UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended December 31, 1999
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 000-23174
THE QUIZNO'S CORPORATION
(Exact name of registrant as specified in its charter)
Colorado 84-1169286
(State of other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1415 Larimer Street
Denver, Colorado 80202
(Address of principal executive offices)
(720) 359-3300
(Registrant's telephone number, including area code)
Check whether issuer (1) has filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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
State the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date.
Outstanding at
Class February 9, 2000
- --------------------------------------- ----------------
Common Stock, $0.001 par value 3,040,716 shares
THE QUIZNO'S CORPORATION
Commission File Number: 000-23174
Quarter Ended December 31, 1999
FORM 10-QSB
Part I - FINANCIAL INFORMATION
Consolidated Statements of Operations............................Page 1
Consolidated Balance Sheets......................................Page 3
Consolidated Statements of Cash Flows............................Page 5
Consolidated Statement of Stockholders' Equity...................Page 7
Notes to Consolidated Financial Statements.......................Page 8
Management's Discussion and Analysis or Plan of Operation.......Page 11
Part II - OTHER INFORMATION.....................................Page 21
Signature.......................................................Page 23
THE QUIZNO'S CORPORATION AND SUBSIDIARIES
STATEMENTS OF OPERATIONS
Three Months Ended
December 31,
----------------------------
1999 1998
----------- -----------
(Unaudited)
FRANCHISE OPERATIONS:
Continuing fees ....................... $ 3,637,481 $ 1,729,631
Initial franchise fees ................ 1,462,430 887,083
Area director and master franchise fees 480,796 1,355,359
Other ................................. 227,404 137,866
Interest .............................. 130,693 116,818
----------- -----------
Total revenue ........................ 5,938,804 4,226,757
----------- -----------
Expenses
Sales and royalty commissions ......... (1,757,020) (1,424,765)
General and administrative ............ (2,521,515) (2,093,970)
----------- -----------
Total expenses ....................... (4,278,535) (3,518,735)
----------- -----------
Net income from franchise operations .... 1,660,269 708,022
----------- -----------
COMPANY STORE OPERATIONS:
Sales ................................. 2,757,584 1,855,805
----------- -----------
Cost of sales ......................... (815,221) (541,653)
Cost of labor ......................... (835,947) (475,826)
Other store expenses .................. (885,389) (754,772)
----------- -----------
Total expenses ....................... (2,536,557) (1,772,251)
----------- -----------
Net income from Company stores operations 221,027 83,554
----------- -----------
See notes to consolidated financial statements.
- 1 -
(continued on next page)
THE QUIZNO'S CORPORATION AND SUBSIDIARIES
STATEMENTS OF OPERATIONS (continued)
Three Months Ended
December 31,
----------------------------
1999 1998
----------- -----------
(Unaudited)
OTHER INCOME (EXPENSE):
Sales by stores held for resale .......... $ 103,153 $ 430,742
Expenses related to stores held for resale (132,385) (482,935)
Loss on sale of Company stores ........... (43,595) (47,505)
Provision for bad debts .................. (167,871) (134,291)
Depreciation and amortization ............ (461,985) (359,536)
Interest expense ......................... (466,968) (80,891)
Other expense ............................ (60,559) (41,958)
----------- -----------
Total other income (expense) ............... (1,230,210) (716,374)
----------- -----------
Net income before income taxes ............. 651,086 75,202
Income tax (provision) benefit ............. (226,367) 368,553
----------- -----------
Net income ................................. 424,719 443,755
Preferred stock dividends .................. (39,285) (54,921)
----------- -----------
Net income applicable to common shareholders $ 385,434 $ 388,834
=========== ===========
Basic net income per share of common stock . $ 0.13 $ 0.13
=========== ===========
Diluted net income per share of common stock $ 0.11 $ 0.11
=========== ===========
Weighted average common shares outstanding
Basic .................................... 3,058,339 3,026,269
=========== ===========
Diluted .................................. 3,765,135 3,903,275
=========== ===========
See notes to consolidated financial statements.
- 2 -
THE QUIZNO'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
December 31, September 30,
1999 1999
----------- -----------
(Unaudited)
CURRENT ASSETS:
Cash and cash equivalents .................... $ 3,612,509 $ 626,828
Short term investments ....................... 5,246,198 4,263,877
Accounts receivable, net of allowance for
doubtful accounts of $155,959 at December 31,
1999 and $43,793 at September 30, 1999 ...... 1,457,416 1,047,438
Current portion of notes receivable .......... 500,529 519,994
Deferred tax asset ........................... 128,718 128,718
Other current assets ......................... 438,202 373,578
Assets held for resale and investment in
area directorships .......................... -- 1,082,310
----------- -----------
Total current assets ........................... 11,383,572 8,042,743
----------- -----------
Property and equipment at cost, net of
accumulated depreciation and amortization of
$1,506,535 at December 31, 1999 and $1,230,461
at September 30, 1999 (Notes 7 and 10) ....... 10,225,615 4,804,051
----------- -----------
OTHER ASSETS:
Intangible assets, net of accumulated
amortization of $827,903 at December 31, 1999
and $712,759 at September 30, 1999 (Note 10) 4,998,186 1,662,265
Investment in area directorships ............. 1,362,197 --
Deferred assets .............................. 2,455,527 1,726,984
Deferred tax asset ........................... 3,520,103 3,507,213
Deposits and other assets .................... 254,041 361,189
Notes receivable, net of allowance for
doubtful accounts of $40,000 at December 31,
1999 and $41,742 at September 30, 1999 ...... 1,534,216 1,670,329
----------- -----------
Total other assets ............................. 14,124,270 8,927,980
----------- -----------
Total assets ................................... $35,733,457 $21,774,774
=========== ===========
See notes to consolidated financial statements.
- 3 -
(continued on next page)
THE QUIZNO'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS' EQUITY
December 31, September 30,
1999 1999
------------ ------------
(Unaudited)
CURRENT LIABILITIES:
Accounts payable ............................ $ 1,782,242 $ 1,219,157
Accrued liabilities ......................... 612,047 544,476
Current portion of subordinated debt ........ -- 218,546
Current portion of long term obligations .... 889,559 337,642
Income taxes payable ........................ 221,936 851,469
------------ ------------
Total current liabilities ..................... 3,505,784 3,171,290
Line of credit (Note 8) ....................... 3,350,000 --
Long term obligations (Note 9) ................ 13,086,968 1,268,504
Subordinated debt ............................. -- 1,498,791
Deferred revenue (Note 4) ..................... 14,272,552 13,722,331
------------ ------------
Total liabilities ............................. 34,215,304 19,660,916
------------ ------------
COMMITMENTS AND CONTINGENCIES (Note 6)
STOCKHOLDERS' EQUITY:
Preferred stock, $.001 par value, 1,000,000
shares authorized:
Series A issued and outstanding 146,000 at
December 31, 1999 and September 30, 1999
($876,000 liquidation preference) ......... 146 146
Series C issued and outstanding 167,000 at
December 31, 1999 and September 30, 1999
($835,000 liquidation preference) ......... 167 167
Series D issued and outstanding 3,000 at
December 31, 1999 ($9,000 liquidation
preference) ............................... 8,400 --
Common stock, $.001 par value; 9,000,000 shares
authorized; issued and outstanding 2,980,179
at December 31, 1999 and 3,074,177 at
September 30, 1999 (Note 13) ................. 2,980 3,074
Capital in excess of par value ................ 3,457,219 4,485,949
Accumulated deficit ........................... (1,950,759) (2,375,478)
------------ ------------
Total stockholders' equity .................... 1,518,153 2,113,858
------------ ------------
Total liabilities and stockholders' equity .... $ 35,733,457 $ 21,774,774
============ ============
See notes to consolidated financial statements.
- 4 -
THE QUIZNO'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
December 31,
------------------------------
1999 1998
------------ ------------
(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ................................. $ 424,719 $ 443,755
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization ............. 443,153 335,470
Provision for losses on accounts receivable 167,871 134,291
Deferred income taxes ..................... (12,890) (575,553)
Promissory notes accepted for area director
fees ..................................... (200,000) (723,958)
Loss on disposal of Company store ......... 43,595 47,505
Amortization of deferred financing costs .. 18,832 24,066
Net deferred area director marketing
agreement fees ......................... 131,573 --
Other ..................................... -- 30,499
Changes in assets and liabilities:
Accounts receivable ...................... (543,517) (99,606)
Other current assets ..................... (38,687) 186,703
Accounts payable ......................... 563,085 194,783
Accrued liabilities ...................... 67,571 372,532
Income taxes payable ..................... (629,533) 200,000
Deferred franchise costs ................. (116,525) 123,162
Deferred initial franchise fees and other
fees .................................... 404,029 502,078
------------ ------------
Net cash provided by operations .............. 723,276 1,195,727
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment ......... (4,189,118) (661,904)
Issuance of other notes receivable ......... (14,000) (325,188)
Short term investments ..................... (982,321) (338,234)
Proceeds from the sale of assets and stores 100,361 213,000
Acquisition of Company owned stores ....... (4,959,746) --
Principal payments received on notes
receivable ................................ 275,126 134,183
Investment by minority interest owners ..... -- 151,601
Intangible and deferred assets and deposits 107,749 (478,783)
Investments in area director territories ... (413,790) --
------------ ------------
Net cash (used in) investing activities ...... (10,075,739) (1,305,325)
------------ ------------
See notes to consolidated financial statements.
- 5 -
(continued on next page)
THE QUIZNO'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
Three Months Ended
December 31,
------------------------------
1999 1998
------------ ------------
(Unaudited)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of stock ................ 124,493 38,172
Principal payments on long term obligations (3,346,956) (229,203)
Line of credit ............................ 3,350,000 --
Proceeds from issuance of notes payable ... 14,000,000 --
Financing costs ........................... (644,476) --
Common stock repurchased ................... (1,114,032) --
Proceeds from Class D Preferred Stock ...... 8,400 --
Dividends paid ............................. (39,285) (54,921)
Other ...................................... -- (301)
------------ ------------
Net cash provided by (used in) financing
activities .................................. 12,338,144 (246,253)
------------ ------------
Net increase (decrease) in cash .............. 2,985,681 (355,851)
Cash, beginning of period .................... 626,828 1,058,109
------------ ------------
Cash, end of period .......................... $ 3,612,509 $ 702,258
============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION:
Cash paid during the period for interest ... $ 459,409 $ 80,891
============ ============
Cash paid during the period for income taxes $ 855,450 $ --
============ ============
SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES:
During the quarter ended December 31, 1998, the Company reduced notes payable,
pursuant to the terms of a purchase agreement, in the amount of $116,118. A
corresponding reduction in intangibles was also recorded. Also, during the
quarter, the Company acquired assets under capital leases totaling $150,082.
During the quarter ended December 31, 1999, the Company accepted a promissory
note in the amount of $19,446 for equipment previously held for resale. A note
receivable in the amount of $79,566 was capitalized in exchange for an Area
Director territory repurchased during the quarter. Also, a Company store held
for resale was closed and the net assets were written-off.
See notes to consolidated financial statements.
- 6 -
THE QUIZNO'S CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Convertible
Preferred Stock Common Stock Additional
-------------------------- ------------------------- Paid-in Accumulated
Shares Amount Shares Amount Capital Deficit
------------ ------------ ----------- ------------ ----------- ----------
Balances at January
1, 1999 413,000 $ 413 3,054,459 $ 3,054 $5,065,247 $(972,507)
Issuance of common
stock for exercise
of options and
pursuant to the
employee benefit
plan - - 28,809 29 75,438 -
Tax benefit from
exercise of options - - - - 14,840 -
Shares cancelled - - (9,091) (9) (45,446) -
Redemption of
Series B Preferred
Stock (100,000) (100) - - (499,900) -
Preferred stock
dividends - - - - (124,230) -
Net (loss) - - - - - (1,402,971)
------------ ------------ ----------- ------------ ----------- ----------
Balances at
September 30, 1999 313,000 313 3,074,177 3,074 4,485,949 (2,375,478)
Issuance of common
stock for exercise
of options and
pursuant to the
employee benefit
plan - - 34,002 34 124,459 -
Common Stock
repurchased (Note 13) - - (128,000) (128) (1,113,904) -
Issuance of Series
D Convertible
Preferred Stock
(Note 12) 3,000 8,400 - - - -
Preferred stock
dividends - - - - (39,285) -
Net income - - - - - 424,719
------------ ------------ ----------- ------------ ----------- ----------
Balances at
December 31, 1999 316,000 $ 8,713 2,980,179 $ 2,980 $3,457,219 $(1,950,759)
============ ============ =========== ============ =========== ==========
See notes to consolidated financial statements.
- 7 -
THE QUIZNO'S CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1) In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
consolidated operations for the three month periods ended December 31, 1999
and December 31, 1998, (b) the consolidated financial position at December
31, 1999, (c) the consolidated statements of cash flows for the three month
periods ended December 31, 1999 and December 31, 1998, and (d) the
consolidated changes in stockholders' equity for the nine month and three
month periods ended September 30, 1999 and December 31, 1999, respectively,
have been made.
2) The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not include all the
information and footnotes required by generally accepted accounting
principles for financial statements. For further information, refer to the
audited consolidated financial statements and notes thereto for the nine
months ended September 30, 1999, included in the Company's Annual Report on
Form 10-KSB to the Securities and Exchange Commission filed on December 30,
1999.
3) In October 1999, the Company changed its fiscal year from December 31 to
September 30. All references in the financial statements to the period ended
December 31 relate to the three months ended December 31, 1999. The results
for the three-month period ended December 31, 1999 are not necessarily
indicative of the results for the entire fiscal year of 2000.
4) Effective January 1, 1999, the Company changed its accounting policy related
to the recognition of area director marketing agreement fees to one that
recognizes such fees as revenue on a straight-line basis over the term of the
agreement, which is ten years. Direct expenses attributable to the fees are
classified as a prepaid and recognized as an expense over the same ten year
term. The effect of the change in fiscal 1999 resulted in the deferral of
$4,262,701 of net revenue previously recognized in prior years. Fiscal 2000
income included $129,036 of amortized deferred net revenue related to area
director marketing agreement fees previously recognized prior to fiscal 1999.
5) The Company is obligated to pay an opening commission to the area director
who sold the franchise at the time the franchise opens for business. These
commissions are expensed at the time the related franchise opens for business
and are not accrued as a liability of the Company until that time. At
December 31, 1999, there were 524 domestic franchises sold but not yet open
with related opening commissions totaling $1,718,373 ($1,585,773 at September
30, 1999).
6) Other than the items discussed in our annual report on Form 10-KSB for the
year ended September 30, 1999, there are no other pending material legal
proceedings to which we are a party or to which our property is subject. In
addition, from time to time, we are involved in litigation and proceedings
arising out of the ordinary course of our business. We do not believe that
any of the foregoing litigation will have a material adverse effect on us.
In 1999, the Company commenced a program called Owner in Training under which
it provides financial assistance to store managers interested in owning their
own franchise. The Company provides financial guarantees to such persons for
start-up capital loans. In 1999, the Company guaranteed two such loans
totaling $320,000.
7) On October 11, 1999, our Board of Directors approved the purchase of a
corporate jet allowing for more efficient travel by management between areas
of franchise operations. For tax purposes, the airplane qualifies for
accelerated depreciation, resulting in the deferral of income tax payments.
The $3,350,000 purchase was completed on October 13, 1999.
8) On December 22, 1999 the Company closed on a line of credit loan and was
loaned $3,350,000 by Merrill Lynch Business Financial Services, Inc. The loan
bears interest at the 30 day Dealer Commercial Paper Rate plus 2.5% (equal to
8.13% at December 31, 1999). The maximum amount of the line of credit loan is
$3,350,000, which maximum is reduced monthly based on a seven-year
amortization. The line of credit loan is secured by a first security interest
in the Company's jet aircraft. In January 2000 the line of credit loan was
paid down to zero.
9) On October 5, 1999, the Company closed on a loan in the principal amount of
$14,000,000 from AMRESCO Commercial Finance, Inc. The loan bears interest at
10.9% (10.1% through January 31, 2000), and is repayable in monthly
installments of $199,274 for nine years and five months. The loan is secured
by the assets of Company owned stores and other assets of the Company
existing at September 30, 1999. The loan is part of a securitized pool and
includes a provision which could require the Company to pay up to another
$1,555,555 depending on the amount of defaults, if any, in the loan pool. The
proceeds of the loan were used to pay-off existing debt of $3,320,956, pay
costs and fees associated with the loan of $560,000, and prepay interest and
one payment of $304,624. The balance of $9,814,420 is available to use, with
certain restrictions, for general corporate purposes other than working
capital, dividends, or to repurchase the majority shareholder's stock.
Certain notes payable held by the Company at September 30, 1999 were repaid
with the AMRESCO note proceeds.
10)On November 16, 1999, the Company, through its subsidiary QUIZ-DIA, Inc.,
purchased the assets of ASI-DIA, Inc. ("ASI") for a total of $4.875 million
in cash.
Assets purchased include two Quizno's Company restaurants and three bars,
including the WWW.COWBOY bar, and various other assets located on Concourses
A and B at Denver International Airport. The Company intends to continue
operating the restaurants as Quizno's Classic Subs and the bars as operated
by ASI.
The purchase was accounted for under the purchase method. The purchase price
was allocated to the assets purchased based on the fair market values at the
date of acquisition as follows:
Restaurant and bar equipment $ 875,000
Furniture and fixtures 370,000
Leasehold improvements 265,000
Concession agreements 3,365,000
-----------
$ 4,875,000
===========
On January 26, 2000, the Company closed on a loan in the amount of $3,180,000
from GE Capital Business Asset Funding. The loan bears interest at 9.53% and
is payable in equal monthly installment of $52,023 for 5 years. The loan is
secured by a first security interest in the assets of QUIZ-DIA, Inc.
11)In January 2000, the Company purchased, for cash, the assets of four Quizno's
Restaurants from two franchisees for a total purchase price of $741,000. The
purchases will be accounted for under the purchase method. The purchase price
will be allocated to the assets purchased based on the fair market values at
the date of acquisition.
12)Each share of Class D Preferred Stock is convertible into twenty-five shares
of our common stock, at any time after (i) our earnings before income tax,
depreciation and amortization for a fiscal year (excluding such earnings
derived from extraordinary asset acquisitions after June 1, 1999, and
nonrecurring or unusual transactions, as determined by our Chief Executive
Officer) equal or exceed $12,000,000, and (ii) our Chief Executive Officer
has approved such conversion. The Class D Preferred Stock is not convertible
before March 31, 2001. The Class D Preferred Stock is exempt from
registration pursuant to Section 4(2) of the Securities Act of 1933.
13)On October 1, 1999, the Company's Board of Directors authorized the purchase
of up to 200,000 shares of the Company's common stock. Subject to applicable
security laws, repurchases may be made at such times, and in such amounts, as
the Company deems appropriate. As of December 31, 1999, the Company had
repurchased 128,000 shares at an average price of $8.70.
THE QUIZNO'S CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-Looking Statements
Certain of the information discussed in this quarterly report, and in particular
in this section entitled "Management's Discussion and Analysis or Plan of
Operation," are forward-looking statements that involve risks and uncertainties
that might adversely affect our operating results in the future in a material
way. Such risks and uncertainties include, without limitation, the effect of
national and regional economic and market conditions in the U.S. and the other
countries in which we franchise Restaurants, costs of labor and employee
benefits, costs of marketing, the success or failure of marketing efforts, costs
of food and non-food items used in the operation of the Restaurants, intensity
of competition for locations and Franchisees as well as customers, perception of
food safety, spending patterns and demographic trends, legal claims and
litigation, the availability of financing for us and our Franchisees at
reasonable interest rates, the availability and cost of land and construction,
legislation and governmental regulations, and accounting policies and practices.
Many of these risks are beyond our control. In addition, specific reference is
made to the "Risk Factors" section contained in our Prospectus, dated January 9,
1998, included in the Registration Statement on Form S-3 filed by us
(Registration No. 333-38691) and to our annual report filed on Form 10-KSB for
the year ended September 30, 1999.
The principal sources of our income are continuing fees, initial franchise fees,
and, historically, area director marketing and master franchise fees. These
sources are subject to a variety of factors that could adversely impact our
profitability in the future, including those mentioned in the preceding
paragraph. The continued strength of the U.S. economy is a key factor to the
restaurant business because consumers tend to immediately reduce their
discretionary purchases in economically difficult times. An economic downturn
would adversely affect all three of the sources of income identified above.
Because our franchises are still concentrated in certain regions of the U.S.,
regional economic factors could adversely affect our profitability. Weather,
particularly severe winter weather, will adversely affect royalty income and
could affect the other sources cited above. Culinary fashions among Americans
and people in other countries in which we franchise the Restaurants will also
impact our profitability. As eating habits change and types of cuisine move in
and out of fashion, our challenge will be to formulate a menu within the
Quizno's distinctive culinary style that appeals to an increasing market share.
Finally, the intense competition in the restaurant industry continues to
challenge participants in all segments of this industry.
As our revenues from foreign operations become more significant, our
profitability could be adversely impacted by international business risks and
political or economic instability in foreign markets. While, international
operations involve risks that do not exist in domestic operations, such as
adverse fluctuation in foreign exchange rates, monetary exchange controls,
foreign government regulation of business relationships, and uncertainty of
intellectual property protection, we believe that the potential rewards of
expanding the market for our services to selected foreign countries far
outweighs such risks.
Overview
In November 1999, we announced that we had changed our fiscal year end from
December 31 to September 30. The financial statements included with this 10-QSB
filing reflect our balance sheet as of December 31, 1999 and September 30, 1999,
the consolidated changes in stockholders' equity for the nine and three months
ended September 30, 1999 and December 31, 1999, respectively, and the related
statements of operations and cash flows for the three months ended December 31,
1999 and 1998. All references to 2000 and 1999 refer to fiscal year 2000 and
fiscal year 1999, respectively.
Our primary business is the franchising of Quizno's Restaurants. As a
franchisor, revenue is principally derived from: (1) continuing fees, (2)
initial franchise fees, and (3) area director and master franchise fees.
Continuing fees increase as the number of franchised restaurants open increase.
Initial franchise fees are one-time fees paid upon the sale of a franchise and
vary directly with the number of franchises we can sell and open. Area director
and master franchise fees occur when a country or exclusive area is sold and are
expected to decline as the number of remaining available markets declines.
Effective January 1, 1999, we changed our accounting policy related to the
recognition of area director marketing agreement fees to one that recognizes
such fees as revenue on a straight-line basis over the term of the agreement,
which is ten years. Each of these sources of revenue contributes to our
profitability, but the relative contribution of each source will vary as we
mature. Over time initial fees and continuing fees will generate proportionately
more revenue than area director and master franchise fees.
We earned a profit before preferred dividends in the first quarter of fiscal
2000 of $424,719, composed of income from franchise operations of $1,660,269,
income from Company owned store operations of $221,027, and less other income
and expense and taxes totaling $(1,456,577).
The following chart reflects our revenue growth by source and number of
restaurants for the first quarter of 2000 compared to the first quarter of 1999:
Three Months Ended
December 31,
------------------------------------------------
1999 1998
---------------------- ------------------------
% Increase % Increase
Amount (Decrease)* Amount (Decrease)*
--------- ----------- ----------- -----------
Continuing fees ....................... $3,637,481 110% $1,729,631 71%
Initial franchise fees ................ 1,462,430 65% 887,083 31%
Area director and master franchise fees 480,796 (65)% 1,355,359 96%
Other ................................. 227,404 65% 137,866 (29)%
Interest .............................. 130,693 12% 116,818 287%
---------- ----- ---------- ------
Total franchise revenue ............... 5,938,804 41% 4,226,757 62%
Sales by Company owned stores ......... 2,757,584 49% 1,855,805 34%
Sales by Stores held for resale ....... 103,153 (76)% 430,742 4,919%
---------- ----- ---------- ------
Total Revenue ......................... $8,799,541 35% $6,513,304 63%
========== ===== ========== ======
* Percent change from comparable prior year period.
Three Months Ended
December 31,
-------------------
1999 1998
-------- --------
Restaurants open, beginning .. 634 438
New restaurants opened ....... 100 61
Restaurants closed, to reopen -- --
Restaurants closed ........... (13) (5)
---- ----
Restaurants open, end ........ 721 494
==== ====
Franchises sold, domestic .... 97 107
Franchises sold, international 21 75
---- ----
Total ........................ 118 182
==== ====
Initial franchise fees collected $1.8 million $1.5 million
Systemwide sales, domestic $53.1 million $30.6 million
Average unit volume for 1999, domestic (1) $365,000 -
Same store sales, domestic (2) Up 4.7% Up 7.1%
1) Average unit volume is for the twelve months ended December 31, 1999. Average
unit volume excludes Restaurants located in convenience stores and gas
stations and includes only Restaurants open at least one year under the same
ownership that are currently not in default.
2) Same store sales are based on 319 stores open since the beginning of October
1998. Stores that transferred ownership during this period or are in
substantial default of the franchise agreement are excluded. Because we are
and will continue to be in an aggressive growth mode over the next few years,
it is anticipated that same store sales will fluctuate as units are included
from more start up markets. Excludes non-traditional units located in
convenience stores and gas stations.
Results of Operations
Comparison of the first quarter of 2000 with the first quarter of 1999
Franchise revenue increased 41% in the first quarter of 2000 to $5,938,804 from
$4,226,757 in the comparable quarter last fiscal year. Total revenue increased
35% in the first quarter of 2000 to $8,799,541 from $6,513,304 in the comparable
quarter last fiscal year.
Continuing fees increased 110% in the first quarter of 2000 to $3,637,481 from
$1,729,631 in the first quarter of 1999. Continuing fees are comprised of
royalties and licensing fees.
Royalty fees are a percentage of each franchisee's sales paid to us and will
increase as new franchises open, as the average royalty percentage increases,
and as average unit sales increase. At December 31, 1999 there were 693
franchises open, as compared to 465 at December 31, 1998. The royalty was 5% for
agreements entered into prior to February 11, 1995, 6% for agreements entered
into from February 11, 1995 to March 31, 1998, and 7% for all franchise
agreements entered into after March 31, 1998. The royalty for Quizno's Express
units is 8%. We have no immediate plans to increase the royalty rate.
Royalty fees were $2,893,887 for the first quarter of fiscal 2000 compared to
$1,592,084 for the same period last year, an increase of 82%.
Licensing fees are fees generated through the licensing of the Quizno's
trademark for use by others, which includes fees received from product companies
to sell proprietary products to our restaurant system. Licensing fees are
expected to increase as systemwide sales and the awareness and value of the
Quizno's brand increases. Licensing fees were $743,594 in the first quarter of
fiscal 2000 and $137,547 in the comparable fiscal 1999 quarter. Included in the
fiscal 2000 first quarter were $200,000 of non-recurring licensing fees from
Coca Cola Company related to a licensing agreement signed in April 1999.
Initial franchise fees increased 65% in the first quarter of fiscal 2000 to
$1,462,430 from $887,083 in the same fiscal quarter last year. Initial franchise
fees are one-time fees paid by franchisees at the time the franchise is
purchased. Initial franchise fees are not recognized as income until the period
in which all of our obligations relating to the sale have been substantially
performed, which generally occurs when the franchise opens. Our share of initial
franchise fees sold by foreign master franchises is recognized when received. In
the first quarter of fiscal 2000, we opened 100 franchises, including 18
international Restaurants, as compared to 61 franchises opened, including 8
international Restaurants, in the same period last fiscal year. Our domestic
initial franchise fee has been $20,000 since 1994. Franchisees may purchase a
second franchise for $15,000 and third and subsequent franchise for $10,000. The
initial franchise fee for a Quizno's Express franchise is $10,000 for the first,
$7,500 for the second, and $5,000 for the third and additional franchises
purchased by the same owner. Our share of initial franchise fees for
international Restaurants is generally 30% of the franchise fee and will vary
depending on the country and the currency exchange rate.
Initial franchise fees collected by us are recorded as deferred initial
franchise fees until the related franchise opens. Deferred initial franchise
fees at December 31, 1999 were $8,235,649 and represent 524 domestic franchises
sold but not yet in operation, compared to $4,781,946 at December 31, 1998
representing 308 domestic franchises sold but not open. Direct costs related to
the franchise sale, primarily sales commissions paid to area directors, are
deferred on our books and recorded as an expense at the same time as the related
initial franchise fee is recorded as income. Deferred costs paid with respect to
initial franchise fees deferred at December 31, 1999 were $1,718,373.
Approximately 50% of all initial franchisee fees received by us are paid to area
directors for sales and opening commissions.
Area director and master franchise fees were $480,796 in the first quarter of
fiscal 2000 and $1,355,359 in the same fiscal quarter last year. For analysis
purposes, these amounts are not comparable. Effective January 1, 1999, we
changed our accounting policy related to the recognition of revenue from
domestic area director marketing agreement fees to one that recognizes these
fees as revenue on a straight-line basis over the term of the agreement, which
is ten years. This change reflected a decision made by the U.S. Securities and
Exchange Commission in December 1999 relative to the recognition of area
director fee revenue. Commissions paid to the area director upon the inception
of the agreement are classified as a prepaid and recognized as an expense over
the same ten year term. The effect of the change in the nine-month period ending
September 30, 1999, was the deferral of $4,262,701 of net revenue previously
recognized in prior years.
Deferred domestic area fees are one-time fees paid to us for the right to sell
franchises on our behalf in a designated, non-exclusive area. Domestic area
director fees recognized were $170,796 in the first quarter of fiscal 2000 and
$760,359 in the comparable fiscal 1999 quarter.
The fee for U.S. areas was $.05 per person from January 1997 through December
1997, $.06 from January 1998 through February 1998, and $.07 since March 1,
1998. In addition, each area director is required to pay a training fee of
$10,000. In the first quarter of fiscal 2000, we sold 5 area directorships for
$316,988 compared to 5 sold in the first quarter of fiscal 1999. At December 31,
1999, we had a total of 71 area directors who owned areas encompassing
approximately 76% of the population of the United States.
International master franchise fees are one-time fees paid to us for the right
to sell franchises in a designated, exclusive, international market. The master
franchisee assumes all of our obligations and duties under the agreement. We
recognize these fees when the agreement is signed. International master
franchise fees were $310,000 in the first quarter of fiscal 2000 and $595,000
for the first quarter of fiscal 1999.
In the first quarter of fiscal 2000, we sold the master franchise rights to
Switzerland for $300,000. A total of $20,000 of these fees was deferred until
our training obligation is completed. We also recognized $30,000 of previously
deferred international master franchise fees in the quarter as we substantially
completed our training obligations under the agreements. The international
master franchise fees in the first quarter of fiscal 1999 were for the sale of
the United Kingdom for $510,000, of which $40,000 was deferred until completion
of our training obligations, and $125,000 related to the sale of Japan.
We offer domestic area director and master franchise applicants financing for
the area fee. The amount financed is required to be paid to us in installments
over five years at interest rates between 6% and 15%. The promissory notes are
personally signed by the Area Director and, depending on the personal financial
strength of the Area Director, secured by collateral unrelated to the area
directorship. Of the five domestic and international areas sold in the first
quarter of fiscal 2000, one used this financing for $200,000, representing 32%
of the total domestic area director fees and international master franchise fees
received or financed in fiscal 2000. In the first quarter of fiscal 1999, six
used this financing for $963,030.
The area director and master franchise agreements set increasing minimum
performance levels that require the area director or master franchisee to sell
and open a specified number of franchised restaurants in each year during the
term of the area agreement. Our experience with the program to date indicates
that while some area directors and master franchisees will exceed their
development schedules, others will fail to meet their schedules. In our
planning, we have allowed for a certain percentage of area directors and master
franchisees that will not meet their development schedule. Delays in the sale
and opening of restaurants can occur for many reasons. The most common are
delays in the selection or acquisition of an appropriate location for the
restaurant, delays in negotiating the terms of the lease and delays in
franchisee financing. We may terminate an area agreement if the area director or
master franchisee fails to meet the development schedule, and we then have the
right to resell the territory to a new area director or operate it our self.
Other revenue increased by 65% in the first quarter of fiscal 2000 to $227,404
from $137,866 in the first quarter of fiscal 1999. Other revenue is primarily
amounts paid by equipment suppliers for design and construction, franchise
transfer fees and bookkeeping fees charged franchisees for whom we provided
bookkeeping services. Amounts paid by equipment suppliers were $181,158 in the
first quarter of fiscal 2000 compared to $103,865 in the first quarter of fiscal
1999. This amount will vary based on new store openings. Since 1995, our
franchise agreement requires all new franchisees to utilize our bookkeeping
services, or a firm designated by us to provide bookkeeping services, for their
first 12 months of operations. Bookkeeping fees were $20,381 in the first
quarter of fiscal 2000 compared to $0 in the first quarter of fiscal 1999. We
out-sourced the bookkeeping to an unaffiliated party beginning in the second
quarter of 1998 and now earn only a small administrative fee relative to the
bookkeeping function. This party will perform all of the functions and incur all
of the costs previously paid by us to perform the bookkeeping functions.
Sales and royalty commissions expense increased 23% in the first quarter of
fiscal 2000 to $1,757,020 from $1,424,765 in the comparable quarter last fiscal
year. Sales and royalty commissions are amounts paid to our domestic Area
Directors, commissions paid to other sales agents and employees, and costs
related to sales promotions and incentives. Sales and royalty commission expense
as a percentage of royalty and initial franchise fee declined in the first
quarter of fiscal 2000 to 40% from 57% in the comparable quarter of fiscal 1999
due to the repurchase and termination of certain area directorships.
Our domestic Area Directors receive commissions equal to 50% of the initial
franchise fees and 40% of royalties received by us from franchises sold, opened,
and operating in the area director's territory. In exchange for these payments,
the Area Director is required to market and sell franchises, provide location
selection assistance, provide opening assistance to new owners, and perform
monthly quality control reviews at each franchise open in the Area Director's
territory.
The Area Director is entitled to receive commissions during the term of the Area
Director Agreement and in some cases, upon expiration of the area director
agreement a commission of 1% of sales for 5 years.
Our foreign master franchisees retain 70% of initial fees, area director fees
and royalties paid from franchises sold, open and operating in the master
franchisee's territory, except the Canadian master franchisee who retained 100%
of initial franchise fees in 1998 only, and the United Kingdom master franchisee
who will retain 85% of the initial franchise fees through December 31, 2001.
Under the master franchise agreement, we have no obligation to provide services
that will result in any incremental cost to us, other than an initial training
trip to the country by an employee of ours.
General and administrative expenses increased 20% to $2,521,515 in the first
quarter of fiscal 2000 from $2,093,970 in the comparable quarter last fiscal
year. As a percent of franchise revenue, general and administrative expenses
have decreased from 50% in the first quarter of fiscal 1999 to 41% in the first
quarter of fiscal 2000. General administrative expenses include all of our
operating costs. The increase is primarily due to the addition of employees and
systems to service the rapidly growing network of our franchisees and Area
Directors. Although general and administrative expenses will likely continue to
increase as we grow, we expect the rate of increase to continue to decline.
Company owned store operations earned $221,027 on sales of $2,757,584 in the
first quarter of fiscal 2000 compared to $83,554 on sales of $1,855,805 in the
comparable quarter last fiscal year. During the first quarter of fiscal 2000 we
operated stores for a total of 80 store operating months, compared to 72 store
operating months in the first quarter of fiscal 1999. At December 31, 1999, we
had 28 operating Company stores, including the Cowboy Bar at Denver
International Airport (24 at December 31, 1998).
Stores held for resale lost $29,232 on sales of $103,153 in the first quarter of
fiscal 2000 compared to a loss of $52,193 on sales of $430,742 in the comparable
quarter last fiscal year. In the first quarter of fiscal 2000, we operated two
stores held for resale and in the comparable quarter of fiscal 1999 we operated
six stores held for resale. At December 31, 1999, we had sold or closed all
stores held for resale.
Loss on sale of Company stores was $43,595 in the first quarter of fiscal 2000
resulting from the December 1999 sale of one store held for resale. The fiscal
1999 loss was also primarily related to the sale of a Company store held for
resale.
Provision for bad debts was $167,871 in the first quarter of fiscal 2000 and
$134,291 in the comparable quarter last fiscal year. As of December 31, 1999, we
had an allowance for doubtful accounts of $195,959 that we believe is adequate
for future losses.
Depreciation and amortization was $461,985 in the first quarter of fiscal 2000
and $359,536 in the comparable quarter last fiscal year. The increase is
primarily due to the acquisition and development of new Company owned
Restaurants in the first quarter of fiscal 2000.
Interest expense was $466,968 in the first quarter of fiscal 2000 and $80,891 in
the comparable quarter last fiscal year. The increase is primarily attributable
to the increase in outstanding debt. On October 5, 1999, we closed on a loan in
the principal amount of $14,000,000 from AMRESCO Commercial Finance, Inc. The
loan bears interest at 10.9% (10.1% through January 31, 2000). The proceeds of
the loan were used to pay-off existing debt of $3,320,956, the majority of which
accrued interest at rates of 10% to 12.75%.
Other expense was $60,559 in the first quarter of fiscal 2000 and $41,958 in the
comparable quarter last fiscal year. The fiscal 2000 expense is primarily
acquisition-related costs while the fiscal 1999 expense is attributable to
subleasing losses related to one store previously owned by us and sold to a
franchisee.
Income tax (provision) benefit was a provision of $226,367 in the first quarter
of fiscal 2000 and a benefit of $368,553 in the comparable quarter of fiscal
1999. Our taxable income has historically exceeded our book income primarily
because initial franchise fees we receive are taxable income in the year
received and are book income in the year the franchise opens. Consequently, we
will not pay income taxes on this income when it is recognized for financial
reporting purposes. In the first quarter of fiscal 1999, we used all of our tax
net operating loss carryforwards and incurred a tax liability. Accordingly, we
reduced the amount by which it had recorded an impairment of its deferred tax
asset in prior years and recorded the tax benefit of prior years net operating
losses.
Liquidity and Capital Resources
Net cash provided by operating activities was $723,276 in the first quarter of
fiscal 2000 compared to cash provided by operating activities of $1,195,727 in
the first quarter of fiscal 1999. The primary reasons for the decrease are an
increase in income taxes paid of $855,450 in fiscal 2000 partially offset by an
increase of $363,202 related to the increase in accounts payable.
Net cash used in investing activities was $10,075,739 in the first quarter of
fiscal 2000 compared to cash used in investing activities of $1,305,325 in the
first quarter of fiscal 1999. The primary reasons for the change were an
increase in purchases of property and equipment of $3,527,214 (primarily the
$3.35 million acquisition of a corporate jet in October 1999) and the $4,959,746
increase related to the acquisition of Company owned stores in fiscal 2000.
Net cash provided by financing activities was $12,338,144 in the first quarter
of fiscal 2000 compared to cash used by financing activities of $246,253 in the
first quarter of fiscal 1999. The primary reason for the change were the $17.35
million of proceeds from new debt and a line of credit in fiscal 2000 partially
offset by fiscal 2000 increases in principal repayments of $3,117,753, common
stock repurchases of $1,114,032 and financing costs of $644,476.
In the first quarter of 1998, we tested a program under which its Area Directors
had the right to elect to have all future Franchisee leases in the Area
Director's territory signed by The Quizno's Realty Company ("QRC"), a wholly
owned subsidiary of ours. As a condition of the lease, the landlord agrees not
to look beyond QRC for payments. These locations would then be subleased by QRC
to the franchisee, whose personal liability is limited to one year. The
franchisee pays QRC an indemnification fee of $165 per month, pays a one-time
lease-processing fee to QRC of $2,200, and pays a security deposit to QRC equal
to two months rent. Effective March 1, 1998, we transferred cash and other
assets having a book value of approximately $500,000 to QRC in exchange for
stock and a promissory note. As of December 31, 1999, 12 leases had been
executed under this program and one other guaranteed lease. The franchisee has
defaulted on the rents due on two of these locations, for which we do not have
replacement franchisees. We expect to negotiate buyouts of these leases between
the landlords, the franchisees and, possibly, us. Our share of any such buyout
is expected to be immaterial. A third location has closed due to a fire and the
lease has been cancelled and the location will not re-open.
On October 1, 1999, our Board of Directors authorized the purchase of up to
200,000 shares of our common stock. Subject to applicable security laws,
repurchases may be made at such times, and in such amounts, as we deem
appropriate. As of December 31, 1999, we had repurchased 128,000 shares at an
average price of $8.70.
On October 5, 1999, we closed on a loan in the principal amount of $14,000,000
from AMRESCO Commercial Finance, Inc. The loan bears interest at 10.9% (10.1%
through January 31, 2000), and is repayable in monthly installments of $199,274
for nine years and five months. The loan is secured by our assets of Company
owned stores and other assets of ours existing at September 30, 1999. The loan
is part of a securitized pool and includes a provision which could require us to
pay up to another $1,555,555 depending on the amount of defaults, if any, in the
loan pool. The proceeds of the loan were used to pay-off existing debt of
$3,320,956, pay costs and fees associated with the loan of $560,000, and prepay
interest and one payment of $304,624. The balance of $9,814,420 is available to
use, with certain restrictions, for general corporate purposes other than
working capital, dividends, or to repurchase the majority shareholder's stock.
On October 11, 1999, our Board of Directors approved the purchase of a corporate
jet allowing for more efficient travel by management between areas of franchise
operations. For tax purposes, the airplane qualifies for accelerated
depreciation, resulting in the deferral of income tax payments. The $3,350,000
purchase was completed on October 13, 1999.
On November 16, 1999, through our subsidiary QUIZ-DIA, Inc., we purchased the
assets of ASI-DIA, Inc. ("ASI") for a total of $4.875 million in cash.
Assets purchased include two Quizno's Company restaurants and three bars,
including the WWW.COWBOY bar, and various other assets located on Concourses A
and B at Denver International Airport. We intend to continue operating the
restaurants as Quizno's Classic Subs and the bars as operated by ASI.
On January 26, 2000, we closed on a loan in the amount of $3,180,000 from GE
Capital Business Asset Funding. The loan bears interest at 9.53% and is payable
in equal monthly installment of $52,023 for 5 years. The loan is secured by a
first security interest in the assets of QUIZ-DIA, Inc.
On December 22, 1999 we closed on a line of credit loan and were funded
$3,350,000 by Merrill Lynch Business Financial Services, Inc. The loan bears
interest at the 30 day Dealer Commercial Paper Rate plus 2.5% (equal to 8.13% at
December 31, 1999). The maximum amount of the line of credit loan is $3,350,000,
which maximum is reduced monthly based on a seven-year amortization. The line of
credit loan is secured by a first security interest in our jet aircraft. In
January 2000, the line of credit loan was paid down to zero.
As we have in the past, we will continue to consider acquisitions of other
chains, the purchase of Quizno's Restaurants from our Franchisees, and the
purchase of Quizno's area directorships from our Area Directors. From time to
time, we will make offers and enter into letters of intent for such transactions
subject to the completion of due diligence. In all such cases, we will identify
the sources of cash required to complete such transactions prior to entering
into a binding agreement.
We have never paid cash dividends on our common stock and we do not anticipate a
change in this policy in the foreseeable future.
At December 31, 1999, our total stockholders equity was $1,518,153, which is
below the Nasdaq SmallCap Market's continued listing requirement of $2,000,000.
The principle reasons for this deficiency were the change in accounting policy
related to the recognition of domestic area director marketing agreement fees,
which was effected in December 1999, coupled with shares of common stock
repurchased prior to the announcement of the change in accounting policy. At
this time, it is uncertain whether our common stock will be de-listed from the
Nasdaq SmallCap Market because of this deficiency. If that does occur, our
common stock could be traded on the OTC Bulletin Board, which is administered by
The Nasdaq Stock Market. If our common stock is de-listed from the Nasdaq
SmallCap Market, such event could have a long-term adverse impact on
the market for our common stock.
THE QUIZNO'S CORPORATION AND SUBSIDIARIES
Commission File Number: 000-23174
Quarter Ended December 31, 1999
Form 10-QSB
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
The Quizno's Corporation v. Hampton-Davis Corp. in the United States District
Court for the District of Colorado (No. 99-S-1812). On July 19, 1999, we
terminated an area director named Hot Concepts, Inc., and instituted litigation
proceedings against that area director. That action is more fully discussed in
our annual report filed on Form 10-KSB for year ended September 30, 1999. The
principal owners of Hot Concepts also owned a second area directorship under
Hampton-Davis Corp. ("Hampton Davis") for the Bowling Green, Kentucky and
Jacksonville, Tennessee markets. On September 15, 1999, we filed an action
entitled The Quizno's Corporation v. Hampton-Davis Corp. in the United States
District Court for the District of Colorado (No. 99-S-1812), in which we
asserted that Hampton-Davis failed to meet its development quota. We are seeking
unspecified damages based on Hampton-Davis' failure to meet its development
schedule. On October 11, 1999, we terminated the area director agreement with
Hampton-Davis. On December 28, 1999, Hampton-Davis filed counterclaims alleging
that we fraudulently terminated the area director agreement and failed to deal
in good faith by terminating the agreement. Hampton-Davis also claims that we
committed common law fraud, negligent misrepresentation, and asserted claims for
tortious interference with prospective business advantage, civil RICO,
promissory estoppel, and unjust enrichment. All of the counterclaims appear to
stem form Hampton-Davis' claim that we acted wrongfully in selling the area
directorship and then terminating the agreement when Hampton-Davis failed to
meet its development obligations. Hampton-Davis seeks in excess of $75,000. We
plan to file a motion to dismiss many of the claims, and will deny any remaining
claims. In addition, we will pursue our claims against Hampton-Davis.
Other than the foregoing and the items discussed in our annual report on Form
10-KSB for the year ended September 30, 1999, there are no other pending
material legal proceedings to which we are a party or to which our property is
subject. In addition, from time to time, we are involved in litigation and
proceedings arising out of the ordinary course of our business. We do not
believe that any of the foregoing litigation will have a material adverse effect
on us.
Item 2. Changes in Securities and Use of Proceeds
Sales of Unregistered Securities
Securities Amount of
Sold/Shares Date Consideration Purchaser(s) Exemption
- ---------------- ------------ --------------- -------------- -------------
Common stock/ Quizno's 401(k)
1,527 shares 11/4/99 $ 12,029 Plan Section 4(2)
Common stock/ Exercise of
1,000 shares 10/26/99 $ 3,875 options by DS Rule 506
Ventures, Inc.
Common stock/ Exercise of options
8,000 shares 11/10/99 $ 44,000 by Bruckal Properties
USA Section 4(2)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
(b) Reports on Form 8-K:
Form 8-K, dated October 12, 1999, reporting in Item 5 that we may repurchase
up to 200,000 of our Common shares from time to time. Form 8-K, dated November
4, 1999, reporting in Item 8 the change of our fiscal year from December 31 to
September 30. Form 8-K, dated November 16, 1999, reporting in Item 2 and Item
5 our purchase of the assets of ASI-DIA, Inc. for a total of $4.875 million in
cash. Form 8-K, dated December 17, 1999, reporting in Item 5 our fiscal 1999
results.
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
THE QUIZNO'S CORPORATION
By: /s/ John L. Gallivan
John L. Gallivan
Chief Financial Officer
(Principal Financial and Accounting Officer)
Denver, Colorado
February 14, 2000