FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
For the Quarterly Period Ended July 12, 1997
Commission File Number 0-19315
Bertucci's, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2947209
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
14 Audubon Road, Wakefield, Massachusetts 01880
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 246-6700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filled by section 13 or 15(d) of the Securities Exchange Act of the 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_____
On August 22, 1997, 8,828,966 shares of the registrant's Common Stock were
outstanding.
BERTUCCI'S, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
1) Consolidated Condensed Balance Sheets
July 12, 1997, and December 28, 1996 4
2) Consolidated Condensed Statements of Operations
For Twelve Weeks and Twenty-Eight Weeks
Ended July 12, 1997, and July 13, 1996 5
3) Consolidated Condensed Statements of Shareholders'
Equity For The Twenty-Eight-Week Period Ended
July 12, 1997 6
4) Consolidated Condensed Statements of Cash
Flows For Twenty-Eight Weeks Ended July 12, 1997,
and July 13, 1996 7
5) Notes to Consolidated Condensed Financial
Statements 8
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9-12
PART II: OTHER INFORMATION 13
PART I: FINANCIAL INFORMATION
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
July 12, December 28,
1997 1996
--------------------------------
(in thousands)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 5,003 $ 4,266
Inventories 1,085 1,048
Accounts receivable 259 179
Note receivable 76 76
Prepaid expenses 770 475
Deferred preopening costs 219 510
Prepaid taxes 1,027 1,027
------------ ------------
Total current assets 8,439 7,581
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
Land 2,902 2,902
Buildings 10,418 10,360
Leasehold improvements 73,190 72,416
Machinery and equipment 37,379 35,674
Construction in progress 666 250
------------ ------------
124,555 121,602
Less - Accumulated depreciation 34,199 29,705
------------ ------------
Net property and equipment 90,356 91,897
PREPAID TAXES 1,275 1,275
OTHER ASSETS 1,848 1,776
------------ ------------
$ 101,918 $ 102,529
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable-current $ 25 $ 25
Accounts payable 4,186 4,179
Accrued expenses 2,518 1,078
Accrued payroll and employee
benefits 3,107 3,298
Accrued taxes 1,717 1,859
------------ ------------
Total current liabilities 11,553 10,439
DEFERRED RENT 6,428 6,064
NOTES PAYABLE 25 50
LONG-TERM DEBT 14,500 18,438
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value -
Authorized - 200,000 shares,
none issued - -
Common stock, $.005 par value -
Authorized - 15,000,000 shares
Issued and outstanding -
8,790,428 shares at December 26,
1996 and 8,812,950 shares at
July 12, 1997 44 44
Additional paid-in capital 44,948 44,841
Retained earnings 24,420 22,653
------------ ------------
Total shareholders' equity 69,412 67,538
------------ ------------
$ 101,918 $ 102,529
============ ============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
12 Weeks Ended 28 Weeks Ended
---------------------- ----------------------
July 12, July 13, July 12, July 13,
1997 1996 1997 1996
---------- ---------- ---------- ----------
(in thousands, except per share data)
NET SALES $ 31,643 $ 30,235 $ 71,980 $ 68,494
---------- ---------- ---------- ----------
COSTS AND EXPENSES:
Cost of sales 7,828 7,589 17,946 17,387
Operating expenses 16,831 15,844 37,776 35,725
General and administrative
expenses 1,900 1,777 4,332 4,255
Depreciation and amortization 1,988 2,043 4,707 4,755
Taxes other than income 1,643 1,568 3,824 3,668
---------- ---------- ---------- ----------
Total costs and expenses 30,190 28,821 68,585 65,790
---------- ---------- ---------- ----------
Operating income 1,453 1,414 3,395 2,704
INTEREST EXPENSE, net 254 323 621 741
INTEREST INCOME 4 4 8 10
---------- ---------- ---------- ----------
Income before income tax
expense 1,203 1,095 2,782 1,973
INCOME TAX EXPENSE 439 410 1,015 739
---------- ---------- ---------- ----------
Net income $ 764 $ 685 $ 1,767 $ 1,234
========== ========== ========== ==========
EARNINGS PER SHARE $ 0.09 $ 0.08 $ 0.20 $ 0.14
========== ========== ========== ==========
WEIGHTED AVERAGE SHARES
OUTSTANDING 8,932,722 8,890,004 8,899,082 8,878,140
========== ========== ========== ==========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Common Stock Additional
------------------ Paid-In Retained Shareholders'
Shares Par Capital Earnings Equity
------- --------- ---------- ---------- ------------
(in thousands)
BALANCE, December 28, 1996 8,790 $ 44 $ 44,841 $ 22,653 $ 67,538
Issuance of stock 17 - 69 - 69
Exercise of options 6 - 38 - 38
Net income - - - 1,767 1,767
------ --------- --------- --------- -----------
BALANCE, July 12, 1997 8,813 $ 44 $ 44,948 $ 24,420 $ 69,412
====== ========= ========= ========= ===========
The accompanying notes are an integral part of these consolidated
condensed financial statements.
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Twenty-Eight Weeks Ended
--------------------------
July 12, July 13,
1997 1996
----------- ------------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,767 $ 1,234
Adjustments to reconcile net income
to net cash provided by operating activities
Depreciation and amortization 4,890 4,893
Increase in inventories (36) (44)
Increase in prepaid expenses,
accounts receivable,
notes receivable and other assets (337) (23)
Increase in accounts payable 6 76
Increase in accrued expenses
and deferred rent 1,614 372
Increase (decrease) in accrued,
deferred and prepaid taxes (142) 856
----------- ------------
Net cash provided by operations 7,762 7,364
----------- ------------
CASH FLOWS USED FROM INVESTING ACTIVITIES:
Additions to preopening costs (104) (684)
Additions to property and equipment (2,954) (6,952)
Purchases of liquor licenses (110) -
----------- ------------
Net cash used by investing activities (3,168) (7,636)
----------- ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 106 59
Paydown of debt (3,938) -
Decrease in notes payable (25) (25)
----------- ------------
Net cash provided by financing
activities (3,857) 34
----------- ------------
NET DECREASE IN CASH AND CASH EQUIVALENTS 737 (238)
CASH AND CASH EQUIVALENTS, beginning of period 4,266 1,384
----------- ------------
CASH AND CASH EQUIVALENTS, end of period $ 5,003 $ 1,146
=========== ============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for ---
Interest, net of amount capitalized $ 656 $ 692
=========== ============
Income taxes $ 1,360 $ 80
=========== ============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
BERTUCCI'S, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 12, 1997
1. Basis of Presentation
In the opinion of management, the accompanying consolidated condensed
financial statements contain all normal recurring adjustments necessary for
a fair presentation. The results of operations for the twelve-week and
twenty-eight-week periods ended July 12, 1997, are not necessarily
indicative of the results to be expected for the full year.
The significant accounting policies followed by the Company are set forth
in the notes to Consolidated Financial Statements in the Company's 1996
Annual Report and Form 10-K filed with the Securities and Exchange
Commission. These financial statements should be read in conjunction with
the financial statements included in the 1996 Annual Report and Form 10-K.
2. Earnings Per Share
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 128, Earnings Per Share (SFAS 128).
This Statement establishes standards for computing and presenting earnings
per share and applies to entities both publicly traded common stock or
potential common stock. SFAS 128 is effective for financial statements for
both interim and annual periods ending after December 15, 1997, and early
adoption is not permitted. When adopted, the Statement will require
restatement of prior years' earnings per share. The Company will adopt this
Statement for its annual report on Form 10-K for the year ended December
27, 1997. Assuming that SFAS 128 had been implemented, basic earnings per
share would have been $0.09 versus $0.08 for the twelve-week period, and
$0.20 versus $0.14 for the twenty-eight week period, ended July 12, 1997,
and July 13, 1996, respectively, and $0.36 for the year ended December 28,
1996. Under this Statement, diluted earnings per share would not have
differed from the earnings per share disclosed on the consolidated
condensed statement of operations.
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following table sets forth the percentage relationship to net sales of
certain items included in the company's income statements for the periods
indicated.
12 Weeks Ended 28 Weeks Ended
------------------- --------------------
July 12, July 13, July 12, July 13,
1997 1996 1997 1996
--------- --------- --------- ---------
NET SALES 100.0% 100.0% 100.0% 100.0%
--------- --------- ---------- ---------
COSTS AND EXPENSES:
Cost of sales 24.7 25.1 24.9 25.4
Operating expenses 53.2 52.4 52.5 52.2
General and administrative
expenses 6.0 5.9 6.0 6.2
Depreciation and amortization 6.3 6.7 6.6 6.9
Taxes other than income 5.2 5.2 5.3 5.4
---------- --------- ---------- ---------
Total costs and expenses 95.4 95.3 95.3 96.1
---------- --------- ---------- ---------
Operating income 4.6 4.7 4.7 3.9
INTEREST EXPENSE, net 0.8 1.1 0.8 1.0
INTEREST INCOME - - - -
---------- --------- ---------- ---------
Income before income tax
expense 3.8 3.6 3.9 2.9
INCOME TAX EXPENSE 1.4 1.3 1.4 1.1
---------- -------- ---------- ---------
Net income 2.4% 2.3% 2.5% 1.8%
========== ======== ========== =========
NUMBER OF RESTAURANTS:
Restaurants open at beginning
of period 81 76 80 76
Restaurants opened during
period - 1 1 4
Restaurants closed during
period - - - (3)
---------- -------- --------- ---------
Restaurants open at end of
period 81 77 81 77
Twelve Weeks Ended July 12, 1997, Compared To Twelve Weeks Ended July 13, 1996
Net sales increased $1.4 million, or 4.7%, to $31.6 million in the second
quarter of fiscal year 1997, from $30.2 million in the second quarter of fiscal
year 1996. Comparable restaurant sales for the twelve-week period increased
0.3%. The Company did not open or close any restaurants in the twelve-week
period ended July 12, 1997.
Cost of sales, primarily food and beverages, increased from $7.6 million
in the twelve weeks ended July 13, 1996, to $7.8 million in the corresponding
1997 period. As a percentage of net sales, these costs were 25.1% in the 1996
fiscal period, and 24.7% in the corresponding 1997 fiscal period. The percentage
decrease was the result of lower prices for cheese and flour, and more efficient
operations.
Restaurant operating expenses for the twelve-week period increased from
$15.8 million in fiscal year 1996, to $16.8 million for the corresponding period
in fiscal year 1997. As a percentage of net sales, operating expenses increased
from 52.4% during the twelve weeks ended July 13, 1996, to 53.2% during the
corresponding period in 1997. The increase was the result of higher payroll and
advertising costs.
General and administrative expenses increased slightly, as a percentage of
net sales, from 5.9% during the twelve weeks ended July 13, 1996, to 6.0% during
the corresponding period of fiscal year 1997. The increase came from increases
in training and in-house marketing costs.
Depreciation and amortization expense decreased, as a percentage of net
sales, from 6.7% in the 1996 twelve-week period, to 6.3% in the 1997 twelve-week
period. This decrease was attributable to the amortization expense on fewer new
restaurants.
Taxes, other than income taxes, remained at $1.6 million for both
twelve-week periods ending in July.
Interest expense decreased from $323,000 to $254,000 for the corresponding
twelve weeks of 1996 and 1997, respectively. The decrease was attributable to
the lower amounts of bank borrowings during the 1997 period.
The effective income tax rate decreased from 37.4% for the twelve weeks
ended July 13, 1996, to 36.5% for the corresponding period ended July 12, 1997.
Twenty-Eight Weeks Ended July 12, 1997, Compared To Twenty-Eight Weeks Ended
July 13, 1996
Net sales increased $3.5 million, or 5.1%, to $72.0 million for the
twenty-eight-week period in 1997, compared to $68.5 million in the same period
last year. New restaurants that were opened in 1996 and 1997 primarily
contributed to the increase. Comparative restaurant sales during the
twenty-eight-week period were positive by 0.8%. Menu price-increases for the
period under comparison were approximately 1.0%.
Cost of sales, primarily food and beverages, increased from $17.4 million
for the 1996 twenty-eight-week period, to $17.9 million for the 1997
twenty-eight-week period, and decreased, as a percentage of net sales, from
25.4% to 24.9% for the twenty-eight-week periods ended in 1996 and 1997,
respectively. The percentage decrease came from better buying opportunities and
better efficiency at the operations level.
Restaurant operating expenses for the twenty-eight-week period increased
from $35.7 million in fiscal year 1996, to $37.8 million in fiscal year 1997. As
a percentage of net sales, operating expenses increased from 52.2% during the
twenty-eight weeks ended July 13, 1996, to 52.5% during the corresponding period
in 1997. The increase was the result of higher payroll and advertising costs.
General and administrative expenses, as a percentage of net sales for the
twenty-eight-week period, decreased from 6.2% in 1996, to 6.0% in 1997. This
decrease was the result of attrition at the corporate level, reduction in costs
associated with opening new stores, and a reduction in region operating costs.
Depreciation and amortization expense, as a percentage of net sales,
decreased from 6.9% in the 1996 twenty-eight-week period, to 6.6% in the 1997
twenty-eight-week period. This decrease was attributable to the amortization
expense on fewer new restaurants.
Taxes, other than income taxes, increased from $3.7 million during the
twenty-eight weeks ended July 13, 1996, to $3.8 million for the corresponding
period in 1997, and decreased, as a percentage of net sales, from 5.4% in 1996
to 5.3% in 1997.
Interest expense decreased from $741,000 to $621,000 for the corresponding
twenty-eight-week periods of 1996 and 1997, respectively. The decrease was
attributable to the lower amount of bank borrowings in the 1997
twenty-eight-week period.
The effective income tax rate decreased from 37.5% for the twenty-eight
weeks ended July 13, 1996, to 36.5% for the corresponding period ended July 12,
1997.
Liquidity and Sources of Capital
To date, the Company has financed its expansion from operations, bank
borrowing, and private placements and public offerings of equity securities. The
Company does not have significant receivables or inventory, and receives trade
credit based upon negotiated terms in purchasing food and supplies.
The Company has a bank line-of-credit in effect until November 30, 1997,
under which it may borrow up to $30.0 million. On November 30, 1997, the Company
will be able to convert the balance, if any, to a term loan maturing on November
30, 2000. The Company pays a fee of 1/4 of 1% on the unused balance, and
interest is calculated using LIBOR plus 1.25%. There are no compensating balance
arrangements or legal restrictions as to the withdrawal of these funds. At July
13, 1996, and July 12, 1997, the amounts outstanding under this bank
line-of-credit were $19.4 million and $14.5 million, respectively.
During the twenty-eight weeks ended July 13, 1996, and July 12, 1997, the
Company's investment in property and equipment was $7.0 million and $3.0
million, respectively. The investments were funded with cash provided by
operations and with the proceeds of financing activities.
Cash provided by operations amounted to $7.4 million and $7.8 million for
the twenty-eight weeks ended July 13, 1996, and July 12, 1997, respectively.
The Company opened one new restaurant in the first twenty-eight weeks of
1997, and expects to open a total of six new restaurants by the end of fiscal
year 1997, with an additional 8 to 10 restaurants planned for fiscal year 1998.
The Company expects to expend approximately $9.0 million in fiscal year 1997,
and approximately $11.0 million in fiscal year 1998, to finance expansion. The
Company believes that it will have sufficient working capital and bank
borrowings to finance its expansion plans through the end of fiscal year 1998.
PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by this
report.
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.
BERTUCCI'S, INC.
(Registrant)
Date: August 22, 1997 By: /s/ Joseph Crugnale
-----------------------------------
Joseph Crugnale
President and Chief
Executive Officer
Date: August 22, 1997 By: /s/ Norman S. Mallett
-----------------------------------
Norman S. Mallett
Vice President - Finance
Chief Financial Officer and
Treasurer