UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
----------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended Commission file number
June 13, 2000 000-22753
------------- ---------
TOTAL ENTERTAINMENT RESTAURANT CORP.
(Exact Name of Registrant as Specified in its Charter)
Delaware 52-2016614
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
9300 East Central Avenue
Suite 100
Wichita, Kansas 67206
(Address of principal executive offices) (Zip code)
(316) 634-0505
(Registrant's telephone number, including area code)
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 the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at July 13, 2000
----- 9,361,571 shares
Common Stock, $.01 par value
<PAGE>
TOTAL ENTERTAINMENT RESTAURANT CORP.
Index
Page
Number
------
PART I. FINANCIAL INFORMATION
Item 1. Condensed Financial Statements (unaudited)
Condensed Consolidated Balance Sheets at
June 13, 2000 and December 28, 1999 2
Condensed Consolidated Statements of
Operations for the twelve weeks ended
June 13, 2000 and June 15, 1999 3
Condensed Consolidated Statements of
Operations for the twenty-four weeks ended
June 13, 2000 and June 15, 1999 4
Condensed Consolidated Statements of
Cash Flows for the twenty-four weeks ended
June 13, 2000 and June 15, 1999 5
Notes to Condensed Consolidated
Financial Statements 6
Item 2. Management's Discussion and
Analysis of Financial Condition and
Results of Operations 7
Item 3. Quantitative and Qualitative
Disclosures About Market Risk 12
PART II. OTHER INFORMATION
Item 2. Changes in Securities 13
Item 4. Submission of Matters to a Vote of Stockholders 13
Item 6. Exhibits and Reports on Form 8-K 14
-1-
<PAGE>
TOTAL ENTERTAINMENT RESTAURANT CORP.
Condensed Consolidated Balance Sheets
(Unaudited)
<TABLE>
<CAPTION>
June 13, 2000 December 28, 1999
------------- -----------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,181,362 $ 2,550,469
Inventories 918,170 973,156
Deferred income taxes 82,763 136,827
Other current assets 566,271 435,639
------------- ------------
Total current assets 3,748,566 4,096,091
Property and equipment:
Land 600,000 600,000
Buildings 670,629 670,629
Leasehold improvements 20,811,335 20,720,043
Equipment 13,202,132 13,189,864
Furniture and fixtures 3,138,247 3,108,243
------------- ------------
38,422,343 38,288,779
Less accumulated depreciation and amortization 7,583,101 5,988,331
------------- ------------
30,839,242 32,300,448
Other assets:
Goodwill, net of accumulated amortization 4,036,768 4,149,459
Deferred income taxes 480,357 490,460
Investment in partnership interests 100,000 --
Other assets 307,306 315,911
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Total other assets 4,924,431 4,955,830
------------- ------------
Total assets $ 39,512,239 $ 41,352,369
============= ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 964,327 $ 1,040,448
Sales tax payable 446,941 359,458
Accrued payroll 658,773 655,702
Accrued payroll taxes 531,510 355,543
Accrued income taxes 697,699 876,838
Lease obligation for closed store 315,944 368,476
Other accrued liabilities 1,073,408 928,359
------------- ------------
Total current liabilities 4,688,602 4,584,824
Notes payable 11,840,000 14,395,000
Deferred revenue 145,703 140,769
Stockholders' equity:
Preferred stock -- --
Common stock 93,616 96,813
Additional paid-in capital 18,728,297 19,385,229
Retained earnings 4,016,021 2,749,734
----------- ----------
Total stockholders' equity 22,837,934 22,231,776
----------- ----------
Total liabilities and stockholders' equity $ 39,512,239 $ 41,352,369
============= ============
</TABLE>
See accompanying notes.
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<PAGE>
TOTAL ENTERTAINMENT RESTAURANT CORP.
Condensed Consolidated Statements of Operations
(Unaudited)
Twelve weeks Twelve weeks
ended ended
June 13,2000 June 15,1999
------------ ------------
Sales:
Food and beverage $ 10,789,539 $ 11,501,979
Entertainment and other 1,216,684 1,294,438
------------ ------------
Total net sales 12,006,223 12,796,417
Costs and expenses:
Costs of sales 3,158,884 3,551,724
Entertainment and restaurant operating expenses 6,345,274 6,876,297
Depreciation and amortization 825,188 861,505
------------ ------------
Entertainment and restaurant costs and expenses 10,329,346 11,289,526
------------ ------------
Entertainment and restaurant operating income 1,676,877 1,506,891
General and administrative expenses 903,851 1,003,924
Goodwill amortization 56,342 56,345
------------ ------------
Income from operations 716,684 446,622
Other income (expense):
Loss on disposal of assets (6,042) --
Interest expense (242,433) (241,717)
------------ ------------
Income before provision for income taxes 468,209 204,905
Provision for income taxes 173,238 76,218
------------ ------------
Net income $ 294,971 $ 128,687
============ ============
Basic and diluted earnings per share $ 0.03 $ 0.01
============ ============
See accompanying notes.
-3-
<PAGE>
TOTAL ENTERTAINMENT RESTAURANT CORP.
Condensed Consolidated Statements of Operations
(Unaudited)
Twenty-four Twenty-four
weeks ended weeks ended
June 13,2000 June 15,1999
------------ ------------
Sales:
Food and beverage $ 23,058,174 $ 24,428,511
Entertainment and other 2,597,839 2,751,425
------------ ------------
Total net sales 25,656,013 27,179,936
Costs and expenses:
Costs of sales 6,702,564 7,510,821
Entertainment and restaurant operating expenses 12,782,865 13,984,596
Depreciation and amortization 1,662,663 1,658,061
------------ ------------
Entertainment and restaurant costs and expenses 21,148,092 23,153,478
------------ ------------
Entertainment and restaurant operating income 4,507,921 4,026,458
General and administrative expenses 1,861,805 1,897,586
Goodwill amortization 112,687 112,690
------------ ------------
Income from operations 2,533,429 2,016,182
Other income (expense):
Loss on disposal of assets (31,733) --
Interest expense (491,716) (471,888)
------------ ------------
Income before provision for income taxes 2,009,980 1,544,294
Provision for income taxes 743,693 571,792
---------- ------------
Income before cumulative effect of a
change in accounting principle 1,266,287 972,502
Cumulative effect of change in
accounting principle (net of income tax) -- (1,127,536)
------------ ------------
Net income (loss) $ 1,266,287 (155,034)
============ ============
Basic and diluted earnings (loss) per share:
Earnings before cumulative effect of a
change in accounting principle $ 0.13 0.09
Cumulative effect of change in
accounting principle (net of income tax) -- (0.11)
------------ ------------
Basic and diluted earnings (loss) per share $ 0.13 (0.02)
============ ============
See accompanying notes.
-4-
<PAGE>
TOTAL ENTERTAINMENT RESTAURANT CORP.
Condensed Consolidated Statement of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
Twenty-four Twenty-four
weeks ended weeks ended
June 13, 2000 June 15, 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,266,287 $ (155,034)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Cumulative effect of change in accounting principle -- 1,127,536
Deferred income taxes 64,167 --
Loss on disposal of assets 31,733 --
Depreciation and amortization 1,775,354 1,770,751
Net change in operating assets and liabilities:
Change in operating assets (78,695) (22,386)
Change in operating liabilities 108,713 (853,812)
------------- -------------
Net cash provided by operating activities 3,167,559 1,867,055
Cash flows from investing activities:
Purchases of property and equipment (259,856) (3,775,010)
Purchases of limited partnership interests (100,000) --
Proceeds from disposal of assets 38,320 --
------------- -------------
Net cash used in investing activities (321,536) (3,775,010)
Cash flows from financing activities:
Proceeds from revolving note payable to bank 17,400,000 21,170,000
Payments of revolving note payable to bank (19,955,000) (17,665,000)
Purchases of common stock (660,130) --
------------- -------------
Net cash (used in) provided by financing activities (3,215,130) 3,505,000
------------- -------------
Net (decrease) increase in cash and cash equivalents (369,107) 1,597,045
Cash and cash equivalents at beginning of period 2,550,469 945,861
------------- -------------
Cash and cash equivalents at end of period $ 2,181,362 $ 2,542,906
============= =============
Supplemental disclosure of cash flow information:
Cash paid for interest $ 544,636 $ 500,298
Cash paid for income taxes 858,664 15,400
</TABLE>
See accompanying notes.
-5-
<PAGE>
TOTAL ENTERTAINMENT RESTAURANT CORP.
Notes to Condensed Consolidated Financial Statements
1. Basis of Presentation and Description of Business
The unaudited condensed consolidated financial statements have been
prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission. The information furnished herein reflects all
adjustments (consisting of normal recurring accruals and adjustments) which are,
in the opinion of management, necessary to fairly present the operating results
for the respective periods. Certain information and footnote disclosures
normally presented in annual financial statements prepared in accordance with
generally accepted accounting principles have been omitted pursuant to such
rules and regulations. These financial statements should be read in conjunction
with the Company's audited consolidated financial statements in its 1999 Form
10-K. The results of the twelve weeks and twenty-four weeks ended June 13, 2000
are not necessarily indicative of the results to be expected for the full year
ending December 26, 2000.
2. Stock Options
During the twenty-four week period ended June 13, 2000, the Company
granted to certain key employees stock options for 32,500 shares of Common Stock
at exercise prices ranging from $1.688 to $2.125 per share and cancelled options
for 56,461 shares with a weighted average exercise price of $4.146 per share
pursuant to its 1997 Incentive and Nonqualified Stock Option Plan. The Company
also granted to certain non-employee Directors stock options for 12,000 shares
of Common Stock at exercise prices ranging from $1.625 to $1.688 per share
pursuant to its 1997 Directors Stock Option Plan.
3. Earnings Per Share
Basic earnings per share amounts are computed based on the weighted
average number of shares actually outstanding. The number of weighted averaged
shares outstanding for the twelve week periods ended June 13, 2000 and June 15,
1999 were 9,451,591 and 10,415,000, respectively; the number of weighted
averaged shares outstanding for the twenty-four week periods ended June 13, 2000
and June 15, 1999 were 9,523,425 and 10,415,000, respectively.
For purposes of diluted computations, the number of shares that would be
issued from the exercise of stock options has been reduced by the number of
shares which could have been purchased from the proceeds at the average market
price of the Company's stock or the price of the Company's stock on the exercise
date if options were exercised during the period presented. The number of shares
resulting from this computation of diluted earnings per share for the twelve
weeks ended June 13, 2000 and June 15, 1999 were 9,456,731 and 10,437,681, and
for the twenty-four week periods ended June 13, 2000 and June 15, 1999 were
9,525,916 and 10,478,502, respectively.
-6-
<PAGE>
Item 2. Management's Discussion and Anaysis of Financial Condition and Results
of Operations
General
The following discussion and analysis should be read in conjunction with
the Financial Statements and Notes thereto included elsewhere in this Form 10-Q.
As of June 13, 2000, the Company owned and operated 35 entertainment and
restaurant locations under the Fox and Hound English Pub & Grille ("Fox and
Hound"), Bailey's Sports Grille and Bailey's Pub & Grille ("Bailey's") brand
names. The Company's entertainment restaurant locations combine a comfortable
and inviting social gathering place, full menu and full-service bar,
state-of-the-art audio and video systems for sports and music entertainment,
traditional games of skill such as pocket billiards and a late-night dining
alternative, all in a single location. As of June 13, 2000, the Company owned
and operated 23 Fox and Hounds and 12 Bailey's located in Alabama, Arkansas,
Georgia, Illinois, Indiana, Kansas, Louisiana, Michigan, Missouri, Nebraska,
North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee and Texas. As of
June 15, 1999, the Company owned and operated 24 Fox and Hounds and 12 Bailey's.
The components of the Company's net sales are food and non-alcoholic
beverages, alcoholic beverages, and entertainment and other. For the twenty-four
weeks ended June 13, 2000, food and non-alcoholic beverages were 32.5% of total
sales, alcoholic beverages were 57.4% of total sales and entertainment and other
were 10.1% of total sales. For the twenty-four weeks ended June 15, 1999, food
and non-alcoholic beverages were 35.2% of total sales, alcoholic beverages were
54.7% of total sales and entertainment and other were 10.1% of total sales.
Components of restaurant operating expenses include operating payroll and
fringe benefits, occupancy, advertising and promotion. These costs are generally
variable and will fluctuate with changes in sales volume and sales mix. All but
one of the Company's locations are leased and provide for a minimum annual rent,
with some leases calling for additional rent based on sales volume at the
particular location of specified minimum levels.
General and administrative expenses include all corporate and
administrative functions that support existing operations and provide an
infrastructure to support future growth. Management, supervisory and staff
salaries, employee benefits, travel, information systems, training, rent and
office supplies as well as accounting services fees are major items of costs in
this category.
-7-
<PAGE>
Results of Operations
The following table sets forth for the periods indicated (i) the
percentages which certain items included in the Condensed Consolidated Statement
of Operations bear to net sales, and (ii) other selected operating data:
<TABLE>
<CAPTION>
Twelve Weeks Ended(1) Twenty-four Weeks Ended(1)
--------------------- --------------------------
June 13, June 15, June 13, June 15,
2000 1999 2000 1999
-------- -------- -------- --------
Operating Statement Data:
<S> <C> <C> <C> <C>
Net sales ............................................. 100.0% 100.0% 100.0% 100.0%
Costs and expenses:
Costs of sales .................................... 26.3 27.8 26.1 27.6
Restaurant operating expenses ..................... 52.8 53.7 49.8 51.5
Depreciation and amortization ..................... 6.9 6.7 6.6 6.1
-------- -------- -------- --------
Restaurant costs and expenses ................. 86.0 88.2 82.5 85.2
-------- -------- -------- --------
Restaurant operating income ........................... 14.0 11.8 17.6 14.8
General and administrative expenses ................... 7.5 7.8 7.3 7.0
Goodwill amortization ................................. 0.5 0.5 0.4 0.4
-------- -------- -------- --------
Income from operations ................................ 6.0 3.5 9.8 7.4
Loss on disposal of assets ............................ 0.1 -- 0.1 --
Interest expense ...................................... 2.0 1.9 1.9 1.7
-------- -------- -------- --------
Income before provision for income taxes and cumulative
effect of a change in accounting principle ........ 3.9 1.6 7.8 5.7
Provision for income taxes ............................ 1.4 0.6 2.9 2.1
-------- -------- -------- --------
Income before cumulative effect of a change in
accounting principle .............................. 2.5 1.0 4.9 3.6
Cumulative effect of change in accounting principle ... -- -- -- (4.2)
-------- -------- -------- --------
Net income (loss) ..................................... 2.5% 1.0% 4.9% (0.6)%
======== ======== ======== ========
Restaurant Operating Data (dollars in thousands):
Annualized average weekly sales per location (2) ...... $ 1,486 $ 1,526 $ 1,588 $ 1,668
Number of restaurants at end of the period ............ 35 36 35 36
</TABLE>
(1) The Company operates on a fifty-two or fifty-three week fiscal year ending
the last Tuesday in December. The fiscal quarters for the Company consist
of accounting periods of twelve, twelve, twelve and sixteen or seventeen
weeks, respectively.
(2) Annualized average weekly sales per location are computed by dividing net
sales for full weeks open during the period by the number of full weeks
open and multiplying the result by fifty-two.
Twelve Weeks Ended June 13, 2000 Compared to Twelve Weeks Ended June 15, 1999
Net sales decreased $790,000 (6.2%) for the twelve weeks ended June 13, 2000 to
$12,006,000 from $12,796,000 for the twelve weeks ended June 15, 1999, which is
due to lower average unit volumes for units open less than 18 months and the
closing of one unit since June 15, 1999. Same store sales for units open more
than 18 months increased 1.7% in the twelve weeks ended June 13, 2000 compared
to the twelve weeks ended June 15, 1999.
Costs of sales, primarily food and beverages, decreased $393,000 (11.1%) for the
twelve weeks ended June 13, 2000 to $3,159,000 from $3,552,000 in the twelve
weeks ended June 15, 1999, and decreased as a percentage of sales to 26.3% from
27.8%. This decrease as a percentage of sales is principally attributable to
improved controls at the restaurant level.
-8-
<PAGE>
Restaurant operating expenses decreased $531,000 (7.7%) for the twelve
weeks ended June 13, 2000 to $6,345,000 from $6,876,000 in the twelve weeks
ended June 15, 1999, and decreased as a percentage of net sales to 52.8% from
53.7%. This decrease is attributable to lower labor costs (7.3%) resulting from
improved controls at the restaurant level, lower advertising costs (1.0%), and
lower administrative costs (0.8%), offset by higher occupancy costs (0.6%) and
other operating expenses (1.2%) including maintenance costs and higher costs
associated with recruiting and training new managers.
Depreciation and amortization decreased $36,000 (4.2%) for the twelve
weeks ended June 13, 2000 to $825,000 from $861,000 in the twelve weeks ended
June 15, 1999, and increased as a percentage of sales to 6.9% from 6.7%. This
net decrease is due principally to the depreciation incurred during 1999 on one
unit which was closed in the third quarter of 1999. The increase as a percentage
of sales is due to a decrease in the average unit volumes of stores open less
than 18 months.
General and administrative expenses decreased $100,000 (10.0%) for the
twelve weeks ended June 13, 2000 to $904,000 from $1,004,000 in the twelve weeks
ended June 15, 1999, and decreased as a percentage of sales to 7.5% from 7.8%.
Interest expense was $242,000 for the twelve weeks ended June 13, 2000 and
for the twelve weeks ended June 15, 1999.
The effective income tax rate for the twelve weeks ended June 13, 2000 and
for the twelve weeks ended June 15, 1999 was 37.0%.
Twenty-four Weeks Ended June 13, 2000 Compared to Twenty-four Weeks Ended June
15, 1999
Net sales decreased $1,524,000 (5.6%) for the twenty-four weeks ended June
13, 2000 to $25,656,000 from $27,180,000 for the twelve weeks ended June 15,
1999, which is due to lower average unit volumes for units open less than 18
months and the closing of one unit since June 15, 1999. Same store sales for
units open more than 18 months increased 2.1% in the twenty-four weeks ended
June 13, 2000 compared to the twelve weeks ended June 15, 1999.
Costs of sales, primarily food and beverages, decreased $808,000 (10.8%)
for the twenty-four weeks ended June 13, 2000 to $6,703,000 from $7,511,000 in
the twenty-four weeks ended June 15, 1999, and decreased as a percentage of
sales to 26.1% from 27.6%. This decrease as a percentage of sales is principally
attributable to improved controls at the restaurant level.
Restaurant operating expenses decreased $1,202,000 (8.6%) for the
twenty-four weeks ended June 13, 2000 to $12,783,000 from $13,985,000 in the
twenty-four weeks ended June 15, 1999, and decreased as a percentage of net
sales to 49.8% from 51.5 %. This decrease is attributable to lower labor costs
(6.5%) resulting from improved controls at the restaurant level, lower
advertising costs (0.6%), and lower administrative costs (0.3%), offset by
higher occupancy costs (0.6%) and other operating expenses (2.0%) including
maintenance costs and higher costs associated with recruiting and training new
managers.
Depreciation and amortization increased $5,000 (0.3%) for the twenty-four
weeks ended June 13, 2000 to $1,663,000 from $1,658,000 in the twenty-four weeks
ended June 15, 1999, and increased as a percentage of sales to 6.6% from 6.1%.
This increase is due to the depreciation of five units opened during the first
quarter of 1999, offset by depreciation incurred in 1999 on two units closed
during the second and third quarters of 1999.
-9-
<PAGE>
General and administrative expenses decreased $35,000 (1.90%) for the
twenty-four weeks ended June 13, 2000 to $1,862,000 from $1,897,000 in the
twenty-four weeks ended June 15, 1999, and increased as a percentage of sales to
7.3% from 7.0%. Through February 28, 1999, certain accounting and administrative
services were contracted from Lone Star Steakhouse & Saloon, Inc. ("Lone Star"),
a restaurant company, of which the Company's former Chairman of the Board, Jamie
B. Coulter, is Chairman and CEO. The service agreement provided for specified
accounting and administrative services to be provided on a cost pass-through
basis. Through February 28, 1999, the fixed annual charge was $194,500, plus an
additional fee of $466 per restaurant per 28-day accounting period. Beginning
March 1, 1999, these services were provided by Franchise Services Company
("FSC") at a market rate.
Interest expense increased $20,000 for the twenty-four weeks ended June
13, 2000 to $492,000. This increase reflects a higher interest rate applicable
to the revolving note payable in the current year compared with the prior year.
The effective income tax rate for the twenty-four weeks ended June 13,
2000 and for the twenty-four weeks ended June 15, 1999 was 37.0%.
Quarterly Fluctuations, Seasonality and Inflation
As a result of the revenues associated with each new location, the timing
of new unit openings will result in significant fluctuations in quarterly
results. The Company expects seasonality to be a factor in the operation or
results of its business in the future due to expected lower second and third
quarter revenues due to the summer season. The primary inflationary factors
affecting the Company's operations include food, liquor and labor costs. The
Company believes low inflation rates in its market areas have contributed to
stable food and labor costs in recent years. However, there is no assurance that
low inflation rates will continue or that the Federal minimum wage rate will not
increase. To date, inflation has not had a material impact on operating margins.
-10-
<PAGE>
Liquidity and Capital Resources
On September 1, 1998 the Company entered into a loan agreement with
Intrust Bank, N.A. (the "Facility") which provides for a line of credit of
$20,000,000 subject to certain limitations based on earnings before interest,
taxes, depreciation and amortization of the past fifty-two weeks. The Facility
requires monthly payments of interest only until November 1, 2001, at which time
equal monthly installments of principal and interest are required as necessary
to fully amortize the outstanding indebtedness plus future interest over a
period of four years. Interest is accrued at 1/2% below the prime rate as
published in The Wall Street Journal. Proceeds from the Facility are being used
for restaurant development and stock repurchases.
Cash flows from operations were $3,167,000, purchases of property and
equipment were $260,000, and net payments of the revolving note payable to bank
was $2,555,000 for the twenty-four week period ending June 13, 2000.
On February 29, 2000, the Board of Directors authorized an increase in the
Company's stock repurchase program for up to an additional 500,000 shares of the
Company's common stock. This approval supplemented the Board's authorization on
October 5, 1999 to purchase 1,000,000 shares of stock. As of June 13, 2000, the
Company had spent $1,853,000 to repurchase 1,053,429 shares of common stock.
At June 13, 2000, the Company had $2,181,000 in cash and cash equivalents.
The Company intends to open up to three new locations in 2000. Four leases have
been executed and three units are currently under non-binding letters of intent
to lease with pending contingencies. The Company is currently evaluating
locations in markets familiar to its management team. However, the number of
locations actually opened and the timing thereof may vary depending upon the
ability of the Company to locate suitable sites and negotiate favorable leases.
The Company expects to expend approximately $9.0 to $11.0 million to open new
locations over the next twelve months.
The Company believes the funds available from the Facility and its cash
flow from operations will be sufficient to satisfy its working capital and
capital expenditure requirements for at least the next twelve months. There can
be no assurance, however, that changes in the Company's operating plans, the
acceleration or modification of the Company's expansion plans, lower than
anticipated revenues, increased expenses, stock repurchases, potential
acquisitions or other events will not cause the Company to seek additional
financing sooner than anticipated, prevent the Company from achieving the goals
of its expansion strategy or prevent any newly opened locations from operating
profitably. There can be no assurance that additional financing will be
available on terms acceptable to the Company or at all.
Forward Looking Statements
This report contains certain forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, which are intended to be covered by
the safe harbors created thereby. Although the Company believes that the
assumptions underlying the forward-looking statements contained herein are
reasonable, any of the assumptions could be inaccurate, and, therefore, there
can be no assurance that the forward-looking statements included in this report
will prove to be accurate. Factors that could cause actual results to differ
from the results discussed in the forward-looking statements include, but are
not limited to, potential increases in food and liquor costs, competition and
the inability to find suitable new locations. In light of the significant
uncertainties inherent in the forward-looking statements included herein, the
inclusion of such information should not be regarded as a representation by the
Company or any other person that the objectives and plans of the Company will be
achieved.
-11-
<PAGE>
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Interest Rate Risk
The Company's Facility has a variable rate which is directly affected by
changes in U.S. interest rates. The average interest rate of the Facility was
8.31% for the twelve weeks ended June 13, 2000. The following table presents the
quantitative interest rate risks at June 13, 2000:
<TABLE>
<CAPTION>
Principal Amount by Expected Maturity
----------------------------------------------------------------------------------------
(In thousands)
Fair
There- Value
(dollars in thousands) 2000 2001 2002 2003 2004 after Total 6/13/00
---------------------- ---- ---- ---- ---- ---- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Variable rate debt -- $ 413 $ 2,613 $ 2,858 $ 3,127 $ 2,829 $ 11,840 $ 11,840
Average Interest Rate--
1/2% below prime 9.00% 9.00% 9.00% 9.00% 9.00% 9.00%
</TABLE>
-12-
<PAGE>
PART II. OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds
Securities Sold
(c) The following unregistered securities were issued by the Company during
the twelve weeks ended June 13, 2000:
<TABLE>
<CAPTION>
Number of Shares
Description of Sold/Issued/Subject Offering/Exercise
Date of Sale/Issuance Securities Issued to Options or Warrants Price Per Share
--------------------- ----------------- ---------------------- ---------------
<S> <C> <C> <C>
May 10, 2000 Common Stock Options 15,000 $ 2.125
</TABLE>
All of the above options were granted to certain key employees pursuant to
the 1997 Incentive and Nonqualified Stock Option Plan or to non-employee
directors pursuant to the Directors Stock Option Plan. The options for
employees have a vesting period of three to five years and a life of ten
years and the options for non-employee directors have a vesting period of
three years and a life of five years.
The issuance of these securities is claimed to be exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933, as amended, as
transactions by an issuer not involving a public offering. There were no
underwriting discounts or commissions paid in connection with the issuance
of any of these securities.
Item 4. Submission of Matters to a Vote of Stockholders
On May 22, 2000, the Company held its Annual Meeting of Stockholders (the
"Meeting"). At the Meeting, the stockholders elected C. Wells Hall, III, James
K. Zielke, and E. Gene Street to the Board of Directors to serve until the 2003
Annual Meeting of Stockholders and until their successors have been duly elected
and qualified. As to the new elected Directors, there were 8,242,700 votes "For"
and 13,976 votes "Withheld" for C. Wells Hall, III and 8,242,700 votes "For" and
13,976 votes "Withheld" for James K. Zielke and 8,242,700 votes "For" and 13,976
votes "Withheld" for E. Gene Street. The continuing directors and the expiration
of their current terms as directors are as follows:
Dennis L. Thompson.......................................2001
Stephen P. Hartnett......................................2001
Thomas A. Hagar..........................................2001
Steven M. Johnson........................................2002
Gary M. Judd.............................................2002
John D. Harkey, Jr.......................................2002
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<PAGE>
In addition, the stockholders ratified the appointment of Grant Thornton, LLP as
the Company's independent auditors for the year ending December 26, 2000. As to
the ratification of auditors, there were 8,246,975 votes "For" and 9,601 votes
"Against"; 100 votes "Abstained."
Item 6. Exhibits and Reports on Form 8-K
Exhibits
The following exhibits are filed as part of this report:
Exhibit No.
27........................................Financial Data Schedule
Reports on Form 8-K
None
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<PAGE>
TOTAL ENTERTAINMENT RESTAURANT CORP.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed in its behalf by the
undersigned thereunto duly authorized.
Total Entertainment Restaurant Corp.
(Registrant)
Date July 21, 2000 /s/ James K. Zielke
-------------------------- ----------------------------------------
James K. Zielke
Chief Financial Officer,
Secretary and Treasurer
(Duly Authorized Officer)
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