MATTHEWS, N.C., June 2 /PRNewswire/ -- PCA International, Inc.
(Nasdaq: PCAI) today reported that sales for the first quarter ended May 3,
1998 were $54.7 million, a decrease of 6.9 percent compared to sales of
$58.7 million reported in the comparable fiscal 1997 quarter. Net income for
the 1998 first quarter was $0.8 million or $0.09 per diluted share, an
increase of 21 percent compared to net income of $0.6 million or $0.08 per
diluted share in the 1997 first quarter. Net income for the 1998 quarter
includes $0.4 million or $0.04 per diluted share for expenses related to the
execution of the merger agreement previously announced with Jupiter Partners
II, L.P.
The Company attributed the decline in sales to discontinued and closed
operations in fiscal 1997. During the first half of fiscal 1997, the Company
discontinued its subsidiary's fashion photography business and PCA's pilot pet
portrait operations, and closed 401 underperforming discount store portrait
studios. These operations represented sales of approximately $8.0 million in
the fiscal 1997 first quarter. Excluding sales from these discontinued or
closed operations in the fiscal 1997 first quarter, sales for PCA's 1998 first
quarter increased $4.0 million or 7.8 percent.
As reported on April 21, 1998, the Company and Jupiter Partners II, L.P.
have entered into a definitive merger agreement under which between
approximately 95% and 97% of the primary common stock of PCA (excluding
certain shares to be retained by PCA senior management) will be acquired for
$26.50 per share in cash. The Company filed a preliminary proxy statement
with the Securities and Exchange Commission on May 15, 1998. Upon clearance
by the SEC, proxy materials will be mailed to all PCA shareholders. A Special
Meeting of PCA shareholders will then be held for the purpose of considering
and taking action upon the approval of the Merger Agreement and the Merger.
The date of this Special Meeting is yet to be determined, but is expected in
mid- to late-summer. The merger agreement provides that the Company cannot
declare or pay any dividends.
On April 22, 1998, the Company and the members of its Board of Directors
were sued by Harbor Finance Partners, a shareholder of the Company, to enjoin
the Merger between the Company and Jupiter, or in the alternative, for
damages. The lawsuit was filed in the Superior Court of Mecklenburg County,
North Carolina. Harbor Finance Partners has alleged that the Company and its
Directors breached their fiduciary duty to the shareholders in connection with
the Merger. The Company and the Directors deny these allegations and will
defend the lawsuit vigorously. On May 26, 1998, the Company and the Directors
moved to dismiss the lawsuit on the basis that Harbor Finance Partners had
failed to state a claim for which relief can be granted. A hearing date for
that motion to dismiss has not yet been set by the Court.
PCA International, Inc. is a holding company that sells and processes
professional color portraits of children, adults, and families. The Company
operates 2,034 permanent portrait studios within Kmart and Wal-Mart discount
stores and supercenters in the United States, Canada, Mexico, Puerto Rico and
South America. The Company also operates an extensive traveling studio
business providing portrait photography services in approximately 1,400
additional Wal-Mart retail locations as well as to church congregations and
other institutions.
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
May 3, February 1,
ASSETS: 1998 1998
Current Assets:
Cash and cash equivalents $ 11,073,455 $ 12,289,761
Other current assets 21,622,289 24,454,236
Total Current Assets 32,695,744 36,743,997
Net Property and Equipment 53,324,557 54,923,487
Intangible Assets 59,240,646 59,733,731
Other Assets 1,655,283 1,899,611
TOTAL ASSETS $ 146,916,230 $ 153,300,826
LIABILITIES AND SHAREHOLDERS' EQUITY:
Current Liabilities:
Current portion of
long-term debt $ 8,750,000 $ 8,750,000
Accounts payable-trade 23,797,823 25,915,285
Other current liabilities 19,815,679 22,413,041
Total Current Liabilities 52,363,502 57,078,326
Long-Term Debt 41,104,831 42,063,857
Deferred Income Taxes 107,019 1,738,255
Other Liabilities 7,628,444 7,730,964
Shareholders' Equity 45,712,434 44,689,424
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 146,916,230 $ 153,300,826
PCA INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended
May 3, May 4,
1998 1997
SALES $ 54,661,925 $ 58,691,809
COSTS AND EXPENSES:
Advertising and
promotional costs 3,392,749 4,313,900
Costs of photographic sales 19,361,353 21,794,658
Store commissions and
selling costs 18,822,775 18,892,362
General and administrative
expenses 9,921,037 10,176,412
Amortization of intangibles 507,418 455,738
Total costs and expenses 52,005,332 55,633,070
INCOME FROM OPERATIONS 2,656,593 3,058,739
Interest expense, net 1,219,709 1,619,383
INCOME BEFORE INCOME TAXES 1,436,884 1,439,356
INCOME TAX PROVISION 658,811 796,030
NET INCOME $ 778,073 $ 643,326
WEIGHTED AVERAGE NUMBER OF COMMON SHARES:
Basic 7,931,757 7,631,209
Diluted 8,373,084 7,932,863
BASIC AND FULLY DILUTED EARNINGS PER
COMMON SHARE:
Basic $ 0.10 $ 0.08
Diluted $ 0.09 $ 0.08
CASH DIVIDENDS PER
COMMON SHARE $ 0.07 $ --
SOURCE PCA International, Inc.
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Related links:
http://www.pca-online.com
Company News On-Call: http://www.prnewswire.com or
fax, 800-758-5804, ext. 114272
CONTACT:
Jean Veatch, Director, Investor Relations and
Corporate Communication, PCA International, Inc., 704-847-8011
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