<PAGE>
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 Quarterly Period Ended March 26, 2000.
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 0-25721.
BUCA, Inc.
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(Exact name of registrant as specified in its Charter)
Minnesota 41-1802364
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1300 Nicollet Mall
Minneapolis, Minnesota 55403
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(Address of principal executive offices) (Zip Code)
(612) 288-2382
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(Registrant's telephone number, including area code)
(Former name, former address and former
fiscal year, if changed since last report)
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 equity, as of the latest practicable date: Common Stock, $.01 par value
14,123,286 shares as of May 8, 2000.
1
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INDEX
BUCA, INC. AND SUBSIDIARIES
Page
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets - December 26, 1999 and
March 26, 2000 3
Consolidated Statements of Operations - Thirteen Weeks Ended
March 28, 1999 and March 26, 2000 4
Consolidated Statements of Cash Flows - Thirteen Weeks Ended
March 28, 1999 and March 26, 2000 5
Notes to 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 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 10
Item 2. Changes in Securities and Use of Proceeds 10
Item 3. Defaults upon Senior Securities 11
Item 4. Submission of Matters to a Vote of Security Holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURES 13
2
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PART 1. - FINANCIAL INFORMATION
Item 1. Financial Statements
BUCA, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
(Unaudited)
December 26, March 26,
1999 2000
------------ -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,726 $ 684
Accounts receivable 1,261 1,603
Inventories 2,293 2,530
Deferred income taxes 1,259 1,259
Prepaid expenses and other 1,034 801
-------- --------
Total current assets 7,573 6,877
PROPERTY AND EQUIPMENT, net 63,763 75,719
OTHER ASSETS 4,609 3,753
-------- --------
$ 75,945 $ 86,349
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 5,303 $ 6,263
Accrued expenses 6,614 4,476
Line of credit borrowings 9,500
Current maturities of long-term debt 50 82
-------- --------
Total current liabilities 11,967 20,321
LONG-TERM DEBT, less current maturities 1,688 2,384
OTHER LIABILITIES 581 618
SHAREHOLDERS' EQUITY:
Undesignated stock, 5,000,000 authorized, none issued and outstanding
Common stock, $.01 par value - 10,810,295 and 10,875,010 shares issued and
outstanding, respectively 108 109
Additional paid-in capital 76,547 77,082
Accumulated deficit (14,413) (13,534)
-------- --------
62,242 63,657
Notes receivable from shareholders (533) (631)
-------- --------
Total shareholders' equity 61,709 63,026
-------- --------
$ 75,945 $ 86,349
======== ========
</TABLE>
See notes to consolidated financial statements.
3
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BUCA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(Unaudited)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-----------------------------------
March 28, 1999 March 26, 2000
-------------- --------------
<S> <C> <C>
Restaurant sales $ 14,173 $ 26,924
Restaurant costs
Product 3,922 7,050
Labor 4,511 8,587
Direct and occupancy 2,870 5,351
Depreciation and amortization 672 1,338
----------- -----------
Total restaurant costs 11,975 22,326
General and administrative costs 1,423 1,817
Preopening costs 390 1,261
----------- -----------
Operating income 385 1,520
Interest income (78) (17)
Interest expense 291 187
----------- -----------
Income before income taxes and extraordinary item 172 1,350
Benefit (provision) for income taxes 6 (472)
----------- -----------
Income before extraordinary item 178 878
Extraordinary loss on extinguishment of debt (1,313) -
----------- -----------
Net (loss) income $ (1,135) $ 878
=========== ===========
Cumulative preferred stock dividends, accretion of preferred stock to
redemption value, and change in redeemable common stock (533) -
----------- -----------
Net (loss) income applicable to common stock $ (1,668) $ 878
=========== ===========
Net (loss) income per common share - Basic:
Income before extraordinary item $ 0.07 $ 0.08
=========== ===========
Net (loss) income applicable to common stock $ (0.66) $ 0.08
=========== ===========
Weighted average common shares outstanding 2,521,007 10,842,585
=========== ===========
Net (loss) income per common share - Diluted:
Income before extraordinary item $ 0.07 $ 0.08
=========== ===========
Net (loss) income applicable to common stock $ (0.66) $ 0.08
=========== ===========
Weighted average common shares outstanding 2,521,007 11,371,770
=========== ===========
</TABLE>
See notes to consolidated financial statements
4
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BUCA, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------------
March 28, 1999 March 26, 2000
-------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net (loss) income $ (1,135) $ 878
Adjustments to reconcile net (loss) income to net cash (used in)
provided by operating activities:
Depreciation and amortization 654 1,338
Deferred income taxes 33 425
Extraordinary loss on extinguishment of debt 1,313
Accretion of call premium 13
Change in assets and liabilities:
Accounts receivable 43 (342)
Inventories (36) (237)
Prepaid expenses and other (700) 233
Accounts payable (381) 960
Accrued expenses (94) (2,138)
Other 77 37
-------- --------
Net cash (used in) provided by operating activities (213) 1,154
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (5,800) (13,250)
(Increase) decrease in other assets (138) 497
-------- --------
Net cash used in investing activities (5,938) (12,753)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit borrowings 9,500
Proceeds from issuance of long-term debt 7,330 800
Principal payments on long-term debt and note payable (6,606) (13)
Loan acquisition costs (201)
Collection on notes receivable from shareholders 52 23
Repurchase of common stock (31)
Common stock issuance costs (537)
Net proceeds from issuance of common stock 247
-------- --------
Net cash provided by financing activities 7 10,557
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NET CHANGE IN CASH AND CASH EQUIVALENTS (6,144) (1,042)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 6,576 1,726
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 432 $ 684
======== ========
</TABLE>
See notes to consolidated financial statements.
5
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BUCA, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. NATURE OF BUSINESS AND BASIS OF PRESENTATION
BUCA, Inc. and subsidiaries ("we", "us", or "our") develops and operates
family-style, immigrant Southern Italian restaurants located in Arizona,
California, Colorado, District of Columbia, Florida, Illinois, Indiana, Iowa,
Kansas, Kentucky, Michigan, Minnesota, Nevada, New York, Ohio, Pennsylvania,
Washington, and Wisconsin under the name of BUCA di BEPPO.
The accompanying financial statements have been prepared by us without audit and
reflect all adjustments, consisting of normal recurring adjustments, which are,
in the opinion of management, necessary for a fair statement of financial
position and the results of operations for the interim periods. The statements
have been prepared in accordance with generally accepted accounting principles
and with the regulations of the Securities and Exchange Commission ("SEC").
Certain information and footnote disclosures, normally included in financial
statements prepared in accordance with generally accepted accounting principles,
have been condensed or omitted pursuant to such SEC rules and regulations.
Operating results for the thirteen weeks ended March 26, 2000 are not
necessarily indicative of the results that may be expected for the year ending
December 31, 2000.
The balance sheet at December 26, 1999 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
Certain prior year amounts have been reclassified to conform to the current
year's presentation.
For further information, refer to the financial statements and notes for the
fiscal year ended December 26, 1999 included in our Annual Report on Form 10-K.
2. NET (LOSS) INCOME PER SHARE
Basic (loss) income per share is computed by dividing net (loss) income by the
weighted average number of common shares outstanding. Diluted (loss) income per
share assumes conversion of the convertible subordinated debentures and
convertible preferred stock as of the beginning of the year and exercise of
stock options and warrants using the treasury stock method, if dilutive.
Dilutive net loss per share for the period ended March 28, 1999 is the same as
basic net loss per share due to the antidilutive effect of the assumed exercise
of stock options, warrants, convertible subordinated debentures, and convertible
preferred stock securities.
Diluted loss per share excludes the following due to their antidilutive effect:
<TABLE>
<CAPTION>
March 28, 1999 March 26, 2000
-------------------------------- --------------------------------
Weighted Weighted
Average Price Average Price
Number of Shares Per Share Number of Shares Per Share
---------------- ------------- ---------------- -------------
<S> <C> <C> <C> <C>
Stock warrants 397,859 $ 2.05
Stock options 1,034,154 6.96 6,000 $ 14.98
Convertible preferred stock 4,545,434 6.70
Convertible subordinated debentures 385,907 4.61 72,878 7.20
</TABLE>
3. SUPPLEMENTAL CASH FLOW INFORMATION
The following is supplemental cash flow information for the period ended:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
-------------------------------
March 28, 1999 March 26, 2000
-------------- --------------
<S> <C> <C>
Cash paid during year for:
Interest expense $203 $ 128
Income taxes 28 47
Non-cash investing and financing activities:
Shareholder receivable from issuance of common stock 180
Shareholder receivable reduction due to retirement of stock 60
Conversion of convertible subordinated debentures to common stock 60
Accretion of redeemable preferred stock to redemption value 120
Dividends accrued on redeemable preferred stock 469
Change in value of redeemable common stock (37)
</TABLE>
6
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
General
At March 26, 2000 we owned and operated 39 full service, dinner-only restaurants
that offer high quality, immigrant Southern Italian cuisine served family-style
in large portions in a fun and energetic atmosphere that parodies the decor and
ambiance of post-War Italian/American restaurants. Since late 1996, we have
pursued a rapid but disciplined expansion strategy, opening two restaurants in
1996, five in 1997, eight in 1998, and 15 in 1999. We intend to open 17 new
restaurants in fiscal 2000, of which six have opened through April 2000 and the
remaining 11 have signed leases and are under construction.
We believe that the sales growth pattern of our new restaurants in the two years
after they open differs from the typical sales growth pattern for new
restaurants in other casual dining concepts. Our restaurants typically
experience lower restaurant sales during the first few periods after opening,
with gradually increasing restaurant sales during the remainder of the
restaurant's first year of operation. In the second year of operation, our
restaurants experience significant comparable restaurant sales growth. In
calculating comparable restaurant sales, we include a restaurant in the
comparable base once it has been open for 12 full calendar months. We believe we
have this "discovery" growth pattern over the first two years of operations
because we rely primarily on word-of-mouth advertising and repeat business to
generate increased restaurant sales. This new restaurant-opening trend has
contributed to our high levels of comparable restaurant sales increases of 8.9%
in fiscal 1997, 13.3% in fiscal 1998, and 9.6% in fiscal 1999. After two years
of operation, our restaurants typically experience lower comparable restaurant
sales increases than experienced in prior periods. We expect this sales growth
trend for new restaurants to generally continue in the future; however, we also
anticipate that in some markets, particularly as we continue to develop
additional restaurants in existing markets, this discovery growth pattern could
compress. In addition, as we continue to grow, we expect that the impact of new
restaurant openings on total comparable restaurant sales will decrease as our
mature restaurant base continues to increase.
We have expanded the use of daily specials and begun other measures to build
sales in existing restaurants and reduce our product costs as a percentage of
restaurant sales. Every day, every restaurant offers from two to four specials.
These daily specials are selected from a list of approximately 75 recipes. These
daily sales typically are priced higher than normal menu items and generate
higher margins. We have also added three of our most popular daily specials to
our regular menu (Mozzarella Caprese, Prosciutto Rollato and Tortoni), that are
the highest priced menu items in their categories.
Our restaurant sales are comprised almost entirely of the sales of food and
beverages. Product costs include the costs of food and beverages. Labor costs
include direct hourly and management wages, bonuses, taxes and benefits for
restaurant employees. Direct and occupancy costs include restaurant supplies,
marketing costs, rent, utilities, real estate taxes, repairs and maintenance and
other related costs. Depreciation and amortization principally includes
depreciation on capital expenditures for restaurants. General and administrative
expenses are composed of expenses associated with all corporate and
administrative functions that support existing operations, management and staff
salaries, employee benefits, travel, information systems and training and market
research. Preopening costs consist of direct costs related to hiring and
training the initial restaurant workforce and certain other direct costs
associated with opening new restaurants.
Results of Operations
Our operating results for the thirteen weeks periods ending March 26, 2000 and
March 28, 1999 expressed as a percentage of restaurant sales were as follows:
<TABLE>
<CAPTION>
Thirteen Weeks Ended
--------------------------------
March 28, 1999 March 26, 2000
-------------- --------------
<S> <C> <C>
Restaurant sales 100.0% 100.0%
Restaurant costs
Product 27.7% 26.2%
Labor 31.8% 31.9%
Direct and occupancy 20.2% 19.9%
Depreciation and amortization 4.7% 5.0%
----- -----
Total restaurant costs 84.5% 82.9%
----- -----
General and administrative expenses 10.0% 6.7%
Preopening costs 2.8% 4.7%
----- -----
Operating income 2.7% 5.6%
Interest income (0.6)% (0.1)%
Interest expense 2.1% 0.7%
----- -----
Income before income taxes and extraordinary items 1.2% 5.0%
===== =====
</TABLE>
7
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Thirteen Weeks Ended March 26, 2000 Compared to the Thirteen Weeks Ended
March 28, 1999
Restaurant Sales. Restaurant sales increased by $12.7 million , or 90%, to $26.9
million in the first quarter of fiscal 2000 from $14.2 million in the first
quarter of fiscal 1999. The total increase consisted of restaurant sales of
approximately $11.5 million at 19 new restaurants opened within the last 12
months and approximately $1.2 million in comparable restaurant sales increases.
Comparable restaurant sales increased by 8.2% in the first quarter of fiscal
2000, due primarily to an increase in our average check from approximately $20
in the first quarter of fiscal 1999 to approximately $21 in the first quarter of
fiscal 2000. This increase in our average check was a result of our price
increase of approximately 2% implemented at the beginning of fiscal 2000 and to
the increased sales of specials and "To Go" items. We expect our average check
to remain consistent with the first quarter of fiscal 2000 in the near future.
Product. Product costs increased by $3.1 million to $7.0 million in the first
quarter of fiscal 2000 from $3.9 million in the first quarter of fiscal 1999.
Product costs as a percentage of restaurant sales decreased to 26.2% in the
first quarter of fiscal 2000 from 27.7% in the first quarter of fiscal 1999.
This decrease resulted from management's efforts to reduce product costs and
from the price increase taken at the beginning of fiscal 2000. We expect product
costs to increase slightly as a percentage of restaurant sales in the second and
third quarters of fiscal 2000, due to the number of new restaurant openings
planned for the second and third quarters.
Labor. Labor costs increased by $4.1 million to $8.6 million in the first
quarter of fiscal 2000 from $4.5 million in the first quarter of fiscal 1999.
Labor costs increased slightly as a percentage of restaurant sales to 31.9% in
the first quarter of fiscal 2000 from 31.8% in the first quarter of fiscal 1999.
This increase was a result of the five new restaurants opened in the first
quarter of fiscal 2000 compared with only one new restaurant in the first
quarter of fiscal 1999.
Direct and Occupancy. Direct and occupancy costs increased by $2.5 million to
$5.4 million in the first quarter of fiscal 2000 from $2.9 million in the first
quarter of fiscal 1999. Direct and occupancy costs as a percentage of restaurant
sales decreased to 19.9% in the first quarter of fiscal 2000 from 20.2% in the
first quarter of fiscal 1999. This decrease as a percentage of restaurant sales
was primarily a result of the increase in our average check. These increased
sales volumes reduce direct and occupancy costs as a percentage of sales as the
majority of direct and occupancy costs are fixed in nature.
Depreciation and Amortization. Depreciation and amortization expenses increased
by $666,000 to $1,338,000 in the first quarter of fiscal 2000 from $672,000 in
the first quarter of fiscal 1999. This increase was primarily the result of
depreciation recognized on capital expenditures for new restaurants.
General and Administrative. General and administrative expenses increased by
$394,000 to $1,817,000 in the first quarter of fiscal 2000 from $1,423,000 in
the first quarter of fiscal 1999. General and administrative expenses as a
percentage of restaurant sales decreased to 6.7% in the first quarter of fiscal
2000 from 10.0% in the first quarter of fiscal 1999. We expect that general and
administrative expenses will continue to increase in dollar amount in the
future, but continue to decrease as a percentage of restaurant sales because our
expansion plans will require proportionately smaller incremental increases in
general and administrative expenses.
Preopening. Preopening expenses increased by $871,000 to $1,261,000 in the first
quarter of fiscal 2000 from $390,000 in the first quarter of fiscal 1999. This
increase was a result of the five new restaurants opened in the first quarter of
fiscal 2000 compared with only one new restaurant in the first quarter of fiscal
1999.
Interest (Income) Expense. Net interest expense decreased $43,000 to $170,000 in
the first quarter of fiscal 2000 from $213,000 in the first quarter of fiscal
1999. This reduction in net interest expense was a result of a reduction in our
average outstanding balance under our credit facilities in the first quarter of
fiscal 2000 compared with the first quarter of fiscal 1999. We expect to
generate net interest income for the remainder of fiscal 2000 due to the
proceeds from our secondary offering that we completed in April of 2000.
Provision / Benefit for Income Taxes. The provision for income taxes in the
first quarter of fiscal 2000 represents our estimate of our income tax rate for
fiscal 2000. In the first quarter of fiscal 1999, we recognized a small tax
benefit due to the expected utilization of our net operating loss
carry-forwards. At the end of fiscal 1999, we recorded a $1.8 million benefit
for income taxes as the utilization of our tax loss carry-forwards from prior
years was deemed more likely than not. These net operating loss carry-forwards
begin to expire in fiscal 2003.
Liquidity and Capital Resources
Prior to fiscal 1999, we had incurred significant net losses, primarily due to
restaurant development and the costs of hiring senior management to develop and
implement our expansion strategy. In the past, we generated income from our
restaurant operations, but incurred aggregate net losses of $6.1 million through
December 26, 1999. We have funded our capital requirements through sales of
8
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equity securities, debt financing and sale-leaseback arrangements. Net cash
provided by operating activities was $1.2 million in the first quarter of fiscal
2000 compared with net cash used in operating activities of $213,000 for the
first quarter of fiscal 1999. We expect to continue to generate cash from
operating activities in future periods.
We use cash primarily to fund the development and construction of new
restaurants. Capital expenditures were $13.3 million in the first quarter of
fiscal 2000 compared with $5.8 million in the first quarter of fiscal 1999. We
opened five new restaurants in the first quarter of fiscal 2000 and only one new
restaurant in the first quarter of fiscal 1999. Each new restaurant is expected
to require, on average, a total cash investment of between $1.0 million and $1.5
million, excluding preopening costs expected to range from $175,000 to $210,000.
To date, the majority of our restaurants have been renovations of existing
facilities ranging in size from 4,500 square feet to 10,400 square feet. We
anticipate that future restaurants will typically range in size from 7,000
square feet to 9,000 square feet. In the last twelve months, we built eight
restaurants based upon our prototype designs. These designs are expected to
require between $1,500,000 and $2,000,000 in total cash investment per
restaurant. This investment represents an incremental $500,000 increase over the
historical cash investment for remodeled restaurants. However, the rental cost
on these restaurants is also significantly lower than on remodeled restaurants
as our lease costs relate to the land only and not the building. We have in the
past and we may in the future acquire the land for our restaurants. The cost of
any land purchases is not included in the cash investment amounts above. In the
future, we may refinance any purchases of land or buildings through
sale-leaseback transactions. We cannot predict whether this financing will be
available when needed or on terms acceptable to us.
Net cash provided by financing operations was $10,557,000 in the first quarter
of 2000 compared with $7,000 for the first quarter of fiscal 1999. Financing
activities in fiscal 2000 and fiscal 1999 consisted primarily of sales of equity
securities as well as the obtainment of long-term debt and lines of credit. At
March 26, 2000, we had a $15 million line of credit with $9.5 million
outstanding. In April 2000, we received approximately $34 million from the
completion of our secondary offering. A portion of those proceeds was used to
repay $12.5 million in line of credit borrowing outstanding at that time. The
line of credit expires in September 2001 and bears interest at the lower of US
Bank's reference rate or LIBOR plus 1.875% to 2.375% (8.5% to 9.0%), dependent
upon our meeting certain financial ratios. We are required to pay 0.25% to 0.5%
on all unused line of credit funds. The credit agreement contains covenants that
place restrictions on sales of properties, transactions with affiliates,
creation of additional debt and other customary covenants. Borrowings under the
credit agreement are collateralized by substantially all of our assets. We are
currently negotiating with our lenders to increase the amount of our line of
credit and to reduce the fee that we are required to pay on all unused line of
credit funds. We cannot predict whether our existing lenders will ultimately
agree to these adjustments.
Our capital requirements, including development costs related to the opening of
additional restaurants, have been and will continue to be significant. We will
need substantial capital to finance our expansion plans, which require funds for
capital expenditures, preopening costs and initial operating losses related to
new restaurant openings. The adequacy of available funds and our future capital
requirements will depend on many factors, including the pace of expansion, the
costs and capital expenditures for new restaurant development and the nature of
contributions, loans and other arrangements negotiated with landlords. Although
we can make no assurance, we believe that cash flow from operations together
with the net proceeds from our secondary public offering and currently available
borrowings will be sufficient to fund our capital requirements through the year
2001. To fund future operations, we will need to raise additional capital
through public or private equity or debt financing to continue our growth. In
addition, we may from time to time consider acquiring the operations of other
restaurants. We may obtain additional equity or debt financing to fund such
acquisitions. The sale of additional equity or debt securities could result in
additional dilution to our shareholders. We cannot predict whether additional
capital will be available on favorable terms, if at all.
Inflation
The primary inflationary factors affecting our operations are food and labor
costs. A large number of our restaurant personnel are paid at rates based on the
applicable minimum wage, and increases in the minimum wage directly affect our
labor costs. To date, inflation has not had a material impact on our operating
results.
Disclosure Regarding Forward-Looking Statements
This Form 10-Q for the first quarter ended March 26, 2000 contains
forward-looking statements within the meaning of the safe harbor provisions of
Section 21E of the Securities Exchange Act of 1934. These forward-looking
statements are based on the beliefs of our management as well as on assumptions
made by and information currently available to us at the time the statements
were made. When used in this Form 10-Q, the words "anticipate", "believe",
"estimate", "expect", "intend" and similar expressions, as they relate to us,
are intended to identify the forward-looking statements. Although we believe
that these statements are reasonable, you should be aware that actual results
could differ materially from those projected by the forward-looking statements.
Because actual results may differ, readers are cautioned not to place undue
reliance on forward-looking statements. The actual number of restaurants opened
during any
9
<PAGE>
period could be higher or lower than the projected amount based upon the timing
and success of locating suitable sites, negotiating acceptable leases, managing
construction and recruiting qualified operating personnel. Our comparable store
sales percentage increases could moderate as a result of competition, general
economic conditions, or changes in consumer preferences or discretionary
consumer spending. The size of our average check could be adversely affected by
our price increase and changes in consumer preferences. The effect of a price
increase on product, labor, and direct and occupancy costs may be adversely
affected by increased products costs, changes in the labor market, or our
ability to negotiate favorable lease terms, as well as general economic
conditions. Product costs could be adversely affected by increased distribution
prices by SYSCO Corporation or a failure to perform by SYSCO, as well as adverse
weather conditions, governmental regulation and general economic conditions.
Labor costs could increase due to increases in the minimum wage as well as
competition for qualified employees and the need to pay higher wages to attract
sufficient employees. Direct and occupancy costs could be adversely affected by
an inability to negotiate favorable lease terms as well as general economic
conditions. General and administrative expenses could increase due to
competition for qualified employees and the need to pay higher wages to attract
sufficient employees as well as general economic conditions. Our ability to
generate net interest income for the remainder of fiscal 2000 could be adversely
affected by the rate of return on our investments, the amount we are able to
invest and our need for additional borrowings on our credit facilities. Our
ability to generate cash from operating activities could be adversely affected
by increases in expenses as well as decreases in our average check and guest
counts. Additional factors that could cause actual results to differ include:
risks associated with future growth; inability to achieve and manage planned
expansion; fluctuations in operating results; the need for additional capital;
risks associated with discretionary consumer spending; inability to compete with
larger, more established competitors; potential labor shortages; our dependence
on governmental licenses; and complaints or litigation from guests. Certain of
these risk factors are more fully discussed in our Annual Report on Form 10-K
for the period ended December 26, 1999. We caution you, however, that the list
of factors above may not be exhaustive and that those or other factors, many of
which are outside of our control, could have a material adverse effect on us and
our results of operations. All forward-looking statements attributable to
persons acting on our behalf or us are expressly qualified in their entirety by
the cautionary statements set forth here. We assume no obligation to publicly
release the results of any revision or updates to these forward-looking
statements to reflect future events or unanticipated occurrences.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
We are exposed to market risk from changes in interest rates on borrowings under
our revolving line of credit that bears interest from time to time at the lower
of the lending bank's reference rate or LIBOR plus 1.875% to 2.375%. Because we
do not believe that changes in interest rates from the maximum available
borrowings under the revolving line of credit are material, we do not believe
this risk will be material. As of May 8, 2000 we did not have any borrowings on
our revolving line of credit.
We have no derivative financial instruments or derivative commodity instruments
in our cash and cash equivalents and marketable securities. We invest our cash
and cash equivalents and marketable securities in investment grade, highly
liquid investments, consisting of money market instruments, bank certificates of
deposit, overnight investments in commercial paper, and short term government
and corporate bonds. We have invested the net proceeds from our public offering
in similar investment grade and highly liquid investments.
Many of the food products purchased by us are affected by commodity pricing and
are, therefore, subject to price volatility caused by weather, production
problems, delivery difficulties and other factors which are outside our control.
To control this risk in part, we have fixed price purchase commitments with
terms of one year or less for food and supplies from vendors who supply our
national food distributor. In addition, we believe that substantially all of our
food and supplies are available from several sources, which helps to control
food commodity risks. We believe we have the ability to increase menu prices, or
vary the menu items offered, if needed in response to a food product price
increases. To compensate for a hypothetical price increase of 10% for food and
supplies, we would need to increase menu prices by an average of 3%, which is
consistent with our average price increase of approximately 2% in fiscal 2000,
3% in fiscal 1998 and 2% in fiscal 1997. Accordingly, we believe that a
hypothetical 10% increase in food product costs would not have a material effect
on our operating results.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We are currently subject to various legal actions arising in the normal course
of business, none of which are expected to have a material effect on our results
of operations, financial condition or cash flows.
Item 2. Changes in Securities and Use of Proceeds
Since December 26, 1999 we have sold the following securities pursuant to
exemption from registration under the Securities Act. All of the sales were made
in reliance upon the exemptions from registration provided under Section 4(2)
and Regulation D of the Securities Act for transactions not involving a public
offering. All shares were issued directly by us, no underwriters were involved
and no discount, commission or other transaction-related remuneration was paid.
10
<PAGE>
1. On February 9, 2000, we issued 6,944 shares of common stock for $50,000, or
$7.20 per share, to outside investors upon conversion of certain
subordinated debentures in aggregate principal amount of $50,000 held by
the investors.
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description Method of Filing
----------- ----------- ----------------
<C> <S> <C>
3.1 Amended and Restated Articles of Incorporation of the Company (1) Incorporated By
Reference
3.2 Amended and Restated Bylaws of the Company (2) Incorporated By
Reference
4.1 Specimen Common Stock Certificate (3) Incorporated By
Reference
4.2 Securities Purchase Agreement dated as of October 13, 1998 Incorporated By
between the Company and the Purchasers (4) Reference
4.3 Non-Statutory Stock Option Agreement between the Company and Incorporated By
1204 Harmon Partnership dated as of June 1, 1998 (5) Reference
4.4 Form of stock purchase warrant dated as of October 31, 1997 (6) Incorporated By
Reference
10.1 Credit Agreement dated as of September 27, 1999 (7) Incorporated By
Reference
10.2 First Amendment to Credit Agreement dated as of October 21, 1999 (8) Incorporated By
Reference
10.3 Second Amendment to Credit Agreement dated as of December 24, 1999 (9) Incorporated By
Reference
10.4 Third Amendment to Credit Agreement dated as of March 3, 2000 (10) Incorporated By
Reference
27.1 Financial Data Schedule for the quarter ended March 26, 2000 Electronic Transmission
</TABLE>
(1) Incorporated by reference to Exhibit 3.4 to the Company's
Registration Statement on Form S-1 (Registration No. 333-72593).
(2) Incorporated by reference to Exhibit 3.5 to the Company's
Registration Statement on Form S-1 (Registration No. 333-72593).
(3) Incorporated by reference to the same numbered Exhibit to the
Company's Registration Statement on Form S-1 (Registration No.
333-72593).
(4) Incorporated by reference to Exhibit 10.17 to the Company's
Registration Statement on Form S-1 (Registration No. 333-72593).
(5) Incorporated by reference to Exhibit 10.15 to the Company's
Registration Statement on Form S-1 (Registration No. 333-72593).
(6) Incorporated by reference to Exhibit 10.12 to the Company's
Registration Statement on Form S-1 (Registration No. 333-72593).
(7) Incorporated by reference to Exhibit 10.1 to the Company's
Quarterly Report on Form 10-Q for the period ended September 26,
1999.
11
<PAGE>
(8) Incorporated by reference to Exhibit 10.2 to the Company's
Quarterly Report on Form 10-Q for the period ended September 26,
1999.
(9) Incorporated by reference to Exhibit 10.8 to the Company's
Registration Statement on Form S-1 (Registration No. 333-32794).
(10) Incorporated by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-1 (Registration No. 333-32794).
(b) Valuation and Qualifying Accounts:
None
(c) Reports on Form 8-K
No reports on Form 8-K were filed during the fiscal quarter ended March 26,
2000.
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BUCA, Inc.
(Registrant)
Date: May 10, 2000 By: /s/ Joseph P. Micatrotto
---------------------------------
Joseph P. Micatrotto,
Chairman, President and Chief
Executive Officer
(Principal Executive Officer)
Date: May 10, 2000 By: /s/ Greg A. Gadel
---------------------------------
Greg A. Gadel
Chief Financial Officer, Secretary
and Treasurer (Principal Financial
Accounting Officer)
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST
QUARTER 2000 10-Q FILING AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> DEC-27-1999
<PERIOD-END> MAR-26-2000
<CASH> 684
<SECURITIES> 0
<RECEIVABLES> 1,603
<ALLOWANCES> 0
<INVENTORY> 2,530
<CURRENT-ASSETS> 6,877
<PP&E> 82,846
<DEPRECIATION> 7,127
<TOTAL-ASSETS> 86,349
<CURRENT-LIABILITIES> 20,321
<BONDS> 2,384
0
0
<COMMON> 109
<OTHER-SE> 62,917
<TOTAL-LIABILITY-AND-EQUITY> 86,349
<SALES> 26,924
<TOTAL-REVENUES> 26,924
<CGS> 7,050
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,078
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 187
<INCOME-PRETAX> 1,350
<INCOME-TAX> (472)
<INCOME-CONTINUING> 878
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 878
<EPS-BASIC> .08
<EPS-DILUTED> .08
</TABLE>
