UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM ____________ TO ____________
COMMISSION FILE NUMBER 0-27366
RAINFOREST CAFE, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 41-1779527
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
720 South Fifth Street
Hopkins, MN 55343
(Address of principal executives offices, including zip code)
(612) 945-5400
(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 (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
----- -----
Number of shares of Common Stock , outstanding as of August 12, 1996:
13,937,055
RAINFOREST CAFE, INC.
INDEX
PART I. FINANCIAL INFORMATION Page number
Item 1. Financial Statements
Balance Sheets as of June 30, 1996 and December 31,
1995.....................................................2
Statements of Operations for the thirteen weeks
and twenty-six weeks ended June 30, 1996 and
July 2, 1995.............................................3
Statements of Cash Flows for the thirteen weeks
and twenty-six weeks ended June 30, 1996 and
July 2, 1995.............................................4
Notes to Condensed Financial
Statements...............................................5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...........6
PART II. OTHER INFORMATION
Item 1. Legal
Procedures...............................................12
Item 4. Submission of Matters to a Vote of Security
Holders..................................................12
Item 6. Exhibits and Reports on Form
8-K......................................................12
Signature Page....................................................13
RAINFOREST CAFE, INC.
BALANCE SHEETS
June 30, December 31,
1996 1995
------------- -------------
(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 76,593,268 $ 16,323,178
Accounts receivable and other 2,628,811 1,447,610
Inventories 1,474,510 1,075,857
Preopening expenses 1,738,755 514,636
------------- -------------
Total current assets 82,435,344 19,361,281
PROPERTY, EQUIPMENT AND LEASEHOLD
IMPROVEMENTS, net 32,550,872 11,847,675
------------- -------------
$ 114,986,216 $ 31,208,956
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 7,140,322 $ 3,213,330
Accrued expenses-
Payroll and payroll taxes 164,194 288,758
Other 943,181 368,849
------------- -------------
Total current liabilities 8,247,697 3,870,937
DEFERRED RENT 3,536,704 982,638
------------- -------------
Total liabilities 11,784,401 4,853,575
------------- -------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, no par value, 50,000,000 shares authorized;
13,934,055 and 9,484,347 shares issued and outstanding 103,332,572 27,867,419
Accumulated deficit (130,757) (1,512,038)
------------- -------------
Total shareholders' equity 103,201,815 26,355,381
------------- -------------
$ 114,986,216 $ 31,208,956
============= =============
RAINFOREST CAFE, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
Thirteen Twenty-six Thirteen Twenty-six
weeks weeks weeks weeks
ended ended ended ended
June 30, June 30, July 2, July 2,
1996 1996 1995 1995
------------ ------------ ------------ ------------
REVENUES:
Restaurant sales $ 5,600,594 $ 10,312,041 $ 1,826,188 $ 3,311,642
Retail sales 1,469,787 2,502,320 676,719 1,182,330
------------ ------------ ------------ ------------
Total revenues 7,070,381 12,814,361 2,502,907 4,493,972
------------ ------------ ------------ ------------
COSTS AND EXPENSES:
Food and beverage costs 1,399,641 2,624,228 462,814 958,104
Cost of retail goods sold 668,596 1,137,451 324,211 587,130
Restaurant operating expenses 2,724,282 5,097,875 993,584 1,839,420
Retail operating expenses 464,183 831,929 143,688 339,376
Depreciation and amortization 324,196 604,879 82,467 154,130
Preopening amortization 170,869 341,738 -- --
------------ ------------ ------------ ------------
Total costs and expenses 5,751,767 10,638,100 2,006,764 3,878,160
------------ ------------ ------------ ------------
Restaurant and retail operating income 1,318,614 2,176,261 496,143 615,812
------------ ------------ ------------ ------------
OTHER EXPENSES
General, administrative and development 1,125,482 1,981,723 286,816 475,587
Loss on sale of equipment -- -- 1,763 1,763
Interest (income) expense, net (1,094,082) (1,936,743) (85,418) (49,637)
Interest expense - amortization of loan discount -- -- 9,698 186,189
------------ ------------ ------------ ------------
Total other expenses 31,400 44,980 212,859 613,902
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM 1,287,214 2,131,281 283,284 1,910
PROVISION FOR INCOME TAXES 454,000 750,000 -- --
------------ ------------ ------------ ------------
INCOME BEFORE EXTRAORDINARY ITEM 833,214 1,381,281 283,284 1,910
EXTRAORDINARY ITEM -- -- 1,053,128 1,053,128
------------ ------------ ------------ ------------
Net income (loss) $ 833,214 $ 1,381,281 $ (769,844) $ (1,051,218)
============ ============ ============ ============
NET INCOME PER COMMON SHARE BEFORE
EXTRAORDINARY ITEM $ 0.06 $ 0.10 $ 0.04 $ 0.00
============ ============ ============ ============
NET INCOME (LOSS) PER COMMON SHARE $ 0.06 $ 0.10 $ (0.12) $ (0.21)
============ ============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING 14,454,956 14,026,655 6,332,844 5,086,872
============ ============ ============ ============
RAINFOREST CAFE, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
Thirteen Twenty-six Thirteen Twenty-six
weeks weeks weeks weeks
ended ended ended ended
June 30, June 30, July 2, July 2,
1996 1996 1995 1995
------------ ------------ ------------- -------------
OPERATING ACTIVITIES:
Net income (loss) $ 833,214 $ 1,381,281 $ (769,844) $ (1,051,218)
Adjustments to reconcile net income (loss) to cash
flows provided by (used in) operating activities-
Depreciation and amortization 3,241,995 3,897,994 84,887 158,535
Amortization of long-term debt discount -- -- 9,698 186,189
Extinguishment of debt - long-term debt discount -- -- 1,053,128 1,053,128
Loss on sale of equipment -- -- 1,763 1,763
Change in operating assets and liabilities-
Accounts receivable and other (1,752,356) (1,181,201) (333,607) (349,855)
Inventories (513,507) (398,653) (111,491) 60,508
Preopening expenses (1,460,352) (1,542,885) -- --
Accounts payable 3,228,632 3,926,992 695,539 526,476
Accrued expenses 363,584 449,768 10,016 (37,976)
------------ ------------ ------------ ------------
Net cash provided by operating activities 3,941,210 6,533,296 640,089 547,550
------------ ------------ ------------ ------------
INVESTING ACTIVITIES:
Proceeds from sale of equipment -- -- 4,500 4,500
Purchases of property, equipment and leasehold
improvements, net (12,280,424) (21,728,359) (1,273,178) (1,647,285)
------------ ------------ ------------ ------------
Net cash provided by (used in) financing activities (12,280,424) (21,728,359) (1,268,678) (1,642,785)
------------ ------------ ------------ ------------
FINANCING ACTIVITIES:
Payments on long-term debt to stockholders -- -- (509,625) (509,625)
Proceeds from the issuance of debt to shareholders -- -- -- 100,000
Proceeds from the sale of common stock, net -- 73,550,734 9,025,286 9,025,286
Tax effect of stock options exercised 384,500 644,048 -- --
Proceeds from stock options exercised 231,912 267,464 -- --
Proceeds from warrants exercised 1,002,907 1,002,907 -- --
------------ ------------ ------------ ------------
Net cash provided by financing activities 1,619,319 75,465,153 8,515,661 8,615,661
------------ ------------ ------------ ------------
INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS (6,719,895) 60,270,090 7,887,072 7,520,426
CASH AND CASH EQUIVALENTS, beginning of period 83,313,163 16,323,178 99,321 465,967
------------ ------------ ------------ ------------
CASH AND CASH EQUIVALENTS, ending of period $ 76,593,268 $ 76,593,268 $ 7,986,393 $ 7,986,393
============ ============ ============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Cash paid during the period for-
Interest $ -- $ -- $ 85,922 $ 85,922
Income taxes -- 45,000 -- --
Noncash investing and financing activities-
Conversion of debt to common stock -- -- 169,372 169,372
RAINFOREST CAFE, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
JUNE 30, 1996
(UNAUDITED)
(1) BASIS OF FINANCIAL STATEMENT PRESENTATION
The accompanying unaudited condensed financial statements have been prepared by
the Company pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. Although management believes that the disclosures are adequate to
make the information presented not misleading, it is suggested that these
interim condensed financial statements be read in conjunction with the Company's
most recent audited financial statements and notes thereto. In the opinion of
management, all adjustments (which include only normal recurring adjustments)
necessary for a fair presentation of the financial position, results of
operations and cash flows for the interim periods presented have been made.
Operating results for the thirteen weeks and twenty-six weeks ended June 30,
1996 are not necessarily indicative of the results that may be expected for the
fiscal year ending December 29, 1996.
(2) COMPLETED STOCK OFFERING AND STOCK SPLIT
In January 1996, the Company completed a secondary offering of 4,140,000 shares
of common stock at an offering price of $19.00 per share, including 540,000
shares from the exercise of the Underwriters' overallotment option. The Company
received net proceeds of approximately $73.6 million after the payment of
approximately $5.1 million in related underwriting discount and offering costs.
On May 21, 1996, the Company's Board of Directors approved a three-for-two stock
split in the form of a fifty percent stock dividend. The stock split has been
retroactively reflected in the accompanying disclosures and financial
statements.
(3) INCOME (LOSS) PER COMMON SHARE
Income (loss) per common share is based on the weighted average number of common
shares outstanding during each period. However, pursuant to certain rules of the
Securities and Exchange Commission, the calculations for the thirteen week and
twenty-six week period ended July 2, 1995 also includes equity securities,
including options and warrants, issued within one year of an initial public
offering with an issue price less than the initial public offering price, even
if the effect is anti-dilutive. The treasury stock approach was used in
determining the dilutive effect of such issuances. Common stock equivalents
(other than those issued within one year of an initial public offering with an
issue price less than the initial public offering price) including options and
warrants are assumed to be exercised or converted into common shares at the
beginning of each period unless the aggregate effect of such inclusion is
anti-dilutive. Primary and fully diluted income (loss) per share are the same.
(4) INCOME TAXES
As of December 31, 1995, the Company had a net operating loss carryforward of
approximately $350,000 which, if not used, would have expired in 2009. At June
30, 1996, the net operating loss carryforward was exhausted and the Company
recorded a provision for federal and state income taxes of $750,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
The Company was founded in February 1994 to own and operate themed
restaurant/retail facilities ("Unit") under the name "Rainforest Cafe -- A Wild
Place to Shop and Eat(R)." As of June 30, 1996 the Company operated three
Rainforest Cafe Units. The Company's initial Unit opened on October 3, 1994 in
the Mall of America in Bloomington, Minnesota, a suburb of Minneapolis, and was
approximately 13,800 square feet with a total of 188 restaurant seats. The
Company has since expanded this Unit to approximately 14,900 square feet
(including an approximately 3,500 square-foot retail selling floor) and a total
of 295 Restaurant seats. The Company's second Unit opened on October 20, 1995 in
the Woodfield Mall in Schaumburg, Illinois, a suburb of Chicago, and is
approximately 23,000 square feet (including an approximately 5,000 square-foot
retail selling floor) with 425 restaurant seats. The Company's third Unit opened
June 2, 1996, in the Gurnee Mills Mall in Gurnee, Illinois, a suburb of Chicago,
and is approximately 19,000 square feet (including an approximate 4,500 square
feet retail selling floor) with 325 restaurant seats. The balance of available
square footage is devoted to the restaurant and ancillary support areas.
The Company opened its fourth Unit on July 25, 1996, at Walt Disney World
Marketplace in Orlando, Florida. The Walt Disney World Unit is approximately
30,000 square feet, with approximately 6,000 square feet of retail selling
floor. The financial statements for the thirteen weeks and twenty-six weeks
ended June 30, 1996 do not reflect any of the operations for this Unit. On
August 6, 1996 the Company announced that sales for the first ten days at the
Walt Disney World Unit totaled $788,000.
The Company had no revenues for the period from February 3, 1994 (Inception)
through October 2, 1994. During this period, the Company developed the
Rainforest Cafe concept and completed construction of the Mall of America Unit.
The Company's policy is to capitalize costs associated with the opening of
Units, including the cost of hiring and training the initial workforce, travel
and other direct costs, if it is determined these costs are recoverable. These
costs are then amortized over the eleven month period following the opening of a
Unit beginning in the first full month of operation. The Company charged to
operations all pre-opening costs for the Mall of America Unit during the period
ended October 2, 1994 due to the developmental nature of this Unit. For the
Woodfield Mall Unit and Gurnee Mills Unit, the Company capitalized approximately
$629,000 and $545,000 respectively of pre-opening costs and is amortizing these
expenses over the eleven month period beginning November 1995 for the Woodfield
Unit and over eleven months beginning July 1996 for the Gurnee Mills Unit.
The Company is currently developing Units at Tysons Corner Center I, in McLean,
Virginia, a suburb of Washington, D.C.; Sawgrass Mills, located in Fort
Lauderdale, Florida; Stratosphere in Las Vegas, Nevada; and in the casino
complex at the Trump Taj Mahal Casino and Hotel in Atlantic City, New Jersey.
The Company has announced plans to develop Units at Palisades Center in West
Nyack, New York; Southcoast Plaza in Costa Mesa, California; The Source, a
shopping mall in Westbury, Long Island, New York; at the MGM Grand Hotel and
Casino in Las Vegas Nevada; Grapevine Mills, adjacent to Dallas, Texas; and at
Disney's Animal Kingdom in Orlando, Florida. The Company intends to lease its
Units and anticipates that most of its future Units will range in size from
approximately 18,000 to 23,000 square feet, with between 300 and 425 restaurant
seats with approximately 20-25% of square footage dedicated to retail selling
floor. However, some Units may be significantly larger, such as the
free-standing Walt Disney World Unit or the Trump Taj Mahal Unit, which is
expected to comprise approximately 36,000 square feet, with 500 restaurant
seats; and the second free standing Unit at Disney's Animal Kingdom which is
expected to comprise approximately 35,000 square feet, with 500 restaurant
seats. The Company believes that in periods of rapid expansion, period to period
comparisons may not be meaningful.
The Company has entered into a joint venture and licensing agreement with the
Foundation Group located in London, England to develop five Rainforest Cafe
Units in the United Kingdom and Ireland over ten years. Under the agreement, the
Company has agreed to provide a 20% capital contribution in return for 20%
ownership in a limited liability company based in the United Kingdom, which will
operate the joint venture's initial Rainforest Cafe Unit in London, England. The
Company also has reached agreement in principle with Empresas de Comunicacion y
Entretenimiento "ECE" to be the exclusive licensee of Rainforest Cafe Units in
Mexico. Under the proposed agreement, ECE would develop seven Rainforest Cafe
Units over a ten year period. The Company anticipates that Units developed by
ECE would not require a capital contribution by the Company.
Components of operating expenses include operating payroll and fringe benefit
costs, occupancy costs, maintenance costs related to the bird habitat and
aquariums, and advertising and promotion costs. The majority of these costs are
variable and will increase with sales volume. Management projects that when a
new Unit opens, it will incur higher than normal levels of labor and food costs
as Unit personnel complete training. Management believes, however, that as new
staff gain experience, hourly labor schedules over the ensuing 30-60 day period
will be gradually adjusted to provide operating efficiencies similar to those at
established Units. Each of the Company's current leases includes both fixed rate
and percentage rent provisions.
General, administrative and development expenses include all corporate and
administrative functions that serve to support existing operations and provide
an infrastructure to support future growth. In addition, certain expenses of
recruiting and training Unit management personnel prior to meeting the criteria
to be capitalized as pre-opening expenses are also included. Management,
supervisory and staff salaries, employee benefits, travel, information systems,
training, rent and office supplies are major items of costs in this category.
RESULTS OF OPERATIONS FOR THE THIRTEEN WEEKS AND TWENTY-SIX WEEKS ENDED JUNE 30,
1996, COMPARED TO THE THIRTEEN WEEKS AND TWENTY-SIX WEEKS ENDED JULY 2, 1995.
Results of operations for the thirteen week and twenty-six week periods ended
June 30, 1996 reflect operations of the Mall of America Unit and the Woodfield
Mall Unit for the entire periods and results of operations for the Gurnee Mills
Unit beginning June 2, 1996. Results of operations for the thirteen week period
ended July 2, 1995 reflect operations for the Mall of America Unit only.
The operating results of the Company expressed as a percentage of total revenues
(except where noted) were as follows:
Thirteen Weeks Ended Twenty-Six Weeks Ended
June 30, 1996 July 2, 1995 June 30, 1996 July 2, 1995
------------- ------------ ------------- ------------
Net sales
Restaurant 79.2 % 73.0 % 80.5 % 73.7 %
Retail 20.8 27.0 19.5 26.3
----- ----- ----- -----
Total net sales 100.0 100.0 100.0 100.0
Costs and expenses
Food and beverage costs (1) 25.0 25.3 25.4 28.9
Cost of retail goods sold (2) 45.5 47.9 45.4 49.7
Restaurant operating expenses (1) 48.6 54.4 49.4 55.5
Retail operating expenses (2) 31.6 21.2 33.2 28.7
Depreciation and amortization 4.6 3.3 4.7 3.4
Preopening amortization 2.4 - 2.7 -
----- ---- ----- ----
Total costs and expenses 81.4 80.2 83.0 86.3
----- ---- ----- ----
Restaurant and retail operating income 18.6 19.8 17.0 13.7
----- ---- ----- ----
Other expenses:
General, administrative and development 15.9 11.5 15.5 10.6
Interest (income) expense, net (15.5) (3.0) (15.1) 3.1
----- ---- ----- ----
Total other expenses .4 8.5 .4 13.7
Income before income taxes and extraordinary item 18.2 11.3 16.6 0.0
Provision for income taxes 6.4 - 5.8 -
----- ----- ----- -----
Income before extraordinary item 11.8 11.3 10.8 0.0
Extraordinary item - 42.1 - 23.4
----- ----- ----- -----
Net income (loss) 11.8 % (30.8) % 10.8 % (23.4) %
===== ===== ===== =====
(1) Percentage of restaurant sales
(2) Percentage of retail sales
Total net sales increased $4.6 million (183%), to $7.1 million for the thirteen
week period ended June 30, 1996 from $2.5 million for the thirteen week period
ended July 2, 1995. For the twenty-six week period ended June 30, 1996 net sales
increased $8.3 million (185%) to $12.8 million from $4.5 million for the
twenty-six week period ended July 2, 1995. The increase in net sales for the
comparative periods from 1995 to 1996 is primarily due to the following:
Thirteen Week Period Twenty-Six Week Period
-------------------- ----------------------
Woodfield Mall Unit addition $ 3.4 million $ 6.7 million
Gurnee Mills Unit addition $ .9 million $ .9 million
Increase Restaurant seating capacity
Mall of America Unit $ .5 million $ .9 million
Retail sales at the Mall of America Unit decreased $.1 million and $.2 million
for the thirteen and twenty-six week comparable periods respectively in 1996
compared to 1995. Retail sales decreased as a percentage of total net sales for
the 1996 periods compared to the 1995 periods due in part to the increase in
restaurant seating capacity and decrease in retail sales area at the Mall of
America Unit.
Food and beverage costs increased 202% to $1.4 million for the thirteen weeks
ended June 30, 1996, from $.5 million for the comparable period in 1995, and
174% to $2.6 million for the twenty-six period ended June 30, 1996, from $1.0
million for the comparable period in 1995. The increase in food and beverage
costs for both periods are due to the addition of the Woodfield Mall and Gurnee
Mills Units and the Mall of America Unit expansion. Food and beverage costs
decreased as a percentage of restaurant sales from the 1995 to the 1996
comparable periods due to price increases at the Mall of America Unit and
improvements in food preparation and purchasing efficiencies at all units.
Cost of retail goods sold increased 106% to $.7 million for the thirteen weeks
ended June 30, 1996, from $.3 million for the comparable period in 1995 and to
$1.1 million for the twenty-six week period ended June 30, 1996, from $.6
million for the comparable period in 1995. The increase for both periods was due
to the addition of the Woodfield Mall and Gurnee Mills Units. Cost of retail
goods sold as a percentage of retail sales decreased from the comparable periods
in 1995 compared to 1996. This decrease was a result of purchase price
decreases, retail price increases and higher margin product additions to the
retail sales offering.
Restaurant and retail operating expenses increased 180% to $3.2 million for the
thirteen weeks ended June 30, 1996, from $1.1 million for the comparable period
in 1995, and 172% to $5.9 million for the twenty-six week period ended June 30,
1996, from $2.2 million for the comparable period in 1995. The increase in
restaurant operating expenses for both periods is due to the addition of 85
restaurant seats at the Mall of America Unit and the addition of the Woodfield
Mall and Gurnee Mills Units. The increase in retail operating expenses over the
same periods are due to the addition of the Woodfield Mall and Gurnee Mills
Units. Restaurant operating expenses decreased as a percentage of restaurant
sales for both periods due to increased leverage of fixed costs and restaurant
labor. Retail operating expenses increased as a percentage of sales for both
periods due to the decrease in retail sales at the Mall of America Unit and
higher fixed costs of Unit retail operations.
Depreciation and amortization expenses increased 293% to $324,000 for the
thirteen weeks ended June 30, 1996, from $82,000 for the comparable period in
1995, and 292% to $605,000 for the twenty-six week period ended June 30, 1996,
from $154,000 for the comparable period in 1995. The increase in depreciation
and amortization expense for both periods is due to the expansion of the number
of seats at the Mall of America Unit and the addition of the Woodfield Mall and
Gurnee Mills Units.
General, administrative and development expenses increased from $.3 million and
$.5 million for the thirteen week and twenty-six week periods in 1995 to $1.1
million and $2.0 million for the thirteen week and twenty-six week periods ended
in 1996. General, administrative and development expenses increased as a
percentage of net sales for both periods as a result of the addition of senior
management, corporate employees and unit management personnel in training all of
whom the Company hired to execute its growth strategy for 1996 and beyond.
Interest income for the thirteen week period ended June 30, 1996, was $1.1
million and $1.9 million for the twenty-six week period ended June 30, 1996.
Interest income was generated by investing the net proceeds from the Company's
initial public offering, the exercise of its Class A Warrants and its secondary
public offering. For the twenty-six week period ended July 2, 1995, the Company
incurred $137,000 of interest expense including amortization of loan discount
totaling $186,000.
The provision for income taxes in 1996 is based upon the Company's anticipated
tax rate less adjustment for approximately $350,000 in net operating loss
carryforwards available at December 31, 1995. The Company did not record a
provision for federal or state income taxes in 1995 due to sufficient net
operating loss carryforwards to offset income tax liabilities.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal capital needs arise from the development and opening of
new Units. Prior to the IPO, completed on April 7, 1995, the Company met its
capital requirements through the private placement of debt and common stock,
landlord contributions and cash flow from operations. During the period from
February 3, 1994 (inception) through July 2, 1994, the Company sold 2,969,400
shares of Common Stock in private transactions resulting in net proceeds to the
Company of approximately $2.0 million. The Company also received approximately
$1.3 million from the issuance of promissory notes to certain of its
shareholders. In addition, the Company acquired certain assets from a principal
shareholder in exchange for a $370,125 promissory note.
In April 1995, the Company completed an IPO of 2,587,500 units with each unit
consisting of one share of Common Stock and one Class A Warrant. The IPO
resulted in net proceeds to the Company of approximately $9.0 million.
Simultaneous with the IPO, approximately $1.2 million owed under the Notes was
converted into 458,437 shares of Common Stock. The conversion of the Notes to
equity resulted in an extraordinary charge to earnings of approximately $1.1
million for the early extinguishment of debt. In August 1995, the Company
received additional net proceeds of approximately $14.2 million resulting from
the exercise of its Class A Warrants, at an exercise price of $5.50 per share.
Since its IPO in April 1995 through December 31, 1995, the Company has financed
its capital requirements through the proceeds from that offering, the exercise
of the Class A Warrants and cash flow from operations. In January 1996, the
Company issued an aggregate of 4,180,000 shares of Common Stock pursuant to a
second public offering at $19.00 per share. The net proceeds to the Company,
after payment of underwriting fees and offering expenses was approximately $73.6
million. In May of 1996 the Company received approximately $1.0 million net
proceeds from the exercise of warrants at $4.80 per share issued to Underwriters
of the Company's IPO. At June 30, 1996, the Company had working capital of
approximately $74.2 million.
The Company spent an aggregate of approximately $13.8 million in capital
expenditures related to the development and opening of the Mall of America,
Woodfield Mall and Gurnee Mills Units and the establishment of the Company's
corporate headquarters. Total expenditures required to develop the Mall of
America Unit were approximately $3.3 million, including costs related to the
expansions of its restaurant and net of landlord contributions. Total
expenditures required to open the Woodfield Mall Unit and Gurnee Mills Unit were
approximately $5.9 million and $4.0 million respectively, net of landlord
contributions. Additionally, the Company incurred $629,000 in pre-opening costs
and purchased approximately $300,000 of inventory in connection with the opening
of its Woodfield Mall Unit and incurred approximately $550,000 in pre-opening
costs and purchased approximately $215,000 of inventory in connection with the
opening of its Gurnee Mills Unit.
Management anticipates capital expenditures of approximately $20.0 million net
of landlord contributions for the remaining 26 weeks in fiscal 1996, related to
the development and opening of four additional Units in 1996, a portion of the
costs associated with the opening of Units in 1997 and capital expenditures
associated with maintenance of its existing Units. The Company expects that
future locations will cost between $4.0 million and $5.5 million, net of
anticipated landlord contributions. In addition, the Company expects that it
will incur approximately $600,000 in pre-opening costs and purchase
approximately $300,000 of inventory in connection with the opening of future
Units. The Company also expects to open selected, larger Units, such as its
planned Units at Walt Disney World and the Trump Taj Mahal Casino and Hotel,
which may cost significantly more.
For the twenty-six week period ended June 30, 1996, the Company spent an
aggregate of approximately $21.7 million in capital expenditures related
primarily to the development of the Gurnee Mills Unit and Walt Disney World Unit
and Tysons Corner Unit before deducting landlord contributions. The Company
generated approximately $6.5 million from operating activities during the
twenty-six week period ended June 30, 1996.
The Company contemplates that the development and opening of each of its Units
in 1996 and 1997 will be financed with the net proceeds of approximately $73.6
million from the Company's second public offering completed in January 1996,
cash on hand, and cash flow from operations. In connection with the Mall of
America, Woodfield Mall and Gurnee Mills Units, the Company has received
landlord contributions, reducing the cost of opening these Units. There can be
no assurance, however, that landlord contributions will be available in the
future or that the Company will be able to raise additional capital on terms
satisfactory to the Company or at all. The proceeds from the second public
offering, together with cash on hand and cash flow from operations, are expected
to fund the Company's expansion plans through 1997. The Company may require
additional equity or debt financing to continue expansion beyond 1997.
It is not anticipated that the Company's business will require substantial
working capital to meet its operating requirements. Virtually all of the
Company's revenues are collected in cash or pursuant to credit card processing.
Food and beverage inventories and merchandise inventories are expected to
increase in relation to trade accounts payable.
QUARTERLY FLUCTUATIONS, SEASONALITY AND INFLATION
As a result of the substantial revenues associated with each new Unit, the
timing of new Unit openings will result in significant fluctuations in quarterly
results. The Units may also have higher third or fourth quarter revenues than
the other two quarters as a result of seasonal traffic increases at mall
locations and seasonally stronger retail sales.
The primary inflationary factors affecting the Company's operations include food
and beverage and labor costs. In addition, the Company's leases require the
Company to pay taxes, maintenance, repairs and utilities, and these costs are
subject to inflationary increases. The Company believes low inflation rates have
contributed to relatively stable costs. There is no assurance, however, that low
inflation rates will continue.
PART II - OTHER INFORMATION
Item 1. Legal Procedures: None
Item 4. Submission of Matters to a Vote of Security Holders.
A. The Annual meeting of Shareholders was held on May 21, 1996.
B. Matters voted upon:
(1) Directors elected at meeting:
AFFIRMATIVE NEGATIVE
VOTES VOTES ABSTENTIONS
-------------- ---------- -----------
David W. Anderson 12,113,633 10,388 1,548,374
Lyle Berman 12,113,483 10,538 1,548,374
Martin J. O'Dowd 12,113,130 10,890 1,548,374
David L. Rogers 12,110,543 13,478 1,548,374
Steven W. Schussler 12,106,350 17,670 1,548,374
Ercu Ucan 12,110,633 13,388 1,548,374
Joel N. Waller 12,112,395 11,625 1,548,374
(2) Proposal to amend the Company's 1995 Stock Option and
Compensation Plan to increase the number of shares of
Common stock reserved for issuance thereunder by
750,000 shares.
AFFIRMATIVE VOTES NEGATIVE VOTES ABSTENTIONS
----------------- -------------- -----------
7,025,795 2,556,030 2,542,196
(3) Proposal to approve the Company's 1996 Employee Stock Purchase Plan.
AFFIRMATIVE VOTES NEGATIVE VOTES ABSTENTIONS
----------------- -------------- -----------
9,328,628 185,471 2,609,922
Item 6. Exhibits and Reports on Form 8-K
A. Exhibits: None
B. Reports on Form 8-K: The Company did not file any reports on
Form 8-K during the quarter ended June 30, 1996.
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.
RAINFOREST CAFE, INC.
Date: August 14, 1996 /s/ Martin J. O'Dowd
--------------------------------------------
Martin J. O'Dowd
President
Date: August 14, 1996 /s/ Mark S. Robinow
--------------------------------------------
Mark S. Robinow
Chief Financial Officer (Principal
Financial Officer)