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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-QSB - QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Quarterly or Transitional Report
FORM 10-QSB
(Mark One)
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended July 14, 1996
/ / TRANSITION REPORT PURSUANT TO 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 0-26400
LOGAN'S ROADHOUSE, INC.
(Exact name of small business issuer as specified in its charter)
TENNESSEE 62-1602074
(State or other jurisdiction of incorporation or organization) (IRS Employer
Identification No.)
P. O. BOX 291047, NASHVILLE, TN 37229
(Address of principal executive offices)
(615) 885-9056
(Issuer's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) 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
----- -----
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes
of common equity, as of the latest practicable date:
Class Outstanding August 23, 1996
----- ---------------------------
Common stock, $.01 par value 6,011,236 shares
Transitional Small Business Disclosure Format (check one): Yes No x
----- -----
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PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
LOGAN'S ROADHOUSE, INC.
BALANCE SHEETS
July 14, 1996
Assets (Unaudited) Dec. 31, 1995
- ---------------------------------------------------- ------------- -------------
Current assets:
Cash and cash equivalents $16,705,684 2,260,776
Receivables: trade and other 394,197 184,875
Inventories 226,867 157,938
Preopening costs 595,703 376,014
Prepaid expenses and other current assets 64,057 232,788
----------- -----------
Total current assets 17,986,508 3,212,391
Property, plant and equipment, net 22,334,871 16,600,294
Other assets 68,116 56,017
----------- -----------
Total assets $40,389,495 19,868,702
=========== ===========
Liabilities and Shareholders' Equity
- ----------------------------------------------------
Current liabilities:
Accounts payable $ 852,870 730,176
Accrued payroll and related expenses 489,480 443,348
Deferred revenue 140,039 239,959
Income taxes payable 166,223 49,700
Accrued state and local taxes 768,710 450,475
Current portion of long-term
debt obligations (note 4) -- 639,439
Deferred income taxes 139,300 139,300
----------- -----------
Total current liabilities 2,556,622 2,692,397
Long-term obligations, less current portion
(note 4) -- 1,939,812
Deferred income taxes 181,900 181,900
----------- -----------
Total liabilities 2,738,522 4,814,109
Shareholders' equity (note 2):
Common stock, $0.01 par value;
Authorized 15,000,000 shares; issued
6,011,236 and 4,717,500 shares, respectively 40,075 31,450
Additional paid-in capital 35,050,669 14,302,035
Retained earnings 2,560,229 721,108
----------- -----------
Total shareholders' equity 37,650,973 15,054,593
----------- -----------
Total liabilities and shareholders' equity $40,389,495 19,868,702
=========== ===========
See accompanying notes to financial statements.
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LOGAN'S ROADHOUSE, INC.
STATEMENTS OF EARNINGS (UNAUDITED)
Twelve Weeks Ended: Twenty-eight Weeks Ended:
-------------------------------- --------------------------------
July 14, 1996 July 9, 1995 July 14, 1996 July 9, 1995
------------- ------------ ------------- ------------
Net restaurant sales $ 9,077,203 6,400,121 $ 19,982,353 13,256,843
Costs and expenses:
Food and beverage 3,039,026 2,334,232 6,635,174 4,758,453
Labor and benefits 2,464,283 1,780,976 5,472,404 3,622,772
Occupancy and other 1,330,828 1,128,508 3,004,069 2,337,858
Depreciation and amortization 381,671 201,086 860,284 406,552
General and administrative 548,869 336,893 1,293,508 805,822
------------ ------------ ------------ -------------
7,764,677 5,781,695 17,265,439 11,931,457
------------ ------------ ------------ -------------
Income from operations 1,312,526 618,426 2,716,914 1,325,386
Other income and (expense):
Interest, net 158,175 (76,386) 94,583 (132,383)
Franchise fee and royalties 33,291 -- 33,291 --
------------ ------------ ------------ -------------
191,466 (76,386) 127,874 (132,383)
------------ ------------ ------------ -------------
Earnings before income taxes 1,503,992 542,040 2,844,788 1,193,003
Income tax expense (note 3) 522,980 192,229 1,005,667 422,800
------------ ------------ ------------ -------------
Net earnings (note 3) $ 981,012 349,811 1,839,121 770,203
============ ============ ============ =============
Earnings per share (note 3) $ 0.16 0.11 0.33 0.25
============ ============ ============ =============
Weighted average shares outstanding (note 3) 6,198,342 3,067,500 5,498,110 3,067,500
============ ============ ============ =============
See accompanying notes to financial statements.
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LOGAN'S ROADHOUSE, INC.
STATEMENTS OF CASH FLOWS
Twenty-eight Weeks Ended
--------------------------------
July 14, 1996 July 9, 1995
------------- ------------
Cash flows from operating activities:
Net earnings $ 1,839,121 1,193,003
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 860,284 406,552
Net effect of changes in current assets and
current liabilities (190,664) 27,452
------------ ------------
Net cash provided by operating activities 2,508,741 1,627,007
------------ ------------
Cash flows from investing activities:
Additions to property, plant and equipment (6,229,742) (2,473,638)
Increase in other assets (12,099) (17,582)
------------ ------------
Net cash used by investing activities (6,241,841) (2,491,220)
------------ ------------
Cash flows from financing activities:
Net proceeds from secondary public offering 20,757,259 --
Proceeds from issuance of long-term debt -- 1,339,000
Payments on long-term obligations (2,579,251) (183,579)
Partner distributions and costs relating to the
formation of the new corporate structure -- (502,591)
------------ ------------
Net cash provided by financing activities 18,178,008 652,830
------------ ------------
Net increase (decrease) in cash 14,444,908 (211,383)
Cash and cash equivalents, beginning of period 2,260,776 400,123
------------ ------------
Cash and cash equivalents, end of period $ 16,705,684 188,740
============ ============
See accompanying notes to financial statements.
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LOGAN'S ROADHOUSE, INC.
NOTES TO UNAUDITED FINANCIAL STATEMENTS
TWENTY-EIGHT WEEKS ENDED JULY 14, 1996 AND JULY 9, 1995
(1) BASIS OF PRESENTATION
The accompanying financial statements have been prepared by the Company
without audit, with the exception of the December 31, 1995 balance sheet which
was derived from the audited financial statements included in the Company's
December 31, 1995 Annual Report. The financial statements include balance
sheets, statements of earnings and statements of cash flows and have been
prepared in accordance with generally accepted accounting principles for interim
financial reporting and in accordance with Item 310 (b) of Regulation S-B. These
financial statements, note disclosures and other information should be read in
conjunction with the "Selected Financial Data" financial statements and the
notes thereto included in the Company's December 31, 1995 Annual Report.
In the opinion of management, the unaudited interim financial
statements contained in this report reflect all adjustments, consisting of only
normal recurring accruals, which are necessary for a fair presentation of the
financial position and the results of operations for the interim periods
presented. The results of operations for any interim period are not necessarily
indicative of results for the full year.
From inception through July 25, 1995, the Company was a partnership
and, accordingly, incurred no federal or state income tax liability. The
discussion of financial condition and results of operations included in the
paragraphs that follow reflect a pro forma adjustment for federal and state
taxes that would have been recorded during the first quarter and six-month
period of 1995 if the Company had been subject to corporate income taxes for
such period.
For accounting purposes, the Company has adopted a 52/53 week fiscal
year ending on the last Sunday in December. For financial reporting purposes,
the first quarter consists of 16 weeks with the second, third and fourth
quarters each consisting of 12 weeks (13 weeks in the fourth quarter of a 53
week year).
(2) REGISTERED PUBLIC OFFERINGS
On July 26, 1995, the Company completed its initial public offering
whereby 1.1 million shares of common stock were sold in a registered offering.
Proceeds to the Company (after underwriting discounts and expenses) amounted to
approximately $13.3 million. The net proceeds were used to repay approximately
$1.7 million under its existing line of credit and to purchase for approximately
$6.1 million land, buildings and
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leasehold improvements for five restaurants which had previously been leased.
The remaining $5.5 million of net proceeds have been used, together with cash
from operations and borrowings, to fund the development of additional
restaurants and for the maintenance and improvement of existing restaurants.
Pursuant to a registered public offering on April 10, 1996, the Company
sold 862,500 common shares at $26 per share. After deducting expenses of the
offering, proceeds to the Company amounted to approximately $20.8 million. From
the net proceeds, the Company has repaid approximately $2.4 million of
outstanding indebtedness and plans to use the remaining $18.4 million of net
proceeds, together with cash on hand, cash flow from operations, and lease
financing to open 10 or 11 additional restaurants during the remainder of 1996
and 1997, depending on the availability of quality sites, the hiring and
training of sufficiently skilled management and other personnel and other
factors.
On May 9, 1996, the Company's Board of Directors authorized a three for
two stock split in the form of a 50% stock dividend which was payable on June 5,
1996, to shareholders of record on May 20, 1996. Prior to the stock split, the
Company had 4,007,500 common shares outstanding. A total of 2,003,736 common
shares were issued in connection with the split bringing the new common shares
outstanding to 6,011,236 at July 14, 1996. All references in the accompanying
financial statements to weighted-average shares outstanding and per share
amounts have been restated to reflect the split.
(3) FORMATION OF LOGAN'S ROADHOUSE, INC. AND PRO FORMA ADJUSTMENTS
Prior to the effective date of the initial public offering (July 26,
1995), the Company operated as a partnership. On July 25, 1995, the partners of
Logan's Partnership exchanged their respective partnership interests for an
aggregate of 3,067,500 shares (giving effect to a three for two stock split) of
common stock of the Company pursuant to a reorganization. Logan's Partnership's
historical carrying value for assets and liabilities carried over to the Company
upon consummation of the reorganization. Income taxes on earnings of the Company
through July 9, 1995 were the responsibility of the partners. Income tax expense
as reflected for the period(s) ended July 9, 1995, provided for pro forma income
taxes in accordance with Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes assuming that a corporation existed during the
entire period. Net earnings per share for the period(s) ended July 9, 1995, is
based on the number of shares which would have been outstanding assuming the
partners had been shareholders and is based on the number of shares the partners
received when the reorganization was consummated.
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(4) LONG-TERM OBLIGATIONS
The following is a summary of long-term obligations at July 14, 1996
and December 31, 1995, respectively.
July 14, 1996 December 1, 1995
------------- ----------------
Installment notes payable bearing interest at prime rate
(8.5% at Dec. 31, 1995). The notes were secured by certain
furniture, fixtures and equipment and were paid prior to
maturity......................................................... - 1,659,988
Capital lease obligations with interest rates ranging from
8.8% to 12.8%.................................................... - 648,910
Unsecured installment notes payable to a fianancing company
bearing interest at 8.4%. The notes were paid prior to
maturity......................................................... - 270,353
---------
Total long-term obligations.......................... - 2,579,251
Less current installments, including capital lease
obligations...................................................... - (639,439)
---------
Long-term obligations, less current portion ......... - 1,939,812
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
General
The following discussion includes comments and data relating to the
Company's financial condition and results of operations for the second quarter
(12 weeks) and six-months (28 weeks) ended July 14, 1996. This section should be
read in connection with the Selected Financial Data and financial statements and
related notes included in the Company's December 31, 1995 Annual Report.
On April 10, 1996, the Company completed a secondary offering whereby
it sold 1,293,750 shares (giving effect to a three for two stock split) of
common stock in a registered offering. Proceeds to the Company (after
underwriting discounts and expenses) amounted to approximately $20.8 million.
The Company currently has 6,011,236 shares of common stock outstanding after a
three for two stock split which was payable on June 5, 1996.
Results of Operations
The following table sets forth for the periods indicated, the
percentages which items in the statements of earnings bear to net sales.
Percentage of Net Restaurant Sales
-------------------------------------------------------------------
Second Quarter Six Months
(12 Weeks Ended) (28 Weeks Ended)
------------------------------ --------------------------------
July 14, 1996 July 9, 1995 July 14, 1996 July 9, 1995
------------- ------------ ------------- ------------
Net restaurant sales .................................... 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Food and beverage................................ 33.5 36.5 33.2 35.9
Labor and benefits............................... 27.1 27.8 27.4 27.3
Occupancy and other.............................. 14.7 17.6 15.0 17.6
Depreciation and amortization.................... 4.2 3.1 4.3 3.1
General and administrative....................... 6.0 5.3 6.5 6.1
----- ----- ----- -----
Total operating costs and expenses....... 85.5 90.3 86.4 90.0
----- ----- ----- -----
Income from operations................... 14.5 9.7 13.6 10.0
Other income (expense), net.............................. 2.1 (1.2) .6 (1.0)
----- ----- ----- -----
Earnings before income taxes............. 16.6 8.5 14.2 9.0
Income tax expense....................................... 5.8 3.0 5.0 3.2
----- ----- ----- -----
Net earnings............................. 10.8% 5.5% 9.2% 5.8%
===== ====== ===== =====
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Net restaurant sales
Sales during the second quarter (12 weeks) and six-month period (28
weeks) ended July 14, 1996, increased 41.8% and 50.7%, respectively, when
compared to the comparable periods of last year. The following table indicates
sales increases by components for both periods as compared to the comparable
periods last year.
Second Quarter Six Months
(12 weeks) (28 weeks)
Ended July 14, 1996 Ended July 14, 1996
------------------- -------------------
% of % of
Restaurants No. Change No. Change
----------- --- ------ --- ------
In operation, for comparable quarters 5 1.3% 5 .4%
Newly opened (non-comparable) 7 40.5 7 50.3
-- ---- -- ----
12 41.8% 12 50.7%
== ==== == ====
The Company opened four new restaurants in 1995 and has opened three
new restaurants thus far in 1996; one during the first quarter and two during
the second quarter. The Company had 12 restaurants in operation at July 14,
1996. The 1.3% increase in same store sales for the second quarter of 1996 is
primarily attributable to a 3% menu price increase which was implemented in late
November, 1995. For the six-month period, same store sales increased .4%. This
relatively small increase is primarily a result of the unusually severe winter
weather in January and early February. Alcoholic beverage sales, consisting of
liquor and beer, accounted for 12.0% and 12.9% of net restaurant sales for the
six-month periods ended July 14, 1996 and July 9, 1995, respectively. Management
attributes the decrease to an overall increase in the Company's lunch sales and
a relative decrease in liquor sales as a percentage of alcoholic beverage sales.
Food and beverage costs
This category primarily consists of the cost of all food and beverages,
including alcoholic and non-alcoholic beverages. In addition, the cost of
peanuts, which are complimentary to all customers, are reflected in this
category.
Food and beverage costs decreased 3.0% as a percentage of net sales
from 36.5% in the second quarter of 1995 to 33.5% in the second quarter of 1996
and decreased 2.7% from 35.9% for the six-month period ended July 9, 1995 to
33.2% for the six-month period ended July 14, 1996. Management attributes the
overall decreases in both periods to lower beef and produce prices and the
switch to a new food distributor during the fourth quarter of 1995. In addition,
cost increases were partially offset by a 3% menu price increase in late
November, 1995. The prices of the Company's commodities (beef, pork, chicken,
seafood and produce) are subject to seasonal fluctuations. Accordingly,
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food cost results for the second quarter and six-month period ended July 14,
1996 may not necessarily be indicative of results to be expected for the year.
The Company has historically experienced higher food costs during the spring
(second quarter) and summer (third quarter) time periods.
Labor and benefits
Labor and benefits include restaurant management salaries, bonuses,
hourly wages for unit level employees, payroll taxes and various employee
benefit programs.
As a percentage of net sales, labor and benefits decreased .7% from
27.8% in the second quarter of 1995 to 27.1% in the second quarter 1996 and
increased .1% from 27.3% for the six months ended July 9, 1995 to 27.4% for the
six months ended July 14, 1996.
During the current six-month period, three new restaurants have been
opened, two of which were opened toward the end of the second quarter. The
second quarter decrease of .7% is primarily attributable to a lower number of
new store operating weeks as compared to the second quarter of last year.
Generally, when a new restaurant opens, management budgets and incurs labor
costs approximately 15% higher than normal to accommodate the initial increased
business and to ensure a high level of food quality and service to its
customers. As the new staff gains experience over a 30-60 day post-opening
period, hourly labor schedules are gradually adjusted to provide maximum
efficiency with existing sales volume.
Occupancy and other
Occupancy and other costs and expenses are primarily fixed in nature
and, with the exception of rent and advertising, generally do not vary with unit
sales volume. Rent, insurance, property taxes, utilities, maintenance and
advertising account for the major expenditures in this category.
Occupancy and other costs as a percentage of net sales decreased 2.9%
from 17.6% in the second quarter of 1995 to 14.7% in the second quarter of 1996
and decreased 2.6% from 17.6% for the six-month period ended July 9, 1995 to
15.0% for the six months ended July 14, 1996.
As a result of operating with a larger restaurant base during 1996,
occupancy and other costs and expenses have increased in total absolute dollars.
The percentage declines in both periods is primarily attributable to the
elimination of a substantial amount of rent expense. In connection with the
Company's initial public offering in July, 1995, five leased facilities
consisting of land, buildings and leasehold improvements were purchased for $6.1
million. Accordingly, rent expense in the category has significantly declined
since July 1995.
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Depreciation and amortization
The Company records depreciation on its property and equipment on a
straight-line basis over an estimated useful life. In addition, this category
also includes amortization of a new restaurant's pre-opening costs, which
include costs of hiring and training the initial staff and certain other costs.
The pre-opening costs are amortized over a one-year period commencing with a
restaurant's opening. As of July 14, 1996, the amount of pre-opening costs, net
of amortization, on the Company's balance sheet was $595,703.
For the second quarter of 1996, depreciation and amortization amounted
to $381,671, an increase of $180,585 or 89.8% over the comparable period in
1995. For the six-month period ended July 14, 1996, these expenses amounted to
$860,284, an increase of $453,732 or 111.6% over the comparable period in 1995.
As a percentage of net restaurant sales, these expenses increased 1.1% from 3.1%
for the second quarter of 1995 to 4.2% for the second quarter of 1996 and
increased 1.2% from 3.1% for the six months ended July 9, 1995 to 4.3% for the
six months ended July 14, 1996. These increases are primarily the result of the
aforementioned purchase of five leased facilities and increased depreciation and
amortization resulting from the opening of seven new restaurants since the
beginning of 1995. Although the Company prefers to own rather than lease its
restaurant facilities and plans to pursue this policy, where possible, in
subsequent quarters, the Company will continue to lease properties in certain
locations.
General and administrative
General and administrative expenses include all corporate and
administrative functions that serve to support the existing restaurant base and
provide the infrastructure for future growth. Management, supervisory and staff
salaries, employee benefits, data processing, training, rent and office supplies
are the major items of expense in this category.
For the second quarter of 1996, general and administrative expenses
amounted to $548,869, an increase of $211,976 or 62.9% over the comparable
period in 1995. For the six-month period ended July 14, 1996, these expenses
amounted to $1,293,508, an increase of $487,686 or 60.5% over the comparable
period in 1995. As a percentage of net sales, these expenses increased .7% from
5.3% for the second quarter of 1995 to 6.0% for the second quarter of 1996; and
increased .4% from 6.1% for the six months ended July 9, 1995 to 6.5% for the
six months ended July 14, 1996.
The increase is primarily attributable to the Company significantly
expanding its management and staff personnel in the areas of finance,
accounting, human resources, operations, training and real estate reflecting the
increased level of organizational support necessary to support the Company's
growing restaurant base. Since July 1995, the Company has also incurred certain
additional costs associated with operating as a public company. Because of the
Company's expansion plans and the expected increase in net
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sales as a result thereof, management expects these expenses to continue to
increase during 1996 in absolute dollars, but to decline slightly as a
percentage of net sales. For a discussion of factors affecting the Company's
plans to open additional restaurants, see "Liquidity and Capital Resources".
Other Income and Expense
Net interest income (interest income minus interest expense) from cash
and cash equivalents amounted to $158,175 during the second quarter of 1996 as
compared to $76,386 of net interest expense last year. For the six-month period
ended July 14, 1996, net interest income amounted to $94,583 versus $132,383 of
net interest expense in the comparable period last year. Toward the end of the
first quarter which ended April 21, 1996, the Company completed a secondary
offering of shares of common stock with net proceeds amounting to approximately
$20.8 million. From the net proceeds, the Company repaid all of the then
outstanding debt. Accordingly, during the second quarter of 1996, the Company
incurred virtually no interest expense and generated interest income from its
various taxable and non-taxable investments.
In May, 1996, the Company's first franchised restaurant was opened in
Edmond, Oklahoma. In connection with the opening, the Company recognized as
income the initial non-refundable $30,000 franchise fee collected. In addition,
royalty fees of $3,291 have been subsequently received and recorded as earned.
Income taxes
The effective tax rates for the second quarters of 1996 and 1995 were
34.8% and 35.4%, respectively. For the six-month period, the effective tax rates
for both 1996 and 1995 were 35.4%. The reduction in the second quarter tax rate
to 34.8% is attributable to the impact of tax-free interest income being
generated from certain non-taxable investments.
From inception through July 25, 1995, the Company was a partnership and
accordingly incurred no federal or state income tax liability. Included in the
second quarter and six-month period ended July 9, 1995, is a pro forma
adjustment that provides for statutory federal and state tax rates then in
effect as though the Company had been subject to corporate income taxes for the
period indicated.
Net earnings
As a result of the factors discussed above, net earnings in the second
quarter of 1996 increased 180.4% to $981,012 or 10.8% of net sales from $349,811
or 5.5% of net sales in the second quarter of 1995. Earnings per share increased
$.05 or 45.5% in the second quarter of 1996 to $.16 from $.11 in the second
quarter of 1995 with a 102.1% increase in shares of common stock outstanding.
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Net earnings increased 138.8% to $1,839,121 or 9.2% of net sales for
the six months ended July 14, 1996, from $770,203 or 5.8% of net sales for the
six months ended July 9, 1995. Earnings per share increased $.08 or 32% for the
six months ended July 14, 1996 to $.33 from $.25 for the six months ended July
9, 1995 with a 79.2% increase in shares of common stock outstanding.
Liquidity and Capital Resources
On April 10, 1996, the Company completed a secondary offering whereby
1,293,750 shares (giving effect to a three for two stock split) of common stock
were sold in a registered offering. Proceeds to the Company (after underwriting
discounts and expenses) amounted to approximately $20.8 million. From the net
proceeds, the Company repaid approximately $2.4 million of outstanding
indebtedness and plans to use the remaining proceeds, together with cash on
hand, cash flow from operations and lease financing, to open 10 or 11 additional
restaurants during the remainder of 1996 and 1997 (3 in 1996 and 7 or 8 in
1997). The Company's ability to expand the number of its restaurants will depend
on a number of factors, including the selection and availability of quality
restaurant sites, the negotiation of acceptable lease or purchase terms, the
securing of required governmental permits and approvals, the adequate
supervision of construction, the hiring, training and retaining of skilled
management and other personnel, the availability of adequate financing and other
factors, many of which are beyond the control of the Company. The hiring and
retention of management and other personnel may be difficult given the low
unemployment rates in the areas in which the Company intends to operate. There
can be no assurance that the Company will be successful in opening the number of
restaurants anticipated in a timely manner. Furthermore, there can be no
assurance that the Company's new restaurants will generate sales revenue or
profit margins consistent with those of the Company's existing restaurants, or
that these new restaurants will be operated profitably.
The Company's principal capital needs arise from the development of new
restaurant facilities and, to a lesser extent, maintenance and improvement of
its existing facilities. Prior to the Company's initial public offering in late
July 1995, the principal sources of capital to fund the aforementioned
expenditures were operating cash flow, bank borrowings and lease financing. The
following table provides certain information regarding the Company's sources and
uses of capital for the periods presented.
Six Months
(28 Weeks) Fiscal Year Ended
Ended -----------------------------------
July 14, 1996 Dec. 31, 1995 Dec. 25, 1994
------------- -------------- -------------
(in thousands)
Cash flows from operations............. $2,509 $3,022 $2,195
Net proceeds from public offering...... 20,757 13,048 -
Capital expenditures................... (6,230) (13,886) (2,047)
Net borrowings (repayments)............ (2,579) 529 806
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Since inception, the Company's single largest use of funds has been for
capital expenditures consisting of land, building, equipment and preopening
costs associated with its restaurant expansion program. The substantial growth
of the Company over the period has not required significant additional working
capital. Sales are predominately cash and the business does not require
significant receivables or inventories. In addition, it is common to receive
trade credit for the purchase of food, beverage and supplies, thereby reducing
the need for incremental working capital to support sales increases.
The Company prefers to own its restaurant facilities when possible
rather than lease. The cost of developing the Company's prototype Logan's
Roadhouse restaurant is estimated to range from $1.9 to $2.5 million, including
$825,000 for building costs, $400,000 for equipment costs and $150,000 for
preopening costs. Land acquisition costs, including site preparation, are the
most variable development costs and are estimated to range between $500,000 and
$1.1 million. The cost of development for a new restaurant will not include land
acquisition costs if the property is leased rather than purchased. The Company
plans to open 10 or 11 restaurants during the remainder of 1996 and in 1997,
depending on the availability of quality sites, the hiring and training of
sufficiently skilled management and other personnel and other factors.
Capital expenditures and preopening costs planned for 1996 total
approximately $11.4 million. Of this amount, $11.1 million will be used for the
development of eight new restaurants, six of which are scheduled to open in 1996
(three have opened during the six months ended July 14, 1996), and $350,000 will
be used for various renovations and replacements of equipment in existing
restaurants. In 1997, capital expenditures and preopening costs are estimated to
range from approximately $14.0 million to $16.3 million for the development of
10 or 11 new restaurants of which seven or eight are expected to be opened in
1997. In addition, the Company plans to spend $200,000 in 1997 to renovate and
replace equipment in existing restaurants.
Management believes that the net proceeds of the secondary offering,
together with available cash reserves and cash provided from operations, will be
sufficient to fund the Company's expansion plans through 1997. Should the
Company's actual results of operations fall short of, or its rate of expansion
significantly exceed it plans, or should its costs or capital expenditures
exceed expectations, the Company may need to seek additional financing in the
future. In negotiating such financing, there can be no assurance that the
Company will be able to raise additional capital on terms satisfactory to the
Company.
In order to provide any additional funds necessary to pursue the
Company's growth strategy, the Company may incur, from time to time, additional
short and long-term bank indebtedness and may issue, in public or private
transactions, its equity and debt securities, the availability and terms of
which will depend upon market and other conditions. There can be no assurance
that such additional financing will be available on terms acceptable to the
Company.
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This report contains certain forward-looking statements, including
those relating to the opening of additional restaurants and planned capital
expenditures, each of which is accompanied by specific, cautionary language.
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PART II - OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS.
On June 11, 1996, Joseph H. Cook filed a lawsuit against the
Company in the Circuit Court of Davidson County, Tennessee. Mr. Cook claims that
the Company terminated his employment because he refused to participate in, or
remain silent about, certain improper or inappropriate activities allegedly
engaged in by the Company. Mr. Cook seeks an injunction enjoining the Company
from any further acts of retaliatory discharge, pay and benefits and punitive
damages of $5,000,000 arising from the Company's termination of his employment.
The Company denies Mr. Cook's allegations and contends that his termination was
based upon legitimate business reasons and that it has not engaged in any
improper activities. The Company believes the case has no merit and will
vigorously defend itself. At this time, the Company believes that the lawsuit
will not have a material adverse effect on the Company's financial position or
results of operations.
On July 19, 1996, Robert Olmstead filed a lawsuit in the United States
Bankruptcy Court, Eastern District of Kentucky, Lexington Division, naming as
defendants Bluegrass Steaks, Inc., a Kentucky corporation ("Bluegrass"), David
K. Wachtel, Jr., Logan's Partnership and the Company. Mr. Olmstead was a
creditor of Bluegrass when Bluegrass sold substantially all of its assets to
Logan's Partnership in August 1992. Mr. Olmstead claims that as a result of the
sale of assets, he has suffered damages which he believes total $7,450,000. The
Company believes the claims against the Company have no merit, will vigorously
defend itself and that it is fully indemnified against such claims. At this
time, the Company believes that the lawsuit will not have a material adverse
effect on the Company's financial position or results of operations.
The Company's forward-looking statements relating to the
above-described litigation reflect the Company's best judgment based on the
status of the litigation to date and facts currently known to the Company and,
as a result, involve a number of risks and uncertainties, including the possible
disclosure of new facts and information adverse to the Company in the discovery
process and the inherent uncertainties associated with litigation.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of shareholders of the Company was held on
Thursday, May 9, 1996. At this meeting, the following matters were voted upon by
the Company's shareholders:
(a) Election of Class I Directors
Gary T. Baker, Jerry O. Bradley and David J. McDaniel were
elected to serve as Class I directors of the Company. The vote was as follows:
Votes Cast Votes Cast Against
Name in Favor or Withheld Abstentions
- ---- ---------- ------------------ -----------
Gary T. Baker 2,429,610 200 0
Jerry O. Bradley 2,429,610 200 0
David J. McDaniel 2,429,610 200 0
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(b) Selection of Auditors
The shareholders of the Company ratified the appointment of
KPMG Peat Marwick LLP as the Company's independent auditors for the fiscal year
ended December 29, 1996 by the following vote:
Votes Cast in Favor Votes Cast Against Abstentions
------------------- ------------------ -----------
2,428,460 100 1,250
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
27 Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K
The Company was not required to file a report on Form 8-K
during the quarter for which this report is filed.
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SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LOGAN'S ROADHOUSE, INC.
By: /s/ David J. McDaniel
-----------------------------------------
David J. McDaniel,
Vice President, Treasurer and Secretary
(Chief Financial Officer)
Date: August 27, 1996
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