<PAGE>
Exhibit 99.2
TACO CABANA, INC.
INDEX
<TABLE>
Page
Number
------
Financial Statements:
<S> <C>
Condensed Consolidated Balance Sheets at October 1, 2000
and January 2, 2000 2
Condensed Consolidated Statements of Operations for the Thirteen Weeks
Ended October 1, 2000 and October 3, 1999 3
Condensed Consolidated Statements of Operations for the Thirty-Nine Weeks
Ended October 1, 2000 and October 3, 1999 4
Condensed Consolidated Statements of Cash Flows for the Thirty-Nine Weeks
Ended October 1, 2000 and October 3, 1999 5
Notes to Condensed Consolidated Financial Statements 6
</TABLE>
1
<PAGE>
TACO CABANA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
January 2, October 1,
2000 2000
------ ------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................................. $ 1,303,000 $ 287,000
Receivables, net.......................................................... 507,000 817,000
Inventory................................................................. 2,413,000 2,603,000
Prepaid expenses.......................................................... 3,237,000 3,358,000
Federal income taxes receivable, net...................................... 200,000 328,000
Interest receivable....................................................... - 271,000
Deferred income taxes..................................................... - 135,000
--------------- ----------------
Total current assets...................................................... 7,660,000 7,799,000
PROPERTY AND EQUIPMENT, net............................................... 82,616,000 91,920,000
NOTES RECEIVABLE.......................................................... 278,000 256,000
INTANGIBLE ASSETS, net.................................................... 10,139,000 9,699,000
OTHER ASSETS.............................................................. 312,000 218,000
DEFERRED INCOME TAXES..................................................... - 7,549,000
--------------- ----------------
TOTAL ................................................................. $ 101,005,000 $ 117,441,000
=============== ================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable.......................................................... $ 4,962,000 $ 3,721,000
Accrued liabilities....................................................... 6,063,000 6,470,000
Current maturities of long-term debt and capital leases................... 5,251,000 4,331,000
Line of credit............................................................ 1,000,000 1,740,000
--------------- ----------------
Total current liabilities................................................. 17,276,000 16,262,000
LONG-TERM OBLIGATIONS, net of current maturities:
Capital leases............................................................ 1,901,000 1,706,000
Long-term debt............................................................ 31,756,000 35,856,000
--------------- ----------------
Total long-term obligations............................................... 33,657,000 37,562,000
ACQUISITION AND CLOSED RESTAURANT LIABILITIES............................. 6,330,000 5,288,000
DEFERRED LEASE PAYMENTS................................................... 744,000 798,000
STOCKHOLDERS' EQUITY:
Common stock.............................................................. 134,000 135,000
Additional paid-in capital................................................ 84,731,000 85,052,000
Retained deficit.......................................................... (30,427,000) (12,678,000)
Treasury stock, at cost (1,354,600 shares at January 2, 2000)
and 1,856,000 shares at October 1, 2000).............................. (11,440,000) (14,978,000)
---------------- ----------------
Total stockholders' equity............................................ 42,998,000 57,531,000
--------------- ----------------
TOTAL ................................................................. $ 101,005,000 $ 117,441,000
=============== ================
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
<PAGE>
TACO CABANA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Thirteen Weeks Ended
-------------------------------------
October 3, October 1,
1999 2000
------ ------
REVENUES:
<S> <C> <C>
Restaurant sales.......................................................... $ 41,359,000 $ 45,239,000
Franchise fees and other income........................................... 90,000 103,000
---------------- ---------------
Total revenues............................................................ 41,449,000 45,342,000
---------------- ---------------
COSTS AND EXPENSES:
Restaurant cost of sales.................................................. 12,539,000 13,654,000
Labor .................................................................. 11,245,000 12,529,000
Occupancy................................................................. 2,094,000 2,235,000
Other restaurant operating costs.......................................... 6,953,000 8,025,000
General and administrative................................................ 1,915,000 1,935,000
Depreciation and amortization............................................. 2,235,000 2,280,000
Restaurant opening costs.................................................. 227,000 303,000
---------------- ---------------
Total costs and expenses.................................................. 37,208,000 40,961,000
---------------- ---------------
INCOME FROM OPERATIONS.................................................... 4,241,000 4,381,000
---------------- ---------------
INTEREST EXPENSE, NET..................................................... (586,000) (645,000)
---------------- ---------------
INCOME BEFORE INCOME TAXES................................................ 3,655,000 3,736,000
INCOME TAX BENEFIT, NET................................................... - 8,500,000
---------------- ---------------
NET INCOME................................................................ $ 3,655,000 $ 12,236,000
================ ===============
BASIC EARNINGS PER SHARE.................................................. $ 0.27 $ 1.05
================ ===============
BASIC WEIGHTED SHARES OUTSTANDING......................................... 13,292,151 11,621,468
================ ===============
DILUTED EARNINGS PER SHARE................................................ $ 0.27 $ 1.05
================ ===============
DILUTED WEIGHTED SHARES OUTSTANDING....................................... 13,776,090 11,670,010
================ ===============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
<PAGE>
TACO CABANA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Thirty-Nine Weeks Ended
-------------------------------------
October 3, October 1,
1999 2000
------ ------
REVENUES:
<S> <C> <C>
Restaurant sales.......................................................... $ 119,516,000 $ 129,704,000
Franchise fees and other income........................................... 260,000 283,000
---------------- ---------------
Total revenues............................................................ 119,776,000 129,987,000
---------------- ---------------
COSTS AND EXPENSES:
Restaurant cost of sales.................................................. 35,975,000 38,626,000
Labor .................................................................. 32,785,000 35,749,000
Occupancy................................................................. 6,167,000 6,566,000
Other restaurant operating costs.......................................... 19,853,000 22,309,000
General and administrative................................................ 5,876,000 6,463,000
Depreciation and amortization............................................. 6,471,000 6,773,000
Restaurant opening costs.................................................. 671,000 754,000
---------------- ---------------
Total costs and expenses.................................................. 107,798,000 117,240,000
---------------- ---------------
INCOME FROM OPERATIONS.................................................... 11,978,000 12,747,000
---------------- ---------------
INTEREST EXPENSE, NET..................................................... (1,702,000) (2,288,000)
---------------- ---------------
INCOME BEFORE INCOME TAXES................................................ 10,276,000 10,459,000
INCOME TAX BENEFIT, NET................................................... - 7,290,000
---------------- ---------------
NET INCOME................................................................ $ 10,276,000 $ 17,749,000
================ ===============
BASIC EARNINGS PER SHARE.................................................... $ 0.77 $ 1.52
=============== ==============
BASIC WEIGHTED SHARES OUTSTANDING......................................... 13,378,942 11,658,816
=============== ==============
DILUTED EARNINGS PER SHARE................................................ $ 0.75 $ 1.51
=============== ==============
DILUTED WEIGHTED SHARES OUTSTANDING....................................... 13,760,243 11,771,167
=============== ==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
TACO CABANA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
For the Thirty-Nine Weeks Ended
---------------------------------
October 3, October 1,
1999 2000
------ ------
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net income .............................................................. $ 10,276,000 $ 17,749,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization..................................... 6,471,000 6,773,000
Deferred income taxes............................................. - (7,684,000)
Changes in operating working capital items........................ (1,309,000) (2,471,000)
-------------- --------------
Net cash provided by operating activities................................. 15,438,000 14,367,000
-------------- --------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment........................................ (17,624,000) (15,742,000)
Proceeds from the sale of property and equipment.......................... 1,337,000 -
-------------- --------------
Net cash used for investing activities.................................... (16,287,000) (15,742,000)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of long-term debt.............................. 4,377,000 3,160,000
(Payments) proceeds on revolving line of credit........................... (1,395,000) 740,000
Principal payments under capital leases................................... (159,000) (176,000)
Purchase of treasury shares............................................... (1,579,000) (3,538,000)
Exercise of stock options................................................. 523,000 173,000
-------------- --------------
Net cash provided by financing activities................................. 1,767,000 359,000
-------------- --------------
NET INCREASE (DECREASE) IN CASH........................................... 918,000 (1,016,000)
CASH AND CASH EQUIVALENTS, beginning of period............................ 719,000 1,303,000
-------------- --------------
CASH AND CASH EQUIVALENTS, end of period.................................. $ 1,637,000 $ 287,000
============== ==============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
TACO CABANA, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Basis of Presentation
Principles of Consolidation - The consolidated financial statements include all
accounts of Taco Cabana, Inc. and its wholly-owned subsidiaries (the Company).
All significant intercompany balances and transactions have been eliminated.
The unaudited Condensed Consolidated Financial Statements include all
adjustments, consisting of normal, recurring adjustments and accruals, which the
Company considers necessary for fair presentation of financial position and the
results of operations for the periods presented. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted. The interim financial statements should be read in conjunction with the
Company's Annual Report on Form 10-K for the year ended January 2, 2000.
2. Stockholders' Equity
The Company's Board of Directors previously approved plans to repurchase up to a
total of 4,500,000 shares of the Company's Common Stock. Through the first
quarter of 1999, the Company had repurchased 2,585,000 shares with an aggregate
cost of $13.9 million. During the first quarter of 1999, the Company retired all
shares held as treasury shares. The cost of retired shares in excess of par
value has been charged to additional paid in capital. Subsequent to the first
quarter of 1999, the Company repurchased an additional 1,865,000 shares at an
aggregate cost of $15.0 million, which as of October 1, 2000 were held as
treasury stock.
3. Earnings per Share
Basic earnings per share was computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding for the
reporting period. Diluted earnings per share reflects the potential dilution
that could occur if securities or other contracts to issue common stock were
exercised or converted into common stock. Outstanding stock options issued by
the Company represent the only dilutive effect reflected in diluted weighted
average shares.
6
<PAGE>
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
13 Weeks Ended 39 Weeks Ended
---------------- ----------------
October 3, October 1, October 3, October 1,
1999 2000 1999 2000
------ ------ ------ ------
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings
per share: Net income....................... $ 3,655,000 $ 12,236,000 $ 10,276,000 $ 17,749,000
Denominator for basic earnings per share:
Weighted-average shares................... 13,392,151 11,621,468 13,378,942 11,658,816
Effect of dilutive securities:
Employee stock options...................... 383,939 48,542 381,301 112,351
-------------- --------------- -------------- ---------------
Denominator for diluted earnings per share:
Adjusted weighted-average and assumed
conversions............................. 13,776,090 11,670,010 13,760,243 11,771,167
============== =============== ============== ===============
Basic earnings per share.................... $ 0.27 $ 1.05 $ 0.77 $ 1.52
============== =============== ============== ===============
Diluted earnings per share.................. $ 0.27 $ 1.05 $ 0.75 $ 1.51
============== =============== ============== ===============
</TABLE>
4. Income Tax Benefit
The amount recorded during 2000 reflects the reversal of a valuation allowance
established in 1997 on the Company's net deferred tax asset, net of current year
federal income tax expense. An audit by the Internal Revenue Service of the 1994
through 1996 tax years was completed during the third quarter of 2000.
Management expects a refund from this audit of approximately $717,000 and
interest of approximately $271,000. A receivable for the anticipated refund was
recorded during the third quarter of 2000. In addition, management anticipates
that upon the completion of an audit by the Internal Revenue Service of the 1997
tax year a refund of approximately $1.6 million could be received, although
there is no assurance that such amount will be received until the audit is
completed. No benefit or provision has been recorded in the financial statements
for the anticipated resolution of this examination.
5. Supplemental Disclosure of Cash Flow Information
<TABLE>
<CAPTION>
Thirty-Nine Weeks Ended
-----------------------
October 3, 1999 October 1, 2000
--------------- ---------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash paid for interest................................... $ 1,656,000 $2,804,000
Interest capitalized on construction costs............... 107,000 205,000
Cash paid for income taxes............................... - 345,000
</TABLE>
7
<PAGE>
6. New Accounting Pronouncements
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities." SFAS No. 133, as
amended by SFAS No. 137 and SFAS No. 138, establishes accounting and reporting
standards for derivative instruments and hedging activities. It requires that an
entity recognize all derivatives as either assets or liabilities in the
statement of financial position and measure those instruments at fair value.
This statement is effective for the Company beginning in the first quarter of
fiscal year 2001. The Company believes that the adoption of the Statements will
not have a material effect on its financial statements, based on current
activities.
In fiscal 2000, the SEC issued Staff Accounting Bulletin 101, "Recognition"
("SAB No. 101"). SAB No. 101 addresses issues related to revenue recognition and
does not impact the Company's consolidated results of operations, financial
position or cash flows.
8
