customer acquisition combined
with new service and product introductions are the primary reasons for the
increase in photofinishing related revenues. Each year the Company prepares
detailed plans for its various marketing activities, including the mix between
customer acquisition expenditures and other selling expenses. However, the
Company occasionally changes both the mix and total marketing expenditures
between periods to take advantage of marketing opportunities as they become
available. Future periods may reflect increased customer acquisition costs due
to the amortization of capitalized expenditures or the development and
initiation of additional marketing programs. For tax purposes, customer
acquisition expenditures are expensed as incurred, thereby reducing current
federal income tax liabilities and increasing deferred federal income tax
liabilities.
Other selling expenses include marketing costs associated with building
brand awareness, testing of new marketing strategies and marketing to existing
customers, as well as certain costs associated with acquiring new customers.
Other selling expenses in the second quarter of fiscal 1996 increased to 11.9%
of net revenues compared to 7.6% of net revenues for the second quarter of
fiscal 1995. For the first six months of fiscal 1996, other selling expenses
increased to 10.0% of net revenues compared to 7.4% of net revenues for the
first six months of fiscal 1995. The increase in the 1996 periods is due
primarily to increased marketing activities associated with expanded promotional
activities to new and existing customers compared to fiscal 1995 periods. The
increase in the second quarter of fiscal 1996 includes approximately $43,000
resulting from an increase in amortization of a non-compete agreement due to a
change in the estimated life from ten years to five years and $126,000 in
expenses related to securing certain rights to the PhotoWorks(TM) mark claimed
by a third party.
Research and development expenses increased to $274,000 for the second
quarter of fiscal 1996 as compared to $94,000 for the second quarter of fiscal
1995. Research and development expenses for the first six months of fiscal 1996
increased to $521,000 as compared to $211,000 for the first six months of fiscal
1995. These increases were primarily related to the Company's continued
development of digital services and products.
General and administrative expenses increased $351,000 and $499,000 for
the second quarter and first six months of fiscal 1996, respectively, as
compared to the same periods of fiscal 1995 due to increased compensation
expenses based on the Company's profitability and increased legal and accounting
costs. General and administrative expenses as a percent of net revenue increased
to 5.7% for the second quarter of fiscal 1996 as compared to 5.4% for the second
quarter of fiscal 1995 and remained at 5.2% of net revenue for the six month
periods in fiscal 1996 and fiscal 1995.
Total net other income for the second quarter of fiscal 1996 increased to
$111,000 as compared to $55,000 for the second quarter of fiscal 1995. Total
net other income increased to $160,000 for the first six months of fiscal 1996
as compared to $118,000 for the first six months of fiscal 1995. The increases
are due primarily to interest income from short-term investments due to higher
levels of cash generated by operations.
Page 10 of 64
The federal income tax rate for the first six months of fiscal 1996 as
compared to the first six months of fiscal 1995 increased to 34.7% from 33.6%.
The increase in the effective tax rate is due primarily to an increase in the
marginal federal corporate tax rate due to expected income levels.
Net income in the second quarter of fiscal 1996 was $503,000, or $.04 per
share, compared to $339,000 or $.03 per share for the second quarter of fiscal
1995. For the first six months of fiscal 1996, net income was $1,454,000, or
$.12 per share compared to $994,000, or $.09 per share for the same period in
fiscal 1995. The increase in net income compared to 1995 periods is primarily
attributable to the increase in net revenues and gross profit partially offset
by the increase in operating expenses.
Liquidity and Capital Resources
As of April 30, 1996, the Company's principal sources of liquidity
included cash and short-term investments of $5,771,135 and an unused revolving
line of credit of $6,000,000. The ratio of current assets to current liabilities
for the Company was 1.9 to 1 at the end of the second quarter of fiscal 1996,
down slightly from the current ratio of 2.0 to 1 at September 30, 1995. During
the first two quarters of fiscal 1996 the Company increased inventory levels by
$2,366,000 to accommodate expanded marketing plans, achieve faster turnaround of
customer orders, and support increased photofinishing volume. This planned
increase in inventory was also the principal reason for the $1,688,000 increase
in accounts payable. Federal income taxes payable were favorably affected by the
increase in capitalized customer acquisition expenditures which are expensed as
incurred for federal income tax purposes, thereby having the effect of
substantially reducing current federal income tax liabilities.
The Company has a commitment to purchase equipment related to its Pictures
On Disk(TM) product in the amount of $470,000 by January 1, 1997. In addition,
the Company plans to expend approximately $1,180,000 during the remainder of
fiscal 1996, principally for photofinishing and data processing equipment and
for leasehold improvements, although at this time it has no binding commitments
to do so.
The Company currently anticipates that existing funds together with
anticipated cash flow from operations and the Company's available line of credit
of $6,000,000 will be sufficient to finance its operations and planned capital
expenditures and to service its indebtedness for the foreseeable future.
However, if the Company does not generate sufficient cash from operations to
satisfy its ongoing expenses, the Company will be required to seek external
sources of financing or to refinance its obligations. Possible sources of
financing include the sale of equity securities or additional bank borrowings.
There can be no assurance that the Company will be able to obtain adequate
financing in the future.
PART II -- OTHER INFORMATION
----------------------------
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
On February 13, 1996, the Company held its annual meeting of shareholders.
The shareholders acted on the following matters at the annual meeting.
1. The following individuals were elected to the Company's Board of
Directors, to hold office for a term of one year. The number of votes cast for
each individual, the number of votes withheld, and the number of broker non-
votes are listed for each individual.
For Withheld Non-votes
--------- -------- ---------
Gary Christophersen 6,510,766 17,728 N/A
Sam Rubinstein 6,516,082 12,412 N/A
Douglas A. Swerland 6,515,202 13,292 N/A
Craig E. Tall 6,516,252 12,242 N/A
Peter H. van Oppen 6,516,252 12,242 N/A
Page 11 of 64
2. The shareholders approved a proposal to amend the Seattle FilmWorks,
Inc. 1987 Stock Option Plan and Incentive Stock Option Plan (the "Plans") to
increase by 300,000 the aggregate numbers of shares of Common Stock available
for purchase upon exercise of options granted under either Plan, to create a
maximum number of options that may be granted under the Plans to any one
employee in any one fiscal year and to extend the terms of the Plans until
December 31, 2005. There were 5,936,729 shares of Common Stock voted in favor
of the amendments, 491,839 shares voted against, 98,026 shares abstained from
voting and 0 shares were broker non-votes.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
---------
3 Second Restated Articles of Incorporation of Seattle FilmWorks,
Inc.
10.1 Business Loan Agreement effective January 31, 1996 with First
Interstate Bank of Washington, N.A.
10.2* Supplement to Agfa Division of Miles, Inc. sales contract dated
March 29, 1996
10.3 Addendum to lease agreement dated January 1, 1996, between
United States of America, Lessors, and the Company
10.64** Sales contract dated August 18, 1995 between the Company and
Agfa Division of Miles, Inc. with respect to the purchase of
certain products
11 Computation of Earnings Per Share
(b) Reports on Form 8-K.
--------------------
None
* Exhibits for which confidential treatment has been requested.
** Replaces exhibit previously filed with the Company's Annual
Report on Form 10-K for the year ended September 30, 1995
Page 12 of 64
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEATTLE FILMWORKS, INC.
DATED: May 14, 1996 /s/ Gary R. Christophersen
------------------------------------
Gary R. Christophersen
President/Chief Executive Officer
(Principal Executive Officer)
/s/ Case H. Kuehn
------------------------------------
Case H. Kuehn
Vice President-Finance/Treasurer
(Principal Financial and Chief
Accounting Officer)
Page 13 of 64
INDEX TO EXHIBITS
SEATTLE FILMWORKS, INC.
Quarterly Report on Form 10-Q
For The Quarter Ended March 30, 1996
Exhibit Description Page No.
- ------- -------------------------- --------
3 Second Restated Articles of Incorporation of Seattle
FilmWorks, Inc. 15-22
10.1 Business Loan Agreement effective January 31, 1996 with
First Interstate Bank of Washington, N.A. 23-41
10.2* Supplement to Agfa Division of Miles, Inc. sales contract
dated March 29, 1996 42-44
10.3 Addendum to lease agreement dated January 1, 1996, between
United States of America, Lessors, and the Company. 45
10.64** Sales contract dated August 18, 1995 between the Company
and Agfa Division of Miles, Inc. with respect to the
purchase of certain products. 46-63
11 Computation of Earnings Per Share 64
* Exhibits for which confidential treatment has been requested.
** Replaces exhibit previously filed with the Company's Annual Report
on Form 10-K for the year ended September 30, 1995.
Page 14 of 64