EXHIBIT 13
SELECTED AND OTHER FINANCIAL DATA
SELECTED FINANCIAL AND OPERATING DATA
(dollars in thousands)
JUNE 30 2000 1999(5) 1998(7) 1997 1996
---------- ---------- ---------- ---------- ----------
INCOME STATEMENT DATA:
Net sales $ 450,276 $ 495,597 $ 335,388 $ 304,838 $ 300,550
Cost of Sales 266,246 298,565 194,898 175,685 171,224
Other operating expenses 160,358 170,200 109,725 100,334 101,459
Provision for unit impairments
and closings --- 1,350 3,453 --- 9,404
General and administrative
expenses 15,230 17,458 12,832 11,465 12,761
Interest expense 7,177 6,255 2,514 2,714 5,253
Other expenses (income) (1,562) (1,000) (590) (505) (179)
---------- ---------- ---------- ---------- ----------
447,449 492,828 322,832 289,693 299,922
Gain from sale of Ralph &
Kacoo's --- 1,556 --- --- ---
---------- ---------- ---------- ---------- ----------
Income before income taxes 2,827 4,425 12,556 15,145 628
Provision for income taxes 416 425(6) 4,653 5,755 243
---------- ---------- ---------- ---------- ----------
Net income $ 2,411 $ 4,000 $ 7,903 $ 9,390 $ 385
========== ========== ========== ========== ==========
Per share data:
Net income .23 .38 .75 .89 .04
Cash dividends .24 .48 .48 .48 .48
BALANCE SHEET DATA:
Cash $ --- $ --- $ --- $ --- $ ---
Net property, plant and
equipment 163,877 176,250 203,865 126,020 129,012
Total assets 214,170 232,939 254,584 147,332 148,280
Long-term debt 68,391 74,226 78,979 31,240 31,700
Total shareholders' equity 79,281 79,402 80,436 77,604 73,293
OTHER DATA
(dollars in thousands)
JUNE 30 2000 1999 1998 1997 1996
---------- ---------- ---------- ---------- ----------
OTHER FINANCIAL DATA:
EBITDA(1) $ 26,702 $ 28,279 $ 31,200 $ 29,975 $ 28,201
Net cash provided by operating
activities 14,222 12,915 23,268 14,857 21,404
Depreciation and amortization(2) 16,698 17,805 12,677 12,116 12,916
Maintenance capital expenditures(3) 3,812 8,460 6,085 5,038 4,462
Total capital expenditures 6,832 15,460 14,928 10,870 6,887
RESTAURANT DATA:
Number of cafeterias and
seafood restaurants (end of
period) 242 254 277 137 138
Same-store cafeteria
sales % increase/(decrease)(4) (5.2)% (2.6)% 1.6% 4.2% 3.1%
___________________
(1) EBITDA is net income before provision for income taxes, gain from
sale of Ralph & Kacoo's, interest expense, provision for cafeteria
impairments and closings and depreciation and amortization. EBITDA
should not be considered as an alternative to, or more meaningful
than, income before income taxes, cash flow from operating activities
or other traditional indicators of operating performance. Rather,
EBITDA is presented because it is a widely accepted supplemental
financial measure that we believe provides relevant and useful
information. Our calculation of EBITDA may not be comparable to a
similarly titled measure reported by other companies, since all
companies do not calculate this non-GAAP measure in the same manner.
(2) Exludes amortization of deferred financing costs.
(3) Maintenance capital expenditures are those regularly scheduled
expensitures required to maintain, remodel and otherwise improve
existing facilities and equipment.
(4) "Same-stores" are cafeterias that were open for twelve full months in
both comparative periods. Since Morrison was acquired on May 28,
1998, the Morrison acquisition only affects the total same-store sales
comparison for fiscal year 2000.
(5) The sale of Ralph & Kacoo's was completed on March 30, 1999. Results
for the fiscal year eneded 1999 include nine months of Ralph & Kacoo's
operations.
(6) The sale of Ralph & Kacoo's resulted in a reported gain of $1.6
million and a net tax benefit of 40.8 million.
(7) Morrison was acquired on May 28, 1998. Results for the fiscal year
ended 1998 include one month of Morrison's operations.
STOCK INFORMATION
The Company's Common Stock is traded on the New York Stock Exchange under
the symbol "PIC." The following table sets forth the high and low sales
prices for each quarter within the last two years. As of September 8, 2000,
there were approximately 2,561 record holders of the Company's Common
Stock.
Per Share Per Share
Cash Cash
Quarter High Low Dividends Quarter High Low Dividends
YEAR ENDED 1ST $8.38 $6.50 $.12 Year ended 1st $13.50 $10.36 $.12
JUNE 30, 2000 2ND 6.88 3.06 .12 June 30, 1999 2nd 11.50 9.63 .12
3RD 4.25 2.63 --- 3rd 11.13 10.00 .12
4TH 3.25 2.63 --- 4th 11.50 8.00 .12
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION
LIQUIDITY AND CAPITAL RESOURCES
The Company has a $90 million credit facility with a syndicated group of
banks maturing on June 22, 2001. The credit facility is secured by
substantially all the current and future assets of the Company. Under the
credit facility, the Board may only declare a dividend to the extent of
the Company's net income for the prior fiscal quarter. Accordingly, the
Company's ability to declare dividends in compliance with the terms of the
credit facility is determined by its operating performance.
On February 7, 2000, the Board elected to suspend the Company's regular
quarterly dividend of $.12 per share. The suspension of the dividend saves
approximately $1.3 million per quarter. The Board concluded that until the
Company had demonstrated a sustained operating performance that would
support a dividend that could be safely maintained, suspension of the
dividend was the prudent course of action.
The balance outstanding under the credit facility is classified as
current at June 30, 2000 because the facility matures on June 22, 2001. At
June 30, 2000, approximately $5.0 million was available under the credit
facility. The Company is evaluating various alternatives and expects to
have a new credit arrangement in place prior to June 22, 2001.
In fiscal 2000, the Company made $3.8 million of maintenance capital
expenditures. In fiscal 2000, the Company was restricted to total capital
expenditures of $7.0 million under the terms of its credit facility. In
fiscal 2001, the Company expects to make approximately $6 million of
capital expenditures. No new cafeterias are scheduled to open in fiscal
2001.
Management believes that its cash from operations, together with remaining
credit available under the credit facility will be sufficient to provide
for the Company's operational needs for the foreseeable future.
RESULTS OF OPERATIONS
OVERVIEW
Piccadilly is the largest cafeteria chain in the United States with 242
cafeterias, and is the dominant cafeteria chain in the Southeastern and
Mid-Atlantic regions. We serve a diverse and extremely loyal customer base
consisting of families, groups of friends and co-workers, senior citizens,
couples and students. Our patrons enjoy a wide selection of convenient,
healthy, freshly prepared "home cooked" meals at value-oriented prices for
lunch and dinner.
We categorize our operating expenses into three major categories: cost of
sales, other operating expenses and general and administrative expenses.
Cost of sales consists of labor and food costs. Other operating expenses
consists primarily of advertising, building and security costs, meal
discounts, insurance, payroll taxes, repairs, supplies, utilities,
cafeteria-level performance incentives, depreciation, rent, and other
cafeteria-level expenses. General and administrative expenses is comprised
of executive and district manager salaries and related benefits, taxes and
travel expenses, legal and professional fees, depreciation, amortization,
and various other costs related to administrative functions.
RECENT ACQUISITIONS AND DISPOSITIONS
THE MORRISON ACQUISITION. In May 1998, we acquired Morrison Restaurants,
Inc. ("Morrison") for $57.3 million of total consideration (the "Morrison
Acquisition"). The discussion that follows refers to the cafeterias
acquired in the Morrison Acquisition as "Morrison cafeterias." All other
cafeterias are referred to as "Piccadilly cafeterias." At the time of the
Morrison Acquisition, Morrison was the largest cafeteria chain in the
Southeastern and Mid-Atlantic regions with 142 cafeterias in operation.
Morrison cafeterias were similar to our traditional Piccadilly cafeterias
in terms of size and markets served. We believe the Morrison Acquisition
allowed us to increase our penetration in our regional markets, enhance our
purchasing power and eliminate redundant costs.
We began converting Morrison cafeterias to Piccadilly-style cafeterias
(the "Morrison Conversions") in fiscal 1999. As of September 30, 1999, we
had completed 112 Morrison Conversions, and there have been no additional
Morrison Conversions since September 30, 1999. Since the Morrison
Acquisition, we closed 27 unprofitable cafeterias. Expenses associated with
the Morrison Conversions averaged approximately $40,000 per cafeteria for
training-team labor, new uniforms, repairs, and supplies. Additional costs
of approximately $25,000 per cafeteria, primarily for signage, were
capitalized. In aggregate, we spent approximately $7.3 million on the
Morrison Conversions. Ten Morrison cafeterias had not been converted as of
June 30, 2000, and will continue to operate as Morrison cafeterias. The
table below shows the number of Morrison Conversions by quarter:
MORRISON CAFETERIAS CONVERTED
FOR THE QUARTER ENDED
-----------------------------------------
FISCAL YEAR SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 TOTAL
- ----------- ------------ ----------- -------- ------- -----
1999 12 16 32 39 99
2000 13 -- -- -- 13
-----
Total conversions 112
=====
RALPH AND KACOO'S SALE. In March 1999, we sold six Ralph & Kacoo's
seafood restaurants for $21.3 million in cash. Ralph & Kacoo's generated
approximately $24.3 million of sales and $3.9 million of EBITDA in the
twelve-month period prior to the sale. Net proceeds from the sale were used
to reduce bank debt. We sold Ralph & Kacoo's in order to focus on our
traditional cafeteria operations.
RESULTS OF OPERATIONS
YEAR ENDED JUNE 30, 2000 COMPARED TO YEAR ENDED JUNE 30, 1999
NET SALES. Total net sales for the year ended June 30, 2000 were $450.3
million, a 9.2% reduction from 1999 net sales of $495.7 million. Included
in net sales for 1999 was $17.7 million realized from the Ralph & Kacoo's
seafood restaurants, which were sold on March 30, 1999. The $27.7 million
decline in cafeteria net sales was due to a $3.9 million decrease relating
to fewer cafeterias in operation and a decline of $23.8 million in same-
store sales. The following table reconciles total cafeteria sales to same-
store cafeteria sales (cafeterias that were open for 12 full months in both
periods) for the years ended June 30, 1999 and 2000:
YEAR ENDED JUNE 30,
------------------------------------------------
2000 1999
--------------------- --------------------- SALES
SALES CAFETERIAS SALES CAFETERIAS CHANGE
-------- ---------- -------- ---------- ------
(SALES IN THOUSANDS)
Total cafeteria sales $450,276 260 $478,013 270 (5.8)%
Less sales relating to:
Cafeterias opened in 2000 9,709 6 --- ---
Cafeterias opened in 1999 --- --- --- ---
Cafeterias closed in 2000 3,570 18 8,321 18
Cafeterias closed in 1999 --- --- 8,868 16
-------- ---------- -------- ----------
Net same-store cafeteria sales $436,997 236 $460,824 236 (5.2)%
======== ========== ======== ==========
_______________
The net decrease in same-store sales of $23.8 million, or 5.2%, reflects
a decline in same-store customer traffic of 6.6%, which was partially
offset by a check average increase of 1.5%. The check average increase
resulted from various price increases implemented at certain cafeterias
since June 30, 1999.
Approximately 73% of the declines in same-store sales was attributable to
the Morrison cafeterias. During fiscal 1999 and 2000, the Company was
focused on the integration of the Morrison cafeterias. The cafeteria
closing and conversion phases of this integration process were completed by
the end of the first quarter of fiscal 2000. The next phase of our
integration plan was improving same-store sales, and during the balance of
fiscal 2000, the Company tested several sales-building initiatives at 16
cafeteria locations in order to attract and retain new customers and to
increase sales to existing customers. These sales-building initiatives
included simplified menu pricing, neighborhood and direct mail marketing
and the sponsorship of employee contests. These initiatives have been well
received by our customers. Specifically, we have experienced a consistent
trend of year-over-year sales improvement at these 16 cafeterias, from a
decline in monthly sales of 14% in January 2000 to an increase of 7% in
June 2000, primarily due to improved customer traffic. We are building on
this success by implementing these initiatives at our other cafeterias over
the next several months.
It is possible that additional declines in same-store sales at individual
cafeterias could result in the closing of such cafeterias or additional
non-cash charges, including impairment of goodwill, under SFAS 121. At
the present time no impairment adjustments for Morrison related goodwill
are necessary.
The following table illustrates cost of sales, other operating expense,
and general and administrative expense as a percent of net sales for the
comparative periods, net of the Ralph & Kacoo's operations, in fiscal 1999
results.
YEAR ENDED JUNE 30,
----------------------------
2000 1999 CHANGE
-------- -------- --------
Cost of sales 59.1% 60.2% (1.1)%
Other operating expenses 35.6% 34.6% 1.0%
General and administrative expenses 3.4% 3.5% (0.1)%
Other expenses (income) (0.3)% (0.2)% 0.1%
RESTAURANT-LEVEL INCOME. During fiscal 2000 and 1999, restaurant-level
income (net sales less cost of sales and other operating expenses) was
$23.7 million, or 5.3% of net sales, and $26.9 million, or 5.4% of net
sales, respectively. Excluding the operations of Ralph & Kacoo's seafood
restaurants, restaurant-level income was $24.7 million, or 5.2% of net
sales, in fiscal 1999.
COST OF SALES. Cost of sales as a percentage of net sales declined 1.1%.
That decline is a combination of a 0.9% decrease in food costs as a
percentage of net sales and a 0.2% decrease in labor costs as a percentage
of net sales. Food costs as a percentage of net sales improved primarily
because food cost efficiency experienced in Morrison cafeterias began to
more closely match the operations of Piccadilly cafeterias.
Improvement in labor costs, as a percentage of net sales, was due
principally to our beginning to realize labor efficiencies at Morrison
cafeterias in the second quarter of 2000, as well as a substantially lower
level of labor costs associated with the conversion of Morrison cafeterias
to Piccadilly-style cafeterias, with only 13 cafeterias being converted in
fiscal 2000 compared to 99 conversions in fiscal 1999.
Factors that offset the labor costs improvements as a percentage of sales
include labor costs associated with the opening of five new cafeterias in
fiscal 2000. No new cafeterias were opened in fiscal 1999.
OTHER OPERATING EXPENSES. Other operating expenses (net of Ralph &
Kacoo's related expenses in fiscal 1999) decreased $4.9 million, but
increased 1.0% as a percentage of net sales. The net movement in other
operating expenses was the result of several factors. First, other
operating expenses in fiscal 1999 included costs relating to 99 Morrison
Conversions (at a cost of approximately $40,000 per cafeteria) compared to
13 Morrison Conversions in fiscal 2000. Other operating expenses increased
as a percentage of net sales due primarily to the generally fixed nature of
these expenses relative to the decline in net sales.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
(net of Ralph & Kacoo's related expenses in fiscal 1999) as a percentage of
net sales decreased 0.1% and decreased in absolute dollars by $1.7 million.
Transitional costs were incurred in fiscal 1999 that related to the
integration of the Morrison and Piccadilly reporting systems. Additionally,
fiscal 1999 costs include certain Morrison costs that were eliminated.
INTEREST EXPENSE. Interest expense increased $0.9 million as a result of
a higher interest rate on our existing credit facility, the effect of which
was partially mitigated by lower debt levels in fiscal 2000 compared to
fiscal 1999. Amortization of financing costs included in interest expense
in fiscal 2000 and fiscal 1999 was $0.8 million and $0.1 million,
respectively.
OTHER INCOME. Other income in fiscal 2000 included income of $0.6
million from the Company's receipt of stock in a whole life insurance
company which had converted to a stock company from a mututal company, and
through which we own whole life insurance policies. Fiscal 1999 other
income included a $0.5 million gain from the sale of a catering facility.
INCOME TAXES. Our fiscal 2000 income tax expense was reduced by $786,000
for the reversal of taxes over-accrued in prior years that primarily
relates to minimum tax credits generated on the carryback in fiscal 2000 of
the fiscal 1999 tax net operating loss to prior years and the review of the
results of IRS examinations for prior years. At June 30, 2000, the Company
has net operating loss carryforwards of $26.2 million and general business
tax credit carryforwards of $1.0 million. See Note 5 of the Notes to
Consolidated Financial Statements included elsewhere herein. The Company
has provided no valuation allowance for deferred tax assets. Management
believes that the deferred tax assets at June 30, 2000 are realizable
through future reversals of existing taxable temporary differences, and, if
necessary, the implementation of tax planning strategies. Uncertainties
that affect the ultimate realization of deferred tax assets include the
risk of not being able to complete tax planning strategies, such as sale-
leaseback transactions. This factor has been considered in determining the
valuation allowance.
YEAR ENDED JUNE 30, 1999 COMPARED TO YEAR ENDED JUNE 30, 1998
Net sales. Net sales for fiscal 1999 increased $160.3 million, or 47.8%,
from fiscal 1998. Cafeteria net sales increased $168.2 million. The
increase in cafeteria net sales is the net result of the Morrison
Acquisition, customer traffic changes, new cafeteria openings and cafeteria
closings.
The following table reconciles total cafeteria sales to same-store
cafeteria sales (cafeterias that were open for 12 full months in both
periods) for the fiscal years ended June 30, 1999 and 1998:
YEAR ENDED JUNE 30,
------------------------------------------------
1999 1998
--------------------- --------------------- SALES
SALES CAFETERIAS SALES CAFETERIAS CHANGE
-------- ---------- -------- ---------- ------
Total cafeteria sales $478,013 267 $309,798 275(1) 54.3%
Less sales related to:
Cafeterias opened in 1999 --- --- --- ---
Cafeterias opened in 1998 6,657 6 2,382 6
Cafeterias closed in 1999 4,273 6 6,163 6
Cafeterias closed in 1998 --- --- 3,993 3
Morrison Acquisition 198,379 131 21,285 136(1)
-------- ---------- -------- ----------
Net same-store cafeteria sales $268,704 124 $275,975 124 (2.6)%
======== ========== ======== ==========
___________________
(1) Includes approximately one month of sales for cafeterias acquired in
the Morrison Acquisition.
_______________
The decrease in same-store sales of 2.6% was the net result of a 3.5%
decline in customer traffic and a 1.2% increase in check average. We made
no significant price changes during fiscal 1999.
Sales relating to the Morrison Acquisition accounted for $177.1 million
of the overall net sales increase. The fiscal 1998 results included only
the sales from May 28, 1998 (the effective date of the Morrison
Acquisition) to June 30, 1998.
Ralph & Kacoo's restaurant sales decreased $7.9 million. The decrease
resulted from Ralph & Kacoo's only being included in operating results for
the first three quarters of fiscal 1999 as these operations were sold on
March 30, 1999. See Note 3 of the Notes to Consolidated Financial
Statements included elsewhere herein for further discussion.
Beginning in the third quarter of fiscal 1999, we accelerated the
Morrison Conversions, which had a significant impact on the operating
results for those cafeterias. 71 cafeterias were converted in the third and
fourth quarters of fiscal 1999, compared to 28 conversions in the first two
quarters of fiscal 1999. Expenses associated with each conversion averaged
approximately $40,000 for training team labor, new uniforms and supplies.
Additional costs amounting to approximately $25,000 per cafeteria,
primarily for signage, were capitalized.
The operating efficiency of a converted cafeteria was impacted by the
conversion process. Food and labor costs are initially higher in cafeterias
for periods subsequent to the conversion to ensure that high quality food
and excellent dining room service are provided to our customers.
RESTAURANT-LEVEL INCOME. During fiscal 1999 and 1998, restaurant-level
income (net sales less cost of sales and other operating expenses) was
$26.9 million, or 5.4% of net sales, and $30.8 million, or 9.2% of net
sales, respectively. Food costs as a percentage of net sales increased 0.6%
due to the Morrison Acquisition. Food costs as a percentage of sales for
Morrison cafeterias were higher than for Piccadilly cafeterias. Labor costs
increased 1.5% reflecting higher hourly wage rates, an increase in the
average number of managers employed at the Morrison cafeterias, and the
Morrison Conversions. Other operating expenses as a percentage of net sales
increased 1.6% due to the Morrison Conversions and a higher ratio of leased
cafeterias to total cafeterias resulting from the Morrison Acquisition.
PROVISION FOR UNIT IMPAIRMENTS AND CLOSINGS. During the fourth quarter
of fiscal 1999, we recorded a $1.4 million charge for the lease related
costs of operating cafeterias for which closure decisions were made. See
further discussion in Notes 2 and 4 of the Notes to Consolidated Financial
Statements included elsewhere herein.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
as a percentage of net sales decreased in fiscal 1999 from 3.8% to 3.4%
reflecting the leveraging effect of the Morrison Acquisition on corporate
overhead.
INTEREST EXPENSE. Interest expense increased $3.7 million in fiscal 1999
reflecting the increased debt levels associated with the Morrison
Acquisition.
INCOME TAXES. Our effective income tax rate for fiscal 1999 was impacted
by the non-deductibility of goodwill amortization, resulting in a higher
rate than in the prior year. Excluding the tax benefit from the Ralph &
Kacoo's sale, the Company's effective tax rate would have been 43.6% for
fiscal 1999 compared to 37.1% in the prior year.
FORWARD-LOOKING STATEMENTS
Forward-looking statements regarding management's present plans or
expectations for new unit openings, remodels, other capital expenditures,
sales-building and cost-saving strategies, advertising expenditures, the
financing thereof, the refinancing of its existing credit facility, and
the disposition of impaired units involve risks and uncertainties relative
to return expectations and related allocation of resources, and changing
economic or competitive conditions, as well as the negotiation of
agreements with third parties, which could cause actual results to differ
from present plans or expectations, and such differences could be material.
Similarly, forward-looking statements regarding management's present
expectations for operating results involve risks and uncertainties relative
to these and other factors, such as advertising effectiveness and the
ability to achieve cost reductions, which also would cause actual results
to differ from present plans. Such differences could be material.
Management does not expect to update such forward-looking statements
continually as conditions change, and readers should consider that such
statements speak only as to the date thereof.
CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
Balances at June 30
2000 1999
-------- --------
ASSETS
Current Assets
Accounts and notes receivable $ 919 $ 1,970
Inventories 12,741 12,595
Deferred income taxes 12,744 11,216
Recoverable income taxes --- 5,578
Other current assets 679 888
-------- --------
TOTAL CURRENT ASSETS 27,083 32,247
Property, Plant and Equipment
Land 20,878 22,511
Buildings and leasehold improvements 151,706 150,138
Furniture and fixtures 121,166 120,469
Machinery and equipment 13,128 13,796
Construction in progress 699 3,371
-------- --------
307,577 310,285
Less allowances for depreciation and unit closings 143,700 134,035
-------- --------
NET PROPERTY, PLANT AND EQUIPMENT 163,877 176,250
Goodwill, net of $939,000 accumulated amortization at
June 30, 2000 and $532,000 at June 30, 1999 11,944 12,982
Other Assets 11,266 11,460
-------- --------
Total Assets $214,170 $232,939
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Current portion of long-term debt $ 68,391 $ ---
Accounts payable 12,461 18,612
Accrued interest 449 275
Accrued salaries, benefits and related taxes 20,871 22,824
Accrued rent 4,438 5,183
Other accrued expenses 4,379 6,267
-------- --------
TOTAL CURRENT LIABILITIES 110,989 53,161
Long-Term Debt --- 74,226
Deferred Income Taxes 4,672 3,992
Reserve for Unit Closings 10,101 12,693
Accrued Employee Benefits, less current portion 9,127 9,465
Shareholders' Equity
Preferred Stock, no par value; authorized 50,000,000
shares; issued and outstanding: none --- ---
Common Stock, no par value, stated value $1.82 per
share, authorized 100,000,000 shares; issued and
outstanding:
10,528,368 shares at June 30, 2000 and at
June 30, 1999 19,141 19,141
Additional paid-in capital 18,735 18,735
Retained earnings 41,678 41,804
-------- --------
79,554 79,680
Less treasury stock, at cost: 25,000 common shares at
June 30, 2000 and at June 30, 1999 273 278
-------- --------
TOTAL SHAREHOLDERS' EQUITY 79,281 79,402
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $214,170 $232,939
======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands - except per share data)
Year Ending June 30 2000 1999 1998
-------- -------- --------
Net sales $450,276 $495,697 $335,388
Costs and expenses:
Cost of sales 266,246 298,565 194,898
Other operating expenses 160,358 170,200 109,725
Provision for unit impairments and closings --- 1,350 3,453
General and administrative expenses 15,230 17,458 12,832
Interest expense 7,177 6,255 2,514
Other expenses (income) (1,562) (1,000) (590)
-------- -------- --------
447,449 492,828 322,832
Gain from sale of Ralph & Kacoo's --- 1,556 --
-------- -------- --------
INCOME BEFORE INCOME TAXES 2,827 4,425 12,556
Provision for income taxes 416 425 4,653
-------- -------- --------
Net Income $ 2,411 $ 4,000 $ 7,903
======== ======== ========
Weighted average number of shares outstanding 10,503 10,503 10,503
======== ======== ========
Net income per share - basic and diluted $ .23 $ .38 $ .75
======== ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Amounts in thousands - except per share data)
Additional
Common Stock Paid-In Retained Treasury Stock
Shares Amount Capital Earnings Shares Amount
BALANCES AT JUNE 30, 1997 10,528 $19,141 $18,735 $39,965 25 $ 237
Net income 7,903
Cash dividends declared ($.48 per share) (5,044)
Sales under dividend reinvestment plan (23)
Stock issuances from treasury 9 (5) (50)
Purchases of treasury stock 5 63
------- ------- ------- ------- ------ ------
BALANCES AT JUNE 30, 1998 10,528 19,141 18,735 42,810 25 250
Net income 4,000
Cash dividends declared ($.48 per share) (5,042)
Sales under dividend reinvestment plan (26)
Stock issuances from treasury 62 (23) (238)
Purchases of treasury stock 23 266
------- ------- ------- ------- ------ ------
BALANCES AT JUNE 30, 1999 10,528 $19,141 18,735 $41,804 25 $ 278
Net income 2,411
Cash dividends declared ($.24 per share) (2,521)
Sales under dividend reinvestment plan (16)
Stock issuances from treasury (11) (57)
Purchases of treasury stock 11 52
------- ------- ------- ------- ------ ------
BALANCES AT JUNE 30, 2000 10,528 $19,141 $18,735 $41,678 25 $ 273
======= ======= ======= ======= ====== ======
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ending June 30 2000 1999 1998
-------- -------- --------
OPERATING ACTIVITIES
Net Income $ 2,411 $ 4,000 $ 7,903
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 17,495 17,950 12,689
Expenditures associated with closed units (2,592) (2,091) (1,132)
Provision for unit impairments and closings --- 1,350 3,453
Provision for deferred income taxes (505) 4,411 100
Gain on sale of Ralph & Kacoo's, net of taxes --- (2,691) ---
Loss on disposition of assets 325 120 148
Pension expense - net of contributions 1,353 (451) (467)
Changes in operating assets and liabilities,
net of effects from Morrison Acquisition:
Accounts and notes receivable 1,051 (418) 32
Inventories (146) (365) 110
Recoverable income taxes 5,578 (3,749) 188
Other current assets 131 486 (292)
Other assets 22 553 (75)
Accounts payable (6,151) (1,426) 1,708
Accrued interest 174 137 (756)
Accrued expenses (2,633) (2,621) (346)
Accrued employee benefits (2,291) (2,280) 5
-------- -------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 14,222 12,915 23,268
INVESTING ACTIVITIES
Net proceeds from sale of Ralph & Kacoo's,
including net tax benefit --- 22,597 ---
Acquisition of business --- (10,933) (41,974)
Purchases of property, plant and equipment (6,832) (15,460) (14,928)
Proceeds from sale of property, plant and equipment 2,877 757 2,288
-------- -------- --------
NET CASH USED BY INVESTING ACTIVITIES (3,955) (3,039) (54,614)
FINANCING ACTIVITIES
Proceeds from long-term debt 6,604 17,392 81,515
Payments on long-term debt (12,439) (22,145) (44,636)
Financing costs (1,900) --- (467)
Proceeds from issuances of treasury stock --- 185 ---
Purchases of treasury stock (11) (266) (22)
Dividends paid (2,521) (5,042) (5,044)
-------- -------- --------
NET CASH PROVIDED (USED) BY FINANCING ACTIVITIES (10,267) (9,876) 31,346
-------- -------- --------
Changes in cash and cash equivalents --- --- ---
Cash and cash equivalents at beginning of year --- --- ---
-------- -------- --------
Cash and cash equivalents at end of year $ --- $ --- $ ---
======== ======== ========
SUPPLEMENTARY CASH FLOW DISCLOSURES
Income taxes paid (net of refunds received) $ (4,314) $ 1,756 $ 3,805
======== ======== ========
Interest paid $ 6,123 $ 6,177 $ 3,145
======== ======== ========
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES. The preparation of the Consolidated Financial Statements
in conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the amounts
reported in the financial statements and accompanying notes. Actual results
could differ from those estimates.
PRINCIPLES OF CONSOLIDATION. The accompanying Consolidated Financial
Statements include the accounts of Piccadilly Cafeterias, Inc. and its
subsidiaries (hereinafter referred to as the Company). All significant
intercompany balances and transactions have been eliminated in
consolidation.
INDUSTRY. The Company's principal industry is the operation of Company-
owned cafeterias primarily in the Southeast and Mid-Atlantic regions of the
United States.
INVENTORIES. Inventories consist primarily of food and supplies and are
stated at the lower of cost (first-in, first-out method) or market.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment (PP&E) is
stated at cost, except for PP&E that has been impaired, for which the
carrying amount is reduced to estimated fair value. Depreciation is
provided using the straight-line method for financial reporting purposes on
the following estimated useful lives:
Buildings and component equipment 10-30 years
Furniture and fixtures 10 years
Machinery and equipment 4 years
Leasehold improvements are amortized over the original lease term,
including expected renewal periods if applicable. The cost of leasehold
improvements has been reduced by the amount of construction allowances
received from developers and landlords. Repairs and maintenance are charged
to operations as incurred. Expenditures for renewals and betterments which
increase the value or extend the lives of assets are capitalized and
depreciated over their estimated useful lives. When assets are retired, or
are otherwise disposed of, cost and the related accumulated depreciation
are eliminated from the accounts and any resulting gain or loss is included
in the determination of income.
IMPAIRMENT OF LONG-LIVED ASSETS. The Company reviews long-lived assets,
including goodwill, to be held and used in the business for impairment
whenever events or changes in circumstances indicate that the carrying
amount of an asset or a group of assets may not be recoverable. The Company
considers a history of operating losses to be its primary indicator of
potential impairment. Except for goodwill, assets are evaluated for
impairment at the operating unit level. Goodwill is evaluated in total for
the Morrison units acquired. An asset is deemed to be impaired if a
forecast of undiscounted future operating cash flows directly related to
the asset, including disposal value, if any, is less than its carrying
amount. If an asset is determined to be impaired, the loss is measured as
the amount by which the carrying amount of the asset exceeds its fair
value. The Company generally estimates fair value by discounting estimated
future cash flows. Considerable management judgment is necessary to
estimate cash flows. Accordingly, it is reasonably possible that actual
results could vary significantly from such estimates.
INCOME TAXES. The Company accounts for income taxes using the liability
method. Under this method, deferred income taxes reflect the net tax
effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting and the amounts used for income taxes.
STOCK-BASED COMPENSATION. The Company accounts for its stock compensation
arrangements under the provisions of Accounting Principles Board (APB) No.
25, "Accounting for Stock Issued to Employees," and makes the pro forma
information disclosures required under the provisions of Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation."
EARNINGS PER SHARE. Earnings per share of Common Stock are calculated
under the provisions of SFAS No. 128, "Earnings Per Share".
ADVERTISING EXPENSE. The cost of advertising is expense as incurred. The
Company incurred $6,541,000, $5,801,000 and $3,203,000 in advertising costs
during 2000, 1999, and 1998, respectively.
NOTE 2: MORRISON ACQUISITION
On May 28, 1998, the Company completed a $5.00 per share cash tender
offer for all outstanding shares of Morrison Restaurant, Inc. (Morrison),
acquiring approximately 89% of the outstanding Morrison shares. The
merger was completed on July 31, 1998 when the Company purchased the
remaining outstanding Morrison shares for $5.00 per share (the Morrison
Acquisition). The total acquisition cost, including $9,588,000 of debt
assumed, was approximately $57,270,000. On May 28, 1998, Morrison
operated 142 restaurants in 13 southeastern and mid-Atlantic states.
This acquisition has been accounted for using the purchase method of
accounting and the results of operations have been included in the
accompanying Consolidated Financial Statements since May 28, 1998. At
the acquisition date, a preliminary allocation of the purchase price of
Morrison was made, resulting in goodwill of $12,467,000. During 1999,
management revised certain estimates used in determining the allocation
of purchase price to the assets and liabilities acquired, resulting in a
$1,047,000 net increase in goodwill. The final allocation of purchase
price based on the fair value of assets and liabilities acquired resulted
in recording assets of $88,520,000 and liabilities of $54,352,000.
Goodwill is being amortized using the straight-line method over 30 years.
In connection with the Morrison Acquisition, the Company recorded
liabilities of $13,460,000 at the date of acquisition for lease buyouts,
occupancy costs and employee termination costs (Morrison Closing Costs)
related to the planned closing of 18 Morrison units and for 23 Morrison
units that were closed prior to the acquisition date. As of June 30,
2000, the Company has closed 27 of the Morrison units compared to the
original estimate of 18. During 1999, the Company revised its original
estimate of Morrison Closing Costs and reduced the recorded liability and
goodwill by $6,777,000. During 2000 and 1999, the Company paid Morrison
Closing Costs of $1,784,000 and $1,134,000 respectively. The Company
does not anticipate closing any Morrison units in the foreseeable future,
other than those units with expiring leases.
NOTE 3: SALE OF RALPH & KACOO'S
On March 30, 1999, the Company completed the sale of the Ralph & Kacoo's
seafood restaurants and related commissary business (Cajun Bayou
Distributors & Management, Inc.) to Cobb Investment Company, Inc. for
$21,314,000 in cash. The transaction resulted in a recorded gain of
$1,556,000, and a net tax benefit of $826,000.
The tax benefit was the result of the sale of the stock of Cajun Bayou
Distributors & Management, Inc. The tax basis in the stock was $6,057,000
higher than the book basis in the stock due to differences that were not
classified as temporary differences under SFAS 109, and resulted in a loss
on the stock sale for tax purposes when compared to the amount recorded for
financial statement purposes. The tax loss on the stock sale generated a
net overall tax loss on the sale of Ralph & Kacoo's.
The remaining portion of the Ralph & Kacoo's business, a catering facility
sold on June 1, 1999, generated a gain of $491,000 and is included in Other
income.
NOTE 4: IMPAIRMENTS OF LONG-LIVED ASSETS AND RESERVES FOR UNIT CLOSINGS
During 1999 and 1998, the Company recorded charges of $1,350,000
($851,000 after tax or $.08 per share) and $3,453,000 ($2,175,000 after
tax or $.21 per share), respectively, for asset write-downs and the lease
related costs of operating units for which closure decisions were made.
The closure decisions primarily related to certain Piccadilly units
expected to close in connection with the Morrison Acquisition.
The Company is responsible for minimum rent obligations of $12,024,000
related to 22 closed units, $3,521,000 of which relate to the Morrison
Acquisition. Sublease arrangements exist relating to 15 of these units
providing for future sublease rentals of $10,305,000. The Company has
recorded liabilities of $10,101,000 to settle the minimum rent
obligations and other lease-related charges. During 2000 and 1999, the
Company charged $2,592,000 and $2,091,000, respectively, against these
reserves for lease settlements and lease-related payments net of sublease
rentals received, of which $1,784,000 and $1,134,000, respectively,
relate to the Morrison Acquisition (see Note 2 for further discussion).
NOTE 5: INCOME TAXES
Significant components of the Company's deferred tax liabilities and assets
are as follows:
(Amounts in thousands)
June 30 2000 1999
-------- --------
Deferred tax assets:
Accrued expenses $ 8,672 $ 11,375
Unit closing reserves 4,222 5,787
NOL and tax credit carryforwards 11,820 7,824
-------- --------
24,714 24,986
Deferred tax liabilities:
Property, plant and equipment 13,127 12,964
Prepaid pension costs 2,041 3,279
Inventories 1,474 1,519
-------- --------
16,642 17,762
-------- --------
Net deferred tax assets $ 8,072 $ 7,224
======== ========
At June 30, 2000 the Company has net operating loss carryforwards of
$26,185,000 and general business tax credit carryforwards of $1,001,000,
including $17,234,000 and $291,000, resulting from the Morrison
acquisition. These carryforwards, which expire from 2010 through 2020,
give rise to deferred tax assets. SFAS 109 specifies that deferred tax
assets are to be reduced by a valuation allowance if it is more likely
than not that some portion of the deferred tax assets will not be
realized. Provisions of the Internal Revenue Code limit the amount of
the Morrison-related net operating loss and tax credit carryforwards that
can be utilized each year to $2,332,000. Management believes that future
reversals of existing taxable differences and tax planning strategies
should be sufficient to realize all of the Company's deferred tax assets;
therefore, a valuation allowance has not been established.
The components of the provision for income taxes are as follows:
(Amounts in thousands)
Year Ended June 30 2000 1999 1998
-------- -------- --------
Current:
Federal $ 1,213 $ (3,826) $ 4,371
State 51 (160) 182
-------- -------- --------
1,264 (3,986) 4,553
Deferred:
Federal (814) $ 4,234 $ 96
State (34) 177 4
-------- -------- --------
(848) 4,411 100
-------- -------- --------
Total provision for income taxes $ 416 $ 425 $ 4,653
======== ======== ========
Differences between the provision for income taxes and the amount
computed by applying the federal statutory income tax rate to income before
income taxes are as follows:
(Amounts in thousands)
Year Ended June 30 2000 1999 1998
-------- -------- --------
Income taxes at statutory rate $ 961 $ 1,505 $ 4,269
State income taxes, net of federal taxes 113 177 502
-------- -------- --------
1,074 1,682 4,771
Sale of Ralph & Kacoo's --- (1,158) ---
Goodwill amortization 132 178 15
Tax credits (117) (158) (161)
Reversal of overaccrual (786) --- ---
Other items 113 (119) 28
-------- -------- --------
Total provision for income taxes $ 416 $ 425 $ 4,653
======== ======== ========
NOTE 6: LEASED PROPERTY
The Company rents most of its cafeteria and restaurant facilities under
long-term leases with varying provisions and with original lease terms
generally of 20 to 30 years. The Company has the option to renew the
leases for specified periods subsequent to their original terms. Minimum
future lease commitments, as of June 30, 1999, including $12,757,000 for
closed units, are as follows:
Year Ending June 30 (Amounts in thousands)
2001 $17,306
2002 15,413
2003 12,737
2004 10,516
2005 8,054
Subsequent 26,898
-------
90,924
Less sublease income 10,305
-------
Net minimum lease commitments $80,619
=======
The leases generally provide for percentage rentals based on sales.
Certain leases also provide for payments of executory costs such as real
estate taxes, insurance, maintenance and other miscellaneous charges.
Rentals for the periods shown below does not include these executory
costs.
(Amounts in thousands)
Year Ended June 30 2000 1999 1998
Minimum rentals $15,513 $15,950 $10,581
Contingent rentals 3,160 4,998 1,385
------- ------- -------
Total $18,673 $20,948 $11,966
======= ======= =======
NOTE 7: LONG-TERM DEBT
(Amounts in thousands)
June 30 2000 1999
Note payable to banks, due at maturity on June 22, 2001 $68,391 $74,226
The fair value of the Company's long-term borrowings approximates their
recorded values. Fair value is estimated using discounted cash flow
analyses, based on the Company's current incremental borrowing rates for
similar types of borrowing arrangements.
The Company has a credit facility with a syndicated group of banks
maturing on June 22, 2001. As reported in the Company's Report on Form
8-K dated November 18, 1999, the Company and its lenders amended the
credit facility to revise certain financial covenants effective September
30, 1999, such that the Company was in compliance with all covenants as
of September 30, 1999. The Company is in compliance with all covenants
as of June 30, 2000.
The financial covenants, as amended, are designed to correlate with the
Company's projected performance over the remaining term of the credit
facility. Negative variance from projected performance with respect to
sales, operating performance, or other unforeseen matters may cause the
Company to be in non-compliance with those covenants. Failure to meet
these covenants could result in the Company being placed in default of
the amended credit facility.
As amended, the credit facility provides for: (i) an increase in the
effective interest rate from LIBOR plus 175 basis points to LIBOR plus
300 basis points, and an increase to the fees payable with respect to
letters of credit, with the amount of the interest rate and letter of
credit fees subject to adjustment at the end of each fiscal quarter based
on the Company's ratio of total debt to EBIYTDA; (ii) mandatory step
downs in the total amount of credit available under the facility from
$100,000,000 to $95,000,000 as of the effective date of the amendment,
from $95,000,000 to $90,000,000 on or before March 31, 2000 and from
$90,000,000 to $80,000,000 on or before March 31, 2001, together with
additional mandatory commitment reductions in an amount equal to the net
proceeds in excess of $5,000,000 in the aggregate from sales of certain
assets; (iii) financial covenants with respect to the ratio of total debt
to EBITDA and the fixed charge coverage ratio; (iv) a restriction on the
Company's ability to make capital expenditures; (v) the replacement of
the funded debt to total capital financial covenant with a financial
covenant requiring a minimum adjusted tangible net worth; (vi) a further
restriction commencing with the third fiscal quarter ended March 31, 2000
on the ability of the Company to pay dividends to an amount that does not
exceed the amount of net income for the prior fiscal quarter; (vii) a
prohibition on acquisitions; (viii) the requirement that the credit
facility will be secured by substantially all the assets of the Company;
and (ix) the payment of an amendment fee to each bank that signs the
amendment. This credit agreement contains a prepayment option, without
penalty, which can be exercised at any time during its term.
The Company is currently in evaluating alternatives and expects to have a
new credit arrangement inplace prior to June 22, 2001.
The Company capitalized interest costs of $80,000 in 2000, $145,000 in
1999 and $120,000 in 1998 with respect to qualifying construction. Total
interest cost incurred was $7,257,000 in 2000, $6,400,000 in 1999 and
$2,634,000 in 1998.
NOTE 8: PENSION PLANS
The Company has a defined benefit pension plan covering substantially all
employees, except for Morrison employees, who meet certain age and
length-of-service requirements. Retirement benefits are based upon an
employee's years of credited service and final average compensation.
Annual contributions are made in amounts sufficient to fund normal costs
as accrued and to amortize prior service costs over a 40-year period.
Assets of the plan are invested principally in obligations of the United
States Government and other marketable debt and equity securities
including 367,662 shares of the Company's Common Stock held at June 30,
2000 and June 30, 1999 with a fair value of $1,011,000 and $3,056,000,
respectively.
At the time of its acquisition by the Company on May 28, 1998, Morrison
maintained two non-qualified employee defined benefit pension plans and
one frozen qualified defined benefit pension plan.
The two Morrison employee defined benefit pension plans continue to
accrue benefits for covered employees. To provide a source for the
payment of benefits under these plans, the Company owns whole-life
insurance contracts on some participants.
Morrison is a co-sponsor of the Morrison Restaurants Inc. Retirement Plan
along with Ruby Tuesday, Inc. and Morrison Management Specialists, Inc.
The MRI Retirement Plan, a qualified defined benefit pension plan, was
frozen on December 31, 1987. The Plan's assets include common stock,
fixed income securities, short-term investments and cash. The Company
will continue to share in future expenses of the Plan, and will make
contributions to the Plan as necessary.
The Company has adopted SFAS No. 132, "Employers' Disclosures about
Pension and Other Postretirement Benefits", which revises the required
disclosures about pension and other postretirement benefit plans.
Changes in plan assets and obligations during the years ended June 30,
2000 and 1999 and the funded status of the defined pension plans
described in the preceding paragraphs (referred to collectively as
"Pension Benefits") at June 30, 2000 and 1999 were as follows:
(Amount in thousands)
Pension Benefits
June 30 2000 1999
-------- --------
CHANGE IN BENEFIT OBLIGATION
Benefit obligation at beginning of year $ 76,553 $ 82,335
Morrison acquisition --- (2,669)
Service cost 2,447 2,717
Interest cost 5,797 5,475
Benefits paid (4,065) (3,798)
Actuarial (gain) loss (2,929) (7,507)
-------- --------
BENEFIT OBLIGATION AT END OF YEAR $ 77,803 $ 76,553
======== ========
CHANGE IN PLAN ASSETS
Fair value of plan assets at beginning of year $ 77,649 $ 74,176
Morrison acquisition --- (1,523)
Actual return 4,135 6,136
Employer contributions --- 2,500
Benefits paid (3,823) (3,640)
Actuarial (gain) loss 25 ---
-------- --------
FAIR VALUE OF PLAN ASSETS AT END OF YEAR $ 77,986 $ 77,649
======== ========
Funded (unfunded) status $ 183 $ 1,096
Unrecognized actuarial (gain) loss 1,108 1,408
Unrecognized prior service cost 76 (27)
-------- --------
Net prepaid pension cost $ 1,367 $ 2,477
======== ========
Net prepaid benefit cost consists of:
Prepaid benefit cost $ 5,835 $ 6,816
Accrued benefit liability (4,468) (4,339)
-------- --------
Net prepaid pension cost $ 1,367 $ 2,477
======== ========
Net periodic pension cost for the pension benefits for 2000, 1999 and 1998
include the following components:
(Amount in thousands)
June 30 2000 1999 1998
-------- -------- --------
Net pension expense:
Service cost $ 2,447 $ 2,717 $ 2,207
Interest cost on projected benefit obligation 5,797 5,475 4,364
Actual return on plan assets (4,135) (6,136) (12,540)
Net amortization and deferral (2,756) (5) 7,902
-------- -------- --------
$ 1,353 $ 2,051 $ 1,933
======== ======== ========
Assumptions used in actuarial calculations were as follows:
(Amounts in thousands)
2000 1999 1998
June 30
Actuarial assumptions:
Discount rate 8.0% 7.75% 7.0%-7.25%
Compensation increases 3.5% 3.5% 3.5%-4.0%
Long-term rate of return 9.0% 9.0% 9.0%
NOTE 9: COMMON STOCK
On August 3, 1987, the Board of Directors adopted the Piccadilly
Cafeterias, Inc. Dividend Reinvestment and Stock Purchase Plan.
Shareholders of record may reinvest quarterly dividends and/or up to
$5,000 per quarter in the Company's Common Stock. Stock obtained through
reinvested dividends is issued at a 5% discount. At June 30, 2000, there
were 255,389 unissued Common Shares reserved under the plan.
On November 2, 1998, the Company's stockholders approved the Amended and
Restated Piccadilly Cafeterias, Inc. 1993 Incentive Compensation Plan
(the 1993 Plan). Under the terms of the plan, which amends and restates
the Piccadilly Cafeterias, Inc. 1993 Stock Option Plan (the 1988 Plan),
incentive stock options and non-qualified stock options, stock
appreciation rights, stock awards, restricted stock, performance shares,
and cash awards may be granted to officers, key employees, or the
Chairman of the Board of Directors of the Company. Options to purchase
shares of the Company's Common Stock may be issued at no less than 100%
of the fair market value on the date of grant. The Company has reserved
1,450,000 shares, in total, for issuance under the 1993 and 1988 Plans.
At June 30, 2000, 401,500 shares were available for future option grants
and options to purchase 941,900 shares were exercisable. Options
outstanding at June 30, 2000, have exercise prices which range from $3.13
to $12.00 and a weighted average remaining contractual life of 7.2 years.
Transactions under the 1993 Plan for the last three years are summarized
as follows:
(Dollars in thousands - except per share data)
Weighted
Common Average
Stock Exercise
Shares Price Total
-------- --------- -------
OUTSTANDING AT JUNE 30, 1997 194,000 $ 10.03 $ 1,946
Cancelled/expired (14,000) 12.75 (179)
Exercised --- --- ---
Granted 634,675 12.00 7,616
-------- -------
OUTSTANDING AT JUNE 30, 1998 814,675 11.52 9,383
Cancelled/expired (29,900) 10.50 (314)
Exercised (17,600) 10.10 (178)
Granted 162,725 9.51 1,548
-------- -------
OUTSTANDING AT JUNE 30, 199 929,900 11.23 10,439
Cancelled/expired
Exercised
Granted 12,000 3.31 40
-------- -------
OUTSTANDING AT JUNE 30, 2000 941,900 $ 11.13 $10,479
======== =======
PRO FORMA SFAS NO. 123 RESULTS. Pro forma information regarding net
income and net income per share is required by SFAS No. 123, and has been
determined as if the Company had accounted for its employee stock options
under the fair value method of SFAS No. 123. The fair value for these
options was estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted average assumptions: risk-free
interest rate of 5.0%; dividend yield of 5.0%; volatility factors of the
expected market price of the Company's common stock of 23%; and a
weighted average expected life of the options of 5.0 years. The weighted
average fair value of the stock options granted in 2000, 1999 and 1998
were $0.48, $1.32 and $1.84 per share, respectively. Proforma net income
and net income per share for 2000, assuming that the Company had
accounted for its employee stock options using the fair value method
would not be different from those reported. 1999 and 1998 pro forma net
income and net income per share, assuming that the Company had accounted
for its employee stock options using the fair value method, would have
been reduced by $111,000 and $.01 and $624,000 and $.06, respectively.
EARNINGS PER SHARE. A reconciliation of the income and common stock share
amounts used in the calculation of basic and diluted net income per share
for the years ended June 30, 2000, 1999 and 1998 are as follows (net
income in thousands).
Per Share
Net Income Shares Amount
For the Year Ended June 30, 2000
BASIC NET INCOME $2,411 10,503,368 $0.23
EFFECT OF DILUTIVE SECURITIES --- --- ---
------ ---------- -----
DILUTED NET INCOME $2,411 10,503,368 $0.23
====== ========== =====
For the Year ended June 30, 1999
Basic net income $4,000 10,503,368 $0.38
Effect of dilutive securities --- 25,458 ---
------ ---------- -----
Diluted net income $4,000 10,528,826 $0.38
====== ========== =====
For the Year Ended June 30, 1998
Basic net income $7,903 10,503,368 $0.75
Effect of dilutive securities --- 65,014 ---
------ ---------- -----
Diluted net income $7,903 10,568,382 $0.75
====== ========== =====
NOTE 10: QUARTERLY RESULTS OF OPERATIONS (UNAUDITED)
(Amounts in thousands -- except per share data)
YEAR ENDED JUNE 30, 2000 Year Ended June 30, 1999
9/30 12/31 3/31 6/30 9/30 12/31 3/31 6/30
Net sales $114,126 $116,368 $110,022 $109,760 $128,935 $130,376 $122,498 $113,888
Cost of sales and other operating expenses 111,353 108,782 103,076 103,393 119,602 121,376 116,134 111,653
Operating income 2,773 7,586 6,946 6,367 9.333 9,000 6,364 2,235
Net income (loss) (1,612) 1,475 872 1,676 1,888 1,976 2,798 (2,662)
Net income (loss) per share- basic
and diluted (.15) .14 .08 .16 .18 .19 .27 (.25)
During the quarter ended June 30, 1999 the Company recorded a $1,350,000
($851,000 after-tax or $.08 per share), for the write-down of long-lived
assets in accordance with SFAS No. 121 (see Note 4 for further discussion)
and lease related costs for units to be closed.
During the quarter ended March 31, 1999, the Company sold its Ralph &
Kacoo's seafood restaurants and related commissary business resulting in a
recorded gain of $1,556,000, and a net tax benefit of $826,000 (see Note 3
for further discussion).
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
Shareholders and Board of Directors
Piccadilly Cafeterias, Inc.
Baton Rouge, Louisiana
We have audited the accompanying consolidated balance sheets of
Piccadilly Cafeterias, Inc. as of June 30, 2000 and 1999, and the related
consolidated statements of income, changes in shareholders' equity, and
cash flows for each of the three years in the period ended June 30, 2000.
Our audits also included the financial statement schedule listed in the
Index at Item 14(a). These financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on
our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing
the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Piccadilly Cafeterias, Inc. at June 30, 2000 and 1999, and the
consolidated results of its operations and its cash flows for each of the
three years in the period ended June 30, 2000 in conformity with
accounting principles generally accepted in the United States. Also, in
our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
New Orleans, Louisiana
August 2, 2000