<PAGE>
FORM 10-Q/A
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 MARCH 29, 2000
Commission File Number 333-62775
NE RESTAURANT COMPANY, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 06-1311266
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
5 CLOCK TOWER PLACE, MAYNARD, MASSACHUSETTS 01754
(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 ___
2,986,622 shares of the registrant's Common Stock were outstanding on May 15,
2000.
<PAGE>
NE RESTAURANT COMPANY, INC.
FORM 10-Q/A
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
PART I: FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements:
1) Consolidated Balance Sheets
March 29, 2000 and December 29, 1999 3
2) Consolidated Statements of Operations
For the Three Months Ended March 29, 2000
and March 31, 1999 4
3) Consolidated Statement of Shareholders'
Equity for the Three Months Ended March 29, 2000 5
4) Consolidated Statements of Cash
Flows for the Three Months Ended March 29, 2000
and March 31, 1999 6
5) Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Results
of Operations and Financial Condition 8
Item 3. Quantitative and Qualitative Disclosures about
Market Risk 13
PART II: OTHER INFORMATION 13
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 14
</TABLE>
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements
NE RESTAURANT COMPANY, INC.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 29, December 29,
2000 1999
--------- ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash 2,867,926 7,578,632
Credit card receivables 1,298,138 1,630,844
Inventories 1,855,402 1,804,346
Prepaid expenses and other current assets 298,925 668,698
Short-term assets held for sale 457,417 1,847,584
Prepaid and current deferred income taxes 8,647,600 8,647,600
------------ -------------
Total current assets 15,425,407 22,177,704
------------ ------------
PROPERTY AND EQUIPMENT, AT COST:
Land and land right 8,402,915 8,422,025
Buildings 12,454,927 12,199,895
Leasehold improvements 79,923,595 76,017,712
Furniture and equipment 46,500,793 44,732,345
------------ ------------
147,282,230 141,371,977
Less-Accumulated depreciation (30,755,112) (27,662,046)
------------ ------------
116,527,118 113,709,930
Construction work in process 1,995,600 4,300,112
------------ ------------
Net property and equipment 118,522,718 118,010,042
Goodwill, net 30,112,637 30,682,037
Deferred Finance Costs, net 8,575,362 8,761,004
Liquor licenses 3,057,235 3,057,235
Restricted investments 63,715 1,177,685
Deferred taxes, noncurrent 4,294,982 4,294,982
Other assets, net 1,411,410 1,417,140
------------ ------------
$181,463,465 $189,577,830
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITES:
Current portion of mortgage loan and bonds payable 1,255,406 1,255,406
Accounts Payable 13,810,126 13,720,971
Accrued Expenses 17,064,948 23,337,877
Capital lease obligation-current portion 72,647 72,647
------------ ------------
Total current liabilities 32,203,127 38,386,901
Capital lease obligation, net of current portion 34,109 57,861
Mortgage Loan Payable, net of current portion 38,793,722 38,017,489
Bonds Payable, net of current portion 100,000,000 100,000,000
Deferred Rent and Other Long-Term Liabilities 4,378,727 5,590,011
------------ ------------
Total liabilities 175,409,685 182,052,261
Commitments and Contingencies
Stockholders' Equity:
Common stock 36,760 36,774
Less Treasury stock--689,344 shares at cost (8,017,070) (8,017,070)
Additional paid in capital 29,003,920 29,003,920
Accumulated deficit (14,969,830) (13,489,055)
------------ ------------
Total stockholders' equity (deficit) 6,053,780 7,525,569
------------ ------------
$181,463,465 $189,577,830
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NE RESTAURANT COMPANY, INC.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended
March 29, March 31,
2000 1999
------------ ------------
<S> <C> <C>
Net Sales $ 67,034,661 $ 63,034,185
------------ ------------
Cost of Sales and Expenses
Cost of Sales 17,563,051 17,353,337
Operating expenses 38,957,634 36,992,233
General and administrative expenses 4,488,004 3,688,604
Deferred rent, depreciation and
amortization and preopening expenses 4,529,443 4,232,789
------------ ------------
Total cost of sales and expenses 65,538,132 62,266,963
------------ ------------
Income from operations 1,496,529 767,222
Interest Expense, net 3,673,804 3,363,344
------------ ------------
Loss before benefit for income taxes and
change in accounting principle (2,177,275) (2,596,122)
Income Tax Benefit (705,500) (944,611)
------------ ------------
Loss before change in accounting principle (1,471,775) (1,651,511)
Change in accounting principle (net of tax) -- (677,968)
------------ ------------
Net Loss $ (1,471,775) $ (2,329,479)
============ ============
Basic and diluted loss per share before change
in accounting principle $ (0.49) $ (0.55)
Change in accounting principle per share -- (0.23)
------------- ------------
Basic and diluted loss per share $ (0.49) $ (0.78)
============ ============
Weighted Average Shares Outstanding 2,986,622 2,977,026
</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 three months ended March 29, 2000
<TABLE>
<CAPTION>
Common Stock Treasury Stock Total
---------------------------------------------------- Stockholders'
Number of $.01 per Number of Additional Paid Accumulated (Deficit)
Shares Share Shares Amount In Capital Deficit Equity
---------------------------------------------------- --------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance December 29, 1999 3,675,966 $ 36,760 (689,344) $(8,017,070) $ 29,003,920 $ (13,498,055) $ 7,525,555
Net (Loss) -- -- -- -- -- (1,471,775) (1,471,775)
--------- -------- -------- ----------- ------------ ------------- -----------
Balance March 29, 2000 3,675,966 $ 36,760 (689,344) $(8,017,000) $ 29,003,920 $ (14,969,830) $ 6,053,780
========= ======== ======== =========== ============ ============= ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements
<PAGE>
NE RESTAURANT COMPANY, INC.
CONSOLIDATED STATEMENTS OF CASH FLOW
<TABLE>
<CAPTION>
Three months ended Three months ended
March 29, 2000 March 31, 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,471,775) $(2,329,479)
----------- -----------
Adjustments to reconcile net loss
to net cash used in operating
activities
Change in accounting principle -- 1,135,055
Total Depreciation, amortization and deferred rent 4,152,897 4,232,789
Change in deferred taxes -- (443,566)
Changes in operating assets and liabilities
Inventories (51,056) 94,331
Prepaid expenses, receivables and other 702,480 12,713
Accrued expenses (6,272,943) (4,508,593)
Accounts payable 89,156 1,032,837
Other operating assets and liabilities (396,372) (478,874)
----------- -----------
Total adjustments (1,775,838) 1,076,692
----------- -----------
Net cash used in operating activities (3,247,613) (1,252,787)
=========== ===========
CASH FLOWS FROM INVESTING ACTIVITIES
Additions to property and equipment (3,605,742) (4,106,891)
Proceeds from sale of restaurant properties 1,390,167 --
Acquisition of liquor licenses -- (71,293)
----------- -----------
Net cash used for investing activities (2,215,575) (4,178,184)
=========== ===========
CASH FLOWS FROM FINANCING ACTIVITIES
Borrowings of mortgage loans 1,100,000 949,381
Repayments of mortgage loans (323,767) (235,834)
Principal payments under capital lease obligations (23,752) (22,857)
----------- -----------
Net cash provided by financing activities 752,481 690,690
=========== ===========
Net Increase (Decrease) in Cash (4,710,706) (4,740,281)
Cash, beginning of period 7,578,632 5,456,110
----------- -----------
Cash, end of period $ 2,867,926 $ 715,829
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid for interest, net of amounts capitalized $ 6,260,642 $ 5,805,534
=========== ===========
Cash paid for income taxes $ 69,423 $ 1,130
=========== ===========
</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 29, June 28, September 27, 2000 and January 3, 2001. In 1999, the
Company's fiscal quarters ended March 31, June 30, September 29 and December 29,
1999.
2. 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 was effective for financial statements for fiscal years
beginning after December 15, 1998. 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 preopening costs which were previously
amortized over the 12-month period subsequent to restaurant openings.
3. In June 1998, the FASB issued Statement of Financial Accounting Standards
(SFAS No. 133), Accounting for Derivative Instruments and Hedging Activities.
This statement established accounting and reporting standards requiring that
every derivative instrument (including certain derivative instruments embedded
in other contracts and for hedging activities) be recorded in the balance sheet
as either an asset or liability measured at its fair value. SFAS No. 133
requires that changes in the derivative's fair value be recognized currently in
earnings unless specific hedging accounting criteria are met. Special accounting
for qualifying hedges allows a derivative's gains and losses to offset related
results on the hedged item in the income statement, and requires that a company
must formally document, designate and assess the effectiveness of transactions
that receive hedge accounting. SFAS 133, as amended by SFAS 137, is effective
for fiscal years beginning after June15, 2000. A company may also implement the
Statement as of the beginning of any fiscal quarter after issuance (that is,
fiscal quarters beginning June 16, 1998 and thereafter). SFAS 133 cannot be
applied retroactively. The Company has not determined the timing of adoption,
but does not anticipate the adoption of this new standard to have a material
impact on the Company's fiscal position or results of operations.
4. Under the terms of the corporation agreements, the stockholders have
consented to the payment of an ongoing financial consulting fee to Jacobson
Partners, Limited Partnership ("Jacobson Partners"), a stockholder of the
corporation. Under this agreement, Jacobson Partners will provide various
financial advisory services to the Company, including, among other things,
assistance in preparing internal budgets, performing cash management activities,
maintaining and improving accounting and other management information systems,
negotiating financing arrangements, complying with public reporting and
disclosure requirements and communicating with creditors and investors. In
consideration of these services, the Company has entered into an agreement with
Jacobson Partners whereby the Company would pay Jacobson Partners $500,000 per
year together with reimbursement of certain travel and other incidental
expenses. During 1999, Jacobson Partners agreed to reduce its annual fee to
$250,000 until further notice. Effective with the beginning of fiscal year 2000,
the Company has agreed to reinstate the annual fee of $500,000 retroactive to
July 1, 1999 which required an additional payment in the first fiscal quarter
2000 of $125,000.
5. Certain prior year amounts have been reclassified to conform to the current
year presentation.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
The following discussion should be read in conjunction with the
consolidated financial statements of NE Restaurant Company, Inc. ("The Company")
and the notes thereto included herein. All mentions of period data refer to the
Company's fiscal periods as defined in Note #1 to the consolidated financial
statements.
GENERAL
The Company was founded in 1991 as a Massachusetts corporation, serving
first as a general partner to a Massachusetts limited partnership and then as
the successor entity to such partnership and two other limited partnerships, and
was re-incorporated in Delaware on October 20, 1994. The Company was formed to
acquire 15 Chili's restaurants from a prior franchisee.
The Company is an operator of full-service, casual dining restaurants
in the northeastern United States. The Company's wholly owned subsidiary,
Bertucci's Restaurant Corp. ("Bertucci's") owns and operates a restaurant
concept under the name Bertucci's Brick Oven Pizzeria(R).
In July 1998, the Company completed its acquisition of Bertucci's'
parent entity, Bertucci's, Inc., a publicly-owned restaurant company for a
purchase price, net of cash received, of approximately $89.4 million (the
"Acquisition"). The Company financed the Acquisition primarily through the
issuance of $100 million of 10 3/4% senior notes due 2008 (the "Senior Notes").
The Acquisition included 90 Bertucci's restaurants and one Sal & Vinnie's
restaurant. During 1999, the Company closed the Bertucci's test kitchen
restaurant in Wakefield, Massachusetts and closed ten under performing
Bertucci's restaurants. Between December 29, 1999 and January 31, 2000, the
Company closed seven additional under performing Bertucci's restaurants, thereby
completing the planned closings identified shortly after the Acquisition. As of
March 29, 2000, Bertucci's owned and operated 72 full-service, casual dining,
Italian-style restaurants under the name Bertucci's Brick Oven Pizzeria(R)
located primarily in New England and Mid-Atlantic United States and one Sal and
Vinnie's Sicilian Steakhouse(TM) ("Sal and Vinnie's") located in Massachusetts.
The Company also develops and operates two distinct restaurant
franchises, Chili's Grill & Bar(R) ("Chili's") and On The Border Mexican Cafe(R)
("On The Border"), under franchise agreements with Brinker International, Inc.,
a publicly-owned company ("Brinker" or the "Franchisor"). The Company is the
world's largest Chili's franchisee and as of March 29, 2000, the Company
operated 38 Chili's and 7 On The Border restaurants in five New England states.
The Company offers its targeted customer base three distinct yet
complementary casual dining menus: Italian at Bertucci's,
"American/southwestern" at Chili's and "Tex-Mex" at On The Border.
RESULTS OF OPERATIONS
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:
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended:
MARCH 29, MARCH 31,
2000 1999
--------- ---------
<S> <C> <C>
Net Sales 100.0% 100.0%
--------- ---------
Cost of sales and expenses
Cost of sales 26.2 27.5
Operating expenses 58.1 58.7
General and administrative expenses 6.7 5.9
Deferred rent, depreciation, amortization and preopening expenses 6.8 6.7
--------- ---------
Total cost of sales and expenses 97.8 98.8
--------- ---------
Income from operations 2.2 1.2
Interest expense, net 5.5 5.3
--------- ---------
Income (loss) before income tax expense (benefit) (3.2) (4.1)
Income tax expense (benefit) (1.1) (1.5)
--------- ---------
Income (loss) before cumulative effect of change in
accounting principle (2.2) (2.6)
========= =========
Cumulative effect of change in accounting principle (net of tax) - (1.1)
--------- ---------
Net Income (2.2) (3.7)
========= =========
</TABLE>
RESTAURANT OPERATING DATA (DOLLARS IN THOUSANDS):
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
EBITDA (a) $ 6,026 $ 5,000
Comparable restaurant sales (b) 5.6% -0.7%
Number of restaurants - Brinker restaurants:
Restaurants open at beginning of period 43 37
Restaurants opened 2 1
--------- ---------
Total restaurants open at end of period 45 38
Number of restaurants - Bertucci's restaurants: (c)
Restaurants open at beginning of period 79 90
Restaurants opened - -
Restaurants closed 7 -
--------- ---------
Total restaurants open at end of period 72 90
</TABLE>
(a) "EBITDA" is defined as income from operations before deferred rent,
depreciation, amortization and preopening costs. EBITDA is not a
measure of performance defined by Generally Accepted Accounting
Principles ("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.
(b) The Company defines comparable restaurant sales as net sales from
restaurants that have been open for at least one full fiscal year.
(c) Does not include Sal & Vinnie's.
<PAGE>
THREE MONTHS ENDED MARCH 29, 2000 COMPARED TO THREE MONTHS ENDED MARCH 31, 1999
NET SALES. Net sales increased $4.0 million, or 6.3%, to $67.0 million
during the first quarter 2000 from $63.0 million during the first quarter 1999.
The increase in net sales primarily was due to increased comparable restaurant
sales and the addition of five new Chili's and three new On The Border
restaurants. This increase was partially offset by closing 18 Bertucci's
restaurants. Approximately $4.8 million of the increase in net sales was
attributable to the additional Chili's and On The Border restaurants. Last
year's sales included the 18 Bertucci's restaurants that have subsequently been
closed. Comparable restaurant sales for the Bertucci's restaurants increased by
5.2% in the first quarter 2000 as compared to the comparable period in 1999.
Comparable restaurant sales increased by 5.8% for the Brinker concept
restaurants operated by the Company in the first quarter 2000 as compared to the
first quarter 1999. Faced with increases in the minimum wage in some states and
the increasing upward pressure on hourly labor rates, the Company raised menu
prices early in the first quarter 2000. The Company believes that the majority
of the sales increases were the result of increased guest satisfaction resulting
in repeat visits and the aforementioned menu price increases that took effect in
late January 2000.
COST OF SALES. Cost of sales increased by approximately $210,000, or
1.2%, to $17.6 million during the first quarter 2000 from $17.4 million during
the first quarter 1999. The dollar increase in cost of sales primarily was due
to increased sales volume partially offset by the closing of the Bertucci's
restaurants, most of which closed during 1999. Expressed as a percentage of net
sales, overall cost of sales decreased to 26.2% during the first quarter 2000
from 27.5% during the first quarter 1999. This percentage decrease was due to
several factors, namely, cost control measures at Bertucci's, a reduced cheese
price slightly offset by increased prices of beef and pork, the favorable impact
of closing the Bertucci's restaurants and menu price increases.
OPERATING EXPENSES. Operating expenses increased by $2.0 million, or
5.3%, to $39.0 million during the first quarter 2000 from $37.0 million during
the first quarter 1999. Expressed as a percentage of net sales, operating
expenses decreased to 58.1% in the first quarter 2000 from 58.7% during the
first quarter 1999. The dollar increase in operating expenses primarily was due
to an increase in advertising expense and from the additional Chili's and On The
Border restaurants ("Brinker concept restaurants") but partially offset by the
closing of the Bertucci's restaurants. Furthermore, the dollar increase was
partially because of increased hourly labor costs driven by a tight labor market
that was a result of low unemployment and mandated state minimum wage increases.
The percentage decrease primarily was attributable to increased efficiency at
the restaurants as well as menu price increases.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative
expenses increased by approximately $800,000, or 21.7%, to $4.5 million during
the first quarter 2000 from $3.7 million during the first quarter 1999. The
dollar increase in general and administrative expenses was due to rent
associated with the new corporate office, higher costs of staffing new
positions, higher incentive payout accruals based on improved performance,
higher professional fees and one-time start-up costs of a new point of sale
system for Bertucci's. Expressed as a percentage of net sales, general and
administrative costs increased to 6.7% during the first quarter 2000 from 5.9%
during the first quarter 1999. The increase was attributable to the
aforementioned dollar increases.
<PAGE>
DEFERRED RENT, DEPRECIATION, AMORTIZATION AND PREOPENING EXPENSES.
Deferred rent, depreciation, amortization and preopening expenses increased by
approximately $300,000 or 7.0%, to $4.5 million during the first quarter 2000
from $4.2 million during the first quarter 1999. The increase was primarily due
to additional depreciation on new restaurant development as well as capital
improvements made to existing restaurants in 1999. Preopening costs of
approximately $375,000 in the first quarter 2000 were almost $115,000 favorable
to the approximate $490,000 expensed in the first quarter 1999.
INTEREST EXPENSE. Interest expense increased by approximately $300,000
to $3.7 million during the first quarter 2000 from $3.4 million during the first
quarter 1999. This increase was primarily attributable to approximately $10.4
million of additional mortgage loan financing for new restaurant development.
Interest was approximately $2.7 million on the Senior Notes, $912,000 on the
mortgage loans and $82,000 on the Company's revolving credit facility, during
the first quarter 2000.
INCOME TAXES. The effective income tax benefit rate decreased to 32.4%
during the first quarter 2000 from 36.4% during the first quarter 1999. The
difference in rate was mainly due to timing differences in estimated taxes
during 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company has historically met its capital expenditures and working
capital needs through a combination of operating cash flow, mortgage loan
financing and borrowing under the Company's revolving credit facility, which
provides for borrowings of up to $20.0 million.
Net cash flows used by operating activities were $3.2 million for the
first quarter 2000 or $2.7 million more than the $504,000 used during the first
quarter 1999. A primary reason for the change was a decrease in accrued expenses
of approximately $6.3 million during the first quarter this year versus a
decrease of approximately $4.5 million during the first quarter last year. The
change was due mainly to reductions of deferred compensation accruals, accrued
bonus and accrued exit costs associated with closed restaurants. In addition,
the Company showed a change in accounts payable to account for most of the
remaining variance.
The Company's capital expenditures decreased by $1.3 million to $3.6
million for the first quarter 2000 compared to $4.9 million of capital
expenditures for the first quarter 1999. The decrease in capital expenditures
was primarily due to less new construction of restaurants (approximately
$600,000 variance) and a change in accounting principle whereby the company
accounted for almost $700,000 of preopening costs in capital expenditures during
the first quarter 1999 but none during the first quarter 2000. The Company
received almost $1.4 million of proceeds from the sale of five previously closed
Bertucci's restaurants in the first quarter 2000 as a result of adopting the new
accounting required for preopening costs.
As of March 29, 2000, the Company had approximately $140.2 million in
consolidated indebtedness, including $100.0 million of indebtedness pursuant to
the Senior Notes, $40.1 million of mortgage loan financing and $0.1 million of
capital lease obligations. Significant liquidity demands will arise from debt
service on the Senior Notes, the mortgage loans and borrowings under the Senior
Bank Facility.
<PAGE>
The Company believes that the cash flow generated from its operations,
together with available borrowings under the Senior Bank Facility and mortgage
loan financing and similar secured indebtedness, should be sufficient to fund
its debt service requirements, lease obligations, current expected capital
expenditures and other operating expenses for the next twelve months. The Senior
Bank Facility provides the Company with available borrowing up to an aggregate
amount of $20.0 million. As of March 29, 2000, there were no borrowings under
the Senior Bank Facility. The Company's future operating performance and ability
to service or refinance the Senior Notes, mortgage loan financing, 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 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.
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 28, 2000 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
<PAGE>
of issuance of the debt facilities. Furthermore, the Company has no
exposure to specific risks related to derivatives or other "hedging" types of
financial instruments.
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
None
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
10.24 Second Amendment to the On The Border Restaurant Development Agreement
as of May 30, 1999 by and between Brinker International, Inc. and NERCO
as previously filed with Form 10-Q on May 15, 2000
10.25 Primary Distribution Agreement dated as of May 13, 1999 by and between
Maine's Paper & Food Service, Inc. and NERCO as previously filed with
Form 10-Q on May 15, 2000
10.26 NERCO Savings and Investment Plan dated as of April 29, 1999 as
previously filed with Form 10-Q on May 15, 2000
10.27 NE Restaurant Company, Inc. Executive Savings and Investment Plan dated
September 2, 1999 as previously filed with Form 10-Q on May 15, 2000
27.1 Financial Data Schedule as previously filed with Form 10-Q on May 15,
2000
(b) The Company did not file a Current Report on Form 8-K during the first
quarter 2000.
<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: May 31, 2000 BY: /S/ BENJAMIN R. JACOBSON
-----------------------------
Benjamin R. Jacobson
Chairman of the Board of Directors
Date: May 31, 2000 BY: /S/ DAVID J. NACE
------------------------------
David J. Nace
Chief Financial Officer and
Executive Vice President
<PAGE>
Exhibit Index
10.24 Second Amendment to the On The Border Restaurant Development Agreement
as of May 30, 1999 by and between Brinker International, Inc. and NERCO
as previously filed with Form 10-Q on May 15, 2000
10.25 Primary Distribution Agreement dated as of May 13, 1999 by and between
Maines Paper & Food Service, Inc. and NERCO as previously filed with
Form 10-Q on May 15, 2000
10.26 NERCO Savings and Investment Plan dated as of April 29, 1999 as
previously filed with Form 10-Q on May 15, 2000
10.27 NE Restaurant Company, Inc. Executive Savings and Investment Plan dated
September 2, 1999 as previously filed with Form 10-Q on May 15, 2000
27.1 Financial Data Schedule as previously filed with Form 10-Q on May 15,
2000
