UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X]QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 6, 1996 .
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
Commission file number 0-27258
SAGEBRUSH, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 56-1875714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
112 Main Street, Claremont, N.C. 28610
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (704) 459-0821
Not Applicable
(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 .
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at October 18, 1996
Common Stock (no par value) 6,300,000
PAGE 1 of 13 PAGES
SAGEBRUSH, INC.
- TABLE OF CONTENTS -
PART I Financial Information: Page No.
Item 1: Financial Statements
Consolidated Balance Sheets as of September 6, 1996
and December 29, 1995. 3
Consolidated Statements of Income for the twelve-weeks and
thirty-six weeks ended September 6, 1996 and September 8, 1995. 4
Consolidated Statements of Cash Flows for the thirty-six weeks
ended September 6, 1996 and September 8, 1995. 5
Notes to Consolidated Financial Statements. 6-7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations. 8-12
PART II Other Information
Item 6. Exhibits 12
Signatures 13
SAGEBRUSH, INC. AND AFFILIATED COMPANIES
CONSOLIDATED BALANCE SHEETS
September 6, 1996 and December 29, 1995
September 6, December 29,
1996 1995
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 3,802,308 $ 2,145,809
Receivables from shareholders - 27,000
Other related party receivables 96,026 100,423
Other receivables 195,832 58,870
Inventories 466,464 411,675
Pre-opening costs, net 422,491 131,434
Prepaid and other current assets 49,348 370,390
Total current assets 5,032,469 3,245,601
Property and equipment, net 10,943,399 7,562,432
Other assets 18,371 12,266
Total assets $ 15,994,239 $ 10,820,299
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,262,586 $ 1,220,206
Accrued salaries 532,384 414,625
Taxes other than income 441,610 188,338
Other accrued liabilities 698,909 464,442
Total current liabilities 2,935,489 2,287,611
Long-term debt, less current maturities - 2,187,909
Total liabilities 2,935,489 4,475,520
Shareholders' equity:
Common stock 6,300,000 535,202
Additional paid-in capital 7,369,068 7,261,164
Accumulated deficit (610,318) (1,451,587)
Total shareholders' equity 13,058,750 6,344,779
Total liabilities and shareholders' equity $ 15,994,239 $ 10,820,299
See accompanying notes to consolidated financial statements.
SAGEBRUSH, INC. AND AFFILIATED COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
Twelve Weeks and Thirty-six Weeks ended September 6, 1996 and September 8, 1995
(Unaudited)
Twelve Weeks Ended Thirty-six Weeks Ended
Sept. 6, 1996Sept. 8, 1995Sept. 6, 1996Sept. 8, 1995
REVENUES - Restaurant sales $ 10,050,955 $ 8,459,773 $ 26,815,083 $ 23,382,286
OPERATING COSTS AND EXPENSES
Cost of restaurant sales 3,746,412 3,146,449 9,778,589 8,750,752
Labor costs 2,721,340 2,204,022 7,219,775 6,188,440
Other operating expenses 1,463,750 1,337,071 4,064,498 3,585,332
General and administrative expenses 839,055 566,893 2,257,372 1,678,129
Depreciation 228,945 183,456 637,123 511,376
Amortization (principally of pre-opening costs) 81,051 82,860 196,159 244,167
Total operating costs and expenses 9,080,553 7,520,751 24,153,516 20,958,196
OPERATING INCOME 970,402 939,022 2,661,567 2,424,090
OTHER INCOME 18,050 19,632 60,400 62,146
INTEREST INCOME 29,626 104,892
INTEREST EXPENSE (264) (42,606) (37,413) (100,580)
INCOME BEFORE INCOME TAXES 1,017,814 916,048 2,789,446 2,385,656
INCOME TAX PROVISION (386,769) (9,000) (1,059,989) (56,000)
NET INCOME $ 631,045 $ 907,048 $ 1,729,457 $ 2,329,656
NET INCOME PER SHARE $ 0.10 $ 0.28
WEIGHTED AVERAGE SHARES
OUTSTANDING 6,300,000 6,283,730
PRO FORMA:
Historical income before income taxes $ 916,048 $ 2,385,656
Pro forma adjustment for compensation (119,000) (350,000)
Pro forma income before income taxes 797,048 2,035,656
Pro forma income taxes (310,849) (793,906)
Pro forma net income $ 486,199 $ 1,241,750
Pro forma net income per share $ 0.09 $ 0.23
Pro forma weighted average shares outstanding 5,462,748 5,462,748
See accompanying notes to consolidated financial statements.
SAGEBRUSH, INC. AND AFFILIATED COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
Thirty-six Weeks ended September 6, 1996 and September 8, 1995 (Unaudited)
Thirty-six Weeks Ended
September 6, September 8,
1996 1995
Cash Flows from Operating Activities:
Net income $ 1,729,457 $ 2,329,656
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 637,123 511,376
Amortization (principally of pre-opening costs) 196,159 244,167
Changes in operating assets and liabilities
providing (using) cash
Receivables (105,565) (5,419)
Inventories (54,789) 9,973
Pre-opening costs (487,216) (150,310)
Prepaid and other assets (54,252) (50,435)
Trade accounts payable and other accrued liabilities 647,878 146,472
Total adjustments 779,338 705,824
Net cash provided by operating activities 2,508,795 3,035,480
Cash Flows from Investing Activities:
Capital expenditures (4,018,090) (2,127,430)
Cash Flows from Financing Activities:
Proceeds from issuance of debt 962,415
Reduction of debt (2,187,909) (243,520)
Purchase of assets related to reorganization (1,652,500)
Cash paid to shareholders related to reorganization (3,500,000)
S Corporation distributions and dividends paid (888,188) 2,859,691)
Proceeds from issuance of common stock 11,394,391 1,108,512
Net cash provided by (used in) financing activities 3,165,794 (1,032,284)
Net increase (decrease) in cash and cash equivalents 1,656,499 (124,234)
Cash and cash equivalents at beginning of period 2,145,809 1,642,141
Cash and cash equivalents at end of period $ 3,802,308 $ 1,517,907
Supplemental disclosure of cash flow information:
Cash paid for interest $ 37,413 $ 100,580
Cash paid for income taxes $ 655,442 $ 75,673
See accompanying notes to consolidated financial statements.
Sagebrush, Inc. and Affiliated Companies
Notes to Consolidated Statements
Note 1: The consolidated financial statements as of September 6, 1996 and
for the twelve-week and thirty-six-week periods then ended include the
accounts of Sagebrush, Inc. and its wholly-owned subsidiaries
("Sagebrush"). The financial statements as of December 29, 1995 and for
the twelve-week and thirty-six-week periods ended September 8, 1995
represent combined statements which include the accounts of Sagebrush,
Inc., and those corporations operating restaurants (the "Restaurant
Corporations") under the name of "Sagebrush Steakhouse and Saloon." In
addition, to the extent considered attributable to "Sagebrush Steakhouse
and Saloon" restaurants, the combined financial statements include the
accounts of Connor Management, Inc. ("Connor Management"), which provided
development, management and administrative services to the restaurants
and to certain other corporations operating other restaurants. The
Restaurant Corporations and Connor Management are collectively referred
to as the "Related Corporations." The combined financial statements were
prepared in connection with a reorganization which resulted in the
Related Corporations becoming wholly-owned subsidiaries of, or
transferring all of their assets to, Sagebrush, Inc., with shareholders
of such corporations becoming shareholders of Sagebrush, Inc. The
combination was accounted for at historical cost in a manner similar to a
pooling-of-interests due to the entities being under common management
and control and the absence of significant monetary consideration to the
shareholders. All intercompany accounts and transactions have been
eliminated in consolidation and combination.
Note 2: In connection with the reorganization referred to in Note 1, the
shareholders of the Related Corporations, other than those formed to
operate the Gatlinburg, Kernersville and Gaffney restaurants, contributed
their capital stock in these corporations to Sagebrush, Inc. in exchange
for an aggregate of 4,500,000 shares of Sagebrush, Inc. common stock and
cash of $3.5 million. The shareholders of these corporations thereby
became the shareholders of Sagebrush, Inc., owning all 4,500,000 shares
of its common stock outstanding immediately prior to the initial public
offering of Sagebrush, Inc. Common Stock. A portion of the proceeds of
the public offering were used to purchase the assets of the Gatlinburg,
Kernersville and Gaffney restaurants for a total consideration of
approximately $1.7 million, which represents the historical cost of such
assets. The accounts of the Gatlinburg, Kernersville and Gaffney
restaurants, opened in April, June and December of 1995, respectively,
are included in the combined financial statements as of December 29,
1995. In connection with the reorganization and the completion of the
public offering, the following structural and organizational changes were
effected: (i) Sagebrush, Inc. and its subsidiaries became subject to
corporate income taxation as a C Corporations and (ii) salaries payable
to certain executive officers were adjusted to more representative levels
as a result of the termination of the S Corporation elections and the
elimination of the related distributions.
The reorganization referred to in Note 1 was effected immediately prior
to the initial public offering of 1,800,000 shares of common stock of
Sagebrush, Inc. in January, 1996. Net proceeds from the offering were
$11.1 million. Approximately $2.2 million of the net proceeds were used
to repay corporate indebtedness and approximately $5.2 million of the net
proceeds were used to fund cash payments to or for the benefit of
shareholders of the Related Corporations in connection with a
reorganization effected immediately prior to the public offering. The
remaining approximately $3.8 million of the net proceeds is being used to
finance the development of additional restaurants and for other general
corporate purposes.
The following table shows the changes in shareholders' equity resulting
from the reorganization and subsequent public offering.
Additional
Common Paid-inAccumulated
Stock Capital Deficit Total
Balance at December 29, 1995$ 535,202$ 7,261,164$(1,451,587) $ 6,344,779
S Corporation distributions
and dividends paid (888,188) (888,188)
Payments to and exchanges with
shareholders related to reorganization3,964,798(9,221,205) (5,256,407)
Net proceeds of public offering1,800,0009,329,109 11,129,109
Net income
1,729,457 1,729,457
Balance at September 6, 1996$ 6,300,000$ 7,369,068$ (610,318)$13,058,750
Note 3: In the opinion of management, the accompanying financial statements
(unaudited) contain all adjustments necessary to present fairly the
financial position as of September 6, 1996, and the results of operations
for the twelve-week and thirty-six-week periods ended September 6, 1996
and September 8, 1995 and cash flows for the thirty-six-week periods
ended September 6, 1996 and September 8, 1995.
Note 4: The results of operations for the twelve-week and thirty-six-week
periods ended September 6, 1996 are not necessarily indicative of results
to be expected for the full year. Quarterly results are presented based
on 12, 12, 12 and 16 or 17 week quarters.
Note 5: In October 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards (SFAS) No. 123, "Accounting
for Stock-Based Compensation," which was effective for the Company
beginning January 1, 1996. SFAS No. 123 requires expanded disclosures of
stock-based compensation arrangements with employees and encourages (but
does not require) compensation cost to be measured based on fair value of
the equity instrument awarded. Companies are permitted, however, to
continue to apply APB Opinion No. 25, which recognizes compensation cost
based on the intrinsic value of the equity instrument awarded. The
Company will continue to apply APB Opinion No. 25 to its stock based
compensation awards to employees and will disclose the required pro forma
effect on net income and earnings per share.
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
This discussion and analysis should be read in conjunction with the financial
statements and the notes thereto included elsewhere in this Form 10-Q.
The Company completed an initial public offering of 1,800,000 shares of its
common stock in January and February 1996. Net proceeds from the offering were
$11.1 million. Approximately $2.2 million of the net proceeds were used to
repay corporate indebtedness and approximately $5.2 million of the net proceeds
were used to fund cash payments to or for the benefit of shareholders of certain
related corporations which had previously conducted the Company's business (the
"Related Corporations") in connection with a reorganization effected immediately
prior to the public offering. (see Notes 1 and 2) The remaining approximately
$3.8 million of the net proceeds is being used to finance the development of
additional restaurants and for other general corporate purposes.
RESULTS OF OPERATIONS
Quarterly results are presented based on 12, 12, 12 and 16 or 17 week
quarters. The following table sets forth for the periods indicated the
percentages of revenues - restaurant sales represented by items in the Company's
consolidated statements of income.
Twelve Weeks Ended Thirty-six Weeks Ended
Sept. 6, Sept. 8, Sept. 6, Sept. 8,
1996 1995 1996 1995
Revenues - restaurant sales 100.0% 100.0% 100.0% 100.0%
Operating costs and expenses:
Cost of restaurant sales 37.3 37.2 36.5 37.4
Labor costs 27.1 26.1 26.9 26.5
Other operating expenses 14.6 15.8 15.2 15.3
General and administrative expenses 8.3 6.7 8.4 7.2
Depreciation 2.3 2.1 2.4 2.2
Amortization (principally of pre-opening costs) .8 1.0 .7 1.0
Total operating costs and expenses 90.4 88.9 90.1 89.6
Operating income 9.6 11.1 9.9 10.4
Other income (received from related parties) .2 .2 .2 .2
Interest income .3 .0 .4 .0
Interest expense .0 (.5) (.1) (.4)
Income before income taxes 10.1 10.8 10.4 10.2
Income tax provision (3.8) (.1) (4.0) (.2)
Net income 6.3% 10.7% 6.4% 10.0%
Pro forma net income 5.7% 5.3%
Twelve weeks ended September 6, 1996 compared to twelve weeks ended September 8,
1995
Revenues. Restaurant sales increased 18.8% to $10.1 million for the third
quarter of 1996 as compared to $8.5 million for the third quarter of 1995. The
increase in sales was primarily the result of an increase in the number of
restaurants operated by the Company from 21 to 26.
Cost of restaurant sales. Cost of restaurant sales increased $600,000, or
19.1%, from $3.1 million to $3.7 million and as a percentage of revenues was
increased slightly from 37.2% to 37.3%.
Labor costs. Labor costs increased $517,000, or 23.5%, from $2.2 million to
$2.7 million, principally due to the increase in the number of restaurants. As a
percentage of revenues, labor costs increased from 26.1% to 27.1%.
Other operating expenses. Other operating expenses increased $127,000, or
9.5%, from $1.3 million to $1.5 million, and as a percentage of revenues
decreased from 15.8% to 14.6%.
General and administrative expenses. General and administrative expenses
increased $272,000, or 48.0%, from $567,000 to $839,000, and as a percentage of
revenues increased from 6.7% to 8.3%. This increase is primarily attributable
to the increase in certain of the Company's executive officers' salaries to more
representative levels in connection with the Company's initial public offering.
Depreciation. Depreciation increased $45,000, or 24.8%, from $183,000 to
$229,000, and as a percentage of revenues increased slightly from 2.1% to 2.3%
primarily because of increased investment in property and equipment due to the
Company's opening of new restaurants.
Amortization. Amortization of pre-opening costs decreased $2,000, or 2.2%,
from $83,000 to $81,000, and as a percentage of revenues decreased from 1.0% to
.8%.
Other income. Other income, which principally represents accounting fees
charged to certain related non-Sagebrush restaurants, remained constant as a
percentage of restaurant sales.
Interest income. The Company had interest income during the third quarter of
1996 as a result of temporary investment of a portion of the proceeds from the
Company's initial public offering.
Income tax provision. The Company's effective tax rate for the third quarter
of 1996 was 38.0%. Prior to January 1996, most of the corporations comprising
the Company were S corporations for federal and state income tax purposes, with
taxable income allocated to shareholders rather than taxed at the corporate
level. All applicable S Corporation elections were terminated in January 1996 in
connection with the reorganization effected in connection with the Company's
initial public offering.
Net income. Net income was $631,000 for the third quarter of 1996, an
increase of 30% over pro forma net income of $486,000 for the third quarter of
1995. Pro forma net income for the third quarter of 1995 reflects (i) a 39%
effective corporate tax rate to give effect to a change in the Company's tax
status and (ii) a $500,000 anticipated increase on an annual basis in management
compensation related to the Company's January 1996 initial public offering. Pro
forma earnings per share for the first three quarters of 1995 is based upon pro
forma adjustments to weighted average shares outstanding to reflect certain cash
payments and S corporation distributions to the Company's existing shareholders
in connection with the initial public offering.
Thirty-six weeks ended September 6, 1996 compared to thirty-six weeks ended
September 8, 1995
Revenues. Restaurant sales increased 14.7% to $26.8 million for the third
quarter of 1996 as compared to $23.4 million for the third quarter of 1995. The
increase in sales was the result of an increase in the number of restaurants
operated by the Company from 21 to 26.
Cost of restaurant sales. Cost of restaurant sales increased $1.0 million, or
11.7%, from $8.8 million to $9.8 million, but as a percentage of revenues
decreased from 37.4% to 36.5%. This decrease as a percentage of revenues
principally resulted from reduced food costs (primarily beef and produce)
realized from lower market prices and improved purchasing practices, as well as
improved waste management.
Labor costs. Labor costs increased $1.0 million, or 16.7%, from $6.2 million
to $7.2 million, principally due to the increase in the number of restaurants.
As a percentage of revenues, labor costs increased slightly from 26.5% to 26.9%.
Other operating expenses. Other operating expenses increased $479,000, or
13.4%, from $3.6 million to $4.1 million, and as a percentage of revenues
decreased slightly from 15.3% to 15.2%.
General and administrative expenses. General and administrative expenses
increased $579,000, or 34.5%, from $1.7 million to $2..3 million, and as a
percentage of revenues increased from 7.2% to 8.4%. This increase is primarily
attributable to the increase in certain of the Company's executive officers'
salaries to more representative levels in connection with the Company's initial
public offering.
Depreciation. Depreciation increased $125,000, or 24.6%, from $511,000 to
$637,000, and as a percentage of revenues increased from 2.2% to 2.4% primarily
because of increased investment in property and equipment due to the Company's
opening of new restaurants.
Amortization. Amortization of pre-opening costs decreased $48,000, or 19.7%,
from $244,000 to $196,000, and as a percentage of revenues decreased from 1.0%
to .7%.
Other income. Other income, which principally represents accounting fees
charged to certain related non-Sagebrush restaurants, remained constant as a
percentage of restaurant sales.
Interest income. The Company had interest income during the first three
quarters of 1996 as a result of temporary investment of a portion of the
proceeds from the Company's initial public offering.
Interest expense. Interest expense decreased $63,000 from $101,000 to $37,000
as a result of the Company's retirement of all its debt using proceeds from the
Company's initial public offering.
Income tax provision. The Company's effective tax rate for the first three
quarters of 1996 was 38.0%. Prior to January 1996, most of the corporations
comprising the Company were S corporations for federal and state income tax
purposes, with taxable income allocated to shareholders rather than taxed at the
corporate level. All applicable S Corporation elections were terminated in
January 1996 in connection with the reorganization effected in connection with
the Company's initial public offering.
Net income. Net income was $1,729,000 for the third quarter of 1996, an
increase of 39% over pro forma net income of $1,241,000 for the first three
quarters of 1995. Pro forma net income for the first three quarters of 1995
reflects (i) a 39% effective corporate tax rate to give effect to a change in
the Company's tax status and (ii) a $500,000 anticipated increase on an annual
basis in management compensation related to the Company's January 1996 initial
public offering. Pro forma earnings per share for the first three quarters of
1995 is based upon pro forma adjustments to weighted average shares outstanding
to reflect certain cash payments and S corporation distributions to the
Company's existing shareholders in connection with the initial public offering.
LIQUIDITY AND CAPITAL RESOURCES
In January 1996, the Company completed its initial public offering and, after
deducting the underwriting discount and expenses of the offering, received
approximately $11.1 million in proceeds (including proceeds received in February
1996 from the underwriter's exercise of their option to purchase additional
shares to cover over-allotments). The Company used approximately $5.2 million
of the proceeds to fund cash payments to or for the benefit of shareholders of
the Related Corporations in connection with the reorganization effected
immediately prior to the initial public offering, and approximately $2.2 million
of the proceeds to repay indebtedness. The remaining $3.8 million of the
proceeds, together with the cash flow from operations, will be used to finance
the development of additional restaurants and for general working capital
purposes. (see Note 3)
At September 6, 1996, the Company had approximately $3.8 million in cash and
short term investments, no long-term debt and $13.1 million in shareholders'
equity. In addition, the Company has obtained a commitment from a commercial
bank for a revolving credit facility providing for borrowings of up to $6.0
million (with a participation by another bank for advances over $3.0 million)
that was effective upon completion of the public offering. During the second
quarter, $600,000 of the facility was used for two days. There were no amounts
outstanding at September 6, 1996. Advances under the line are unsecured and
limited to short-term working capital purposes. The facility will expire on
January 31, 1997, and the interest rate for borrowings thereunder is the lead
bank's prime rate.
The Company primarily requires capital for the development and opening of new
restaurants. Prior to the Company's initial public offering, the Company
financed most of its capital expenditures with cash provided by operating
activities, proceeds from the issuance of common stock of the Related
Corporations, and from other shareholder contributions.
Because most of the Company's restaurants have been established by converting
existing restaurant facilities to the Sagebrush concept, the Company's capital
expenditures principally have been for leasehold improvements, machinery,
equipment, furniture and fixtures. The Company's substantial growth has not
historically required significant additional working capital. Sales are
predominantly cash, and the business does not require the maintenance of
significant receivables or inventories. In addition, it is common to receive
trade credit on the purchase of food, beverage and supplies, thereby reducing
the need for incremental working capital to support sales increases.
The Company currently plans to open six restaurants in 1996 (of which 4 had
opened by September 6, 1996), and eight to ten in 1997. With the third quarter
openings of "Sagebrush Steakhouse & Saloon" restaurants in Lynchburg, Virginia
and Morristown, Tennessee, the Company now operates 26 restaurants in North
Carolina, South Carolina, Tennessee and Virginia. Fourth quarter restaurant
openings will be in Colonial Heights, Virginia and Greenwood, South Carolina.
Construction began on sites in Mount Airy and Salisbury, North Carolina
subsequent to the end of the quarter.
While the Company expects to own rather than lease some of its restaurant
locations in the future, it plans to continue its practice of leasing and
renovating existing facilities whenever possible. The Company's cost of opening
a restaurant when the Company leases and renovates an existing building is
approximately $500,000, including the costs of renovating the facility,
purchasing necessary equipment and training personnel. The Company's cost of
building a restaurant on land the Company purchases ranges from $1.2 million to
$1.6 million. Assuming that the Company opens a total of 6 restaurants in 1996,
Management expects capital expenditures to range from $5.0 million to $6.0
million, of which $4.0 million had been expended through September 6, 1996.
Management believes that the Company's $3.8 million of cash and short-term
investments together with cash flow from operations will be sufficient to fund
capital expenditures through the first part of 1997.
Inflation
The impact of inflation on food, labor, equipment, land and construction costs
could affect the Company's operations. A majority of the Company's employees are
paid hourly rates related to federal and state minimum wage laws. In addition,
most of the Company's leases require the Company to pay taxes, insurance,
maintenance, repairs and utility costs, and these costs are subject to
inflationary pressures. The Company may attempt to offset the effect of
inflation through periodic menu price increases, economies of scale in
purchasing and cost controls and efficiencies at existing restaurants.
Management believes that inflation has had no significant impact on costs during
the first three quarters of 1996 or 1995, primarily because the largest single
item of expense, food costs, has remained relatively stable during this period.
Part II - Other Information
(a) Exhibits.
Exhibit 27 Financial Data Schedule (filed in electronic format only)
(b) Reports on Form 8-K.
None
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.
SAGEBRUSH, INC.
Date October 24, 1996 By: \s\ Noland M. Mewborn
Noland M. Mewborn,
Vice President, Treasurer and CFO
(Principal Financial Officer)