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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 JULY 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
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(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 August 14, 1995, 13,379,542 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
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ITEM 1. FINANCIAL STATEMENTS.............................. 3
Consolidated Balance Sheets --
July 2, 1995 and October 2, 1994.................. 3
Consolidated Statements of Income --
Thirteen weeks and Thirty-nine weeks ended
July 2, 1995 and July 3, 1994..................... 4
Consolidated Statements of Cash Flows --
Thirty-nine weeks ended July 2, 1995 and
July 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
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ITEM 5. OTHER INFORMATION................................. 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.................. 13
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3
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except share data)
July 2, Oct. 2,
1995 1994
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(Unaudited)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 430 $ 961
Royalties receivable 597 553
Consumer products receivables 485 473
Inventory 2,136 1,744
Prepaid expenses 1,589 990
Deferred pre-opening costs 1,229 568
Deferred income taxes 226 139
Other current assets 1,109 610
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TOTAL CURRENT ASSETS 7,801 6,038
PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Land 9,870 7,601
Buildings 11,619 9,729
Leasehold improvements 74,603 55,657
Equipment 40,876 31,797
Construction in progress 4,370 2,870
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141,338 107,654
Less allowance for depreciation and amortization 34,261 27,597
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107,077 80,057
OTHER ASSETS
Deposit 3,000
Deferred income taxes 1,434 1,303
Royalty fee 426 487
Liquor licenses and other assets 3,365 1,336
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$120,103 $92,221
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LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 5,807 $ 5,006
Accrued expenses 4,532 4,064
Accrued compensation and taxes 2,282 2,357
Income taxes payable 356 654
Current portion--bank loan 3,403 3,400
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TOTAL CURRENT LIABILITIES 16,380 15,481
LONG-TERM DEBT 16,500 17,303
CAPITAL LEASE OBLIGATION 767 820
DEFERRED RENT 3,047 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, 13,678,917 and
9,072,499 shares issued and outstanding in Fiscal
Years 1995 and 1994, respectively 137 91
Additional paid-in capital 53,403 30,613
Retained earnings 29,869 25,254
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TOTAL SHAREHOLDERS' EQUITY 83,409 55,958
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$120,103 $92,221
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CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share data)
Thirteen Weeks Ended Thirty-nine Weeks Ended
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July 2, July 3, July 2, July 3,
1995 1994 1995 1994
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REVENUES
Restaurant sales $38,176 $29,527 $104,943 $79,290
Consumer product sales 2,320 1,737 6,673 5,633
Franchise income 1,040 995 3,047 2,931
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41,536 32,259 114,663 87,854
COSTS AND EXPENSES
Cost of sales 10,318 7,867 28,750 21,551
Labor and benefits 12,456 9,622 34,545 26,356
Occupancy 5,864 4,917 16,448 13,559
Other operating costs 3,736 2,902 9,925 7,922
General and administrative 2,661 2,390 8,282 6,780
Depreciation and amortization 2,974 1,922 7,845 5,521
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38,009 29,620 105,795 81,689
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OPERATING INCOME 3,527 2,639 8,868 6,165
OTHER INCOME (EXPENSE) (587) (277) (1,541) (540)
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Income before income taxes 2,940 2,362 7,327 5,625
Provision for income taxes 1,088 872 2,712 2,194
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NET INCOME $ 1,852 $ 1,490 $ 4,615 $ 3,431
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EARNINGS PER COMMON SHARE $.15 $.13 $.39 $.30
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Weighted average shares
outstanding 12,491 11,454 11,953 11,403
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CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Thirty-nine Weeks Ended
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July 2, July 3,
1995 1994
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OPERATING ACTIVITIES
Net Income $ 4,615 $ 3,431
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,726 5,595
Deferred income taxes (218) 90
Gain on disposal of equipment (14) (336)
Changes in operating assets and liabilities:
Decrease (Increase) in receivables (56) 195
Increase in inventory (392) (293)
Increase in other assets and prepaid expenses (2,025) (1,430)
Increase in accounts payable and
accrued expenses 1,397 1,515
Decrease in income taxes payable (298) (499)
Increase in deferred rent 388 575
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 10,123 $ 8,843
INVESTMENT ACTIVITIES
Additions to improvements and equipment (32,349) (16,514)
Proceeds from sale of fixed assets 28 2,544
Business acquisition, less cash acquired (316) (1,800)
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NET CASH USED FOR INVESTING ACTIVITIES (32,637) (15,770)
FINANCING ACTIVITIES
Proceeds from revolving credit agreement 44,570 28,900
Proceeds from tax-exempt capital lease 442
Issuance of Common Stock 22,565
Principal payments on revolving credit agreement
and capital lease obligations (45,423) (23,215)
Exercise of stock options 271 306
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NET CASH PROVIDED BY FINANCING ACTIVITIES 21,983 6,433
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DECREASE IN CASH AND CASH EQUIVALENTS (531) (494)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 961 998
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CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 430 $ 504
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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.
NOTE C - CAPITAL STOCK
During the quarter, the Company completed a public offering of
2,300,000 shares of common stock at $10.50 per share. The net proceeds to the
Company of approximately $22.8 million will be used to repay a portion of the
principal amount outstanding under the Company's unsecured revolving credit
facility, to develop additional restaurants and for working capital.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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RESULTS OF OPERATIONS
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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 JULY 2, 1995 COMPARED TO THIRTEEN WEEKS ENDED JULY 3, 1994
13 Weeks 13 Weeks
Ended Ended
7/2/95 7/3/94
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REVENUES:
Restaurant sales 91.9% 91.5%
Consumer product sales 5.6 5.4
Franchise income 2.5 3.1
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Total 100.0% 100.0%
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COSTS AND EXPENSES:
Cost of food & beverages (1) 25.5% 25.2%
Labor and benefits (1) 30.8 30.8
Occupancy costs (1) 14.5 15.7
Other operating costs (1) 9.2 9.3
General and administrative 6.4 7.4
Depreciation and amortization (1) 7.3 6.1
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Operating income 8.5 8.2
Other income (expense) (1.4) (.9)
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Income before taxes 7.1 7.3
Provision for income taxes 2.6 2.7
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Net income 4.5 4.6
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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 75 62
Franchised Uno's - full service 59 59
Total revenue increased 28.8% to $41.5 million for the thirteen weeks
ended July 2, 1995 from $32.3 million for the same period last year.
Company-owned restaurant sales increased 29.3% to $38.2 million for the
thirteen weeks ended July 2, 1995 from $29.6 million for the same period last
year due primarily to 23% 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 third
quarter of the fiscal year were 1.4% above the same period last year. For the
ninth consecutive quarter, the company has realized positive comparable-store
sales gains.
Consumer product sales increased 33.6% to $2.3 million for the thirteen
weeks ended July 2, 1995 from $1.7 million for the same period last year.
Sales growth in the core New England region was principally due to increased
promotional activities. Distribution of a new frozen product line outside of
the New England market continues to expand as several new customers have been
added.
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Franchise income, which includes royalty income and initial franchise
fees, increased to $1,040,000 for the thirteen weeks ended July 2, 1995 from
$995,000 for the same period last year. Royalty income increased slightly due
to average weekly sales gains of 4.9% which were somewhat offset by a decline in
operating weeks of 1.3%. Initial franchise fees amounted to $45,000 this year
compared to $10,000 last year due to the opening of two full-service units
during the quarter versus two quick service openings last year.
Cost of food and beverages increased to 25.5% of restaurant and consumer
product sales for the thirteen weeks ended July 2, 1995 from 25.2% for the same
period last year. This percentage cost increase reflects primarily changes in
sales mix due to our expansion of our non-pizza menu offerings which have a
higher-cost than our pizza menu items.
Labor and benefits as a percentage of restaurant and consumer product
sales remained constant at 30.8% for the thirteen weeks ended July 2, 1995 as
compared to the same period last year.
Occupancy costs declined as a percentage of restaurant and consumer
product sales from 15.7% for the thirteen weeks ended July 2, 1995 to 14.5% for
the same period last year, due to 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 slightly as a percentage of restaurant and
consumer products sales to 9.2% for the thirteen weeks ended July 2, 1995 from
9.3% for the same period last year, principally due to operating leverage
provided by the increase in comparable store sales.
General and administrative costs as a percentage of total revenues
declined to 6.4% for the thirteen weeks ended July 2, 1995 from 7.4% for the
same period last year, reflecting the benefits of operating leverage generated
by the Company's sales growth and unit expansion.
Depreciation and amortization expenses increased as a percentage of
restaurant and consumer product sales to 7.3% for the thirteen weeks ended July
2, 1995 from 6.1% for the same period last year due principally to an increase
in pre-opening amortization expense associated with the higher rate of unit
growth recently.
Operating income for the thirteen weeks ended July 2, 1995 improved 33% to
$3.5 million from $2.6 million for the same period last year, as the operating
margin for the thirteen weeks ended July 2, 1995 increased to 8.5% from 8.2%
for the same period last year.
Other expense of $587,000 for the thirteen weeks ended July 2, 1995
increased from $277,000 for the same period last year, principally due 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 remained unchanged at 37.0% for the thirteen
weeks ended July 2, 1995 from the comparable period a year ago.
Net income increased 24.3% for the thirteen weeks ended July 2, 1995 to
$1,852,000 from $1,490,000 for the same period last year based on the factors
noted above.
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THIRTY-NINE WEEKS ENDED JULY 2, 1995 COMPARED TO THIRTY-NINE WEEKS ENDED JULY 3, 1994
39 Weeks 39 Weeks
Ended Ended
7/2/95 7/3/94
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REVENUES:
Restaurant sales 91.5% 90.3%
Consumer product sales 5.8 6.4
Franchise income 2.7 3.3
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Total 100.0% 100.0%
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COSTS AND EXPENSES:
Cost of food and beverages (1) 25.8 25.4
Labor and benefits (1) 30.9 31.0
Occupancy costs (1) 14.7 16.0
Other operating costs (1) 8.9 9.3
General and administrative 7.2 7.7
Depreciation and amortization (1) 7.0 6.5
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Operating income 7.7 7.0
Other income (expense) (1.3) (.6)
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Income before taxes 6.4 6.4
Provision for income taxes 2.4 2.5
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Net income 4.0% 3.9%
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<FN>
(1) Percentage of income of restaurant and consumer product sales
Total revenue increased 30.5% to $114.7 million for the 39 weeks ended
July 2, 1995 from $87.9 million in the comparable period in 1994.
Company-owned restaurant sales increased 32.4% to $104.9 million for the 39
weeks ended July 2, 1995 due primarily to a 20.9% 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 4.7% increase in comparable store sales for the 39 weeks
ended July 2, 1995.
Consumer product sales increased 18.5% to $6.7 million for the 39 weeks
ended July 2, 1995 from $5.6 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 4% to $3.0 million for the 39 weeks ended July
2, 1995 from $2.9 million in the comparable period in 1994. Royalty income
increased 5.4% to $2.9 million for the 39 weeks ended July 2, 1995 due
principally to an increase in average weekly sales of 4.1%. Initial franchise
fees totaled $100,000 for the 39 weeks ended July 2, 1995 compared to $135,000
in the comparable period in 1994.
Cost of food and beverages as a percentage of restaurant and consumer
product sales increased to 25.8% for the 39 weeks ended July 2, 1995 from 25.4%
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.
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Labor and benefits as a percentage of restaurant and consumer product
sales decreased slightly to 30.9% for the 39 weeks ended July 2, 1995 from
31.0% 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 14.7% for the 39 weeks ended July 2, 1995 from 16.0% 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 8.9% for the 39 weeks ended July 2, 1995 from 9.3% in the
comparable period in 1994. The primary reasons for these improvements 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 7.2% for the 39 weeks ended July 2, 1995 from 7.7% 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 to 7.0% for the 39 weeks ended July 2, 1995
compared to 6.5% 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 43.8% to $8.9 million for the 39 weeks ended
July 2, 1995 compared to $6.2 million in the comparable period in 1994. The
operating profit margin improved to 7.7% from 7.0%, primarily as a result of
the increase in Company-owned restaurants and comparable store sales.
Other expense increased to $1,541,000 or 1.3% as a percentage of total
revenues for the 39 weeks ended July 2, 1995 from $540,000 or .6% 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 franchise.
The effective income tax rate declined to 37.0% for the 39 weeks ended
July 2, 1995 from 39% in the comparable period in 1994. The effective income
tax rate was lower primarily due to the effect of the FICA tip tax credit,
which became effective 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 39 weeks ended July 2, 1995.
Net cash provided by operating activities $10,123
Net cash used in investing activities (32,637)
Net cash provided by financing activities 21,983
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Increase (Decrease) in cash and cash equivalents (531)
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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 39 week period ended July 2, 1995, the Company's investment in
property, equipment and leasehold improvements was $32.6 million.
The Company currently plans to open approximately 38 restaurants during
fiscal 1995 and fiscal 1996, 14 of which were open as of July 17, 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 approximately $9.0 million in additional capital
expenditures primarily for the development of new restaurants.
During the third quarter, the Company completed an equity offering that
generated approximately $22.8 million. The proceeds were used to partially
repay its unsecured, revolving line of credit. As of July 2, 1995, the Company
had outstanding indebtedness of $16.5 million under its unsecured, revolving
line of credit, $3.3 million of senior, unsecured notes and $837,000 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 - 150 basis points above LIBOR. The Company anticipates using the revolving
credit facility in the future for repayment of all or a portion of the $3.3
million of principal outstanding under its senior, unsecured notes, for the
development of additional restaurants, and for working capital.
The Company announced on July 7, 1995, its intention to purchase up to
500,000 shares of its Common Stock in the market from time to time over the
next six months. The Board of Directors of the Company determined that at
current price levels the purchase of its Common Stock is an appropriate use of
available funds. The shares of Common Stock to be purchased will be held in
treasury and may be used by the Company from time to time for its employee
benefit plans. As of August 14, 1995, the Company has purchased 300,000 shares
of its Common Stock at prices ranging from $7.875 to $8.25.
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 1996.
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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
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ITEM 5. OTHER INFORMATION
The Company announced on July 7, 1995, its intention to purchase up to
500,000 shares of its Common Stock in the market from time to time
over the next six months. The Board of Directors of the Company
determined that at current price levels the purchase of its Common
Stock is an appropriate use of available funds. The shares of Common
Stock to be purchased will be held in treasury and may be used by the
Company from time to time for its employee benefit plans. As of August
14, 1995, the Company has purchased 300,000 shares of its Common Stock
at prices ranging from $7.875 to $8.25.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
11. Statement re: computation of per share earnings
(b) REPORTS ON FORM 8-K - Uno Restaurant Corporation did not file any
Reports on Form 8-K during the quarter ended July 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
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(Registrant)
Date: August 14, 1995 By: /s/ Craig S. Miller
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Craig S. Miller
President
Date: August 14, 1995 By: /s/ Robert M. Brown
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Robert M. Brown
Senior Vice President-Finance,
and Chief Financial Officer
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