FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 1, 2001
-----------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-9573
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UNO RESTAURANT CORPORATION
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(Exact name of registrant as specified in its charter)
DELAWARE 04-2953702
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 CHARLES PARK ROAD, WEST ROXBURY, MASSACHUSETTS 02132
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(Address of principal executive offices) (Zip Code)
(617) 323-9200
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(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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
--- ---
As of May 1, 2001, 11,000,302 shares of the registrant's Common Stock,
$.01 par value, were outstanding.
UNO RESTAURANT CORPORATION
INDEX
PAGE
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.............................3
Consolidated Balance Sheets --
April 1, 2001 and October 1, 2000 ...............3
Consolidated Statements of Income --
Thirteen and twenty-six weeks ended
April 1, 2001 and April 2, 2000..................4
Consolidated Statements of Cash Flows --
Twenty-six weeks ended April 1, 2001 and
April 2, 2000....................................5
Notes to Consolidated Financial
Statements.......................................6
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS........................8
ITEM 3. QUANTITATIVE AND QUALITATIVE
DISCLOSURE ABOUT MARKET RISKS...................13
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION...............................14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................14
2
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except per share data)
April 1, October 1,
2001 2000
----------- ----------
(Unaudited)
ASSETS
CURRENT ASSETS
Cash $ 1,272 $ 788
Accounts receivable, net 2,832 3,530
Inventory 2,515 2,497
Prepaid expenses and other assets 2,346 1,999
--------- ---------
TOTAL CURRENT ASSETS 8,965 8,814
PROPERTY AND EQUIPMENT
Land 20,126 19,640
Buildings 38,317 35,215
Leasehold improvements 110,008 106,342
Equipment 68,199 64,385
Construction in progress 2,488 3,029
--------- ---------
239,138 228,611
Allowance for depreciation and amortization 93,492 86,619
--------- ---------
145,646 141,992
OTHER ASSETS
Deferred income taxes 14,089 14,132
Liquor licenses and other assets 3,691 3,538
--------- ---------
$172,391 $168,476
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 7,951 $ 9,851
Accrued expenses 9,470 8,459
Accrued compensation and taxes 3,751 2,889
Income taxes payable 565 558
Current portion of long-term debt and capital
lease obligations 3,932 3,953
--------- ---------
TOTAL CURRENT LIABILITIES 25,669 25,710
Long-term debt, net of current portion 51,773 50,900
Capital lease obligations, net of current portion 451 453
Other liabilities 9,350 9,699
SHAREHOLDERS' EQUITY
Preferred Stock, $1.00 par value, 1,000 shares
authorized, none issued
Common Stock, $.01 par value, 25,000 shares authorized,
15,779 and 15,744 shares issued and out-
standing in fiscal years 2001 and 2000, respectively 158 158
Additional paid-in capital 58,974 58,755
Retained earnings 59,253 56,038
--------- ---------
118,385 114,951
Treasury Stock (4,784 shares in fiscal years
2001 and 2000) at cost (33,237) (33,237)
--------- ---------
TOTAL SHAREHOLDERS' EQUITY 85,148 81,714
--------- ---------
$172,391 $168,476
========= =========
3
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data)
Thirteen Weeks Ended Twenty-six Weeks Ended
------------------------- -------------------------
April 1, April 2, April 1, April 2,
2001 2000 2001 2000
-------- -------- -------- ---------
REVENUES
Restaurant sales $58,252 $50,501 $113,711 $ 99,529
Consumer product sales 2,753 2,819 6,086 5,630
Franchise income 1,410 1,341 2,907 2,648
-------- -------- --------- ---------
62,415 54,661 122,704 107,807
COSTS AND EXPENSES
Cost of food and beverages 15,877 13,608 31,004 26,971
Labor and benefits 20,179 17,093 39,363 33,296
Occupancy costs 9,136 7,616 17,484 14,962
Other operating costs 5,209 4,530 10,408 8,928
General and administrative 5,173 4,307 9,983 8,510
Depreciation and amortization 3,450 3,270 6,888 6,494
Pre-opening costs 346 393 587 868
-------- -------- --------- ---------
59,370 50,817 115,717 100,029
OPERATING INCOME 3,045 3,844 6,987 7,778
INTEREST AND OTHER EXPENSE 958 742 2,097 1,382
-------- -------- --------- ---------
INCOME BEFORE INCOME TAXES 2,087 3,102 4,890 6,396
PROVISION FOR INCOME TAXES 708 1,055 1,675 2,175
-------- -------- --------- ---------
NET INCOME $ 1,379 $ 2,047 $ 3,215 $ 4,221
======== ======== ========= =========
Earnings per Share:
Basic $ .13 $ .18 $ .29 $ .37
Diluted $ .12 $ .17 $ .28 $ .35
Weighted average shares outstanding:
Basic 10,992 11,302 10,987 11,303
Diluted 11,375 12,077 11,286 12,077
4
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Twenty-Six Weeks Ended
---------------------------
April 1, April 2,
2001 2000
-------- --------
OPERATING ACTIVITIES
Net income $ 3,215 $ 4,221
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,973 6,566
Deferred income taxes 43 (938)
Provision for deferred rent 152 151
Gain on disposal of equipment (3) (38)
Contribution to employee benefit program 0 55
Changes in operating assets and liabilities, net
of effects from business acquisitions:
Accounts receivable 698 (510)
Inventory (18) (210)
Prepaid expenses and other assets (520) (703)
Accounts payable and other liabilities (451) 10
Income taxes payable 7 (1,917)
-------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES 10,096 6,687
INVESTMENT ACTIVITIES
Additions to property, equipment and
leasehold improvements (10,684) (14,623)
Proceeds from sale of fixed assets 3 38
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (10,681) (14,585)
FINANCING ACTIVITIES
Proceeds from revolving credit agreement 24,928 44,561
Principal payments on revolving credit agreement
and capital lease obligations (24,078) (34,495)
Purchase of Treasury Stock 0 (3,825)
Exercise of stock options 219 1,741
-------- --------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,069 7,982
-------- -------
INCREASE IN CASH 484 84
CASH AT BEGINNING OF YEAR 788 752
-------- --------
CASH AT END OF PERIOD $ 1,272 $ 836
======== ========
Certain amounts in fiscal 2000 have been reclassified to permit comparison.
5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited, consolidated financial statements have been prepared
in accordance with instructions to Form 10-Q and, therefore, do not include all
information and footnotes normally included in financial statements prepared in
conformity with generally accepted accounting principles. They should be read in
conjunction with our financial statements for the fiscal year ended October 1,
2000.
The accompanying financial statements include all adjustments (consisting only
of normal recurring accruals) that management considers necessary for a fair
presentation of its financial position and results of operations for the interim
periods presented.
NOTE B - EARNINGS PER SHARE
Basic earnings per share represents net income divided by the weighted average
shares of common stock outstanding during the period. Weighted average shares
used in diluted earnings per share include common stock equivalents arising from
stock options using the treasury stock method.
The following table sets forth the computation of basic and diluted earnings per
share.
Thirteen Weeks Ended Twenty-six Weeks Ended
April 1, April 2, April 1, April 2,
2001 2000 2001 2000
---------- ---------- ---------- ----------
Denominator for Basic Earnings
per Share:
Weighted average shares
outstanding 10,991,914 11,302,038 10,986,596 11,302,728
Common Stock equivalents:
Stock options 382,616 774,800 299,515 774,331
---------- ---------- ---------- ----------
Denominator for Diluted Earnings
per Share:
Weighted average shares
outstanding including common
stock equivalents 11,374,530 12,076,838 11,286,111 12,077,059
========== ========== ========== ==========
Net income $1,379,000 $2,047,000 $3,215,000 $4,221,000
========== ========== ========== ==========
Basic and Diluted Earnings per Share:
Basic $ .13 $ .18 $ .29 $ .37
=========== ========== ========== ==========
Diluted $ .12 $ .17 $ .28 $ .35
=========== ========== ========== ==========
NOTE C - NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the Financial Accounting Standards Board (FASB) issued SFAS No.
133, "Accounting for Derivative Instruments and Hedging Activities," which is
effective for fiscal year 2001. This statement requires all derivatives to be
carried on the balance sheet as assets or liabilities at fair value. The
accounting for changes in the fair value of the derivatives would depend on the
hedging relationship and would be reported in the income statement, or as a
component of comprehensive income. We adopted this new accounting standard
during the first quarter of fiscal 2001. The adoption of SFAS No. 133 did not
have a material impact on the consolidated financial statements.
6
In December 1999, the Securities and Exchange Commission (SEC) issued Staff
Accounting Bulletin (SAB) 101, REVENUE RECOGNITION IN FINANCIAL STATEMENTS. SAB
101 clarifies the SEC staff's views on applying generally accepted accounting
principles to revenue recognition in financial statements. We are required to
adopt SAB 101 in the fourth quarter of fiscal 2001, and we believe that the
adoption of this pronouncement will not have an impact on the consolidated
financial statements.
7
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
SAFE HARBOR CAUTIONARY STATEMENT
From time to time, information and statements provided by our filings with the
Securities and Exchange Commission, shareholder reports, press releases and oral
statements may include forward-looking statements which reflect our current view
with respect to future events and financial performance. Forward-looking
statements are made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. Investors are cautioned that all
forward-looking statements involve risks and uncertainties, which could cause
actual results to differ materially from historical results or those
anticipated. We undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise. Risks and uncertainties include, without limitation, the
ability to open new restaurants and operate new and existing restaurants
profitably, changes in local, regional and national economic conditions,
especially economic conditions in the areas in which our restaurants are
concentrated, increasingly intense competition in the restaurant industry,
increases in food, labor, employee benefits and similar costs, and other risks
detailed from time to time in our news releases, reports to shareholders and
periodic reports filed with the Securities and Exchange Commission.
The following tables set forth the percentage relationship to total revenues,
unless otherwise indicated, of certain items included in our income statements
and operating data for the periods indicated:
THIRTEEN WEEKS ENDED APRIL 1, 2001 COMPARED TO THIRTEEN WEEKS ENDED
APRIL 2, 2000
13 Weeks Ended
--------------
4/1/01 4/2/00
------ -------
REVENUES:
Restaurant sales 93.3% 92.4%
Consumer product sales 4.4 5.2
Franchise income 2.3 2.4
------ ------
Total 100.0% 100.0%
------ ------
COSTS AND EXPENSES:
Cost of food and beverages (1) 26.0% 25.5%
Labor and benefits (1) 33.1 32.1
Occupancy costs (1) 15.0 14.3
Other operating costs (1) 8.5 8.5
General and administrative 8.3 7.9
Depreciation and amortization (1) 5.7 6.1
Pre-opening costs (2) .6 .8
------ ------
Operating income 4.9 7.0
Interest and other expense 1.6 1.3
------ ------
Income before income taxes 3.3 5.7
Provision for income taxes 1.1 1.9
------ ------
Net income 2.2% 3.8%
====== ======
(1) Percentage of restaurant and consumer product sales
(2) Percentage of restaurant sales
NUMBER OF RESTAURANTS AT END OF QUARTER:
Company-owned Uno's - full service 112 103
Franchised Uno's - full service 68 62
8
TOTAL REVENUES. Total revenues increased 14.2% to $62.4 million from $54.7
million last year.
RESTAURANT SALES. Company-owned restaurant sales rose 15.3% in the second
quarter of fiscal 2001 to $58.3 million from $50.5 million last year, due
primarily to the net addition of nine restaurants during the past four quarters.
This new unit growth led to a 9.2% increase in operating weeks for the quarter
versus the same period last year. Comparable store sales rose 3.8% for the
quarter, also contributing to the sales growth. Average weekly sales, which
includes sales at comparable stores as well as new units, increased 6.0% during
the second quarter, reflecting higher-than-average sales levels for our newest
prototype units. Four company-owned restaurants opened during the quarter
(including one acquired from a franchisee) and two were closed.
CONSUMER PRODUCT SALES. Consumer product sales decreased 2.3% during the second
quarter of fiscal 2001 to $2.75 million from $2.82 million last year. Sales in
the contract food service category grew 7.8% over last year, primarily
reflecting increased shipments to airlines. Sales of fresh product to retail
grocers in the Northeast were down 21.4%, due in part to lower levels of
promotional activity during the second quarter of fiscal 2001.
FRANCHISE INCOME. Franchise income, which includes royalty income and initial
franchise fees, increased to $1.4 million from $1.3 million last year. Royalty
income rose 7.5% to $1.4 million this year compared to $1.3 million last year,
reflecting a 10.1% increase in total operating weeks and a 4.1% gain in average
weekly sales for full-service franchised restaurants. Franchise fees of $50,000
were recorded during the second quarter of fiscal 2001 compared to $75,000 last
year. Two full-service franchised restaurants opened during the quarter, while
one was sold to the company.
COST OF FOOD AND BEVERAGES. Cost of food and beverages as a percentage of
restaurant and consumer product sales increased to 26.0% from 25.5% last year,
primarily reflecting the impact of a shift in menu mix to higher cost specialty
items.
LABOR AND BENEFITS. Labor costs as a percentage of restaurant and consumer
product sales rose to 33.1% from 32.1%, primarily due to an increase in the
average wage rate, higher insurance costs, slightly lower direct labor
productivity and increased management staffing levels.
OCCUPANCY COSTS. Occupancy costs increased as a percentage of restaurant and
consumer product sales to 15.0% from 14.3% due primarily to higher utility
costs.
OTHER OPERATING COSTS. Other operating costs at 8.5% as a percentage of
restaurant and consumer product sales remained stable compared to last year.
GENERAL AND ADMINISTRATIVE. General and administrative expense as a percentage
of total revenues increased to 8.3% from 7.9% last year, primarily reflecting
growth in salary and wage costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense as a
percentage of restaurant and consumer product sales declined to 5.7% from 6.1%
last year due to sales leverage gains.
PRE-OPENING COSTS. Pre-opening costs as a percentage of restaurant sales
decreased to 0.6% from 0.8% on a slightly slower pace of new store openings.
OPERATING INCOME. Operating income was $3,045,000, which represents an operating
margin of 4.9%. Operating income for last year was $3,844,000, which represents
an operating margin of 7.0%.
INTEREST AND OTHER EXPENSE. Interest and other expense of $958,000 is up from
$742,000 last year, primarily reflecting the impact of a $12.6 million increase
in the average bank debt outstanding.
PROVISION FOR INCOME TAXES. The effective tax rate for the quarter was 34.0%
versus an effective tax rate of 34.0% for the same quarter last year.
NET INCOME. Net income decreased to $1.4 million from $2.0 million last year
based on the factors noted above.
9
TWENTY-SIX WEEKS ENDED APRIL 1, 2001 COMPARED TO TWENTY-SIX WEEKS ENDED
APRIL 2, 2000
26 Weeks Ended
--------------
4/1/01 4/2/00
------ -------
REVENUES:
Restaurant sales 92.7% 92.3%
Consumer product sales 5.0 5.2
Franchise income 2.3 2.5
------ ------
Total 100.0% 100.0%
------ ------
COSTS AND EXPENSES:
Cost of food and beverages (1) 25.9% 25.6%
Labor and benefits (1) 32.9 31.7
Occupancy costs (1) 14.6 14.2
Other operating costs (1) 8.7 8.5
General and administrative 8.1 7.9
Depreciation and amortization (1) 5.7 6.2
Pre-opening costs (2) .5 .9
------ ------
Operating income 5.7 7.2
Interest and other expense 1.7 1.3
------ ------
Income before taxes 4.0 5.9
Provision for income taxes 1.4 2.0
------ ------
Net income 2.6% 3.9%
====== ======
(1) Percentage of restaurant and consumer product sales
(2) Percentage of restaurant sales
TOTAL REVENUES. Total revenues increased 13.8% to $122.7 million from $107.8
million last year.
RESTAURANT SALES. Company-owned restaurant sales rose 14.2% to $113.7 million
from $99.5 million last year. The gain reflects a 10.1% increase in operating
weeks for the first half of fiscal 2001 versus the same period last year. Higher
comparable store sales also contributed to the revenue growth, up 2.1% for the
twenty-six week period. Average weekly sales, which includes sales at comparable
stores as well as new units, increased 3.9% during the first six months of the
fiscal year. Five company-owned restaurants opened during the first half of
fiscal 2001 (including one acquired from a franchisee) and three were closed.
CONSUMER PRODUCT SALES. Consumer product sales increased 8.1% for the first six
months of fiscal 2001 to $6.1 million from $5.6 million last year. Sales in the
contract food service category grew 21.8% over last year, primarily reflecting
increased shipments to airlines. Sales of fresh product to retail grocers in the
Northeast were down 21.0%, the result of lower levels of promotional activity
this fiscal year.
FRANCHISE INCOME. Franchise income, which includes royalty income and initial
franchise fees, increased to $2.9 million from $2.6 million last year. Royalty
income rose 8.7% to $2.7 million this year compared to $2.5 million last year,
reflecting a 9.5% increase in total operating weeks and a 3.5% gain in average
weekly sales for full-service franchised restaurants. Franchise fees of $195,000
were recorded during the twenty-six week period compared to $153,300 last year.
Seven full-service franchised restaurants opened during the first six months of
fiscal 2001 while one was sold to the company.
COST OF FOOD AND BEVERAGES. Cost of food and beverages as a percentage of
restaurant and consumer product sales increased to 25.9% from 25.6% last year,
primarily reflecting a shift in menu mix to higher cost specialty items.
LABOR AND BENEFITS. Labor costs as a percentage of restaurant and consumer
product sales rose to 32.9% from 31.7% last year, reflecting the impact of
higher wages,
10
increased insurance costs, slightly lower direct labor productivity and higher
management staffing levels.
OCCUPANCY COSTS. Occupancy costs increased as a percentage of restaurant and
consumer product sales to 14.6% from 14.2% due primarily to higher utility
costs.
OTHER OPERATING COSTS. Other operating costs were 8.7% of restaurant and
consumer product sales, up slightly from 8.5% last year on higher advertising
and promotion expense.
GENERAL AND ADMINISTRATIVE. General and administrative expense as a percentage
of total revenues increased to 8.1% from 7.9% last year, reflecting higher
salary and wage costs.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense as a
percentage of restaurant and consumer product sales declined to 5.7% from 6.2%
last year due to sales leverage gains.
PRE-OPENING COSTS. Pre-opening costs as a percentage of restaurant sales
decreased to 0.5% from 0.9%, reflecting fewer new store openings during the
first half of fiscal 2001 than in the same period last year.
OPERATING INCOME. Operating income was $7.0 million, which represents an
operating margin of 5.7%. Operating income for last year was $7.8 million, which
represents an operating margin of 7.2%.
INTEREST AND OTHER EXPENSE. Interest and other expense of $2,097,000 is up from
$1,382,000 last year due primarily to a $15.6 million increase in the average
bank debt outstanding.
PROVISION FOR INCOME TAXES. The effective tax rate for the first six months of
fiscal 2001 was 34.3% versus an effective tax rate of 34.0% for the same period
last year.
NET INCOME. Net income decreased to $3.2 million from $4.2 million last year
based on the factors noted above.
LIQUIDITY AND SOURCES OF CAPITAL
The following table presents a summary of our cash flows for the twenty-six
weeks ended April 1, 2001.
(In Thousands)
--------------
Net cash provided by operating activities $ 10,096
Net cash used in investing activities (10,681)
Net cash provided by financing activities 1,069
-------
Increase in cash $ 484
=======
Historically, we have leased most of our restaurant locations and pursued a
strategy of controlled growth, financing our expansion principally from
operating cash flow, public equity offerings, the sale of senior, unsecured
notes, and revolving lines of credit. During the first six months of fiscal
2001, our investment in property, equipment and leasehold improvements was $10.7
million.
We currently plan to open approximately six to eight restaurants in fiscal 2001,
four of which were opened in the first six months of the fiscal year. The
average cash investment required to open a full service Pizzeria Uno restaurant,
excluding land and pre-opening costs, is approximately $1.7 million.
As of April 1, 2001, we had outstanding indebtedness of $51.4 million under our
$55 million credit facility, $455,000 in capital lease obligations and $4.3
million under our mortgage financing. Advances under the revolving credit
facility will accrue interest at the lender's prime rate plus 0-50 basis points,
or alternatively, at 75-175 basis points above LIBOR. In June 2000, we amended
our $55 million credit facility to increase the revolver component from $26.6
million to $36.6 million, leaving the remaining original principal amounts of
the term loans of the facility unchanged. The maturity of the revolver is now
June 2005. We anticipate using the revolving credit
11
facility in the future for the development of additional restaurants, and for
working capital.
On February 25, 2000, the board of directors amended its authorization regarding
the repurchase of the company's common stock. Under this amendment, the company
has approval to repurchase up to 1,500,000 shares of its common stock at such
time and at such prices as the company deems appropriate. To date under this
authorization, we have repurchased 1,392,775 shares, with no share repurchases
occurring during the first six months of fiscal 2001.
On May 11, 2001, we completed a sale-leaseback transaction involving 12 of our
company-owned restaurants. Under the transaction, the land, buildings and
improvements at the locations were sold for consideration of $25,140,000 and
have been leased back for an initial term of 20 years. Net proceeds from the
sale were used to reduce outstanding borrowings under the Company's revolving
credit facility. The leases have certain financial covenants related to fixed
charge coverage for the leased units. The estimated effect of the transaction on
our results from operations would be to increase occupancy costs by the net
effect of increased lease expense partially offset by lower depreciation, and to
reduce, by a lesser amount based on present interest rates, interest expense.
We believe that existing cash balances, cash generated from operations and
borrowing under our revolving line of credit will be sufficient to fund our
capital requirements for the foreseeable future.
We are currently obligated under 114 leases, including 110 leases for
Company-owned restaurants, two leases for our executive offices, one lease for
an office building containing one of our restaurants and one lease for a mill
shop.
IMPACT OF INFLATION
Inflation has not been a major factor in our business for the last several
years. We believe we have historically been able to pass on increased costs
through menu price increases, but there can be no assurance that we will be able
to do so in the future. Future increases in local area construction costs could
adversely affect our ability to expand.
SEASONALITY
Our business is seasonal in nature, with revenues and, to a greater degree,
operating income being lower in the first and second fiscal quarters than in
other quarters. Our seasonal business pattern is due to our concentration of
units in the Northeast, and the resulting lower winter volumes.
12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
We have market risk exposure to interest rates on our fixed and
variable rate debt obligations and we manage this exposure through the use of
interest rate swaps. We do not enter into contracts for trading purposes. The
information below summarizes our market risk associated with debt obligations
and derivative financial instruments as of April 1, 2001. For debt obligations,
the table presents principal cash flows and related average interest rates by
expected fiscal year of maturity. For variable rate debt obligations, the
average variable rates are based on implied forward rates as derived from
appropriate quarterly spot rate observations as of the fiscal quarter end. For
interest rate swaps, the table presents the notional amounts and related
weighted average interest rates by fiscal year of maturity. The average variable
rates are the implied forward rates as derived from appropriate quarterly spot
rate observations as of the fiscal quarter end.
Expected Fiscal Year of Maturity
(US$ in millions)
Fair
Value
2001 2002 2003 2004 2005 Thereafter 4/1/01
---- ---- ---- ---- ---- ---------- ------
Liabilities:
Fixed Rate $0.12 $0.26 $0.28 $0.31 $0.34 $2.95 $ 4.26
Average Interest Rate 8.75% 8.75% 8.75% 8.75% 8.75%
Variable rate $1.84 $3.68 $2.42 $2.00 $41.50 - $51.44
Average Interest Rate 5.73% 6.06% 6.83% 7.22% 7.48%
Interest Rate Swaps:
Receive Variable/
Pay Fixed $10.00 $(0.03)
Weighted Average
Pay Rate 5.80% - - - - -
Average Receive Rate 4.29% - - - - -
13
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
The Company has entered into an Agreement and Plan of Merger, dated
as of April 19, 2001, with Uno Restaurant Holdings Corporation (the
"Parent"), a corporation formed by Aaron D. Spencer, the Company's chairman
and majority stockholder and four key executive officers, and a wholly-owned
subsidiary of Parent, Uno Acquisition Corp. Under the Merger Agreement, Uno
Acquisition Corp. will be merged with and into the Company, with the Company
as the surviving corporation. Upon completion of the merger, each issued and
outstanding share of the Company's common stock not owned by Parent will be
entitled to receive $9.75 per share in cash, without interest. After the
merger, the Company will continue its operations as a privately held company.
Completion of the merger is subject to a number of conditions, including
receipt of financing, approval by the holders of a majority of the Company's
shares not owned or controlled by Mr. Spencer and four key executive
officers, holders who seek to exercise their appraisal rights under Delaware
law not owning more than five percent of the Company's outstanding shares,
receipt of a further fairness opinion from the financial advisor to the
Special Committee of the Company's Board of Directors who negotiated the
transaction, and absence of a material adverse change or the institution of
certain litigation.
On April 27, 2001 the Company filed its preliminary proxy statement on
Schedule 14A with the Securities and Exchange Commission relating to the merger
and the Merger Agreement. Details of the merger and the Merger Agreement are
discussed in the proxy statement.
INFORMATION CONCERNING THE IDENTITY OF THE DIRECTORS AND EXECUTIVE
OFFICERS OF THE COMPANY AND THE BENEFICIAL OWNERSHIP OF THE COMPANY'S COMMON
STOCK BY EACH OF THESE INDIVIDUALS AND THEIR OTHER POTENTIAL INTERESTS IN THE
TRANSACTION CONTEMPLATED BY THIS ITEM 5 MAY BE FOUND IN THE COMPANY'S
PRELIMINARY PROXY STATEMENT FILED WITH THE SEC UNDER SCHEDULE 14A ON APRIL 27,
2001 AND IN THE MANAGEMENT GROUP'S SCHEDULE 13D FILED WITH THE SEC. IN
CONNECTION WITH THE PROPOSED MERGER, THE COMPANY HAS FILED A PRELIMINARY PROXY
STATEMENT AND WILL FILE A DEFINITIVE PROXY STATEMENT ON SCHEDULE 14A WITH THE
SEC. SHAREHOLDERS OF THE COMPANY AND OTHER INVESTORS ARE ENCOURAGED TO READ THE
PROXY STATEMENT BECAUSE IT CONTAINS AND WILL CONTAIN IMPORTANT INFORMATION ABOUT
THE MERGER. ALL OF THESE DOCUMENTS THAT HAVE BEEN, OR MAY BE, FILED WITH THE SEC
ARE AVAILABLE FREE OF CHARGE ON THE SEC'S WEB SITE (HTTP://WWW.SEC.GOV/).
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
EXHIBIT NO.
2 Agreement and Plan of Merger dated as of April 19,
2001 among Uno Restaurant Corporation, Uno Restaurant
Holdings Corporation and Uno Acquisition Corp.*
* In accordance with Rule 12b-32 under the Securities
Exchange Act of 1934, as amended, reference is made
to the Company's preliminary proxy statement on
Schedule 14A filed with the Securities and Exchange
Commission on April 27, 2001, Appendix A of which is
hereby incorporated by reference.
(b) Reports on Form 8-K
Uno Restaurant Corporation did not file any Reports
on Form 8-K during the quarter ended April 1, 2001.
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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.
UNO RESTAURANT CORPORATION
--------------------------
(Registrant)
Date: May 14, 2001 By: /s/ Craig S. Miller
---------------- ----------------------------------
Craig S. Miller
Chief Executive Officer
(Principal Executive Officer)
Date: May 14, 2001 By: /s/ Robert M. Vincent
---------------- ----------------------------------
Robert M. Vincent
Executive Vice President
and Chief Financial Officer
(Principal Financial Officer)
15