United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly report pursuant to Section 13 or 15(d) of the Securities
- - - --- Exchange Act of 1934
For the quarterly period ended March 31, 1996
Or
Transition report pursuant to Section 13 or 15(d) of the Securities
- - - --- Exchange Act of 1934
For the transition period from ____ to ____
Commission file number: 0-11104
NOBLE ROMAN'S, INC.
(Exact name of registrant as specified in its charter)
Indiana
(State or other jurisdiction of organization)
35-1281154
(I.R.S. Employer Identification No.)
One Virginia Avenue, Suite 800
Indianapolis, Indiana
(Address of principal executive offices)
46204
(Zip Code)
(317) 634-3377
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
--- ---
As of May 1, 1996, there were 4,131,324 shares of Common Stock, no par
value, outstanding.
Page 1 of 9
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
The following condensed consolidated financial statements are included
herein:
Condensed consolidated balance sheets as of December 31, 1995
and March 31, 1996 Page 3
Condensed consolidated statements of operations for the three
months ended March 31, 1995 and 1996 Page 4
Condensed consolidated statements of cash flows for the three
months ended March 31, 1995 and 1996 Page 5
The interim condensed consolidated financial statements included herein
reflect all adjustments which are, in the opinion of management, necessary
for a fair statement of the results for the interim periods presented, which
adjustments are of a normal recurring nature.
The Company provides for current and deferred income tax liabilities and
assets utilizing an asset and liability approach along with a valuation
allowance as appropriate. At December 31, 1995 the Company determined that it
needed to revise its financial reporting for the deferred income tax
liability and, therefore, increased its accrual for income tax expense.
The change effected the entire 1995 year and when spread had the effect of
lowering first quarter 1995 earnings by $17,331. This change is reflected on
the Condensed Consolidated Statement of Operations for the three months
ended March 31, 1995 included herein.
Page 2 of 9
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited)
December 31, March 31,
1995 1996
----------- -----------
Assets
Current assets:
Cash $ 229,462 $ 223,079
Accounts receivable 950,622 951,108
Inventories 980,534 977,553
Prepaid expenses 512,949 741,303
----------- -----------
Total current assets 2,673,567 2,893,043
Property and equipment, less accumulated
depreciation and amortization of
$3,737,594 and $3,971,356 9,135,949 9,256,797
Costs in excess of assets required, net 6,722,812 6,657,317
Other assets 2,127,594 2,337,277
----------- -----------
$20,659,922 $21,144,434
----------- -----------
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 946,033 $ 953,627
Notes payable - current 761,128 761,128
Other current liabilities 1,019,247 685,907
----------- -----------
Total current liabilities 2,726,408 2,400,662
Long-term liabilities:
Revolving line of credit 2,914,919 3,510,286
Notes payable 8,290,793 8,306,253
Capital leases 258,037 243,469
Deferred tax liability 896,390 896,390
----------- -----------
Total long-term liabilities 12,360,139 12,956,398
Stockholders' equity
Common stock, no par value, authorized
9,000,000 shares, issued 4,131,324
and 4,131,324 5,442,788 5,442,788
Retained earnings 130,587 344,586
----------- -----------
Total stockholders' equity 5,273,375 5,787,374
----------- -----------
$20,659,922 $21,144,434
----------- -----------
Page 3 of 9
Noble Roman's, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended
March 31,
-----------------------
1995 1996
---------- ----------
Restaurant revenue $8,044,248 $8,715,445
Royalties 57,253 58,719
Administrative fees and other 109,367 112,026
---------- ----------
Total revenue 8,210,868 8,886,190
Restaurant operating expenses:
Cost of revenue 1,438,421 1,625,209
Salaries and wages 2,480,174 2,721,127
Rent 666,407 715,860
Advertising 365,606 401,285
Other 1,844,211 2,035,329
Depreciation and amortization 283,830 297,122
General and administrative 498,377 425,804
---------- ----------
Operating income 633,842 664,454
Interest 284,674 333,517
---------- ----------
Income before income taxes 349,168 330,937
Income taxes 135,331 116,938
---------- ----------
Net income $ 213,837 $ 213,999
---------- ----------
Net income per share $ .05 $ .05
Weighted average number of common shares outstanding 3,993,392 4,131,324
Page 4 of 9
Noble Roman's and Subsidiaries
Consolidated Statements of Cash Flows
(Unaudited)
Three Months Ended
April 31,
--------------------
1995 1996
--------- --------
OPERATING ACTIVITIES
Net income $ 213,837 $ 213,999
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 319,388 297,122
Changes in operating assets and liabilities
(increase) decrease in:
Accounts receivable (183,808) (486)
Inventory (137,099) 2,981
Prepaid expenses (275,446) (228,354)
Other assets (52,003) -
Increase (decrease) in:
Accounts payable 483,864 7,594
Accrued expenses (512,279) (333,340)
--------- ---------
NET CASH PROVIDED BY OPERATING ACTIVITIES (127,884) (40,484)
INVESTING ACTIVITIES
Purchase of equipment (298,636) (314,610)
Payments received on notes receivable 623 -
--------- ---------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES (298,013) (314,610)
FINANCING ACTIVITIES
Proceeds from long-term debt - 363,279
Proceeds from sale of common stock 10,630 -
Principal payments on long-term debt
and capital lease obligations (58,169) (14,568)
--------- ---------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES (47,539) 348,711
--------- ---------
INCREASE (DECREASE) IN CASH (473,436) (6,383)
Cash at beginning of period 621,726 229,462
--------- ---------
Cash at end of period $ 148,290 $ 223,079
--------- ---------
Page 5 of 9
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Noble Roman's, Inc. and Subsidiaries
Results of Operations - Three month period ended March 31, 1995 and 1996
The following table sets forth the percentage relationship to total revenue
of the listed items included in Noble Roman's consolidated statement of
operations. Certain items are shown as a percentage of restaurant revenue.
Three Months Ended
March 31,
--------------
1995 1996
----- -----
Revenue:
Restaurant revenue 98.0% 98.0%
Royalties .7 .7
Administrative fees and other 1.3 1.3
----- -----
100.0 100.0
Restaurant operating expenses (1):
Cost of revenue 17.9 18.6
Salaries and wages 30.8 31.2
Rent 8.3 8.2
Advertising 4.5 4.6
Other 22.9 23.4
Depreciation and amortization 3.5 3.3
General and administrative 6.1 4.8
----- -----
Operating income 7.7 7.5
Interest 3.4 3.8
----- -----
Income before federal income taxes 4.3% 3.7%
<FN>
(1) As a percentage of restaurant revenue
</FN>
Total revenue increased 8.2% in the three months ended March 31, 1996,
from $8.2 million in 1995 to $8.9 million in the three months ended
March 31, 1996. The increase was attributable to revenue at the five new
restaurants opened after the first quarter in 1995 and the one new
restaurant opened during the first quarter of 1996, to a 2.0% increase
in comparable restaurant revenue offset by a .4% increase in discounts as a
percentage of revenue.
Page 6 of 9
Cost of revenue as percentage of restaurant revenue increased from 17.9% in
the first three months of 1995 to 18.6% in the same period in 1996. The
increase was primarily the result of increased cheese prices which were
unusually low during the first three months of 1995. Salaries and wages
increased as a percentage of restaurant revenue from 30.8% for the three
month period in 1995 to 31.2% in 1996. The increase was attributable to a
higher average hourly wage, partially offset by more efficient scheduling
of hourly employees. Management believes that the competition for labor in
1996 has declined to date due to decreased competition from certain casual
dining chains which opened in the region during 1995. Other expenses
increased as a percentage of revenue from 22.9% in the three month period
in 1995 to 23.4% in 1996. The increase was primarily attributable to
increased utility costs which resulted from colder than normal winter weather.
General and administrative expenses as a percentage of total revenue
decreased from 6.1% during the three months ended March 31, 1995 to 4.8% in
1996. The decrease as a percentage of total revenue was primarily
attributable to the increase in total revenue due to new restaurant openings
in 1995.
Operating income increased from $634 thousand in the three month period
ended March 31, 1995 to $664 thousand in 1996. Operating income decreased as
a percentage of total revenue from 7.7% in 1995 to 7.5% in 1996.
Interest expense increased from $285 thousand for the three month period
ended March 31, 1995 to $334 thousand in 1996. The increase is the result of
a higher interest rate on the Company's debt as a result of the refinancing
in December, 1995 in order to repay notes which had a short term maturity.
Income before federal income taxes decreased 5.2% from $349 thousand for the
three month period in 1995 to $331 thousand in 1996. The decrease was
attributable to the increase in interest expense which was partially offset
by the increase in operating income.
Liquidity and Capital Resources
The Company's principal capital requirements arise from the costs associated
with the development and opening of new restaurants and refurbishment of
existing restaurants. The Company's primary sources of working capital are
cash flow from operations and borrowings under its credit facilities.
Capital expenditures were $298,636 for the three month period in 1995 and
$314,610 in 1996. The Company expands primarily through the use of leased
land and buildings. The capital requirements for new restaurants in
build-to-suit, free-standing leased facilities is expected to average
approximately $150,000 per restaurant.
The Company has signed a Letter of Intent to acquire Papa Gino's, another
regional chain of 182 restaurants, located in Boston, Massachusetts and
surrounding areas. This transaction is contingent upon execution of a
definitive agreement, completion of a public equity offering and the
securing of a senior credit facility for the combined company.
Page 7 of 9
Absent the above transaction, the Company believes that cash generated from
operations, combined with its current credit facility, will be sufficient to
accomplish its development plans. The Company also believes that, if the
above acquisition is completed, the cash flow from operations combined with
the equity offering and the new credit facility will be sufficient to
accomplish its internal growth plans of the combined entities and to pursue
its growth strategy of acquiring other regional pizza chains.
PART II - OTHER INFORMATION
ITEM 1. Legal Proceedings.
From time to time, the Company is involved in litigation relating to claims
arising out of its normal business operations. The Company believes that
none of its current proceedings, individually or in the aggregate, will
have a material adverse effect on the Company.
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.
Report on Form 8-K filed March 25, 1996.
Page 8 of 9
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.
NOBLE ROMAN'S, INC.
Date: May 20, 1996
/s/ Paul W. Mobley
- - - --------------------------------------------
Paul W. Mobley, President
(Principal Executive Officer and Chief Financial Officer)
Page 9 of 9