<PAGE> 1
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U.S. 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 Thirteen Weeks Ended October 29, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-28930
ROADHOUSE GRILL, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
FLORIDA 65-0367604
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2703-A GATEWAY DRIVE, POMPANO BEACH, FLORIDA 33069
-----------------------------------------------------
(Address of principal executive offices and zip code)
Registrant's telephone number (954) 957-2600
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 [ ]
The number of shares of the registrant's common stock outstanding as of
December 11, 2000 was 9,708,741.
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ROADHOUSE GRILL, INC.
FORM 10-Q
THIRTEEN WEEKS ENDED OCTOBER 29, 2000
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of October 29, 2000 (unaudited)
and April 30, 2000............................................................... 2
Consolidated Statements of Income for the Thirteen and Twenty-six
Weeks Ended October 29, 2000 and October 24, 1999 (unaudited) .................... 3
Consolidated Statement of Changes in Shareholders'
Equity for the Twenty-six Weeks Ended October 29, 2000 (unaudited) .............. 4
Consolidated Statements of Cash Flows for the Twenty-six
Weeks Ended October 29, 2000 and October 24, 1999 (unaudited) .................... 5
Notes to Consolidated Financial Statements............................................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......................................................... 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS..................................................................... 15
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................................... 15
SIGNATURES ...................................................................................... 16
EXHIBIT INDEX ...................................................................................... 17
</TABLE>
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PART I
ITEM 1. FINANCIAL STATEMENTS
ROADHOUSE GRILL, INC.
CONSOLIDATED BALANCE SHEETS
October 29, 2000 and April 30, 2000
(Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
October 29, April 30,
2000 2000
----------------- ------------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,387 $ 378
Accounts receivable 808 1,026
Inventory 1,562 1,622
Deferred tax assets, net 431 431
Prepaid expenses 2,045 2,127
-------- --------
Total current assets 6,233 5,584
Note receivable -- 84
Property & equipment, net 88,753 92,469
Intangible assets, net of accumulated amortization of $471
and $386 at October 29, 2000 and April 30, 2000,
respectively 2,191 2,276
Deferred tax assets, net 1,678 1,678
Other assets 3,586 3,221
-------- --------
Total assets $102,441 $105,312
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 6,227 $ 11,666
Accrued expenses 5,904 7,317
Current portion of long-term debt 1,693 1,252
Current portion of capitalized lease obligations 1,318 1,280
-------- --------
Total current liabilities 15,142 21,515
Long-term debt 31,062 24,409
Capitalized lease obligations 5,146 5,199
-------- --------
Total liabilities 51,350 51,123
Shareholders' equity:
Common stock $.03 par value. Authorized 30,000,000 shares;
Issued and outstanding 9,708,741 shares as of
October 29, 2000 and April 30, 2000 291 291
Additional paid-in-capital 50,039 50,039
Retained earnings 761 3,859
-------- --------
Total shareholders' equity 51,091 54,189
Commitments and contingencies -- --
-------- --------
Total liabilities and shareholders' equity $102,441 $105,312
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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ROADHOUSE GRILL, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Thirteen Weeks and Twenty-six Weeks Ended October 29, 2000 and
October 24, 1999 (Dollars in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY-SIX WEEKS ENDED
----------------------------- -----------------------------
OCTOBER 29, OCTOBER 24, OCTOBER 29, OCTOBER 24,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenues $ 39,396 $ 32,457 $ 80,816 $ 67,773
Cost of restaurant sales:
Food and beverage 13,616 11,275 27,567 23,321
Labor and benefits 13,204 9,413 25,977 19,427
Occupancy and other 10,297 6,901 18,688 13,863
Pre-opening expenses 617 528 1,535 576
----------- ----------- ----------- -----------
Total cost of restaurant sales 37,734 28,117 73,767 57,187
Depreciation and amortization 2,532 2,032 4,933 4,044
General and administrative expenses 2,713 1,981 5,399 4,114
----------- ----------- ----------- -----------
Total operating expenses 42,979 32,130 84,099 65,345
----------- ----------- ----------- -----------
Operating income (loss) (3,583) 327 (3,283) 2,428
Other expense:
Interest expense, net 965 597 1,633 1,178
----------- ----------- ----------- -----------
Income (loss) before taxes and
cumulative effect of change
in accounting principle (4,548) (270) (4,916) 1,250
Income tax expense (benefit) (1,683) (58) (1,818) 276
----------- ----------- ----------- -----------
Income (loss) before
cumulative effect of
change in accounting principle (2,865) (212) (3,098) 974
Cumulative effect of change in
accounting principle (net of tax
benefit of $269) -- -- -- (953)
----------- ----------- ----------- -----------
Net income (loss) $ (2,865) $ (212) $ (3,098) $ 21
=========== =========== =========== ===========
Basic net income (loss) per common share:
Basic income (loss) before cumulative
effect of change in accounting
principle $ (0.30) $ (0.02) $ (0.32) $ 0.10
Cumulative effect of change in
accounting principle -- -- -- (0.10)
----------- ----------- ----------- -----------
Basic net income (loss) per common
share $ (0.30) $ (0.02) $ (0.32) $ 0.00
=========== =========== =========== ===========
Diluted net income (loss) per common share:
Diluted income (loss) before
cumulative effect of change
in accounting principle $ (0.30) $ (0.20) $ (0.32) $ 0.10
Cumulative effect of change in
accounting principle -- -- -- (0.10)
----------- ----------- ----------- -----------
Diluted net income (loss) per common
share $ (0.30) $ (0.02) $ (0.32) $ 0.00
=========== =========== =========== ===========
Weighted-average common shares
outstanding 9,708,741 9,708,741 9,708,741 9,708,741
=========== =========== =========== ===========
Weighted-average common shares and
share equivalents outstanding -
assuming dilution 9,708,741 9,708,741 9,708,741 9,836,081
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 5
ROADHOUSE GRILL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Twenty Six Weeks Ended October 29, 2000
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------- PAID-IN RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance April 30, 2000 9,708,741 $ 291 $ 50,039 $ 3,859 $ 54,189
Net loss -- -- -- (3,098) (3,098)
--------- --------- --------- --------- ---------
Balance October 29, 2000 9,708,741 $ 291 $ 50,039 $ 761 $ 51,091
========= ========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
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ROADHOUSE GRILL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Twenty Six Weeks Ended October 29, 2000 and October 24, 1999
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
October 29, October 24,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income (loss) $ (3,098) $ 21
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 4,933 4,044
Cumulative effect of change in accounting principle -- 1,222
Deferred tax benefit -- (269)
Changes in assets and liabilities:
(Increase) in accounts receivable 218 (63)
(Increase) in inventory 60 (55)
(Increase) in prepaid expense 82 (932)
(Increase) in other assets (365) (296)
Increase (decrease) in accounts payable (5,439) 4,871
(Decrease) in accrued expenses (1,413) 60
-------- --------
Net cash provided (used) by operating activities (5,022) 8,603
Cash flows from investing activities
Payments for intangibles -- (404)
Proceeds from payment on notes receivable 84 --
Proceeds from sale-leaseback transactions 6,994 6,733
Purchase of property and equipment (7,486) (15,175)
-------- --------
Net cash used in investing activities (408) (8,846)
Cash flows from financing activities
Proceeds from borrowings on note payable 7,761 1,000
Repayments of long-term debt (630) (518)
Payments on capital lease obligations (692) (732)
-------- --------
Net cash used in financing activities 6,439 (250)
Increase (decrease) in cash and cash equivalents 1,009 (493)
Cash and cash equivalents at beginning of period 378 975
-------- --------
Cash and cash equivalents at end of period $ 1,387 $ 482
======== ========
Supplementary disclosures:
Interest paid $ 1,758 $ 1,427
======== ========
Income taxes paid $ 809 $ 881
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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<PAGE> 7
ROADHOUSE GRILL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The consolidated financial statements of Roadhouse Grill, Inc. (the
"Company") for the thirteen and twenty six weeks ended October 29, 2000 and
October 24, 1999 are unaudited and reflect all adjustments (consisting of
normal recurring adjustments) which are, in the opinion of management,
necessary for a fair presentation of the financial statements for the interim
periods. The financial statements should be read in conjunction with the
notes to consolidated financial statements included herein, together with
management's discussion and analysis of financial condition and results of
operations, contained in the Company's Annual Report on Form 10-K/A for the
fifty-three weeks ended April 30, 2000 ("fiscal year 2000").
The Company operates on a fifty-two or fifty-three week fiscal year. Each
fiscal quarter consists of thirteen weeks, except in the case of a
fifty-three week year, in which case the fourth fiscal quarter consists of
fourteen weeks.
The results of operations for the thirteen and twenty six weeks ended
October 29, 2000 are not necessarily indicative of the results for the entire
fiscal year ending April 29, 2001.
Certain prior year balances have been reclassified to conform to the
current year presentation.
2. COMMITMENTS AND CONTINGENCIES
The Company is a party to legal proceedings arising in the ordinary
course of business, many of which are covered by insurance. In the opinion of
management, disposition of these matters will not materially affect the
Company's financial condition.
Three restaurants were opened during the thirteen weeks ended October 29,
2000. As of October 29, 2000, construction was underway on six sites which
are expected to open during the third and fourth quarters of fiscal year
2001. The estimated aggregate cost to complete these restaurants is
approximately $4.2 million. In addition, as of October 29, 2000, the Company
had contracted to purchase or lease ten additional sites for new restaurant
development.
3. PRE-OPENING COSTS
In April 1998, the AICPA Accounting Standards Executive Committee
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5"). SOP 98-5 defines start-up activities broadly
(including organizational costs) and requires that the cost of start-up
activities be expensed as incurred. SOP 98-5 amends provisions of a number of
existing SOP's and audit and accounting guides. SOP 98-5 is effective for
fiscal years beginning after December 15, 1998. In previous years, the
Company's accounting policy was to capitalize pre-opening costs and amortize
them over a one-year period. The Company adopted SOP 98-5 during the first
quarter of fiscal year 2000. The effect of initially applying the provisions
of SOP 98-5 was reported as a change in accounting principle at the beginning
of the first quarter of fiscal year 2000 in the amount of $953,000, net of
income tax benefit. Thereafter, all such costs have been expensed as incurred
and are included in "pre-opening expenses" within the accompanying statements
of operations.
4. NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities".
This FASB Statement was later amended by SFAS No. 137 "Accounting for
Derivative Instruments and Hedging Activities - Deferral of the Effective
Date of SFAS No. 133" and SFAS No. 138, "Accounting for Derivative
Instruments and Hedging Activities - an Amendment of FASB Statement No. 133".
Among other provisions, SFAS No. 133 and SFAS No. 138 establish accounting
and reporting standards for derivative instruments and hedging activities.
They also require that an entity recognizes all derivatives as either assets
or liabilities in the statement of financial position and measures those
instruments at fair value. SFAS No. 133 and SFAS No. 138 are effective for
financial statements for fiscal years beginning after June 15, 2000.
Management does not expect to have a significant impact on its financial
position or results of operations associated with the adoption of SFAS No.
133 and SFAS No. 138.
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<PAGE> 8
On March 31, 2000, the FASB issued FASB interpretation No. 44, Accounting
for Certain Transactions involving Stock Compensation - an interpretation of
APB Opinion No. 25 (FIN 44). This interpretation provides guidance for issues
that have arisen in applying APB Opinion No. 25, Accounting for Stock Issued
to Employees. FIN 44 applies prospectively to new awards, exchanges of awards
in a business combination, modifications to outstanding awards, and changes
in grantee status that occur on or after July 1, 2000, except for the
provisions related to repricings and the definition of an employee which
apply to awards issued after December 15, 1998. The provisions related to
modifications to fixed stock option awards to add a reload feature are
effective for awards modified after January 12, 2000. The implementation of
FIN 44 did not have a material impact to the Company's consolidated financial
statements and notes thereto.
5. LEASES
As of October 29, 2000, the Company has a sale-leaseback credit
facility available with Franchise Finance Corporation of America ("FFCA") and
CNL Fund Advisors ("CNL"). The credit facility with FFCA is available for
development by the Company of new Roadhouse Grill restaurants. The credit
facility with FFCA expires in January 2001. The credit facility with CNL is
available for development by the Company of new Roadhouse Grill restaurants.
The credit facility with CNL expires on September 29, 2001. The Company is
currently in negotiations with other lenders to secure additional
sale-leaseback credit facilities. While the Company anticipates securing
additional sale-leaseback credit facilities with both FFCA and CNL upon
expiration of the current agreements, there is no assurance that the Company
can, in fact, secure any credit facilities with FFCA, CNL or any other
lending institution. If the Company fails to obtain additional capital
through some type of financing, its expansion plans for fiscal year 2001 and
beyond would be greatly reduced.
6. NET INCOME (LOSS) PER COMMON SHARE ("EPS")
Net income (loss) per share has been calculated and presented in accordance
with Statement of Financial Accounting Standards No. 128 "Earnings per
Share", which requires the Company to compute and present basic and diluted
earnings per share. Basic EPS excludes all dilution and is based upon the
weighted-average number of common shares outstanding during the year. Diluted
EPS reflects the potential dilution that would occur if securities or other
contracts to issue common stock were exercised or converted into common
stock. The following is a reconciliation of the numerators (net income/loss)
and the denominators (common shares outstanding) of the basic and diluted per
share computations for net income (loss):
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED OCTOBER 29,2000 TWENTY SIX WEEKS ENDED OCTOBER 29, 2000
---------------------------------- ------ -----------------------------------------
NET INCOME SHARES AMOUNT NET INCOME SHARES AMOUNT
---------- ------ ------ ---------- ------ ------
(Dollars in thousands, except per share data) (Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net loss available
to common shareholders $ (2,865) 9,708,741 $(0.30) $ (3,098) 9,708,741 $(0.32)
EFFECT OF DILUTIVE SECURITIES
Stock options -- -- -- -- -- --
--------- --------- ------ --------- --------- ------
DILUTED EPS $ (2,865) 9,708,741 $(0.30) $ (3,098) 9,708,741 $(0.32)
========= ========= ====== ========= ========= ======
</TABLE>
Options to purchase 821,296 shares of common stock at a weighted-average
exercise price of $5.22 per share were outstanding during the thirteen and
twenty six weeks ended October 29, 2000. These options were not included in the
computation of diluted EPS because the Company recognized a loss during the
quarter and including such options would result in anti-dilutive EPS.
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<PAGE> 9
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED OCTOBER 24, 1999 TWENTY SIX WEEKS ENDED OCTOBER 24, 1999
------------------------------------- ---------------------------------------
NET INCOME SHARES AMOUNT NET INCOME SHARES AMOUNT
---------- ------ ------ ---------- ------ ------
(Dollars in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income available
to common shareholders $(212) 9,708,741 $(0.02) $21 9,708,741 $0.00
EFFECT OF DILUTIVE SECURITIES
Stock options -- -- -- -- 127,340 --
----- --------- ------ --- --------- -----
DILUTED EPS $(212) 9,708,741 $(0.02) $21 9,836,081 $0.00
===== ========= ====== === ========= =====
</TABLE>
Options to purchase 841,228 shares of common stock at a weighted-average
exercise price of $5.25 per share were outstanding during the thirteen and
twenty six weeks ended October 24, 1999. These options were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto, included elsewhere in
this Form 10-Q.
As of October 29, 2000, Roadhouse Grill, Inc. owns and operates 79
full-service casual dining restaurants under the name "Roadhouse Grill". In
addition, Roadhouse Grill, Inc. franchises seven full-service casual dining
restaurants. The Company was incorporated in October 1992 and opened the first
Company-owned restaurant in Pembroke Pines, Florida in March of 1993. Since
then, the Company has opened 78 additional restaurants in 12 states. Three
franchised locations are located in Kuala Lumpur, capital city of Malaysia; one
franchised location is located in Brasilia, Brazil; and three domestic
franchises are located in Las Vegas, Nevada.
On July 6, 2000, the Company entered into a joint venture agreement with
Cremonini S.p.A. ("Cremonini Group"), a leading publicly traded Italian
conglomerate, specializing in the food service industry in Europe. The joint
venture agreement will allow the Cremonini Group to operate a minimum of 60
Roadhouse Grill restaurants in Italy, France, Spain, Great Britain and other
principal European countries by the year 2004. This joint venture agreement
requires no capital outlay by Roadhouse Grill, Inc. As of October 29, 2000,
there has been no activity associated with this joint venture.
The Company's revenues are derived primarily from the sale of food and
beverages. Sales of alcoholic beverages accounted for approximately 10.0% of
total revenues for the thirteen and twenty six weeks ended October 29, 2000.
Franchise and management fees have accounted for less than 1.0% of the Company's
total revenues for all periods since its inception.
The Company's new restaurants can be expected to incur above-average costs
during the first few months of operation. In prior years, pre-opening costs,
such as employee recruiting and training costs and other initial expenses
incurred in connection with the opening of a new restaurant, were amortized over
a twelve-month period commencing with the first full accounting period that the
restaurant opened. The Company adopted the provisions of SOP 98-5 during the
first quarter of fiscal year 2000 and currently expenses all pre-opening costs
as incurred.
The average cash investment, excluding real estate costs and pre-opening
expenses, required to open each of the Roadhouse Grill restaurants opened by the
Company prior to October 29, 2000 was approximately $1.2 million. The average
real estate acquisition cost for the 14 restaurant sites owned by the Company
was approximately $902,000. The Company has obtained financing in connection
with the acquisition of its owned properties, which financing generally has
required a down payment of 10% of the purchase price. The average annual
occupancy cost for the restaurant sites leased by the Company is approximately
$113,000 per site. The Company expects that the average cash investment required
to open its prototype restaurants, including pre-opening expenses but excluding
real estate costs, will be between $1.2 million and $1.6 million each, depending
upon whether the Company converts an existing building or constructs a new
restaurant from the ground up.
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<PAGE> 10
RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain selected
statements of operations data expressed as a percentage of total revenues:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED TWENTY SIX WEEKS ENDED
---------------------------------- -------------------------------------
OCTOBER 29, 2000 OCTOBER 24, 1999 OCTOBER 29,2000 OCTOBER 24, 1999
---------------- ---------------- --------------- -----------------
<S> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100% 100%
Cost of restaurant sales:
Food and beverage 34.6 34.7 34.1 34.4
Labor and benefits 33.5 29.0 32.1 28.7
Occupancy and other 26.1 21.3 23.1 20.4
Pre-opening expenses 1.6 1.6 1.9 0.9
----- ----- ----- -----
Total cost of restaurant sale 95.8 86.6 91.2 84.4
Depreciation and amortization 6.4 6.3 6.1 6.0
General and administrative 6.9 6.1 6.7 6.1
----- ----- ----- -----
Total operating expenses 109.1 99.0 104.0 96.5
----- ----- ----- -----
Operating income (9.1) 1.0 (4.0) 3.5
Other expense:
Interest expense, net 2.4 1.8 2.0 1.7
----- ----- ----- -----
Income (loss) before income taxes and
cumulative effect of change in
accounting principle (11.5) (0.8) (6.0) 1.8
Income tax expense (benefit) (4.3) (0.2) (2.2) .4
----- ----- ----- -----
Income (loss) before cumulative effect
of change in accounting principle (7.2) (0.6) (3.8) 1.4
Cumulative effect of change in
accounting principle (0.0) 0.0 0.0 (1.4)
----- ----- ----- -----
Net income (loss) (7.2)% (0.6)% (3.8)% 0.0%
===== ===== ===== =====
</TABLE>
This Form 10-Q contains forward-looking statements, including statements
regarding, among other things (i) the Company's growth strategies, (ii)
anticipated trends in the economy and the restaurant industry and (iii) the
Company's future financing plans. In addition, when used in this Form 10-Q, the
words "believes," "anticipates," "expects" and similar words often are intended
to identify certain forward-looking statements. These forward-looking statements
are based largely on the Company's expectations and are subject to a number of
risks and uncertainties, many of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of changes in trends in the economy and the restaurant industry,
reductions in the availability of financing, increases in interest rates and
other factors. In light of the foregoing, there is no assurance that the
forward-looking statements contained in this Form 10-Q will in fact prove
correct or occur. The Company does not undertake any obligation to revise these
forward-looking statements to reflect future events or circumstances.
THIRTEEN WEEKS ENDED OCTOBER 29, 2000 ("FISCAL YEAR 2001 SECOND QUARTER")
COMPARED TO THIRTEEN WEEKS ENDED OCTOBER 24, 1999 ("FISCAL YEAR 2000 SECOND
QUARTER")
RESTAURANTS OPEN. At October 29, 2000 there were 79 Company-owned
restaurants open, including the North Palm Beach Roadhouse Grill restaurant
("North Palm"). On July 12, 1999, the Company terminated a licensing agreement
for the North Palm Beach restaurant and began operating the location as a
Company-owned restaurant. At October 24, 1999, there were 60 Company-owned
restaurants. This represents a 31.7% increase in the number of Company-owned
restaurants since October 24, 1999.
TOTAL REVENUES. Total revenues increased $6.9 million, or 21.4%, from $32.4
million for the fiscal year 2000 second quarter to $39.4 million for the fiscal
year 2001 second quarter. This increase is primarily attributable to sales
generated at the 19 new restaurants opened by the Company since the end of the
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<PAGE> 11
fiscal year 2000 second quarter. Sales at comparable stores for the fiscal year
2001 first quarter decreased 3.6% compared with sales in the fiscal year 2000
second quarter. The Company believes that this decrease is partially
attributable to reduced marketing and advertising expenditures in the fiscal
year 2001 first quarter as compared to the fiscal year 2000 first quarter and
increased competition. In the second quarter of 2001, the Company launched a
radio advertising campaign in several media-efficient markets and increased
local store marketing. As a result of the increased advertising in the second
quarter 2001, sales at comparable stores were only down 3.6% versus 6.5% for the
first quarter of 2001.
FOOD AND BEVERAGE. Food and beverage costs increased $2.3 million to $13.6
million in the fiscal year 2001 second quarter from $11.3 million in the fiscal
year 2000 second quarter. This increase is primarily attributable to 19 new
restaurants opened by the Company since the end of the fiscal year 2000 second
quarter. As a percentage of sales, food and beverage costs decreased by 0.1
percentage points to 34.6% for the fiscal year 2001 second quarter from 34.7%
for the fiscal year 2000 second quarter. The decrease is primarily due to the
Company's focus on expanding and regionalizing the distribution network that
delivers products and supplies to the Company's restaurants, resulting in better
logistics and lower costs. In addition, the Company has concentrated on
improving its operating procedures and increasing management review and
supervision.
LABOR AND BENEFITS. Labor and benefits costs increased $3.8 million to
$13.2 million in the fiscal year 2001 second quarter from $9.4 million in the
fiscal year 2000 second quarter. The increase is primarily due to the operation
of 19 new restaurants opened since the end of the fiscal year 2000 second
quarter. As a percentage of sales, labor and benefits costs increased 4.5% to
33.5% for the fiscal year 2001 second quarter from 29.0% for the fiscal year
2000 second quarter. This increase is primarily due to increases in the number
of hourly personnel at its restaurants in order to continue to provide excellent
customer service ("extreme service"), a decline in same store sales and the
opening of new stores which have higher labor costs. During the past three
quarters, the Company has implemented an aggressive recruiting campaign to
attract talented restaurant managers. Due to the competitive labor market, the
Company has also incurred higher management salaries.
OCCUPANCY AND OTHER. Occupancy and other costs increased $3.4 million to
$10.3 million in the fiscal year 2001 second quarter from $6.9 million in the
fiscal year 2000 second quarter. The increase is due to the operation of 19 new
restaurants opened since the end of the fiscal year 2000 second quarter,
increases in marketing expense due to increased marketing efforts and increase
in equipment rental expense. As a percentage of sales, occupancy and other was
26.1% for the fiscal year 2001 second quarter to 21.3% for the fiscal year 2000
second quarter. During fiscal year 2001, the Company entered into sale-leaseback
agreements to finance furniture and equipment for new locations. These leases
were recorded as operating leases and no gain or loss was recorded in these
transactions.
PRE-OPENING EXPENSES. Pre-opening expenses increased $89,000 to $617,000 in
the fiscal year 2001 second quarter from $528,000 in the fiscal year 2000 second
quarter. The Company opened four stores in both the second quarter of 2001 and
2000. The increase is primarily due to pre-opening costs associated with the
seven restaurants that it plans to open during the third and fourth quarter of
fiscal year 2001. The amount recorded for fiscal year 2001 second quarter
represents actual pre-opening expenditures associated with the restaurants that
will be opened during the fiscal year 2001.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $0.5
million to $2.5 million in the fiscal year 2001 second quarter from $2.0 million
in the fiscal year 2000 second quarter. The increase is primarily due to the
operation of 19 new restaurants opened since the end of the fiscal year 2000
second quarter. As a percentage of sales, depreciation and amortization was
comparable for both periods presented.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased $0.7
million to $2.7 million in the fiscal year 2001 second quarter, from $2.0
million in the fiscal year 2000 second quarter. The increase is primarily the
result of the Company's substantial recruiting efforts. The Company currently
has approximately 52 managers in various stages of training that will be ready
for the expected openings later this fiscal year. The Company plans to continue
to maintain a pool of managers that are trained according to the Roadhouse Grill
philosophy. As a percentage of sales, general and administrative costs increased
0.8 percentage points from 6.1% for the fiscal year 2000 second quarter to 6.9%
for the fiscal year 2001 second quarter.
TOTAL OTHER EXPENSE. Total other expense increased $0.4 million to $1.0
million in the fiscal year 2001 second quarter from $0.6 million in the fiscal
year 2000 second quarter. The increase is primarily due to additional interest
expense on additional debt incurred due to the development and opening of 19 new
restaurants since the end of the fiscal year 2000 first quarter. As a percentage
of sales, total other expense was 2.4% for the second quarter of 2001 versus
1.8% for the second quarter of 2000.
INCOME TAXES (BENEFIT). In the prior years, the Company maintained a
valuation allowance that offset a portion of its net deferred tax assets. Based
on the Company's recent history of operating profits, management reversed 100%
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of its valuation allowance into income during fiscal year 2000. The reduction in
income taxes caused by the reversal of the valuation allowance was offset by
increased taxable income during fiscal year 2000. Management believes that it is
more likely than not that all of its deferred tax assets will be realized in the
future.
During the second quarter of fiscal year 2001, the Company recognized an
income tax benefit of $1.7 million associated with the Company's fiscal year
2001 second quarter loss. The Company incurred income tax expense of $0.1
million in the fiscal year 2000 second quarter, representing state income tax
and alternative minimum tax
TWENTY SIX WEEKS ENDED OCTOBER 29, 2000 ("FIRST SIX MONTHS OF FISCAL YEAR 2001)
COMPARED TO TWENTY SIX WEEKS ENDED OCTOBER 24, 1999 ("FIRST SIX MONTHS OF FISCAL
YEAR 2000")
TOTAL REVENUES. Total revenues increased $13.0 million, or 19.2%, from
$67.8 million for the first six months of fiscal year 2000 to $80.8 million for
the first six months of fiscal year 2001. This increase is primarily
attributable to sales generated at the 19 new restaurants opened by the Company
since the end of the fiscal year 2000 second quarter. Sales at comparable stores
for the first six months fiscal year 2001 decreased 4.7% compared with sales in
the first six months of fiscal year 2000. . The Company believes that this
decrease is partially attributable to reduced marketing and advertising
expenditures in the fiscal year 2001 first quarter as compared to the fiscal
year 2000 first quarter and increased competition. In the second quarter of
2001, the Company launched a radio advertising campaign in several
media-efficient markets and increased local store marketing. As a result of the
increased advertising in the second quarter 2001, sales at comparable stores
were only down 3.6% versus 6.5% for the first quarter of 2001.
FOOD AND BEVERAGE. Food and beverage costs increased $4.3 million to $27.6
million in the first six months of fiscal year 2001 from $23.3 million in the
first six months of fiscal year 2000. This increase is primarily attributable to
19 new restaurants opened by the Company since the end of the fiscal year 2000
first quarter. As a percentage of sales, food and beverage costs decreased by
0.3 percentage points to 34.1% for the first six months of fiscal year 2001 from
34.4% for the first six months of fiscal year 2000. The decrease is primarily
due to the Company's focus on expanding and regionalizing the distribution
network that delivers products and supplies to the Company's restaurants,
resulting in better logistics and lower costs. In addition, the Company has
concentrated on improving its operating procedures and increasing management
review and supervision.
LABOR AND BENEFITS. Labor and benefits costs increased $6.6 million to
$26.0 million in the first six months of fiscal year 2001 from $19.4 million in
the first six months of fiscal year 2000. The increase is primarily due to the
operation of 19 new restaurants opened since the end of the fiscal year 2000
second quarter. As a percentage of sales, labor and benefits costs increased
3.4% to 32.1% for the first six months of fiscal year 2001 from 28.7% for the
first six months of fiscal year 2000. This increase is primarily due to
above-average labor costs typically associated with opening of new restaurants.
During the first several months that restaurants are open (commonly referred to
as the "Honeymoon" period), labor costs as well as other operating costs are
higher than costs in more mature restaurant operations. The Company opened seven
restaurants during the first six months of fiscal year 2001 compared to four
openings during the fiscal year 2000 first six months quarter. In addition,
during the first quarter of fiscal year 2001, the Company increased the number
of hourly personnel at its restaurants in order to continue to provide excellent
customer service ("extreme service"). During the past three quarters, the
Company has implemented an aggressive recruiting campaign to attract talented
restaurant managers. Due to the competitive labor market, the Company has
incurred higher management salaries.
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<PAGE> 13
OCCUPANCY AND OTHER. Occupancy and other costs increased $4.8 million to
$18.7 million in the first six months fiscal year 2001 from $13.9 million in the
first six months fiscal year 2000. The increase is due to the operation of 19
new restaurants opened since the end of the fiscal year 2000 second quarter,
increases in marketing expense due to increased marketing efforts and increase
in equipment rental expense. As a percentage of sales, occupancy and other was
23.1% for the first six months of fiscal year 2001 versus 20.4% for the first
six months of fiscal year 2000. During fiscal year 2001, the Company entered
into sale-leaseback agreements to finance furniture and equipment for new
locations. These leases were recorded as operating leases and no gain or loss
was recorded in these transactions.
PRE-OPENING EXPENSES. Pre-opening expenses increased $959,000 to $1,535,000
in the first six months of fiscal year 2001 from $576,000 in the first six
months of fiscal year 2000. The increase is primarily due to opening seven
restaurants during the fiscal year 2001 first quarter as compared to four
restaurant openings in the fiscal year 2000 first six months. In addition, the
Company has incurred pre-opening costs associated with the seven restaurants
that it plans to open during the third and fourth quarter of fiscal year 2001.
The amount recorded for fiscal year 2001 represents actual pre-opening
expenditures associated with the restaurants that will be opened during the
fiscal year 2001.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased $0.9
million to $4.9 million in the first six months of fiscal year 2001 from $4.0
million in the first six months of fiscal year 2000. The increase is primarily
due to the operation of 19 new restaurants opened since the end of the fiscal
year 2000 second quarter. As a percentage of sales, depreciation and
amortization was comparable for both periods presented.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased $1.3
million to $5.4 million for the first six months of fiscal year 2001 versus $4.1
million in the first six months of fiscal year 2000. The increase is primarily
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the result of the Company's substantial recruiting efforts. The Company
currently has approximately 52 managers in various stages of training that will
be ready for the expected openings later this fiscal year. The Company plans to
continue to maintain a pool of managers that are trained according to the
Roadhouse Grill philosophy. As a percentage of sales, general and administrative
costs increased 0.6 percentage points from 6.1% for the first six months of
fiscal year 2000 to 6.7% for the first six months of fiscal year 2001.
TOTAL OTHER EXPENSE. Total other expense increased $0.4 million in expense
to $1.6 million in the first six months of fiscal year 2001, or 33.0%, from $1.2
million in the first six months of fiscal year 2000. The increase is primarily
due to additional interest expense on additional debt incurred due to the
development and opening of 19 new restaurants since the end of the fiscal year
2000 second quarter. As a percentage of sales, total other expense was
comparable for both periods presented.
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE. During the first
quarter of fiscal year 2000, the Company adopted the provisions of SOP 98-5. The
Company recorded an expense of $953,000 (net of tax benefit) related to the
adoption of SOP 98-5. The Company's policy, effective at the beginning of the
fiscal year 2000 first quarter, has been to expense all pre-opening costs as
incurred, as required by SOP 98-5.
INCOME TAXES (BENEFIT). In the prior years, the Company maintained a
valuation allowance that offset a portion of its net deferred tax assets. Based
on the Company's recent history of operating profits, management reversed 100%
of its valuation allowance into income during fiscal year 2000. The reduction in
income taxes caused by the reversal of the valuation allowance was offset by
increased taxable income during fiscal year 2000. Management believes that it is
more likely than not that all of its deferred tax assets will be realized in the
future.
During the first six months of fiscal year 2001, the Company recognized an
income tax benefit of $1.8 million associated with the Company's fiscal year
2001 first and second quarter loss. The Company incurred income tax expense of
$0.3 million in the fiscal year 2000 first six months, representing state income
tax and alternative minimum tax.
ADOPTION OF NEW ACCOUNTING STANDARDS
In April 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities"
("SOP 98-5"). SOP 98-5 defines start-up activities broadly (including
organizational costs) and requires that the cost of start-up activities be
expensed as incurred. SOP 98-5 amends provisions of a number of existing SOP's
and audit and accounting guides. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998. In previous years, the Company's accounting
policy was to capitalize pre-opening costs and amortize them over a one-year
period. The Company adopted SOP 98-5 during the first quarter of fiscal year
2000. The effect of initially applying the provisions of SOP 98-5 was reported
as a change in accounting principle at the beginning of the first quarter of
fiscal year 2000 in the amount of $953,000, net of income tax benefit.
Thereafter, all such costs have been expensed as incurred and are included in
"pre-opening expenses" within the accompanying statements of income.
NEW ACCOUNTING STANDARDS
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities". This
FASB Statement was later amended by SFAS No. 137 "Accounting for Derivative
Instruments and Hedging Activities - Deferral of the Effective Date of SFAS No.
133" and SFAS No. 138, "Accounting for Derivative Instruments and Hedging
Activities - an Amendment of FASB Statement No. 133". Among other provisions,
SFAS No. 133 and SFAS No. 138 establish accounting and reporting standards for
derivative instruments and hedging activities. They also require that an entity
recognizes all derivatives as either assets or liabilities in the statement of
financial position and measures those instruments at fair value. SFAS No. 133
and SFAS No. 138 are effective for financial statements for fiscal years
beginning after June 15, 2000. Management does not expect to have a significant
impact on its financial position or results of operations associated with the
adoption of SFAS No. 133 and SFAS No. 138.
On March 31, 2000, the FASB issued FASB interpretation No. 44, Accounting
for Certain Transactions involving Stock Compensation - an interpretation of APB
Opinion No. 25 (FIN 44). This interpretation provides guidance for issues that
have arisen in applying APB Opinion No. 25, Accounting for Stock Issued to
Employees. FIN 44 applies prospectively to new awards, exchanges of awards in a
business combination, modifications to outstanding awards, and changes in
grantee status that occur on or after July 1, 2000, except for the provisions
related to repricings and the definition of an employee which apply to awards
issued after December 15, 1998. The provisions related to modifications to fixed
stock option awards to add a reload feature are effective for awards modified
after January 12, 2000. The implementation of FIN 44 did not have a material
impact to the Company's consolidated financial statements and notes thereto.
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LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital principally for the opening of new restaurants
and has financed its requirements through the private placement of common stock,
an Initial Public Offering, bank loans, leasing facilities and loans from
certain private parties, including present and former shareholders of the
Company.
As of October 29, 2000, the Company has a sale-leaseback credit facility
available with Franchise Finance Corporation of America ("FFCA") and CNL Fund
Advisors ("CNL"). The credit facility with FFCA is available for development by
the Company of new Roadhouse Grill restaurants. The credit facility with FFCA
expires in January 2001. The credit facility with CNL is available for
development by the Company of new Roadhouse Grill restaurants. The credit
facility with CNL expires on September 29, 2001. The Company is currently in
negotiations with CNL Fund Advisors ("CNL") to secure additional sale-leaseback
credit facilities with them, as well as other lenders. While the Company
anticipates securing additional sale-leaseback credit facilities with both FFCA
and CNL upon expiration of the current agreements, there is no assurance that
the Company can, in fact, secure any credit facilities with FFCA, CNL or any
other lending institution. If the Company fails to obtain additional capital
through some type of financing, its expansion plans for fiscal year 2001 and
beyond would be greatly reduced. The Company's capital expenditures aggregated
approximately $3.6 million for the thirteen weeks ended July 30, 2000 and $5.9
million for the thirteen weeks ended July 25, 1999, substantially all of which
were used to open Roadhouse Grill restaurants.
The Company anticipates that it may require additional debt or equity
financing in order to continue to open new restaurants. There can be no
guarantee or assurance financing will be available on terms acceptable to the
Company, if at all. In the event the Company is unable to secure additional
financing sufficient to support continued growth, the Company's operating and
financial plans would require revision.
As is common in the restaurant industry, the Company has generally operated
with negative working capital ($8.9 million at October 29, 2000). The Company
does not have significant receivables or inventory and receives trade credit on
its purchases of food and supplies.
SEASONALITY AND QUARTERLY RESULTS
The Company's sales and earnings fluctuate seasonally. The Company's highest
earnings are expected to occur in the third and fourth fiscal quarters. The
fiscal year ends on the last Sunday in April and consists of four thirteen week
quarters (except in the case of a fifty-three week year in which the fourth
quarter consists of fourteen weeks) structured as follows:
o 1st Quarter - May, June, July
o 2nd Quarter - August, September, October
o 3rd Quarter - November, December, January
o 4th Quarter - February, March, April
IMPACT OF INFLATION
The Company does not believe that inflation has materially affected its
results of operations during the past five fiscal years. Substantial increases
in costs and expenses, particularly food, supplies, labor and operating expenses
could have a significant impact on the Company's operating results to the extent
that such increases cannot be passed along to customers.
EMPLOYEES
The Company competes with other companies for qualified personnel,
especially management. A shortage of qualified personnel could materially affect
the Company. The Company has not experienced a shortage of qualified personnel
to date and believes that the risk of a shortage is minimal.
SITE LOCATION
The Company competes in the marketplace for qualified restaurant locations.
There is no assurance that the Company can find enough qualified sites to
continue its expansion plans.
CONSUMER TASTE
The restaurant industry is highly competitive and subject to changes in
consumer tastes. The Company believes that it has the ability to respond quickly
to changing taste and preferences because of its flexible format and trade name.
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PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various legal actions arising in the normal
course of business. While the resolution of any such action may have an impact
on the financial results for the period in which it is resolved, the Company
believes that the ultimate disposition of these matters will not, in the
aggregate, have a material adverse effect upon its business or financial
position.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The Exhibits listed on the accompanying Exhibit Index are filed with or
incorporated by reference in this report.
(b) The Company filed no reports on Form 8-K during the period covered by this
Form 10-Q.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf on December 13, 2000, by the undersigned, thereunto duly authorized.
ROADHOUSE GRILL, INC.
(Registrant)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ AYMAN SABI President, Chief Executive Officer December 13, 2000
------------------------ and Director
Ayman Sabi (Principal Executive Officer)
/s/ HARRY ROSENFELD Chief Financial Officer December 13, 2000
------------------------ (Principal Financial Officer
Harry Rosenfeld and Principal
Accounting Officer)
</TABLE>
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<PAGE> 18
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
------ -----------
27 Financial Data Schedule.
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