SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(MARK ONE)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 25, 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 NO. 0-10717
BAYPORT RESTAURANT GROUP, INC.
------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
FLORIDA 59-1827559
- ---------------------------- ----------------------
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION IDENTIFICATION NUMBER)
OR ORGANIZATION)
4000 HOLLYWOOD BOULEVARD; SUITE 695-S; HOLLYWOOD, FLORIDA 33021
---------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (954) 967-6700
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 THE FILING
REQUIREMENTS FOR AT LEAST THE PAST 90 DAYS.
YES [X] NO [ ]
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE REGISTRANT'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE:
9,655,599 SHARES OF COMMON STOCK, $.001 PAR VALUE AS OF MAY 7, 1996
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
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Item 1 Financial Statements
Consolidated Statements of Earnings for 3
the three months ended March 25, 1996 and
March 27, 1995
Consolidated Balance Sheets as of 4 - 5
March 25, 1996 and December 25, 1995
Consolidated Statements of Cash Flows for 6 - 7
the three months ended March 25, 1996
and March 27, 1995
Notes to Consolidated Financial Statements 8
Item 2 Management's Discussion and Analysis of 9 - 12
the Financial Condition and Results of
Operations
PART II. OTHER INFORMATION
Item 1 Litigation 13
Item 2 Changes in Securities 13
Item 3 Defaults Upon Senior Securities 13
Item 4 Submission of Matters to a Vote
of Securities-Holders 13
Item 5 Other Information 13
Item 6 Exhibits and Reports on Form 8-K 13
Signature Page 14
2
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS ENDED MARCH 25, 1996 AND MARCH 27, 1995
(UNAUDITED)
March 25, March 27,
1996 1995
----------- -----------
Revenues
Restaurant Sales $16,741,957 $10,742,385
Processing Plant Sales 1,509,274 1,655,018
Interest and other 16,581 31,543
----------- -----------
Total Revenues 18,267,812 12,428,946
Costs and expenses
Cost of sales 5,496,990 3,741,670
Payroll and related expenses 4,328,645 2,442,373
Other operating expenses 2,679,469 1,749,925
Occupancy and equipment 1,534,295 911,649
Processing plant cost of sales and operating expenses 1,621,666 1,688,900
Restaurant opening expenses 559,189 99,250
General and administrative 1,342,569 894,056
Interest expense 215,476 0
----------- -----------
Total costs and expenses 17,778,299 11,527,823
----------- -----------
Earnings before income taxes 489,513 901,123
Provision for income taxes 166,434 306,382
----------- -----------
NET EARNINGS $ 323,079 $ 594,741
=========== ===========
Earnings per common share
Net earnings $ 0.03 $ 0.06
=========== ===========
Weighted average number of 10,363,553 10,400,650
shares outstanding =========== ===========
The accompanying notes are an integral part of these statements
3
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 25, 1996 AND DECEMBER 25, 1995
(UNAUDITED)
ASSETS
March 25, December 25,
1996 1995
---------- ------------
CURRENT ASSETS
Cash and cash equivalents $ 467,950 $ 1,073,017
Investments In Marketable Securities 0 300,000
Accounts receivable 3,419,344 1,918,081
Inventories 4,072,156 5,461,381
Prepaid expenses and other current assets 651,929 735,648
Deferred Pre-opening costs 1,838,314 1,928,078
----------- -----------
Total current assets 10,449,693 11,416,205
PROPERTY AND EQUIPMENT - AT COST,
less accumulated depreciation 39,082,597 34,010,527
OTHER ASSETS
Notes Receivable 125,000 125,000
Deposits 645,535 525,698
Other 1,713,616 1,687,351
Goodwill 98,564 100,026
----------- -----------
Total other assets 2,582,715 2,438,075
----------- -----------
TOTAL ASSETS $52,115,005 $47,864,807
=========== ===========
The accompanying notes are an integral part of these statements
4
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 25, 1996 AND DECEMBER 25, 1995
(UNAUDITED)
LIABILITIES AND STOCKHOLDERS' EQUITY
March 25, December 25,
1996 1995
----------- -------------
CURRENT LIABILITIES
Current maturities of long-term
obligations $ 18,007,401 $ 2,283,576
Due to related parties 94,332 94,332
Accounts payable 6,369,513 5,521,837
Accrued liabilities 1,879,745 759,042
------------ ------------
Total current liabilities 26,350,991 8,658,787
LONG-TERM OBLIGATIONS 796,499 14,680,446
DUE TO RELATED PARTIES 1,139,862 1,155,586
DEFERRED INCOME TAXES 955,741 789,307
STOCKHOLDERS' EQUITY
Preferred stock - authorized and issued
15,000,000 shares of $.01 par value;
issued and outstanding 2,136,499 shares at
March 25, 1996 and 2,293,999 shares
at December 25, 1995 21,365 22,940
Common stock - authorized 50,000,000
shares of $.001 par value; issued
9,655,599 shares at March 25, 1996
and 9,600,568 at December 25, 1995 9,656 9,602
Paid in capital 22,126,779 22,113,189
Retained earnings 1,142,798 819,719
------------ ------------
23,300,598 22,965,450
Notes receivable from
officers (428,686) (384,769)
------------ ------------
Total stockholders' equity 22,871,912 22,580,681
============ ============
Total Liabilities & Stockholders'
Equity $ 52,115,005 $ 47,864,807
============ ============
The accompanying notes are an integral part of these statements
5
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 25, 1996 AND MARCH 27, 1995
(UNAUDITED)
March 25, March 27,
1996 1995
----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 323,07 $ 594,741
Increase in deferred tax liability 166,434 271,182
Depreciation of property,
plant and equipment 368,047 276,255
Amortization of intangible
assets 12,511 11,952
Recognition of deferred
income -- --
Adjustments to reconcile net
earnings to net cash provided
by (used in) operating activities
(Increase) decrease in
accounts receivable (1,501,263) 310,422
(Increase) in inventories 1,389,225 279,538
(Increase) decrease in
prepaid expenses 83,719 (231,521)
(Decrease) in accounts payable
and accrued expenses and
restructuring 1,968,379 800,300
(Increase) in deposits, goodwill
and other assets (144,640) 97,506
Decrease in deferred
pre-opening costs 89,764 (37,529)
----------- -----------
Net Cash provided by
operating activities 2,755,255 2,372,846
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property, plant and
equipment (5,491,618) (3,015,914)
Proceeds from maturity of
marketable securities 293,859 3,678,109
----------- -----------
Net Cash used in
investing activities $(5,197,759) $ 662,195
=========== ===========
The accompanying notes are an integral part of these statements
6
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS - CON'T
FOR THE THREE MONTHS ENDED MARCH 25, 1996 AND MARCH 27, 1995
(UNAUDITED)
March 25, March 27,
1996 1995
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal borrowings of Long-Term Debt $ 2,294,401
Principal payments of debt (470,564) (2,766,811)
Proceeds from issuance of Stock 13,600 --
Net cash used in financing activities 1,837,437 (2,766,811)
Increase (decrease) in cash and
cash equivalents (605,067) 268,230
Cash and cash equivalents at
beginning of the period 1,073,017 404,513
------------ -----------
Cash and cash equivalents at end
of the period $ 467,950 $ 672,743
============ ===========
Supplemental disclosures of cash flow
information
Cash paid during the period for
interest $ 286,937 $ 62,983
============ ===========
The accompanying notes are an integral part of these statements
7
BAYPORT RESTAURANT GROUP, INC. AND SUBSIDIARIES
BASIS OF PRESENTATION
RESULTS OF OPERATIONS FOR THE INTERIM PERIODS ARE NOT NECESSARILY INDICATIVE OF
THE RESULTS TO BE ATTAINED FOR THE ENTIRE PERIOD. IN THE OPINION OF THE COMPANY,
THE ACCOMPANYING UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS CONTAIN ALL
ADJUSTMENTS (CONSISTING ONLY OF NORMAL RECURRING ACCRUALS) NECESSARY TO PRESENT
FAIRLY THE CONSOLIDATED FINANCIAL POSITION AS OF MARCH 25, 1996 AND DECEMBER 25,
1995 AND RESULTS OF OPERATIONS AND CASH FLOWS FOR THE THREE MONTHS ENDED MARCH
25, 1996 AND MARCH 27, 1995. FOR A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
AND FOR ADDITIONAL FINANCIAL INFORMATION, SEE THE COMPANY'S ANNUAL REPORT ON
FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER 25, 1995 ("FORM 10-K").
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - Merger with Landry's Seafood Restaurants, Inc.
On April 18, 1996, the Company entered into an Agreement and Plan of Merger (the
"Merger Agreement") with Landry's Seafood Restaurants Inc. ("Landry's") and
Landry's Acquisition Corp. The closing of the merger contemplated by the Merger
Agreement (the "Merger") is subject to various closing conditions, including the
receipt of shareholder approval of the Company's shareholders. For a description
of the terms of the Merger Agreement, see the Company's Current Report on Form
8-K (the "Form 8-K") filed on May 1, 1996.
On April 18, 1996, the Company entered into a loan agreement (the "Loan
Agrement") with Landry's pursuant to which Landry's agreed to loan the Company
up to $11.0 million (the "Loan") to finance the continued construction of four
restaurants. For a description of the terms of the Loan, see the Form 8-K.
On May 8, 1996, Landry's filed a registration statement on Form S-4 (the
"Registration Statement") in connection with the transactions contemplated by
the Merger Agreement. The Registration Statement includes the form of Proxy
Statement which, when the Registration Statement becomes effective, will be
mailed to the Company's shareholders for use used in connection with the
Company's Special Meeting of Shareholders to be held for the purpose of voting
on the Merger Agreement.
NOTE 2 - Change in Status of Debt Obligation
The Company is presently in violation of certain covenants contained in its
credit agreements with certain lenders. See Note D to Notes to Consolidated
Financial Statements for the year ended December 25, 1995 for a description of
debt due to financial institutions. All covenants have been waived through the
end of 1996 so long as the Merger Agreement remains in effect and all required
payments of interest are made. However, due to this violation, current
maturities of long term debt includes $15,723,825 of debt due to financial
institutions.
8
ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following is management's discussion and analysis of certain factors which
have affected the Company's financial position and operating results during the
periods included in the accompanying financial statements. This discussion and
analysis should be read in conjunction with Management's Discussion and Analysis
contained in the Company's Annual Report on Form 10-K for the fiscal year ended
December 25, 1995. This Quarterly Report on Form 10-Q contains certain forward
looking statements which involve risks and uncertainties. The Company's actual
results could differ from the results anticipated herein.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
The Company's current ratio at March 25, 1996 was approximately .4 to 1. The
decrease from a current ratio of 1.3 to 1 at December 25, 1995 to .4 to 1 at
March 25, 1996 is due to the continued use by the Company of its available
resources in connection with its restaurant expansion program and the inclusion
at March 25, 1996 of certain amounts due to financial institutions in current
liabilities. See Note 2 to Notes to Consolidated Financial Statements.
The increase in accounts receivables of $1.5 million and the $1.3 million
decrease in inventory from the end of December 1995 to the end of March 1996 is
primarily attributable to a change subsequent to year end in the manner in which
the Company purchases its seafood commodity requirements. Prior to year end, the
Company purchased its seafood commodities and shipped them to various food
distributors which would then service the Company's restaurants in different
markets. Under this agreement, the Company retained title to the inventory and
the distributor charged the Company a nominal fee for shipping and handling.
Subsequent to year end, the Company's distributors have begun to purchase
seafood commodities from the Company as needed to service the Company's
restaurants. Under the new arrangement, the distributor obtains title to the
inventory and then resells it to the Company based on orders from the Company's
restaurants, relieving the Company of the burden of tracking and monitoring its
distributors' inventory for shrinkage and theft. This arrangement, in turn,
creates a receivable due to the Company and reduces the Company's inventory.
The increase in property, plant, and equipment from December 25, 1995 to March
25, 1996 principally results from the development of two restaurants opened
during the first quarter of 1996 and the construction in progress of four new
restaurants. At the present time, the Company has four restaurants under
construction and leases for an additional three restaurant sites on which
construction has not yet commenced.
The increase in accounts payable and accrued liabilities from period to period
was primarily due to the construction in progress of four new restaurants during
the period and the additional expenses incurred in connection with the operation
of the two new restaurants opened by the Company during 1996.
Effective December 14, 1994, Bayport and certain of its subsidiaries (the
"Subsidiaries") entered into a Revolving Credit and Term Loan Agreement (the
"Credit Agreement") with The First National Bank of Boston, as Agent, and with
the First National Bank of Boston and Capital Bank, as "Lenders". In accordance
with the Credit Agreement, the Lenders granted to Bayport a credit facility in
the amount of $14.0 million. The credit facility is for a term of seven years
and is structured in two parts: (i) for the first three years, the facility is
structured as a revolving loan; (ii) at the end of three years, so long as
Bayport is not then in default under the Credit Agreement, Bayport may convert
the amount then due and payable to the Lenders into a term loan payable in
quarterly principal installments over an additional four year period. Bayport
pays interest on the loans at the Bank's "Base Rate", as announced from time to
time, plus one-half percent (.5%). Interest is payable monthly. Bayport is also
obligated to pay the following fees to the Lenders: (i) a commitment fee equal
to 3/8 of one percent on the unused portion of the revolving loan; and (ii) a
fee for early termination of the revolving portion of the credit facility
(waived in connection with the Merger Agreement). Bayport is presently in
violation of certain covenants
9
contained in the Credit Agreement, but has recieved a waiver of these covenants
for the period that the Merger Agreement is in effect. See Note 2 to Notes to
Consolidated Financial Statements.
In June 1995, Bayport entered into an agreement to cap at 14% interest on a $7.0
million portion of the debt due to the Lenders until January 31, 1998. Bayport
paid a fee of $14,000 in connection with this agreement.
In February 1996, the Lenders agreed to increase the credit facility from $14.0
million to $16.0 million on the same terms and conditions as the Credit
Agreement. As of May 9, 1996, $15,791,662 was outstanding under the Credit
Agreement.
Additionally, on December 15, 1995, Bayport and each of its wholly-owned
subsidiaries, and Capital Bank entered into a Revolving Credit Agreement whereby
Capital Bank agreed to advance up to $2.0 million to Bayport, as determined by a
borrowing base of 80% of Bayport's seafood commodity inventory which is located
at a bonded warehouse in Jacksonville, Florida. The unpaid balance bears
interest at the rate of 1% over the prime rate as set forth from time to time in
The Wall Street Journal and is payable monthly. As of May 9, 1996, $1,850,000
was outstanding under this facility.
On April 18, 1996, the Company entered into the Loan Agreement with Landry's to
borrow up to $11.0 million to pay costs to complete construction of four
restaurants. If the Merger is not completed, Bayport will have 120 days to repay
the funds borrowed from Landry's. If funding cannot be obtained, Landry's has
the obligation to convert the Loan into the ownership of the five restaurants
which collateralize the Loan. Additionally, if the Merger were not to be
completed, Bayport might become obligated to pay a termination fee, which would
be due six months after the termination of the Merger Agreement. See Note 1 to
Notes to Consolidated Financial Statements.
Bayport believes that if the Merger is not completed, it will need approximately
$16.0 million to complete its 1996 expansion program, which includes repayment
of the $11.0 million being loaned to Bayport by Landry's pursuant to the Loan
Agreement. The failure to obtain this required funding would likely cause
Bayport to lose the five restaurants collaterizing the Loan and to have to
curtail its restaurant expansion program. Bayport is also currently obligated on
leases for three restaurant sites as to which it has not yet commenced
construction of new restaurants.
If the Merger is not completed, Bayport will most likely seek to raise the
capital which it requires for restaurant expansion and to repay debt through
sales of equity securites of Bayport (or debt securities convertible into equity
securities of Bayport). Issuances of these securities would likely be at
substantial discounts to current market and would likely substantially dilute
the interest of Bayport's existing equity holders. If capital cannot be obtained
in this manner, Bayport will seek alterntive types of financing, such as
build-to-suits, sale leasebacks, or joint ventures. There can be no assurance
that any financing will be available to Bayport for any or all of these
purposes. No funding has been committed at this date. The failure to obtain the
required funding would likely have a material adverse effect on Bayport's
operations, financial position and results of operations.
10
RESULTS OF OPERATIONS
Total revenues for the quarter ended March 25, 1996 were $18,276,812, which
represents an increase of 47% over total revenues of $12,428,946 for the quarter
ended March 27, 1996. The increase in revenues from period to period is
attributable to revenues from five Crab Houses and two Capt. Crab's Take-Aways
opened in 1995 and two Crab House Restaurants opened during the first quarter of
1996. Same store sales for restaurants open during both the first quarter of
1995 and 1996 were down approximately 2%. This reduction in same store sales
from period to period was primarily due to the impact on restaurant sales of the
severe winter during the first quarter of 1996 and to the impact on existing
restaurants of having opened opening of three new restaurants during 1995 and
1996 in markets where the Company already had restaurants in operation.
Cost of sales as a percentage of restaurant sales declined by 2%, from 34.8% for
the quarter ended March 27, 1995 to 32.8% for the quarter ended March 25, 1996.
The decrease in cost of sales is primarily attributable to an overall reduction
in seafood commodity costs.
During 1995, the Company opened three restaurants in hotels (Gulfport, Biloxi
and Singer Island). The Company's operational costs of these restaurants are
substantially higher than the Company's other restaurants, due to the other
services (banquet and room service) provided at these restaurants. The operating
profits, if any, from these restaurants will tend to be lower than has
historically been the case in the Company's restaurants, despite lower costs of
sales at these facilities.
Payroll and related expenses increased significantly from 1995 to 1996, both in
actual dollars and as a percentage of total revenues and restaurant sales.
Payroll increased as a result of increased labor costs in the Company's new
restaurants, particularly in those restaurants which are attached to hotels.
Overall, Operating Expenses (Payroll and Related Other Operating Expenses and
Occupancy and Related Expenses) increased significantly, both in actual dollars
and as a percentage of total revenues and restaurants sales (although Other
Operating Expenses decreased slightly as a percentage of Restaurant Sales).
These costs increased as a result of the opening of five Crab House Restaurants
and two Capt. Crab's Take-Aways in 1995 and the opening of two Crab Houses in
the first quarter of 1996. Operating Expenses as a percentage of Restaurant
Sales increased to 51% for the quarter ended March 25, 1996, compared to 47.5%
for the same period in 1995. Additionally, the Company's two new take-out
restaurants in Maryland have been operating at a loss in their initial operating
phase.
Restaurant opening expenses increased significantly during the first quarter of
1996 to $559,189, compared to $99,250 for the same period in 1995. The increase
in restaurant opening expenses is directly attributable to the opening of the
new restaurants discussed above.
General and Administrative Expenses were $1,342,569 for the quarter ended March
25, 1996 compared to $894,056 for the quarter ended March 27, 1995. The increase
is primarily attributable to the addition of administrative and operations
personnel and office space to handle the Company's restaurant expansion program.
General and Administrative Expenses as a percentage of total revenues were 7.3%
for the first quarter of 1996, compared to 7.2% for the first quarter of 1995.
Interest expense for the quarter ended March 25, 1996 was $215,476 compared to
the same quarter in 1995 which had no interest expence. Interest expense is a
result of borrowings used to fund the Company's restaurant expansion program.
11
The Company' seafood processing operation lost $112,392 for the first quarter of
1996, compared to a loss of $33,882 for the first quarter of 1995.
As a result of the above, net earnings were down by $271,662 from $594,741 for
the quarter ended March 27, 1995 to $323,079 for the quarter ended March 25,
1996.
12
PART II - OTHER INFORMATION
Item 1. LITIGATION
Not applicable.
Item 2. CHANGES IN SECURITIES
Not applicable.
Item 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES-HOLDERS
None.
Item 5. OTHER INFORMATION
None.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Exhibits
1. Agreement and Plan of Merger (incorporated by
reference from the Form 8-K).
2. Loan Agreement (incorporated by reference from the
Form 8-K).
(B) Reports of Form 8-K
The Registrant filed a Current Report on Form 8-K on
May 1, 1996 reporting that the Company had
entered into the Merger Agreement and the Loan
Agreement.
13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Company has caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BAYPORT RESTAURANT GROUP, INC.
SIGNATURE TITLE DATE
- --------- ----- ----
/s/ WILLIAM D. KORENBAUM President, Chief May 14, 1996
----------------------- Chief Financial and
William D. Korenbaum Operating Officer
/s/ DAVID J. KIRINCIC Controller and Chief
----------------------- Accounting Officer May 14, 1996
David J. Kirincic
14