10-Q 1 0001.txt FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 QUARTERLY REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT FOR THE QUARTER ENDED: COMMISSION FILE NUMBER: JULY 29, 2000 0-21258 ------------- ------- CHICO'S FAS, Inc. -------------------------------------------------- (Exact name of registrant as specified in charter) FLORIDA 59-2389435 ------- ---------- (State of Incorporation) (I.R.S. Employer Identification No.) 11215 METRO PARKWAY, FORT MYERS, FLORIDA 33912 ---------------------------------------------- (Address of principal executive offices) 941-277-6200 ------------ (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practical date. At August 28th, there were 17,437,830 shares outstanding of Common Stock, $.01 par value per share. CHICO'S FAS, Inc. Index PART I - FINANCIAL INFORMATION ITEM I. FINANCIAL STATEMENTS (UNAUDITED): Condensed Consolidated Balance Sheets - July 29, 2000 and January 29, 2000_______________________________________________ 3 Condensed Consolidated Statements of Income for the Thirteen and Twenty-Six Weeks Ended July 29, 2000 and July 31, 1999________________________________ 4 Condensed Consolidated Statements of Cash Flows for the Twenty-Six Weeks Ended July 29, 2000 and July 31, 1999__________________________________________________ 5 Notes to Condensed Consolidated Financial Statements_________________ 6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS_______________________________________ 7 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK___________ 11 PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS_________________ 11 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K____________________________________ 12 Signatures___________________________________________________________________ 12 2 CHICO'S FAS, Inc. and Subsidiaries Condensed Consolidated Balance Sheets (Unaudited)
AS OF AS OF 07-29-00 01-29-00 ------------ ------------ ASSETS CURRENT ASSETS: Cash and cash equivalents $ 3,829,580 $ 3,980,930 Marketable securities, at market 19,133,617 13,995,527 Receivables, net 1,944,146 1,706,661 Inventories 21,449,962 14,834,800 Prepaid expenses 1,667,686 668,695 Deferred taxes 2,785,000 2,038,000 ------------ ------------ TOTAL CURRENT ASSETS 50,809,991 37,224,613 ------------ ------------ LAND, BUILDING AND EQUIPMENT: Cost 56,803,901 41,217,160 Less accumulated depreciation and amortization (11,930,734) (9,872,163) ------------ ------------ LAND, BUILDING AND EQUIPMENT, NET 44,873,167 31,344,997 ------------ ------------ OTHER ASSETS: Deferred taxes 1,363,000 1,106,000 Other assets, net 631,885 640,211 ------------ ------------ TOTAL OTHER ASSETS 1,994,885 1,746,211 ------------ ------------ $ 97,678,043 $ 70,315,821 ============ ============ LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable $ 12,564,037 $ 5,982,684 Accrued liabilities 7,426,302 4,593,104 Current portion of debt and lease obligations 275,247 260,111 ------------ ------------ TOTAL CURRENT LIABILITIES 20,265,586 10,835,899 ------------ ------------ NONCURRENT LIABILITIES: Notes and capital leases payable 5,185,500 5,221,500 Deferred rent 1,774,265 1,617,680 ------------ ------------ TOTAL NONCURRENT LIABILITIES 6,959,765 6,839,180 ------------ ------------ STOCKHOLDERS' EQUITY: Common stock 174,263 171,285 Additional paid-in capital 17,627,740 14,709,238 Unrealized gain (loss) on marketable securities 12,790 (24,334) Retained earnings 52,637,899 37,784,553 ------------ ------------ TOTAL STOCKHOLDERS' EQUITY 70,452,692 52,640,742 ------------ ------------ $ 97,678,043 $ 70,315,821 ============ ============
SEE ACCOMPANYING NOTES 3 CHICO'S FAS, Inc. and Subsidiaries Condensed Consolidated Statements of Income (Unaudited)
TWENTY-SIX WEEKS ENDED THIRTEEN WEEKS ENDED 07-29-00 07-31-99 07-29-00 07-31-99 ------------ ------------ ------------ ------------ Net sales by Company stores $115,255,264 $ 71,913,385 $ 59,572,855 $ 36,192,085 Net sales to Franchisees 2,075,866 1,282,889 1,065,461 579,208 ------------ ------------ ------------ ------------ NET SALES 117,331,130 73,196,274 60,638,316 36,771,293 Cost of goods sold 48,407,946 30,394,972 25,643,952 15,494,349 ------------ ------------ ------------ ------------ GROSS PROFIT 68,923,184 42,801,302 34,994,364 21,276,944 General, administrative and store operating expenses 45,235,343 29,679,614 23,267,122 14,954,637 ------------ ------------ ------------ ------------ INCOME FROM OPERATIONS 23,687,841 13,121,688 11,727,242 6,322,307 Interest income, net 268,505 44,431 171,184 42,359 ------------ ------------ ------------ ------------ INCOME BEFORE TAXES 23,956,346 13,166,119 11,898,426 6,364,666 Income tax provision 9,103,000 5,003,000 4,521,000 2,418,000 ------------ ------------ ------------ ------------ NET INCOME $ 14,853,346 $ 8,163,119 $ 7,377,426 $ 3,946,666 ============ ============ ============ ============ PER SHARE DATA: Net income per common share - basic $ 0.86 $ 0.48 $ 0.43 $ 0.23 ============ ============ ============ ============ Net income per common and common equivalent share - diluted $ 0.83 $ 0.46 $ 0.41 $ 0.22 ============ ============ ============ ============ Weighted average common shares outstanding - basic 17,218,987 16,847,146 17,293,448 16,884,584 ============ ============ ============ ============ Weighted average common and common equivalent shares outstanding - diluted 17,966,178 17,582,042 18,076,725 17,617,638 ============ ============ ============ ============
SEE ACCOMPANYING NOTES 4 CHICO'S FAS, Inc. and Subsidiaries Condensed Consolidated Statements of Cash Flows (Unaudited)
TWENTY-SIX WEEKS ENDED 07-29-00 07-31-99 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 14,853,346 $ 8,163,119 ------------ ------------ Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,453,241 1,464,529 Deferred taxes (1,004,000) (362,000) Loss on disposal of land, building and equipment 193,255 112,206 Deferred rent expense, net 156,585 99,944 Changes in assets and liabilities: Increase in receivables, net (237,485) (668,194) Increase in inventories (6,615,162) (2,328,328) Increase in prepaid expenses and other assets (1,028,125) (298,288) Increase in accounts payable 6,581,353 2,784,851 Increase (decrease) in accrued liabilities 2,848,334 (237,072) ------------ ------------ Total adjustments 3,347,996 567,648 ------------ ------------ Net cash provided by operating activities 18,201,342 8,730,767 ------------ ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of marketable securities, net (5,100,966) (12,678,466) Purchase of land, building and equipment (16,122,206) (5,266,205) ------------ ------------ Net cash used in investing activities (21,223,172) (17,944,671) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from issuances of common stock 2,921,480 861,031 Principal payments on debt (36,000) (96,273) Purchase of intangible assets (15,000) -- ------------ ------------ Net cash provided by financing activities 2,870,480 764,758 ------------ ------------ Net decrease in cash and cash equivalents (151,350) (8,449,146) CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 3,980,930 14,484,776 ------------ ------------ CASH AND CASH EQUIVALENTS - END OF PERIOD $ 3,829,580 $ 6,035,630 ============ ============
SEE ACCOMPANYING NOTES 5 CHICO'S FAS, Inc. and Subsidiaries Notes to Condensed Consolidated Financial Statements July 29, 2000 (Unaudited) ITEM 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PRESENTATION The accompanying unaudited condensed consolidated financial statements of Chico's FAS, Inc. and its wholly-owned subsidiaries (collectively, "Chico's" or the "Company") have been prepared in accordance with the instructions to Form 10-Q and do not include all of the information and notes required by accounting principles generally accepted in the U.S. for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. All significant intercompany balances and transactions have been eliminated in consolidation. For further information, refer to the financial statements and notes thereto for the fiscal year ended January 29, 2000, included in the Company's Annual Report on Form 10-K filed on April 28, 2000. The January 29, 2000 balance sheet amounts were derived from audited financial statements included in the Company's Annual Report. Operating results for the thirteen and twenty-six weeks ended July 29, 2000 are not necessarily indicative of the results that may be expected for the entire year. All per share data for the prior year has been restated to reflect the two-for-one split effective in January 2000. NET INCOME PER COMMON AND COMMON EQUIVALENT SHARE Basic EPS is based upon the weighted average number of common shares outstanding and diluted EPS is based upon the weighted average number of common shares outstanding plus the dilutive common equivalent shares outstanding during the period. The following is a reconciliation of the denominators of the basic and diluted EPS computations shown on the face of the accompanying statements of income:
TWENTY-SIX WEEKS ENDED THIRTEEN WEEKS ENDED 07-29-00 07-31-99 07-29-00 07-31-99 ---------- ---------- ---------- ---------- Basic weighted average outstanding common shares 17,218,987 16,847,146 17,293,448 16,884,584 Dilutive effect of options outstanding 747,191 734,896 783,277 733,054 ---------- ---------- ---------- ---------- Diluted weighted average common and common equivalent shares outstanding 17,966,178 17,582,042 18,076,725 17,617,638 ========== ========== ========== ==========
6 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS - THIRTEEN WEEKS ENDED JULY 29, 2000 COMPARED TO THE THIRTEEN WEEKS ENDED JULY 31, 1999. NET SALES. Net sales by Company-owned stores for the thirteen weeks ended July 29, 2000 (the current period) increased by $23.4 million, or 64.6%, over net sales by Company-owned stores for the comparable thirteen weeks ended July 31, 1999 (the prior period). The increase was the result of a comparable Company store net sales increase of $12.2 million, $11.0 million additional sales from the new stores not yet included in the Company's comparable store base (net of sales of approximately $332,000 from three stores closed in fiscal 2000 and fiscal 2001), and approximately $203,000 of net sales from the Company's call center (website and mailer sales) which began operations in late May 2000. Net sales to franchisees for the current period increased by approximately $486,000 or 84.0% compared to net sales to franchisees for the prior period. The increase in net sales to franchisees was primarily due to a net increase in purchases by the franchisees as a whole and the opening of one additional franchised location in fiscal 2001 by an existing franchisee. GROSS PROFIT. Gross profit for the current period was $35.0 million, or 57.7% of net sales, compared with $21.3 million, or 57.9% of net sales, for the prior period. The decrease in the gross profit percentage resulted from a substantial decline in gross margins in the Company's seven outlet locations and to a lesser degree, an increase in the Company's distribution center, product development and merchandising costs, net of improved initial markups on its products. GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES. General, administrative and store operating expenses increased to $23.3 million, or 38.3% of net sales, in the current period from $15.0 million, or 40.7% of net sales, in the prior period. The increase in general, administrative and store operating expenses was, for the most part, the result of increases in store operating expenses, including store compensation, occupancy and other costs associated with additional store openings. The decrease in these expenses as a percentage of net sales was principally due to leverage associated with the Company's 34.3% comparable Company store sales increase for the current period, net of an increase in marketing expenses as a percentage of net sales. INTEREST INCOME, NET. The Company had net interest income during the current period of approximately $171,000 versus approximately $42,000 in the prior period. The increase in net interest income was primarily a result of the Company's increased cash and marketable securities position, as well as improved interest rates on cash and marketable securities. NET INCOME. As a result of the factors discussed above, net income reflects an increase of 86.9% to $7.4 million in the current period from net income of $3.9 million in the prior period. The income tax provision represented an effective rate of 38.0% for the current and prior period. 7 RESULTS OF OPERATIONS - TWENTY-SIX WEEKS ENDING JULY 29, 2000 COMPARED TO THE TWENTY-SIX WEEKS ENDED JULY 31, 1999. NET SALES. Net sales by Company-owned stores for the twenty-six weeks ended July 29, 2000 (the current period) increased by $43.3 million, or 60.3%, over net sales by Company-owned stores for the comparable twenty-six weeks ended July 31, 1999 (the prior period). The increase was the result of a comparable Company store net sales increase of $23.0 million, $20.1 million additional sales from the new stores not yet included in the Company's comparable store base (net of sales of approximately $643,000 from five stores closed in fiscal 2000 and fiscal 2001), and approximately $203,000 of net sales from the Company's call center (website and mailer phone sales) which began operations in late May 2000. Net sales to franchisees for the current period increased by approximately $793,000 or 61.8% compared to net sales to franchisees for the prior period. The increase in net sales to franchisees was primarily due to a net increase in purchases by the franchisees as a whole and the opening by an existing franchisee of one additional franchised location in each of fiscal 2001 and fiscal 2000. GROSS PROFIT. Gross profit for the current period was $68.9 million, or 58.7% of net sales, compared with $42.8 million, or 58.5% of net sales, for the prior period. The increase in the gross profit percentage resulted from reduced markdowns and improved initial markups in the current period versus the prior period, net of additional mailer-related promotional activities and increased volume of discounts, including those associated with expanding the Company's frequent shopper club (the "Passport Club") which was relaunched in the first quarter of last year, and net of a decline in the gross margins in the Company's seven outlet locations. GENERAL, ADMINISTRATIVE AND STORE OPERATING EXPENSES. General, administrative and store operating expenses increased to $45.2 million, or 38.6% of net sales, in the current period from $29.7 million, or 40.5% of net sales, in the prior period. The increase in general, administrative and store operating expenses was, for the most part, the result of increases in store operating expenses, including store compensation, occupancy and other costs associated with additional store openings. The decrease in these expenses as a percentage of net sales was principally due to leverage associated with the Company's 32.7% comparable Company store sales increase for the current period, net of an increase in marketing expenses as a percentage of sales. INTEREST INCOME, NET. The Company had net interest income during the current period of approximately $269,000 versus approximately $44,000 in the prior period. The increase in net interest income was primarily a result of the Company's increased cash and marketable securities position, as well as improved interest rates on cash and marketable securities. NET INCOME. As a result of the factors discussed above, net income reflects an increase of 82.0% to $14.9 million in the current period from net income of $8.2 million in the prior period. The income tax provision represented an effective rate of 38% for the current and prior period. 8 COMPARABLE COMPANY STORE NET SALES Comparable Company store net sales increased by 34.3% in the current quarter and 32.7% in the first six months of this fiscal year when compared to the comparable prior periods. Comparable Company store net sales data is calculated based on the change in net sales of currently open Company-owned stores that have operated as a Company store for at least thirteen months. The Company believes that the increase in comparable Company store net sales in the current quarter resulted from the continuing effort to focus the Company's product development, merchandise planning, buying and marketing departments on Chico's target customer. The Company also believes that the look, fit and pricing policy of the Company's product was in line with the needs of our target customer and that the increase in comparable stores sales was also fueled by increased direct mailings, a larger database of existing customers for such mailings and the success of the Company's frequent shopper club (the "Passport Club"). To a lesser degree, the Company believes the increase was due to increased store-level training efforts associated with ongoing training programs and continuing strong sales associated with several styles of clothing produced from a related group of fabrics introduced by the Company in the fourth quarter of fiscal 1998. LIQUIDITY AND CAPITAL RESOURCES The Company's primary ongoing capital requirements are for funding capital expenditures for new store openings and merchandise inventory purchases. In addition, over the past six months and continuing over the next twelve months, the Company has experienced and anticipates continuing to experience the need for capital to address expansions of its office and design facility at its headquarters facilities, the chain-wide roll out of new point-of-sale devices and the development of infrastructure, including internal call and fulfillment centers, to support the Company's planned expansion into catalog and Internet sales. During the first two quarters of the current fiscal year (fiscal 2001) and the first two quarters of the prior fiscal year (fiscal 2000), the Company's primary source of working capital was cash flow from operations of $18.2 million and $8.7 million, respectively. The increase in cash flow from operations of $9.5 million was primarily due to an increase of $6.7 million in net income, an increase of $9.4 million in accounts payable and accrued liabilities, and an increase of $1.0 million in depreciation and amortization, net of an increase in inventories of $6.6 million, and an increase in deferred taxes of $1.0 million. The increase in accounts payable and inventories is associated with increased fabric purchases (which generally have an extended payment due date) and other required increased inventory purchase activities to support the Company's significant sales increases. The Company invested $16.1 million in the first two quarters of the current fiscal year for capital expenditures. The capital expenditures for the first two quarters of the current fiscal year included $9.7 million primarily associated with the planning and opening of new Company stores, and the remodeling/relocating/expansion of numerous existing stores, $2.5 million for new point-of-sale devices, approximately $2.4 million for the expansion of its office and design facilities, and approximately $1.5 million for the development of infrastructure associated with catalog and Internet sales. During the same period in the prior fiscal year, the Company invested $5.3 million primarily for capital expenditures associated with the opening of new Company stores, and the remodeling of several existing stores. 9 LIQUIDITY AND CAPITAL RESOURCES (CONTINUED) During the first two quarters of the current fiscal year, the Company invested an additional $5.1 million in high quality tax free municipal bonds in an effort to improve the after-tax interest earnings from its increased cash and marketable securities position. During the first two quarters of the current fiscal year, two of the Company's officers and its three independent directors exercised 248,735 stock options at prices ranging from $1.625 to $11.344 and several employees and former employees exercised 35,892 options at prices ranging from $1.625 to $11.344. Also during this period, the Company sold 13,155 shares of common stock under its employee stock purchase plan at a price of $15.25. The proceeds from these issuances of stock, together with the tax benefit recognized by the Company, amounted to approximately $2.9 million. As more fully described in "Item 1-Business" beginning on page 13 of the Company's Annual Report on Form 10-K for the fiscal year ended January 29, 2000, the Company is subject to ongoing risks associated with imports. The Company's reliance on sourcing from foreign countries causes the Company to be exposed to certain unique business and political risks. Import restrictions, including tariffs and quotas, and changes in such tariffs or quotas could affect the importation of apparel generally and, in that event, could increase the cost or reduce the supply of apparel available to the Company and have an adverse effect on the Company's business, financial condition and/or results of operations. The Company's merchandise flow could also be adversely affected by political instability in any of the countries in which its goods are manufactured, by significant fluctuations in the value of the U.S. dollar against applicable foreign currencies and by restrictions on the transfer of funds. The Company plans to open between 45 and 50 Company-owned new stores in fiscal 2001, 20 of which were open as of August 28, 2000. The Company believes that the liquidity needed for its planned new store growth, continuing remodel/expansion program, maintenance of proper inventory levels associated with this growth, expansion of its office and design facilities and establishment of catalog and Internet sales activities will be funded primarily from cash flow from operations and its strong existing cash balances. The Company further believes that this liquidity will be sufficient, based on currently planned new store openings, to fund anticipated capital needs over the near-term, including scheduled debt repayments. In further support of its liquidity needs, the Company expanded its line of credit and letter of credit facilities to $25 million, effective May 2000. Given the Company's existing cash and marketable securities balances and the capacity included in its newly expanded bank credit facilities, the Company does not believe that it would need to seek other sources of financing to conduct its operations or pursue its expansion plans even if cash flow from operations should prove to be less than anticipated or even if there should arise a need for additional letter of credit capacity due to establishing new and expanded sources of supply, or if the Company were to increase the number of new Company stores planned to be opened in future periods. SEASONALITY AND INFLATION Although the operations of the Company are influenced by general economic conditions, the Company does not believe that inflation has had a material effect on the results of operations during the current or prior periods. The Company does not consider its business to be seasonal. 10 CERTAIN FACTORS THAT MAY AFFECT FUTURE RESULTS This 10-Q may contain forward-looking statements which reflect the current views of the Company with respect to certain events that could have an effect on the Company's future financial performance. These statements include the words "expects", "believes", and similar expressions. These forward-looking statements are subject to various risks and uncertainties that could cause actual results to differ materially from historical results or those currently anticipated. These potential risks and uncertainties include ability to secure customer acceptance of Chico's styles, propriety of inventory mix and sizing, quality of merchandise received from vendors, timeliness of vendor production and deliveries, increased competition, extent of the market demand by women for private label clothing and related accessories, adequacy and perception of customer service, ability to coordinate product development along with buying and planning, rate of new store openings, performance of management information systems, ability to hire, train, energize and retain qualified sales associates and other employees, availability of quality store sites, ability to hire and retain qualified managerial employees, ability to effectively and efficiently establish and operate catalog and Internet sales activities and other risks. In addition, there are potential risks and uncertainties that are peculiar to the Company's heavy reliance on sourcing from foreign vendors including the impact of work stoppages, transportation delays and other interruptions, political instability, foreign currency fluctuations, imposition of and changes in tariffs and import and export controls such as import quotas, changes in governmental policies in or towards such foreign countries and other similar factors. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The market risk of the Company's financial instruments as of July 29, 2000 has not significantly changed since April 29, 2000. The Company is exposed to market risk from changes in interest rates on its indebtedness. The Company's exposure to interest rate risk relates in part to its revolving line of credit with its bank; however, as of July 29, 2000, the Company did not have any outstanding balance on its line of credit and, given its existing liquidity position, does not expect to utilize its line of credit in the foreseeable future except for its continuing use of the letter of credit facility portion thereof. The Company's exposure to interest rate risk also relates to its $5.3 million mortgage loan indebtedness which bears a variable interest rate based upon changes in the prime rate. PART II - OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders of the Company was held on June 13, 2000. There were 17,180,936 shares of common stock entitled to a vote. The following matters were voted upon at the meeting:
a) Election of Directors: VOTES FOR VOTES WITHHELD --------- -------------- CLASS I - TERM EXPIRING IN 2003 ------------------------------- Charles J. Kleman 15,683,199 276,295 Ross E. Roeder 15,865,809 93,685
11 b) Board of Directors proposal to ratify the appointment of Arthur Andersen LLP as independent certified public accountants for fiscal year 2001. Voting Results: For the Proposal 15,942,909 Against the Proposal 12,176 Abstentions 4,409 c) Board of Directors proposal to ratify amendments to the Non-Employee Directors' Stock Option Plan Voting Results: For the Proposal 14,649,166 Against the Proposal 1,281,629 Abstentions 28,699 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: 10.1 Employment Agreement between the Company and Marvin J. Gralnick, effective as of February 7, 2000. 10.2 Employment Agreement between the Company and Helene B. Gralnick, effective as of February 7, 2000. 10.3 Employment Agreement between the Company and Tedford Marlow, dated August 28, 2000. 10.4 Revolving Credit and Term Loan Agreement by and among Bank of America, N.A., the Company and the subsidiaries of the Company dated as of May 12, 2000. 27 Financial Data Schedule. (b) Reports on Form 8-K The Company did not file any reports on Form 8-K during the current period. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: AUGUST 31, 2000 By: /s/ MARVIN J. GRALNICK --------------- --------------------------------------------- Marvin J. Gralnick Chief Executive Officer (Principal Executive Officer) Date: AUGUST 31, 2000 By: /s/ CHARLES J. KLEMAN --------------- --------------------------------------------- Charles J. Kleman Chief Financial Officer (Principal Financial and Accounting Officer) 12 EXHIBIT INDEX EXHIBIT DESCRIPTION ------- ----------- 10.1 Employment Agreement between the Company and Marvin J. Gralnick, effective as of February 7, 2000. 10.2 Employment Agreement between the Company and Helene B. Gralnick, effective as of February 7, 2000. 10.3 Employment Agreement between the Company and Tedford Marlow, dated August 28, 2000. 10.4 Revolving Credit and Term Loan Agreement by and among Bank of America, N.A., the Company and the subsidiaries of the Company dated as of May 12, 2000. 27 Financial Data Schedule.