UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported)
November 20, 1997
TACO CABANA, INC.
(Exact name of registrant as specified in its charter)
Delaware 0-20716
74-2201241
(State or other jurisdiction (Commission File Number)
(IRS employer identification no.)
of incorporation or organization)
8918 Tesoro Drive, Suite 200
San Antonio, Texas 78217
(Address of principal executive offices, including ZIP Code)
(210) 804-0990
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Item 5. OTHER EVENTS
On November 20, 1997, Taco Cabana, Inc. issued a
press release with respect to certain strategic
actions to be taken during the fourth quarter to
improve the operating results of its business. A
copy of such press release is attached hereto as
Exhibit 1.
The actions described in the press release include
the closure of seventeen restaurants, including
all seven of the Company's restaurants in
Colorado. The carrying value of the restaurants
to be disposed of totals approximately $14
million, or 9.7% of total assets as of September
28, 1997. In addition to the net carrying value,
the Company will establish lease reserves related
to these restaurants of approximately $5 million,
net of expected proceeds from the sale of the
three locations which are owned. In addition,
several significant items were accrued for
relating to the closing of the restaurants.
Finally, due to the significance of the events
described above, an analysis of all operating
assets in accordance with Statement of Financial
Accounting Standards No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of, was performed. The
total amount of the announced special charge is up
to $70 million, including the tax benefit to be
realized due to the charge. It is anticipated
that much of the tax benefit to be recorded will
be reduced by a valuation allowance as called for
by Statement of Financial Accounting Standards No.
109, Accounting for Income Taxes. As a result of
this valuation allowance, the Company does not
anticipate incurring any income tax expense for
financial reporting purposes during fiscal 1998.
Item 7. FINANCIAL STATEMENTS AND EXHIBITS
[C] Exhibits
1. Press Release dated November 20, 1997.
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 hereunto duly
authorized.
TACO CABANA, INC.
(Registrant)
Date: December 24, 1997 By: /s/ David G. Lloyd
David G. Lloyd
Senior Vice President and
Chief Financial Officer
Exhibit 1
TACO CABANA REPORTS CLOSURE OF COLORADO
MARKET AND SPECIAL CHARGE
San Antonio - November 20, 1997
Taco Cabana, Inc. (NASDAQ - TACO) announced today its
plan to cease operations in its Colorado market, and to take
a special charge which will include the anticipated costs
and expenses relative to the closure of its seven
restaurants in the Colorado market. The charge will also
include the cost of closing ten additional underperforming
restaurants and non-cash charges for the revaluation of
certain assets and goodwill in accordance with Statement of
Financial Accounting Standards No. 121 (FAS 121).
Management anticipates that the aggregate amount of the
special charge will be up to $70 million, after taking into
account the tax benefit associated with the charge. Since a
majority of these charges and costs are non-cash items, the
Company estimates that the after-tax cash impact will be
approximately $5 million.
Stephen V. Clark, President & CEO, said "Management and
the Board of Directors are committed to taking whatever
steps are necessary to improve our performance and enhance
shareholder value. We are convinced that the difficult
decisions we have made will make us a more efficient and
more profitable Company going forward. These restaurant
closings and associated writedowns will make us much more
focused in our successful markets." Mr. Clark added, "Our
core markets are performing well. We are particularly
pleased with the results from our five new prototype
restaurants as well as our reimaging program. We currently
have two restaurants under construction and plan to open an
additional eight to ten restaurants in existing markets, and
expand our reimage program during 1998. We would expect
these actions to result in a significant improvement in our
performance going forward."
David G. Lloyd, Chief Financial Officer, stated "We
believe that this charge will allow shareholders to more
clearly focus on our Company's underlying strengths. The
amount of the charge related to the closing of existing
restaurants totals approximately $20 million, pre-tax.
Additionally, we have reviewed other long-lived assets as
required by FAS 121 and determined that a reduction of
approximately $50 to $60 million, pre-tax, is required in
the carrying value of goodwill and certain other long-lived
assets. Finally certain other accruals will be increased by
approximately $2 million, pre-tax. The closing of these
underperforming restaurants will allow us to increase our
cash flows and earnings on a prospective basis. The final
amount of the charge will be determined during the annual
audit process and will be included in the Company's year-
end earnings release in early 1998."
Statements in this press release concerning Taco Cabana
which are (a) projections of revenues or other financial
items, (b) statements of plans and objectives for future
operations, specifically statements regarding planned
restaurant openings and reimagings, (c) statements of future
economic performance, (d) statements of assumptions or
estimates underlying or supporting the foregoing, or (e)
statements regarding the expected cash flows from property
sales or closures are forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Act of 1934. The ultimate
accuracy of forward-looking statements is subject to a wide
range of business risks and changes in circumstances, and
actual results and outcomes often differ from expectations.
Any number of important factors could cause actual results
to differ materially from those in the forward-looking
statements herein, including the following: the timing and
extent of changes in prices; actions of our customers and
competitors; the liquidity in the real estate markets in
which the Company is or will be attempting to market closed
properties; state and federal environmental, economic,
safety and other policies and regulations, any changes
therein, and any legal or regulatory delays or other factors
beyond the Company's control; execution of and availability
of financing for planned capital projects; weather
conditions affecting the Company's operations or the areas
in which the Company's products are marketed; natural
disasters affecting operations; and adverse rulings,
judgments, or settlements in litigation or other legal
matters. The Company undertakes no obligation to publicly
release the result of any revisions to any such forward-
looking statements that may be made to reflect events or
circumstances after the date hereof or to reflect the
occurrence of unanticipated events.