FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
|X| Quarterly report pursuant to Section 13 or 15(d) of the Securities and
Exchange Act of 1934
For the Quarterly Period Ended September 29, 1999
Commission File Number 333-62775
NE RESTAURANT COMPANY, INC.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 06-1311266
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Five Clock Tower Place, Maynard, Massachusetts 01581
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (978) 897-1400
--------------
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filled by Section 13 or 15(d) of the Securities Exchange Act of
the 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 the
filing requirements for the past 90 days.
Yes |X| No |_|
2,977,026 shares of the registrant's Common Stock were outstanding on November
15, 1999.
<PAGE>
NE RESTAURANT COMPANY, INC.
FORM 10-Q
TABLE OF CONTENTS
PAGE
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements:
1) Consolidated Balance Sheets
September 29, 1999 and December 30, 1998 3
2) Consolidated Statements of Operations
For the Three and Nine months Ended September 29, 1999
and September 30, 1998 4
3) Consolidated Statement of Changes in Stockholders'
Equity For the Nine months Ended September 29, 1999 5
4) Consolidated Statements of Cash
Flows For the Nine months Ended September 29, 1999
and September 30, 1998 6
5) Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 9
Item 3. Quantitative and Qualitative Disclosures about Market Risk 19
PART II: OTHER INFORMATION 20
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES 22
<PAGE>
PART I: FINANCIAL INFORMATION
NE RESTAURANT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 29, December 30,
1999 1998
------------- -------------
ASSETS (UNAUDITED)
<S> <C> <C>
Current Assets:
Cash 1,577,263 5,456,110
Credit card receivables 1,696,840 1,115,925
Inventories 1,983,546 2,063,964
Prepaid expenses and other current assets 204,262 866,643
Prepaid and current deferred income taxes 10,536,453 10,530,585
Pre-opening costs, net of accumulated amortization -- 1,135,055
------------- -------------
Total current assets 15,998,363 21,168,282
------------- -------------
Property and Equipment, at cost:
Land and land right 8,190,476 8,190,477
Buildings 11,678,048 11,676,629
Leasehold improvements 73,363,018 65,525,594
Furniture and equipment 42,903,376 38,436,293
------------- -------------
136,134,917 123,828,993
Less - Accumulated depreciation (24,746,826) (16,340,923)
------------- -------------
111,388,091 107,488,070
Construction work in process 3,332,446 3,309,822
------------- -------------
Net property and equipment 114,720,537 110,797,892
Goodwill, net 31,288,037 32,958,037
Deferred Finance Costs, net 8,571,140 9,116,719
Assets held for Sale 6,101,000 6,601,000
Liquor licenses 3,265,857 3,138,464
Restricted investments 1,177,685 1,170,043
Other assets, net 1,591,660 1,781,168
------------- -------------
$ 182,714,279 $ 186,731,605
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Current portion of mortgage loan and bonds payable 913,982 843,708
Accounts Payable 10,325,026 10,649,346
Accrued Expenses 22,493,455 27,790,614
Capital lease obligation-current portion 72,647 72,647
------------- -------------
Total current liabiliites 33,805,110 39,356,315
Line of Credit Loans -- --
Capital lease obligation, net of current portion 89,291 150,739
Mortgage Loan Payable, net of current portion 33,498,091 28,151,894
Bonds Payable, net of current portion 100,000,000 100,000,000
Deferred Rent and Other Long-Term Liabilites 5,579,412 4,960,790
------------- -------------
Total liabilities 172,971,903 172,619,738
Commitments and Contingencies
Stockholders' Equity:
Common stock 36,664 36,664
Less Treasury stock-689,344 shares at cost (8,017,070) (8,017,070)
Additional paid in capital 29,003,920 29,053,920
Accumulated deficit (11,281,138) (6,961,647)
------------- -------------
Total stockholders' equity (deficit) 9,742,376 14,111,867
------------- -------------
$ 182,714,279 $ 186,731,605
============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements
<PAGE>
NE RESTAURANT COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 29, 1999 September 30, 1998 September 29, 1999 September 30, 1998
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Net Sales $ 70,072,355 $ 54,253,416 $ 200,754,835 $ 99,302,468
------------------ ------------------ ------------------ ------------------
Cost of Sales and Expenses
Cost of sales 19,487,044 14,644,067 55,333,180 27,365,935
Operating expenses 36,803,219 29,183,569 106,274,271 51,811,239
General and administrative expenses 3,538,794 2,582,115 10,531,273 4,880,412
Deferred rent, depreciation, amortization
and pre-opening expenses 4,170,982 3,565,982 13,004,459 5,555,295
Taxes other than income 3,507,840 2,504,891 10,472,434 4,636,932
------------------ ------------------ ------------------ ------------------
Total cost of sales and expenses 67,507,879 52,480,624 195,615,617 94,249,813
------------------ ------------------ ------------------ ------------------
Income from operations 2,564,475 1,772,792 5,139,218 5,052,655
Interest expense, net 3,625,661 2,894,657 10,420,052 4,758,594
------------------ ------------------ ------------------ ------------------
Income (loss) before income tax expense
(benefit) (1,061,186) (1,121,865) (5,280,834) 294,061
Income tax expense (benefit) (233,500) (406,393) (1,639,311) 66,648
------------------ ------------------ ------------------ ------------------
Income (Loss) before cumulative effect of
change in accounting principle (827,686) (715,472) (3,641,523) 227,413
Cumulative effect of change in accounting
principle (net of tax) -- -- (677,968) --
------------------ ------------------ ------------------ ------------------
Net Income (Loss) (827,686) (715,472) (4,319,491) 227,413
================== ================== ================== ==================
Basic and diluted earnings (loss) per share $ (0.28) $ (0.28) $ (1.45) $ 0.13
Weighted average shares outstanding 2,977,026 2,595,557 2,977,026 1,745,255
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
NE RESTAURANT COMPANY, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' (DEFICIT) EQUITY
(UNAUDITED)
For the nine months ended September 29th, 1999
<TABLE>
<CAPTION>
(Accumulated Total
Common Stock Treasury Stock Deficit) Stockholders'
----------------------------------------------------------------------------------------------------
Number of .01 per Number of Additional Paid Retained (Deficit)
Shares Share Shares Amount In Capital Earnings Equity
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 30, 1998 3,666,370 $ 36,664 (689,344) $ (8,017,070) $ 29,053,920 $ (6,961,647) $ 14,111,867
Net Income (4,319,491) (4,319,491)
Return of Capital (50,000) (50,000)
====================================================================================================
Balance September 29, 1999 3,666,370 36,664 (689,344) (8,017,070) 29,003,920 (11,281,138) $ 9,742,376
====================================================================================================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
NE RESTAURANT COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended Nine months ended
September 29, September 30,
1999 1998
----------------- -----------------
(UNAUDITED)
<S> <C> <C>
Cash Flows from Operating Activities
Net income/(loss) $ (4,319,491) $ 227,413
----------------- ------------------
Adjustments to reconcile net income
to net cash provided by operating
activities
Change in accounting principle 1,135,055 --
Depreciation, amortization and deferred rent 11,240,104 5,555,295
Change in deferred taxes (5,868) --
Changes in operating assets and liabilities
Inventories 80,418 (65,150)
Prepaid expenses, receivables and other 81,466 3,294
Accrued expenses (5,297,161) 7,870,719
Accounts payable (324,320) (2,433,803)
Other operating assets and liabilities 281,866 (4,045,599)
----------------- ------------------
Total adjustments 7,191,560 6,884,756
----------------- ------------------
Net cash provided by operating activities 2,872,069 7,112,169
================= ==================
Cash Flows from Investing Activities
Business acquired, net of cash acquired -- (90,002,596)
Additions to property and equipment (12,328,548) (13,678,668)
Acquisition of liquor licenses (127,393) (25,324)
Proceeds from sale of locations 400,000 --
Additions to preopening costs -- (1,440,790)
----------------- ------------------
Net cash used for investing activities (12,055,941) (105,147,378)
================= ==================
Cash Flows from Financing Activities
Borrowings of mortgage loans 6,120,034 1,859,867
Repayments of mortgage loans (703,561) (318,611)
Financing costs -- (6,618,127)
Return of capital (50,000) --
Issuance of common shares -- 29,048,069
Principal payments under capital lease obligations (61,448) (66,488)
Net (payments)/borrowings under lines of credit -- (25,900,000)
Borrowings of Bonds Payable -- 100,000,000
----------------- ------------------
Net cash provided by financing activities 5,305,025 98,004,710
================= ==================
Net Increase (Decrease) in Cash (3,878,847) (30,499)
Cash, beginning of period 5,456,110 247,675
----------------- ------------------
Cash, end of period $ 1,577,263 $ 217,176
================= ==================
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest, net of amounts capitalized $ 12,719,659 $ 1,437,315
================= ==================
Cash paid for income taxes $ 15,296 $ 810,000
================= ==================
</TABLE>
The accompanying notes are an integral part of these consolidated
financial statements.
<PAGE>
NE RESTAURANT COMPANY, INC.
Notes To Consolidated Financial Statements
(Unaudited)
1. The unaudited consolidated financial statements (the "Unaudited Financial
Statements") presented herein have been prepared by NE Restaurant Co.,
Inc. and include all of its subsidiaries (collectively, the "Company")
after elimination of intercompany accounts and transactions, without
audit, and, in the opinion of management, reflect all adjustments of a
normal recurring nature necessary for a fair statement of the interim
periods presented. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with generally
accepted accounting principles ("GAAP") have been omitted, although the
Company believes that the disclosures included are adequate to make the
information presented not misleading. It is suggested that the Unaudited
Financial Statements be read in conjunction with the financial statements
and notes included in the Company's Form 10K.
In 1998, the Company changed its fiscal year to the 52 or 53 week period
ended on the Wednesday closest to December 31st. The Company's fiscal
quarters end March 31, June 30, September 29 and December 29, 1999. In
1998, the Company's fiscal quarters ended March 31, June 30, September 30
and December 30, 1998.
2. On July 21, 1998 the Company completed its acquisition of Bertucci's, Inc.
("Bertucci's") pursuant to the terms of an Agreement and Plan of Merger
dated as of May 13, 1998 (the "Acquisition"). The Company purchased all of
the issued and outstanding shares of the Bertucci's common stock at a
price of $10.50 per share. The total purchase price was approximately
$89.4 million.
3. In connection with the acquisition of Bertucci's, the Company sold
$100,000,000 principal amount of its 10 3/4% Senior Notes due July 15,
2008. The net proceeds were used to consummate the Acquisition, repay
certain outstanding indebtedness of the Company and Bertucci's and pay
fees and expenses incurred in connection with the financing and the
Acquisition.
4. The Acquisition has been accounted for as a purchase and, accordingly, the
results for Bertucci's have been included in the Company's consolidated
results of operations since the consummation of the Acquisition on July
21, 1998.
5. In April 1988, the AICPA issued its Statement of Position 98-5 ("SOP
98-5"), Reporting on the Costs of Start-Up Activities. SOP 98-5 requires
that costs incurred during start-up activities, including organization
costs, be expensed as incurred. SOP 98-5 is effective for financial
statements for fiscal years beginning after December 15, 1998, although
early application is encouraged. SOP 98-5 was first applied as of the
beginning of the fiscal year in which it is was adopted (fiscal 1999) and
is reported as a cumulative effect of a change in accounting principle.
The Company adopted SOP 98-5 on December 31, 1998, the first day of fiscal
1999. Upon adoption, the Company incurred a cumulative effect of a change
in accounting principle of approximately $678,000, net of tax. This
includes unamortized pre-opening costs which were previously deferred then
amortized over the 12-month period subsequent to restaurant openings.
6. The following presents the unaudited pro forma consolidated statements of
income of the Company for the three and nine months ended September 30,
1998. In computing nine-month pro forma earnings, Bertucci's earnings have
been included for the period from December 28, 1997 through September 5,
1998 and earnings have been reduced by the incremental interest expense on
indebtedness incurred in connection with the Acquisition. In addition,
earnings have been reduced by amortization of goodwill and deferred
finance costs. The pro forma information presented does not purport to be
indicative of the results which would have been reported if these
transactions had occurred at the beginning of the respective period, or
which may be reported in the future.
<PAGE>
Note 6 (continued)
NE RESTAURANT COMPANY, INC.
UNAUDITED PROFORMA STATEMENT OF OPERATIONS
(Dollars in thousands except for per share information)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, 1998(b) September 30, 1998(c)
--------------------- ---------------------
<S> <C> <C>
Net Sales $ 58,646 $ 170,588
Cost of Sales and Expenses
Cost of sales 15,681 45,012
Operating expenses 31,165 89,842
General and administrative expenses 2,813 8,846
Deferred rent, depreciation and amortization(a) 4,219 12,196
Taxes other than income 2,659 8,147
--------------------- --------------------
Total cost of sales and expenses 56,537 164,043
Income from operations 2,108 6,545
Interest expense, net 3,423 11,078
--------------------- --------------------
Loss before income tax benefit (1,315) (4,533)
Income tax benefit (406) (1,385)
--------------------- --------------------
Net Loss $ (909) $ (3,148)
===================== ====================
Basic and diluted earnings (loss) per share $ (0.31) $ (1.06)
Weighted average shares outstanding 2,977,026 2,977,026
EBITDA(d) $ 6,328 $ 18,741
</TABLE>
(a) Includes the amortization of pre-opening expenses.
(b) Includes 13 weeks of Chili's and On The Border restaurants and 12 weeks of
Bertucci's restaurants.
(c) Includes 39 weeks of Chili's and On The Border restaurants and 36 weeks of
Bertucci's restaurants.
(d) "EBITDA" is defined as income from operations before deferred rent,
depreciation and amortization. EBITDA is not a measure of performance
defined by GAAP. EBITDA should not be considered in isolation or as a
substitute for net income or the statement of cash flows which have been
prepared in accordance with GAAP. The Company believes EBITDA provides
useful information regarding the Company's ability to service its debt and
the Company understands that such information is considered by certain
investors to be an additional basis for evaluating a company's ability to
pay interest and repay debt. The EBITDA measures presented herein may not
be comparable to similarly titled measures of other companies.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements of the Company and the notes thereto included
herein.
General
NE Restaurant Company, Inc. (together with its subsidiaries, the
"Company") is a leading operator of full-service, casual dining restaurants in
the Northeastern United States. The Company develops and operates two distinct
restaurant franchises, Chili's Grill & Bar(r) ("Chili's") and On The Border
Mexican Cafe(r) ("On The Border") restaurants, under franchise agreements with
Brinker International, Inc., a publicly-owned company ("Brinker" or the
"Franchisor"), together with a proprietary restaurant concept under the name
Bertucci's Brick Oven Pizzeria(r) ("Bertucci's"). As of September 29, 1999, the
Company operated 37 Chili's and five On The Border restaurants in five New
England states, and owned and operated 84 Bertucci's restaurants located
primarily in the northeastern and Mid-Atlantic United States and one Sal and
Vinnie's Sicilian Steakhouse(TM) ("Sal and Vinnie's") restaurant located in
Massachusetts.
The Company has entered into franchise and development agreements with
Brinker to operate the 42 Chili's and On The Border restaurants and to
exclusively develop additional restaurants in New England and Westchester
County, New York and additionally, in the case of On The Border, upstate New
York. The Company acquired the Bertucci's and Sal and Vinnie's concepts pursuant
to the terms of an Agreement and Plan of Merger dated as of May 13, 1998,
whereby the Company (through a wholly-owned subsidiary) acquired on July 21,
1998 all of the issued and outstanding shares of common stock of Bertucci's,
Inc. for an aggregate purchase price of approximately $89.4 million (the
"Acquisition").
The Acquisition included 90 Bertucci's restaurants and one Sal & Vinnie's
restaurant. The Company has decided to close certain underperforming Bertucci's
restaurants. In addition, the Company has decided to sell the former Bertucci's
headquarters located in Massachusetts. One of the under-performing restaurants,
Bertucci's in Wakefield, Massachusetts was located within the former Bertucci's
headquarters and was closed in the second fiscal quarter of 1999 as planned. The
assets related to all of the under-performing restaurant locations, which are
primarily property and equipment, were assigned a value of approximately $6.6
million based on estimated sale proceeds. As of September 29, 1999, that amount
had been reduced by $0.5 million reflecting the sale of the Buckhead, Georgia
restaurant. From the date of the Acquisition to September 29, 1999, the
restaurant locations planned for closure had combined net sales of approximately
$18.1 million and a combined approximate $1.9 million loss from operations. None
of these locations' results during the period from date of the Acquisition to
September 29, 1999 have been excluded from the consolidated income statement and
accounted for as an adjustment to the carrying amount of assets, as the
operating locations to be sold had not been identified at the date of the
Acquisition. Manassas and Fairlakes, Virginia closed on July 1, 1999. Bertucci's
in Centreville, Virginia closed on July 28, 1999. The Buckhead and East Cobb,
Georgia restaurants closed on September 2, 1999 while Atlanta and Roswell,
Georgia closed on September 30, 1999. The final two restaurants in Georgia,
Lawrenceville and Sandy Springs, closed on October 7, 1999. As of October 7,
1999, the Company no longer operates any restaurants in Georgia. It is
anticipated that the closing and sale of the remaining restaurants will be
completed by the end of the first fiscal quarter 2000.
<PAGE>
As of the date of the Acquisition, the Company accrued approximately $3.0
million related to closing these locations, consisting of estimated lease
commitments beyond the closings and certain exit costs. As of September 29,
1999, these accrued costs are included in accrued expenses. Any additional
restaurant closing costs and any gain/(loss) on the sales or the ultimate
disposition of these locations has been or will be treated as an adjustment to
the original purchase price allocation. The Company has entered into a contract
to sell its fee interest in the Wakefield property and anticipates the
completion of the sale during the fourth fiscal quarter 1999.
For all the Company's restaurants, net sales consist of food, beverage and
alcohol sales. Cost of sales consists of food, beverage and alcohol costs. Total
operating expenses consist of five primary categories: (i) labor expenses; (ii)
restaurant operations; (iii) facility costs; (iv) office expenses; and (v)
non-controllable expenses, which include such items as Brinker's royalty and
advertising fees, rent, and insurance. General and administrative expenses
include costs associated with those departments of the Company that assist in
restaurant operations and management of the business, including accounting,
management information systems, human resources, marketing, training, executive
management, purchasing and construction. Taxes, other than income taxes consist
of payroll taxes, real estate taxes and personal property taxes. Depreciation,
amortization, deferred rent and pre-opening expenses include depreciation and
amortization on appropriate assets (including but not limited to goodwill,
deferred financing costs, property and equipment), deferred rent
expenses/credits recorded to average rental payments over the individual lives
of the leased properties and all pre-opening expenses as incurred.
Results of Operations
The results of operations for the third fiscal quarter ended September 29,
1999 and the first three fiscal quarters ended September 29, 1999 include the
results of operations of the Chili's and On The Border ("Brinker concept
restaurants") and Bertucci's concepts. The results of operations for the third
fiscal quarter ended September 30, 1998 include the Brinker concept restaurants
for the full period from July 1, 1998 through September 30, 1998 and the results
of the Bertucci's concepts from July 21, 1998 through October 3, 1998. The
results of operations for the first three fiscal quarters ended September 30,
1998 include the Brinker concept restaurants for the full period from January 1,
1998 through September 30, 1998 and the results of the Bertucci's concepts from
July 21, 1998 through October 3, 1998.
<PAGE>
The following table sets forth the percentage relationship to net sales,
unless otherwise indicated, of certain items included in the Company's income
statement, as well as certain operating data, for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended: Nine Months Ended:
September 30, September 29, September 30, September 29,
1998 1999 1998 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net Sales 100.0% 100.0% 100.0% 100.0%
------------- ------------- ------------- -------------
Cost of sales and expenses
Cost of sales 27.0 27.8 27.6 27.6
Operating expenses 53.8 52.5 52.2 52.9
General and administrative expenses 4.8 5.1 4.9 5.2
Deferred rent, depreciation, amortization and pre-opening
expenses 6.6 6.0 5.6 6.5
Taxes other than income 4.6 5.0 4.7 5.2
------------- ------------- ------------- -------------
Total cost of sales and expenses 96.7 96.3 94.9 97.4
------------- ------------- ------------- -------------
Income from operations 3.3 3.7 5.1 2.6
Interest expense, net 5.3 5.2 4.8 5.2
------------- ------------- ------------- -------------
Income (loss) before income tax expense (benefit) (2.1) (1.5) 0.3 (2.6)
Income tax expense (benefit) (0.7) (0.3) 0.1 (0.8)
============= ============= ============= =============
Income (Loss) before cumulative effect of change in accounting
principle (1.3) (1.2) 0.2 (1.8)
============= ============= ============= =============
Cumulative effect of change in accounting principle (net of tax) -- -- -- (0.3)
------------- ------------- ------------- -------------
Net Income (Loss) (1.3) (1.2) 0.2 (2.2)
============= ============= ============= =============
Restaurant Operating Data (Dollars in Thousands):
- ------------------------------------------------------------------------------------------------------------------------------------
EBITDA $ 5,339 $ 6,736 $ 10,608 $ 18,144
Average annual sales per restaurant-Brinker concepts (a) $ 2,735 $ 2,980 $ 2,699 $ 2,907
Average annual sales per restaurant-Bertucci's concepts (a) $ 1,695 $ 1,784 $ 1,680 $ 1,680
Comparable restaurant sales-Brinker concepts 2.3% 7.1% 5.4% 4.4%
Comparable restaurant sales-Bertucci's concepts -2.7% 4.6% 0.6% -1.0%
Number of restaurants - Brinker restaurants:
Restaurants open at beginning of period 33 42 32 37
Restaurants opened 2 -- 3 5
Restaurants closed -- -- -- --
------------- ------------- ------------- -------------
Total restaurants open at end of period 35 42 35 42
Number of restaurants - Bertucci's restaurants:
Restaurants open at beginning of period 87 89 84 90
Restaurants opened 2 -- 5 --
Restaurants closed -- 5 -- 6
------------- ------------- ------------- -------------
Total restaurants open at end of period 89 84 89 84
</TABLE>
- ----------
NOTE (a) Average sales per restaurant for the fiscal quarters have been
annualized to reflect a full year of operations, but are not
necessarily indicative of results for a full year.
<PAGE>
Three Months Ended September 29, 1999 Compared to Three Months Ended September
30, 1998
Net Sales. Net sales increased $15.8 million, or 29.2%, to $70.0 million
during the third fiscal quarter 1999 from $54.3 million during the third fiscal
quarter 1998. The increase in net sales was due partially to the inclusion of
the results of operations of the Bertucci's restaurants since the Acquisition.
In addition, $7.4 million of the increase in net sales was attributable to the
opening of six Chili's, four On The Borders and three Bertucci's restaurants
since the beginning of 1998. The increase was partially offset by the closing of
seven Bertucci's restaurants: Owings Mills (MD), Manassas, Fairlakes and
Centreville (VA), Wakefield (MA) and Buckhead and Roswell (GA). Comparable
restaurant sales increased by 7.1% for the Brinker concept restaurants operated
by the Company in the third fiscal quarter 1999 as compared to the third fiscal
quarter 1998. The Company believes that approximately 2% of the increase was as
a result of a 1% menu price increase in the Connecticut restaurants effective
January 1999 and a 2% increase in all Brinker Concept restaurants effective
during the Summer 1999. Comparable restaurant sales for the Bertucci's
restaurants increased by 4.6% in the third fiscal quarter 1999 as compared to
the comparable period in 1998. The increase was partially offset by declining
comparable sales in the restaurants that have been closed. Net of the
restaurants that have closed or are scheduled to close, comparable sales at the
continuing Bertucci's restaurants increased by 6.2% in the third fiscal quarter
1999 versus like days of 1998. The Company attributes the growth to an
approximate 0.3% menu price increase, increasing guest counts and an increase in
the average sale per guest ("Per Person Average" or "PPA"). The Company believes
the increases were as a result of marketing programs implemented for Bertucci's
in the third fiscal quarter 1999 after five consecutive quarters of no broadcast
media advertising activity.
Cost of Sales. Cost of sales increased by $4.8 million, or 33.1%, to $19.5
million during the third fiscal quarter 1999 from $14.6 million during the third
fiscal quarter 1998. The dollar increase in cost of sales primarily was due to
the inclusion of the results of operations of Bertucci's restaurants since the
Acquisition and the new restaurants that opened in the previous four fiscal
quarters. The increase was partially offset by the closing of restaurants
previously mentioned. Expressed as a percentage of net sales, overall cost of
sales increased to 27.8% during the third fiscal quarter 1999 from 27.0% during
the third fiscal quarter 1998. This percentage increase was primarily due to a
shift in menu mix for the Bertucci's restaurants and a high cheese price. Cost
of sales for the Bertucci's restaurants which, expressed as a percentage of net
sales for the Bertucci's restaurants, increased to 27.6% during the third fiscal
quarter (13 weeks) 1999 from 25.5% during the third twelve weeks of 1998. This
increase was primarily as a result of a menu mix shift to meat and seafood items
as a result of a broader menu, a high cheese price and higher dairy commodity
costs during the third fiscal quarter 1999. Cost of sales for the Brinker
concept restaurants, expressed as a percentage of Brinker concept restaurant
sales, decreased from 28.5% in the third fiscal quarter 1998 to 28.1% in the
third fiscal quarter 1999. The Company believes that this decrease was mainly
due to price increases that offset the high cost of cheese.
Operating Expenses. Operating expenses increased by $7.6 million, or
26.1%, to $36.8 million during the third fiscal quarter 1999 from $29.2 million
during the third fiscal quarter 1998. The dollar increase in operating expenses
primarily was due to the inclusion of the results of operations of the
Bertucci's restaurants since the Acquisition and the addition of new restaurants
that opened in the previous four fiscal quarters. The increase was partially
offset by the closing of restaurants previously mentioned. Expressed as a
percentage of net sales, operating expenses decreased to 52.5% in the third
fiscal quarter 1999 from 53.8% during the third fiscal quarter 1998. The
percentage decrease primarily was attributable to lower advertising costs, lower
employee benefit expenses and lower insurance costs. These benefits
<PAGE>
were partially offset by increased hourly labor costs driven by a tight labor
market as a result of low unemployment and mandated Federal and state minimum
wage increases, as well as to increased labor costs arising from increased
staffing of restaurant-level management implemented to strengthen restaurant
operations in the Bertucci's restaurants.
General and Administrative Expenses. General and administrative expenses
increased by $0.9 million, or 37.1%, to $3.5 million during the third fiscal
quarter 1999 from $2.6 million during the third fiscal quarter 1998. The dollar
increase in general and administrative expenses primarily was due to the
inclusion of the results of operations of Bertucci's overhead since the
Acquisition. Expressed as a percentage of net sales, general and administrative
costs increased to 5.1% during the third fiscal quarter 1999 from 4.8% during
the third fiscal quarter 1998. The increase was attributable to increased
Bertucci's restaurant manager recruiting and additional staffing of corporate
support positions to further service the expanded Company.
Deferred Rent, Depreciation, Amortization and Pre-opening Expenses.
Deferred rent, depreciation, amortization and pre-opening expenses increased by
$0.6 million, or 17.0%, to $4.2 million during the third fiscal quarter 1999
from $3.6 million during the third fiscal quarter 1998. The Company adopted the
AICPA's Statement of Position 98-5 ("SOP 98-5", Reporting on the Costs of
Start-Up Activities) effective December 31, 1998, the first day of fiscal 1999.
SOP 98-5 requires that costs incurred during start-up activities, including
organization costs, be expensed as incurred. Those expenses amounted to less
than $0.1 million in the third fiscal quarter 1999 and were primarily for the
pre-opening expenses related to one Chili's restaurant currently under
construction and one On the Border restaurant that opened in the prior period.
In addition, the third fiscal quarter 1999 includes approximately $0.6 million
of amortization expenses of goodwill associated with the Acquisition.
Taxes Other than Income Taxes. Taxes, other than income taxes, increased
by $1.0 million, or 40.0%, to $3.5 million during the third fiscal quarter 1999
from $2.5 million during the third fiscal quarter 1998. Expressed as a
percentage of net sales, taxes, other than income taxes, increased from 4.6%
during third fiscal quarter 1998 to 5.0% during the third fiscal quarter 1999.
The overall dollar increase in taxes, other than income taxes, was due to the
inclusion of the results of operations of the Bertucci's restaurants since the
Acquisition and the new restaurants that have opened in the previous twelve
months. The increase was partially offset by the closing of restaurants
previously mentioned. The percentage increase was due primarily to increased
payroll taxes associated with higher Bertucci's restaurant management and
employee payroll as well as increased manager training payroll and general and
administrative support staff payroll.
Interest Expense. Interest expense increased by $0.7 million to $3.6
million during the third fiscal quarter 1999 from $2.9 million during the third
fiscal quarter 1998. Approximately $0.6 million of the increase was attributable
to the sale by the Company in July 1998 of $100.0 million aggregate principal
amount of its 10-3/4% Senior Notes due 2008 (the "Senior Notes"). The remainder
was due to the approximate $34.4 million aggregate principal amount of mortgage
loan financing provided, since August 1997, to the Company by FFCA Acquisition
Corporation (the "FFCA Loans"). Interest was approximately $2.7 million on the
Senior Notes, $0.8 million on the FFCA Loans and $0.1 million on the Company's
revolving credit facility, during the third fiscal quarter 1999.
<PAGE>
Income Taxes. The effective income tax rate decreased to a 22.0% tax
benefit during the third fiscal quarter 1999 from a 36.2% tax benefit during the
third fiscal quarter 1998. The reason for the reduced rate of tax benefit in
1999 was mainly due to the non-deductible portion of goodwill resulting from the
Acquisition.
Nine months Ended September 29, 1999 Compared to Nine months Ended September 30,
1998
Net Sales. Net sales increased $101.5 million, or 102.2%, to $200.8
million during the first three fiscal quarters 1999 from $99.3 million during
the first three fiscal quarters 1998. The increase in net sales primarily was
due to the inclusion of the results of operations of the Bertucci's restaurants
since the Acquisition. In addition, $21.6 million of the increase in net sales
was attributable to the opening of six Chili's, four On The Borders and three
Bertucci's restaurants in the prior four fiscal quarters. The increase was
partially offset by the closing of seven Bertucci's restaurants: Owings Mills
(MD), Manassas, Fairlakes and Centreville (VA), Wakefield (MA) and Buckhead and
Roswell (GA). Comparable restaurant sales increased by 4.4% for the Brinker
concept restaurants operated by the Company in the first three fiscal quarters
1999 as compared to the first three fiscal quarters 1998. The Company believes
that approximately 1.5% of the increase was as a result of a 1% menu price
increase in the Connecticut restaurants effective January 1999 and a 2% increase
in all Brinker Concept restaurants effective Summer 1999. Comparable restaurant
sales for the Bertucci's restaurants decreased by 1.0% in the first three fiscal
quarters 1999 as compared to the comparable period in 1998. The Company believes
that the Bertucci's comparable sales decrease of 3.7% through the end of the
first two fiscal quarters was partially offset by planned marketing efforts that
resulted in the 4.6% comparable sales increase in the third fiscal quarter. The
Company further attributes a portion of the Bertucci's growth to an approximate
0.3% menu price increase during the third fiscal quarter of 1999, increasing
guest counts and an increase in PPA. Excluding the restaurants that have closed
or are planned to close, comparable sales at Bertucci's were unchanged for the
first three fiscal quarters 1999 versus the like days of 1998.
Cost of Sales. Cost of sales increased by $28.0 million, or 102.2%, to
$55.3 million during the first three fiscal quarters 1999 from $27.4 million
during the first three fiscal quarters 1998. The dollar increase in cost of
sales primarily was due to the inclusion of the results of operations of
Bertucci's restaurants since the Acquisition. The increase was partially offset
by the closing of restaurants previously mentioned. Expressed as a percentage of
net sales, overall cost of sales remained at 27.6% during the first three fiscal
quarters of both 1998 and 1999. Despite the higher margins associated with the
Bertucci's restaurants, cheese costs placed upward pressure on cost of sales in
1999. Cost of sales for the Bertucci's restaurants which, expressed as a
percentage of net sales for the Bertucci's restaurants, increased to 26.9%
during the first three fiscal quarters (39 weeks) 1999 from 25.2% during the
first 36 weeks of 1998. This increase was primarily as a result of higher cheese
and dairy commodity costs during the first three fiscal quarters 1999. Although
cost of sales for the Bertucci's restaurants increased, Bertucci's results are
only included in the consolidated statements for just over 10 weeks from July
21, 1998 through October 3, 1998 and, thus, do not impact the consolidated
statements by a proportionate amount. Cost of sales for the Brinker concept
restaurants, expressed as a percentage of Brinker concept restaurant sales,
increased from 28.3% in the first three fiscal quarters 1998 to 28.4% in the
first three fiscal quarters 1999. The Company believes that this increase was
mainly due to higher commodity costs of cheese and dairy products during the
first three fiscal quarters of this year that were partially offset by a menu
price increase in June 1999.
<PAGE>
Operating Expenses. Operating expenses increased by $54.5 million, or
105.1%, to $106.3 million during the first three fiscal quarters 1999 from $51.8
million during the first three fiscal quarters 1998. The dollar increase in
operating expenses primarily was due to the inclusion of the results of
operations of the Bertucci's restaurants since the Acquisition. The increase was
partially offset by the closing of restaurants previously mentioned. Expressed
as a percentage of net sales, operating expenses increased to 52.9% in the first
three fiscal quarters 1999 from 52.2% during the first three fiscal quarters
1998. The percentage increase primarily was attributable to increased hourly
labor costs driven by a tight labor market as a result of low unemployment and
mandated Federal and state minimum wage increases, as well as to increased labor
costs arising from increased staffing of restaurant-level management implemented
to strengthen restaurant operations.
General and Administrative Expenses. General and administrative expenses
increased by $5.6 million, or 115.8%, to $10.5 million during the first three
fiscal quarters 1999 from $4.9 million during the first three fiscal quarters
1998. The dollar increase in general and administrative expenses primarily was
due to the inclusion of the results of operations of Bertucci's overhead since
the Acquisition. Expressed as a percentage of net sales, general and
administrative costs increased to 5.2% during the first three fiscal quarters
1999 from 4.9% during the first three fiscal quarters 1998. The increase was
attributable to increased Bertucci's restaurant manager recruiting and training
and additional staffing of corporate support positions to further service the
expanded Company.
Deferred Rent, Depreciation, Amortization and Pre-opening Expenses.
Deferred rent, depreciation, amortization and pre-opening expenses increased by
$7.4 million, or 134.1%, to $13.0 million during the first three fiscal quarters
1999 from $5.6 million during the first three fiscal quarters 1998. The Company
adopted the AICPA's Statement of Position 98-5 ("SOP 98-5", Reporting on the
Costs of Start-Up Activities) effective December 31, 1998, the first day of
fiscal 1999. SOP 98-5 requires that costs incurred during start-up activities,
including organization costs, be expensed as incurred. Those expenses amounted
to approximately $1.2 million in the first three fiscal quarters 1999 and were
primarily for the pre-opening expenses related to the construction of four
Chili's restaurants and one On the Border restaurant in that period. In
addition, the year to date 1999 includes approximately $1.7 million of
amortization expenses of goodwill associated with the Acquisition. The remainder
of the increase was primarily due to the inclusion of Bertucci's since the
Acquisition.
Taxes Other than Income Taxes. Taxes, other than income taxes, increased
by $5.8 million, or 125.8%, to $10.5 million during the first three fiscal
quarters 1999 from $4.7 million during the first three fiscal quarters 1998. The
overall dollar increase in taxes, other than income taxes, was due to the
inclusion of the results of operations of the Bertucci's restaurants since the
Acquisition. The increase was partially offset by the closing of restaurants
previously mentioned. Expressed as a percentage of net sales, taxes, other than
income taxes, increased from 4.7% during first three fiscal quarters 1998 to
5.2% during the first three fiscal quarters 1999. The percentage increase was
due primarily to increased payroll taxes associated with higher Bertucci's
restaurant management and employee payroll as well as increased manager training
payroll and general and administrative support staff payroll.
Interest Expense. Interest expense increased by $5.7 million to $10.4
million during the first three fiscal quarters 1999 from $4.7 million during the
first three fiscal quarters 1998. This increase was primarily attributable to
the sale by the Company in July 1998 of $100.0 million aggregate principal
amount of its Senior Notes, and to the approximately $34.4 million aggregate
principal amount of the FFCA
<PAGE>
Loans. Interest was approximately $8.1 million on the Senior Notes, $2.1 million
on the FFCA Loans and $0.2 million on the Company's revolving credit facility,
during the first three fiscal quarters 1999.
Income Taxes. The effective income tax rate increased to a 31.0% tax
benefit during the first three fiscal quarters 1999 from a 22.7% tax expense
during the first three fiscal quarters 1998. The reason for the change was
primarily as a result of the effect of non-deductible goodwill associated with
the Acquisition.
Liquidity And Capital Resources
The Company has historically met its capital expenditures and working
capital needs through a combination of operating cash flow, borrowings under the
FFCA Loans and borrowing under the Company's revolving credit facility, which
provides for borrowings of up to $20.0 million, with BankBoston, N.A. acting as
administrative agent and Chase Bank of Texas, N.A. acting as documentation agent
(the "Senior Bank Facility").
Net cash flows provided by operating activities were $3.3 million for the
first three fiscal quarters 1999. Other changes in working capital were mainly
due to the inclusion of the results of operations of the Bertucci's restaurants
since the Acquisition. The decrease in accrued expenses was mainly attributable
to the payment of bonuses, advertising and interest that were accrued at
year-end.
The Company's capital expenditures decreased $1.4 million from $13.7
million during the first three fiscal quarters 1998 to $12.3 million for the
first three fiscal quarters 1999. The decrease in capital expenditures was
primarily due to timing differences in the construction of five new Chili's
restaurants and three new On The Border restaurants in 1999 versus 1998. Under
its area development agreements with the Franchisor, the Company is required to
build at least four Chili's and two On The Border restaurants by the end of
January 2000 to meet its minimum development requirements. The Company has met
the minimum requirement for Chili's in fiscal 1999. The Company expects to open
two On The Border restaurants by the end of the first fiscal quarter 2000 which
will meet the development requirement for that brand. The development of four
Chili's and three On The Border restaurants are expected to require capital
expenditures of approximately $13.4 million. As described below, the Company
believes that it will have sufficient working capital and bank borrowing
availability to finance its expansion and other plans for the remainder of
fiscal 1999.
The Company incurred a significant amount of indebtedness in connection
with the Acquisition. As of September 29, 1999, the Company had approximately
$134.6 million in consolidated indebtedness, including $100.0 million of
indebtedness pursuant to the Senior Notes, $34.4 million of borrowings under the
FFCA Loans and $0.2 million of capital lease obligations. Significant liquidity
demands will arise from debt service on the Senior Notes, the FFCA Loans and
borrowings under the Senior Bank Facility. In addition to its debt service
obligations, the Company has determined that it will require $19.4 million to
complete all planned capital expenditures (which includes the $13.4 million that
is expected to be used for new restaurant development plus an additional $6.0
million expected to be used for capital improvements to existing locations),
$0.1 million for lease obligations and ($0.4) million for general working
capital needs in 1999.
The Company believes that the cash flow generated from its operations,
together with available
<PAGE>
borrowings under the Senior Bank Facility and under the FFCA Loans and similar
secured indebtedness, should be sufficient to fund its debt service
requirements, lease obligations, working capital needs, current expected capital
expenditures and other operating expenses for the remainder of 1999. The Senior
Bank Facility provides the Company with available borrowing up to an aggregate
amount of $20.0 million. As of September 29, 1999, $20.0 million of borrowings
were available under the Senior Bank Facility. The Company's future operating
performance and ability to service or refinance the Senior Notes, the FFCA
Loans, and the Senior Bank Facility will be subject to future economic
conditions and to financial, business and other factors, many of which are
beyond the Company's control.
Seasonality
The Company's quarterly results of operations have fluctuated and are
expected to continue to fluctuate depending on a variety of factors, including
the timing of new restaurant openings and related pre-opening and other startup
expenses, net sales contributed by new restaurants, increases or decreases in
comparable restaurant sales, competition and overall economic conditions. The
Company's business is also subject to seasonal influences of consumer spending,
dining out patterns and weather. As is the case with many restaurant companies,
the Company typically experiences lower net sales and net income during the
first and fourth fiscal quarters. Because of these fluctuations in net sales and
net income (loss), the results of operations of any quarter are not necessarily
indicative of the results that may be achieved for a full year or any future
quarter.
Year 2000 Impact
Many currently installed computer systems and software products are coded
to accept only two digit entries in the date code field. Beginning in the year
2000, these date code fields will need to accept four digit entries to
distinguish twenty-first century dates from twentieth century dates. As a
result, computer systems and/or software used by many companies may need to be
upgraded to comply with such "Year 2000" requirements. The Company is currently
updating any potential impact of Year 2000 on the processing of date-sensitive
information by the Company's automated information and point-of-sale systems.
While there can be no assurance that Year 2000 matters will be satisfactorily
identified and resolved, the Company currently believes, based on discussions
and assurances with its information systems vendors, that Year 2000 issues will
not have a materially adverse affect on the Company.
The Company's comprehensive Year 2000 initiative is being managed by a
team of internal staff and is designed to ensure that there are no adverse
affects on the Company's ability to conduct business at the restaurant level and
to process and support restaurant activity at the corporate level. The
initiative covers restaurant point-of-sale systems, back office software,
including labor, menu and inventory management software, ordering systems, the
corporate office network and financial systems, payroll processing, corporate
computers and telephone systems. In addition, the project includes a review of
the Year 2000 compliance effects of the Company's key suppliers and other
principal business partners and, as appropriate, the development of joint
business support and continuity plans for Year 2000 issues. The Year 2000
project is divided into the following phases: inventory, assessment,
remediation, testing, deployment and monitoring. As of September 29, 1999, the
inventory, assessment, remediation and testing phases are substantially
completed, and the deployment and monitoring phases are in progress. In
addition, selected Year 2000 upgrades are slated to undergo testing in a
controlled environment that replicates the current network and is equipped to
simulate the turn of the century and leap year dates.
<PAGE>
Under its current Year 2000 plan, the Company has brought a number of its
systems into Year 2000 compliance. The Company's accounts receivable system is
expected to be compliant by December 1999 and all point-of-sale systems in the
Chili's restaurants are compliant. The Company's ability to meet the target
dates is dependent upon the timely provision of necessary upgrades and
modifications by its suppliers and contractors. In some instances, first party
upgrades or modifications are not expected to be available until late 1999;
accordingly, the Company's testing and redeployment of affected items may be
delayed until that time. The Company has established a supplier compliance
program, and is working with its key suppliers and the Franchisor to minimize
such risks. Based upon information obtained from the Company's principal vendor
of restaurant supplies and products (which together account for approximately
75% to 80% of its supplies) the Company believes that the vendor's systems that
could affect the Company's business are Year 2000 compliant. While the Company
believes that its relationships with its smaller suppliers and the Franchisor,
as such relationships relate to Year 2000 issues, are less significant, it is
continuing to assess these relationships. The Company currently estimates that
it will incur expenses of approximately $230,000 through 1999 in connection with
its anticipated Year 2000 efforts. To date, the Company has spent approximately
$210,000 in connection with its anticipated Year 2000 efforts with the remainder
expected to be incurred throughout the rest of fiscal 1999. The timing and
amount of the Company's expenses may vary and are not necessarily indicative of
readiness efforts or progress to date.
As part of its Year 2000 initiative, the Company is evaluating scenarios
that may occur as a result of the century change and is in the process of
developing a contingency and business continuity plan tailored for Year
2000-related occurrences. The Company believes that most of its significant
hardware and software systems are already Year 2000 compliant. The Company
believes that the most reasonably likely worst case scenario of failure by the
Company or its suppliers to adequately resolve Year 2000 issues would arise from
a complete failure of its point-of-sale and ordering systems. Such a failure
would require the Company to resort to "non-computerized" means to undertake
such restaurant functions as placing customer orders, preparing customer checks,
accounting of restaurant receipts, recording and ordering restaurant inventory
and supplies, evaluating menu mix and analyzing other operating statistics.
While the Company believes that it is equipped to operate in such
"non-computerized" mode to address such a failure, there can be no assurance
that the Company would not suffer, as a result of such or any other
unanticipated Year 2000 failure, from lost revenues, increased operating costs,
loss of customers or other business interruptions of a material nature.
The above information is based on the Company's current best estimates,
which were derived using numerous assumptions of future events, including the
availability and future costs of certain technologies and other resources, first
party modification actions and other factors. Given the complexity of these
issues and possible unidentified risks, actual results may vary from those
anticipated and discussed above. Specific factors that might cause such
differences include, among others, the availability and cost of personnel
trained in this area, the ability to locate and correct all affected computer
code, the timing and success of remedial efforts of the Company's first party
suppliers and similar uncertainties.
<PAGE>
Forward-Looking Statements
All statements other than statements of historical facts included in this
Quarterly Report on Form 10-Q, including, without limitation, statements set
forth under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" regarding the Company's future financial position,
business strategy, budgets, projected costs and plans and objectives of
management for future operations, are forward-looking statements. In addition,
forward-looking statements generally can be identified by the use of
forward-looking terminology such as "may," "will," "expect," "intend,"
"estimate," "anticipate" or "believe" or the negative thereof or variations
thereon or similar terminology. Although the Company believes that the
expectations reflected in such forward-looking statements will prove to have
been correct, it can give no assurance that such expectations will prove to have
been correct. Factors including those set forth herein, as well as those set
forth in the Company's Form 10K filed with the Securities and Exchange
Commission ("SEC") on March 30, 1999 and other filings with the SEC may affect
such expectations. Investors are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events.
Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISKS
The Company has market risk associated with interest rate risk. The
Company manages its exposure through its regular financing activities. Interest
rate changes would result in a change in the fair value of the Company's debt
facilities due to the difference between the market interest rate and the rate
at the date of issuance of the debt facilities. The Company has no exposure to
specific risks related to derivatives or other "hedging" types of financial
instruments.
<PAGE>
PART II: OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings from time to time
incidental to the conduct of its business. In the opinion of management, any
ultimate liability arising out of such proceedings will not have a material
adverse effect on the financial condition or results of operations of the
Company.
Management is not aware of any litigation to which the Company is a party
that is likely to have a material adverse effect on the Company.
Item 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
Item 3. DEFAULTS UPON SENIOR SECURITIES
None
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
Item 5. OTHER INFORMATION
On October 28, 1999, Dennis Pedra tendered his resignation as President,
Chief Executive Officer and Director of NE Restaurant Company, Inc. Mr. Pedra
continues to be a significant shareholder of the Company.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27.1 Financial Data Schedule
(b) The Company did not file a Current Report on Form 8-K during the
third fiscal quarter 1999.
<PAGE>
Exhibit Index
27.1 Financial Data Schedule
<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.
NE RESTAURANT COMPANY, INC.
---------------------------
(Registrant)
Date: November 15, 1999 By: /s/ Benjamin Jacobson
----------------------------------------
Benjamin Jacobson
Chairman of the Board of Directors
and Treasurer
Date: November 15, 1999 By: /s/ Paul Hoagland
----------------------------------------
Paul Hoagland
Chief Financial Officer and
Executive Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FORM 10-Q
FOR QUARTERLY PERIOD ENDED SEPTEMBER 29, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-29-1999 DEC-29-1999
<PERIOD-START> JUL-01-1999 DEC-31-1998
<PERIOD-END> SEP-29-1999 SEP-29-1999
<CASH> 1,577 1,577
<SECURITIES> 0 0
<RECEIVABLES> 1,597 1,597
<ALLOWANCES> 0 0
<INVENTORY> 1,984 1,984
<CURRENT-ASSETS> 15,998 15,998
<PP&E> 139,467 139,467
<DEPRECIATION> 24,747 24,747
<TOTAL-ASSETS> 182,714 182,714
<CURRENT-LIABILITIES> 33,808 33,808
<BONDS> 100,000 100,000
0 0
0 0
<COMMON> 37 37
<OTHER-SE> 9,705 9,705
<TOTAL-LIABILITY-AND-EQUITY> 182,714 182,714
<SALES> 70,072 200,755
<TOTAL-REVENUES> 70,072 200,755
<CGS> 19,487 55,333
<TOTAL-COSTS> 67,508 195,616
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,626 10,420
<INCOME-PRETAX> (1,001) (5,261)
<INCOME-TAX> (234) (1,630)
<INCOME-CONTINUING> (828) (3,642)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 678
<NET-INCOME> (828) (4,319)
<EPS-BASIC> (0.28) (1.45)
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