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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Fiscal Year Ended April 30, 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, FL
33069 (Address of principal executive offices and zip code)
Registrant's telephone number (954) 957-2600
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK, PAR VALUE $0.03 PER SHARE
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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 BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO
ITEM 405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED,
TO THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates
of the registrant as of July 28, 2000 was $14,694,417 based upon the closing
sale price of $4.6875 as reported on the Nasdaq National Market on July 28,
2000.
The number of shares of the registrant's common stock outstanding as
of July 28, 2000 was 9,708,741.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the definitive proxy statement relating to the 2000 Annual
Meeting of Shareholders of the Company, which will be filed with the Securities
and Exchange Commission within 120 days of April 30, 2000, are incorporated by
reference in Item 10, Item 11, Item 12, and Item 13, of Part III of this Form
10-K.
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ROADHOUSE GRILL, INC.
FORM 10-K
FISCAL YEAR ENDED APRIL 30, 2000
INDEX
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PART I Page
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Item 1. Business.............................................................................. 1
Item 2. Properties............................................................................ 7
Item 3. Legal Proceedings..................................................................... 8
Item 4. Submission of Matters to a Vote of Security Holders................................... 8
PART II
Item 5. Market for Registrant's Common Equity and
Related Shareholder Matters.................................................... 9
Item 6. Selected Financial Data............................................................... 10
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations.................................. 11
Item 8. Financial Statements and Supplementary Data........................................... 18
Item 9. Changes in and Disagreements with Accountant
on Accounting and Financial Disclosure......................................... 18
PART III
Item 10. Directors and Executive Officers of the Registrant.................................... 19
Item 11. Executive Compensation................................................................ 19
Item 12. Security Ownership of Certain Beneficial Owners and Management........................ 19
Item 13. Certain Relationships and Related Transactions........................................ 19
PART IV
Item 14. Financial Statements and Exhibits..................................................... 19
Signatures ...................................................................................... 20
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PART I
Item 1. Business
This Form 10-K 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-K, 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
(including trends affecting the Company's products, markets, prices and
competition), reductions in the availability of financing, increases in interest
rates, risks and uncertainties associated with the Company's expansion strategy
and other factors discussed elsewhere in this report and documents filed by the
Company with the Securities and Exchange Commission. In light of the foregoing,
there is no assurance that the forward-looking statements contained in this Form
10-K 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.
Overview
The Company operates, franchises and licenses high-quality full-service
casual dining restaurants under the name "Roadhouse Grill." The Company is
currently the largest operator of the roadhouse-style casual dining restaurant
concept in the United States.
The Company was founded in 1992 and opened its first Roadhouse Grill
restaurant in Pembroke Pines, Florida (the greater Fort Lauderdale area) in
1993. As of April 30, 2000, there were 72 Company-owned and three franchised
Roadhouse Grill restaurants located in Alabama, Arkansas, Florida, Georgia,
Louisiana, Mississippi, Nevada, New York, Ohio, North Carolina, South Carolina
and Tennessee. Of the 72 Company-owned locations open as of April 30, 2000, 35
are situated in Florida. One of the three franchised restaurants is located in
Kuala Lumpur, capital city of Malaysia. The Company is engaged in an active plan
of expansion and expects to open approximately 15 Company-owned restaurants in
fiscal year 2001.
On July 12, 1999, the Company terminated its licensing agreement for the
North Palm Beach Roadhouse Grill restaurant ("North Palm Beach") and began
operating the location as a Company-owned restaurant.
Roadhouse Grill restaurants offer a diverse, moderately priced lunch and
dinner menu highlighting exhibition cooking of steaks and other grilled entrees.
The restaurants feature daily fresh baked yeast rolls, appetizers and homemade
ice cream, as signature items.
The Roadhouse Grill Concept
The Company's primary business is the operation of full-service casual
dining restaurants targeted toward singles, couples, families and senior
citizens. Roadhouse Grill is now a substantial operator in the casual dining
arena and its growth strategy will be controlled, expanding in existing strong
markets and, upon significant due diligence, target new markets that complement
the Company's existing base.
Guest satisfaction comes from a pleasant restaurant atmosphere in which
high-quality food and beverage are served at an excellent price/value. The
Company motivates its employees to provide friendly and efficient service on a
consistent basis.
The key elements that define the Roadhouse Grill concept are:
o Premium Quality Grilled Entrees and a Diverse Menu. Roadhouse Grill
restaurants offer a wide variety of steaks, chicken, seafood and other
entrees, many of which are grilled in an exhibition style kitchen.
o High Price/Value to Guests. Roadhouse Grill restaurants strive to provide a
high price/value dining experience for its guests by offering a broad,
moderately priced menu and serving high quality generous portions.
o Attentive, Friendly Service. The Company believes that a distinctive,
enjoyable dining experience is made possible through excellent service.
Accordingly, the Company seeks to hire individuals who possess strong
initiative and the ability to provide quality and personalized service.
o Spacious, Open Layout. Roadhouse Grill restaurants are designed to have a
fun and casual atmosphere. The interior of each restaurant is large, open
and visually appealing, with exposed ceilings to help create Roadhouse
Grill's casual ambiance.
o Broad Customer Appeal. The Roadhouse Grill concept is designed to appeal to
a broad range of customers, including business people, couples, singles and
particularly families. The Company believes that to be attractive to
families, a concept must be appealing to
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both children and parents. Consequently, Roadhouse Grill restaurants
furnish children with coloring menus, balloons and a free souvenir cup. In
addition, each restaurant offers a special "Kids' Menu" featuring an
assortment of entrees for approximately $2.99. In 1999, for the fourth
consecutive year, Roadhouse Grill was voted "Favorite Family Dining
Restaurant" in a survey conducted by Sunshine Magazine, the South Florida
based Sun-Sentinel Sunday magazine. For adults, each Roadhouse Grill
restaurant offers beverages from its full-service bar, which is separated
from the dining area.
Unit Economics
The Company believes that Company-owned Roadhouse Grill restaurants produce
attractive restaurant-level economics. The 56 Company-owned Roadhouse Grill
restaurants open for the entire 53 weeks in fiscal year 2000 generated average
net sales of approximately $2.4 million, average cash flow (operating income
plus depreciation) of approximately $412,000, and average operating income of
$267,000. The Company's average cash investment for these 56 restaurants was
approximately $1.4 million, including building structures (where applicable),
building or leasehold improvements and equipment and fixtures, but excluding
land and pre-opening costs. Restaurant-level economics are affected to the
extent that the Company constructs free-standing units on Company-owned or
leased land, rather than leasing existing buildings. In such cases, initial
development costs are substantially greater and occupancy costs (other than
depreciation) are substantially less when the Company leases existing buildings.
The Company cannot predict if average unit-level economics would be altered
significantly if in the future the mix of restaurants placed in leased buildings
compared to free-standing buildings on Company-owned or leased land were to
change materially from the Company's current mix.
Expansion
The following paragraph contains forward-looking information concerning the
Company's expansion plans for fiscal year 2001 that involve a number of risks
and uncertainties. Similar forward-looking information is contained elsewhere in
this document under "Business--Overview" and "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
As of April 30, 2000, there were 72 Company-owned and three franchised
Roadhouse Grill restaurants located in Alabama, Arkansas, Florida, Georgia,
Louisiana, Mississippi, Nevada, New York, Ohio, North Carolina, South Carolina
and Tennessee. Of the 72 Company-owned locations open as of April 30, 2000, 35
are situated in Florida. One of the three franchised restaurants is located in
Kuala Lumpur, capital city of Malaysia. The Company is engaged in an active plan
of expansion and expects to open approximately 15 Company-owned restaurants in
fiscal year 2001. The Company's expansion strategy through fiscal year 2001 is
to increase its presence in markets where Roadhouse Grill restaurants now exist,
and the potential for additional revenues and operating cash flows and profits
is strong. The Company currently has a strong presence in Florida with 35
locations and intends to increase such presence during fiscal year 2001. The
other markets where the Company expects to build its existing presence in fiscal
year 2001 include Atlanta, Georgia, Ohio, North and South Carolina and Western
New York.
The Company's ability to achieve its projected expansion plans will depend
on a variety of factors, many of which may be beyond the Company's control,
including the Company's ability to locate suitable restaurant sites; to
negotiate acceptable lease or purchase terms; to obtain required governmental
approvals and construct new restaurants in a timely manner; to attract, train
and retain qualified and experienced personnel and management; to obtain
adequate funds; and to continue to operate its restaurants profitably. Due to
these factors and others set out above, there is no assurance that the Company
will be able to continue to effectively develop or operate additional
restaurants or that it will be able to expand as planned. There is also no
assurance that additional restaurants that may be opened in the future will be
profitable or that expansion will not result in reduced sales in existing
restaurants in close proximity to new restaurants, and to the extent this
reduces cash flow available for new development and construction, it could cause
the Company to fail to meet its expansion plans.
Menu
The Roadhouse Grill menu features aged USDA Choice steaks and prime rib,
beef ribs, chicken and seafood, all of which are grilled to order. The Company's
steaks and prime rib are aged both before and after being cut and trimmed. The
menu features over sixty items, including 13 cuts of steak ranging from 6 oz. to
18 oz. In addition to grilled selections, the menu offers a wide variety of
appetizers, sandwiches, salads and desserts, including signature items such as
Roadhouse cheese wraps and a daily selection of homemade ice cream. Each entree
is served with a choice of a house salad or caesar salad, a choice of baked
sweet potato, baked potato, home fries, french fries or rice pilaf and homemade
yeast rolls. Roadhouse Grill restaurants are open seven days a week for lunch
and dinner and offer full bar service. Prices range from $5.79 to $17.29. From
11:00 a.m. to 3 p.m. Monday through Friday, in addition to its full menu, each
Roadhouse Grill offers a selection of 19 "Lunch in a Rush" menu items ranging
from charbroiled steak salad to hand-breaded chicken strips and french fries,
all prepared to order quickly and priced at $7.29 or less.
Site Selection and Construction
The Company believes the site selection process is critical to the
long-term success of any restaurant, and, accordingly, devotes significant time
and effort to the investigation and evaluations of potential locations. Among
the factors in the site selection process are advertising and management
efficiency; market demographics (including population, age and median household
income); traffic patterns
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and activity; site visibility, accessibility and parking; and proximity to
residential developments, office complexes, hotels, retail establishments and
entertainment areas. Another important factor is the convenience of the
potential location to both lunch and dinner guests and the occupancy cost of the
proposed site. The Company's current strategy is that of clustering restaurants
in markets that can support them with cost-effective media advertising. In
addition, the Company believes that clustering multiple units in metropolitan
areas allows more efficient use of supervision of the restaurants. The Company
also considers existing or potential competition in the area and attempts to
analyze the performance of other area restaurants. To date the Company has
located most of its restaurants in or near neighborhood shopping malls and
shopping centers, and currently expects that most of the restaurants opened in
the future will be in or near malls and shopping centers.
Corporate management of the Company generally determines which geographic
areas may be suitable for Roadhouse Grill restaurants. Potential sites in those
geographic areas are identified by Company personnel, consultants and
independent real estate brokers. In connection with the Company's evaluation,
Company personnel visit and analyze each potential site.
When the Company has built restaurants in existing buildings, construction
has taken approximately 90 days to 120 days after required construction permits
have been obtained. Construction of from-the-ground-up restaurants is a longer
process and has generally ranged from 120 days to 180 days. The Company's
experience to date has been that obtaining construction permits has generally
taken from 30 days to 180 days. The Company engages outside general contractors
for construction of its restaurants and expects to continue this practice for
the foreseeable future.
Restaurant Design and Layout
The Company's prototypical restaurant format is approximately 6,800 square
feet with seating for approximately 260 guests. Roadhouse Grill restaurants
range in size from 5,000 to 12,000 square feet with seating for approximately
190 to 398 guests. The Company uses a standardized design in constructing
restaurants, with modifications made for each particular site. The Company is
assisted by outside architects in the design of individual restaurants. The
Company makes its standardized design available to its franchisees and has final
right of approval on the design of each franchised restaurant.
Roadhouse Grill, Inc. believes its restaurants have a comfortable
atmosphere and are visually appealing with exposed ceilings and brick and
lapboard cedar walls decorated with colorful murals and neon signs. The typical
interior also includes multi-level seating, a full-service bar, an exhibition
grill and display kitchen. The exterior of each restaurant features rough-sawed
siding, a wrap-around wood plank porch, a tin roof trimmed in neon and an
oversized "Roadhouse Grill" sign. In addition to the public areas, each
restaurant has a food preparation and storage area including a fully-equipped
kitchen.
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Restaurant Locations
The following table sets forth the location of Company-owned and franchised
restaurants open as of April 30, 2000.
Number of
Company-owned Restaurants in Operation
Number of
Location Restaurants
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Florida..........................................................35
Georgia .........................................................6
New York..........................................................6
Louisiana.........................................................4
South Carolina....................................................3
Alabama...........................................................2
Mississippi.......................................................2
Ohio..............................................................7
Arkansas..........................................................1
Tennessee.........................................................1
North Carolina....................................................5
Total............................................................72
Number of
Franchised Restaurants in Operation
Number of
Location Restaurants
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Nevada............................................................2
Malaysia..........................................................1
Total.............................................................3
Franchise Operations
General. In addition to operating Company-owned restaurants, the Company
franchises others to operate Roadhouse Grill restaurants. The Company currently
has three franchisees: Roadhouse Operating Company, LLC, Roadhouse Grill Asia
Pacific (H.K.) Limited ("Roadhouse Grill Hong Kong") and Roadhouse Grill Asia
Pacific (Cayman) Limited ("Roadhouse Grill Asia"). Berjaya Group (Cayman)
Limited ("Berjaya"), the majority shareholder of the Company, directly or
indirectly owns Roadhouse Grill Hong Kong and Roadhouse Grill Asia.
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The Company is currently seeking to develop additional franchising
opportunities on an international basis with the primary focus on development in
Europe and South America. The Company does not plan significant franchising in
the United States in the foreseeable future.
Roadhouse Operating Company, LLC. Roadhouse Operating Company, LLC entered
into an initial franchise agreement and Master Development Agreement with the
Company in August 1995. Pursuant to the Master Development Agreement, the
Company enters into a franchise agreement with Roadhouse Operating Company, LLC
for each new franchise restaurant prior to the opening of that restaurant.
The Master Development Agreement between the Company and Roadhouse
Operating Company, LLC provides for the exclusive development of up to five
restaurants over a period ending October 31, 1999 in Clark County, Nevada (which
includes the Las Vegas, Nevada metropolitan area). Under the Master Development
Agreement, Roadhouse Operating Company, LLC's exclusive right to develop
Roadhouse Grill restaurants in the area specified is contingent upon Roadhouse
Operating Company, LLC meeting the development schedule set forth in the Master
Development Agreement. The Company is precluded from operating or franchising
others to operate Roadhouse Grill restaurants in the specified area so long as
the exclusive development rights remain in effect. Pursuant to the Master
Development Agreement, and in each case pursuant to a separate franchise
agreement, Roadhouse Operating Company, LLC currently operates two Roadhouse
Grill restaurants and has one under construction.
Roadhouse Operating Company, LLC pays the Company a percentage royalty fee
based on gross sales. Under the Master Development Agreement, Roadhouse
Operating Company, LLC is not obligated to pay any area development or initial
franchise fees.
Roadhouse Operating Company, LLC was not able to meet the development
schedule under the Master Development Agreement which expired on October 31,
1999. The Company anticipates amending the Master Development Agreement and
granting Roadhouse Operating Company, LLC an additional period of time to
complete its development schedule.
Roadhouse Grill Hong Kong. In January 1996, the Company entered into a
Master Development Agreement with Roadhouse Grill Hong Kong, which provides for
the development and franchising of Roadhouse Grill restaurants in Hong Kong.
Under the agreement, Roadhouse Grill Hong Kong is not required to develop any
specific number of restaurants in Hong Kong, but any restaurants that it
develops are credited against the development obligations of Roadhouse Grill
Asia under Roadhouse Grill Asia's Master Development Agreement with the Company.
Roadhouse Grill Hong Kong or its affiliates are not required to pay any
franchise or reservation fee for restaurants that it develops, but it is
responsible for paying or reimbursing approved expenses incurred by the Company
in connection with the opening of each restaurant. In addition, Roadhouse Grill
Hong Kong is required to pay a royalty on gross sales in connection with the
operation of each of its restaurants. Under certain circumstances, Roadhouse
Grill Hong Kong or the Company may grant franchises to third parties in Hong
Kong. In that event, the Company is entitled to receive 50% of any franchise and
reservation fees and 50% of any royalty fee payable by the third party
franchisee, subject to limitations on the amounts payable to the Company of
$10,000 per restaurant in the case of franchise and reservations fees and 2.5%
of gross sales in the case of royalty fees. Effective December 1, 1997, the
agreement was amended to allow the Company to receive 40% of any royalty fee
payable by the third party franchisee, subject to a limitation of 2% of gross
sales. Amounts for franchise and reservation fees were left unchanged.
Currently there are no franchise restaurants open under the Roadhouse Grill
Hong Kong Master Development Agreement and the Company does not anticipate any
development of Roadhouse Grill restaurants in the foreseeable future.
Roadhouse Grill Asia. In January 1996, the Company also entered into a
Master Development Agreement with Roadhouse Grill Asia which covers countries in
Asia and the Pacific Rim (other than Hong Kong), including, but not limited to,
Australia, China, India, Indonesia, Japan, Malaysia, New Zealand, Singapore,
South Korea, the Philippines and Thailand. Under the agreement, Roadhouse Grill
Asia is required to open and maintain at least thirty Roadhouse Grill
restaurants during the first ten years of the term of the agreement, with a
minimum of two restaurants to be developed each year. Under certain
circumstances, Roadhouse Grill Asia or the Company may grant franchises to third
parties in the territory. The fee arrangements under the agreement are
substantially the same as those under the agreement between the Company and
Roadhouse Grill Hong Kong. See Item 13 "Certain Relationships and Related
Transactions."
Roadhouse Grill Asia currently operates one franchised Roadhouse Grill
restaurant. The Company is anticipating further development of restaurants under
the Master Development Agreement in the foreseeable future. The franchisee has
opened 2 more restaurants in the 1st quarter of fiscal year 2001.
Roadhouse Grill Brazil. In 1999, the Company signed a Master Development
Agreement for 8 restaurants in Brazil. The first unit opened in Brazilia, Brazil
in June 2000.
Advertising and Marketing
The Company attempts to build brand-awareness by providing a distinctive
dining experience that results in a significant number of new customers being
attracted through word of mouth, as well as by traditional marketing efforts and
promotional activities. The Company believes that clustering multiple
restaurants in target markets will help build brand-awareness and increase
efficiencies in its marketing efforts. Roadhouse Grill, Inc. also utilizes
television, radio and billboard advertising to promote its restaurants and build
brand-awareness. In January 1999, the Company launched a 16-month advertising
campaign that focuses on the "irreverent" or "rambunctious" behavior at
Roadhouse Grill restaurants. The Company's motto is: "Roadhouse Grill...Eat,
Drink and be Yourself." The Company also markets at the restaurant level through
sponsorship of community charity activities, sporting events, festivals and
Chamber of Commerce events. For fiscal year 2000, advertising and marketing
expense relating to Roadhouse Grill restaurants amounted to approximately 3.0%
of total revenues.
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Restaurant Operations and Management
Restaurant Personnel. The Company believes that excellent service
contributes significantly to a distinctive, enjoyable dining experience.
Accordingly, the Company seeks to hire individuals who possess strong initiative
and the ability to provide quality and personalized service. Roadhouse Grill
attempts to foster the individuality of its employees, encouraging them to
interact with customers on a friendly, casual basis. The Company recruits both
experienced restaurant managers from outside the Company and promotes qualified
employees from within the Company. The Company seeks to retain high-quality
restaurant managers and personnel by providing them with opportunities for
promotion and financial incentives based on individual restaurant performance.
These financial incentives include a bonus plan that enables each restaurant
manager to earn a portion of a bonus pool by achieving certain predetermined
performance goals.
Roadhouse Grill restaurants generally operate with a general manager, a
dining room manager, a kitchen manager and one or two assistant managers
depending upon volume. The general manager of each restaurant has primary
responsibility for managing the day-to-day operations of the restaurant in
accordance with Company standards. The general manager and kitchen manager of
each restaurant generally are responsible for interviewing, hiring and training
restaurant staff. Each restaurant has a staff of approximately 90 employees. The
Company currently employs 16 area supervisors, each of whom is responsible for
three to six restaurants. There are three regional directors, each of whom is
responsible for four to six area supervisors. The three regional directors
communicate daily with the Director of Operations and the Vice President of
Operations.
The Company devotes a significant amount of time and resources to
restaurant management and staff training. Each new manager participates in an
eight-week training program, which is conducted at designated training
restaurants, before assuming an assistant manager position (or, in some
instances, a kitchen manager position) at a Roadhouse Grill restaurant. This
program is designed to provide training in all areas of restaurant operations,
including food preparation and service, alcoholic beverage service, Company
philosophy, operating standards, policies and procedures, and business
management and administration techniques. The managers of the training
restaurant conduct weekly evaluations of each manager trainee.
In connection with the opening of each new restaurant, the Company sends an
experienced training team to train and assist the new restaurant employees. The
training team generally arrives at each restaurant two weeks prior to opening
and remains for four weeks after opening. Typically, the top three managers (the
general manager, the dining room manager and the kitchen manager) of each new
restaurant are individuals who have been managers at an existing Roadhouse Grill
restaurant.
Purchasing. To better insure uniform quality and obtain competitive prices,
the Company contracts centrally for most restaurant food products and other
supplies. Individual restaurants decide the amount of each item they require and
place orders directly with the Company's distributors several times a week.
Managers also arrange for dairy and produce items to be provided by local
vendors that meet the Company's quality standards. Corporate management closely
monitors prices and other supply contract terms for locally and centrally
contracted items. Because of the volume of its aggregate orders and the volume
of supplies delivered to each individual restaurant, the Company believes that
it is able to obtain favorable prices for its supplies.
Reporting and Financial Controls. The Company maintains financial and
accounting controls for each of its restaurants through the use of centralized
accounting and management information systems. In addition, each restaurant is
equipped with a computerized accounting system that allows restaurant management
to efficiently manage labor, food cost and other direct operating expenses, that
provide corporate management rapid access to financial data and that reduces
time devoted by its restaurant managers to administrative responsibilities.
Guest counts, sales, cash deposits and labor cost information are collected
daily from each restaurant. Physical inventories of all food and beverage items
are performed weekly. Each restaurant manager prepares a restaurant level weekly
profit and loss statement, and at the end of each accounting period, operating
statements are prepared for each location. The weekly and accounting period
operating statements are reviewed at both the corporate level and restaurant
level for variances from expected results to allow for any corrective actions to
be taken as quickly as possible.
Hours of Operation. The Company's Roadhouse Grill restaurants are open
seven days a week, typically from 11:00 a.m. to 10:00 p.m. Sunday through
Thursday and from 11:00 a.m. to 11:00 p.m. on Friday and Saturday.
Restaurant Industry and Competition
The restaurant industry is highly competitive. The Company competes with a
broad range of restaurants, including national and regional casual dining chains
as well as locally-owned restaurants, some of which operate with concepts
similar to that of the Company. A number of competitors have been in existence
longer than the Company and have substantially greater financial, marketing and
other resources and wider geographical diversity than the Company. The entrance
of new competitors into the Company's market areas or the expansion of
operations by existing competitors could have a material adverse effect on the
Company's results of operations and financial condition. There is no assurance
that the Company will be able to compete successfully in the markets in which it
operates. In addition, the Company competes with other restaurant companies and
retailers for sites, labor and, in many cases, customers. The Company believes
that the key competitive factors in the restaurant industry are quality of food
and service, price, location and concept. To the extent that one or more of its
competitors becomes more successful with respect to any of the key competitive
factors, the Company's business could be adversely affected.
The restaurant industry has few non-economic barriers to entry and is
affected by changes in consumer tastes as well as national, regional and local
economic conditions, demographic trends, traffic patterns, and the type, number
and location of competing restaurants. Dependence on fresh meats and produce
also subjects restaurant companies to the risk that shortages or interruptions
of supply could adversely affect the availability, quality or cost of
ingredients. In addition, factors such as inflation, increased food, labor
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and employee benefit costs and the availability of qualified management and
hourly employees also may adversely affect the restaurant industry generally and
the Company's restaurants in particular. The Company's significant investment in
and long-term commitment to each of its restaurant sites limits its ability to
respond quickly or effectively to changes in local competitive conditions or
other changes that could affect the Company's operations. The Company's
continued success is dependent to a large extent on its reputation for providing
high quality and value and this reputation may be affected not only by
performance of Company-owned restaurants but also by the performance of
franchisee-owned restaurants over which the Company has limited control.
Government Regulation
Each Roadhouse Grill restaurant is subject to and affected by various
federal, state and local laws and governmental regulations, including those
relating to the preparation, sale and service of food and alcoholic beverages,
designation of non-smoking and smoking areas, accessibility of restaurants to
disabled customers, development and construction of restaurants and
environmental matters. Difficulties or failures in obtaining the required
construction and operating licenses, permits or approvals could delay or prevent
the opening of a new restaurant. Roadhouse Grill believes that it is operating
in compliance in all material respects with applicable laws and regulations that
govern its operations.
Roadhouse Grill, Inc. is also subject to laws governing its relationship
with employees, including minimum wage requirements, overtime, working
conditions and immigration requirements. Legislative proposals are under
consideration by governmental authorities from time to time that would, if
enacted, have a material adverse effect on the Company's business by increasing
the Company's operating costs. There is no assurance that the Company would be
able to pass such increased costs on to its guests or that, if it were able to
do so, it could do so in a short period of time.
Alcoholic beverage control regulations require each Roadhouse Grill
restaurant to apply to a state authority and, in certain locations, county
and/or municipal authorities for a license or permit to sell alcoholic beverages
on the premises and to provide service for extended hours. Typically, licenses
must be renewed annually and may be revoked or suspended for cause at any time.
If a liquor license for any restaurant were lost, revenues for that restaurant
would be adversely affected. Alcoholic beverage control regulations relate to
numerous aspects of the Company's restaurants, including minimum age of patrons
consuming and employees serving alcoholic beverages, hours of operation,
advertising, wholesale purchasing, inventory control, and handling, storage and
dispensing of alcoholic beverages. The Company is also subject to "dram-shop"
statutes, which generally provide a person, injured by an intoxicated person the
right to recover damages from an establishment that wrongfully served alcoholic
beverages to the intoxicated person. The Company carries liquor liability
coverage as part of its existing comprehensive general liability insurance.
In connection with its sale of franchises, the Company is subject to the
United States Federal Trade Commission rules and regulations and state laws that
regulate the offer and sale of franchises. The Company also is subject to laws
that regulate certain aspects of the franchise relationship.
The Company is subject to various local, state and federal laws regulating
the discharge of pollutants into the environment. The Company believes that its
operations are in compliance in all material respects with applicable
environmental laws and regulations. The Company conducts environmental audits of
all proposed restaurant sites in order to determine whether there is any
evidence of contamination prior to purchasing or entering into a lease with
respect to such sites. However, there can be no assurance that the Company will
not incur material environmental liability in connection with any of its owned
or leased properties.
Employees
At April 30, 2000, the Company employed approximately 5,388 persons, of
whom 4,948 were restaurant employees, 385 were restaurant management and
supervisory personnel, and 55 were corporate personnel. Restaurant employees
include both full-time and part-time workers and substantially all are paid on
an hourly basis. No Company employees are covered by collective bargaining
agreements, and the Company has never experienced an organized work stoppage,
strike or labor dispute. The Company believes its relations with its employees
are generally satisfactory.
Trademarks, Service Marks and Trade Dress
Roadhouse Grill, Inc. believes that its rights in trademarks, service marks
and trade dress are important to its marketing efforts. Roadhouse Grill has
registered the "Roadhouse Grill" service mark, the "Cowboy Jim and rocking
chair" design and the slogan "Good Food and a Smile . . . That's Roadhouse
Style" with the U.S. Patent and Trademark Office. The Company currently has
registered the "Roadhouse Grill" service mark in France and Malaysia and has
been approved for registration in Canada. Roadhouse Grill has certain foreign
trademarks in various stages of the registration process; however, the Company
has temporarily ceased the registration process in several countries and will
resume such process on a case-by-case basis in certain of those countries in the
near future.
Item 2. Properties
As of April 30, 2000, all but 14 of the Company's restaurants were located
in leased space. Initial lease expirations range from five to twenty years, with
the majority of these leases providing renewal options extending the lease term.
All of the Company's leases provide for a minimum annual rent, and several
leases call for additional rent based on sales volume at the particular location
over specified minimum levels. Generally, the leases are triple net leases which
require the Company to pay the costs of insurance, taxes and a portion of the
lessors' operating costs. The Company believes its facilities are in
satisfactory condition, are suitable for their intended use and are, in the
aggregate, sufficient for the present business needs of the Company.
7
<PAGE> 10
The Company purchased an office building in Pompano Beach, FL, which is
approximately 30,000 square feet. The Company relocated its corporate functions
to this facility in October 1999. The Company occupies approximately 17,000
square feet of the new facility and has signed an agreement to lease out the
excess space on a short-term lease. Prior to October 1999, the Company leased
approximately 8,000 square feet for its corporate offices in Ft. Lauderdale,
Florida. The lease had expired in September 1998, and the Company had been on a
month-to-month rental since that time.
Item 3. Legal Proceedings
On May 3, 2000 the Company issued a press release in which it announced
that an independent committee of the Board of Directors had proposed a tender
offer purchase price of $7.00. On May 3, 2000, a shareholder of the Company
filed a class representation complaint with the Circuit Court of the 17th
Judicial Circuit in Broward County, Florida. The complaint names the Company,
Vincent Tan, Ayman Sabi, Philip Friedman, Phillip Ratner, Alain K.K. Lee and
Berjaya Group (Cayman) Limited ("Berjaya") as defendants. The complaint relates
to a proposed going private transaction involving a tender offer by the Company.
The class action suit claims that $7.00 is not a fair price, and alleges that
Berjaya and the individual defendants are breaching their fiduciary duties to
Company's shareholders. The plaintiff seeks an injunction, costs and
disbursements of the action, including reasonable attorneys and experts fees,
and in the event the tender offer is consummated, rescission of the offer and
damages. Based on the condition of the retail financing environment and the
increase in interest rates, the Company has decided to postpone the tender
offer. The Company believes that the lawsuit is without merit.
The Company is a party to certain other legal proceedings arising in the
ordinary course of business. While it is not possible to predict or determine
the outcome of any of these proceedings, in the opinion of the Company, based on
review by legal counsel, any resulting liability will not have a material
adverse effect on the Company's financial position or results of operations or
its business.
Item 4. Submission of Matters to a Vote of Security Holders
There were no maters submitted for a vote of security holders during the
fourth quarter of fiscal year 2000.
8
<PAGE> 11
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
Market Information
As of July 28, 2000, the Company's authorized and issued common equity
consists of 9,708,741 shares of common stock, par value $.03 per share.
The common stock of the Company has been traded on the Nasdaq National
Market System since the Company's initial public offering on November 26, 1996
under the symbol "GRLL".
The following table sets forth, for the periods indicated, the highest and
lowest closing sale prices for the common stock, as reported by the Nasdaq
National Market:
High Low
---- ---
Fiscal 1999
-----------
First Quarter $6.31 $4.19
Second Quarter 5.13 2.75
Third Quarter 6.25 3.63
Fourth Quarter 6.19 4.25
Fiscal 2000
-----------
First Quarter 6.88 5.75
Second Quarter 6.25 5.00
Third Quarter 6.19 3.69
Fourth Quarter 5.88 3.88
Fiscal 2001
-----------
First Quarter 6.1875 4.00
Through July 28, 2000
On July 28, 2000, the last reported sales price of the common stock on the
Nasdaq National Market was $4.6875.
Dividend Policy
The Company has not declared or paid any cash dividends or distributions on
its capital stock in the past fiscal years. The Company does not intend to pay
any cash dividends on its common stock in the foreseeable future, as the current
policy of the Company's Board of Directors is to retain all earnings to support
operations and finance expansion. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations - Liquidity and Capital
Resources." Future declaration and payment of dividends, if any, will be
determined in light of then current conditions, including the Company's
earnings, operations, capital requirements, financial condition, and other
factors deemed relevant by the Board of Directors.
Shareholders
As of April 30, 2000, there were 65 shareholders of record of the Company's
common stock. The Company believes a certain portion of the Company's
outstanding common stock may be held of record in broker "street name" for the
benefit of individual investors.
9
<PAGE> 12
Item 6. Selected Financial Data
The following table sets forth for the periods and the dates indicated
selected financial data of the Company. The following should be read in
conjunction with the Consolidated Financial Statements and Notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" appearing elsewhere in this Form 10-K.
<TABLE>
<CAPTION>
($ in thousands, except per share data)
(Unaudited)
17 Weeks 17 Weeks
(Unaudited) Ended Ended
Fiscal Fiscal Fiscal April 26, April 27, Fiscal Fiscal
2000 1999 1998 1998 1997 1997 1996
---------- ---------- ---------- ---------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations Data:
Total revenues $ 148,495 $ 120,681 $ 100,194 $ 37,684 $ 30,285 $ 92,795 $ 62,433
Cost of restaurant sales:
Food and beverage 48,710 39,505 33,065 12,130 10,056 30,991 21,382
Labor and benefits 43,201 33,897 29,232 10,340 8,957 27,849 19,748
Occupancy and other 29,879 23,776 19,938 7,856 5,495 17,577 12,747
Pre-opening expenses 2,387 1,318 1,822 520 719 2,021 1,027
---------- ---------- ---------- ---------- ---------- ----------- ----------
Total cost of restaurant sales 124,177 98,496 84,057 30,846 25,227 78,438 54,904
Depreciation and amortization 8,510 7,351 5,672 2,145 1,454 4,981 3,136
General and administrative expenses 8,241 6,766 6,645 2,210 1,773 6,208 4,471
Impairment of long-lived assets -- -- 1,120 -- -- 1,120 --
---------- ---------- ---------- ---------- ---------- ----------- ----------
Total operating expenses 140,928 112,613 97,494 35,201 28,454 90,747 62,511
---------- ---------- ---------- ---------- ---------- ----------- ----------
Operating income 7,567 8,068 2,700 2,483 1,831 2,048 (78)
Other income (expense):
Interest expense, net (2,301) (2,210) (1,924) (719) (347) (1,552) (1,296)
Equity in income (loss) of affiliates -- (3) 90 57 29 62 206
Other, net -- 386 314 119 110 320 278
Loss on sale of investment in affiliate -- -- (611) -- -- (611) --
---------- ---------- ---------- ---------- ---------- ----------- ----------
Total other (expense) (2,301) (1,827) (2,131) (543) (208) (1,781) (812)
---------- ---------- ---------- ---------- ---------- ----------- ----------
Income (loss) before income
taxes and cumulative effect of
change in accounting principle 5,266 6,241 569 1,940 1,623 267 (890)
Income tax expense 801 233 216 81 40 175 --
---------- ---------- ---------- ---------- ---------- ----------- ----------
Income (loss) before cumulative
change in accounting principle 4,465 6,008 353 1,859 1,623 92 (890)
Cumulative effect of change in
accounting principle (net of
tax benefit of $269) (953) -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------- ----------
Net income (loss) $ 3,512 $ 6,008 $ 353 $ 1,859 $ 1,583 $ 92 $ (890)
========== ========== ========== ========== ========== =========== ==========
Basic net income (loss) per common share:
Basic income before cumulative
effect of change in accounting principle $ 0.46 $ 0.63 $ 0.04 $ 0.20 $ 0.17 $ 0.01 $ (0.18)
Cumulative effect of change in
accounting principle (0.10) -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------- ----------
Basic net income (loss) per common share: $ 0.36 $ 0.63 $ 0.04 $ 0.20 $ 0.17 $ 0.01 $ (0.18)
========== ========== ========== ========== ========== =========== ==========
Diluted net income (loss) per common share:
Diluted income before cumulative
effect of change in accounting
principle $ 0.46 $ 0.62 $ 0.04 $ 0.20 $ 0.17 $ 0.01 $ (0.18)
Cumulative effect of change in
accounting principle (0.10) -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------- ----------
Diluted net income (loss) per common share $ 0.36 $ 0.62 $ 0.04 $ 0.20 $ 0.17 $ 0.01 $ (0.18)
========== ========== ========== ========== ========== =========== ==========
Weighted average common shares outstanding 9,708,741 9,536,631 9,305,408 9,305,408 9,305,408 9,305,408 4,909,894
========== ========== ========== ========== ========== =========== ==========
Weighted average common shares and
share equivalents outstanding-assuming
dilution 9,792,019 9,668,469 9,315,139 9,326,642 9,315,307 9,305,408 4,909,894
========== ========== ========== ========== ========== =========== ==========
</TABLE>
10
<PAGE> 13
<TABLE>
<CAPTION>
($ in thousands, except per share data)
(Unaudited)
17 Weeks 17 Weeks
(Unaudited) Ended Ended
Fiscal Fiscal Fiscal April 26, April 27, Fiscal Fiscal
2000 1999 1998 1998 1997 1997 1996
--------- --------- --------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance Sheet Data:
Working capital (deficit) $ (15,931) $ (5,586) $ (5,864) $ (5,864) $ (10,776) $ (5,886) $ (5,605)
Total assets 105,312 91,283 80,109 80,109 67,943 75,432 67,335
Long-term debt and due to related parties,
including current portion 25,661 19,505 19,095 19,095 12,850 18,115 13,657
Obligations under capital leases,
including current portion 6,479 11,933 7,542 7,542 4,186 7,908 4,271
Total shareholders' equity $ 54,189 $ 50,677 $ 43,154 $ 43,154 $ 42,705 $ 41,295 $ 41,100
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Company operates, franchises and licenses high-quality full-service
casual dining restaurants under the name "Roadhouse Grill." The Company was
founded in 1992 and opened its first restaurant in 1993. As of April 30, 2000,
there were 72 Company-owned and three franchised Roadhouse Grill restaurants
located in Alabama, Arkansas, Florida, Georgia, Louisiana, Mississippi, Nevada,
New York, Ohio, North Carolina, South Carolina and Tennessee. Of the 72
Company-owned restaurants open as of April 30, 2000, 35 are situated in Florida.
One of the franchised restaurants is located in Kuala Lumpur, capital city of
Malaysia.
The Company's revenues are derived primarily from the sale of food and
beverages. In fiscal year 2000, restaurant sales generated from lunch and dinner
amounted to approximately 27% and 73% of restaurant sales, respectively.
Restaurant sales of food and beverages accounted for approximately 89% and 11%,
respectively, of total restaurant sales in fiscal year 2000, respectively.
Franchise and management fees during fiscal year 1999 accounted for less than 1%
of the Company's total revenues. Restaurant operating expenses include food and
beverage, labor, direct operating and occupancy costs. Direct operating costs
consist primarily of costs of expendable supplies, marketing and advertising
expense, maintenance, utilities and restaurant general and administrative
expenses. Occupancy costs include rent, real estate and personal property taxes
and insurance. Certain elements of the Company's restaurant operating expenses,
including direct operating and occupancy costs and to a lesser extent labor
costs, are relatively fixed. During the first quarter of fiscal year 2000, the
Company adopted the provisions of Statement of Position 98-5."Reporting for the
Costs of Start-up Activities", which requires that pre-opening costs be expensed
as incurred. Previously, the Company amortized pre-opening costs over a
twelve-month period. The cumulative effect of the change was $953,000, net of
taxes. Pre-opening costs consist of direct costs related to hiring and training
the initial work force and other direct costs associated with opening a new
restaurant. During fiscal year 2000, pre-opening costs incurred in connection
with the opening of 15 Company-owned restaurants averaged approximately
$130,000.
The Company's new restaurants can be expected to generate above-average
sales during the initial weeks that the restaurant is open, commonly referred to
as the "honeymoon" period. As the restaurant is open longer, sales generally
decline after initial trial by guests. There is no assurance that a new
Roadhouse Grill restaurant will attain the average unit volume that has been the
Company's historical experience. Furthermore, costs during the first several
months of operation can be expected to be higher than the Company's average
costs, primarily cost of food and beverage sales and labor costs. There is no
assurance that these costs will decline as the restaurant matures or that it
will attain average 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 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. Thereafter, all such
costs are expensed as incurred and are included in "pre-opening expenses" within
the accompanying statements of income.
The average cash investment of the 56 Company-owned Roadhouse Grill
restaurants open the entire 53 weeks in fiscal year 2000 was approximately $1.4
million, including building structures (where applicable), building or leasehold
improvements and equipment and fixtures, but excluding land and pre-opening
costs. The average land 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 $99,000 per site. The Company expects that the average cash
investment required to open
11
<PAGE> 14
new restaurants in fiscal year 2001, excluding land and pre-opening costs, will
be approximately $1.2 million to $1.6 million, depending upon whether the
Company converts an existing building or constructs a ground-up restaurant.
In August 1996, the Company entered into an agreement to purchase the
remaining 50 percent interest in Kendall Roadhouse Grill, L.C., a limited
liability company that owned the Kendall restaurant, from the joint venture
partners for a purchase price of $2.3 million. The purchase price was to be paid
from the proceeds of the Initial Public Offering ("IPO") completed by the
Company in November 1996, in which 2,500,000 shares were sold at $6.00 per
share. During the first quarter of 1997, the agreement was amended as follows:
the purchase price was changed to $1.8 million with a deposit of $400,000 paid
in January 1997, and the remaining $1.4 million payable by December 31, 1997
when the acquisition was expected to be closed and consummated. Subsequent to
December 1997, the Company negotiated the price down to $1.6 million and
completed the purchase on August 14, 1998. The Company accounted for this
transaction using the purchase method of accounting. The purchase price was
allocated based on the fair value of the assets acquired at the time of
acquisition. The excess of the purchase price over the fair value of the assets
acquired was recorded as goodwill and is being amortized over 16 years.
In December 1996, the Company purchased from an unaffiliated third party a
50% interest in Boca Roadhouse, L.C., a limited liability company that owned the
Boca Raton, Florida, Roadhouse Grill restaurant ("Boca"). Prior to the
acquisition, the restaurant had been a franchise managed by the Company under a
management agreement. In December 1997, operations at Boca were discontinued and
the Company sold its interest in Boca to Boca Raton Roadhouse Grill, L.L.C.,
recognizing a loss of $611,000.
12
<PAGE> 15
Results of Operations
The following table sets forth for the periods indicated the percentage
relationship to total revenues of certain statements of operations data.
<TABLE>
<CAPTION>
17 Weeks 17 Weeks
Ended Ended
Fiscal Fiscal Fiscal April 26, April 27, Fiscal
2000 1999 1998 1998 1997 1997
------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Statements of Operations Data:
Total revenues 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of Company restaurant sales:
Food and beverage 32.8 32.7 33.0 32.2 33.2 33.4
Labor and benefits 29.1 28.1 29.2 27.4 29.6 30.0
Occupancy and other 20.1 19.7 19.9 20.8 18.1 18.9
Pre-opening expenses 1.6 1.1 1.8 1.4 2.4 2.2
------ ------ ------ ------ ------ ------
Total cost of Company restaurant sales 83.6 81.6 83.9 81.8 83.3 84.5
Depreciation and amortization 5.7 6.1 5.7 5.7 4.8 5.4
General and administrative 5.5 5.6 6.6 5.9 5.9 6.7
Impairment of long-lived assets -- -- 1.1 -- -- 1.2
------ ------ ------ ------ ------ ------
Total operating expenses 94.9 93.3 97.3 93.4 94.0 97.8
Operating income (loss) 5.1 6.7 2.7 6.6 6.0 2.2
Total other (expense) (1.5) (1.5) (2.1) (1.4) (0.7) (1.9)
------ ------ ------ ------ ------ ------
Income (loss) before taxes and cumulative
effect of change in accounting principle 3.5 5.2 0.6 5.2 5.4 0.3
Income tax expense 0.5 0.2 0.2 0.2 0.1 0.2
------ ------ ------ ------ ------ ------
Income (loss) before cumulative effect of
change in accounting principle 3.0 5.0 0.4 4.9 5.2 0.1
Cumulative effect of change in accounting
principle (net of tax benefit of $269) (0.6) -- -- -- -- --
------ ------ ------ ------ ------ ------
Net income (loss) 2.5% 5.0% 0.4% 5.0% 5.3% 0.1%
====== ====== ====== ====== ====== ======
Restaurant Data:
Company-owned restaurants:
Beginning of period 56 44 34 42 31 31
Opened 15 12 10 2 3 11
Termination of Licensed Restaurant 1 0 0 0 0 0
------ ------ ------ ------ ------ ------
End of period 72 56 44 44 34 42
Franchised restaurants 3 3 3 3 3 3
Licensed restaurants 0 1 -- -- -- --
------ ------ ------ ------ ------ ------
Total restaurants 75 60 47 47 37 45
====== ====== ====== ====== ====== ======
</TABLE>
Fifty-Three Weeks Ended April 30, 2000 ("Fiscal Year 2000") Compared to the
Fifty-Two Weeks Ended April 25, 1999 ("Fiscal Year 1999")
Restaurants open. At April 30, 2000 there were 72 Company-owned restaurants
open, including the Kendall Roadhouse Grill ("Kendall") restaurant and the North
Palm Beach Roadhouse Grill ("North Palm Beach") restaurant. On July 12, 1999,
the Company terminated its licensing agreement for North Palm Beach and began
operating the location as a Company-owned restaurant. At April 25, 1999, there
were 56 Company-owned restaurants, including the Kendall restaurant. On August
14, 1998 the Company purchased the remaining 50% equity interest outstanding in
Kendall. The 15 new restaurants opened during fiscal year 2000 represent a 28.6%
increase in the number of Company-owned restaurants from the end of fiscal year
1999 to the end of fiscal year 2000.
13
<PAGE> 16
Total revenues. Total revenues increased $27.8 million, or 23.0%, to $148.5
million for fiscal year 2000 from $120.7 million for fiscal year 1999. This
increase is primarily attributable to sales generated at the 15 new restaurants
opened by the Company since the end of fiscal year 1999 and the full year
operations of the 12 new restaurants opened in fiscal year 1999 that were open
and operating only partially during fiscal year 1999. At the end of fiscal year
2000, the Company operated 35 Company-owned restaurants in Florida. A restaurant
is considered comparable after its first 18 months of operation.
Food and beverage. Food and beverage costs increased $9.2 million, or
23.3%, during fiscal year 2000 to $48.7 million from $39.5 million in fiscal
year 1999. The increase is primarily attributable to the opening and operating
of 15 new restaurants since the end of fiscal year 1999 and the full year of
operations of the 12 new restaurants opened in fiscal year 1999 that were open
and operating only partially during that fiscal year. As a percentage of total
revenues, food and beverage costs were comparable for both periods presented.
Labor and benefits. Labor and benefits costs increased $9.3 million to
$43.2 million in fiscal year 2000, or 27.4%, from $33.9 million in fiscal year
1999. The increase is primarily due to the operation of 15 new restaurants
opened since the end of the fiscal year 1999 as well as the full year of
operations of the 12 restaurants opened during fiscal year 1999 that were open
and operating only partially during that fiscal year. However, as a percentage
of sales, labor and benefits costs increased by 1.0 percentage points to 29.1%
for fiscal year 2000 from 28.1% for fiscal year 1999. This increase is primarily
due to the restructuring of the restaurant level management team, improved
productivity of the Company's in-store meat operation and including hostesses as
tipped employees eligible for the tip credit. Previously, hostesses were paid a
higher rate per hour.
Occupancy and other. Occupancy and other costs increased $6.1 million to
$29.9 million in fiscal year 2000, or 25.7%, from $23.8 million in fiscal year
1999. The increase is primarily due to the operation of 15 new restaurants
opened since the end of fiscal year 1999 and the full year of operations of the
12 new restaurants opened during fiscal year 1999 that were open and operating
only partially during that fiscal year. As a percentage of sales, occupancy and
other costs increased by 0.4 percentage points to 20.1% for fiscal year 2000
from 19.7% for fiscal year 1999. The increase in occupancy and other costs as a
percentage of total revenues was primarily due to an increase in marketing and
advertising costs in fiscal year 2000. As a percentage of total revenues,
marketing and advertising costs decreased to 3.0% in fiscal year 2000 compared
to 3.3% of total revenues in fiscal year 1999.
Pre-opening expenses. Pre-opening amortization increased $1.1 million to
$2.4 million in fiscal year 2000, or 81.1%, from $1.3 million in fiscal year
1999. The increase is associated with the adoption of Statement of Position 98-5
"Reporting on the Costs of Start-Up Activities," which requires that pre-opening
costs be expensed as incurred. Previously, the Company amortized pre-opening
costs over a twelve-month period. The Company adopted SOP 98-5 in the fiscal
year 2000 first quarter. Pre-opening expenses in fiscal year 2000 were primarily
costs associated with the opening of fifteen new restaurants during the year.
Depreciation and amortization. Depreciation and amortization increased $1.2
million to $8.5 million in fiscal year 2000, or 15.8%, from $7.4 million in
fiscal year 1999. The increase is primarily due to the operation of 15 new
restaurants opened since the end of fiscal year 1999 and the full year of
operations of the 12 new restaurants opened in fiscal year 1999 that were open
and operating only partially during that fiscal year. As a percentage of sales,
depreciation and amortization decreased by 0.4 percentage points to 5.7% for
fiscal year 2000 from 6.1% for fiscal year 1999.
General and administrative. General and administrative costs increased $1.5
million to $8.2 million in fiscal year 2000, or 21.8%, from $6.8 million in
fiscal year 1999. As a percentage of sales, general and administrative costs
were comparable for both periods presented.
Total other income (expense). Total other income (expense) increased
$474,000 in expense to $2.3 million in fiscal year 2000, or 25.9%, from $1.8
million in fiscal year 1999. The increase is due to additional interest expense
on additional debt incurred due to the development and opening of 15 new
restaurants since the end of fiscal year 1999.
Income tax. 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.
Fifty-Two Weeks Ended April 25, 1999 ("Fiscal Year 1999") Compared to the
Fifty-Two Weeks Ended April 26, 1998 ("Fiscal Year 1998")
Restaurants open. At April 25, 1999 there were 56 Company-owned restaurants
open, including the Kendall restaurant. On August 14, 1998, the Company
purchased the remaining 50% equity interest outstanding in Kendall. At April 26,
1998, there were 44 Company-owned restaurants, excluding Kendall and the Boca
restaurant, which were owned by limited liability companies in which the Company
held 50% ownership interest. (In December 1997, the Company sold its ownership
interest in Boca). The 12 new restaurants opened during fiscal year 1999
represent a 27.3% increase in the number of Company-owned restaurants from the
end of fiscal year 1998 to the end of fiscal year 1999.
Total revenues. Total revenues increased $20.5 million, or 20.4%, from
$100.2 million for fiscal year 1998 to $120.7 million for fiscal year 1999. This
increase is primarily attributable to sales generated at the 12 new restaurants
opened by the Company since the end of fiscal year 1998 and the full year
operations of the 10 new restaurants opened in fiscal year 1998 that were open
and operating only partially during fiscal year 1998. Sales at comparable
restaurants for fiscal year 1999 were even with sales in the prior year
comparable period. This was due in part to the late start of the tourist season
in Florida. At the end of fiscal year 1999, the Company operated 31
14
<PAGE> 17
Company-owned restaurants in Florida. A restaurant is considered comparable
after its first 18 months of operation.
Food and beverage. Food and beverage costs increased $6.4 million, or
19.5%, during fiscal year 1999 to $39.5 million from $33.1 million in fiscal
year 1998. The increase is primarily attributable to the opening and operating
of 12 new restaurants since the end of fiscal year 1998 and the full year of
operations of the 10 new restaurants opened in fiscal year 1998 that were open
and operating only partially during that fiscal year. As a percentage of total
revenues, food and beverage costs decreased 0.3 percentage points to 32.7% for
fiscal year 1999 from 33.0% for fiscal year 1998.
Labor and benefits. Labor and benefits costs increased $4.7 million to
$33.9 million in fiscal year 1999, or 16.0%, from $29.2 million in fiscal year
1998. The increase is primarily due to the operation of 12 new restaurants
opened since the end of the fiscal year 1998 as well as the full year of
operations of the 10 restaurants opened during fiscal year 1998 that were open
and operating only partially during that fiscal year. However, as a percentage
of sales, labor and benefits costs decreased by 1.1 percentage points to 28.1%
for fiscal year 1999 from 29.2% for fiscal year 1998. This decrease is primarily
due to the restructuring of the restaurant level management team, improved
productivity of the Company's in-store meat operation and including hostesses as
tipped employees eligible for the tip credit. Previously, hostesses were paid a
higher rate per hour.
Occupancy and other. Occupancy and other costs increased $3.9 million to
$23.8 million in fiscal year 1999, or 19.2%, from $19.9 million in fiscal year
1998. The increase is primarily due to the operation of 12 new restaurants
opened since the end of fiscal year 1998 and the full year of operations of the
10 new restaurants opened during fiscal year 1998 that were open and operating
only partially during that fiscal year. As a percentage of sales, occupancy and
other costs decreased by 0.2 percentage points from 19.9% for fiscal year 1998
to 19.7% for fiscal year 1999. Partially offsetting the decline in occupancy and
other costs as a percentage of total revenues was an increase in marketing and
advertising costs in fiscal year 1999. As a percentage of total revenues,
marketing and advertising costs rose to 3.3% in fiscal year 1999 compared to
2.1% of total revenues in fiscal year 1998.
Pre-opening expense. Pre-opening expenses decreased $504,000 to $1.3
million in fiscal year 1999, or 27.7%, from $1.8 million in fiscal year 1998.
The decrease is primarily due to lower expenditures on pre-opening costs for new
restaurants during fiscal year 1999 than was expended on pre-opening costs for
restaurants opened in fiscal year 1998.
Depreciation and amortization. Depreciation and amortization increased $1.7
million to $7.4 million in fiscal year 1999, or 29.6%, from $5.7 million in
fiscal year 1998. The increase is primarily due to the operation of 12 new
restaurants opened since the end of fiscal year 1998 and the full year of
operations of the 10 new restaurants opened in fiscal year 1998 that were open
and operating only partially during that fiscal year. As a percentage of sales,
depreciation and amortization increased by 0.4 percentage points from 5.7% for
fiscal year 1998 to 6.1% for fiscal year 1999.
General and administrative. General and administrative costs increased
$121,000 to $6.8 million in fiscal year 1999, or 1.8%, from $6.6 million in
fiscal year 1998. As a percentage of sales, general and administrative costs
decreased 1.0 percentage points from 6.6% for fiscal year 1998 to 5.6% for
fiscal year 1999. This percentage decrease was a result of the increase in the
revenue base since fiscal year 1998 and the fixed nature of general and
administrative costs.
Impairment of long-lived assets. During fiscal year 1998, the Company
recognized an impairment loss of $1.1 million relating to the write-down of
assets of two Company-owned restaurants. The write-down was calculated according
to the provisions of Statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be
Disposed Of".
Total other income (expense). Total other income (expense) decreased
$304,000 in expense to $1.8 million in fiscal year 1999, or 14.3%, from $2.1
million in fiscal year 1998. During fiscal year 1998 third quarter, the Company
incurred a loss of $611,000 on the sale of the Boca Raton, Florida restaurant.
The decrease is offset by additional interest expense on additional debt
incurred due to the development and opening of 12 new restaurants since the end
of fiscal year 1998.
Income tax. The Company has a valuation allowance that offsets a portion of
its net deferred tax assets. Each quarter management determines, based on
projections, the realizability of the related deferred tax assets in future
years and reduces the allowance to the extent year-to-date income is available
to realize the benefit of the deferred tax assets. The reduction of the
valuation allowance currently minimizes income tax expense. Income tax expense
of $233,000 and $216,000 in fiscal year 1999 and fiscal year 1998, respectively,
represent state income tax and alternative minimum tax.
17 Weeks Ended April 26, 1998 ("Stub Period 1998") Compared to the 17 Weeks
Ended April 27, 1997 ("Stub Period 1997")
Restaurants open. At April 26, 1998, there were 44 Company-owned
restaurants in operation, excluding Kendall. At April 27, 1997, there were 34
Company-owned restaurants, excluding Kendall and Boca. (In December 1997, the
Company sold its ownership interest in the limited liability company which owned
Boca.) This represented a 29.4% increase in the number of Company-owned
restaurants.
Total revenues. Total revenues increased $7.4 million, or 24.4%, from $30.3
million for the stub period 1997 to $37.7 million for the stub period 1998. The
increase was primarily attributable to the operation of 10 new restaurants
opened since the end of the stub period 1997. Sales at comparable stores were up
0.2% reversing a three-year period of declines. This positive trend resulted
from a media advertising campaign launched in February 1998. In the comparable
period of 1997, advertising expenditures had been curtailed.
Food and beverage. Food and beverage costs as a percentage of sales
decreased by 1.0 percentage points to 32.2% for the stub period 1998 from 33.2%
for the stub period 1997. This decrease was primarily due to improved management
of such costs in field operations as
15
<PAGE> 18
well as corporate management and to food and bar cost models designed to improve
margins through reduced costs.
Labor and benefits. Labor and benefits costs increased $1.3 million to
$10.3 million for the stub period 1998, or 15.4%, from $9.0 million for the stub
period 1997. The increase was primarily due to the operation of 10 new
restaurants opened since the end of stub period 1997. However, as a percentage
of sales, labor and benefits costs decreased by 2.2 percentage points to 27.4%
for the stub period 1998 from 29.6% for the stub period 1997. This decrease was
primarily due to the restructuring of the restaurant level management team,
improved productivity of the Company's in-store meat operation and including
hostesses as tipped employees eligible for the tip credit. Previously, hostesses
were paid a higher rate per hour.
Occupancy and other. Occupancy and other costs increased $2.4 million to
$7.9 million in the stub period 1998 or 43.0%, from $5.5 million in the stub
period 1997. The increase is primarily due to the operation of 10 new
restaurants opened since the end of the stub period 1997. As a percentage of
sales, occupancy and other costs increased by 2.7 percentage points from 18.1%
for the stub period 1997 to 20.8% for the stub period 1998. This increase was
due to management's conscious decision to concentrate on building
brand-awareness through investment spending on production and media advertising.
Advertising expense was curtailed in the prior year's comparable period.
Pre-opening amortization. Pre-opening amortization decreased $199,000 to
$520,000 for the stub period 1998, or 27.7%, from $719,000 for the stub period
1997. The decrease is primarily due to lower expenditures on pre-opening costs
for new restaurants during the stub period 1998 than was expended on pre-opening
costs for restaurants opened in the stub period 1997.
Depreciation and amortization. Depreciation and amortization increased
$691,000 to $2.1 million for the stub period 1998, or 47.5%, from $1.5 million
for the stub period 1997. The increase was due to the Company entering into
sale-leaseback transactions for the financing of certain restaurant furniture,
fixtures and equipment. The transactions resulted in capital leases with terms
shorter than the original lives of the furniture, fixtures and equipment. As a
percentage of sales, depreciation and amortization increased by 0.9 percentage
points from 4.8% for the stub period 1997 to 5.7% for the stub period 1998.
General and administrative. General and administrative costs increased
$437,000 to $2.2 million for the stub period 1998, or 24.6%, from $1.8 million
for the stub period 1997. As a percentage of sales, general and administrative
costs were comparable for both periods presented.
Total other income (expense). Total other income (expense) increased
$335,000 in expense to $543,000 for the stub period 1998, or 161.0%, from
$208,000 for the stub period 1997. The increase was attributable to additional
interest expense on new debt incurred due to the development and opening of 10
new restaurants since the end of the stub period 1997.
Income tax. The Company has a valuation allowance that offsets a portion of
its net deferred tax assets. Each quarter management determines, based on
projections, the realizability of the related deferred tax assets in future
years and reduces the allowance to the extent year-to-date income is available
to realize the benefit of the deferred tax assets. The reduction of the
valuation allowance currently minimizes income tax expense. Income tax expense
of $81,000 and $40,000 in the stub period 1998 and the stub period 1997,
respectively, represent state income tax and alternative minimum tax.
Liquidity and Capital Resources
The Company requires capital principally for the opening of new restaurants
and, to date, has financed its requirements through privately placed equity
financing, a public offering of equity, bank borrowings, operating and capital
leases, borrowings from related parties, and cash flows from operations.
As of April 30, 2000, the Company has obtained sale-leaseback credit
facilities from Franchise Finance Corporation of America ("FFCA"). This
sale-leaseback credit facility 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 Fund Advisors, Inc. ("CNL") expired
in January 2000. The Company is in the process of securing additional
sale-leaseback credit facilities with CNL. 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.
In September 1997, the Company entered into a $15.0 million loan facility
with Finova Capital Corporation. The facility consists of a 15-year term loan
collateralized by real estate with a 9.55% interest rate. The proceeds were used
in part to liquidate existing mortgages on 12 restaurants, which amounted to
$7.4 million as of September 1997. The remaining balance of $7.3 million, net of
fees and other costs, was primarily used for expansion of the Company's
operations. Monthly principal and interest payments for this facility are due
through October 2012.
On March 27, 1998, the Company entered into a $2.9 million loan facility
with Finova Capital Corporation. The facility consists of a 10-year term loan
collateralized by personal property and fixtures at four Company-owned
restaurants with an interest rate of 8.96%. The proceeds, net of fees and other
costs, were used primarily for expansion of the Company's operations.
During January 1999, the Company entered into a Master Security Agreement
with Pacific Financial Company. The agreement consists of three 5-year term
loans collateralized by personal property and fixtures at three Company-owned
restaurants with an effective interest rate of 10.74%. Monthly principal and
interest payments are due through February 2004.
16
<PAGE> 19
The Company's capital expenditures aggregated approximately $32.7 million
and $14.6 million in fiscal year 2000 and 1999, respectively, primarily for new
restaurant expansion.
The Company plans to open approximately 15 new Company-owned Roadhouse
Grill restaurants in fiscal year 2001. The development costs for a restaurant
may increase substantially when the Company purchases or leases land for the
building site and constructs a restaurant from the ground-up. The average cash
investment for the 15 new restaurants opened during fiscal year 2000 was
approximately $3.9 million for units in remodeled buildings (3 units) and
approximately $18.5 million for from-the-ground-up units constructed (12 units).
This average cash investment includes building structures (where applicable),
building or leasehold improvements, and equipment and fixtures, but excludes
land and pre-opening costs. Costs for land, if purchased, have ranged from
approximately $550,000 to $1.2 million per site. The Company has estimated
capital expenditures to be approximately $22.5 million to $30 million in fiscal
year 2001. Actual capital needs could vary significantly depending on the number
of restaurants the Company develops through the lease of space in existing
buildings as compared to the purchase or lease of building sites and the
construction of from-the-ground-up restaurants. The Company expects that in
fiscal year 2001, a greater percentage of restaurant development will come
through the purchase or lease of building sites and construction of ground-up
units compared to prior years, and therefore the Company's average cash
investment in new unit development will be somewhat greater than in prior years.
The Company expects that funds available to it under existing
sale-leaseback credit facilities as well as other sale-leaseback credit
facilities secured along with cash flows from restaurant operations and
equipment financing will fund planned expansion through fiscal year 2001. The
Company will require additional capital to carry out its current expansion plans
beyond fiscal year 2001. Various factors, however, could cause the Company to
use capital more rapidly than planned. These factors include increased
expansion, an increased number of restaurants developed through the purchase or
lease of a building site and the construction of a restaurant from-the-ground-up
rather than through leased space, and decreased cash flows from existing or new
restaurants. Although to date the Company has developed each of its restaurants
individually, it may in the future consider expansion through the acquisition of
groups of existing restaurants (including restaurants owned by its franchisees).
In that case, the Company might use capital more rapidly than expected. If the
Company uses capital more rapidly than expected and/or fails to obtain the
additional required capital through some type of financing, it would reduce
future planned expansion, particularly beyond fiscal year 2001.
As is common in the restaurant industry, the Company has generally operated
with negative working capital ($15.9 million at April 30, 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 operates on a fifty-two or fifty-three week fiscal year. 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
In fiscal year 2000 the Company operated on a fifty-three week fiscal
year in which the fourth quarter consisted of fourteen weeks. The Company's
Roadhouse Grill restaurants have generally experienced higher average sales in
third and fourth quarters ("Winter Months"). As a result, operating income and
net income margins have been and are expected to continue to be higher in each
of those quarters than in the first and second quarters ("Summer Months"). As a
general rule, the restaurant industry as a whole experiences higher averge
sales, operating and net income in the Winter Months as opposed to the Summer
Months. At April 30, 2000, of the 72 Company-owned restaurants in operation, 35
are located in Florida which has a significant influx of tourists during the
Winter Months, thus increasing the Company's sales, operating and net income
during that period. Because of the tremendous amount of tourism in Florida, if
tourism declines from one year to the next, it could have a significant impact
on the Company's sales, operating and net income during the Winter Months.
In addition, quarterly results have been and are expected to continue
to be substantially affected by the timing of new restaurant openings.
Accordingly, quarter-to-quarter comparisons of the Company's results of
operations may not be meaningful. Moreover, because of seasonality of the
Company's business and the impact of new restaurant openings, results for any
quarter are not necessarily indicative of the results that may be achieved for a
full fiscal year.
To date, the Company's primary development has been focused in areas
of the southeastern United States that enjoy more moderate climates than other
regions of the country. During the last several fiscal years, however, the
Company developed a limited number of Roadhouse Grill restaurants in the Midwest
and Northeast. The Company's current plans call for a substantial increase in
development of restaurants in the Midwest and Northeast. Climates in these
regions are less mild and harsh weather conditions (primarily in winter and late
fall) have in the past, and could in the future, adversely affect the
performance of restaurants in these regions and the Company as a whole.
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<PAGE> 20
Year 2000 Issue
The principal Year 2000 issue was whether previously written software
applications and operating programs would properly recognize dates beginning in
the Year 2000. As of April 30, 2000, the Company has not experienced any
significant information technology systems issues or any material adverse impact
on the Company's results of operations, financial condition or cash flows as a
result of the Year 2000.
Impact of Inflation
The primary inflationary factors affecting the Company's operations include
food, beverage and labor costs. Labor costs are affected by changes in the labor
market generally and, because many of the Company's employees are paid at
federal and state established minimum wage levels, changes in such wage laws
affect the Company's labor costs. In addition, most of the Company's leases
require the Company to pay taxes, maintenance, repairs and utilities, and these
costs are subject to inflationary pressures. The Company believes recent low
inflation rates in its principal markets have contributed to relatively stable
food and labor costs. There is no assurance that low inflation rates will
continue or that the Company will have the ability to control costs in the
future.
Impact of Recent Accounting Pronouncements
The Company adopted the provisions of Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1") during fiscal year 2000. SOP 98-1 provides guidance
in determining capitalizable costs incurred in connection with the development
or acquisition of internal use software. SOP 98-1 states that certain costs
incurred during the "Application Development Stage," (design of chosen path,
coding, installation to hardware, and testing) be capitalized. These costs
include external direct costs of materials and services consumed in developing
or obtaining internal use software, payroll and payroll-related costs for
employees who are directly associated with and who devote time to the
internal-use software project, and interest cost in accordance with SFAS
Statement No. 34, "Capitalization of Interest Costs." Initial application was at
the beginning of the fiscal year and applied to costs incurred for all projects
during the current fiscal year, including projects in progress upon initial
application of SOP 98-1. The adoption of SOP 98-1 did not have a material impact
on the Company's consolidated financial statements and notes thereto.
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 is reported as
a change in accounting principle at the beginning of the first quarter of fiscal
year 2000. Thereafter, all such cost are expensed as incurred and are included
in "pre-opening expenses" within the accompanying statements of income.
In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities." Among
other provisions, SFAS No. 133 establishes accounting and reporting standards
for derivative instruments and hedging activities. It also requires that an
entity recognizes all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
SFAS No. 133 is effective for financial statements for fiscal years beginning
after June 15, 2000. Management has not determined the effect, if any, of
adopting SFAS No. 133.
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 on the Company's consolidated financial statements and notes thereto.
Item 8. Financial Statements and Supplementary Data
See "Index to Financial Statements" on Page F-1.
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
18
<PAGE> 21
PART III
Item 10. Directors and Executive Officers of the Registrant
The information called for by Item 10 is or will be set forth in the
definitive proxy statement relating to Roadhouse Grill's 2000 annual meeting of
shareholders pursuant to the Commission's Regulation 14A. Such definitive proxy
statement relates to a meeting of shareholders involving the election of
directors and the portions thereof called for by Item 10 are incorporated herein
by reference pursuant to Instruction G to Form 10-K.
Item 11. Executive Compensation
The information called for by Item 11 is or will be set forth in the
definitive proxy statement relating to Roadhouse Grill's 2000 annual meeting of
shareholders pursuant to the Commission's Regulation 14A. Such definitive proxy
statement relates to a meeting of shareholders involving the election of
directors and the portions thereof called for by Item 11 are incorporated herein
by reference pursuant to Instruction G to Form 10-K.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information called for by Item 12 is or will be set forth in the
definitive proxy statement relating to Roadhouse Grill's 2000 annual meeting of
shareholders pursuant to the Commission's Regulation 14A. Such definitive proxy
statement relates to a meeting of shareholders involving the election of
directors and the portions thereof called for by Item 12 are incorporated herein
by reference pursuant to Instruction G to Form 10-K.
Item 13. Certain Relationships and Related Transactions
The information called for by Item 13 is or will be set forth in the
definitive proxy statement relating to Roadhouse Grill's 2000 annual meeting of
shareholders pursuant to the Commission's Regulation 14A. Such definitive proxy
statement relates to a meeting of shareholders involving the election of
directors and the portions thereof called for by Item 13 are incorporated herein
by reference pursuant to Instruction G to Form 10-K.
PART IV
Item 14. Financial Statements and Exhibits
(a) List of documents filed as part of this report:
1. Consolidated Financial Statements
The Consolidated Financial Statements are listed in the accompanying
"Index to Financial Statements" on Page F-1.
2. Financial Statement Schedules
Financial Statement Schedules are listed in the accompanying "Index to
Financial Statements" on Page F-1.
3. Exhibits
The exhibits filed with or incorporated by reference in this report
are as follows:
The exhibits indicated by an asterisk (*) have been previously filed with the
Securities and Exchange Commission and are incorporated herein by reference.
3.1* Articles of Incorporation of the Company (Exhibit 3.1 to the Company's
Registration Statement on Form S-1 as filed with the Securities and Exchange
Commission on September 26, 1996, as amended (the "Registration Statement")).
3.2* Bylaws of the Company (Exhibit 3.2 to the Company's Registration
Statement).
10.1* Form of the Company's Development Agreement (Exhibit 10.2 to the
Registration Statement).
10.3* Form of the Company's Stock Option Agreement (Exhibit 10.5 to the
Registration Statement).
10.4* Sub-Lease Agreement, dated July 31, 1995, between Equitable Real Estate
Investment, Inc., Compass management and Leasing, Inc. and the Company., for
property located at 6600 N. Andrews Ave., Ste. 160, Ft. Lauderdale, Florida
33309 (Exhibit 10.6 to the Registration Statement).
10.5* Assignment and Assumption Agreement, dated March 15, 1995, between
Roadhouse Waterway, inc. and Roadhouse Grill Commercial, Inc., for property
located in Fort Lauderdale, Florida (lease of restaurant premises) (Exhibit 10.7
to the Registration Statement).
10.6* Lease Agreement, dated April 26, 1994, between Piccadilly Cafeterias, Inc.
and the Company, for property located in Winter Park, Florida (lease of
restaurant premises) (Exhibit 10.8 to the Registration Statement).
10.7* Ground Lease, dated May 25, 1995, between Bruno, Inc. and the Company, for
property located in Sandy Springs, Georgia (lease of restaurant premises)
(Exhibit 10.9 to the Registration Statement).
10.8* Lease, dated April 17, 1995, between Captec Net Lease Realty, Inc. and New
York Roasters, for property located in Cheektowaga, New York (lease of
restaurant premises, assumed by the Company) (Exhibit 10.10 to the Registration
Statement).
10.9* Operating Agreement dated April 28, 1994, of Kendall Roadhouse Grill, L.C.
(Exhibit 10.11 to the Registration Statement).
10.10* Management Agreement, dated November 8, 1994, between Boca Roadhouse, Inc
and the Company (Exhibit 10.12 to the Registration Statement).
10.11* 1994 Registration Rights Agreement, dated February 10, 1994 (Exhibit
10.19 to the Registration Statement).
10.12* Amendment to 1994 Registration Rights Agreement, dated June 8, 1994
(Exhibit 10.20 to the Registration Statement).
10.13* Amendment to 1994 Registration Rights Agreement, dated July 26, 1996
(Exhibit 10.21 to the Registration Statement).
10.14* Stock Option Agreement, dated February 10, 1994, between the Company and
J. David Toole III (Exhibit 10.22 to the Registration Statement).
10.15* Purchase and Sale Agreement, dated August 30, 1996, between Roadwear,
Inc. and the Company, relating to the Kendall restaurant (Exhibit 10.28 to the
Registration Statement).
10.16* Promissory note, dated August 16, 1996, made by the Company in favor of
Berjaya (Exhibit 10.30 to the Registration Statement).
10.17* Master Development Agreement, dated January 5, 1996, between the Company
and Roadhouse Grill Asia (Exhibit 10.31 to the Registration Statement).
10.18* Lease Transfer and Assumption Agreement for equipment used in New York
Roadhouse Grill restaurant, dated March 29, 1995, assumed by the Company
(Exhibit 10.32 to the Registration Statement).
10.19* Amended and Restated 1994 Stock Option Plan (Exhibit 10.37 to the
Registration Statement).
10.20* Stock Purchase Agreement dated May 26, 1995 between the Company and the
several purchasers named in Schedule I (Exhibit 10.38 to the Registration
Statement).
10.21* Investment Agreement, dated October 25, 1995 between Berjaya and the
Company (Exhibit 10.39 to the Registration Statement).
10.22* Stock Option Agreement between the Company and J. David Toole III, dated
October 24, 1996 (Exhibit 10.41 to the Registration Statement).
10.23* Master Lease Agreement between the Company and Pacific Financial Company,
dated June 2, 1997 (Exhibit 10.42 to the Company's Quarterly Report on Form 10-Q
for the fiscal quarter ended June 29, 1997).
10.24* Severance Agreement dated July 29, 1997, between the Company and John
David Toole III (Exhibit 4.8 to the Company's Registration Statement on Form S-8
dated August 19, 1997).
10.25* Loan and Security Agreement by and between the Company and Finova Capital
Corporation, dated September 12, 1997(Exhibit 10.44 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended September 28, 1997).
10.26* Mortgage and Security Agreement by and between the Company and Finova
Capital Corporation, dated September 5, 1997(Exhibit 10.45 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended September 28, 1997).
10.27* Promissory Note, dated September 5, 1997, made by the Company in favor of
Finova Capital Corporation(Exhibit 10.46 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended September 28, 1997).
10.28* Agreement for Purchase and Sale of Membership Interest in Boca Roadhouse,
L.C., a limited liability company, dated December 15, 1997 (Exhibit 10.47 to the
Company's Annual Report on Form 10-K405 for the fiscal year ended December 28,
1997).
10.29* Roadhouse Grill, Inc. Deferred Compensation Plan. Effective June 3, 1997
(Exhibit 10.48 to the Company's Annual Report on Form 10-K405 for the fiscal
year ended December 28, 1997).
10.30* Amendment dated December 1, 1997 to that Master Development Agreement
executed January 5, 1996 by and between Roadhouse Grill, Inc. and Roadhouse
Grill Asia Pacific (H.K.) Limited (Exhibit 10.49 to the Company's Annual Report
on Form 10-K405 for the fiscal year ended December 28, 1997).
10.31* Amendment dated December 1, 1997 to that Master Development Agreement
executed January 5, 1996 by and between Roadhouse Grill, Inc. and Roadhouse
Grill Asia Pacific (Cayman) Limited (Exhibit 10.50 to the Company's Annual
Report on Form 10-K405 for the fiscal year ended December 28, 1997).
10.32* Loan and Security Agreement by and between the Company and Finova Capital
Corporation, dated March 27, 1998 (Exhibit 10.51 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 29, 1999).
10.33* Promissory Note, dated March 27, 1998, made by the Company in favor of
Finova Capital Corporation (Exhibit 10.52 to the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended March 29, 1999).
10.34* Roadhouse Grill, Inc. 1998 Omnibus Stock Option Plan, effective July 1,
1998 (Exhibit 10.53 to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended January 24, 1999).
10.35* Lease Agreement by and between the Company and FFCA Acquisition
Corporation, dated August 19, 1998 (Exhibit 10.54 to the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended January 24, 1999).
10.36* Lease Agreement and Construction Addendum by and between the Company and
CNL APF Partners, L.P., dated September 15, 1998 (Exhibit 10.55 to the Company's
Quarterly Report on Form 10-Q for the fiscal quarter ended January 24, 1999).
10.37* Master Security Agreement and Schedule No. 1 by and between the Company
and Pacific Financial Company, dated January 14, 1999 (Exhibit 10.56 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended January 24,
1999).
10.38* Revolving Loan Agreement with FINOVA Capital Corporation (Exhibit 10.57
to the Company's Quarterly Report on Form 10-Q for the fiscal quarter ended
October 24, 1999).
10.39* Promissory Note with First Union National Bank (Exhibit 10.58 to the
Company's Quarterly Report on Form 10-Q for the fiscal quarter ended October 24,
1999).
21.1 - Subsidiaries of the Registrant
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
The Company filed no reports on Form 8-K during the period covered by this
Form 10-K.
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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 by the undersigned, thereunto duly authorized, on this 31th day of
July, 2000.
ROADHOUSE GRILL, INC.
By: /s/ Ayman Sabi
------------------------
Ayman Sabi
President, Chief Executive
Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ Ayman Sabi President, Chief Executive July 31, 2000
---------------------------- Officer and Director
Ayman Sabi (Principal Executive Officer)
/s/ Ayman Sabi Acting Chief Financial Officer July 31, 2000
---------------------------- (Principal Financial Officer
Ayman Sabi and Principal Accounting Officer)
/s/ Vincent Tan Chairman of the Board July 31, 2000
---------------------------- of Directors
Vincent Tan
/s/ Philip Friedman Director July 31, 2000
----------------------------
Philip Friedman
/s/ Phillip Ratner Director July 31, 2000
----------------------------
Phillip Ratner
/s/ Alain K.K. Lee Director July 31, 2000
----------------------------
Alain K.K. Lee
</TABLE>
20
<PAGE> 23
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Report.............................................................................. F-2
Consolidated Balance Sheets as of April 30, 2000 and April 25, 1999....................................... F-3
Consolidated Statements of Operations for the Fifty-Three Weeks Ended April 30, 2000, the Fifty-Two Weeks
Ended April 25, 1999, the Seventeen Weeks Ended April 26, 1998, and the Fifty-Two Weeks Ended
December 28, 1997................................................................................... F-4
Consolidated Statements of Changes in Shareholders' Equity for the Fifty-Three Weeks Ended April 30, 2000,
the Fifty-Two Weeks Ended April 25, 1999, the Seventeen Weeks Ended April 26, 1998, and the Fifty-Two
Weeks Ended December 28, 1997....................................................................... F-5
Consolidated Statements of Cash Flows for the Fifty-Three Weeks Ended April 30, 2000, the Fifty-Two Weeks
Ended April 25, 1999, the Seventeen Weeks Ended April 26, 1998, and the Fifty-Two Weeks Ended
December 28, 1997................................................................................... F-6
Notes to Consolidated Financial Statements................................................................ F-7
</TABLE>
F-1
<PAGE> 24
Independent Auditors' Report
The Board of Directors
Roadhouse Grill, Inc.:
We have audited the accompanying consolidated balance sheets of Roadhouse Grill,
Inc. and subsidiaries as of April 30, 2000 and April 25, 1999 and the related
consolidated statements of operations, changes in shareholders' equity and cash
flows for the fifty-three weeks ended April 30, 2000, the fifty-two weeks ended
April 25, 1999, the seventeen weeks ended April 26, 1998 and the fifty-two weeks
ended December 28, 1997. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Roadhouse Grill,
Inc. and subsidiaries as of April 30, 2000 and April 25, 1999 and the results of
their operations and their cash flows for the fifty-three weeks ended April 30,
2000, the fifty-two weeks ended April 25, 1999, the seventeen weeks ended April
26, 1998 and the fifty-two weeks ended December 28, 1997 in conformity with
accounting principles generally accepted in the United States of America.
KPMG LLP
June 16, 2000
Miami, Florida
F-2
<PAGE> 25
ROADHOUSE GRILL, INC.
Consolidated Balance Sheets
April 30, 2000 and April 25, 1999
($ in thousands, except per share data)
<TABLE>
<CAPTION>
April 30, April 25,
2000 1999
-------- --------
Assets
<S> <C> <C>
Current assets:
Cash and cash equivalents .............................................................. $ 378 $ 975
Accounts receivable .................................................................... 1,026 1,279
Inventory .............................................................................. 1,622 1,181
Pre-opening costs, net ................................................................. -- 1,222
Deferred tax assets, net ............................................................... 431 573
Prepaid expenses ....................................................................... 2,127 992
-------- --------
Total current assets ................................................................ 5,584 6,222
Note receivable .......................................................................... 84 167
Property & equipment, net ................................................................ 92,469 77,821
Intangible assets, net of accumulated amortization of $386
and $227 at April 30, 2000 and April 25, 1999, respectively ............................ 2,276 2,031
Deferred tax assets, net ................................................................. 1,678 1,697
Other assets ............................................................................. 3,221 3,345
-------- --------
Total assets ....................................................................... $105,312 $ 91,283
======== ========
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable ....................................................................... $ 11,666 $ 4,692
Accrued expenses ....................................................................... 7,317 4,476
Current portion of long-term debt ...................................................... 1,252 1,047
Current portion of capital lease obligations ........................................... 1,280 1,593
-------- --------
Total current liabilities .......................................................... 21,515 11,808
Long-term debt ........................................................................... 24,409 18,458
Capital lease obligations ................................................................ 5,199 10,340
-------- --------
Total liabilities ................................................................... 51,123 40,606
Shareholders' equity:
Common stock $0.03 par value. Authorized 30,000,000 shares;
issued and outstanding 9,708,741 shares as of
April 30, 2000 and April 25, 1999................................................... 291 291
Additional paid-in capital ............................................................. 50,039 50,039
Retained earnings ...................................................................... 3,859 347
-------- --------
Total shareholders' equity ......................................................... 54,189 50,677
Total liabilities and shareholders' equity ......................................... $105,312 $ 91,283
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
F-3
<PAGE> 26
ROADHOUSE GRILL, INC.
Consolidated Statements of Operations
For the Fifty-Three Weeks Ended April 30, 2000, the Fifty-Two Weeks
Ended April 25, 1999, the Seventeen Weeks Ended April 26, 1998, and
the Fifty-Two Weeks Ended December 28, 1997
($ in thousands, except per share data)
<TABLE>
<CAPTION>
April 30, 2000 April 25, 1999 April 26, 1998 December 28, 1997
-------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Total revenues ............................................... $ 148,495 $ 120,681 $ 37,684 $ 92,795
Cost of restaurant sales:
Food and beverage ......................................... 48,710 39,505 12,130 30,991
Labor and benefits ........................................ 43,201 33,897 10,340 27,849
Occupancy and other ....................................... 29,879 23,776 7,856 17,577
Pre-opening expenses ...................................... 2,387 1,318 520 2,021
----------- ----------- ----------- -----------
Total cost of restaurant sales ............................ 124,177 98,496 30,846 78,438
Depreciation and amortization ................................ 8,510 7,351 2,145 4,981
General and administrative ................................... 8,241 6,766 2,210 6,208
Impairment of long-lived assets .............................. -- -- -- 1,120
----------- ----------- ----------- -----------
Total operating expenses .................................. 140,928 112,613 35,201 90,747
----------- ----------- ----------- -----------
Operating income .......................................... 7,567 8,068 2,483 2,048
Other income (expense):
Interest expense, net ..................................... (2,301) (2,210) (719) (1,552)
Equity in net income of affiliates ........................ -- (3) 57 62
Other, net ................................................ -- 386 119 320
Loss on sale of investments in affiliate .................. -- -- -- (611)
----------- ----------- ----------- -----------
Total other expense .................................. (2,301) (1,827) (543) (1,781)
----------- ----------- ----------- -----------
Income before taxes and cumulative
effect of change in accounting principle ........... 5,266 6,241 1,940 267
Income tax expense ........................................... 801 233 81 175
----------- ----------- ----------- -----------
Income before cumulative effect of
effect of change in accounting principle ........... 4,465 6,008 1,859 92
Cumulative effect of change in accounting
principle (net of tax benefit of $269) ..................... (953) -- -- --
----------- ----------- ----------- -----------
Net Income ................................................... $ 3,512 $ 6,008 $ 1,859 $ 92
=========== =========== =========== ===========
Basic net income per common share:
Basic income before cumulative
effect of change in accounting principle ................. $ 0.46 $ 0.63 $ 0.20 $ 0.01
Cumulative effect of change in accounting principle......... (0.10) -- -- --
----------- ----------- ----------- -----------
Basic net income per common share ............................ $ 0.36 $ 0.63 $ 0.20 $ 0.01
=========== =========== =========== ===========
Diluted net income per common share:
Diluted income before cumulative
effect of change in accounting principle ................. $ 0.46 $ 0.62 $ 0.20 $ 0.01
Cumulative effect of change in accounting principle ........ (0.10) -- -- --
----------- ----------- ----------- -----------
Diluted net income per common share .......................... $ 0.36 $ 0.62 $ 0.20 $ 0.01
=========== =========== =========== ===========
Weighted-average common shares outstanding ................... 9,708,741 9,536,631 9,305,408 9,305,408
=========== =========== =========== ===========
Weighted-average common shares and share
equivalents outstanding - assuming dilution ................ 9,792,019 9,668,469 9,326,642 9,305,408
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE> 27
ROADHOUSE GRILL, INC.
Consolidated Statements of Changes in Shareholders' Equity
For the Fifty-Three Weeks Ended April 30, 2000, the Fifty-Two Weeks Ended
April 25, 1999, the Seventeen Weeks Ended April 26, 1998
and the Fifty-Two Weeks Ended December 28, 1997
($ in thousands)
<TABLE>
<CAPTION>
Common Stock Preferred Stock
----------------------- -----------------
Additional Retained
Shares Amount Shares Amount Paid-in-Capital Earnings Total
------ ------ ------ ------ --------------- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 29, 1996 ............ 9,305,408 $ 279 -- $ -- $ 48,433 $ (7,612) $ 41,100
Deferred compensation ............. -- -- -- -- 103 -- 103
Net income ........................ -- -- -- -- -- 92 92
--------- --------- ----- ----- --------- --------- ---------
Balance December 28, 1997 ............ 9,305,408 279 -- -- 48,536 (7,520) 41,295
Net income ........................ -- -- -- -- -- 1,859 1,859
--------- --------- ----- ----- --------- --------- ---------
Balance April 26, 1998 ............... 9,305,408 279 -- -- 48,536 (5,661) 43,154
Stock options exercised ........... 3,333 -- -- -- 15 -- 15
Conversion of debt to equity....... 400,000 12 -- -- 1,488 -- 1,500
Net income ........................ -- -- -- -- -- 6,008 6,008
--------- --------- ----- ----- --------- --------- ---------
Balance April 25, 1999 ............... 9,708,741 -- -- -- 50,039 347 50,677
Net income ........................ -- -- -- -- -- 3,512 3,512
--------- --------- ----- ----- --------- --------- ---------
Balance April 30, 2000 ............... 9,708,741 $ 291 -- $ -- $ 50,039 $ 3,859 $ 54,189
========= ========= ===== ===== ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE> 28
ROADHOUSE GRILL, INC.
Consolidated Statements of Cash Flows
For the Fifty-Three Weeks Ended April 30, 2000, the Fifty-Two Weeks Ended
April 25, 1999, the Seventeen Weeks Ended April 26, 1998,
and the Fifty-Two Weeks Ended December 28, 1997
($ in thousands)
<TABLE>
<CAPTION>
April 30, April 25, April 26, December 28,
2000 1999 1998 1997
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash flows from operating activities
Net income .................................................. $ 3,512 $ 6,008 $ 1,859 $ 92
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization ............................. 8,510 8,669 2,665 7,002
Provision for bad debt .................................... 83 -- -- --
Deferred tax expense (benefit) ............................ 161 (1,849) (421) --
Non-cash compensation expense ............................. -- -- -- 103
Equity in net income (loss) of affiliate .................. -- 3 (57) (62)
Cumulative effect of change in accounting principle........ 1,222 -- -- --
Impairment of long-lived assets ........................... -- -- -- 1,120
Loss on sale of restaurant................................. -- -- -- 611
Changes in assets and liabilities:
Decrease (increase) in accounts receivable................. 253 (1,037) (80) 79
(Increase) in inventory ................................... (441) (208) (9) (116)
(Increase) in pre-opening costs ........................... -- (1,573) (383) (1,618)
(Increase) decrease in prepaid expenses ................... (1,135) (450) 273 (237)
Decrease (increase) in other assets........................ 35 247 (478) (1,911)
Increase (decrease) in accounts payable ................... 6,974 (166) 1,097 (1,486)
Increase (decrease) increase in accrued expenses........... 2,840 (991) 1,108 1,361
-------- -------- -------- --------
Net cash provided by operating activities................ 22,014 8,653 5,574 4,938
-------- -------- -------- --------
Cash flows from investing activities
Dividends received from affiliate ........................... -- 93 70 58
Advances to affiliates, net ................................. -- 9 9 (41)
Payments for intangibles .................................... (404) (20) (5) (31)
Acquisition of restaurant, net of cash acquired.............. -- (1,359) -- --
Note from related party for borrowed funds .................. -- -- (1,000) --
Issuance of promissory note ................................. -- -- (100) --
Payment received from note from related party ............... -- 1,000 -- --
Payment received from notes receivable ...................... -- 128 26 75
Proceeds from sale-leaseback transactions ................... 5,700 2,787 -- 4,287
Purchase of property and equipment .......................... (32,694) (14,592) (5,595) (15,193)
Deposit on Kendall restaurant acquisition ................... -- -- -- (400)
Capital contribution to affiliate ........................... -- -- -- (25)
-------- -------- -------- --------
Net cash used in investing activities ................... (27,398) (11,954) (6,595) (11,270)
-------- -------- -------- --------
Cash flows from financing activities
Repayment of amount due to related party .................... -- -- (1,500) (2,000)
Proceeds from long-term debt ................................ 7,196 2,651 2,880 15,000
Repayment of long-term debt ................................. (1,039) (741) (171) (8,542)
Payments on capital lease obligations ....................... (1,370) (1,204) (366) (650)
Proceeds from issuance of common stock ...................... -- 15 -- --
-------- -------- -------- --------
Net cash provided by financing .......................... 4,787 721 843 3,808
-------- -------- -------- --------
(Decrease) in cash and cash equivalents ........................ (597) (2,580) (178) (2,524)
Cash and cash equivalents at beginning of year ................. 975 3,555 3,733 6,257
-------- -------- -------- --------
Cash and cash equivalents at end of year ....................... $ 378 $ 975 $ 3,555 $ 3,733
======== ======== ======== ========
Supplementary disclosures:
Interest paid ............................................... $ 2,782 $ 2,532 $ 809 $ 2,215
======== ======== ======== ========
Income taxes paid ........................................... $ 923 $ 2,223 $ 23 $ 156
======== ======== ======== ========
</TABLE>
Non-cash investing and financing activities:
During, the fifty-three weeks ended April 30, 2000, the Company entered
into four sale-leaseback transactions that have been accounted for as
capital leases for real estate in the amount of $3.6 million. No gain or
loss was deferred or recognized in connection with these transactions.
During the fifty-two weeks ended April 25, 1999, the Company issued 400,000
shares of common stock to Berjaya Group (Cayman) Limited ("Berjaya"), the
Company's majority shareholder. The transaction was consummated pursuant to
approval by the Board of Directors to convert $1.5 million of debt
outstanding into common stock at a price of $3.75 per share.
During the fifty-two weeks ended April 25, 1999, the Company entered into
four sale-leaseback transactions that have been accounted for as capital
leases for real estate in the amount of $3.8 million. No gain or loss was
deferred or recognized in connection with these transactions.
During the fifty-two weeks ended December 29, 1996, $3.5 million of
long-term debt was converted into common stock. The Company entered into
capital lease obligations and seller financing mortgage agreements of
$44,000 and $2.1 million, respectively, during the fifty-two weeks ended
December 29, 1996.
See accompanying notes to consolidated financial statements.
F-6
<PAGE> 29
ROADHOUSE GRILL, INC.
Notes to Consolidated Financial Statements
April 30, 2000, April 25, 1999, April 26, 1998 and December 28, 1997
(1) Description of Business and Summary of Significant Accounting Policies
(a) Business
Roadhouse Grill, Inc. (the "Company") was incorporated under the laws
of the state of Florida in 1992. The principal business of the Company is
the operation of specialty restaurants. The Company has also granted
franchises and licenses to operate restaurants under the "Roadhouse Grill"
name.
The consolidated financial statements include the financial statements
of Roadhouse Grill, Inc., and its wholly-owned subsidiaries. All
significant intercompany balances and transactions have been eliminated in
consolidation.
As of April 30, 2000, Roadhouse Grill, Inc. owns and operates 72 full
service, casual dining restaurants, and franchises three other restaurants
under the name "Roadhouse Grill". The Company was incorporated in October
1992 and opened the first Company-owned restaurant in Pembroke Pines,
Florida in March 1993. Since then, the Company has opened 71 more
restaurants in Florida, Georgia, North Carolina, South Carolina,
Mississippi, Louisiana, Arkansas, Alabama, New York and Ohio. One
franchised location is located in Kuala Lumpur, capital city of Malaysia,
and two domestic franchises are located in Las Vegas, Nevada.
On July 12, 1999, the Company terminated its licensing agreement for
the North Palm Beach Roadhouse Grill restaurant ("North Palm Beach") and
began operating the location as a Company-owned restaurant.
During 1998, the Company had a 50 percent interest in Kendall Roadhouse
Grill, L.C., a limited liability company which owned the Kendall, Florida
restaurant ("Kendall"). Pursuant to its operating agreement, the Company
managed the operations of the Kendall restaurant. The Company also received
management fees and allocated its share of the restaurant's profits and
losses under this operating agreement. On August 14, 1998, the Company
purchased the remaining 50 percent interest in Kendall Roadhouse Grill,
L.C. for a purchase price of $1.6 million (see Note 13). Subsequent to the
purchase, Kendall Roadhouse Grill, L.C. ceased to exist as a legal entity.
On December 11, 1997, the Company's Board of Directors voted to change
the Company's fiscal year. The new fiscal year ends on the last Sunday in
April. The Company filed a Form 10-K for the transition period which was
from December 29, 1997 through April 26, 1998. 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, the fourth
quarter consists of fourteen weeks.
During 1997, the Company had four restaurants licensed by Buffets, Inc.
During the seventeen weeks ended April 26, 1998, the Company dissolved its
licensee arrangement with Buffets, Inc. Buffets, Inc. discontinued using
the Roadhouse Grill name in its present form and there are no future
liabilities on either company's part.
During 1997, the Company also had a 50 percent interest in Boca Raton
Roadhouse Grill, L.C., a limited liability company that owned the Boca
Raton, Florida Roadhouse Grill restaurant ("Boca"). In December 1997,
operations at the Boca restaurant were discontinued and the Company sold
its interest in Boca to Boca Raton Roadhouse Grill, L.C. The Company
recognized a loss of $611,000 on the sale of its fifty percent interest.
During 1997, the Company managed the operations of Boca pursuant to its
operating agreement. Under such operating agreement, the Company received
management fees and was allocated its share of the restaurant's profits and
losses.
(b) Property and Equipment
Property and equipment are carried at cost less accumulated
depreciation. The cost of restaurants held under capital leases is recorded
at the lower of the net present value of the minimum lease payments or the
fair value of the leased property at the inception of the lease. Repairs
and maintenance are charged to expense as incurred. Major renewals and
betterments, which substantially extend the useful life of the property,
are capitalized and depreciated over the useful life of the asset. When
assets are retired or otherwise disposed of, the cost and accumulated
depreciation are removed from their respective accounts and any gain or
loss is recognized.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets. Amortization of capitalized leased
assets is calculated using the straight-line method over the shorter of the
estimated useful life of the leased asset or the lease term.
The Company accounts for long-lived assets in accordance with the
provisions of Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to Be Disposed Of". This Statement requires that long-lived assets and
certain identifiable intangibles be reviewed for impairment whenever events
or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to the future
net cash flows expected to be generated by the asset. If such assets are
considered to be impaired, the impairment to be recognized is measured by
the amount by which the carrying amount of the assets exceeds the fair
value of the assets. Assets to be disposed
F-7
<PAGE> 30
of are reported at the lower of the carrying amount or fair value less
costs to sell. During the fourth quarter of 1997, the Company recognized an
impairment loss of $1.1 million for the write-down of assets at two
Company-owned restaurants.
(c) Intangible Assets
Intangible assets consist primarily of goodwill recorded as a result of
a restaurant acquisitions (see Note 13) and are being amortized on a
straight-line basis over 16-17 years, the lease terms of the respective
restaurant properties. The Company evaluates whether changes have occurred
that would require revision of the remaining estimated useful life of the
assigned goodwill or render goodwill not recoverable. If such circumstances
arise, the Company uses undiscounted future cash flows to determine whether
the goodwill is recoverable.
(d) Cash and Cash Equivalents
The Company considers all short-term investments with an original
maturity of three months or less to be cash equivalents.
(e) Inventory
Inventories are valued at the lower of cost (based on first-in,
first-out inventory costing) or net realizable value and consist primarily
of restaurant food items, beverages and paper supplies.
(f) Income Taxes
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary differences
are expected to be recovered or settled. The effect on deferred tax assets
and liabilities of a change in tax rates is recognized in income in the
period that includes the enactment date.
(g) Pre-opening Costs
Pre-opening costs are costs incurred in the opening of new stores
(primarily payroll costs). During first quarter of fiscal year 2000, the
Company adopted the provisions of Statement of Position 98-5, "Reporting
for the Costs of Start-up Activities", which requires that pre-opening
costs be expensed as incurred. Previously, the Company amortized
pre-opening costs over a twelve-month period. The cumulative effect of the
change was $953,000, net of taxes.
Deferred costs related to sites subsequently determined to be
unsatisfactory and general site selection costs which cannot be identified
with a specific restaurant are charged to operations.
(h) Fiscal Year
The Company's fiscal year ends on the last Sunday in April.
(i) Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
(j) Disclosures About Fair Value of Financial Instruments
The estimated fair values of financial instruments have been determined
based on available information and appropriate valuation methodologies. The
carrying amounts of accounts receivable, accounts payable and accrued
expenses approximate fair value due to the short-term nature of the
accounts. The fair value of long-term debt is estimated based on market
rates of interest currently available to the Company. The fair value of
long-term debt at April 30, 2000 and April 25, 1999 is approximately $25.7
million and $19.5 million, respectively.
(k) Revenue Recognition
Total revenues include sales at Company-owned restaurants, royalties
received from restaurants operating under franchise agreements, and fees
earned under management agreements. Revenue earned from the game rooms and
vending machines in the restaurants is included in other income.
(l) New Accounting Standards
The Company adopted the provisions of Statement of Position 98-1,
"Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use" ("SOP 98-1") during fiscal year 2000. SOP 98-1 provides
guidance in determining capitalizable costs incurred in connection with the
development or acquisition of internal use software. SOP 98-1 states that
certain costs incurred during the "Application Development Stage," (design
of chosen path, coding, installation to hardware, and testing) be
capitalized. These costs include external direct costs of materials and
services consumed in developing or
F-8
<PAGE> 31
obtaining internal use software, payroll and payroll-related costs for
employees who are directly associated with and who devote time to the
internal-use software project, and interest cost in accordance with SFAS
Statement No. 34, "Capitalization of Interest Costs." Initial application
was at the beginning of the fiscal year and applied to costs incurred for
all projects during the current fiscal year, including projects in progress
upon initial application of SOP 98-1. The adoption of SOP 98-1 did not have
a material impact on the Company's consolidated financial statements and
notes thereto.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
SFAS No. 133, "Accounting for Derivative Instruments and Hedging
Activities." Among other provisions, SFAS No. 133 establishes accounting
and reporting standards for derivative instruments and hedging activities.
It also requires that an entity recognizes all derivatives as either assets
or liabilities in the statement of financial position and measure those
instruments at fair value. SFAS No. 133 is effective for financial
statements for fiscal years beginning after June 15, 2000. Management has
not determined the effect, if any, of adopting SFAS No. 133.
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 on the
Company's consolidated financial statements and notes thereto.
(m) Advertising Costs
The Company expenses all advertising costs as incurred. Advertising
expense for the fifty-three weeks ended April 30, 2000 ("Fiscal Year
2000"), the fifty-two weeks ended April 25, 1999 ("Fiscal Year 1999"), the
seventeen weeks ended April 26, 1998 (the "Stub Period 1998") and the
fifty-two weeks ended December 28, 1997 ("Fiscal Year 1997"), amounted to
approximately $4.4 million, $4.0 million, $1.4 million and $1.1 million,
respectively. Advertising expense is included within "occupancy and other"
in the accompanying consolidated statements of operations.
(n) Reclassifications
Certain prior year balances have been reclassified to conform to the
current presentation.
F-9
<PAGE> 32
(2) Statement of Operations
The following represents the Company's (unaudited) Statement of
Operations for the 17 weeks ended April 27, 1997:
(in thousands, except per share data)
April 27,
1997
-----------
Total revenue ..................................... $ 30,285
Cost of restaurant sales:
Food and beverage .............................. 10,056
Labor and benefits ............................. 8,957
Occupancy and other ............................ 6,214
-----------
Total cost of restaurant sales ................. 25,227
Depreciation and amortization ..................... 1,454
General and administrative ........................ 1,773
-----------
Total operating expenses ...................... 28,454
-----------
Operating income ............................... 1,831
Other income (expense):
Interest expense, net .......................... (347)
Equity in net income of affiliates ............. 29
Other, net ..................................... 110
Loss on sale of investments in affiliate ....... --
-----------
Total other income (expense) .............. (208)
-----------
Income before taxes ............................ 1,623
Income tax ..................................... 40
-----------
Net income ................................ $ 1,583
===========
Basic and diluted net income per
common share ...................................... $ 0.17
===========
Weighted average common shares
outstanding ....................................... 9,305,408
===========
Weighted average common shares and
share equivalents outstanding - assuming
dilution .......................................... 9,315,307
===========
The unaudited Statement of Operations for the 17 weeks ended April 27, 1997
reflects all adjustments which are, in the opinion of management, necessary to a
fair statement of operations for the 17 weeks ended April 27, 1997.
F-10
<PAGE> 33
(3) Property and Equipment
Property and equipment, net consist of the following:
<TABLE>
<CAPTION>
($ in thousands)
Estimated
April 30, 2000 April 25, 1999 Useful Lives
-------------- -------------- ------------
<S> <C> <C> <C>
Building ................................... $ 15,958 $ 25,215 20 years
Land ....................................... 13,257 11,699 --
Furniture and equipment .................... 25,604 21,730 3-7 years
Leasehold improvements ..................... 56,015 34,816 7-20 years
--------- ---------
110,834 93,460
Less: accumulated depreciation ............. (26,018) (18,392)
--------- ---------
84,816 75,068
Construction in progress ................... 7,653 2,753
--------- ---------
$ 92,469 $ 77,821
========= =========
</TABLE>
Included in property and equipment are buildings and equipment under
capital leases of $9.7 million and $10.0 million at April 30, 2000 and
April 25, 1999, respectively (see Note 4). The Company capitalized interest
costs of approximately $416,000 and $120,000 during Fiscal Year 2000 and
Fiscal Year 1999, respectively, with respect to qualifying construction
projects.
(4) Capital Leases
The following is a schedule of future minimum lease payments required
under capital leases as of April 30, 2000:
($ in thousands)
2001.................................................... $ 1,917
2002.................................................... 1,281
2003.................................................... 641
2004.................................................... 608
2005.................................................... 589
Thereafter.............................................. 4,100
--------
Total minimum lease payments............................ 9,136
Less: amount representing interest at varying rates
ranging from 9 percent to 13 percent.................. (2,657)
--------
Present value of net minimum capital lease payments..... 6,479
Less: current portion of capital lease obligations...... 1,280
--------
Minimum capital lease obligations excluding current
portion................................................ $ 5,199
========
(5) Operating Leases
The Company leases the majority of its operating restaurant facilities.
The lease terms range from 5 to 10 years and generally provide for renewal
options to extend the lease term.
The following is a schedule of future minimum lease payments required
under operating leases that have remaining noncancelable lease terms in
excess of one year as of April 30, 2000:
F-11
<PAGE> 34
($ in thousands)
2001...................................... $ 5,954
2002...................................... 5,944
2003...................................... 5,928
2004...................................... 5,889
2005...................................... 5,817
Thereafter................................ 27,802
--------
Total minimum lease payments.............. $ 57,334
========
The total rent expense for operating leases was $6.0 million, $4.2
million, $1.2 million and $3.1 million for Fiscal Year 2000, Fiscal Year
1999, the Stub Period 1998 and Fiscal Year 1997, respectively.
During Fiscal Year 2000, the Company entered into agreements for the
sale and leaseback of certain restaurant equipment for a period of sixty
months, which were recorded as operating leases. The equipment was sold at
book value of approximately $5.7 million.
During Fiscal Year 2000, the Company amended various sale-leaseback
agreements it had with Franchise Finance Corporation of America ("FFCA")
and CNL. The amended sale-leaseback agreements were then treated as
operating leases as of the effective date of the amendment. As a result of
this amendment, approximately $4.9 million in property and equipment and
$5.1 million in capital lease debt were removed from the balance sheet
and a gain of approximately $179,000 was recognized in the accompanying
statement of operations.
In April 2000, the Company secured an $18.5 million sale-leaseback
credit facility from FFCA which expires December 31, 2001. As of April 30,
2000, the $18.5 million balance is available from FFCA.
(6) Investment in and Advances to Affiliates
As discussed in Note 1(a), the Company had a 50 percent interest in
Boca during Fiscal Year 1997, and a 50 percent interest in Kendall at April
26, 1998 and December 28, 1997.
The Company accounted for these investments under the equity method.
Summarized income statement information for the Kendall and Boca
investments are as follows:
<TABLE>
<CAPTION>
($ in thousands)
Seventeen Weeks Fifty-Two Weeks
Ended December 28,
Summarized Income Statement Information: April 26, 1998 1997
---------------------------------------- -------------- ----
<S> <C> <C>
Revenue .................................. $1,055 $3,227
====== ======
Operating income ......................... $ 181 $ 335
====== ======
Net income ............................... $ 187 $ 287
====== ======
</TABLE>
Under the terms of the operating agreements discussed in Note 1(a),
profits and losses were allocated 50 percent to each partner for each
affiliate. Kendall cash distributions were paid 25 percent to the Company
and 75 percent to its partner until such time as the partners recover their
investment. Thereafter, the cash distributions were paid 50 percent to each
partner.
(7) Long-Term Debt
A summary of long-term debt, as of April 30, 2000 and April 25, 1999,
respectively, follows:
<TABLE>
<CAPTION>
($ in thousands)
1999 1998
---- ----
<S> <C> <C>
Loan payable to Finova Capital Corporation in the principal amount of $15.0
million; interest payable at 9.55%; principal and interest payable in equal
consecutive monthly installments of $157,087 each through October 1, 2012. $ 13,680 14,230
The facility consists of a 15-year term loan collateralized by real
estate. The proceeds were used in part to liquidate existing mortgages on 12
restaurants,
</TABLE>
F-12
<PAGE> 35
<TABLE>
<CAPTION>
<S> <C> <C>
which amounted to $7.4 million as of September 1997. The remaining balance of
$7.3 million, net of fees and other costs, was primarily used for expansion of
the Company's operations.
Loan payable to Finova Capital Corporation in the principal amount of $2.9
million; interest payable at 8.96%; principal and interest payable in equal
consecutive monthly installments of $36,420 each through April 2008. The 2,472 2,677
facility consists of a 10-year loan collateralized by personal property and
fixtures at four Company owned-restaurants. The proceeds, net of fees and other
costs, were used primarily for expansion of the Company's operations.
Note payable to First Union National Bank in the principal amount of $1.3
million; interest payable at one-month LIBOR rate plus 1.90%; principal and
interest payable in consecutive monthly installments through March 1, 2004.
The loan is a 5-year term loan collateralized by personal property and 1,253 1,323
fixtures at the Company's new corporate facility.
Master Security Agreement with Pacific Financial Company for three 5-year term
loans in the principal amount of $1.3 million; interest payable at 10.74%;
principal and interest payable in equal consecutive monthly
installments of $26,356 through February 2004. There is a principal balloon 1,060 1,275
payment of $132,400 due at the end of the term. The loans are
collateralized by personal property and fixtures at three Company-owned
restaurants.
Loan payable to First Union National Bank in the principal amount of $1.0
million; principal and interest payable in consecutive monthly installments
through May 1, 2010. The loan was originally short-term in nature, as a 120-
day promissory note. However, this note was refinanced to a 10-year term loan 1,000 --
with the interest payable at one-month LIBOR rate plus 1.75%. The proceeds
were utilized for the purchase of land for one new restaurant constructed
during the third quarter of fiscal year 2000.
Working Capital Line of Credit payable to Finova Capital Corporation in the
principal amount of $5 million; interest payable at prime rate plus 2%;
principal balloon payments of $1.0 million, $2.0 million, $1.0 million, and 5,000 --
$1.0 million due November 15, 2001, October 28, 2001, December 9, 2001 and
January 13, 2002, respectively, interest payable on a monthly basis. The
credit facility was utilized solely for the interim construction of new
restaurants.
Note payable to Finova in the principal amount of $1.196 million; interest
payable at 10.11%; principal and interest payable in equal consecutive
monthly installments of $14,366 through May 1, 2012. The proceeds were $ 1,196 --
utilized for the purchase of land for one new restaurant under construction.
--------- --------
Total long-term debt obligations 25,661 19,505
Less current installments 1,252 1,047
--------- --------
Long-term debt, net of current installments $ 24,409 18,458
========= ========
</TABLE>
Annual maturities on notes payable as of April 30, 2000 are as follows:
($ in thousands)
2001......................................... $ 1,252
2002......................................... 6,384
2003......................................... 1,505
2004......................................... 2,643
2005......................................... 1,386
Thereafter................................... 12,491
--------
25,661
Less: current portion........................ 1,252
--------
$ 24,409
========
F-13
<PAGE> 36
The carrying amount of assets used as collateral is approximately $27.1
million and $26.2 million at April 30, 2000 and April 25, 1999,
respectively. The Company is required to comply with various financial
covenants in connection with loan facilities entered into with Finova
Capital Corporation.
(8) Capital Stock
On February 6, 1998, the Company's Board of Directors approved the
issuance of 400,000 shares to Berjaya to convert $1.5 million of debt
outstanding to common stock at a price of $3.75 per share, based on the
closing market price as of February 6, 1998. The debt carried an interest
rate of 8.5% and was scheduled to be repaid during the first quarter of
1998. The transaction was consummated on September 30, 1998.
(9) Stock Option Plans
A Stock Option Plan (the "Original Plan") was adopted during 1994, and
later amended, for employees of the Company and members of the Board of
Directors who are not employees, and 516,666, shares of the Company's
common stock were reserved for issuance pursuant to such plan at April 30,
2000, April 26, 1998 and December 28, 1997. These options vest over a
three-year period from the date of grant and are exercisable for a period
of ten years after grant. During 1997, the Company granted options to
employees to purchase 173,000 shares of common stock at a price of $6.75
per share and certain directors options to purchase 15,000 shares of the
Company's common stock at a price of $6.38 per share. During 1996, the
Company granted options to employees to purchase 115,416 shares of common
stock at a price of $10.80 per share and certain directors options to
purchase 50,000 shares of the Company's common stock at a price ranging
from $6.00 to $6.13 per share.
In February 1998, options were granted to the President and Chief
Executive Officer, the general counsel and a consultant of the Company to
purchase 300,000 shares of the authorized, but unissued shares of common
stock at a purchase price of $3.50 per share. According to the terms of the
agreement (the "Agreement"), these options vested as follows: 100,000
vested at the date of grant, 100,000 vested upon attainment and maintenance
of an average closing price for the Company's common stock, over a ten day
period, of at least $6.50 per share, and the final 100,000 vested upon
attainment and maintenance of an average closing price for the Company's
common stock, over a ten day period, of at least $9.50 per share. The
Agreement was later amended (effective as of the grant date) with respect
to the vesting schedule and the general counsel and consultant became
employees of the Company. According to the terms of the amended agreement,
all the options vest at the date of grant. The options are exercisable for
a period of ten years after grant. In addition, the Company granted options
to purchase 15,000 shares of common stock, at $3.50 per share, to the
family of Tan Kim Poh, deceased former Chairman of the Board of Directors
of the Company. These options were all granted outside the Plan. No
compensation expense was recorded as a result of these issuances during
Fiscal Year 2000, Fiscal Year 1999 or the Stub Period 1998.
On December 16, 1998, the Company adopted the 1998 Omnibus Stock Option
Plan (the "1998 Plan"). The 1998 Plan was adopted for employees, key
executives and directors of the Company, and options to purchase 324,500
shares of common stock at an exercise price of $6.00 per share were granted
by the Company. Of these options, 118,000 options vest over a three-year
period from December 16, 1998, and are exercisable for a period of ten
years after the date of grant. The remaining 206,500 options vest over a
three-year period beginning on December 16, 1999, and are exercisable for a
period of ten years after the date of grant. The Company did not recognize
compensation expense related to the issuance of these options.
On November 4, 1999, the Company's Shareholders voted to amend the 1998
Omnibus Stock Option Plan whereby the number of shares issuable under the
plan increased from 236,000 to 436,000.
At April 30, 2000, there were 419,971 additional shares available for
grant under the original Plan and the 1998 Plan. The weighted average fair
value of stock options granted during Fiscal Year 2000, Fiscal Year 1999,
the Stub Period 1998 and Fiscal Year 1997 was as follows using the
Black-Scholes option-pricing model with the following weighted average
assumptions:
<TABLE>
<CAPTION>
Fifty-Three Fifty-Two Seventeen Fifty-Two
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
April 30, 2000 April 25, 1999 April 26, 1998 December 28, 1997
-------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C>
Weighted average fair value ....... $ 3.81 $ 3.10 $ 2.05 $ 3.49
Expected dividend yield ........... 0.0% 0.0% 0.0% 0.0%
Risk-free interest rate ........... 5.27 4.5% 5.5% 6.1%
Historical volatility ............. 70% 66.4% 63.6% 63.6%
Expected life ..................... 5 years 8 years 5 years 4 years
</TABLE>
On February 11, 1997, the Board of Directors authorized a repricing
program for the Original Plan which allowed employees to elect to reprice
all of their outstanding options to purchase common stock of the Company,
granted under
F-14
<PAGE> 37
the Stock Option Agreement dated May 1, 1996. Effective February 11, 1997,
the employees' stock options were repriced to $6.75 per share and
registered with the Securities and Exchange Commission (the "SEC")
effective July 2, 1997.
The Company applies Accounting Principles Board Opinion No. 25
"Accounting for Stock Issued to Employees", in accounting for its Plans
and, accordingly, recognized compensation expense for certain options, as
discussed above. Had the Company determined compensation cost based on the
fair value at the grant date for its stock options under SFAS No. 123,
"Accounting for Stock-Based Compensation", the Company's net income (loss)
would have been reduced (increased) to the pro forma amounts indicated
below:
<TABLE>
<CAPTION>
($ in thousands, except per share data)
Fifty-Three Fifty-Two Seventeen Fifty-Two
Weeks Ended Weeks Ended Weeks Ended Weeks Ended
April 30, 2000 April 25, 1999 April 26, 1998 December 28, 1997
-------------- -------------- -------------- -----------------
<S> <C> <C> <C> <C> <C>
Net income As reported $ 3,512 $ 6,008 $ 1,859 $ 92
Pro forma 3,391 5,489 1,212 (10)
Basic net income (loss)
per share As reported $ 0.36 $ 0.63 $ 0.20 $ 0.01
Pro forma 0.35 0.58 0.13 0.00
Diluted net income (loss)
per share As reported $ 0.36 $ 0.62 $ 0.20 $ 0.01
Pro forma 0.35 0.57 0.13 0.00
</TABLE>
Pro forma net income (loss) reflects only options granted during Fiscal
Year 2000, Fiscal Year 1999, the Stub Period 1998, and Fiscal Year 1997.
Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net income
(loss) amounts presented above because compensation cost is reflected over
the options' vesting period ranging from one to three years and
compensation cost for options granted prior to December 31, 1996 is not
considered.
Stock option activity during the periods indicated is as follows:
<TABLE>
<CAPTION>
Number of Weighted Average
Shares Exercise Price
------ --------------
<S> <C> <C>
Balance at December 29, 1996 ............. 544,740 7.52
Granted ............................. 188,000 6.72
Exercised ........................... -- --
Forfeited ........................... (15,068) 6.86
Expired ............................. (18,349) 7.13
Balance at December 28, 1997 ............. 699,323 6.66
Granted ............................. 315,000 3.50
Exercised ........................... -- --
Forfeited ........................... (24,331) 6.75
Expired ............................. (1,287) 7.14
Balance at April 26, 1998 ................ 988,705 5.65
Granted ............................. 324,500 6.00
Exercised ........................... (3,333) 4.50
Forfeited ........................... (52,352) 6.75
Expired ............................. (428,563) 6.66
Balance at April 25, 1999 ................ 828,957 5.25
Granted ............................. 55,505 6.00
Exercised ........................... -- --
Forfeited ........................... 51,767 6.27
Expired ............................. -- --
Balance at April 30, 2000 ................ 832,695 5.24
</TABLE>
At April 30, 2000, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $3.50 to $7.50 and
7.9 years, respectively.
F-15
<PAGE> 38
At April 25, 1999, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $3.50 to $7.50 and
8.2 years, respectively.
At April 26, 1998, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $3.50 to $7.50 and
5.2 years, respectively.
At December 28, 1997, the range of exercise prices and weighted average
remaining contractual life of outstanding options was $4.50 to $7.50 and
3.7 years, respectively.
At April 30, 2000, April 25, 1999, April 26, 1998, and December 28,
1997, the number of options exercisable was 657,673, 497,634, 384,260, and
398,417, respectively, and the weighted average exercise price of those
options was $5.01, $4.73, $6.59, and $6.66, respectively.
(10) Income Taxes
Income tax expense for Fiscal Year 2000, Fiscal Year 1999, the Stub
Period 1998 and Fiscal Year 1997 consists of the following:
<TABLE>
<CAPTION>
($ in thousands)
April 30, April 25, April 26, December 28,
2000 1999 1998 1997
------- ------- ----- ----
<S> <C> <C> <C> <C>
Current:
Federal $ 295 $ 1,748 $ 458 $103
State 76 334 44 72
------- ------- ----- ----
371 2,082 502 175
Deferred:
Federal 291 (1,849) (421) --
State 139 -- -- --
------- ------- ----- ----
430 (1,849) (421) --
Total income tax expense
before tax benefit from
cumulative effect of change ------- ------- ----- ----
in accounting principle $ 801 $ 233 $ 81 $175
======= ======= ===== ====
Tax benefit from cumulative
change in accounting
principle (269) -- -- --
======= ======= ===== ====
Total income tax expense $ 532 $ 233 $ 81 $175
======= ======= ===== ====
</TABLE>
The tax effects of the temporary differences comprising deferred tax
assets and liabilities are as follows:
<TABLE>
<CAPTION>
($ in thousands)
April 30, April 25,
2000 1999
---- ----
<S> <C> <C>
Deferred tax assets:
Tax credit carryforwards .......................... $ 1,014 $ 792
Pre-opening expenses, differences principally
due to differences in amortization............... -- 254
Accrued workers' compensation ..................... 126 189
Property and equipment ............................ 664 1,667
Other ............................................. 476 667
Less: valuation allowance ......................... -- (1,122)
------- -------
2,280 2,447
Deferred tax liabilities:
Other ............................................. (171) (177)
------- -------
$ 2,109 $ 2,270
======= =======
</TABLE>
F-16
<PAGE> 39
The Valuation Allowance for deferred tax assets as of April 26, 1999
was $1.122 million. The net change in the valuation allowance for the year
ended April 30, 2000 was a decrease of $1.122 million. In assessing the
realizability of deferred tax assets, management considers whether it is
more likely than not that some portion or all of the deferred tax assets
will not be realized. The ultimate realization of deferred tax assets is
dependent upon the generation of future taxable income during the periods
in which those temporary differences become deductible. Management
considers the scheduled reversal of deferred tax liabilities, projected
future taxable income, and tax planning strategies in making this
assessment. Based upon the level of historical taxable income and
projections for future taxable income over the periods which the deferred
tax assets are deductible, management believes it is more likely than not
the Company will realize the benefits of these deductible differences, net
of the existing valuation allowance of $0 at April 30, 2000.
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable
income during the periods in which those temporary differences become
deductible. Management considers the level of historical income, scheduled
reversal of deferred tax liabilities, and projected further taxable income
in making this assessment.
At April 26, 1998, the Company had a Florida net operating loss
carryforward of $1.4 million consisting of $780,000 and $620,000 expiring
in varying amounts through 2010 and 2011, respectively. The Company
utilized the remaining Florida net operating loss carryforward during
Fiscal Year 1999.
The actual income tax expense differs from the "expected" income tax
effect (computed by applying the U.S. Federal corporate tax rate of 34
percent to earnings before income taxes), for Fiscal Year 2000 and Fiscal
Year 1999 as follows:
<TABLE>
<CAPTION>
April 30, April 25,
2000 1999
---- ----
<S> <C> <C>
Income taxes at statutory rates ................. 34.00% 34.00%
State and local taxes, net of federal tax benefit 2.70% 3.01%
FICA tip tax credit ............................ 2.91% 2.15%
Utilization of tax credit carryforwards.......... (8.55)% (12.79)%
Other items...................................... 3.62% 0.08%
Release of valuation allowance .................. (19.47)% (22.72)%
------ ------
15.21% 3.73%
====== ======
</TABLE>
(11) Concentrations of Business and Credit Risk
Financial instruments, which potentially subject the Company to
concentrations of credit risk, consist primarily of cash in bank and
investment custodian accounts. At times, the Company maintains cash
balances in excess of insured limits. The custodian of the investment
account is a major financial institution.
The Company currently owns and operates 35 of its 72 (49%) restaurants
within the state of Florida. Consequently, the operations of the Company
are affected by fluctuations in the Florida economy. Furthermore, the
Company may be affected by changing conditions within the food service
industry.
For Fiscal Year 2000, Fiscal Year 1999, the Stub Period 1998, and
Fiscal Year 1997, two suppliers comprised approximately 27%, 67%, 82% and
94%, respectively, of the Company's purchases. Purchases from these
suppliers were approximately $33.6 million, $26.3 million, $9.5 million and
$32.3 million for Fiscal Year 2000, Fiscal Year 1999, the Stub Period 1998,
and Fiscal Year 1997, respectively.
(12) Commitments and Contingencies
The Company is a party to legal proceedings arising in the ordinary
course of business. In the opinion of management and based upon review with
legal counsel, disposition of these matters will not materially affect the
Company's financial condition.
The Company plans to open approximately 15 new Company-owned Roadhouse
Grill restaurants in Fiscal Year 2001. At April 30, 2000, the Company had
17 restaurants under development. The estimated cost to complete these
restaurants and other capital projects in process was approximately $16.5
million at April 30, 2000.
(13) Acquisitions
In August 1996, the Company entered into an agreement to purchase the
remaining 50 percent interest in Kendall Roadhouse Grill, L.C., a limited
liability company that owned Kendall, from the joint venture partners for a
purchase price of $2.3 million. The purchase price was to be paid from the
proceeds of the IPO completed by the Company in December 1996 in which
2,500,000 shares were sold at $6.00 per share. During the first quarter of
1997, the agreement was amended as follows: the purchase price was changed
to $1.8 million with a deposit of $400,000 paid in January 1997, and the
remaining $1.4 million payable by December 31, 1997 when the acquisition
was expected to be closed and consummated. The purchase price was
negotiated further and on August 14, 1998, the Company purchased the
remaining 50 percent interest in Kendall Roadhouse Grill, L.C. for a
purchase price of $1.6 million.
F-17
<PAGE> 40
The Company accounted for this transaction using the purchase method of
accounting. The purchase price was allocated based on the fair value of the
assets acquired at the time of acquisition. Approximately $716,000 was
allocated to property and equipment and approximately $53,000 was allocated
to inventory and other assets. In connection with the acquisition, the
Company also assumed certain liabilities in the amount of $167,000. Prior
to the purchase, the Company had recorded its investment in Kendall using
the equity method. This resulted in an investment in affiliate balance
amounting to approximately $273,000. In addition, the Company had recorded
accounts receivable of approximately $232,000. These amounts were
eliminated in connection with the purchase of Kendall. The excess of the
purchase price over the net assets acquired was recorded as goodwill and is
being amortized over 16 years, the Kendall lease term. Subsequent to the
purchase, Kendall Roadhouse Grill, L.C. ceased to exist as a legal entity.
In December 1996, the Company acquired a 50 percent ownership interest
in Boca for approximately $480,000. The transaction was accounted for using
the purchase method of accounting. The excess of the purchase price over
the fair value of the investment amounted to $203,000 and was treated as
goodwill, which was being amortized over the remaining lease term of Boca.
Subsequent to the acquisition, the Company and the owner of the remaining
50 percent interest each contributed $75,000 to Boca.
In December 1997, operations at Boca were discontinued and the Company
sold its interest in Boca to Boca Raton Roadhouse Grill, L.C. (See Note
1(a)). Prior to this event, the Company managed the operations of Boca
pursuant to its operating agreement. Under such operating agreement, the
Company received management fees and was allocated its share of the
restaurant's profits and losses.
(14) Employee 401(k) Plan and Supplemental Executive Retirement Plan
On June 3, 1997, the Board of Directors of the Company approved a plan
to provide mid-level employees with an employee savings plan pursuant to
Section 401(k) of the Internal Revenue Service Code (the "Code"). As an
alternative to providing highly compensated employees with participation in
such 401(k) plan, which would have required the Company to extend plan
benefits to a broader group of employees, the Company also authorized a
Supplemental Executive Retirement Plan (the "SERP") for execution. A formal
plan, in each case, was adopted by the Company during the fourth quarter of
1997.
The 401(k) plan permits participants to contribute, on a pre-tax basis,
a percentage of compensation but not in excess of the maximum level allowed
by the Code. The Company will match 10% of up to the first six percent
contributed by each employee. The cost recognized by the Company for
matching contributions for Fiscal Year 2000, Fiscal Year 1999, the Stub
Period 1998, and Fiscal Year 1997 was approximately $16,300, $19,800,
$6,000 and $5,400, respectively.
The SERP permits participants to contribute, on a pre-tax basis, a
maximum of 15% of annual compensation. The Company will match 100% up to
the first 10% of annual compensation contributed. The cost recognized by
the Company for matching contributions for Fiscal Year 2000, Fiscal Year
1999, the Stub Period 1998, and Fiscal Year 1997 was approximately
$116,500, $75,200, $16,400 and $16,600, respectively.
The Company has filed its 1998 Form 5500 with the Internal Revenue
Service. As of June 16, 2000, the Company has not filed the 1998 audited
financial statements for its 401(k) plan, as required by the IRS.
Management has not been notified by the IRS of any penalties associated
with their delinquent filing. Management plans to file its 1998 audited
401(k) plan financial statements within the next few months. Management
does not believe that the delinquent filing of its audited 401(k) plan
financial statements will have a material adverse effect on the Company's
financial position or results of operations.
(15) Related Party Transactions
Berjaya directly or indirectly owns Roadhouse Grill Asia Pacific (H.K.)
Limited ("Roadhouse Grill Hong Kong") and Roadhouse Grill Asia Pacific
(Cayman) Limited ("Roadhouse Grill Asia"). In January 1996, the Company
entered into a Master Development Agreement with Roadhouse Grill Hong Kong
which provides for the development and franchising of Roadhouse Grill
restaurants in Hong Kong. Under the agreement, Roadhouse Grill Hong Kong is
not required to develop any specific number of restaurants in Hong Kong,
but any restaurants that it develops are credited against the development
obligations of Roadhouse Grill Asia under Roadhouse Grill Asia's Master
Development Agreement with the Company. Roadhouse Grill Hong Kong or its
affiliates are not required to pay any franchise or reservation fee for
restaurants that it develops, but it is responsible for paying or
reimbursing approved expenses incurred by the Company in connection with
the opening of each restaurant. In addition, Roadhouse Grill Hong Kong is
required to pay a royalty in connection with the operation of each of its
restaurants in the amount of 2% of gross sales. Under certain
circumstances, Roadhouse Grill Hong Kong or the Company may grant
franchises to third parties in Hong Kong. In that event, the Company is
entitled to receive 50% of any franchise and reservation fees and 40% of
any royalty fee payable by the third party franchisee, subject to
limitations on the amounts payable to the Company of $10,000 per restaurant
in the case of franchise and reservations fees and 2% of gross sales in the
case of royalty fees. The Company did not recognize royalty income from
Roadhouse Grill Hong Kong for Fiscal Year 2000, Fiscal Year 1999, the Stub
Period 1998 and Fiscal Year 1997.
F-18
<PAGE> 41
In January 1996, the Company also entered into a Master Development
Agreement with Roadhouse Grill Asia, which covers countries in Asia and the
Pacific Rim (other than Hong Kong), including but not limited to,
Australia, China, India, Indonesia, Japan, Malaysia, New Zealand,
Singapore, South Korea, the Philippines and Thailand. Under the agreement,
Roadhouse Grill Asia is required to open and maintain at least thirty
Roadhouse Grill restaurants during the first ten years of the term of the
agreement, with a minimum of two restaurants to be developed each year.
Under certain circumstances, Roadhouse Grill Asia or the Company may grant
franchises to third parties in the territory. The fee arrangements under
the agreement are substantially the same as those under the agreement
between the Company and Roadhouse Grill Hong Kong.
As of December 28, 1997, there were three Roadhouse Grill restaurants
operating in Malaysia under the Master Development Agreement with Roadhouse
Grill Asia. Subsequently, two of the franchisees in Malaysia ceased
operations. The Company recorded $12,000, $16,000, $95,000 and $51,000 in
royalty income from those restaurants during fiscal Year 2000, Fiscal Year
1999, the Stub Period 1998 and Fiscal Year 1997, respectively.
On February 6, 1998, the Company's Board of Directors approved the
issuance of 400,000 shares of common stock to Berjaya, the majority
shareholder of the Company, to convert $1.5 million of debt outstanding to
common equity at a price of $3.75 per share, based on the closing market
price as of February 6, 1998. The debt carried an interest rate of 8.5% and
was scheduled to be repaid during the first quarter of 1998. The
transaction was consummated on September 30, 1998.
On April 13, 1998, the Company received a promissory note from Berjaya
for $1.0 million in borrowings from the Company, with an annual interest
rate of 10.55%. The note was scheduled to be repaid to the Company on June
15, 1998. The Company extended payment of the note to July 24, 1998, at
which date the note was paid.
During the fourth quarter of 1997, the Company engaged National Retail
Group, Inc. ("NRG"), a real estate and retailing consulting firm, and SABi
International Developments, Inc. ("SABi"), a management consulting and
investment firm, to provide specified real estate development and
management consulting services to the Company. SABi is wholly-owned by
Ayman Sabi. NRG is an affiliate of Ayman Sabi. Mr. Sabi was and remains a
director of the Company, was Chairman of the Company's Executive Committee
from November 1997 to February 1998, and was elected President and Chief
Executive Officer of the Company on February 6, 1998. Martin Bernholz,
President of NRG, is Secretary of the Company and in-house counsel of the
Company as of April 25, 1999. During Fiscal Year 2000 and Fiscal Year 1999,
the Company paid fees and reimbursed expenses in the aggregate amount of
$1,069,316 and $554,000, respectively to NRG. The Company did not make any
payments to SABi during Fiscal Year 2000 or Fiscal Year 1999. During the
Stub Period 1998, the Company paid fees and reimbursed expenses in the
aggregate amount of $141,048 to NRG. The Company did not make any payments
to SABi during the Stub Period 1998. During Fiscal Year 1997, the Company
paid fees and reimbursed expenses in the aggregate amounts of $168,214 and
$60,000 to NRG and SABi, respectively.
(16) Net Income (Loss) per Common Share ("EPS")
The calculation of Basic EPS excludes all dilution and is based upon
the weighted average number of common shares outstanding during the year.
Diluted EPS reflects the potential dilution that would occur if securities
or other contracts to issue common stock were exercised or converted into
common stock. The following is a reconciliation of the numerators (net
income) and the denominators (common shares outstanding) of the basic and
diluted per share computations for net income:
Fifty-Two Weeks Ended April 30, 2000
------------------------------------
Net Income Shares Amount
---------- ------ ------
($ in thousands, except per share data)
Basic EPS
Net income available
to common shareholders $3,512 9,708,741 $0.36
Effect of Dilutive Securities
Stock options -- 83,278 --
------ --------- -----
Diluted EPS $3,512 9,792,019 $0.36
====== ========= =====
Options to purchase 532,695 shares of common stock at a weighted average
exercise price of $6.21 per share were outstanding during Fiscal Year 2000, but
were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common shares.
The options, which expire on varying dates, were still outstanding as of April
30, 2000.
F-19
<PAGE> 42
Fifty-Two Weeks Ended April 25, 1999
------------------------------------
Net Income Shares Amount
---------- ------ ------
($ in thousands, except per share data)
Basic EPS
Net income available
to common shareholders $6,008 9,536,631 $0.63
Effect of Dilutive Securities
Stock options -- 131,838 (.01)
------ --------- -----
Diluted EPS $6,008 9,668,469 $0.62
====== ========= =====
Options to purchase 513,957 shares of common stock at a weighted average
exercise price of $6.26 per share were outstanding during Fiscal Year 1999, but
were not included in the computation of diluted EPS because the options'
exercise price was greater than the average market price of the common shares.
The options, which expire on varying dates, were still outstanding as of April
25, 1999.
Seventeen Weeks Ended April 26, 1998
------------------------------------
Net Income Shares Amount
---------- ------ ------
($ in thousands, except per share data)
Basic EPS
Net income available
to common shareholders $1,859 9,305,408 $0.20
Effect of Dilutive Securities
Stock options -- 21,234 --
------ --------- -----
Diluted EPS $1,859 9,326,642 $0.20
====== ========= =====
Options to purchase 685,927 shares of common stock at a weighted average
exercise price of $6.66 per share were outstanding during the Stub Period 1998,
but 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.
The options, which expire on varying dates, were still outstanding as of April
26, 1998.
As discussed in Note 8, on February 6, 1998, the Company's Board of
Directors approved the issuance of 400,000 shares to Berjaya to convert $1.5
million of debt outstanding to common equity at a price of $3.75 per share,
based on the closing market price as of February 6, 1998. The debt carried an
interest rate of 8.5% and was scheduled to be repaid during the first quarter of
1998. As such, these shares are not included in the EPS calculation as of April
26, 1998. The transaction was consummated on September 30, 1998.
For Fiscal Year 1997, the number of weighted average common shares
outstanding is essentially equivalent to the weighted average common share and
share equivalents outstanding - assuming dilution.
F-20
<PAGE> 43
(17) Quarterly Financial Data (Unaudited)
The following is a summary of the unaudited quarterly results of operations
for Fiscal Year 2000 and Fiscal Year 1999 with the quarters structured according
to the new fiscal year:
<TABLE>
<CAPTION>
($ in thousands, except per share data)
1st Qtr 2nd Qtr 3rd Qtr 4th Qtr Total Year
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
2000:
Total revenues $ 35,232 $ 32,331 $35,842 $45,090 $ 148,495
Operating income 2,101 326 806 4,334 7,567
Income (loss) before cumulative effect of
change in accounting principle 1,186 (212) 204 3,287 4,465
Cumulative effect of change in accounting
principle (953) -- -- -- (953)
Net income (loss) $ 233 $ (212) $ 204 $ 3,287 $ 3,512
Basic net income (loss) per common share:
Basic income (loss) before cumulative
effect of change in accounting principle $ 0.12 $ (0.02) $ 0.02 $ 0.34 $ 0.46
Cumulative effect of change in accounting
principle (0.10) -- -- -- (0.10)
Basic net income (loss) per common share $ 0.02 $ (0.02) $ 0.02 $ 0.34 $ 0.36
Diluted net income (loss) per common share:
Diluted income (loss) before cumulative
effect of change in accounting principle $ 0.12 $ (0.02) $ 0.02 $ 0.34 $ 0.46
Cumulative effect of change in accounting
principle (0.10) -- -- -- (0.10)
Diluted net income (loss) per common share $ 0.02 $ (0.02) $ 0.02 $ 0.34 $ 0.36
1999:
Total revenues $ 29,040 $ 28,181 $28,749 $34,711 $ 120,681
Operating income 1,668 1,469 2,213 2,718 8,068
Pretax income 1,294 954 1,766 2,227 6,241
Net income $ 1,260 $ 904 $ 1,716 $ 2,128 $ 6,008
Basic net income per common share $ 0.14 $ 0.10 $ 0.18 $ 0.22 $ 0.63
Diluted net income per common share $ 0.13 $ 0.10 $ 0.18 $ 0.22 $ 0.62
</TABLE>
F-21
