1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) June 3, 1996
--------------------------
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
- --------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 33-77510C 38-3160141
- --------------------------------------------------------------------------
(State or other (IRS Employer Identification No.) (Commission File No.)
jurisdiction of
incorporation)
24 FRANK LLOYD WRIGHT DR., P.O. BOX 544, ANN ARBOR, MI 48106
- --------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (313) 994-5505
or (800) 522-7832
- --------------------------------------------------------------------------
Not Applicable
- --------------------------------------------------------------------------
(Former name or former address, if changed since last report)
This document, including exhibits, contains 25 pages. The exhibit index is
located on page F-i.
2
Item 7. Financial Statements and Exhibits.
a) Financial Statements
On March 29, 1996, Captec Franchise Capital Partners L.P. III (the
"Partnership") purchased the land and building comprising a Red Robin Grill &
Spirits Restaurant located at 1701 William D. Tate Avenue, Grapevine, Texas
(the "Grapevine Property"). Details of this acquisition were previously
reported under cover of Form 8-K dated April 3, 1996.
The prior Form 8-K indicated that the Seller/Tenant would endeavor to
make available audited financial statements for the years ending December 31,
1995, December 25, 1994 and December 26, 1993 and Independent Auditors' Report
and the management prepared interim financial statements within 60 days of the
Form 8-K filing. The Tenant has provided to the registrant a management
prepared statement for the period ending April 21, 1996 as well as the audited
financial statements for the years ending December 31, 1995, December 25, 1994
and December 26, 1993 and Independent Auditors' Report, both of which are
attached as an exhibit hereto.
2
3
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.
By: Captec Franchise Capital Corporation III
Managing General Partner of
Captec Franchise Capital Partners L.P. III
By: /s/ W. Ross Martin
----------------------------------
W. Ross Martin
Chief Financial Officer and Vice President,
a duly authorized officer
Date: June 4, 1996
3
4
FORM 8 - K/A NO. 1
CAPTEC FRANCHISE CAPITAL PARTNERS L.P. III
EXHIBIT INDEX
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES consolidated
financial statements for the period ended April 21, 1996.
Consolidated Income Statement F-1
Consolidated Balance Sheet F-2
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES consolidated
financial statements for the years ended December 31, 1995,
December 25, 1994 and December 26, 1993 and Independent Auditors'
Report
Independent Auditor's Report
Consolidated Balance Sheets F-1A
Consolidated Statement of Operations F-2A-F-3A
Consolidated Statements of Shareholder's Equity F-4A
Consolidated Statement of Cash Flows F-5A - F-6A
Notes to Financial Statements F-7A - F-17A
F-i
5
RED ROBIN INTERNATIONAL
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE PERIOD ENDING 4/21/96
Sales $30,429,608
Cost of Sales 8,467,436
------------
GROSS MARGIN 21,962,172
Total Rest. Oper. Exp. 22,547,371
------------
RESTAURANT OPERATING INCOME (585,199)
NET FRANCHISE INCOME 1,883,405
TOTAL CORP G & A EXP. 2,362,008
------------
INCOME BEFORE TAX (1,063,802)
PROV. FOR TAXES 688
------------
NET INCOME (LOSS) $(1,064,490)
============
F-1
6
RED ROBIN INTERNATIONAL
CONSOLIDATED BALANCE SHEET
FOR THE PERIOD ENDING APRIL 21, 1996
CURRENT ASSETS
Cash $2,394,304
Accounts Receivable 1,280,109
Inventories 735,763
Prepaid Expense 367,512
Current Portion N/R 518,361
Preopening Costs - Net of Amortization 991,449
Current Deferred Tax Asset 671,487
-----------
TOTAL CURRENT ASSETS 6,958,985
PROPERTY AND EQUIPMENT, NET 75,998,316
TOTAL OTHER ASSETS 4,283,596
-----------
TOTAL ASSETS $87,240,897
===========
CURRENT LIABILITIES
Accounts Payable/Payroll $5,409,418
Accrued Liabilities and Interest 5,295,025
Accrued Other Liabilities 881,761
Current Portion Long Term Debt 878,969
-----------
TOTAL CURRENT LIABILITIES 12,465,173
-----------
LONG TERM LIABILITIES 69,323,806
STOCKHOLDERS' EQUITY
Common Stock 11,412,395
Retained Earnings (5,960,476)
-----------
NET STOCKHOLDERS' EQUITY 5,451,919
-----------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $87,240,898
===========
F-2
7
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS FOR
THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994
AND DECEMBER 26, 1993
AND INDEPENDENT AUDITOR'S REPORT
8
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Red Robin International, Inc.
Irvine, California
We have audited the accompanying consolidated balance sheets of Red Robin
International, Inc. (the Company) (a 64%-owned subsidiary of Skylark Co., Ltd.)
and subsidiaries as of December 31, 1995 and December 25, 1994, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the fifty-three or fifty-two week periods ended December 31, 1995, December 25,
1994 and December 26, 1993. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Red Robin International, Inc. and
subsidiaries as of December 31, 1995 and December 25, 1994, and the results of
their operations and their cash flows for the fifty-three or fifty-two week
periods ended December 31, 1995, December 25, 1994 and December 26, 1993, in
conformity with generally accepted accounting principles.
/s/ Deloitte & Touche LLP
February 22, 1996
9
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 1995 AND DECEMBER 25, 1994
ASSETS 1995 1994
CURRENT ASSETS:
Cash $ 540,350 $ 248,040
Restricted cash 1,213,711
Accounts receivable, net (Note 2) 1,515,495 1,082,767
Inventories 935,428 858,342
Prepaid expenses and other current assets 2,098,731 986,019
Deferred taxes (Note 6) 671,486 1,200,314
------- ---------
Total current assets 6,975,201 4,375,482
PROPERTY HELD FOR SALE 5,435,004
PROPERTY AND EQUIPMENT, (net (Notes 3 and 5) 72,154,210 52,121,495
OTHER ASSETS, net (Note 4) 1,601,690 1,361,785
DEFERRED TAXES (Note 6) 2,752,555 2,217,271
--------- ---------
$88,918,660 $60,076,033
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade accounts payable $3,574,245 $3,125,599
Accrued liabilities 8,993,236 8,165,032
Current portion of long-term debt (Note 5) 841,115
---------- ----------
Total current liabilities 13,408,596 11,290,631
DEFERRED RENT PAYABLE (Note 7) 2,325,731 2,002,905
LONG TERM DEBT (Note 5) 66,670,021 35,150,000
COMMITMENTS AND CONTINGENCIES (Note 7)
STOCKHOLDERS' EQUITY (Note 9):
Common stock, $.001 par value: 15,000,000 shares authorized;
7,254,675 shares issued and outstanding 11,410,295 11,410,295
Retained (deficit) earnings (4,895,983) 222,202
----------- -------
Total stockholders' equity 6,514,312 11,632,497
--------- ----------
$88,918,660 $60,076,033
=========== ===========
See notes to consolidated financial statements.
F-1A
10
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993
1995 1994 1993
COMPANY-OWNED
RESTAURANT OPERATIONS:
Net sales $ 95,738,031 $ 84,628,729 $79,301,828
Cost of sales 26,746,681 22,564,265 21,111,721
---------- ---------- ----------
GROSS MARGIN 68,991,350 62,064,464 58,190,107
RESTAURANT OPERATING EXPENSES
(INCOME):
Payroll and employee benefits 33,372,927 29,123,385 27,973,875
Operating expenses 17,037,670 14,339,074 13,394,232
Occupancy costs (Note 7) 6,388,082 6,218,114 6,053,011
Depreciation and amortization 8,828,074 5,711,058 6,255,672
Other income (289,283) (259,792) (280,199)
----------- ----------- -----------
Net restaurant operating expenses 65,337,470 55,131,839 53,396,591
---------- ---------- ----------
OPERATING INCOME FROM COMPANY-
OWNED RESTAURANT OPERATIONS 3,653,880 6,932,625 4,793,516
OPERATING INCOME FROM FRANCHISE
OPERATIONS (Note 8) 5,167,925 4,711,126 4,575,346
CORPORATE, GENERAL AND
ADMINISTRATIVE EXPENSES (INCOME):
Payroll and employee benefits 6,088,422 5,277,617 5,002,563
General and administrative 4,969,969 2,882,752 6,728,760
Depreciation and Amortization 637,909 496,822 427,010
Interest 3,105,301 1,262,954 984,631
Other income (661,321) (965,798) (326,202)
--------- --------- ---------
Net corporate, general and administrative
expenses 14,140,280 8,954,347 12,816,762
---------- --------- ----------
See notes to consolidated financial statements.
F-2A
11
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
1995 1994 1993
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES $ (5,318,475) $ 2,689,404 $ (3,447,900)
PROVISION (BENEFIT) FOR INCOME
TAXES (Note 6) (200,290) 699,978 (1,471,100)
-------------- ------------ --------------
NET INCOME (LOSS) $ (5,118,185) $ 1,989,426 $ (1,976,800)
============= ============ ==============
See notes to consolidated financial statements.
F-3A
12
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993
RETAINED
COMMON STOCK EARNINGS
------------------------
SHARES AMOUNT (DEFICIT) TOTAL
BALANCE, December 27, 1992 7,250,000 $11,400,945 $ 192,271 $11,593,216
Net loss (1,976,800) (1,976,800)
Change in limited partners' equity _________ _________ 17,305 17,305
------------ ------------
BALANCE, December 26, 1993 7,250,000 11,400,945 (1,767,224) 9,633,721
Stock options exercised 4,675 9,350 9,350
Net income _________ _________ 1,989,426 1,989,426
--------- ---------
BALANCE, December 25, 1994 7,254,675 11,410,295 222,202 11,632,497
Net loss _________ _________ (5,118,185) (5,118,185)
------------- -----------
BALANCE, December 31, 1995 7,254,675 $11,410,295 $(4,895,983) $(6,514,312)
========= =========== ============ ===========
See notes to consolidated financial statements.
F-4A
13
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993
1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (5,118,185) $ 1,989,426 $ (1,976,800)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 9,465,983 6,207,880 6,682,682
Loss (gain) on sale of property and equipment 773,878 (595,454) 493,555
Write-down of land held for resale and
closed store assets 614,801 244,671 1,185,978
Minority interest in loss of limited partnership (701)
Provision for doubtful accounts, net of charge-offs 904,411 379,186 107,861
Changes in assets and liabilities:
Restricted cash (1,213,711)
Accounts receivable (1,337,139) (436,001) (154,297)
Inventories (77,086) 53,033 11,422
Prepaid expenses and other assets, net (3,968,538) (733,868) (852,633)
Deferred tax asset (6,456) (563,700) (1,877,978)
Trade accounts payable and accrued liabilities 1,325,187 2,137,949 980,024
Deferred taxes payable (297,143)
Deferred rent payable 322,826 443,805 460,433
Income tax liability (48,337) 81,314 (41,561)
------------ ----------- ------------
Net cash provided by operating activities 1,637,634 9,208,241 4,720,842
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of property and equipment 18,150 1,556,253 25,593
Capital expenditures (33,724,610) (19,107,314) (10,405,840)
Purchase of minority interest in partnership (375,000)
------------ ----------- ------------
Net cash used in investing activities (33,706,460) (17,551,061) (10,755,247)
See notes to consolidated financial statements.
F-5A
14
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
1995 1994 1993
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of long-term debt $ 43,778,570 $10,400,000 $4,750,000
Payments on long term debt (11,417,434) (2,000,000)
Distributions to limited partners (49,777)
Proceeds from exercise of stock options 9,350
---------- --------- ---------
Net cash provided by financing activities 32,361,136 8,409,350 4,700,223
---------- --------- ---------
NET INCREASE (DECREASE) IN CASH 292,310 66,530 (1,334,182)
CASH, beginning of period 248,040 181,510 1,515,692
------- ------- ---------
CASH, end of period $ 540,350 $ 248,040 $ 181,510
============ ============ ============
SUPPLEMENTAL DISCLOSURES OF
CASH FLOW INFORMATION -
Cash paid during the year for:
Interest $ 3,384,796 $ 1,563,831 $ 1,079,544
Income taxes $ 449,630 $ 1,189,910 $ 739,675
NONCASH TRANSACTIONS:
During the year, $1,852,391 of property and equipment was reclassified to
property held for sale.
See notes to consolidated financial statements.
F-6A
15
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993
1. SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business - Red Robin International, Inc., (the Company) is
a 64%-owned subsidiary of Skylark Co., Ltd. (Skylark), a Japanese
company. Skylark has committed to provide financing for future growth,
and in connection with this commitment, notes payable to banks of
$66,670,021 are supported by a letter of awareness from Skylark.
The Company, a Nevada corporation, operateS Red Robin restaurants from
facilities that are owned or leased. The Company also sells franchises
and receives royalties from the operation of franchised Red Robin
restaurants. At December 31, 1995, there were 52 Company-operated and
84 franchise-operated restaurants which are located throughout the
United States and Canada. The Company's corporate offices are located
in California.
Consolidation - The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries. Material
intercompany accounts and transactions have been eliminated in
consolidation.
Fiscal Year - The Company's fiscal year ends on the last Sunday in
December.
Restricted Cash - Restricted cash is funds restricted solely for use in
the Cooperative Advertising Program, whereby certain franchises and
Company restaurants contribute .5% of adjusted sales to be used for
future advertising in accordance with an agreement with franchisees.
Inventories - Inventories consist of food, beverages and other
restaurant supplies and are valued at the lower of cost (first-in,
first-out method) or market.
Property Held for Sale - Property held for sale is recorded at cost, not
to exceed net realizable value. Determination of the lower of cost or
market involves subjective judgment, because the actual market value of
property can only be determined by negotiation between the parties in a
sale transaction. The ultimate recoverability and valuation of these
assets is dependent on future events, and the ability to successfully
sell these properties is heavily influenced by economic conditions
affected by the real estate industry.
Property and Equipment - Depreciation on property and equipment is
computed on the straight-line method for financial reporting purposes
and on the straight-line and accelerated methods for tax purposes, based
on the shorter of the estimated useful lives or the term of the
underlying leases of the related assets.
Other assets - Franchise area rights represent costs incurred to
re-acquire certain areas from franchisees. These areas are held for
development of Company restaurants or for resale. The costs are
amortized on a straight-line basis. In 1995, the remaining life was
changed to two and one-half years from four years. The effect of this
change on current and future income statements is to record additional
amortization of expense of approximately $32,500 per year until the
franchise area rights are fully amortized. When areas are resold to
franchisees, any remaining capitalized costs are expensed on the opening
date of the first restaurant.
F-7A
16
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
Also included in other assets are restaurant prototype designs which are
being amortized over three years.
Franchise Operations - The Company grants franchise rights to private
operators for a term of 20 years. The Company provides management
expertise, training, pre-opening assistance and restaurant operating
assistance in exchange for area franchise fees, license fees and
royalties of 3% to 4.75% of the franchised restaurant's adjusted sales.
Area franchise fees and one-time license fees are recognized when the
restaurants are opened. Royalties are accrued as earned. Area
franchise fees to be paid by the franchisee depend on the number of
restaurants to be constructed and opened.
Pre-Opening Costs - Costs incurred prior to commencement of a
restaurant's are capitalized and amortized over 12 months which begins
after the restaurant's opening date. Such costs are included in prepaid
expenses and other current assets in the accompanying consolidated
balance sheets and were $1,765,847 and $740,206 as of December 31, 1995
and December 25, 1994, respectively.
The Company capitalized costs incurred in the selection and acquisition
of sites for new restaurants. The Company's policy is to capitalize
costs not to exceed a maximum of $60,000 per site for lease property and
$75,000 per site for purchased property. These costs are generally
amortized over a period not exceeding the estimated useful life of the
building or the term of the underlying land lease. For the years ended
December 31, 1995 and December 25, 1994, such capitalized costs totaled
$626,750 and $100,000, respectively. If a potential site is abandoned,
deferred costs related to that site are charged to expense.
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumption that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
Fair Value of Financial Instruments - The recorded amounts of cash,
trade receivables, accounts payable and short and long-term borrowings
approximate their fair values.
Reclassifications - Certain reclassifications were made to the 1994 and
1993 consolidated financial statements to conform them to the 1995
presentation.
F-8A
17
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
New Accounting Pronouncements - In October 1995, the Financial
Accounting Standards Board issued Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation. The Company
has determined that it will not change to the fair value method and will
continue to use Accounting Principle Board Opinion No. 25 for
measurement and recognition of employee stock-based transactions.
The Company will adopt Statement of Financial Accounting Standards No.
121, Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of, during the year ended December 29,
1996. Management does not believe the impact of the adoption will have
a material impact on the Company's operations.
2. ACCOUNTS RECEIVABLE
Accounts receivable include $1,032,754 and $964,086 due from
franchisees, net of a related allowance for doubtful accounts of
$1,457,124 and $552,713, at December 31, 1995 and December 25, 1994,
respectively.
3. PROPERTY AND EQUIPMENT
Property and equipment are summarized as follows at December 31, 1995
and December 25, 1994:
ESTIMATED LIVES 1995 1994
Land $16,858,367 $9,692,586
Buildings 15 to 30 years 13,158,253 3,099,012
Furniture, fixtures and equipment 3 to 7 years 34,683,260 27,885,790
Leasehold improvements Shorter of lease term or life 29,923,661 30,885,333
Construction in progress 4,853,233 4,818,436
------------ ------------
99,476,774 76,381,157
Less accumulated depreciation and amortization (27,322,564) (24,259,662)
------------ ------------
$72,154,210 $52,121,495
============ ============
The Company capitalized interest on new restaurants during the
construction period totaling approximately $849,862 and $269,000 in
fiscal 1995 and 1994, respectively.
F-9A
18
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
4. OTHER ASSETS
Other assets are summarized as follows at December 31, 1995 and December
25, 1994:
1995 1994
Franchise area rights $1,151,790 $1,151,790
Deposits 253,178 169,509
Liquor licenses 339,996 359,996
Other 896,846 399,969
---------- ----------
2,641,810 2,081,264
Less accumulated amortization (1,040,120) (719,479)
---------- ----------
$1,601,690 $1,361,785
========== ==========
Included in other assets are noninterest-bearing notes receivable from
employees, discounted at the Company's prevailing borrowing interest
rate, totaling $51,127 which are due in 1998 and 1999.
5. LONG-TERM DEBT
Long-term debt consists of the following at December 31, 1995 and
December 25, 1994:
1995 1994
Revolving credit agreements $48,550,000 $35,150,000
Collateralized notes payable 14,461,136
Note payable - Other 4,500,000
---------- -----------
67,511,136 35,150,000
Less current portion (841,115)
$66,670,021 $35,150,000
=========== ===========
The revolving credit agreements are with three banks with a credit limit
of $20,000,000 each, interest at 3/4% above the term federal funds rate
at the date of borrowings. Borrowings are due within six months from
the renewal date, are renewable at borrower's option and expire in 2000.
F-10A
19
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
The collateralized notes payable are collateralized by certain property
and equipment of the Company. Under these agreements, the Company is
required to maintain certain financial ratios, including maximum debt to
net worth ratios. At December 31, 1995, the Company was in violation of
certain financial covenants pertaining to loan agreements with two
lenders. One lender has waived the violations through January 1, 1997.
Under the provisions of the loan agreement, the other lender has the
right to demand repayment of collateralized notes payable totaling
$6,655,211. In the event that repayment is demanded, the Company
believes available borrowings under its revolving credit agreement will
be sufficient to repay the outstanding balance. The collateralized
notes payable are payable in monthly principal and interest payments
though 2015, with interest rates ranging from 8.81 to 10.83 at December
31, 1995.
The note payable - other is uncollateralized and is to an affiliated
company. The note is due September 4, 1997, with an interest rate of 6%
per annum. Interest is payable at the end of each year and no principal
payments are due until maturity.
Maturities of long term debt are as follows:
1996 $ 841,115
1997 5,411,523
1998 983,601
1999 1,063,012
2000 49,607,765
Thereafter 9,604,120
------------
$67,511,136
===========
6. INCOME TAXES
The Company and its subsidiaries account for income taxes using
Statement of Financial Accounting Standards No. 109, Accounting for
Income Taxes (SFAS 109). This statement requires the recognition of
deferred tax liabilities and assets for the future consequences of
events that have been recognized in the consolidated financial
statements or tax returns of the Company and its subsidiaries. In the
event the future consequences of differences between financial reporting
bases and tax bases of the assets and liabilities of the Company and its
subsidiaries result in a deferred tax asset, SFAS 109 requires an
evaluation of the probability of being able to realize the future
benefits indicated by such asset. A valuation allowance related to a
deferred tax asset is recorded when it is more likely than not that some
portion or all of the deferred tax asset will not be realized.
Measurement of the deferred items is based on enacted tax laws.
F-11A
20
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
A summary of the provision (benefit) for income taxes for the
fifty-three or fifty-two week periods ended December 31, 1995, December
25, 1994 and December 26, 1993 follows:
1995 1994 1993
Current:
Federal $(163,483) $1,016,660 $542,282
State (36,807) 247,018 161,732
Deferred:
Federal (1,880,763) (500,471) (1,817,652)
State (226,647) (63,229) (357,462)
------------ ----------- ------------
(2,307,700) 699,978 (1,471,100)
Valuation allowance 2,107,410
------------ ----------- ------------
$ (200,290) $ 699,978 $(1,471,100)
============ =========== ============
The reconciliation of income tax expense (benefit) related to continuing
operations to income tax expense (benefit) that would result from
applying the federal statutory rate to pretax income from continuing
operations is as follows for the fifty-three or fifty-two week periods
ended December 31, 1995, December 25, 1994 and December 26, 1993:
1995 1994 1993
Tax (benefit) provision at federal statutory rate $(1,777,802) $ 942,248 $ (1,172,286)
State income taxes, net of federal benefit (173,880) 121,301 (129,182)
Foreign and job tax credits (196,835) (385,915) (106,702)
Prior year income tax refund (200,290)
Other 41,107 22,344 (62,930)
Valuation allowance 2,107,410
----------- --------
$ (200,290) $699,978 $ (1,471,100)
=========== ======== ============
F-12A
21
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
The Company's federal and state deferred taxes are comprised of the
following at December 31, 1995
1995 1994
Alternative minimum tax credits $1,145,454 $1,131,706
Net operating losses 1,371,320 17,808
Write-downs of other assets 268,552 114,364
Closed store reserves 339,842 582,426
Deferred rent 942,656 812,279
Tip tax credit 946,226 438,224
Accrued compensation and related benefits 258,494 201,435
General insurance 175,268 224,786
Workers compensation 325,951 202,206
Jobs tax credits 216,352 192,009
Allowance for doubtful accounts 590,595 224,153
Other, net 332,780 279,635
Amortization 330,710 251,817
State deferred tax asset (261,874) (91,920)
Pre-opening costs (773,721) (358,219)
Depreciation (78,039) (314,408)
Capitalized development costs (599,115) (490,716)
--------- ----------
5,531,451 3,417,585
Gross deferred tax asset (2,107,410)
----------- ----------
$3,424,041 $3,417,585
=========== ==========
Federal and state net operating losses and certain tax credit
carryforwards available to reduce future taxes for tax reporting
purposes expire on various dates through 2010.
7. COMMITMENTS AND CONTINGENCIES
Leasing Activities - The Company leases land, buildings and equipment
used in its operations under operating leases. The Company leases one
restaurant from a stockholder. Rent paid under the restaurant lease with
the stockholder was $115,236, $102,973 and $90,725 during fiscal years
1995, 1994, and 1993, respectively.
F-13A
22
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
The remaining leases have terms ranging from less than one year to 20
years and generally contain renewal options which permit the Company to
renew the leases at prevailing market rates. Certain equipment leases
also include options to purchase equipment at the end of the lease term.
Land and building lease agreements require contingent rentals based on a
percentage of stated sales volumes. Certain lease agreements also
require the Company to pay maintenance, insurance and property tax costs.
Rental expense related to land and building leases is as follows:
Minimum rent $4,130,053 $3,995,402 $3,607,216
Percentage rent 350,099 330,674 316,762
------- ------- -------
$4,480,152 $4,326,076 $3,923,978
========== ========== ==========
Future minimum lease commitments under all operating leases as of December 31,
1995 are as follows:
EQUIPMENT
AND
RESTAURANTS
Fiscal year ending
1996 $4,174,181
1997 4,182,312
1998 3,893,128
1999 3,802,709
2000 3,845,668
Thereafter 32,129,509
----------
$52,027,507
===========
Deferred rent payable represents rental expense (recorded on a
straight-line basis), which is being amortized over the lives of the
leases, in excess of actual rental payments.
Contingencies - In the normal course of business, the Company has various
claims in process, matters in litigation and other contingencies. While
it is not possible to predict the outcome of these suits and other legal
proceedings and claims with certainty, management is of the opinion that
adequate provision for potential losses has been made in the consolidated
financial statements and that the ultimate resolution of these matters
will not have a material adverse effect on the Company's financial
position.
F-A14
23
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
8. FRANCHISE OPERATIONS
Results of franchise operations are summarized as follows for the
fifty-three or fifty-two week periods ended December 31, 1995, December
25, 1994 and December 26, 1993:
1995 1994 1993
Franchise income
Royalty income $6,753,084 $6,109,109 $5,391,618
Franchise fees 205,000 245,000 315,000
----------- ----------- -----------
Total franchise income 6,958,084 6,354,109 5,706,618
Franchise expenses:
Payroll and employee benefits 466,828 567,995 508,030
General and administrative 1,323,331 1,074,988 623,242
--------- --------- -------
Total franchise expenses 1,790,159 1,642,983 1,131,272
--------- --------- ---------
Operating income from
franchise operations $5,167,925 $4,711,126 $4,575,346
========== ========== ==========
An officer of the Company operates two franchised restaurants. Royalty
income from the stores for the fifty-three week period ended December
31, 1995 totaled $126,951 of which $19,292 was included in accounts
receivable.
9. STOCKHOLDERS' EQUITY
Stock Plan - The Company adopted the 1990 Incentive Stock Option and
Nonqualified Stock Option Plan (the 1990 Stock Plan). The 1990 Stock
Plan was amended during 1993 and authorizes the granting of options to
purchase up to an aggregate of approximately 15% of total common stock
or 1,279,412 shares. Stock option awards are at the discretion of the
Board of Directors.
F-A15
24
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
Information with respect to options under the above plan follows:
OPTION PRICE
OPTIONS PER SHARE
Outstanding at December 27, 1992 500,000 $2.00 to $3.75
Granted 417,000 $2.00
Canceled (173,000) $2.00
---------
Outstanding at December 26, 1993 744,000 $2.00
Granted 92,000 $2.00
Canceled (32,500) $2.00
Exercised (4,675) $2.00
----------
Outstanding at December 25, 1994 798,825 $2.00
Granted 2,000 $2.00
Canceled (157,900) $2.00
---------
Outstanding at December 31, 1995 642,925
=======
In December 1993, the Company revised the exercise price of those
options previously granted at $3.75 to $2.00.
At December 31, 1995, options for 631,812 shares were available for
future grant.
Stock Warrants - The Company haswarrants outstanding, issued to existing
stockholders to purchase 375,000 shares of common stock at $2.00 per
share, which expire July 15, 1998.
10. EMPLOYEE BENEFIT PLAN
In 1990, the Company adopted the Red Robin International 401(k) Savings
Plan (the Plan) which covers substantially all of its eligible
employees.
The Plan, which qualifies under Section 401(k) of the Internal Revenue
Code, allows employees to defer specified percentages of their
compensation (as defined) in a tax-exempt trust. The Company may make
matching contributions in an amount determined by the board of
Directors. In addition, the Company may contribute each year, at its
discretion, an additional amount from profits. There were no Company
contributions for the fifty-three or fifty-two week periods ended
December 31, 1995, December 25, 1994 and December 26, 1993.
F-16A
25
RED ROBIN INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE FIFTY-THREE OR FIFTY-TWO WEEK PERIODS
ENDED DECEMBER 31, 1995, DECEMBER 25, 1994 AND DECEMBER 26, 1993 (Continued)
11. UNUSUAL EXPENSES
The consolidated statement of operations for fiscal 1993 includes
unusual expenses as follows:
Expenses associated with store closures $2,669,000
Organizational restructuring expenses and
write-downs of other assets 1,479,000
Other 542,000
-------
$4,690,000
==========
The consolidated statement of operations for fiscal 1995 includes
unusual expenses as follows:
Expenses associated with store closures $838,000
Expenses associated with abandoned sites 513,000
Write-downs of property held for sale 381,000
-------
$1,732,000
==========
F-17A