FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the Quarterly Period Ended July 13, 1996
Commission File Number 0-19315
Bertucci's, Inc.
(Exact name of registrant as specified in its charter)
Massachusetts 04-2947209
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
14 Audubon Road, Wakefield, Massachusetts 01880
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (617) 246-6700
Indicate by check mark whether the registrant (1) has filed all reports required
to be filled by section 13 or 15(d) of the Securities Exchange Act of the 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 the past 90 days.
Yes [X] No
On August 23, 1996, 8,752,928 shares of the registrant's Common Stock were
outstanding.
BERTUCCI'S, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
1) Consolidated Condensed Balance Sheets
July 13, 1996, and December 30, 1995 4
2) Consolidated Condensed Statements of Operations
For Twelve Weeks and Twenty-Eight Weeks
Ended July 13, 1996, and July 15, 1995 5
3) Consolidated Condensed Statements of Shareholders'
Equity For The Twenty-Eight-Week Period Ended
July 13, 1996 6
4) Consolidated Condensed Statements of Cash
Flows - Twenty-Eight Weeks Ended July 13, 1996,
and July 15, 1995 7
5) Notes to Consolidated Condensed Financial
Statements 8
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 9-12
PARTII: OTHER INFORMATION 13
PART I:FINANCIAL INFORMATION
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
July 13, December 30,
1996 1995
(in thousands)
----------------------------------------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,146 $ 1,384
Inventories 995 951
Accounts receivable 148 154
Note receivable 70 70
Prepaid expenses 407 366
Deferred preopening costs 750 818
Prepaid taxes 758 758
---------------- ----------------
Total current assets 4,274 4,501
---------------- ----------------
PROPERTY AND EQUIPMENT, at cost:
Land 2,902 2,902
Buildings 10,345 10,324
Leasehold improvements 70,845 69,028
Machinery and equipment 34,968 32,274
Construction in progress 1,591 1,216
Equipment under capital lease 164 164
---------------- ----------------
120,815 115,908
Less - Accumulated depreciation 28,098 26,048
---------------- ----------------
Net property and equipment 92,717 89,860
---------------- ----------------
PREPAID TAXES 2,405 2,405
OTHER ASSETS 2,114 2,172
---------------- ----------------
$ 101,510 $ 98,938
================ ================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Notes payable-current $ 25 $ 25
Accounts payable 4,319 4,243
Accrued expenses 765 513
Accrued restaurant closing expense 1,273 1,539
Accrued payroll and employee benefits 2,510 2,419
Accrued taxes 1,875 1,019
---------------- ----------------
Total current liabilities 10,767 9,758
DEFERRED RENT 5,870 5,575
NOTES PAYABLE 50 75
LONG-TERM DEBT 19,438 19,438
SHAREHOLDERS' EQUITY:
Preferred stock, $.01 par value -
Authorized - 200,000 shares, none issued - -
Common stock, $.005 par value -
Authorized - 15,000,000 shares
Issued and outstanding -
8,728,442 shares at December 30, 1995 and
8,739,552 shares at July 13, 1996 44 44
Additional paid-in capital 44,679 44,620
Retained earnings 20,662 19,428
---------------- ----------------
Total shareholders' equity 65,385 64,092
---------------- ----------------
$ 101,510 $ 98,938
================ ================
The accompanying notes are an integral part of these consolidated
condensed financial statements.
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
12 Weeks Ended 28 Weeks Ended
------------------------------------------ -------------------------------------------
July 13, July 15, July 13, July 15,
1996 1995 1996 1995
------------------ ------------------ ----------------- -----------------
(in thousands, except per share data)
NET SALES $ 30,235 $ 28,521 $ 68,494 $ 63,967
------------------ ------------------ ----------------- -----------------
COSTS AND EXPENSES:
Cost of sales 7,589 7,278 17,387 16,329
Operating expenses 15,844 14,380 35,725 31,706
General and administrative expenses 1,777 2,030 4,255 4,671
Depreciation and amortization 2,043 2,212 4,755 4,974
Taxes other than income 1,568 1,516 3,668 3,448
------------------ ------------------ ----------------- -----------------
Total costs and expenses 28,821 27,416 65,790 61,128
------------------ ------------------ -- --------------- -- ---------------
Operating income 1,414 1,105 2,704 2,839
INTEREST EXPENSE, net 323 292 741 615
INTEREST INCOME 4 5 10 13
----------------- ------------------ -- --------------- -- ---------------
Income before income tax expense 1,095 818 1,973 2,237
INCOME TAX EXPENSE 410 293 739 810
------------------ ------------------ -- --------------- -- ---------------
Net income $ 685 $ 525 $ 1,234 $ 1,427
================== ================== == =============== == ===============
WEIGHTED AVERAGE SHARES
OUTSTANDING 8,890,004 8,857,734 8,878,140 8,878,124
================== ================== == =============== == ===============
EARNINGS PER SHARE $ 0.08 $ 0.06 $ 0.14 $ 0.16
================== ================== == =============== == ===============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF SHAREHOLDERS' EQUITY
(Unaudited)
Common Stock Additional
--------------------------- Paid-In Retained Shareholders'
Shares Par Capital Earnings Equity
---------- ------------ ---------- ---------- ---------------
(in thousands)
BALANCE, December 30, 1995 8,728 $ 44 $ 44,620 $ 19,428 $ 64,092
Issuance of stock 12 - 59 - 59
Net income - - - 1,234 1,234
---------- ------------ ------------ ------------- ------------
BALANCE, July 13, 1996 8,740 $ 44 $ 44,679 $ 20,662 $ 65,385
========== ============ ============ ============= ============
The accompanying notes are an integral part of these consolidated
condensed financial statements.
BERTUCCI'S, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Twenty-Eight Weeks Ended
---------------------------------------------
July 13, July 15,
1996 1995
----------------- --------------------
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,234 $ 1,427
Adjustments to reconcile net income to net cash provided by
operating activities
Depreciation and amortization 4,893 5,097
Increase in inventories (44) (149)
Increase in prepaid expenses, accounts receivable,
notes receivable and other assets (23) (70)
Increase (decrease) in accounts payable 76 (2,229)
Increase in accrued expenses and deferred rent 372 692
Increase (decrease) in accrued, deferred and prepaid taxes 856 (877)
----------------- -------------
Net cash provided by operations 7,364 3,891
----------------- ------------
CASH FLOWS USED FROM INVESTING ACTIVITIES:
Additions to preopening costs (684) (878)
Additions to property and equipment (6,952) (9,183)
----------------- -------------
Net cash used by investing activities (7,636) (10,061)
----------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 59 122
Proceeds from debt - 5,438
Decrease in notes payable (25) (25)
----------------- -------------
Net cash provided by financing activities 34 5,535
----------------- -------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (238) (635)
CASH AND CASH EQUIVALENTS, beginning of period 1,384 750
----------------- -------------
CASH AND CASH EQUIVALENTS, end of period 1,146 $ 115
================= =============
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for ---
Interest, net of amount capitalized $ 692 $ 542
================= ==============
Income taxes $ 80 $ 859
The accompanying notes are an integral part of these consolidated
condensed financial statements.
BERTUCCI'S, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
July 13, 1996
1. Basis of Presentation
In the opinion of management, the accompanying consolidated condensed
financial statements contain all normal recurring adjustments necessary for a
fair presentation. The results of operations for the twelve-week and
twenty-eight-week periods ended July 13, 1996 are not necessarily indicative
of the results to be expected for the full year.
The significant accounting policies followed by the Company are set
forth in the notes toConsolidated Financial Statements in the Company's 1995
Annual Report and Form 10-K filed with the Securities and Exchange Commission.
These financial statements should be read in conjunction with the financial
statements included in the 1995 Annual Report and Form 10-K.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following table sets forth the percentage relationship to net sales of
certain items included in the company's income statements for the periods
indicated.
12 Weeks Ended 28 Weeks Ended
---------------------------------- ---------------------------------
July 13, July 15, July 13, July 15,
1996 1995 1996 1995
---------------- --------------- --------------- ---------------
NET SALES 100.0% 100.0% 100.0% 100.0%
---------------- --------------- --------------- ---------------
COSTS AND EXPENSES:
Costs of sales 25.1 25.5 25.4 25.5
Operating expenses 52.4 50.4 52.2 49.6
General and administrative expenses 5.9 7.1 6.2 7.3
Depreciation and amortization 6.7 7.8 6.9 7.8
Taxes other than income 5.2 5.3 5.4 5.4
---------------- --------------- --------------- ---------------
Total costs and expenses 95.3 96.1 96.1 95.6
---------------- --------------- --------------- ---------------
Operating income 4.7 3.9 3.9 4.4
INTEREST EXPENSE, net 1.1 1.0 1.0 1.0
INTEREST INCOME - - - -
---------------- --------------- --------------- ---------------
Income before income tax expense 3.6 2.9 2.9 3.4
INCOME TAX EXPENSE 1.3 1.0 1.1 1.2
---------------- --------------- --------------- ---------------
Net income 2.3% 1.9% 1.8% 2.2%
================ =============== =============== ===============
NUMBER OF RESTAURANTS:
Restaurants open at beginning of period 76 70 76 67
Restaurants opened during period 1 3 4 6
Restaurants closed during period - - (3) -
---------------- --------------- --------------- ---------------
Restaurants open at end of period 77 73 77 73
Twelve Weeks Ended July 13, 1996, Compared To Twelve Weeks Ended July 15, 1995
Net sales increased $1.7 million, or 6.0%, to $30.2 million in the
second quarter of fiscal year 1996, from $28.5 million in the second quarter of
fiscal year 1995. Comparable restaurant sales for the twelve-week period
increased 1.7%. The Company opened one additional new restaurant in the twelve-
week period ended July 13, 1996.
Cost of sales, primarily food and beverages, increased from $7.3
million in the twelve weeks ended July 15, 1995, to $7.6 million in the
corresponding 1996 period. As a percentage of net sales, these costs were 25.5%
in the 1995 fiscal period, and 25.1% in the corresponding 1996 fiscal period.
The percentage decrease was the result of more efficient operations. The price
of flour and cheese remained high throughout the period.
Restaurant operating expenses for the twelve-week period increased from
$14.4 million in fiscal year 1995, to $15.8 million for the corresponding period
in fiscal year 1996. As a percentage of net sales, operating expenses increased
from 50.4% during the twelve weeks ended July 15, 1995, to 52.4% during the
corresponding period in 1996. The increase was the result of higher maintenance
costs and advertising costs.
General and administrative expenses decreased, as a percentage of net
sales, from 7.1% during the twelve weeks ended July 15, 1995, to 5.9% during the
corresponding period of fiscal year 1996. The decrease has come from attrition
at the corporate level, reduction in training costs associated with new
restaurant openings, and a reduction of in-house marketing costs.
Depreciation and amortization expense decreased, as a percentage of net
sales, from 7.8% in the 1995 twelve-week period, to 6.7% in the 1996 twelve-week
period. This decrease was attributable to the amortization expense on fewer new
restaurants.
Taxes, other than income taxes, increased from $1.5 million during the
twelve weeks ended July 15, 1995, to $1.6 million in the corresponding 1996
period, and decreased, as a percentage of net sales, from 5.3% for 1995 to 5.2%
for 1996. The percentage decrease was due to lower state unemployment tax rates
on payroll.
Interest expense increased from $292,000 to $323,000 for the
corresponding twelve weeks of 1995 and 1996, respectively. The increase was
attributable to the higher amounts of bank borrowings, as well as higher
interest rates during the 1996 period.
The effective income tax rate increased from 35.8% for the twelve weeks
ended July 15, 1995, to 37.4% for the corresponding period ended July 13, 1996.
The increase in tax rate is attributable to the expiration of the Targeted Sales
Tax Credit program, and reduction of start-up costs associated with fewer new
store openings.
Twenty-Eight Weeks Ended July 13, 1996, Compared To Twenty-Eight Weeks
Ended July 15, 1995
Net sales increased $4.5 million, or 7.1%, to $68.5 million for the
twenty-eight-week period in 1996, compared to $64.0 million in the same period
last year. New restaurants that were opened in 1995 and 1996 contributed to the
increase. Comparative restaurant sales during the twenty-eight-week period were
negative by 0.8%, which was attributable to the severe winter weather early in
the year. Menu price-increases for the period under comparison were less than
2.0%.
Cost of sales, primarily food and beverages, increased from $16.3
million for the 1995 twenty- eight-week period, to $17.4 million for the 1996
twenty-eight-week period, and decreased slightly, as a percentage of net sales,
from 25.5% to 25.4% for the twenty-eight-week periods ended in 1995 and 1996,
respectively. While the costs of flour, cheese, and produce increased during the
comparable period, the Company was able to offset the increase through more
efficient operations.
Restaurant operating expenses for the twenty-eight-week period
increased from $31.7 million in fiscal year 1995, to $35.7 million in fiscal
year 1996. As a percentage of net sales, operating expenses increased from 49.6%
during the twenty-eight weeks ended July 15, 1995, to 52.2% during the
corresponding period in 1996. The increase was the result of advertising costs
of 2.3%, as a percentage of net sales, that were over and above the amount
expensed in the first twenty-eight weeks of 1995. In addition, costs for
maintenance and labor also increased during the 1996 fiscal year period.
General and administrative expenses, as a percentage of net sales for
the twenty-eight-week period, decreased from 7.3% in 1995, to 6.2% in 1996. This
decrease was the result of attrition at the corporate level, reduction in
training costs associated with new restaurant openings, and a reduction of
in-house marketing costs.
Depreciation and amortization expense, as a percentage of net sales,
decreased from 7.8% in the 1995 twenty-eight-week period, to 6.9% in the 1996
twenty-eight-week period. This decrease was attributable to the amortization
expense on fewer new restaurants.
Taxes, other than income taxes, increased from $3.4 million during the
twenty-eight weeks ended July 15, 1995, to $3.7 million for the corresponding
period in 1996, and remained, as a percentage of net sales, at 5.4% for both the
1995 and 1996 periods.
Interest expense increased from $615,000 to $741,000 for the
corresponding twenty-eight-week periods of 1995 and 1996, respectively. The
increase was attributable to higher interest rates and the higher amounts of
bank borrowings during the 1996 period.
The effective income tax rate increased from 36.2% for the twenty-eight
weeks ended July 15, 1995, to 37.5% for the corresponding period ended July 13,
1996. The increase in tax rate is attributable to the expiration of the Targeted
Sales Tax Credit program, and reduction of start-up costs associated with fewer
new store openings.
Liquidity and Sources of Capital
To date, the Company has financed its expansion from operations, bank
borrowing, and private placements and public offerings of equity securities. The
Company does not have significant receivables or inventory, and receives trade
credit based upon negotiated terms in purchasing food and supplies.
The Company has a bank line-of-credit in effect until November 30,
1997, under which it may borrow up to $30.0 million. On November 30, 1997, the
Company will be able to convert the balance, if any, to a term loan maturing on
November 30, 2000. The Company pays a fee of 1/4 of 1% on the unused balance,
and interest is calculated using LIBOR plus 1.25%. There are no compensating
balance arrangements or legal restrictions as to the withdrawal of these funds.
The amounts outstanding under this bank line-of-credit for both July 15, 1995,
and July 13, 1996, was $19.4 million.
During the twenty-eight weeks ended July 15, 1995, and July 13, 1996,
the Company's investment in property and equipment was $9.2 million and $7.0
million, respectively. The investments were funded with cash provided by
operations and with the proceeds of financing activities.
Cash provided by operations amounted to $3.9 million and $7.4 million
for the twenty-eight weeks ended July 15, 1995, and July 13, 1996, respectively.
Cash from financing activities amounted to $5.5 million for the
twenty-eight-week period in 1995.
The Company opened four new restaurants in the first twenty-eight weeks
of 1996, and expects to open a total of seven to eight new restaurants by the
end of fiscal year 1996, with an additional five to six restaurants planned for
fiscal year 1997. The Company expects to expend approximately $12.0 million in
fiscal year 1996, and approximately $10.0 million in fiscal year 1997, to
finance expansion. The Company believes that it will have sufficient working
capital and bank borrowings to finance its expansion plans through the end of
fiscal year 1997.
PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
None
Item 2. CHANGES IN SECURITIES
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27: Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the period covered by
this report.
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.
BERTUCCI'S, INC.
(Registrant)
Date: August 23, 1996 By: /s/ Joseph Crugnale
-------------------
Joseph Crugnale
President and Chief
Executive Officer
Date: August 23, 1996 By: /s/ Norman S. Mallett
---------------------
Norman S. Mallett
Vice President - Finance
Chief Financial Officer and
Treasurer