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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Thirteen Weeks Ended January 23, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number: 0-28930
ROADHOUSE GRILL, INC.
(Exact name of registrant as specified in its charter)
FLORIDA 65-0367604
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2703-A GATEWAY DRIVE, POMPANO BEACH, FLORIDA 33069
(Address of principal executive offices and zip code)
Registrant's telephone number (954) 957-2600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
The number of shares of the registrant's common stock outstanding as of
March 3, 2000 was 9,708,741.
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ROADHOUSE GRILL, INC.
FORM 10-Q
THIRTEEN WEEKS ENDED JANUARY 23, 2000
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE NO.
--------
<S> <C> <C>
ITEM 1. FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of January 23, 2000 (Unaudited)
and April 25, 1999............................................................... 2
Consolidated Statements of Income for the Thirteen Weeks and
Thirty-Nine Weeks Ended January 23, 2000 and January 24, 1999
(Unaudited)....................................................................... 3
Consolidated Statement of Changes in Shareholders' Equity
for the Thirty-Nine Weeks Ended January 23, 2000 (Unaudited) .................... 4
Consolidated Statements of Cash Flows for the Thirty-Nine Weeks Ended
January 23, 2000 and January 24, 1999 (Unaudited) ................................ 5
Notes to Consolidated Financial Statements............................................ 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS......................................................... 8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS..................................................................... 14
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................................... 14
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K...................................................... 14
SIGNATURES ...................................................................................... 15
EXHIBIT INDEX ...................................................................................... 16
</TABLE>
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PART I
ITEM 1. FINANCIAL STATEMENTS
ROADHOUSE GRILL, INC.
CONSOLIDATED BALANCE SHEETS
January 23, 2000 and April 25, 1999
($ in thousands, except per share data)
<TABLE>
<CAPTION>
January 23, April 25,
2000 1999
------------- -----------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents ................................................. $ 998 $ 975
Accounts receivable ....................................................... 696 1,279
Inventory ................................................................. 1,402 1,181
Pre-opening costs, net .................................................... -- 1,222
Deferred tax assets, net .................................................. 2,539 2,270
Prepaid expenses .......................................................... 1,964 992
-------- --------
Total current assets .................................................... 7,599 7,919
Note receivable .............................................................. 167 167
Property & equipment, net .................................................... 89,386 77,821
Intangible assets, net of accumulated amortization of $343 and $227 at January
23, 2000 and April 25, 1999, respectively .................................. 2,319 2,031
Other assets ................................................................. 3,383 3,345
-------- --------
Total assets ........................................................... $102,854 $ 91,283
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable ........................................................... $ 7,981 $ 4,692
Accrued expenses ........................................................... 6,525 4,476
Short-term note payable .................................................... 1,000 --
Current portion of long-term debt .......................................... 1,082 1,047
Current portion of capitalized lease obligations ........................... 1,610 1,593
-------- --------
Total current liabilities .............................................. 18,198 11,808
Long-term debt ............................................................... 22,647 18,458
Capitalized lease obligations ................................................ 11,107 10,340
-------- --------
Total liabilities ....................................................... 51,952 40,606
Commitments and contingencies (Note 2) ....................................... -- --
Shareholders' equity:
Common stock $0.03 par value. Authorized 30,000,000 shares;
issued and outstanding 9,708,741 shares as of January 23, 2000
and April 25, 1999 ......................................................... 291 291
Additional paid-in-capital ................................................... 50,039 50,039
Retained earnings ............................................................ 572 347
-------- --------
Total shareholders' equity ............................................. 50,902 50,677
-------- --------
Total liabilities and shareholders' equity ............................. $102,854 $ 91,283
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
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ROADHOUSE GRILL, INC.
CONSOLIDATED STATEMENTS OF INCOME
For the Thirteen Weeks and Thirty-Nine
Weeks Ended January 23, 2000 and January 24, 1999
($ in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
-------------------------- -------------------------
JANUARY 23, JANUARY 24, JANUARY 23, JANUARY 24,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Total revenues ........................... $ 35,842 $ 28,749 $ 103,405 $ 85,970
Cost of restaurant sales:
Food and beverage ..................... 11,871 9,236 34,612 28,275
Labor and benefits .................... 10,707 8,100 30,134 24,391
Occupancy and other ................... 7,657 5,288 21,891 16,230
Pre-opening expenses .................. 749 298 1,325 1,028
----------- ----------- ----------- -----------
Total cost of restaurant sales ........ 30,984 22,922 87,962 69,924
Depreciation and amortization ............ 2,162 1,894 6,206 5,450
General and administrative expenses ...... 1,890 1,623 6,004 4,952
----------- ----------- ----------- -----------
Total operating expenses .............. 35,036 26,439 100,172 80,326
----------- ----------- ----------- -----------
Operating income ...................... 806 2,310 3,233 5,644
Other income (expense):
Interest expense, net ................. (544) (544) (1,721) (1,626)
Equity in net (loss) of affiliates .... -- -- -- (3)
----------- ----------- ----------- -----------
Total other (expense) ............... (544) (544) (1,721) (1,629)
----------- ----------- ----------- -----------
Income before taxes and
cumulative effect of change in
accounting principle ............... 262 1,766 1,512 4,015
Income tax expense ....................... 58 50 334 134
----------- ----------- ----------- -----------
Income before cumulative effect of
change in accounting principle .... 204 1,716 1,178 3,881
Cumulative effect of change in accounting
principle (net of tax benefit of $269) -- -- (953) --
----------- ----------- ----------- -----------
Net income ............................... $ 204 $ 1,716 $ 225 $ 3,881
=========== =========== =========== ===========
Basic net income per common share:
Basic income before cumulative
effect of change in accounting
principle ........................... $ 0.02 $ 0.18 $ 0.12 $ 0.41
Cumulative effect of change in
accounting principle ................ -- -- (0.10) --
----------- ----------- ----------- -----------
Basic net income per common
share ............................... $ 0.02 $ 0.18 $ 0.02 $ 0.41
=========== =========== =========== ===========
Diluted net income per common share:
Diluted income before cumulative
effect of change in accounting
principle ........................... $ 0.02 $ 0.18 $ 0.12 $ 0.40
Cumulative effect of change in
accounting principle ................ -- -- (0.10) --
----------- ----------- ----------- -----------
Diluted net income per common
share ................................. $ 0.02 $ 0.18 $ 0.02 $ 0.40
=========== =========== =========== ===========
Weighted-average common shares outstanding 9,708,741 9,708,741 9,708,741 9,480,894
=========== =========== =========== ===========
Weighted-average common shares and share
equivalents outstanding - assuming
dilution ................................. 9,779,825 9,801,463 9,787,751 9,606,097
=========== =========== =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
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ROADHOUSE GRILL, INC.
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
For the Thirty-Nine Weeks Ended January 23, 2000
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
------------------ PAID-IN- RETAINED
SHARES AMOUNT CAPITAL EARNINGS TOTAL
------ ------ ------- -------- -----
<S> <C> <C> <C> <C> <C>
Balance April 25, 1999..... 9,708,741 $ 291 $50,039 $ 347 $50,677
Net income ................ -- -- -- 225 225
--------- -------- ------- ------- -------
Balance January 23, 2000... 9,708,741 $ 291 $50,039 $ 572 $50,902
========= ======== ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
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ROADHOUSE GRILL, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Thirty-Nine Weeks Ended January 23, 2000 and January 24, 1999
($ in thousands)
(Unaudited)
<TABLE>
<CAPTION>
JANUARY 23, JANUARY 24,
2000 1999
----------- -----------
<S> <C> <C>
Cash flows from operating activities
Net income .................................................................. $ 225 $ 3,881
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization ............................................. 6,206 6,478
Equity in net loss of affiliate ........................................... -- 3
Cumulative effect of change in accounting principle ....................... 1,222 --
Deferred tax benefit ...................................................... (269) --
Changes in assets and liabilities:
(Increase) in accounts receivable ......................................... (213) (266)
(Increase) in inventory ................................................... (221) (66)
(Increase) in pre-opening costs ........................................... -- (817)
(Increase) in prepaid expense ............................................. (972) (1,912)
(Increase) decrease in other assets ....................................... (99) 242
Increase (decrease) in accounts payable ................................... 3,289 (611)
Increase (decrease) in accrued expenses ................................... 2,049 (1,476)
-------- --------
Net cash provided by operating activities ............................... 11,217 5,456
Cash flows from investing activities
Dividends received from affiliate ........................................... -- 93
Advances to affiliates, net ................................................. -- 9
Payments for intangibles .................................................... (404) (20)
Acquisition of restaurant, net of cash acquired ............................. -- (1,359)
Proceeds from payment on note receivable from affiliate ..................... -- 1,000
Proceeds from payment on notes receivable ................................... -- 128
Proceeds from leasing transactions .......................................... 11,435 861
Purchase of property and equipment .......................................... (26,291) (7,994)
-------- --------
Net cash used in investing activities ................................... (15,260) (7,282)
Cash flows from financing activities
Issuance of common stock .................................................... -- 15
Proceeds from short-term note payable ....................................... 1,000 --
Proceeds from long-term debt ................................................ 5,000 846
Repayments of long-term debt ................................................ (776) (510)
Payments on capital lease obligations ....................................... (1,158) (882)
-------- --------
Net cash provided by (used in) financing activities ..................... 4,066 (531)
Increase (decrease) in cash and cash equivalents ............................... 23 (2,357)
Cash and cash equivalents at beginning of period ............................... 975 3,555
-------- --------
Cash and cash equivalents at end of period ..................................... $ 998 $ 1,198
======== ========
Supplementary disclosures:
Interest paid ............................................................... $ 2,144 $ 1,886
======== ========
Income taxes paid ........................................................... $ 910 $ 1,793
======== ========
Non-cash investing and financing activities:
During the thirty-nine weeks ended January 23, 2000, the Company entered into
two capital lease transactions for real estate in the amount of $780,000.
During the thirty-nine weeks ended January 24, 1999, the Company issued
400,000 shares of common stock to Berjaya Cayman. 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 thirty-nine weeks ended January 24, 1999, the Company entered into
three capital lease transactions for real estate in the amount of $3.4
million.
</TABLE>
See accompanying notes to consolidated financial statements.
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ROADHOUSE GRILL, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The financial statements of Roadhouse Grill, Inc. (the "Company") for
the thirteen weeks and thirty-nine weeks ended January 23, 2000 and January 24,
1999, are unaudited and reflect all adjustments (consisting of normal recurring
adjustments) which are, in the opinion of management, necessary for a fair
presentation of the financial statements for the interim periods. The financial
statements should be read in conjunction with the notes to consolidated
financial statements included herein, together with management's discussion and
analysis of financial condition and results of operations, contained in the
Company's Annual Report on Form 10-K for the fifty-two weeks ended April 25,
1999 ("fiscal year 1999").
The results of operations for the thirteen weeks and thirty-nine weeks
ended January 23, 2000 are not necessarily indicative of the results for the
entire fiscal year ending April 30, 2000 ("fiscal year 2000").
The Company operates on a fifty-two or fifty-three week fiscal year.
Each fiscal quarter consists of thirteen weeks, except in the case of a
fifty-three week year, in which the fourth fiscal quarter consists of fourteen
weeks. Fiscal year 2000, ending on April 30, 2000, is a fifty-three week fiscal
year.
Certain prior year balances have been reclassified to conform to the
current year presentation.
2. COMMITMENTS AND CONTINGENCIES
The Company is a party to legal proceedings arising in the ordinary
course of business, many of which are covered by insurance. In the opinion of
management, disposition of these matters will not materially affect the
Company's financial condition.
During the thirteen weeks ended January 23, 2000, the Company completed
construction and opened four new Company-Owned restaurants. During the thirteen
weeks ended January 23, 2000, construction was underway on twelve sites which
are expected to open during the fourth quarter of fiscal year 2000 and the first
quarter of fiscal year 2001. The estimated aggregate cost to complete these
restaurants is approximately $11.0 million. In addition, as of January 23, 2000,
the Company had contracted to purchase or lease thirteen additional sites for
new restaurant development.
3. ADOPTION OF NEW ACCOUNTING STANDARDS
In April 1998, the AICPA Accounting Standards Executive Committee
issued Statement of Position 98-5, "Reporting on the Costs of Start-Up
Activities" ("SOP 98-5"). SOP 98-5 defines start-up activities broadly
(including organizational costs) and requires that the cost of start-up
activities be expensed as incurred. SOP 98-5 amends provisions of a number of
existing SOP's and audit and accounting guides. SOP 98-5 is effective for fiscal
years beginning after December 15, 1998. In previous years, the Company's
accounting policy was to capitalize pre-opening costs and amortize them over a
one-year period. The Company adopted SOP 98-5 during the first quarter of fiscal
year 2000. The effect of initially applying the provisions of SOP 98-5 is
reported as a change in accounting principle at the beginning of the first
quarter of fiscal year 2000 as an expense within the statements of income in
the amount of $953,000, net of income tax benefit. Thereafter, all such costs
are expensed as incurred and are included in "pre-opening expenses" within the
accompanying statements of income.
4. LEASES
Pursuant to a $10.0 million funding commitment secured in July 1999
from CNL Fund Advisors, Inc. ("CNL"), the Company entered into sale-leaseback
transactions for new Roadhouse Grill restaurants. These transactions were
recorded as financing-type leases with no deferred gain. As of January 23, 2000,
the Company is in negotiations with CNL to secure a new sale-leaseback credit
facility.
In January 2000, the Company secured an $18.0 million sale-leaseback
credit facility from Franchise Finance Corporation of America ("FFCA") for the
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construction of new Roadhouse Grill restaurants. The credit facility with FFCA
expires January 2001.
5. NET INCOME (LOSS) PER COMMON SHARE ("EPS")
The calculation of basic EPS excludes all dilution and is based upon
the weighted-average number of common shares outstanding during the year.
Diluted EPS reflects the potential dilution that would occur if securities or
other contracts to issue common stock were exercised or converted into common
stock. The following is a reconciliation of the numerators (net income) and the
denominators (common shares outstanding) of the basic and diluted per share
computations for net income:
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED JANUARY 23, 2000 THIRTY-NINE WEEKS ENDED JANUARY 23, 2000
-------------------------------------------- ----------------------------------------------
NET INCOME SHARES AMOUNT NET INCOME SHARES AMOUNT
-------------- ------------ -------------- --------------- ------------ --------------
($ in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income available
to common shareholders $204 9,708,741 $ 0.02 $225 9,708,741 $ 0.02
EFFECT OF DILUTIVE SECURITIES
Stock options -- 71,084 -- -- 79,010 --
-------------- ------------ -------------- --------------- ------------ --------------
DILUTED EPS $204 9,779,825 $ 0.02 $225 9,787,751 $ 0.02
============== ============ ============== =============== ============ ==============
</TABLE>
Options to purchase 539,661 shares of common stock at a weighted-average
exercise price of $6.21 per share were outstanding during the thirteen weeks and
thirty-nine weeks ended January 23, 2000, but were not included in the
computation of diluted EPS because the options' exercise price was greater than
the average market price of the common shares. The options, which expire on
varying dates, were still outstanding as of January 23, 2000.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED JANUARY 24, 1999 THIRTY-NINE WEEKS ENDED JANUARY 24, 1999
-------------------------------------------- ----------------------------------------------
NET INCOME SHARES AMOUNT NET INCOME SHARES AMOUNT
-------------- ------------ -------------- --------------- ------------ --------------
($ in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C>
BASIC EPS
Net income available
to common shareholders $ 1,716 9,708,741 $ 0.18 $ 3,881 9,480,894 $ 0.41
EFFECT OF DILUTIVE SECURITIES
Stock options -- 92,722 -- -- 78,019 (0.01)
Convertible debt -- -- -- -- 47,184 --
-------------- ------------ -------------- --------------- ------------ --------------
DILUTED EPS $ 1,716 9,801,463 $ 0.18 $ 3,881 9,606,097 $ 0.40
============== ============ ============== =============== ============ ==============
</TABLE>
Options to purchase 562,287 shares of common stock at a weighted-average
exercise price of $6.29 per share were outstanding during the thirteen weeks and
thirty-nine weeks ended January 24, 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 January 24, 1999.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
the consolidated financial statements and notes thereto, included elsewhere in
this Form 10-Q.
As of March 3, 2000, Roadhouse Grill, Inc. owns and operates 68
full-service, casual dining restaurants under the name "Roadhouse Grill". In
addition, Roadhouse Grill, Inc. franchises three full-service casual dining
restaurants. The Company was incorporated in October 1992 and opened the first
Company-Owned restaurant in Pembroke Pines, Florida in March of 1993. Since
then, the Company has opened 67 additional restaurants in 11 states. The three
franchises are located in Las Vegas, Nevada.
The Company's revenues are derived primarily from the sale of food and
beverages. Sales of alcoholic beverages accounted for approximately 10.9% and
10.7% of total revenues for the thirteen weeks and the thirty-nine weeks ended
January 23, 2000, respectively. Franchise and management fees have accounted for
less than 1% of the Company's total revenues for all periods since its
inception.
The Company's new restaurants can be expected to incur above-average costs
during the first few months of operation. In prior years, pre-opening costs,
such as employee recruiting and training costs and other initial expenses
incurred in connection with the opening of a new restaurant, were amortized over
a twelve-month period commencing with the first full accounting period that the
restaurant was open. The Company adopted the provisions of SOP 98-5 during the
first quarter of fiscal year 2000 and currently expenses all pre-opening costs
as incurred.
The average cash investment, excluding land costs and pre-opening expenses,
required to open each of the Roadhouse Grill restaurants opened by the Company
prior to January 23, 2000 was approximately $1.4 million. 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 $100,000 per
site. The Company expects that the average cash investment required to open its
prototype restaurants, including pre-opening expenses but excluding real estate
costs, will be between $1.1 million and $1.6 million, depending upon whether the
Company converts an existing building or constructs a new restaurant from the
ground up.
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RESULTS OF OPERATIONS
The following table sets forth for the periods indicated certain selected
statements of income data expressed as a percentage of total revenues.
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED THIRTY-NINE WEEKS ENDED
------------------------------------- --------------------------------------
JANUARY 23, 2000 JANUARY 24, 1999 JANUARY 23, 2000 JANUARY 24, 1999
---------------- ---------------- ---------------- ----------------
<S> <C> <C> <C> <C>
Total revenues 100.0% 100.0% 100.0% 100.0%
Cost of restaurant sales:
Food and beverage 33.1 32.1 33.5 32.9
Labor and benefits 29.9 28.2 29.1 28.4
Occupancy and other 21.4 18.4 21.2 18.9
Pre-opening expenses 2.1 1.0 1.3 1.2
--- --- --- ---
Total cost of restaurant sales 86.5 79.7 85.1 81.4
Depreciation and amortization 6.0 6.6 6.0 6.3
General and administrative 5.3 5.6 5.8 5.8
--- --- --- ---
Total operating expenses 97.8 91.9 96.9 93.5
---- ---- ---- ----
Operating income 2.2 8.1 3.1 6.5
Other income (expense):
Interest expense, net (1.5) (1.9) (1.7) (1.9)
Income before income taxes
and cumulative effect of change in
accounting principle 0.7 6.2 1.4 4.6
Income taxes 0.2 0.2 0.3 0.2
--- --- --- ---
Income before cumulative effect
of change in accounting principle 0.5 6.0 1.1 4.4
Cumulative effect of change in
accounting principle 0.0 0.0 (0.9) 0.0
--- --- ---- ---
Net income 0.5% 6.0% 0.2% 4.4%
==== ==== ==== ====
</TABLE>
This Form 10-Q contains forward-looking statements, including statements
regarding, among other things (i) the Company's growth strategies, (ii)
anticipated trends in the economy and the restaurant industry and (iii) the
Company's future financing plans. In addition, when used in this Form 10-Q, the
words "believes," "anticipates," "expects," and similar words often are intended
to identify certain forward-looking statements. These forward-looking statements
are based largely on the Company's expectations and are subject to a number of
risks and uncertainties, many of which are beyond the Company's control. Actual
results could differ materially from these forward-looking statements as a
result of changes in trends in the economy and the restaurant industry,
reductions in the availability of financing, increases in interest rates,
adverse weather conditions, and other factors. In light of the foregoing, there
is no assurance that the forward-looking statements contained in this Form 10-Q
will, in fact, prove correct or occur. The Company does not undertake any
obligation to revise these forward-looking statements to reflect future events
or circumstances.
THIRTEEN WEEKS ENDED JANUARY 23, 2000 ("FISCAL YEAR 2000 THIRD QUARTER")
COMPARED TO THIRTEEN WEEKS ENDED JANUARY 24, 1999 ("FISCAL YEAR 1999 THIRD
QUARTER")
RESTAURANTS OPEN. At January 23, 2000, there were 65 Company-Owned
restaurants open, including the North Palm Beach Roadhouse Grill restaurant
("North Palm Beach"). 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 January 24, 1999, there were 49 Company-Owned
restaurants open, excluding North Palm Beach. This represents a 32.7% increase
in the number of Company-Owned restaurants. In addition, three franchised
Roadhouse Grill restaurants were open at January 23, 2000 in Las Vegas, Nevada.
TOTAL REVENUES. Total revenues increased $7.1 million, or 24.7%, from $28.7
million for the fiscal year 1999 third quarter to $35.8 million for the fiscal
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<PAGE> 11
year 2000 third quarter. This increase is primarily attributable to sales
generated at the 15 new restaurants opened by the Company since the end of the
fiscal year 1999 third quarter and the inclusion of 100% of sales from North
Palm Beach this current fiscal quarter. Sales at comparable stores for the
fiscal year 2000 third quarter decreased 2.8% compared with sales in the fiscal
year 1999 third quarter. The average number of restaurants included in the same
store sales base for the fiscal year 2000 third quarter was 45.
FOOD AND BEVERAGE. Food and beverage costs increased $2.7 million, or
28.5%, to $11.9 million in the fiscal year 2000 third quarter from $9.2 million
in the fiscal year 1999 third quarter. This increase is primarily attributable
to the opening and operating of 15 new restaurants since the end of the fiscal
year 1999 third quarter and the operations of North Palm Beach. In addition, the
Company incurred higher than expected beef costs in the fiscal year 2000 third
quarter. As a percentage of sales, food and beverage costs increased by 1.0
percentage points to 33.1% for the fiscal year 2000 third quarter from 32.1% for
the fiscal year 1999 third quarter. Beef prices moderated substantially in the
latter part of the fiscal year 2000 third quarter. This moderation in prices
should have a favorable impact on the Company's food costs in future periods.
Also food costs were higher due, in part, to the fact that eight of the 15 new
restaurants opened since the end of the fiscal year 1999 third quarter were
opened in the last four months, October 1999 through January 2000. During the
first several months that restaurants are open (commonly referred to as the
"Honeymoon" period), food costs as well as other operating costs are higher than
costs in more mature restaurant operations.
LABOR AND BENEFITS. Labor and benefits costs increased $2.6 million to
$10.7 million in the fiscal year 2000 third quarter, or 32.2%, from $8.1 million
in the fiscal year 1999 third quarter. The increase is primarily due to the
opening and operating of 15 new restaurants since the end of the fiscal year
1999 third quarter and the operations of North Palm Beach. As a percentage of
sales, labor and benefits costs increased by 1.7 percentage points to 29.9% for
the fiscal year 2000 third quarter from 28.2% for the fiscal year 1999 third
quarter. The labor percentage was higher due, in part, to the fact that eight of
the 15 new restaurants opened since the end of the fiscal year 1999 third
quarter were opened in the last four months, October 1999 through January 2000.
During the first several months that restaurants are open (commonly referred to
as the "Honeymoon" period), labor costs as well as other operating costs are
higher than costs in more mature restaurant operations.
OCCUPANCY AND OTHER. Occupancy and other costs increased $2.4 million to
$7.7 million in the fiscal year 2000 third quarter, or 44.8%, from $5.3 million
in the fiscal 1999 third quarter. The increase is primarily due to the opening
and operating of 15 new restaurants since the end of the fiscal year 1999 third
quarter and the operations of North Palm Beach. As a percentage of sales,
occupancy and other costs increased by 3.0 percentage points from 18.4% for the
fiscal year 1999 third quarter to 21.4% for the fiscal year 2000 third quarter.
This increase is due primarily to increased marketing costs during the fiscal
year 2000 third quarter compared to the fiscal year 1999 third quarter.
PRE-OPENING EXPENSES. Pre-opening expenses increased $451,000 to $749,000
in the fiscal year 2000 third quarter, or 151.3%, from $298,000 in the fiscal
year 1999 third quarter. The increase is primarily due to 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
the fiscal year 2000 third quarter were primarily costs associated with the
opening of 4 new restaurants during that period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$268,000 to $2.2 million in the fiscal year 2000 third quarter, or 14.2%, from
$1.9 million in the fiscal year 1999 third quarter. The increase is primarily
due to the opening and operating of 15 new restaurants since the end of the
fiscal year 1999 third quarter. As a percentage of sales, depreciation and
amortization decreased by 0.6 percentage points from 6.6% for the fiscal year
1999 third quarter to 6.0% for the fiscal year 2000 third quarter.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased
$267,000 to $1.9 million in the fiscal year 2000 third quarter, or 16.4%, from
$1.6 million in the fiscal year 1999 third quarter. As a percentage of sales,
general and administrative costs were 5.3% of sales for the fiscal year 2000
third quarter compared to 5.6% in the prior year comparable period.
INTEREST EXPENSE. Interest expense was comparable for both periods
presented.
INCOME TAXES (BENEFIT). 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 Company has
-10-
<PAGE> 12
concluded that the beginning of the year valuation allowance is still necessary
as of January 23, 2000. Therefore, the only benefit recorded during the current
year relates to the amount of ordinary income realized during the current year.
THIRTY-NINE WEEKS ENDED JANUARY 23, 2000 ("FIRST NINE MONTHS OF FISCAL YEAR
2000") COMPARED TO THIRTY-NINE WEEKS ENDED JANUARY 24, 1999 ("FIRST NINE MONTHS
OF FISCAL YEAR 1999")
TOTAL REVENUES. Total revenues increased $17.4 million, or 20.3%, from
$86.0 million in the first nine months of fiscal year 1999 to $103.4 million in
the first nine months of fiscal year 2000. This increase is primarily
attributable to the opening and operating of 15 new restaurants since the end of
the fiscal year 1999 third quarter, the operation of North Palm Beach and sales
from five new restaurants that were only open and operating part of the first
nine months of fiscal year 1999. Sales at comparable stores for the first nine
months of fiscal year 2000 decreased 1.7% compared with sales in the first nine
months of fiscal year 1999. The average number of restaurants included in the
same store sales base for the first nine months of fiscal year 2000 was 43.
FOOD AND BEVERAGE. Food and beverage costs amounted to $34.6 million in the
first nine months of fiscal year 2000, an increase of $6.3 million, or 22.4%,
from $28.3 million in the same period last year. This increase is primarily due
to the opening and operating of 15 new restaurants since the end of the fiscal
year 1999 third quarter, the operation of North Palm Beach and the operation of
five new restaurants that were only open and operating part of the first nine
months of fiscal year 1999. In addition, the Company incurred higher than
expected beef costs in the fiscal year 2000 second and third quarters. As a
percentage of sales, food and beverage increased by 0.6 percentage points to
33.5% for the first nine months of fiscal year 2000 from 32.9% for the first
nine months of fiscal year 1999. Beef prices moderated substantially in the
latter part of the fiscal year 2000 third quarter. This moderation in prices
should have a favorable impact on the Company's food costs in future periods.
Also, food costs were higher due, in part, to the fact that eight of the 15 new
restaurants opened since the end of the fiscal year 1999 third quarter were
opened in the last four months, October 1999 through January 2000. During the
first several months that restaurants are open (commonly referred to as the
"Honeymoon" period), food costs as well as other operating costs are higher than
costs in more mature restaurant operations.
LABOR AND BENEFITS. Labor and benefits costs increased $5.7 million to
$30.1 million in the first nine months of fiscal year 2000, or 23.5%, from $24.4
million in the first nine months of fiscal year 1999. The increase is primarily
due to the opening and operating of 15 new restaurants opened since the end of
the fiscal year 1999 third quarter, the operations of North Palm Beach and five
new restaurants that were only open and operating part of the first nine months
of fiscal year 1999. As a percentage of sales, labor and benefits costs
increased by 0.7 percentage points to 29.1% for the first nine months of fiscal
year 2000 from 28.4% for the first nine months of fiscal year 1999. The labor
percentage was higher due, in part, to the fact that eight of the 15 new
restaurants opened since the end of the fiscal year 1999 third quarter were
opened in the last four months, October 1999 through January 2000. During the
first several months that restaurants are open (commonly referred to as the
"Honeymoon" period), labor costs as well as other operating costs are higher
than costs in more mature restaurant operations.
OCCUPANCY AND OTHER. Occupancy and other costs increased $5.7 million to
$21.9 million in the first nine months of fiscal year 2000, or 34.9%, from $16.2
million in the first nine months of fiscal year 1999. The increase is primarily
due to the opening and operating of 15 new restaurants since the end of the
fiscal year 1999 third quarter, the operations of North Palm Beach and five new
restaurants that were only open and operating part of the first nine months of
fiscal year 1999. As a percentage of sales, occupancy and other costs increased
by 2.3 percentage points from 18.9% for the first nine months of fiscal year
1999 to 21.2% for the first nine months of fiscal year 2000. This increase is
primarily due to increased marketing costs during the first nine months of
fiscal year 2000 compared to the first nine months of fiscal year 1999.
PRE-OPENING EXPENSES. Pre-opening expenses increased $297,000 to $1.3
million in the first nine months of fiscal year 2000, or 28.9%, from $1.0
million in the first nine months of 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 the first nine months of fiscal year 2000 were
primarily costs associated with the opening of eight new restaurants during that
period.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$756,000 to $6.2 million in the first nine months of fiscal year 2000, or 13.9%,
from $5.5 million in the first nine months of fiscal year 1999. The increase is
primarily due to the opening and operating of 15 new restaurants since the end
of the fiscal year 1999 third quarter and the operations of five new restaurants
that were only open and operating part of the first nine months of fiscal year
1999. As a percentage of sales, depreciation and amortization decreased by 0.3
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<PAGE> 13
percentage points from 6.3% for the first nine months of fiscal year 1999 to
6.0% for the first nine months of fiscal year 2000.
GENERAL AND ADMINISTRATIVE. General and administrative costs increased
$1.0 million to $6.0 million for the first nine months of fiscal year 2000, or
21.2%, from $5.0 million for the first nine months of fiscal year 1999. As a
percentage of sales, general and administrative costs were comparable for both
periods presented.
INTEREST EXPENSE. Interest expense increased $95,000 to $1.7 million in the
first nine months of fiscal year 2000, or 5.8%, from $1.6 million in the first
nine months of fiscal year 1999. The increase is primarily due to additional
interest expense on additional debt incurred due to the development and opening
of 15 new restaurants during the first nine months of fiscal year 2000.
INCOME TAXES. 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 has reduced the allowance to the extent year-to-date income is
available to realize the benefit of the deferred tax assets. The Company has
concluded that the beginning of the year valuation allowance is still necessary
as of January 23, 2000. Therefore, the only benefit recorded during the current
year relates to the amount of ordinary income realized during the current year.
ADOPTION OF NEW ACCOUNTING STANDARDS
In April 1998, the AICPA Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities." SOP
98-5 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
costs are expensed as incurred and are included in "pre-opening expenses" within
the accompanying statements of income.
LIQUIDITY AND CAPITAL RESOURCES
The Company requires capital principally for the opening of new restaurants
and has financed its requirements through the private placement of common stock,
an Initial Public Offering, bank loans, leasing facilities and loans from
certain private parties, including present and former shareholders of the
Company.
As of January 23, 2000, the Company had available to it approximately $18.0
million in a sale-leaseback credit facility 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 Company is also currently in
negotiations with CNL Fund Advisors, Inc. ("CNL") to secure a new sale-leaseback
credit facility with them, as well as other lenders. The Company has an existing
relationship 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 2000 and beyond would be greatly reduced.
During the fiscal year 2000 second quarter, the Company borrowed $1.0
million from First Union National Bank. This 120-day promissory note has an
interest rate of the one-month LIBOR rate plus 1.75%. The Company was granted a
90-day extension during the fiscal year 2000 third quarter extending the due
date of the promissory note to April 1, 2000. The proceeds were utilized for the
purchase of land for one new restaurant currently under construction.
During the fiscal year 2000 third quarter, the Company secured from FINOVA
Capital Corporation a two-year $5.0 million working capital line of credit, with
an interest rate of the prime rate plus 2%, adjusted on a daily basis. The
credit facility was utilized solely for the interim construction of new
restaurants. As of January 23, 2000, the Company has borrowed the entire amount
available under the line of credit.
The Company's capital expenditures aggregated approximately $26.3 million
for the thirty-nine weeks ended January 23, 2000 and $8.0 million for the
thirty-nine weeks ended January 24, 1999, substantially all of which were used
to open Roadhouse Grill restaurants.
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<PAGE> 14
The Company anticipates that it may require additional debt or equity
financing in order to continue to open new restaurants. There can be no
guarantee or assurance financing will be available on terms acceptable to the
Company, if at all. In the event the Company is unable to secure additional
financing sufficient to support continued growth, the Company's operating and
financial plans would require revision.
As is common in the restaurant industry, the Company has generally operated
with negative working capital ($10.6 million at January 23, 2000). The Company
does not have significant receivables or inventory and receives trade credit on
its purchases of food and supplies.
RECENT DEVELOPMENTS
On February 23, 2000, the Company's Board of Directors formed an
independent special committee to evaluate a proposed offer by the Company to
purchase all, or substantially all, shares of the Company's common stock held by
non-affiliates of the Company. At this time, no offer has been presented to the
special committee and there is no additional information that can be provided
regarding this transaction.
SEASONALITY AND QUARTERLY RESULTS
The Company's sales and earnings fluctuate seasonally. The Company operates
on a fifty-two or fifty-three week fiscal year structure and the Company's
highest earnings are expected to occur in the third and fourth fiscal quarters.
The current 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
The Company's fiscal year 2000, ending April 30, 2000, is a fifty-three
week year.
Quarterly results have been, and in the future are likely to be,
substantially affected by the timing of new restaurant openings. Because of the
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.
YEAR 2000
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 January 23, 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 Company does not believe that inflation has materially affected its
results of operations during the past five fiscal years. Substantial increases
in costs and expenses, particularly food, supplies, labor and operating expenses
could have a significant impact on the Company's operating results to the extent
that such increases cannot be passed along to customers.
EMPLOYEES
The Company competes with other companies for qualified personnel,
especially management. A shortage of qualified personnel could materially affect
the Company. The Company has not experienced a shortage of qualified personnel
to date and believes that the risk of a shortage is minimal.
SITE LOCATION
The Company competes in the marketplace for qualified restaurant locations.
There is no assurance that the Company can find enough qualified sites to
continue its expansion plans.
CONSUMER TASTE
The restaurant industry is highly competitive and subject to changes in
consumer tastes. The Company believes that it has the ability to respond quickly
to changing taste and preferences because of its flexible format and trade name.
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<PAGE> 15
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various legal actions arising in the normal
course of business. While the resolution of any of such actions may have an
impact on the financial results for the period in which it is resolved, the
Company believes that the ultimate disposition of these matters will not, in the
aggregate, have a material adverse effect upon its business or financial
position.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on November 4, 1999.
The following matters were submitted to votes of the Stockholders:
It was proposed that the five members of the board of directors be
re-elected to serve for a term of one year. Each director was re-elected to
serve for a term of one year. The results of the voting on the foregoing matter
were as follows:
<TABLE>
<CAPTION>
AFFIRMATIVE NEGATIVE BROKER
DIRECTOR VOTES VOTES ABSTENTIONS NON-VOTES
-------- ----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Vincent Tan 9,071,458 20,669 -- 616,614
Ayman Sabi 9,071,458 20,669 -- 616,614
Philip Friedman 9,071,458 20,669 -- 616,614
Phillip Ratner 9,071,458 20,669 -- 616,614
Alain K.K. Lee 9,071,458 20,669 -- 616,614
</TABLE>
It was proposed that the selection of KPMG LLP as independent auditors for
the Company for the fiscal year 2000 be ratified. The selection of KPMG LLP as
independent auditors for the Company for the fiscal year 2000 was ratified. The
results of the voting on the foregoing matter were as follows:
AFFIRMATIVE NEGATIVE BROKER
VOTES VOTES ABSTENTIONS NON-VOTES
------------ --------- ----------- ---------
9,081,260 8,149 2,718 616,614
It was proposed that an amendment to the Company's 1998 Omnibus Stock
Option Plan to increase the number of shares issuable under the plan from
236,000 shares to 436,000 be approved by the Company's shareholders. The
amendment to the 1998 Omnibus Stock Option Plan was approved. The results of the
voting on the foregoing matter were as follows:
AFFIRMATIVE NEGATIVE BROKER
VOTES VOTES ABSTENTIONS NON-VOTES
------------ --------- ----------- ----------
8,471,452 608,528 12,147 616,614
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The Exhibits listed on the accompanying Exhibit Index are filed with or
incorporated by reference in this report.
(b) The Company filed no reports on Form 8-K during the period covered by this
Form 10-Q.
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<PAGE> 16
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf on March 8, 2000, by the undersigned, thereunto duly authorized.
ROADHOUSE GRILL, INC.
(Registrant)
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ AYMAN SABI President, Chief Executive Officer March 8, 2000
-------------------------------- and Director
Ayman Sabi (Principal Executive Officer)
/s/ GLENN E. GLASSHAGEL Chief Financial Officer March 8, 2000
-------------------------------- (Principal Financial Officer
Glenn E. Glasshagel and Principal Accounting Officer)
</TABLE>
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<PAGE> 17
INDEX TO EXHIBITS
EXHIBIT
NUMBER DESCRIPTION
- ------- ------------
21.0 Subsidiaries of the Registrant.
27 Financial Data Schedule.
-16-
<PAGE> 1
Exhibit 21.0 Subsidiaries of the Registrant
Roadhouse Grill-Commercial, Inc.
Roadhouse Grill of North Miami, Inc.
Roadhouse Grill of South Carolina, Inc.
Roadhouse Grill of Georgia, Inc.
Roadhouse Grill of New York, Inc.
Roadhouse Grill Property, L.C.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> APR-26-1999
<PERIOD-END> JAN-23-2000
<CASH> 998
<SECURITIES> 0
<RECEIVABLES> 696
<ALLOWANCES> 0
<INVENTORY> 1,402
<CURRENT-ASSETS> 7,599
<PP&E> 113,615
<DEPRECIATION> 24,229
<TOTAL-ASSETS> 102,854
<CURRENT-LIABILITIES> 18,198
<BONDS> 0
0
0
<COMMON> 291
<OTHER-SE> 50,611
<TOTAL-LIABILITY-AND-EQUITY> 102,854
<SALES> 103,220
<TOTAL-REVENUES> 103,405
<CGS> 87,962
<TOTAL-COSTS> 100,172
<OTHER-EXPENSES> 1,721
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,721
<INCOME-PRETAX> 1,512
<INCOME-TAX> 334
<INCOME-CONTINUING> 1,178
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 953
<NET-INCOME> 225
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
