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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 September 26, 2000
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.
INCORPORATED IN DELAWARE IRS EMPLOYER INDENTIFICATION
NO. 75-2186655
3001 E. PRESIDENT GEORGE BUSH HWY., SUITE 200, RICHARDSON, TEXAS 75082
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (972) 808-2923
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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
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CAFETERIA OPERATORS, L.P.
<TABLE>
<CAPTION>
INDEX
PART I. FINANCIAL INFOMRATION PAGE
----
<S> <C>
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
September 26, 2000 (Unaudited) and December 28, 1999 3
Unaudited Condensed Consolidated Statements of
Operations - For the thirteen weeks ended
September 26, 2000 and September 28, 1999 5
Unaudited Condensed Consolidated Statements of Operations-
For the thirty-nine weeks ended September 26, 2000 and
September 28, 1999 6
Unaudited Condensed Consolidated Statement of Changes in
Partners' Deficit - For the thirty-nine weeks ended
September 26, 2000 7
Unaudited Condensed Consolidated Statements of
Cash Flows - For the thirty-nine weeks ended
September 26, 2000 and September 28, 1999 8
Notes to Unaudited Condensed Consolidated
Financial Statements 9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosure About Market Risk 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 12
SIGNATURES 13
</TABLE>
2
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 26, 2000 AND DECEMBER 28, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
September 26, December 28,
2000 1999
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,249 $ 5,163
Accounts and notes receivable, net 1,221 894
Inventories 6,712 6,544
Prepaid expenses and other 1,161 861
-------- ----------
Total current assets 11,343 13,462
-------- ----------
PROPERTY, PLANT AND EQUIPMENT, NET 57,358 54,586
RECEIVABLE FROM AFFILIATES 11,233 10,563
OTHER ASSETS 567 552
-------- ----------
TOTAL ASSETS $ 80,501 $ 79,163
======== ========
</TABLE>
(Continued)
3
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CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
SEPTEMBER 26, 2000 AND DECEMBER 28, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
(Unaudited)
September 26, December 28,
2000 1999
---- ----
<S> <C> <C>
LIABILITIES AND PARTNERS' DEFICIT
CURRENT LIABILITIES:
Current maturities of long-term debt $ 5,493 $ 5,493
Trade accounts payable 5,446 5,233
Other payables and accrued expenses 13,289 17,058
Reserve for store closings, current 508 804
-------- --------
Total current liabilities 24,736 28,588
-------- --------
RESERVE FOR STORE CLOSINGS, NET OF CURRENT MATURITIES 2,278 2,558
LONG-TERM DEBT, NET OF CURRENT PORTION 52,473 55,220
OTHER PAYABLES 10,671 10,218
EXCESS OF FUTURE LEASE PAYMENTS OVER FAIR VALUE, NET OF AMORTIZATION 1,585 1,919
PARTNERS' DEFICIT (11,242) (19,340)
-------- --------
TOTAL LIABILITIES AND PARTNERS' DEFICIT $80,501 $79,163
======== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
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CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THIRTEEN WEEKS ENDED SEPTEMBER 26, 2000 AND SEPTEMBER 28, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Thirteen weeks ended
---------------------------------------
September 26, September 28,
2000 1999
---- ----
<S> <C> <C>
Sales $ 49,597 $ 47,788
Costs and expenses:
Cost of sales (excluding depreciation) 14,644 14,552
Selling, general and administrative 29,861 28,228
Depreciation and amortization 2,734 2,432
---------- ---------
47,239 45,212
---------- ---------
Operating income 2,358 2,576
Interest expense 87 85
---------- ---------
Net income $ 2,271 $ 2,491
========== ========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THIRTY-NINE
WEEKS ENDED SEPTEMBER 26, 2000 AND SEPTEMBER 28, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Thirty-nine weeks ended
---------------------------------------
September 26, September 28,
2000 1999
---- ----
<S> <C> <C>
Sales $ 145,549 $ 140,987
Costs and expenses:
Cost of sales (excluding depreciation) 42,869 42,164
Selling, general and administrative 86,276 85,421
Depreciation and amortization 8,047 7,303
Special Charge - 566
------------ ----------
137,192 135,454
------------ ----------
Operating income 8,357 5,533
Interest expense 259 232
------------ ----------
Net income $ 8,098 $ 5,301
============ =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENT OF CHANGES IN PARTNERS' DEFICIT
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 2000
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Accumulated
Other
General Limited Comprehensive
Partners Partners Loss Total
-------- -------- ---- -----
<S> <C> <C> <C> <C>
BALANCE, DECEMBER 28, 1999 $ (32,584) $ 14,972 $ (1,728) $(19,340)
Net income 8,098 - - 8,098
---------------- --------- ---------- ---------
BALANCE, SEPTEMBER 26, 2000 $ (24,486) $ 14,972 $ (1,728) $(11,242)
================ ========= ========== ==========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
Thirty-nine weeks ended
-----------------------------------
September 26, September 28,
2000 1999
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 8,098 $ 5,301
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 8,047 7,303
Gain on disposition of assets (365) (148)
Changes in operating assets and liabilities:
Accounts and notes receivable (327) (378)
Inventories (168) 24
Prepaid expenses and other (985) (994)
Reserve for store closings (576) (786)
Trade accounts payable, other payables,
accrued expenses and other liabilities (3,033) 58
---------- -----------
Net cash provided by operating activities 10,691 10,380
---------- -----------
Cash flows from investing activities:
Purchases of property, plant and equipment (11,577) (15,495)
Proceeds from the sale of property, plant and equipment 718 2,756
---------- -----------
Net cash used in investing activities (10,859) (12,739)
---------- -----------
Cash flows from financing activities:
Payment of indebtedness (2,746) (2,746)
---------- -----------
Net cash used in financing activities (2,746) (2,746)
---------- -----------
Decrease in cash and cash equivalents (2,914) (5,105)
Cash and cash equivalents at beginning of period 5,163 11,478
---------- -----------
Cash and cash equivalents at end of period $ 2,249 $ 6,373
========== ===========
Supplemental disclosure of cash flow information:
Cash paid for interest (including $2,746 in 2000 and in 1999
classified as payment of indebtedness.) $ 3,006 $ 2,905
========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
8
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CAFETERIA OPERATORS, L.P. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in Thousands)
BASIS OF PRESENTATION
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 Management's Discussion and Analysis of Financial
Condition and Results of Operations and the consolidated financial statements
and notes thereto included in the Company's Form 10-K for the year ended
December 28, 1999. In the opinion of management, the accompanying unaudited
condensed consolidated financial statements include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of interim financial position and results of operations.
Interim results of operations may not be indicative of the results
that may be expected for a full fiscal year.
BUSINESS SEGMENTS
Following is a summary of segment information of the Company for the
thirteen weeks ended September 26, 2000 and September 28, 1999:
<TABLE>
<CAPTION>
Cafeterias Dynamic Foods Total
---------- ------------- -----
<S> <C> <C> <C>
2000:
External revenues $ 49,130 $ 467 $ 49,597
Intersegment revenues - 15,386 15,386
Depreciation and amortization 2,463 271 2,734
Segment profit 2,052 219 2,271
1999:
External revenues $ 47,425 $ 363 $ 47,788
Intersegment revenues - 15,115 15,115
Depreciation and amortization 2,196 236 2,432
Segment profit 2,445 46 2,491
</TABLE>
Following is a summary of segment information of the Company for the
thirty-nine weeks ended September 26, 2000 and September 28, 1999:
<TABLE>
<CAPTION>
Cafeterias Dynamic Foods Total
---------- ------------- -----
<S> <C> <C> <C>
2000:
External revenues $144,339 $ 1,210 $ 145,549
Intersegment revenues - 45,523 45,523
Depreciation and amortization 7,261 786 8,047
Segment profit 7,463 635 8,098
1999:
External revenues $140,120 $ 867 $ 140,987
Intersegment revenues - 44,794 44,794
Depreciation and amortization 6,591 712 7,303
Segment profit 4,665 636 5,301
</TABLE>
9
<PAGE>
Following is a reconciliation of reportable segments to the Company's
consolidated totals for the periods ended September 26, 2000 and September 28,
1999:
<TABLE>
<CAPTION>
Thirteen Weeks Ended Thirty-nine Weeks Ended
--------------------------------------- ----------------------------------------
September 26, September 28, September 26, September 28,
2000 1999 2000 1999
----------------- ----------------- ----------------- ------------------
<S> <C> <C> <C> <C>
Revenues
Total revenues of reportable segments $ 64,983 $ 62,903 $ 191,072 $ 185,781
Elimination of inter-segment revenue (15,386) (15,115) (45,523) (44,794)
----------------- ----------------- ----------------- ------------------
Total consolidated revenues $ 49,597 $ 47,788 $ 145,549 $ 140,987
================= ================= ================= ==================
</TABLE>
RECENT ACCOUNTING MATTERS
The Company has assessed the reporting and disclosure requirements
of SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities. This statement establishes accounting and reporting standards for
derivative instruments and hedging activities and will require the Company to
recognize all derivatives on its balance sheet at fair value. If the
derivative is a hedge, depending on the nature of the hedge, changes in the
fair value of the derivatives will either be offset against the change in
fair value of the hedged item through earnings, or recognized in other
comprehensive income until the hedged item is recognized in earnings. The
Company will adopt SFAS No. 133, as amended, in the first quarter of fiscal
2001, is not currently party to any derivative contracts, and does not
anticipate that the adoption will have a material effect on the Company's
results of operations or financial position.
CONTINGENCIES
In July 1998, the Company filed a declaratory judgement lawsuit in
State District Court in Lubbock, Texas, in which the Court was asked to find
that the Company is not obligated to make severance payments that have been
demanded by Theodore Papit, the former President and Chief Executive Officer
of Furr's. This litigation was settled by agreement with Mr. Papit in June
2000.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
THIRTEEN WEEKS ENDED SEPTEMBER 26, 2000 COMPARED TO THIRTEEN WEEKS ENDED
SEPTEMBER 28, 1999:
Sales for the third fiscal quarter of 2000 were $49.6 million, an
increase of $1.8 million from the same quarter of 1999. Operating income for
the third quarter of 2000 was $2.4 million compared to $2.6 million in the
comparable period in the prior year. Net income for the third quarter of 2000
was $2.3 million compared to $2.5 million in the third quarter 1999.
SALES. Restaurant sales in comparable units increased $32 thousand,
or 0.1% in the third quarter of 2000 over the same quarter of 1999. Third
quarter sales for the new units opened since second quarter 1999 was $2.1
million, an increase of $1.7 million over the aggregate sales of the units
that were closed after third quarter 1999. Sales by Dynamic Foods to third
parties were $104 thousand higher in the third quarter 2000 than that of
third quarter 1999.
10
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COST OF SALES. Excluding depreciation, cost of sales were 29.5% of
sales for the third quarter of 2000 as compared to 30.5% for the same quarter
of 1999. The decrease in the percentage of sales was the result of lower
product costs.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative ("SG&A") expense was higher in the aggregate by $1.6 million
in the third quarter of 2000 as compared to 1999. Third quarter 2000 included
a loss of $32 thousand from the sale of assets. The change in SG&A expense
included an increase of $129 thousand in supplies expense, $186 thousand in
repair and maintenance, $186 thousand in utilities, and $1.1 million in labor
and related benefits. We had decreases of $200 thousand in marketing expense,
$116 thousand in professional services and $166 thousand in rent. The
increase in labor and related benefits in the current year is principally due
to a prior year reduction in accrued workers compensation liability of $1
million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
was $302 thousand higher in the third quarter of 2000 than that of third
quarter of 1999 due to depreciation of prior year's re-imaging capital
expenditures.
THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 2000 COMPARED TO THIRTY-NINE WEEKS
ENDED SEPTEMBER 28, 1999:
Sales for the first thirty-nine weeks of 2000 were $145.5 million,
an increase of $4.5 million from the period of 1999. Operating income for the
first thirty-nine weeks of 2000 was $8.4 million compared to $5.5 million in
the comparable period in the prior year. The operating results of the first
thirty-nine weeks of 1999 included a special charge of $566 thousand for the
costs associated with the move of our support center from Lubbock, Texas to
Richardson, Texas. Net income for the first thirty-nine weeks of 2000 was
$8.1 million compared to $5.3 million in the same period of 1999.
SALES. Restaurant sales in comparable units increased $3.3 million,
or 2.4% in the first thirty-nine weeks of 2000 over the same period of 1999,
reflecting the effects of our re-imaging program. Year to date sales for the
new units opened since third quarter 1999 was $2.5 million, an increase of
$.9 million over the aggregate sales of the units that were closed after
third quarter 1999. Sales by Dynamic Foods to third parties were $343
thousand higher in the first thirty-nine weeks of 2000 than that of the
comparable period of 1999.
COST OF SALES. Excluding depreciation, cost of sales were 29.5% of
sales for the first thirty-nine weeks of 2000 as compared to 29.9% for the
same period of 1999. The decrease in the percentage of sales was the result
of lower product costs.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and
administrative ("SG&A") expense was higher in the aggregate by $855 thousand
in the first thirty-nine weeks of 2000 as compared to 1999. The thirty-nine
weeks of 2000 included an increased gain of $217 thousand from the sale of
assets over the same period of 1999. The change in SG&A expense included an
increase of $367 thousand in supplies expense, $326 thousand in repairs and
maintenance expense, $210 thousand in utilities and $1.5 million in labor and
related benefits. We had decreases of $650 thousand in marketing expense,
$206 thousand in other store expenses, $662 thousand in professional services
and $427 thousand in rent. The increase in labor and related benefits in the
current year is principally due to a prior year reduction in accrued workers
compensation liability of $1.4 million.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense
was higher by $744 thousand in the first thirty-nine weeks of 2000 due to
depreciation of prior year's re-imaging capital expenditures.
11
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LIQUIDITY AND CAPITAL RESOURCES
During the thirty-nine weeks ended September 26, 2000, cash provided
by operating activities was $10.7 million compared to $10.4 million in the
same period of 1999. We made capital expenditures of $11.6 million during the
first thirty-nine weeks of 2000 compared to $15.5 million during the same
period of 1999. Capital expenditures for the remainder of fiscal year 2000
are expected to be $.7 million. Expenditures for reimaging and new units were
front loaded in the current year to maximize the impact on net income that
these expenditures would generate. Cash and temporary investments were $2.2
million at September 26, 2000 compared to $6.4 million at September 28, 1999
and $5.2 million at December 28, 1999. Our current ratio was .46:1 at
September 26, 2000 compared to .56:1 at September 28, 1999 and .47:1 at
December 28, 1999. Total assets at September 26, 2000 aggregated $80.5
million, compared to $83.3 million at September 28, 1999 and $79.2 million at
December 28, 1999.
Our 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 Company have not
historically required proportionately large amounts of working capital, which
is generally common among similar restaurant companies.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
We are exposed to market risk from changes in commodity prices. We
purchase certain commodities used in food preparation. These commodities are
generally purchased based upon market prices established with vendors. These
purchase arrangements may contain contractual features that limit the price
paid by establishing certain price floors or caps. We do not use financial
instruments to hedge commodity prices because these purchase arrangements
help control the ultimate cost paid and any commodity price aberrations are
generally short term in nature.
Our long-term debt does not expose us to market risk as all interest
accrues at fixed rates. We do not use derivative financial instruments to
manage overall borrowing costs.
This market risk discussion contains forward-looking statements.
Actual results may differ materially from this discussion based upon general
market conditions and changes in domestic and global financial markets.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
None.
Items 2, 3, 4 and 5 are not applicable and have been intentionally omitted.
Item 6. Exhibits and Reports on Form 8-K
None.
12
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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.
DATE: November 8, 2000 CAFETERIA OPERATORS, L.P.
-----------------------
/s/ Phillip Ratner
------------------------------------------
Phillip Ratner
President and Chief Executive Officer
/s/ Paul G. Hargett
------------------------------------------
Paul G. Hargett
Chief Financial Officer
13
