UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
FORM 10-Q/A
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 28, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from __________ to __________
Commission file number 0-22639
UNIQUE CASUAL RESTAURANTS, INC.
(Exact name of registrant as specified in its charter)
Delaware 04-3370491
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Corporate Place, 55 Ferncroft Road, Danvers, MA 01923
(Address of principal executive offices) (Zip Code)
(978) 774-6606
(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 [ ]
Number of shares of Common Stock, $.01 par value, outstanding at November 10,
1997: 11,504,210.
<PAGE>
The Company's Quarterly Report on Form 10-Q/A contains an amended Item 1
(Financial Statements) for the fiscal quarter ended September 28, 1997.
The reason for this amended filing is an arithmatic error in the prior year's
Consolidated Statement of Cash Flows which does not result in any changes to net
income reported or to the balance sheet.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Financial Statements
UNIQUE CASUAL RESTAURANTS, INC.
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
September 28, June 29,
1997 1997
------ ------
<S> <C> <C>
ASSETS:
Current assets:
Cash $ 3,061 $ 172
Cash - restricted (Note 3) 7,000 5,000
Accounts receivable, net 6,197 4,376
Inventories 3,678 3,975
Prepaid expenses and other current assets 3,285 1,387
--------- ---------
Total current assets 23,221 14,910
Property and equipment, net 97,608 94,673
Investments in, and advances to, affiliates 5,000 5,000
Other assets, net 12,876 10,626
--------- ---------
Total assets $ 138,705 $ 125,209
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
Current liabilities:
Accounts payable $ 17,584 $ 10,397
Accrued expenses 16,601 11,548
Accrued transaction costs -- 6,347
Current portion of long-term debt 911 1,102
--------- ---------
Total current liabilities 35,096 29,394
--------- ---------
Long-term debt 3,404 4,026
Deferred tax liabilities 1,099 --
Other long-term liabilities 14,281 11,636
Minority interest 1,100 1,100
--------- ---------
Total long-term liabilities 19,884 16,762
--------- ---------
Commitments and contingencies (Note 4)
Stockholders' equity:
Common stock, $.01 par value; 30,000,000
shares authorized; 11,464,000 and
1,000 shares issued and outstanding
at September 28, 1997 and
June 29, 1997, respectively 114 --
Capital in excess of par 84,404 --
Accumulated deficit (793) --
Group equity -- 79,053
--------- ---------
Total stockholders' equity 83,725 79,053
--------- ---------
Total liabilities and stockholders' equity $ 138,705 $ 125,209
========= =========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
UNIQUE CASUAL RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended September 28, 1997 and 1996
(Amounts in thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
REVENUES:
Sales $ 51,124 $ 49,571
Franchising and royalty income 1,318 1,363
-------- --------
52,442 50,934
COSTS AND EXPENSES:
Cost of sales 14,473 14,335
Labor 16,220 15,881
Other restaurant operating expenses 15,081 14,282
Marketing and promotion 806 844
Depreciation and amortization 2,593 3,659
General and administrative expenses 4,026 6,361
-------- --------
(Loss) from operations (757) (4,428)
OTHER (EXPENSES):
Interest expense (108) (228)
Interest income 213 98
Other non-operating expenses (141) --
-------- --------
(Loss) before income tax benefit
and minority interests (793) (4,558)
-------- --------
Income tax benefit -- (1,213)
Minority interests -- (26)
-------- --------
Net (loss) $ (793) $ (3,319)
======== ========
(Loss) per share $ (0.07)
========
Weighted average shares outstanding 11,464
========
Pro forma (loss) per share $ (0.29)
========
Pro forma weighted average 11,425
========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
UNIQUE CASUAL RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended September 28, 1997 and 1996
(Dollars in thousands)
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) $ (793) $ (3,319)
Adjustments to reconcile net (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 2,827 3,873
Restricted cash balances (2,000) --
Deferred income taxes -- 422
Minority interests -- (26)
Changes in working capital (1,039) 2,870
Changes in other long-term liabilities
and deferrals 2,353 (2,211)
-------- --------
Net cash provided by (used in)
operating activities 1,348 1,609
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (2,277) (4,725)
-------- --------
Net cash flows from investing activities (2,277) (4,725)
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of capital lease obligations (813) (455)
Contributed capital 3,029 4,500
Issuances of common stock 265 --
Proceeds from sale-leaseback facility 1,337 6,061
-------- --------
Net cash flows from financing activities 3,818 10,106
-------- --------
Net cash flows 2,889 6,990
Cash and cash equivalents, beginning of period 172 5,281
-------- --------
Cash and cash equivalents, end of period $ 3,061 $ 12,271
======== ========
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Cash paid for (received from):
Interest $ 108 $ 228
Income taxes (325) (1,213)
</TABLE>
The Company acquired equipment by entering into capital leases in the amount of
$1,126 during 1997.
See notes to unaudited condensed consolidated financial statements.
<PAGE>
UNIQUE CASUAL RESTAURANTS, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Three Months Ended September 28, 1997 and 1996
(Amounts in thousands)
(Unaudited)
<TABLE>
<CAPTION>
Additional
Common Paid-in Accumulated Group
Shares Stock Capital Deficit Equity Total
------ ----- ------- ------- ------ -----
<S> <C> <C> <C> <C> <C> <C>
BALANCE, JUNE 29, 1997 1 -- $ -- $ -- $ 79,053 $ 79,053
Contributed assets, net -- -- -- -- 5,200 5,200
Distribution by Parent 11,425 114 84,139 -- (84,253) --
Common shares issued 38 -- 265 -- -- 265
Net (loss) -- -- -- (793) -- (793)
------ ----- -------- -------- -------- --------
BALANCE, SEPTEMBER 28, 1997 11,464 114 $ 84,404 $ (793) $ -- $ 83,725
====== ===== ======== ======== ======== ========
</TABLE>
See notes to unaudited condensed consolidated financial statements.
<PAGE>
UNIQUE CASUAL RESTAURANTS, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
Three Months Ended September 28, 1997 and 1996
(Dollars in thousands, except per share data)
(Unaudited)
1. BACKGROUND AND BASIS OF PRESENTATION
Background
Unique Casual Restaurants, Inc. (the "Company") is a Delaware corporation formed
on May 27, 1997 which was spun-off to holders of the common stock of DAKA
International, Inc. ("DAKA International") pursuant to the transactions
described below in Note 2 (the "Spin-off"). The Company's principal business
activities are to own and operate the restaurant operations previously operated
by various subsidiaries and divisions of DAKA International prior to the
formation and the Spin-off of the Company.
Basis of Presentation
The accompanying 1998 consolidated and 1997 combined (hereafter referred to as
consolidated) financial statements include the accounts of Fuddruckers, Inc.
("Fuddruckers"), Champps Entertainment, Inc. ("CEI" or "Champps"), The Great
Bagel and Coffee Company ("Great Bagel and Coffee"), Casual Dining Ventures,
Inc. ("CDVI"), Atlantic Restaurant Ventures, Inc. ("ARVI") and Restaurant
Consulting Services, Inc. ("RCS"). The historical DAKA International basis in
the assets and liabilities transferred to the Company in connection with the
transactions described in Note 2 have been recorded as the Company's initial
cost basis. Minority shareholders' equity in earnings (losses) of less than 100%
owned subsidiaries is presented as minority interests in the accompanying
consolidated financial statements. Significant intercompany balances and
transactions have been eliminated in consolidation.
2. FORMATION OF THE COMPANY
On May 27, 1997, DAKA International and its wholly-owned subsidiary, Daka, Inc.,
a Massachusetts corporation ("Daka"), entered into an Agreement and Plan of
Merger (the "Merger Agreement") with Compass Interim, Inc., a Delaware
corporation, a wholly-owned subsidiary of Compass Holdings, Inc., a Delaware
corporation, a wholly-owned subsidiary of Compass Group PLC (collectively
"Compass"), pursuant to which Compass agreed, upon the satisfaction of certain
conditions, to commence a tender offer (the "Offer") for all of the outstanding
shares of DAKA International common stock (the "Merger"). The Offer was
consummated on July 17, 1997. Immediately prior to the consummation of the
Offer, pursuant to a plan of contribution and distribution as described in the
Reorganization Agreement (the "Reorganization Agreement"), dated as of May 27,
1997, by and among DAKA International, Daka, the Company and Compass, DAKA
International and certain of its subsidiaries made various contributions of
assets and equity interests to each other in the form of dividends and capital
contributions in order to divest DAKA International of its restaurant businesses
which were contributed to the Company.
Certain non-restaurant operating assets and liabilities of DAKA International
were also contributed to the Company (the "Additional Capital Contribution")
consisting of cash, prepaid expenses, notes receivable, property and accounts
payable, accrued expenses, refundable income taxes and contingent liabilities.
These assets and liabilities, which resulted in an increase to stockholders'
equity of approximately $5.2 million, have been recorded within their respective
captions on the September 28, 1997 consolidated balance sheet.
<PAGE>
Following the consummation of the Offer, Compass merged with and into DAKA
International. Pursuant to the Offer, DAKA International distributed to each
holder of record of shares of DAKA International common stock, one share of
common stock of the Company for each share of DAKA International owned by such
stockholder (the "Distribution"). No consideration was paid by DAKA
International's stockholders for the shares of the Company's common stock. As a
result of the Distribution, the Company ceased to be a subsidiary of DAKA
International and began operating as an independent, publicly-held company on
July 17, 1997. The Company's net loss during the period June 30 to July 17, 1997
has been charged to retained earnings in the accompanying financial statements,
as the loss was not material.
Effective July 1, 1997, the Company entered into a sale and services agreement
with RCS whereby the Company sold to RCS for an aggregate purchase price of $2.3
million certain data processing equipment which had been contributed to the
Company by DAKA International as part of the Additional Capital Contribution.
The purchase price will be satisfied through the repayment of a promissory note
due June 30, 2002 which bears interest at 6% per annum. The Company also
received DAKA International's 50% interest in RCS at the Transaction Date. In
connection with this sale, the Company has entered into a management agreement
with RCS whereby the Company has agreed to provide certain managerial services
to RCS. In addition, the Company has entered into a two year service agreement
with RCS for data processing and consulting services for an annual fee of $1.8
million. The Company has also provided RCS with a $300 line-of-credit which
bears interest at 6% and is payable in full on or before December 31, 1999. The
Company will consolidate RCS' operations until such time as the obligations of
RCS to the Company are satisfied.
3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Business Activities of the Company
The Company is a diversified restaurant company serving customers through a
variety of venues. The Company's Fuddruckers and Champps operations serve
customers in casual and upscale restaurant settings, respectively, throughout
the United States, Canada, the Middle East and the Far East. At September 28,
1997, the Company's Specialty Concepts business unit consists principally of
Great Bagel and Coffee, which serves coffee, bagels and sandwich items in a cafe
setting in western locations of the United States. Restaurant operations are
conducted through Company-owned and franchised stores.
In the opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting of normal recurring
adjustments, necessary for the fair presentation of financial position and
results of operations. The accompanying unaudited condensed consolidated
financial statements should be read in conjunction with the audited combined
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K for the fiscal year ended June 29, 1997. The unaudited condensed
consolidated results of operations for the three months ended September 28, 1997
and 1996 are not necessarily indicative of the results that could be expected
for a full year.
Restricted Cash
The Company placed certificates of deposit to serve as cash collateral for
stand-by letters of credit in the amount of $7.0 million and $5.0 million at
September 28, 1997 and June 29, 1997, respectively.
<PAGE>
Fiscal Year
Beginning in fiscal 1997, the Company's fiscal year ends on the Sunday closest
to June 30th. Prior to fiscal 1997, the Company's fiscal year ended on the
Saturday closest to June 30th. For purposes of these notes to the unaudited
condensed consolidated financial statements, the three months ended September
28, 1997 and 1996 are referred to as 1998 and 1997, respectively.
Reclassifications
Certain reclassifications have been made to the 1997 financial statements in
order to conform to the 1998 presentation.
Significant Estimates
In the process of preparing its financial statements, the Company estimates the
appropriate carrying value of certain assets and liabilities which are not
readily apparent from other sources. The primary estimates underlying the
Company's financial statements include allowances for potential bad debts on
accounts and notes receivable, the useful lives and recoverability of its assets
such as property and intangibles, fair values of financial instruments, the
realizable value of its tax assets and accruals for health insurance and other
matters. Management bases its estimates on certain assumptions, which they
believe are reasonable in the circumstances, and while actual results could
differ from those estimates, management does not believe that any change in
those assumptions in the near term would have a material effect on the Company's
financial position or the results of operations.
Group Equity
Group equity represents the net intercompany activities between the Company and
DAKA International through June 29, 1997. At June 29, 1997, the Company had
issued 1,000 shares of its common stock, par value $.01 per share, to DAKA
International for $.01 in connection with its formation. Such shares were
reported within group equity for purposes of the June 29, 1997 financial
statements.
4. COMMITMENTS AND CONTINGENCIES
Transaction Indemnifications
The Company has agreed to a $15.0 million settlement with Compass pursuant to a
Post-Closing Covenants Agreement and to reimburse Compass an additional $3.8
million for liabilities assumed by the Company which were paid by Compass on
behalf of the Company. This obligation has been settled through the transfer by
the Company to Compass of (i) certain cash balances of the Company being held by
Compass ($4.3 million); (ii) all rights to certain trade receivables currently
being managed and collected by Compass on behalf of the Company ($5.2 million);
(iii) refundable income taxes of DAKA International at June 29, 1997 ($6.3
million); (iv) assignment of notes receivable ($2.3 million); and (v) assignment
of all future tax benefits resulting from the operations of DAKA International
prior to July 17, 1997 (valued by the Company at $700). The effect of this
settlement has been reflected in the net contribution recorded in the
accompanying consolidated financial statements.
<PAGE>
Litigation
On October 18, 1996, a purported class action lawsuit was filed in the United
States District Court for the District of Massachusetts on behalf of persons who
acquired DAKA International's common stock between October 30, 1995 and
September 9, 1996 (Venturino et al. V. DAKA International, Inc. and William H.
Baumhauer, Civil Action No. 96-12109-GAO). The complaint alleges violations of
federal and state securities laws by, among other things, allegedly
misrepresenting and/or omitting material information concerning the results and
prospects of Fuddruckers during that period and seeks compensatory damages and
reasonable costs and expenses, including counsel fees. On May 22, 1997, DAKA
International filed with the court a motion to dismiss plaintiffs' complaint.
The Company has agreed to indemnify Compass for any losses or expenses
associated with the complaint. The Company believes this suit is without merit
and intends to defend itself vigorously unless the litigation settled.
Settlement negotiations are in process. While the outcome of the case is not
presently determinable, the Company believes that the ultimate outcome of this
matter will not have a material adverse effect on the Company's consolidated
financial condition, results of operations or cash flows.
The Company is also engaged in various other actions arising in the ordinary
course of business. The Company believes, based upon consultation with legal
counsel, that the ultimate collective outcome of these other matters will not
have a material adverse effect on the Company's consolidated financial
condition, results of operations or cash flows.
5. LONG-TERM DEBT
Obligations Transferred to the Company
Notes payable include several notes bearing interest ranging from 6% to 11%,
require monthly or quarterly payments of principal and interest, and mature at
various times ranging from July 1997 to July 2002.
All of the assets of the Company were pledged as collateral under DAKA
International's various debt agreements pursuant to such agreements through the
Transaction Date. Subsequent to the transaction, the security interests in these
assets were released. In connection with the Transaction, the Company has
pledged eight Fuddruckers restaurants and future royalties as collateral to
creditors and to Compass pending the Company's release of certain guarantees and
the Company's payment of deposits ($3.5 million) and trade payables ($15.8
million). As of September 28, 1997, approximately $14.5 million in trade payable
payments and $2.0 million in deposits had been made.
<PAGE>
6. BUSINESS INFORMATION
Income from restaurant and franchising operations have been determined applying
the accounting policies in Note 3. Revenue and costs as shown below are directly
related to each business and do not include an allocation of corporate expenses,
non-operating income, interest expense and income taxes. There are no sales
among the Company's three businesses. The table below presents certain financial
information for the Company's Fuddruckers, Champps and Specialty Concepts
businesses for the three months ended September 28, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997
------ ------
<S> <C> <C>
TOTAL REVENUES:
Restaurant sales - Fuddruckers $ 33,455 $ 34,945
Franchising income - Fuddruckers 974 907
Restaurant sales - Champps 17,000 13,480
Franchising income - Champps 104 117
Restaurant sales - Specialty Concepts 669 1,146
Franchising income - Specialty Concepts 240 339
-------- --------
Total revenues $ 52,442 $ 50,934
======== ========
FUDDRUCKERS:
Sales from restaurant operations 33,455 34,945
Operating expenses:
Cost of sales 9,244 9,925
Labor 10,341 10,829
Other restaurant operating expenses 10,623 10,777
Marketing and promotion 806 844
Depreciation and amortization 1,634 2,311
-------- --------
Income from company operations 807 259
Franchising income 974 907
-------- --------
Income from company and franchising operations 1,781 1,166
-------- --------
CHAMPPS:
Sales from restaurant operations 17,000 13,480
Operating expenses:
Cost of sales 4,943 3,980
Labor 5,591 4,562
Other restaurant operating expenses 4,285 3,174
Depreciation and amortization 934 1,230
-------- --------
Income from company operations 1,247 534
Franchising income 104 117
-------- --------
Income from company and franchising operations 1,351 651
-------- --------
SPECIALTY CONCEPTS:
Sales from restaurant operations 669 1,146
Operating expenses:
Cost of sales 286 430
Labor 288 490
Other restaurant operating expenses 173 331
Depreciation and amortization 25 118
-------- --------
(Loss) from company operations (103) (223)
Franchising income 240 339
-------- --------
Income from company and franchising operations 137 116
-------- --------
INCOME FROM OPERATIONS BEFORE GENERAL AND
ADMINISTRATIVE EXPENSES 3,269 1,933
General and administrative expenses (1) 4,026 6,361
-------- --------
OPERATING (LOSS) (757) (4,428)
Interest expense (108) (228)
Interest income 213 98
Other expenses - net (141) --
-------- --------
(LOSS) BEFORE INCOME TAXES AND MINORITY INTERESTS (793) (4,558)
Income tax benefit -- (1,213)
Minority interests -- (26)
-------- --------
NET (LOSS) $ (793) $ (3,319)
======== ========
</TABLE>
(1) General and administrative expenses include depreciation expense on
corporate assets of $99 and $215 in 1998 and 1997, respectively, and
other non-operating expenses includes depreciation of $135 for 1998.
<PAGE>
PART II - OTHER INFORMATION
Item 6: Exhibits and Reports on Form 8-K
(a) Exhibits
Not applicable
(b) Reports on Form 8-K
Not applicable
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
UNIQUE CASUAL RESTAURANTS, INC.
(Registrant)
By: /s/Donald C. Moore
-----------------------------------------
Donald C. Moore
Chief Financial Officer
(Principal Financial and Principal
Accounting Officer)
December 18, 1997
