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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended APRIL 2, 1995
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OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission file number 1-9573
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UNO RESTAURANT CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 04-2953702
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
100 Charles Park Road, West Roxbury, Massachusetts 02132
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(Address of principal executive offices) (Zip Code)
(617) 323-9200
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
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As of April 30, 1995, 11,377,793 shares of the registrant's Common
Stock, $.01 par value, were outstanding.
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UNO RESTAURANT CORPORATION
INDEX
Page
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS............................ 3
Consolidated Balance Sheets --
April 2, 1995 and October 2, 1994............... 3
Consolidated Statements of Income --
Twenty-six weeks ended April 2, 1995
and April 3, 1994............................... 4
Consolidated Statements of Cash Flows --
Twenty-six weeks ended April 2, 1995 and
April 3, 1994................................... 5
Notes to Consolidated Financial
Statements...................................... 6
ITEM 2. MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS....................... 7
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-
HOLDERS......................................... 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K............... 12
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3
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
April 2, Oct. 2,
1995 1994
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(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 214 $ 961
Royalties receivable 597 553
Consumer products receivables 682 473
Inventory 1,936 1,744
Prepaid expenses 2,143 990
Deferred pre-opening costs 1,180 568
Deferred income taxes 238 139
Other current assets 1,041 610
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TOTAL CURRENT ASSETS 8,031 6,038
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Land 9,166 7,601
Buildings 11,502 9,729
Leasehold improvements 66,868 55,657
Equipment 37,789 31,797
Construction in progress 6,518 2,870
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131,843 107,654
Less allowances for depreciation and amortization 31,792 27,597
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100,051 80,057
OTHER ASSETS
Deposit 3,000
Deferred income taxes 1,435 1,303
Royalty fee 446 487
Liquor licenses and other assets 3,184 1,336
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$113,147 $ 92,221
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 6,619 $ 5,006
Accrued expenses 4,620 4,064
Accrued compensation and taxes 2,319 2,357
Income taxes payable 138 654
Current portion--bank loan 3,402 3,400
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TOTAL CURRENT LIABILITIES 17,098 15,481
LONG-TERM DEBT 33,358 17,303
CAPITAL LEASE OBLIGATION 778 820
DEFERRED RENT 2,952 2,659
SHAREHOLDERS' EQUITY
Preferred Stock, $1.00 par value, 1,000,000 shares
authorized, none issued
Common Stock, $.01 par value, 25,000,000 shares (12,000,000 in 1994)
authorized, 11,374,699 and 9,072,499 shares issued and outstanding in Fiscal
Years 1995 and 1994, respectively 114 91
Additional paid-in capital 30,830 30,613
Retained earnings 28,017 25,254
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TOTAL SHAREHOLDERS' EQUITY 58,961 55,958
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$113,147 $92,221
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CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
Thirteen Weeks Ended Twenty-six Weeks Ended
------------------------- ------------------------
Apr 2, Apr 3, Apr 2, Apr 3,
1995 1994 1995 1994
-------- -------- -------- --------
REVENUES
Restaurant sales $33,873 $25,010 $66,767 $49,980
Consumer product sales 2,245 2,175 4,353 3,896
Franchise income 1,033 951 2,007 1,936
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37,151 28,136 73,127 55,812
COSTS AND EXPENSES
Cost of sales 9,365 6,899 18,432 13,731
Labor and benefits 11,429 8,469 22,089 16,813
Occupancy 5,274 4,447 10,584 8,680
Other operating costs 3,000 2,518 6,189 5,049
General and administrative 2,924 2,195 5,621 4,390
Depreciation and amortization 2,604 1,833 4,871 3,609
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34,596 26,361 67,786 52,272
------- ------- ------- -------
OPERATING INCOME 2,555 1,775 5,341 3,540
OTHER EXPENSE (583) (292) (954) (277)
------- ------- ------- -------
Income before income taxes 1,972 1,483 4,387 3,263
Provision for income taxes 729 601 1,624 1,322
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NET INCOME $ 1,243 $ 882 $ 2,763 $ 1,941
======= ======= ======= =======
EARNINGS PER COMMON SHARE $ .11 $ .08 $ .24 $ .17
======= ======= ======= =======
Weighted average shares outstanding 11,748 11,360 11,684 11,377
======= ======= ======= =======
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Twenty-six Weeks Ended
------------------------
Apr 2, Apr 3,
1995 1994
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OPERATING ACTIVITIES
Net Income $ 2,763 $ 1,941
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,921 3,658
Deferred income taxes (231) 10
Gain on disposal of equipment (9) (332)
Changes in operating assets and liabilities:
Decrease (Increase) in consumer product receivable (209) 118
Decrease (Increase) in royalty receivables (44) (87)
Increase in inventory (192) (36)
Increase in other assets and prepaid expenses (2,977) (998)
Increase in accounts payable and
accrued expenses 2,131 572
Decrease in income taxes payable (516) (638)
Increase in deferred rent 293 379
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NET CASH PROVIDED BY OPERATING ACTIVITIES 5,930 4,587
INVESTMENT ACTIVITIES
Additions to improvements and equipment (22,625) (9,477)
Proceeds from sale of fixed assets 9 2,517
Business acquisition, less cash acquired, and deposit (316) (1,800)
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NET CASH USED FOR INVESTING ACTIVITIES (22,932) (8,760)
FINANCING ACTIVITIES
Proceeds from revolving credit agreement 31,075 15,135
Principal payments on revolving credit agreement
and capital lease obligations (15,060) (11,556)
Exercise of stock options 240 48
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NET CASH PROVIDED BY FINANCING ACTIVITIES 16,255 3,627
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DECREASE IN CASH AND CASH EQUIVALENTS (747) (546)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 961 998
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 214 $ 452
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited, consolidated financial statements have been
prepared in accordance with instructions to Form 10-Q and, therefore, do not
include all information and footnotes normally included in financial statements
prepared in conformity with generally accepted accounting principles. They
should be read in conjunction with the financial statements of the company for
the fiscal year ended October 2, 1994.
The accompanying financial statements include all adjustments (consisting
only of normal recurring accruals) that management considers necessary for a
fair presentation of its financial position and results of operations for the
interim periods presented.
NOTE B - STOCK SPLIT
On February 28, 1995, the Company effected a 25% stock split in the form of
a stock dividend to the stockholders of record on February 8, 1995 which was
approved by the Company's Board of Directors on November 15, 1994.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following table sets forth the percentage relationship to total revenues,
unless otherwise indicated, of certain items included in the Company's income
statements and operating data for the periods indicated:
THIRTEEN WEEKS ENDED APRIL 2, 1995 COMPARED TO THIRTEEN WEEKS ENDED
APRIL 3, 1994
13 Weeks 13 Weeks
Ended Ended
4/2/95 4/3/94
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REVENUES:
Restaurant sales 91.2% 88.9%
Consumer product sales 6.0 7.7
Franchise income 2.8 3.4
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Total 100.0% 100.0%
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COSTS AND EXPENSES:
Cost of food and beverages (1) 25.9% 25.4%
Labor and benefits (1) 31.6 31.1
Occupancy costs (1) 14.6 16.4
Other operating costs (1) 8.3 9.3
General and administrative 7.9 7.8
Depreciation and amortization (1) 7.2 6.8
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Operating income 6.9 6.3
Other expense (1.6) (1.0)
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Income before taxes 5.3 5.3
Provision for income taxes 2.0 2.1
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Net income 3.3% 3.2%
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<FN>
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(1) Percentage of restaurant and consumer product sales
NUMBER OF RESTAURANTS
AT END OF QUARTER:
Company-owned Uno's full service 71 57
Franchised Uno's - full service 58 59
Total revenues increased 32.0% to $37.2 million for the thirteen weeks
ended April 2, 1995 from $28.1 million for the same period last year.
Company-owned restaurant sales increased 35.4% to $33.9 million for the thirteen
weeks ended April 2, 1995 from $25.0 million for the same period last year due
primarily to a 21.4% growth in store operating weeks of full-service Pizzeria
Uno units and the acquisition of three Bay Street Grill restaurants.
Comparable-store sales for Pizzeria Uno full-service units for the thirteen
weeks ended April 2, 1995 were 5.8% above the same period last year.
Consumer product sales increased 3.2% to $2,244,700 for the thirteen
weeks
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ended April 2, 1995 from $2,174,700 for the same period last year. Sales growth
within the core New England region for the thirteen weeks ended April 2, 1995
continued, especially of private label products, and test shipments of frozen
products outside of the New England market also continued.
Franchise income, which includes royalty income and initial franchise
fees, increased 8.7% to $1,033,400 for the thirteen weeks ended April 2, 1995
from $951,000 for the same period last year. Royalty income increased 10.1% to
$1,008,400 from $916,000 for the same period last year due in part to
increases in franchise restaurant sales for the thirteen weeks ended April 2,
1995 and two new openings since the comparable period last year. Initial
franchise fees amounted to $25,000 for the thirteen weeks ended April 2, 1995
compared to $35,000 for the same period last year.
Cost of food and beverages increased to 25.9% of restaurant and
consumer product sales for the thirteen weeks ended April 2, 1995 from 25.4% for
the same period last year. This percentage cost increase reflected primarily
changes in sales mix toward a larger percentage of higher-cost non-pizza menu
items.
Labor and benefits increased as a percentage of restaurant and consumer
product sales to 31.6% for the thirteen weeks ended April 2, 1995 compared to
31.1% for the same period last year due to initial periods of labor inefficiency
in connection with accelerated unit growth.
Occupancy costs declined as a percentage of restaurant and consumer
product sales from 16.4% for the thirteen weeks ended April 2, 1995 to 14.6% for
the same period last year, due to the operating leverage provided by the
increase in comparable store sales as well as the Company's ownership of an
increasing number of fee owned properties.
Other operating costs declined as a percentage of restaurant and
consumer product sales to 8.3% for the thirteen weeks ended April 2, 1995 from
9.3% for the same period last year, principally due to lower advertising
expenditures.
General and administrative costs as a percentage of total revenues for
the thirteen weeks ended April 2, 1995 remained relatively unchanged from the
same period last year.
Depreciation and amortization expenses increased as a percentage of
restaurant and consumer product sales to 7.2% for the thirteen weeks ended April
2, 1995 from 6.8% for the same period last year due to an increase in
pre-opening amortization expense associated with the increased rate of unit
growth recently.
Operating income for the for the thirteen weeks ended April 2, 1995
improved 43.9% to $2,555,000 from $1,775,000 for the same period last year, as
the operating margin for the thirteen weeks ended April 2, 1995 increased to
6.9% from 6.3% for the same period last year.
Other expense of $583,000 for the thirteen weeks ended April 2, 1995
increased from $292,000 for the same period last year, due principally to
higher interest costs relating to the increased level of debt used to fund the
Company's accelerated expansion plan and its ownership of an increasing number
of restaurant properties.
The effective income tax rate declined to 37.0% for the 13 weeks ended
April 2, 1995 from 40.5% in the comparable period in 1994. The effective income
tax
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rate for the 13 weeks ended April 2, 1995 was lower primarily due to the effect
of the FICA tip tax credit, which became effective on January 1, 1994 and
generally lower state income taxes.
Net income increased 40.9% for the 13 weeks ended April 2, 1995
to $1,243,000 from $882,000 for the same period last year based on
the factors noted above.
TWENTY-SIX WEEKS ENDED APRIL 2, 1995 COMPARED TO TWENTY-SIX WEEKS ENDED
APRIL 3, 1994
26 Weeks 26 Weeks
Ended Ended
4/2/95 4/3/94
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REVENUES:
Restaurant sales 91.3% 89.6%
Consumer product sales 6.0 7.0
Franchise income 2.7 3.4
Total 100.0% 100.0%
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COSTS AND EXPENSES:
Cost of food and beverages (1) 25.9 25.5
Labor and benefits (1) 31.1 31.2
Occupancy costs (1) 14.9 16.1
Other operating costs (1) 8.7 9.4
General and administrative 7.7 7.9
Depreciation and amortization (1) 6.8 6.7
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Operating income 7.3 6.3
Other income (expense) (1.3) (.5)
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Income before taxes 6.0 5.8
Provision for income taxes 2.2 2.4
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Net income 3.8% 3.4%
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<FN>
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(1) Percentage of restaurant and consumer product sales
Total revenue increased 31.0% to $73.1 million for the 26 weeks ended
April 2, 1995 from $55.8 million in the comparable period in 1994. Company-owned
restaurant sales increased 33.6% to $66.8 million for the 26 weeks ended April
2, 1995 due primarily to a 19.8% increase in operating weeks of full-service
Pizzeria Uno restaurants resulting from the addition of 14 restaurants during
the past four quarters, as well as the purchase of three Bay Street Grill
restaurants in December 1994. The increase in restaurant sales was also due to a
6.6% increase in comparable store sales for the 26 weeks ended April 2, 1995.
Consumer product sales increased 11.7% to $4.4 million for the 26 weeks
ended April 2, 1995 from $3.9 million in the comparable period in 1994 due to
higher sales of Pizzeria Uno brand and private label refrigerated pizza, as well
as increased shipments of frozen pizza for tests by customers outside New
England.
Franchise income increased 3.7% to $2.0 million for the 26 weeks ended
April 2, 1995 from $1.9 million in the comparable period in 1994. Royalty income
increased 7.8% to $2.0 for the 26 weeks ended April 2, 1995 generally due to an
increase in franchise restaurant sales. Initial franchise fees totaled $55,000
for the
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26 weeks ended April 2, 1995 compared to $125,000 in the comparable period in
1994.
Cost of food and beverages as a percentage of restaurant and consumer
product sales increased to 25.9% for the 26 weeks ended April 2, 1995 from 25.5%
in the comparable period in 1994. This percentage cost increase primarily
reflected changes in sales mix toward a larger percentage of higher-cost
non-pizza menu items.
Labor and benefits as a percentage of restaurant and consumer product
sales decreased slightly to 31.1% for the 26 weeks ended April 2, 1995 from
31.2% in the comparable period in 1994, principally due to the leverage of
higher comparable store sales.
Occupancy costs as a percentage of restaurant and consumer product sales
declined to 14.9% for the 26 weeks ended April 2, 1995 from 16.1% in the
comparable period in 1994, primarily due to an increased number of owned
restaurant properties and the operating leverage provided by the increase in
comparable store sales noted above.
Other operating costs declined as a percentage of restaurant and consumer
product sales to 8.7% for the 26 weeks ended April 2, 1995 from 9.4% in the
comparable period in 1994. The primary reasons for this improvement were lower
advertising expenses as a percentage of restaurant and consumer product sales
and the operating leverage provided by the increase in comparable store sales.
General and administrative expenses decreased as a percentage of total
revenues to 7.7% for the 26 weeks ended April 2, 1995 from 7.9% in the
comparable period in 1994 as a result of allocating certain fixed expenses over
a larger revenue base.
Depreciation and amortization expenses as a percentage of restaurant and
consumer product sales increased slightly to 6.8% for the 26 weeks ended April
2, 1995 from 6.7% in the comparable period in 1994, principally due to increased
amortization of pre-opening costs associated with the higher rate of unit
growth.
Operating income increased 50.9% to $5.3 million for the 26 weeks ended
April 2, 1995 compared to $3.5 million in the comparable period in 1994. The
operating profit margin improved to 7.3% from 6.3%, primarily as a result of the
increase in Company-owned restaurants and comparable store sales.
Other expense increased to $954,000 or 1.3% as a percentage of total
revenues for the 26 weeks ended April 2, 1995 from $277,000 or .5% of total
revenues in the comparable period in 1994. This increase was due to higher
interest expense associated with the increased level of debt used to fund the
Company's accelerated expansion plan and its ownership of an increasing number
of restaurant properties. In addition, other expense in the comparable period in
1994 was favorably affected by a $312,000 gain on the sale of a restaurant to a
franchisee.
The effective income tax rate declined to 37.0% for the 26 weeks ended
April 2, 1995 from 40.5% in the comparable period in 1994. The effective income
tax rate for the 26 weeks ended April 2, 1995 was lower primarily due to the
effect of the FICA tip tax credit, which became effective on January 1, 1994 and
generally lower state income taxes.
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LIQUIDITY AND SOURCES OF CAPITAL
The following table presents a summary of the Company's cash flows for the
26 weeks ended April 2, 1995.
Net cash provided by operating activities $ 5,930
Net cash used in investing activities (22,932)
Net cash provided by financing activities 16,255
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Increase (Decrease) in cash and cash equivalents (747)
========
Historically, the Company has leased most of its restaurant locations and
pursued a strategy of controlled growth, financing its expansion principally
from operating cash flow, equity offerings and from the sale of senior,
unsecured notes and short-term borrowing under revolving lines of credit. During
the 26 week period ended April 2, 1995, the Company's investment in property,
equipment and leasehold improvements was $22.6 million.
The Company currently plans to open approximately 38 restaurants during
fiscal 1995 and fiscal 1996, 11 of which were open as of May 5, 1995. The
Company expects that the average cash investment required to open a full-service
Pizzeria Uno restaurant, excluding land and pre-opening costs, will be
approximately $1.5 million. For the balance of fiscal 1995, the Company has
planned $19.0 million in additional capital expenditures primarily for the
development of new restaurants.
As of April 2, 1995, the Company had outstanding indebtedness of $30.0
million under its unsecured, revolving line of credit, $6.7 million of senior,
unsecured notes and $847,000 in capital lease obligations. In December 1994, the
Company obtained a $50.0 million unsecured revolving credit facility to replace
its then existing $20.0 million revolving credit facility. The new revolving
credit facility will convert to a three year term loan in December 1997.
Advances under the revolving credit facility will accrue interest at the
lender's prime rate, or alternatively, 125 basis points above LIBOR. The Company
anticipates using the revolving credit facility in the future for repayment of
all or a portion of the $6.7 million of principal outstanding under its senior,
unsecured notes, for the development of additional restaurants, and for working
capital.
The Company believes that existing cash balances, cash generated from
operations and borrowings under its revolving line of credit will be sufficient
to satisfy the Company's working capital and capital expenditure requirements
through fiscal 1995.
IMPACT OF INFLATION
Inflation has not been a major factor in the Company's business for the
last several years. The Company believes it has historically been able to pass
on increased costs through menu price increases, but there can be no assurance
that it will be able to do so in the future. Future increases in local area
construction costs could adversely affect the Company's ability to expand.
SEASONALITY
The Company's business is seasonal in nature, with revenues and, to a
greater degree, operating income being lower in its first and second quarters
than its other quarters due to the Company's reduced winter volumes.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
The Company held its Annual Meeting of Stockholders on
February 8, 1995. Of the 9,079,298 shares of Common Stock of
the Company issued and outstanding as of December 28, 1994,
approximately 8,341,077 shares were represented at the meeting
in person or by proxy. Set forth below is a brief description
of each matter voted upon at the meeting and the voting results
with respect to each matter.
1. A proposal to elect two class I directors to serve as
members of the Company's Board of Directors until 1998:
Name For Withheld Abstain
---- --- -------- -------
S. James Coppersmith 8,325,632 15,445
John T. Gerlach 8,336,632 4,445
Craig S. Miller, Robert M. Brown and E. Robert
Kinney, the Company's class II directors, will serve as
such until 1996. Aaron D. Spencer and Stephen J. Sweeney,
the Company's class III directors, will serve as such
until 1997.
2. A proposal to amend the Company's Restated Certificate of
Incorportion, as amended, to increase the number of authorized
shares of Common Stock from 12,000,000 to 25,000,000:
For Withheld Abstain
--- -------- -------
8,229,799 97,491 13,787
3. A proposal to amend the Company's 1989 Non-Qualified Stock
Option Plan for Non-Employee Directors (i) to increase from 625
to 925 the number of shares of Common Stock for which an option
will be granted each year to each then non-employee director
and (ii) to grant an option to purchase 300 shares of Common
Stock to each non-employee director for each year such
individual has already served as a director of the Company:
For Withheld Abstain
--- -------- -------
8,150,912 151,936 38,229
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
3.1 Restated Certificate of Incorporation, as amended, of
the Registrant
3.2 Restated Bylaws, as amended, of the Registrant
11. Statement re: computation of per share earnings
27. Financial Data Schedule
(b) Reports on Form 8-K - Uno Restaurant Corporation
did not file any Reports on Form 8-K during the quarter ended
April 2, 1995.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNO RESTAURANT CORPORATION
--------------------------
(Registrant)
Date: May 9, 1995 By: /s/ Robert M. Brown
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Robert M. Brown, Duly Authorized
Senior Vice President-Finance,
and Chief Financial Officer
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