SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended April 1, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NO. 333-4578
CAFETERIA OPERATORS, L.P.
ORGANIZED IN DELAWARE I.R.S. EMPLOYER IDENTIFICATION
NO.75-2186655
6901 QUAKER AVENUE, LUBBOCK, TX 79413
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (806)792-7151
_______________________________________________________________________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 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
_______________________________________________________________________________
Page 1 of 12
Exhibit Index Located on Page 11
<PAGE>
CAFETERIA OPERATORS, L.P.
INDEX
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
April 1, 1997 (Unaudited) and December 31, 1996 3
Unaudited Condensed Consolidated Statements
of Operations - For the thirteen weeks
ended April 1, 1997 and April 2, 1996 5
Unaudited Consolidated Statement of Partners'
Deficit - For the thirteen weeks ended
April 1, 1997 6
Unaudited Condensed Consolidated Statements of
Cash Flows - For the thirteen weeks ended
April 1, 1997 and April 2, 1996 7
Notes to Unaudited Condensed Consolidated
Financial Statements 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 9
PART II. OTHER INFORMATION 11
SIGNATURES 12
Page 2
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<TABLE>
CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
<CAPTION> April 1, December 31,
1997 1996
---------- ----------
(Unaudited)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,398 $ 3,668
Accounts and notes receivable, net 1,180 1,186
Inventories 5,603 5,722
Prepaid expenses and other 1,105 306
---------- ----------
Total current assets 9,286 10,882
Property, plant and equipment, net 59,299 63,806
Receivable from affiliate 11,194 11,129
Other assets 599 525
---------- ----------
$ 80,378 $ 86,342
========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
(Continued on following page)
Page 3
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<TABLE>
CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
(dollars in thousands)
<CAPTION> April 1, December 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
Liabilities and Partners' Deficit
Current liabilities:
Current maturities of long-term debt $ 5,493 $ 5,493
Trade accounts payable 6,127 5,498
Other payables and accrued expenses 13,792 14,957
Reserve for store closings - current portion 1,056 1,078
----------- -----------
Total current liabilities 26,468 27,026
Reserve for store closings, net of current portion 2,605 2,470
Long-term debt, net of current portion 66,401 69,147
Other payables 7,062 8,184
Excess of future lease payments over fair value,
net of amortization 3,353 3,482
Commitments and contingencies
Partners' deficit (25,511) (23,967)
----------- ----------
$ 80,378 $ 86,342
=========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
Page 4
<PAGE>
<TABLE> CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands)
<CAPTION> Thirteen weeks ended
--------------------------------
April 1, 1997 April 2, 1996
------------- -------------
<S> <C> <C>
Sales $ 47,353 $ 48,747
Costs and expenses:
Cost of sales (excluding depreciation) 14,343 15,089
Selling, general and administrative 29,346 29,161
Depreciation and amortization 2,721 2,349
Special charges (net) 2,431 0
------------ ------------
48,841 46,599
------------ ------------
Operating income (loss) (1,488) 2,148
Interest expense 56 64
Net income (loss) $ (1,544) $ 2,084
============ ============
</TABLE>
See notes to unaudited condensed consolidated financial statements.
Page 5
<PAGE>
<TABLE>
CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT
FOR THE THIRTEEN WEEKS ENDED APRIL 1, 1997
(dollars in thousands)
<CAPTION> Total
General Limited Partners'
Partner Partner Deficit
------- ------- --------
<S> <C> <C> <C>
Balance, December 31, 1996 $ (36,114) $ 12,147 $ (23,967)
Net loss (1,544) (1,544)
---------- ---------- ----------
Balance, April 1, 1997 $ (37,658) $ 12,147 $ (25,511)
========== ========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
Page 6
<PAGE>
<TABLE> CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
<CAPTION> Thirteen weeks ended
---------------------------
April 1, 1997 April 2, 1996
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss): $ (1,544) $ 2,084
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 2,721 2,349
Loss (gain) on disposition of assets 34 (28)
Provision for (reversal of) closed store reserve 36 92
Special charge (net) 2,431 0
Other, net 75 203
Changes in operating assets and liabilities:
Decrease in accounts and notes receivable 5 142
Decrease in inventories 119 190
Increase in prepaid expenses and other (798) (197)
Decrease in trade accounts payable and other
payables, accrued expenses and other
liabilities (529) (393)
---------- ----------
Net cash provided by operating activities 2,550 4,442
---------- ----------
Cash flows used in investing activities:
Purchases of property, plant and equipment (1,641) (1,928)
Expenditures charged to reserve for store closings (377) (342)
Proceeds from the sale of property, plant and
equipment 4 59
Other, net (1) 59
---------- ----------
Net cash used in investing activities (2,015) (2,152)
---------- ----------
Cash flows used in financing activities:
Payment of indebtedness (2,746) (1,021)
Other, net (59) (208)
---------- ----------
Net cash used in financing activities (2,805) (1,229)
---------- ----------
Increase (decrease) in unrestricted cash and cash
equivalents (2,270) 1,061
Cash and cash equivalents at beginning of period 3,668 965
---------- ----------
Cash and cash equivalents at end of period $ 1,398 $ 2,026
========== ==========
Supplemental disclosure of cash flow information:
Interest paid, including $2,746 and $1,007
of interest classified as payment of indebtedness $ 2,748 $ 1,015
========== ==========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
Page 7
<PAGE>
CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE A: Summary of Significant Accounting Policies
Cafeteria Operators, L.P. (the "Partnership"), a Delaware limited
partnership, is wholly owned by Furr's/Bishop's, Incorporated (the "Company")
and operates cafeterias and specialty restaurants. The financial statements
presented herein are the unaudited condensed consolidated financial statements
of Cafeteria Operators, L.P. and its majority owned subsidiaries.
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions to Form 10-Q
and do not include all of the information and note disclosures required by
generally accepted accounting principles. These statements should be read in
conjunction with the consolidated financial statements, and notes thereto,
which are included in the Partnership's Form 10-K for the year ended December
31, 1996. The accompanying unaudited condensed consolidated financial
statements reflect the accounts of the Partnership after elimination of all
material intercompany and interpartnership accounts and transactions, and in
the opinion of management include all adjustments, of a normal recurring
nature, necessary for a fair presentation. Certain expenditures benefiting
more than one period are charged to operations on a percentage of sales or on a
pro rata basis over the 52-53 week fiscal year. Certain amounts have been
reclassified in the statements of operations for the thirteen weeks ended April
2, 1996 to conform to the classifications used in the financial statements for
the period ended April 1, 1997.
The results of operations for the thirteen weeks ended April 1, 1997
may not be indicative of the results that may be expected for the fiscal year
ending December 30, 1997.
NOTE B: Income Tax
For state and federal income tax purposes, the Partnership is not a
tax-paying entity. As a result, the taxable income or loss, which may vary
substantially from income or loss reported for financial reporting purposes, is
included in the state and federal returns of the individual partners.
Accordingly, no provision for income taxes is reflected in the accompanying
financial statements.
NOTE C: Special Charges
The loss from operations for the quarter ended April 1, 1997 includes
net special charges of $2.4 million primarily resulting from the writedown to
carrying values of property, plant and equipment. The results of operations
includes a charge of $1.9 million for the writedown of assets and adjustments
to closed store reserves of units previously closed, as well as one unit to be
closed. Also included is $1.8 million to recognize the writedown of certain
assets in property, plant and equipment to estimated fair values in accordance
with Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of"
("SFAS 121"). Also included is a credit of $1.3 million related to the
settlement of a lawsuit previously filed against the Company by the Internal
Revenue Service.
Page 8
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
---------------------------------------------
Thirteen Weeks Ended April 1, 1997
- ----------------------------------
Results of operations. Sales for the first fiscal quarter of 1997
were $47.4 million, a decrease of $1.4 million from the same quarter of 1996.
The operating loss for the first quarter of 1997 was $1.5 million after net
special charges of $2.4 million compared to income of $2.1 million in the
comparable period in the prior year. The net loss for the first quarter of
1997 was $1.5 million compared to $2.1 million in the first quarter of 1996.
During the first quarter of 1997, sales were negatively impacted by severe
winter weather and by including fewer units in the operating results.
Sales. Restaurant sales in comparable units were 1.2% lower in the
first quarter of 1997 than the same quarter of 1996. Sales for the first
fiscal quarter were $228 thousand lower than the prior year due to there being
a net of two fewer units included in operating results. Sales by Dynamic Foods
to third parties was $585 thousand lower in the first quarter of 1997 than the
prior year.
Cost of sales. Excluding depreciation, cost of sales was 30.3% of
sales for the first quarter of 1997 as compared to 31.0% for the same quarter
of 1996. The decrease in the percentage of revenues was the result of changes
in the menu mix and lower product costs.
Selling, general and administrative. Selling, general and
administrative ("SG&A") expense was higher in the aggregate by $185 thousand in
the first quarter of 1997 as compared to 1996 due to increases in some expense
categories being partially offset by there being fewer units included in the
operating results. The change in SG&A expense included increases of $409
thousand in salaries, wages and related benefits, $214 thousand in marketing
expense, and decreases of $115 thousand in taxes other than income tax. SG&A
expense was $305 thousand lower than the prior year due to there being a net of
two fewer units included in operating results.
Special Charges. The loss from operations for the quarter ended
April 1, 1997 includes net special charges of $2.4 million primarily resulting
from the writedown to carrying values of property, plant and equipment. The
results of operations includes a charge of $1.9 million for the writedown of
assets and adjustments to closed store reserves of units previously closed, as
well as one unit to be closed. Also included is $1.8 million to recognize the
writedown of certain assets in property, plant and equipment to estimated fair
values in accordance with SFAS 121. Also included is a credit of $1.3 million
related to the settlement of a lawsuit.
Depreciation and amortization. Depreciation and amortization expense
was higher by $372 thousand in the first quarter of 1997 due primarily to
higher depreciation on newly acquired property, plant and equipment, along with
the use of shorter depreciation periods.
Interest expense. Interest expense was $56 thousand in the first
quarter of 1997, which was slightly lower than the comparable period in the
prior year. In accordance with Statement of Financial Accounting Standards No.
15, the restructured debt was recorded at the sum of all future principal and
interest payments and there is no recognition of interest expense thereon.
Page 9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES OF
CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
------------------------------------------
During the thirteen weeks ended April 1, 1997, cash provided from
operating activities of the Partnership was $2.6 million compared to $4.4
million in the same period of 1996. The Partnership made capital expenditures
of $1.6 million during the first thirteen weeks of 1997 compared to $1.9
million during the same period of 1996. Cash, temporary investments and
marketable securities were $1.4 million at April 1, 1997 compared to $2.0
million at April 2, 1996. The cash balance in the prior year included $800
thousand which was restricted pursuant to collateral requirements in a letter
of credit agreement. The current ratio of the Partnership was .35:1 at April
1, 1997 compared to .32:1 at April 2, 1996. The Partnership total assets at
April 1, 1997 aggregated $80.4 million following the special charges compared
to $86.5 million at April 2, 1996.
The Partnership's restaurants are a cash business. Funds available
from cash sales are not needed to finance receivables and are not generally
needed immediately to pay for food, supplies and certain other expenses of the
restaurants. Therefore, the business and operations of the Partnership have
not historically required proportionately large amounts of working capital,
which is generally common among similar restaurant companies.
Total scheduled maturities of long-term debt of the Partnership and
its subsidiaries over the next five fiscal years are: $2.7 million in 1997,
$5.5 million in 1998, $5.5 million in 1999, $5.5 million in 2000 and $52.7
million in 2001.
The Partnership has outstanding $71.9 million of 12% Notes due
December 31, 2001, which includes $26.1 million of interest to maturity. Under
the terms of the indenture covering the 12% Notes, a semi-annual cash interest
payment of approximately $2.7 million is due on each March 31 and September 30.
The obligations of the Partnership under the 12% Notes are secured by a
security interest in and a lien on all of the personal property of the
Partnership and mortgages on all fee and leasehold properties of the
Partnership (to the extent such properties are mortgageable).
Page 10
<PAGE>
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
10 Employment Letter Agreement, dated as of March 24, 1997, by and
among Theodore J. Papit and Furr's/Bishop's, Incorporated, parent
of Cafeteria Operators, L.P. (filed as an Exhibit to the Form
10-Q of Furr's/Bishop's, Incorporated for the quarter ended April
1, 1997).
27 Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended April
1, 1997.
Page 11
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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.
CAFETERIA OPERATORS, L.P.
by Furr's/Bishop's, Incorporated, its Managing General Partner
BY:/s/ Theodore J. Papit /s/ Alton R. Smith
----------------------------------- ------------------------------------
Theodore J. Papit Alton R. Smith
President and Chief Executive Officer Principal Accounting Officer
DATE: May 16, 1997
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
CAFETERIA OPERATORS, L.P. FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD
ENDED APRIL 1, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-30-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> APR-01-1997
<CASH> 1,398
<SECURITIES> 0
<RECEIVABLES> 1,202
<ALLOWANCES> 22
<INVENTORY> 5,603
<CURRENT-ASSETS> 9,286
<PP&E> 120,608
<DEPRECIATION> 61,309
<TOTAL-ASSETS> 80,378
<CURRENT-LIABILITIES> 26,468
<BONDS> 66,401
0
0
<COMMON> 0
<OTHER-SE> (25,511)
<TOTAL-LIABILITY-AND-EQUITY> 80,378
<SALES> 47,353
<TOTAL-REVENUES> 47,353
<CGS> 14,343
<TOTAL-COSTS> 14,343
<OTHER-EXPENSES> 34,498
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56
<INCOME-PRETAX> (1,544)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,544)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,544)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
