Exhibit 99.2
Romano’s Macaroni Grill
Condensed Consolidated Financial Statements
December 26, 2012 and June 27, 2012
Romano’s Macaroni Grill
Index
December 26, 2012 and June 27, 2012
| Page |
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Condensed Consolidated Financial Statements (Unaudited) | |
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Condensed Consolidated Balance Sheets | 1 |
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Condensed Consolidated Statements of Operations | 2 |
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Condensed Consolidated Statements of Changes in Net Assets (Liabilities) | 3 |
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Condensed Consolidated Statements of Cash Flows | 4 |
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Notes to Condensed Consolidated Financial Statements | 5–8 |
Romano’s Macaroni Grill
Condensed Consolidated Balance Sheets
December 26, 2012 and June 27, 2012
(in thousands)
| | December 26,
2012 | | June 27,
2012 | |
| | (Unaudited) | | | |
Assets | | | | | |
Current assets | | | | | |
Cash and cash equivalents | | $ | 5,797 | | $ | 7,105 | |
Restricted cash | | — | | 2,511 | |
Accounts receivable, net of reserve of $53 and $131 | | 3,490 | | 5,186 | |
Inventory | | 4,508 | | 3,646 | |
Prepaid expenses and other | | 4,162 | | 4,116 | |
Total current assets | | 17,957 | | 22,564 | |
Property and equipment, net | | 21,698 | | 22,649 | |
Intangible assets | | 8,435 | | 8,510 | |
Deposits and other | | 5,031 | | 2,937 | |
Total assets | | $ | 53,121 | | $ | 56,660 | |
Liabilities and Net Assets (Liabilities) | | | | | |
Current liabilities | | | | | |
Accounts payable | | $ | 15,955 | | $ | 13,529 | |
Accrued liabilities | | 26,650 | | 25,036 | |
Short-term debt | | 4,129 | | — | |
Total current liabilities | | 46,734 | | 38,565 | |
Unfavorable lease liability | | 1,244 | | 1,518 | |
Deferred rent | | 15,523 | | 13,538 | |
Total liabilities | | 63,501 | | 53,621 | |
Net assets (liabilities) | | (10,380 | ) | 3,039 | |
Total liabilities and net assets (liabilities) | | $ | 53,121 | | $ | 56,660 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Romano’s Macaroni Grill
Condensed Consolidated Statement of Operations (Unaudited)
Six Months Ended December 26, 2012 and December 28, 2011
(in thousands)
| | Six Months Ended | |
| | December 26,
2012 | | December 28,
2011 | |
Revenue | | | | | |
Restaurant sales | | $ | 182,111 | | $ | 188,443 | |
Royalties | | 1,760 | | 2,867 | |
Total revenue | | 183,871 | | 191,310 | |
Cost and expenses | | | | | |
Restaurant operating costs | | | | | |
Cost of sales | | 50,100 | | 52,191 | |
Labor | | 61,741 | | 63,664 | |
Rent expense | | 15,678 | | 15,387 | |
Other operating costs | | 57,862 | | 53,781 | |
General and administrative | | 11,911 | | 10,573 | |
Advisory fees, net | | 624 | | 624 | |
Depreciation and amortization | | 3,299 | | 2,553 | |
Total costs and expenses | | 201,215 | | 198,773 | |
Operating loss | | (17,344 | ) | (7,463 | ) |
Interest expense, net | | (172 | ) | (16 | ) |
Gain on insurance | | 1,348 | | 1,956 | |
Loss before income taxes | | (16,168 | ) | (5,523 | ) |
Income tax expense (benefit) | | (2,645 | ) | 864 | |
Net loss | | $ | (13,523 | ) | $ | (6,387 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Romano’s Macaroni Grill
Condensed Consolidated Statement of Changes in Net Assets (Liabilities) (Unaudited)
Six Months Ended December 26, 2012
(in thousands)
Balance at June 27, 2012 | | $ | 3,039 | |
Stock-based compensation | | 104 | |
Net loss | | (13,523 | ) |
Balance at December 26, 2012 | | $ | (10,380 | ) |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Romano’s Macaroni Grill
Condensed Consolidated Statement of Cash Flows (Unaudited)
Six Months Ended December 26, 2012 and December 28, 2011
(in thousands)
| | Six Months Ended | |
| | December 26,
2012 | | December 28,
2011 | |
Cash flows from operating activities | | | | | |
Net loss | | $ | (13,523 | ) | $ | (6,387 | ) |
Adjustments to reconcile net loss to net cash used in operating activities | | | | | |
Depreciation and amortization | | 3,299 | | 2,553 | |
Impairment charges | | 2,636 | | 187 | |
Stock-based compensation | | 104 | | 119 | |
Deferred income taxes | | (1,963 | ) | 1,227 | |
Changes in assets and liabilities | | | | | |
Accounts receivable | | 1,696 | | (700 | ) |
Inventories | | (781 | ) | (675 | ) |
Prepaid expenses and other | | (46 | ) | 2,690 | |
Deposits and other | | (405 | ) | (1,909 | ) |
Accounts payable | | 1,917 | | 1,187 | |
Accrued liabilities | | 1,614 | | (6,406 | ) |
Deferred rent | | 1,985 | | 3,953 | |
Net cash used in operating activities | | (3,467 | ) | (4,161 | ) |
Cash flows from investing activities | | | | | |
Purchase of restaurants | | (941 | ) | — | |
Payments for property and equipment | | (3,540 | ) | (4,452 | ) |
Decrease in restricted cash | | 2,511 | | 539 | |
Net cash used in investing activities | | (1,970 | ) | (3,913 | ) |
Cash flows from financing activities | | | | | |
Borrowings on line of credit | | 4,129 | | — | |
Net cash provided by financing activities | | 4,129 | | — | |
Net change in cash and cash equivalents | | (1,308 | ) | (8,074 | ) |
Cash and cash equivalents | | | | | |
Beginning of period | | 7,105 | | 20,210 | |
End of period | | $ | 5,797 | | $ | 12,136 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Romano’s Macaroni Grill
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 26, 2012 and June 27, 2012
1. Basis of Presentation
Nature of Operations
Romano’s Macaroni Grill (the “Business”) owns, operates and franchises a full service, casual dining restaurant brand under the name Romano’s Macaroni Grill. The restaurant operations are included in Mac Parent LLC (“Mac Parent”), a Delaware limited liability company, and its wholly owned subsidiaries. At December 26, 2012, it operated 186 company-owned restaurants in the United States and franchised 24 restaurants.
On April 9, 2013, the Business was sold by Golden Gate Capital, management and other investors to Ignite Restaurant Group, Inc. (“Ignite”) for $60.8 million in an all-cash transaction. The transaction was organized such that Ignite purchased approximately 83% of Mac Parent by acquiring the stock of two holding entities (“Holding Entities”) formerly owned by Golden Gate Capital and management. The remaining approximately 17% of the partnership interest of Mac Parent was purchased directly from other investors.
Basis of Presentation
The financial statements of the Business include the accounts of the consolidated operations of Mac Parent and its subsidiaries, as well as 100% of the tax attributes of the Business. The tax attributes attributable to the 17% interest held by other investors were not acquired by Ignite; management has determined that this portion of the Business’s tax attributes are not material to these consolidated financial statements. All intercompany accounts and transactions have been eliminated upon consolidation.
The Business has adopted a 52/53 week fiscal year ending on the last Wednesday in June. Fiscal year 2012 which ended on June 27, 2012 contained 52 weeks. Each of our quarters consists of 13 weeks, except for 53 week fiscal years for which the fourth quarter will be comprised of 14 weeks.
The accompanying unaudited consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments, including normal recurring accruals, considered necessary for a fair presentation have been included. The accompanying unaudited consolidated financial statements should be read in conjunction with the Business’s audited annual financial statements for the fiscal year ended June 27, 2012 issued on June 24, 2013. The results of operations for the interim period are not necessarily indicative of the results that may be expected for the full year.
Use of Estimates
The preparation of the consolidated financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues, costs and expenses during the reporting period. Actual results could differ significantly from those estimates.
2. Acquisition of Certain Franchised Units
On September 19, 2012, the Business acquired the assets and assumed certain liabilities of the restaurant operations of a certain franchisee that was operating four franchised units for $1.5 million. Of the purchase price, $509 thousand was paid subsequent to December 26, 2012. The
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Romano’s Macaroni Grill
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 26, 2012 and June 27, 2012
purchase price has been preliminary allocated to property and equipment. The purchase price allocation has not been finalized due to the finalization of certain valuations.
3. Intangible Assets
Intangible assets consist of the following (in thousands):
| | December 26,
2012 | | June 27,
2012 | |
| | | | | |
Definite Lived | | | | | |
Franchise agreements | | $ | 2,272 | | $ | 2,272 | |
Less: Accumulated amortization | | (608 | ) | (533 | ) |
| | 1,664 | | 1,739 | |
Indefinite Lived | | | | | |
Trade names and trademarks | | 5,149 | | 5,149 | |
Liquor licenses | | 1,622 | | 1,622 | |
| | $ | 8,435 | | $ | 8,510 | |
Amortization of franchise agreements is included in depreciation and amortization, and the amortization expense was $76 thousand and $76 thousand for the six months ended December 26, 2012 and December 28, 2011, respectively.
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Romano’s Macaroni Grill
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 26, 2012 and June 27, 2012
4. Debt
On July 31, 2012, the Business entered into a Credit Agreement with Cadence Bank, N.A. The facility is for a principal amount of $10.0 million and has a term of three years. The revolving credit facility is available to be used for working capital, other general corporate purposes and allows for a basket of $4.0 million in letters of credit. Each Revolving Loan may be a Base Rate Loan or a Eurodollar Rate Loan. Interest will be calculated on (i) each Eurodollar Rate Loans at a rate annum equal to the Eurodollar Rate for such Interest Period plus the Applicable Rate; and (ii) each Base Rate Loan shall bear interest on the outstanding principal amount thereof from the applicable borrowing date at a rate per annum equal to the Base Rate plus the Applicable Rate. Base Rate means for any day a fluctuating rate per annum equal to the highest of a) the Federal Funds Rate plus 0.50%, (b) the rate of interest in effect for such day as publicly announced from time to time by Cadence Bank as its “prime rate,” and (c) the Eurodollar Rate plus 1.00%. “Applicable Rate” means, (i) for any Loan that is a Eurodollar Loan, four percent (4.00%), and (ii) for any Loan that is a Base Rate Loan, three percent (3.00%). The Credit Agreement contains customary covenants and restrictions, including, but not limited to: (1) prohibitions on incurring additional indebtedness and from guaranteeing obligations of others; (2) prohibitions on creating, incurring, assuming or permitting to exist any lien on or with respect to any property or asset; (3) limitations on our ability to enter joint ventures, acquisitions, and other investments; (4) prohibitions on directly or indirectly creating or becoming liable with respect to certain contingent liabilities; and (5) restrictions on directly or indirectly declaring, ordering, paying, or making equity distributions. The Credit Agreement also requires the Business to maintain certain financial covenants. The Business’s obligations under the Credit Agreement are guaranteed by each of its existing and future subsidiaries and are secured by substantially all of its assets and pledge of the capital stock of its subsidiaries. The Credit Agreement includes customary events of default.
In connection with this Credit Agreement, the Business replaced the cash secured letters of credit with debt secured letters of credit, thereby reducing the amount of restricted cash.
On April 9, 2013, the balance of the revolving credit facility was repaid in connection with the Business’s sale to Ignite.
5. Contingencies
The Business is engaged in ordinary and routine litigation incidental to its business, but management does not anticipate that any amounts that the Business may be required to pay by reason of such litigation, net of insurance reimbursements, will have a materially adverse effect on its financial position.
6. Income Taxes
The Business’s effective tax rate is generally less than the combined federal and state statutory rate primarily due to the tax benefit of FICA tax credits for employee reported tip income. The effective tax rate for the six months ended December 26, 2012 and December 28, 2011 was 16.4% and (15.6%), respectively. The increase in the effective tax rate is primarily due to the decrease in FICA tax credit and foreign tax credit partially offset by the increase in the valuation allowance.
7. Subsequent Events
The Business has performed an evaluation of subsequent events through June 25, 2013, which is the date the financial statements were available to be issued.
On April 9, 2013, the Business was sold to Ignite Restaurant Group, Inc. for an aggregate purchase price of approximately $60.8 million in an all-cash transaction, which reflects estimated working
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Romano’s Macaroni Grill
Notes to Condensed Consolidated Financial Statements (Unaudited)
December 26, 2012 and June 27, 2012
capital and other pre-closing adjustments, from Golden Gate and certain of its affiliates that control Mac Parent. The aggregate purchase price includes repayment of the outstanding balance of the revolving credit facility on the date of closing. The final purchase price remains subject to additional working capital and post-closing adjustments. The sale includes 186 company-owned and twelve franchised restaurants across 36 states and Puerto Rico, as well as twelve additional franchised units throughout nine foreign countries.
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