UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K
[X] Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [Fee Required]
For the fiscal year ended June 30, 1996
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[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 [No Fee Required]
For the transition period from to
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Commission file Number 0-9037
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Piccadilly Cafeterias, Inc.
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(Exact name of registrant as specified in its charter)
Louisiana 72-0604977
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3232 Sherwood Forest Blvd., Baton Rouge, Louisiana 70816
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (504) 293-9440
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Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
Common Stock New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act:
None
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(Title of class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form
10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
the registrant based on the closing price of such stock on September 16,
1996 was $80,786,123.
The number of shares outstanding of Common Stock, without par value, as
of September 16, 1996 was 10,503,368.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Annual Report to Shareholders for the fiscal year ended
June 30, 1996 are incorporated by reference into Part II.
Portions of the definitive proxy statement for the 1996 annual meeting
of shareholders are incorporated by reference into Part III.
PART I
Item 1. Business
General Development of Business
Piccadilly Cafeterias, Inc. was incorporated under the laws of
Louisiana in 1965 and is the successor to various predecessor
corporations and partnerships which operated "Piccadilly" cafeterias
beginning with the acquisition of the first unit in 1944. Except where
the context otherwise indicates, the terms "Company", "Piccadilly", and
"Registrant" as used herein refer to Piccadilly Cafeterias, Inc.
At June 30, 1996, the Company operated 130 cafeterias in 17
states. Of these, 58 were in suburban malls, 22 were in suburban strip
centers, and 50 were free-standing suburban locations. Two new
cafeterias are expected to be opened during the year ending June 30,
1997. The Company expects to close two cafeterias during the year
ending June 30, 1997. The following table sets forth certain
information regarding development of the Company's cafeteria chain
during the five years ended June 30, 1996:
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Year Ended June 30 1996 1995 1994 1993 1992
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Net sales per unit (in thousands)(A) $2,058 $1,990 $1,916 $1,868 $1,880
Units opened 1 5 3 1 3
Units closed 3 3 4 11 5
Units open at year-end 130 132 130 131 141
Total customer volume (in thousands) 49,629 48,274 48,098 50,564 54,298
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(A) Excludes cafeterias opened or closed during period.
-----------------------------------
At June 30, 1996 the Company operated eight "Ralph and Kacoo's"
seafood restaurants in Louisiana, Alabama, Mississippi, and Texas. No
additional Ralph & Kacoo's seafood restaurants are expected to be opened
in the year ending June 30, 1997. One restaurant was closed in the
first quarter of the year ending June 30, 1997. The following table
sets forth certain information regarding the Company's "Ralph and
Kacoo's" seafood restaurant chain during the five years ended June 30,
1996:
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Year Ended June 30 1996 1995 1994 1993 1992
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Net sales per unit (in thousands) (A) $3,277 $3,394 $3,343 $3,362 $3,151
Units opened 0 1 0 0 1
Units closed 0 0 0 2 1
Units open at year-end 8 8 7 7 9
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(A) Excludes restaurants opened or closed during period.
-----------------------------------
Although the Company's operations are primarily in the southern,
southwestern, and western regions of the United States, the Company does
not consider its growth to be limited to such areas. Piccadilly
evaluates numerous potential expansion locations, focusing on
demographic data such as population densities, population profiles,
income levels, traffic counts, as well as the extent of competition.
The number of new cafeterias and restaurants that the Company can open
depends upon its ability to secure appropriate locations, generate
necessary financial resources, and develop personnel for expansion.
Cafeteria and Restaurant Operations
The Company's cafeterias seat from 250 to 450 customers each.
Each cafeteria unit offers a wide variety of food, at reasonable prices,
and with the convenience of cafeteria service, to a diverse luncheon and
dinner clientele. Cafeteria personnel cook and prepare from scratch
substantially all food served. All items are prepared from standardized
recipes. Menus are varied at the discretion of unit management in
response to local and seasonal food preferences.
Like most industry participants, the Company purchases foodstuffs
in small quantities from local and regional suppliers in order to better
assure freshness. As a result, inventory is kept relatively low;
average per-cafeteria-inventory at June 30, 1996 was $14,000.
Foodstuffs are typically purchased on 30-day credit terms and sold for
cash within such 30-day period, thereby favorably affecting cash flow.
Ralph & Kacoo's restaurants seat from 250 to 600 customers each.
These restaurants are full-service menu facilities. All of the food
served is cooked and prepared by the restaurant staff from standardized
recipes. Substantially all of the food, supplies, and other materials
required for the preparation of meals are supplied by the Company-owned
commissary.
The commissary, located in Baton Rouge, Louisiana, contains
approximately 26,500 square feet of restaurant food and supplies
storage. Seafood accounts for approximately 50% of inventory at the
commissary. In order to provide consistent quality, selection, and
price throughout the year, the commissary purchases in-season seafood in
quantities sufficient to supply the restaurants during periods when such
products would otherwise not be available at reasonable prices in the
marketplace. On the average, seafood inventory turns approximately once
every four months. Inventory maintained at the commissary at June 30,
1996, was approximately $2,455,000 while the average "Ralph and Kacoo's"
restaurant inventory level at year-end was approximately $44,700. The
commissary is not dependent upon a single supplier nor a small group of
suppliers.
Each cafeteria and restaurant is operated as a separate unit under
the control of a manager and associate manager who have responsibility
for virtually all aspects of the unit's business, including purchasing,
food preparation, and employee matters. Thirteen district managers,
under the supervision of one general manager, and the chief executive
officer oversee and regularly inspect cafeteria operations. Two district
managers, under the supervision of a general manager and the chief
executive officer, oversee restaurant operations. The Company employed
approximately 8,500 persons at June 30, 1996, of whom all but 63
corporate headquarters employees worked at Piccadilly's 138 cafeteria
and restaurant locations and its commissary.
The food service industry is highly competitive. Competitive
factors include food quality and variety, price, customer service,
location, the number and proximity of competitors, decor, and public
reputation. The Company considers its principal competitors to be other
cafeterias, casual dining venues, and fast-food operations. Like other
food service operations, the Company is attuned to changes in both
consumer preferences for food and habits in patronizing eating
establishments.
Customer volume at established cafeterias and sales volume at
established restaurants are generally higher in the Company's second
fiscal quarter and lower in the third quarter. These patterns reflect
the general seasonal fluctuations of the retail industry.
Cost of sales is affected by statutory minimum wage rates. The
Company's operations are subject to federal, state, and local laws and
regulations relating to environmental protection, including regulation
of discharges into the air and water, and relating to safety and labor,
including the Federal Occupational Safety and Health Act and wage and
hour laws. Additionally, the Company's operations are regulated
pursuant to state and local sanitation and public health laws.
Operating units utilize electricity and natural gas, which are subject
to various federal and state regulations concerning the allocation of
energy. The Company's operating costs have been and will continue to be
affected by increases in the cost of energy.
Item 2. Properties
All but 24 of the cafeterias and restaurants operated by the
Company at June 30, 1996, were operated on premises held under long-term
leases with differing provisions and expiration dates. The 24
cafeterias and restaurants not operated on premises held under long-term
leases are owned. Leases provide for monthly rentals, typically
computed on the basis of a fixed amount plus a percentage of sales.
Most leases contain provisions permitting the Company to renew for one
or more specified terms. These leases are scheduled to expire, exclusive
of renewal provisions, as follows:
------------------------------------
Five-year
periods Units Units
ending June 30 Operating Closed
2001 44 1
2006 32 3
2011 32 9
2016 6 2
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Total 114 15
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Reference is made to Note 4 of the Notes to Consolidated Financial
Statements for certain additional information regarding the Company's
leases.
All cafeterias and restaurants have been constructed or remodeled
since 1984 and all cafeteria equipment is maintained and modernized as
necessary to maintain appearance and utility. For a discussion of the
Company's current remodeling program see Management's Discussion and
Analysis of Financial Condition and Results of Operations on pages eight
and nine of the Annual Shareholders Report for the year ended June 30,
1996. The list below provides a general geographic review of the
locations of the Company's cafeterias and restaurants at June 30, 1996:
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State Cafeterias Restaurants
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Alabama 6 1
Arizona 3
California 1
Florida 22
Georgia 18
Illinois 1
Kansas 1
Kentucky 1
Louisiana 26 5
Mississippi 3 1
Missouri 3
North Carolina 5
Oklahoma 3
South Carolina 2
Tennessee 11
Texas 17 1
Virginia 7
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The Company utilizes generally standardized building
configurations for its new cafeterias and restaurants in terms of
seating, food display, preparation areas, and other factors and attempts
to build out floor space to maximize efficient use of available space.
The Company recently completed the design of a new cafeteria prototype.
The prototype has approximately 6,000 square feet compared to the
Company's 10,000 square feet traditional cafeteria. This smaller
cafeteria allows the Company to access a broader range of markets. Both
cafeterias to be opened in fiscal year 1997 will be of the new prototype
design.
The Company continues to pursue strategies to increase the
capacity and utilization of its cafeterias. Although most of the
Company's cafeterias are single-line, 31 of the Company's cafeterias are
double-line which provide increased capacity at peak hours. The
Company does not currently intend to convert any of its single-line
cafeterias to double-line.
Piccadilly's corporate headquarters occupy approximately two-
thirds of a Company-owned 45,000 square foot office building completed
in 1974 and located on a Company-owned tract comprising approximately
five acres in Baton Rouge, Louisiana. The remainder of the building is
leased to commercial tenants.
Item 3. Legal Proceedings
The Company is not a party to and does not have any property that
is the subject of any legal proceedings pending or, to the knowledge of
management, threatened, other than ordinary routine litigation
incidental to its business and proceedings which are material or as to
which management believes the Company does not have adequate insurance.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 4(a). Executive Officers of the Registrant
Executive officers are elected annually by the Board of Directors and
hold office until a successor is duly elected. The names and positions
of executive officers of the Registrant, together with a brief
description of the business experience of each such person during the
past five years, is set forth below.
W. Scott Bozzell, Vice President and Controller, age 33, has held such
positions since July, 1996. From May 1992 to July 1996 he was Vice
President and Assistant Controller. Prior to that he was Assistant
Controller.
Frederick E. Fuchs Jr., Executive Vice President and Director of Real
Estate, age 49, has held such positions since June 1986.
Jere W. Goldsmith Jr., Executive Vice President and Director of
Training, age 50, has held such positions since July 1995. Mr.
Goldsmith previously served in this capacity from May 1987 to February
1992. From February 1992 to July 1995 he was Executive Vice President
and Region Manager.
J. Fred Johnson, age 45, Executive Vice President, Treasurer, and Chief
Financial Officer, has held such positions since November 1995. From
August 1985 through October 1995 he was with Graphic Industries, Inc., a
printing company, in various capacities, including Chief Financial
Officer and Treasurer.
Ronald A. LaBorde, age 40, President and Chief Executive Officer, has
held such positions since June 1995. From January 1992 to May 1995 he
was Executive Vice President, Treasurer and Chief Financial Officer.
Prior to that he was Executive Vice President, Secretary, and
Controller.
D. Thomas Landry, Executive Vice President and Director of Maintenance,
Construction and Design, age 44, has held such positions since May 1992.
From July 1990 to May 1992 he was Vice President and Director of
Maintenance.
Robert P. Listen, Executive Vice President and Director of Technical
Services, age 48, has held such positions since December 1992. From
July 1987 to November 1992 he was Executive Vice President and District
Manager.
Mark L. Mestayer, Executive Vice President, Secretary, and Director of
Finance, age 38, has held such positions since July 1996. From May 1992
to July 1996, he was Executive Vice President, Secretary and Controller.
From January 1992 to May 1992, he was Vice President and Controller.
Prior to that, he was Vice President and Controller, Ralph & Kacoo's.
Joseph S. Polito, Executive Vice President and General Manager, age 54,
has held such positions since July 1995. From October 1992 to July
1995, he was Executive Vice President and Director of Training. From
1987 to October 1992 he was Executive Vice President and District
Manager.
Patrick R. Prudhomme, Executive Vice President and Region Manager, age
44, has held such positions since February 1992. From January 1989 to
February 1992 he was Vice President and District Manager, Ralph &
Kacoo's.
C. Warriner Siddle, Executive Vice President and Director of
Development, age 45, has held such positions since July 1995. From
February 1992 to July 1995 he was Executive Vice President and Region
Manager. From October 1984 to February 1992 he was Executive Vice
President and District Manager.
Donovan B. Touchet, Executive Vice President and Director of Data
Processing, age 47, has held such positions since June 1988.
Brian G. Von Gruben, Executive Vice President and Director of
Administrative Services, age 48, has held such positions since May 1987.
PART II
Item 5. Market for the Registrant's Common Stock and Related Security
Holder Matters
Information regarding Common Stock market prices and dividends, on
page one of the Annual Shareholders Report for the year ended June 30,
1996, is incorporated herein by reference.
Item 6. Selected Financial Data
"Selected Financial Data", on the inside cover of the Annual
Shareholders Report for the year ended June 30, 1996, is incorporated
herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Management's Discussion and Analysis of Financial Condition and Results
of Operations, on pages eight and nine of the Annual Shareholders Report
for the year ended June 30, 1996, is incorporated herein by reference.
Item 8. Financial Statements and Supplementary Data
The following consolidated financial statements and supplementary data,
included on pages 10 through 18 of the Annual Shareholders Report for
the year ended June 30, 1996, are incorporated herein by reference:
Consolidated balance sheets as of June 30, 1996 and 1995
Consolidated statements of income for the fiscal years ended June
30, 1996, 1995 and 1994
Consolidated statements of changes in shareholders' equity for the
fiscal years ended June 30, 1996, 1995 and 1994
Consolidated statements of cash flows for the fiscal years ended
June 30, 1996, 1995 and 1994
Notes to consolidated financial statements
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
None.
PART III
In accordance with General Instruction G (3) to Form 10-K, Items 10, 11,
12, and 13 have been omitted since the Company will file with the
Commission a definitive proxy statement complying with Regulation 14A
relating to its 1996 annual meeting and involving the election of
directors not later than 120 days after the close of its fiscal year.
The Company incorporates by reference the information in response to
such items set forth in its definitive proxy statement.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) (1) Financial Statements--The following are incorporated herein by
reference in this Annual Report on Form 10-K from the indicated
pages of the Registrant's Annual Shareholders Report for the year
ended June 30, 1996:
Annual
Shareholders
Description Report Page
----------- -----------
Consolidated balance sheets as of June 30, 1996 and 1995 10
Consolidated statements of income for the fiscal years
ended June 30, 1996, 1995 and 1994 11
Consolidated statements of changes in shareholders'
equity for the fiscal years ended June 30, 1996, 1995
and 1994 11
Consolidated statements of cash flows for the fiscal
years ended June 30, 1996, 1995 and 1994 12
Notes to consolidated financial statements 13-18
Report of independent auditors 18
(2) Schedules--The following consolidated schedules and
information are included in this annual report on Form 10-K
on the pages indicated. All other schedules for which
provision is made in the applicable accounting regulation of
the Securities and Exchange Commission are not required
under the related instructions or are inapplicable, and
therefore have been omitted.
Annual Report
on Form 10-K
Description Page
----------- ----
Schedule II--Valuation and qualifying accounts 11
(3) Listing of Exhibits -- See sub-section (c) below.
(b) No reports on Form 8-K were filed during the last quarter of the
year covered by this report.
(c) EXHIBITS
3. (a) Articles of Incorporation of the Company <F1>, as amended on
September 14,1987 <F2> as amended on September 27,1988 <F3>,
and as amended on September 28, 1989 <F4>
(b) By-laws of the Company, as amended through June 19,1995 <F5>.
4. (a) Piccadilly Cafeterias, Inc. Stockholder Rights Agreement <F6>.
(b) Note Agreement, dated as of January 31, 1989, relating to
$30 million principal amount of 10.15% Senior Notes due
January 31, 1999 <F7>
10. (a) Piccadilly Cafeteria, Inc. Pension Plan, as amended, dated
May 3, 1993 <F8>.
(b) Piccadilly Cafeterias, Inc. Employee Stock Purchase
Plan <F9> , as amended on September 27, 1991 <F10>.
(c) Piccadilly Cafeterias, Inc. 1988 Stock Option Plan <F11>,
as amended on August 2, 1993 <F8>
(d) Form of Management Continuity Agreement, effective March 27,
1995, unless otherwise indicated, between Piccadilly Cafeterias,
Inc. and each of Messrs. LaBorde, Bozzell, Fuchs, Goldsmith,
Johnson (November 16, 1995), Landry, Listen, Mestayer, Polito,
Prudhomme, Siddle, Touchet, and Von Gruben <F5>.
(e) Form of Director Indemnity Agreement, effective April 27,
1995, unless otherwise indicated, other between Piccadilly
Cafeterias, Inc. and each of Messrs. LaBorde, Francis,
Guyton (July 1, 1996), Murrill, Quick, Redman (September 25,
1995), Ross, Simmons, Smith and Stein and Ms. Hamilton <F5>.
(f) Agreement between Piccadilly Cafeterias, Inc. and Ronald
A. LaBorde, effective June 26, 1995 <F5>.
(g) Form of Agreement, effective August 1, 1995, between
Piccadilly Cafeterias, Inc. and each of Malcolm T. Stein,
Jr. and James E. Durham, Jr. <F5>.
13. The Registrant's Annual Report to Shareholders for the fiscal year
ended June 30, 1996.
21. List of Subsidiaries of the Registrant
23. Consent of Independent Auditors
27. Financial Data Schedule
__________________________
<F1> Incorporated by reference from the Registrant's Registration
Statement on Form S-1 (Registration No. 2-63249) filed with the
Commission on December 19, 1978.
<F2> Incorporated by reference from the Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1987.
<F3> Incorporated by reference from the Registrant's Annual Report on
Form 10-K for the fiscal year ended June 30, 1988.
<F4> Incorporated by reference from the Registrant's Annual Report on
Form 10-K, as amended, for the fiscal year ended June 30, 1989.
<F5> Incorporated by reference from the Registrant's Annual Report
on Form 10-K for the fiscal year ended June 30, 1995.
<F6> Incorporated by reference from the Company's Current Report on
Form 8-K filed with the Commission on August 22, 1988.
<F7> Incorporated by reference from the Company's Quarterly Report on
Form 10-Q for the fiscal quarter ended December 31, 1988.
<F8> Incorporated by reference from the Company's Annual Report on
Form 10-K, as amended, for the fiscal year ended June 30, 1993.
<F9> Incorporated by reference from the Registrant's Registration
Statement on Form S-8 (Registration No. 33-17737) filed with
the Commission on October 7, 1989.
<F10>Incorporated by reference from the Registrant's Annual Report on
Form 10-K, as amended, for the fiscal year ended June 30, 1991.
<F11>Incorporated by reference from the Registrant's Registration
Statement on Form S-8 (Registration No. 33-27793) filed with the
Commission on March 29, 1989.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Piccadilly Cafeterias, Inc.
------------------------------
(Registrant)
By:/s/ Ronald A. LaBorde
---------------------------
Ronald A. LaBorde
President and Chief
Executive Officer
Date: September 23, 1996
-------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
/s/ Norman C. Francis 9/23/96 /s/ Dale E. Redman 9/23/96
- --------------------------- ------- ------------------------- -------
Norman C. Francis, Director Date Dale E. Redman, Director Date
/s/ Robert P. Guyton 9/23/96 /s/ William D. Ross, Jr. 9/23/96
- --------------------------- ------- --------------------------- -------
Robert P. Guyton, Director Date William D. Ross, Jr., Date
Director
/s/Julia H. R. Hamilton 9/23/96 /s/ Edward M. Simmons, Sr. 9/23/96
- --------------------------- ------- --------------------------- -------
Julia H. R. Hamilton, Date Edward M. Simmons, Sr., Date
Director Director
/s/ Ronald A. LaBorde 9/23/96
- --------------------------- ------- --------------------------- -------
Ronald A. LaBorde, Date C. Ray Smith, Director Date
President, Chief Executive
Officer and Director
/s/ Paul W. Murrill 9/23/96 /s/ Malcolm T. Stein, Jr. 9/23/96
- --------------------------- ------- --------------------------- -------
Paul W. Murrill, Chairman Date Malcolm T. Stein, Jr., Date
of the Board Director
/s/ O.Q. Quick 9/23/96 /s/ J. Fred Johnson 9/23/96
- --------------------------- ------- ---------------------------- -------
O.Q. Quick, Director Date J. Fred Johnson Date
Executive Vice President,
Treasurer and Chief Financial
Officer (Principal Financial
Officer)
/s/ Mark L. Mestayer 9/19/96
- --------------------------- -------
Mark L. Mestayer, Secretary Date
and Director of Finance
(Principal Accounting
Officer)
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
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| COL. A | COL. B | COL. C | COL. D | COL. E |
- ----------------------------------------------------------------------------------------------------
| | | Additions | | |
- ----------------------------------------------------------------------------------------------------
| | | | (2) | | |
| | | (1) |Charged to | | |
| |Balance at |Charged to | Other | | Balance at|
| |Beginning |costs and |Accounts- | Deduction-- | End of |
| Description |of Period |expenses |Describe | Desribe | Period |
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Reserves for Unit Closings:
Year ended June 30, 1996:
Property, plant & equipment
allowance $ 800,796 $ 3,726,958 $ 120,282 $ 4,407,472
Current liability 254,339 100,000 6,843(A) 347,496
Long-term liability 5,009,297 1,000,819 960,607(A) 5,049,509
----------- ----------- ----------- ------------
$ 6,064,432 $ 4,827,777 $ 1,087,732 $ 9,804,477
=========== =========== =========== ============
Year ended June 30, 1995:
Property, plant & equipment
allowance $ 1,356,659 $ 555,863(A)$ 800,796
Current liability 350,482 96,143(A) 254,339
Long-term liability 6,502,486 1,493,189 5,009,297
----------- ----------- ------------
$ 8,209,627 $ 2,145,195 $ 6,064,432
=========== =========== ============
Year ended June 30, 1994:
Property, plant & equipment
allowance $ 1,832,143 $ 475,484(A) $ 1,356,659
Current liability 499,647 149,165(A) 350,482
Long-term liability 7,804,739 1,302,253 6,502,486
----------- ----------- ------------
$10,136,529 $ 1,926,902 $ 8,209,627
=========== =========== ============
(A) Deductions are for the write-off of certain property, plant and equipment relating to units
closed and for the payment of other obligations (primarily rent) for those units closed and
for those units for which a provision for unit closing was recorded during the year ended
June 30, 1992.
</TABLE>
EXHIBIT 13(a)
<TABLE>
<CAPTION>
Selected Financial Data
Piccadilly Cafeterias, Inc.
(Amounts in thousands--except per share data and number of employees)
- ----------------------------------------------------------------------------------------
Year Ended June 30 1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net sales $300,550 $287,848 $276,223 $271,460 $295,114
Cost of sales 171,224 163,830 155,411 158,777 166,900
Other operating expense 101,459 97,213 92,250 88,676 99,892
Net income (loss) 385 (A) 4,051 7,047 4,825 (24,586)(B)
Per share data:
Net income (loss) .04 (A) .40 .70 .49 (2.51)(B)
Cash dividends .48 .48 .48 .48 .48
Total assets 148,280 65,121 154,773 152,618 152,906
Cash and cash equivalents --- --- --- 14,094 9,438
Long-term debt 25,700 18,000 24,000 36,000 39,000
Shareholders' equity 73,293 76,445 75,874 72,192 71,018
Operating cash flow 21,404 20,823 23,426 16,782 23,675
Number of employees 8,500 7,600 7,300 7,600 8,700
</TABLE>
(A) Includes $5,830,000 ($.56 per share) for the after-tax effect of the
write-down of long-lived assets in accordance with SFAS 121 (See Note 2
for further discussion).
(B) Includes $30,904,000 ($3.14 per share) for the after-tax effect of
the write-off of intangible assets related to the Ralph & Kacoo's
acquisition on December 2, 1988 and estimated disposition costs of 15
cafeteria and restaurant operating units.
___________________________________
EXHIBIT 13(b)
Stock Information
Piccadilly Cafeterias, Inc.
The Company's Common Stock is traded on the New York Stock Exchange
under the symbol "PIC." The following table sets forth the high and low
sales prices for each quarter within the last two fiscal years. As of
July 29, 1996 there were approximately 2,716 record holders of the
Company's Common Stock.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Per Share Per Share
Quarter High Low Cash Quarter High Low Cash
Dividends Dividends
- ------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Fiscal year ended 1st $ 8.88 $ 7.75 $.12 Fiscal year ended 1st $10.25 $ 7.75 $.12
June 30, 1996 2nd 10.88 7.88 .12 June 30, 1995 2nd 8.50 7.50 .12
3rd 9.88 8.75 .12 3rd 9.38 7.63 .12
4th 10.63 9.38 .12 4th 9.63 8.50 .12
___________________________________
</TABLE>
EXHIBIT 13(c)
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Piccadilly Cafeterias, Inc.
Liquidity and Capital Resources
During 1996, cash generated from operations of $21,348,000 combined with cash
from available lines of credit were used primarily to fund $5,006,000 of net
capital expenditures, $13,320,000 of debt reductions, and $4,979,000 of
dividends. Working capital increased $19,021,000 as the Company restructured
its $21,020,000 short-term obligations at March 31, 1996 into long-term
facilities. These facilities include line-of-credit arrangements with two banks
for which up to $38,500,000 can be borrowed.
For 1997, total capital expenditures are expected to approximate $8,100,000
and will include construction of two new cafeteria units and minor
remodels to 18 existing cafeterias and restaurants. Also during 1997, $6,000,000
of the 10.15% senior notes will become due. Management anticipates that cash
generated from operations will be sufficient to fund capital expenditures,
dividends, and maturing debt for 1997.
Results of Operations
FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995. Same-store customer counts
increased in eleven of the twelve months of 1996. These increases reverse trends
of same-store customer count decreases in 1995. Management believes that
these customer count gains were accomplished with enhanced customer service
and expanded menu selections.
Cafeteria sales for 1996 increased $9,685,000, or 3.7%, from 1995. Same-store
sales increased 3.4% as same-store customer counts increased 2.3%. The customer
check average increased 1.0% from $5.38 for 1995 to $5.43 for 1996.
Ralph & Kacoo's restaurant sales increased $2,924,000, or 11.6%, resulting
primarily from the opening of one restaurant during the fourth quarter of
1995. Same-store sales decreased 3.4%.
General and administrative expense for the first quarter of fiscal 1996
includes a $1,300,000 severance charge resulting from the elimination of
approximately 100 jobs.
During 1996 and 1995, operating profits (net sales less cost of sales and other
operating expenses) were 9.3% of net sales. Food costs as a percentage of sales
increased 0.1% and labor costs as a percentage of sales were unchanged
compared to the prior year.
Three cafeteria units were closed in 1996 while one unit was opened.
Other expense (income) for 1996 improved $1,474,000 compared to 1995,
primarily as a result of the 1995 non-cash write-offs related to the
Company's "deluxe" remodeling program.
General and administrative expense (net of severance costs included in both
periods) as a percentage of sales improved from 4.7% in 1995 to 3.8% in
1996. This decrease is attributable to reduced corporate expenses.
Interest expense increased $229,000 in 1996. The Company recorded an additional
$1,528,000 charge for interest associated with the anticipated outcome of open
examinations of the Company's tax returns for 1987 through 1992 by the Internal
Revenue Service. This reserve relates primarily to deferrals in the timing of
certain deductions taken by the Company including amortization of the
intangible assets acquired in the purchase of Ralph & Kacoo's in 1989.
The Company continues to contest certain of these adjustments. However, based
on the results of recent negotiations with the Internal Revenue Service, the
Company has determined that some adjustment to the timing of deductions
will be required in addition to that provided for in 1995.
During the fourth quarter of 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 (SFAS 121), "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." The initial,
non-cash charge in connection with the adoption of SFAS 121 was $9,404,000
($5,830,000 after-tax or $.56 per share). Twelve of the Company's operating
units were impacted by SFAS 121. As the initial charge was based upon estimated
cash flow forecasts requiring considerable management judgment, future
charges, though not of the magnitude of the initial charge, are reasonably
possible. These charges will generally arise as estimates used in the
evaluation and measurement of impairment upon adoption of SFAS 121 are refined
based upon new information or as a result of future events or changes in
circumstances that cause operating units to be impaired.
As of June 30, 1996, the Company had eight properties related to closed units
for which it has continuing rent obligations not offset by sublease
arrangements. Several of these properties are under varying stages of
sublease negotiation. Management will continue to pursue disposition of those
properties at terms favorable to the Company.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994. Cafeteria sales for 1995
increased $9,807,000, or 3.9%, from 1994. The customer check average increased
3.3% from $5.22 for 1994 to $5.38 for 1995, primarily due to price
increases. Same-store customer counts decreased 1.0%.
Ralph & Kacoo's restaurant sales increased $1,818,000, or 7.8%, resulting
primarily from the opening of one restaurant during the fourth quarter
of 1995. Same-store sales increased 1.5%.
During 1995, operating profits (net sales less cost of sales and other
operating expenses) deteriorated from 10.3% of net sales to 9.3% of net sales.
Food costs and labor costs as a percentage of sales increased 0.2% and
0.4%, respectively. Other operating expenses increased from 33.4% of net
sales for 1994 to 33.8% of net sales for 1995.
Five cafeteria units were opened in 1995 while three cafeteria units were
closed. All of these closed units had substantially reached the end of their
respective lease terms.
Other expense for 1995 increased $916,000 compared to 1994. During 1995,
non-cash write-offs related to the Company's "deluxe" remodeling program
totaled $1,393,000.
General and administrative expense included a charge for severance benefits
totaling $361,000 ($220,000 after-tax or $.02 per share).
Interest expense increased $1,935,000 from $3,089,000 in 1994 to $5,024,000
in 1995. The increase was partially attributable to increased short-term
borrowings arising from the Company's level of capital expenditures.
Additionally, the Company recorded a $1,200,000 charge to establish a reserve
for interest associated with the anticipated outcomes of open examinations of
the Company's tax returns for 1987 through 1992 by the Internal Revenue
Service.
KNOWN TRENDS OR UNCERTAINTIES. The Company believes that the minimum wage
legislation recently adopted will not have a material impact on the
Company's earnings and the resulting increase in costs will be offset through
selling price increases.
Most of the Company's operating costs are subject to inflationary pressures.
Historically, the Company has generally been able to maintain its operating
margins through increases in selling prices.
The Company is not aware of other material trends that may be expected to
cause reported financial information not to be indicative of future
operating results or of future financial condition.
EXHIBIT 13(d)
<TABLE>
<CAPTION>
Consolidated Balance Sheets
Piccadilly Cafeterias, Inc.
-------------------------------------------------------------------------------
(Amounts in thousands)
-------------------------------------------------------------------------------
Balances at June 30 1996 1995
-------------------------------------------------------------------------------
<S> <C> <C>
Assets
CURRENT ASSETS
Accounts and notes receivable 619 482
Inventories 10,087 10,584
Deferred income taxes 2,434 1,416
Other current assets 579 627
-------------------------------------------------------------------------------
TOTAL CURRENT ASSETS 13,719 13,109
PROPERTY, PLANT & EQUIPMENT
Land 20,437 20,429
Buildings and leasehold improvements 112,550 114,832
Furniture and fixtures 96,526 95,538
Machinery and equipment 14,267 14,607
Construction in progress 1,644 3,098
-------------------------------------------------------------------------------
245,424 248,504
Less allowances for depreciation and unit closings 116,412 103,245
-------------------------------------------------------------------------------
NET PROPERTY, PLANT AND EQUIPMENT 129,012 145,259
OTHER ASSETS 5,549 6,753
-------------------------------------------------------------------------------
TOTAL ASSETS $148,280 $165,121
-------------------------------------------------------------------------------
Liabilities and Shareholders' Equity
CURRENT LIABILITIES
Short-term debt due to banks --- 20,577
Accounts payable 8,387 8,964
Accrued interest 3,588 2,248
Accrued salaries, benefits and related taxes 14,191 12,491
Accrued rent 4,671 4,457
Other accrued expenses 3,632 4,143
Current portion of long-term debt 6,000 6,000
-------------------------------------------------------------------------------
TOTAL CURRENT LIABILITIES 40,469 58,880
Long-term Debt, less current portion 25,700 18,000
Deferred Income Taxes 3,768 6,787
Reserve for Unit Closings 5,050 5,009
SHAREHOLDERS' EQUITY
Preferred Stock, no par value; authorized 50,000,000 shares;
issued and outstanding: none --- ---
Common Stock, no par value, stated value $1.82 per share;
authorized 100,000,000 shares; issued and outstanding:
10,503,368 shares at June 30, 1996, and 10,316,946 shares
at June 30, 1995 19,096 18,758
Additional paid-in capital 18,555 17,416
Retained earnings 35,642 40,271
--------------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 73,293 76,445
-------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $148,280 $165,121
-------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Income
Piccadilly Cafeterias, Inc.
-------------------------------------------------------------------------------
(Amounts in thousands -- except per share data)|
--------------------------------------------------------------------------------
Year Ended June 30 1996 1995 1994
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Net sales $300,550 $287,848 $276,223
Costs and expenses:
Cost of sales 171,224 163,830 155,411
Other operating expense 101,459 97,213 92,250
Provision for unit impairments and closings 9,404 --- ---
General and administrative expense 12,761 13,845 13,541
Interest expense 5,253 5,024 3,089
Other expense (income) (179) 1,295 379
--------------------------------------------------------------------------------
299,922 281,207 264,670
--------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 628 6,641 11,553
Provision for income taxes 243 2,590 4,506
--------------------------------------------------------------------------------
NET INCOME $ 385 $ 4,051 $ 7,047
--------------------------------------------------------------------------------
Weighted average number of shares outstanding 10,401 10,228 10,061
--------------------------------------------------------------------------------
Net income per share $ 0.04 $ 0.40 $ 0.70
--------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Changes in Shareholders' Equity
Piccadilly Cafeterias, Inc.
-------------------------------------------------------------------------------
(Amounts in thousands)
-------------------------------------------------------------------------------
Additional
Common Stock Paid-In Retained
Shares Amount Capital Earnings
--------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
BALANCES AT JUNE 30, 1993 9,888 $18,160 $15,119 $38,913
Net income 7,047
Cash dividends declared (4,831)
Sales under employee stock purchase plan 103 188 843
Sales under dividend reinvestment plan 27 48 242
Sales under employee stock option plan 14 25 120
-------------------------------------------------------------------------------
BALANCES AT JUNE 30, 1994 10,132 18,421 16,324 41,129
Net income 4,051
Cash dividends declared (4,909)
Sales under employee stock purchase plan 133 242 755
Sales under dividend reinvestment plan 52 95 337
-------------------------------------------------------------------------------
BALANCES AT JUNE 30, 1995 10,317 18,758 17,416 40,271
Net income 385
Cash dividends declared (4,995)
Sales under employee stock purchase plan 120 218 671
Sales under dividend reinvestment plan 16 30 108 (19)
Sales under employee stock option plan 50 90 360
-------------------------------------------------------------------------------
BALANCES AT JUNE 30, 1996 10,503 $19,096 $18,555 $35,642
-------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
</TABLE>
<TABLE>
<CAPTION>
Consolidated Statements of Cash Flows
Piccadilly Cafeterias, Inc.
-------------------------------------------------------------------------------
(Amounts in thousands)
-------------------------------------------------------------------------------
Year Ended June 30 1996 1995 1994
-------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income $ 385 $ 4,051 $ 7,047
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 12,916 12,880 11,720
Costs associated with reserved units (1,092) (1,165) (1,587)
Provision for unit impairments and closings 9,404 --- ---
Provision for deferred income taxes (benefit) (4,037) (568) 878
Loss on disposition of assets 50 1,880 1,336
Pension expense - net of contributions 1,036 (313) (1,157)
Changes in operating assets and liabilities:
Accounts and notes receivable (137) 97 258
Inventories 497 (476) 1,904
Other current assets 48 2,093 127
Other assets 168 59 (56)
Accounts payable (577) (2,634) 2,682
Accrued interest 1,340 980 (97)
Accrued expenses 1,403 3,939 371
---------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 21,404 20,823 23,426
INVESTING ACTIVITIES
Purchases of property, plant and equipment (6,887) (26,942) (31,895)
Proceeds from sale of property, plant and
equipment 1,881 251 1,472
---------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (5,006) (26,691) (30,423)
FINANCING ACTIVITIES
Proceeds from short-term debt due to banks -
net (20,577) 20,577 ---
Proceeds from long-term debt 21,020 --- ---
Payments on long-term debt (13,320) (11,250) (3,750)
Proceeds from sales of Common Stock 1,458 1,429 1,466
Dividends paid (4,979) (4,888) (4,813)
---------------------------------------------------------------------------------
NET CASH PROVIDED (USED) BY FINANCING (16,398) 5,868 (7,097)
ACTIVITIES
---------------------------------------------------------------------------------
Decrease in cash and cash equivalents --- --- (14,094)
Cash and cash equivalents at beginning of year --- --- 14,094
---------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ --- $ --- $ ---
---------------------------------------------------------------------------------
SUPPLEMENTARY CASH FLOW DISCLOSURES
Income taxes paid (net of refunds received) $ 4,389 $ 641 $ 2,708
---------------------------------------------------------------------------------
Interest paid $ 3,913 $ 4,288 $ 3,433
---------------------------------------------------------------------------------
See Notes to Consolidated Financial Statements
</TABLE>
Notes To Consolidated Financial Statements
Piccadilly Cafeterias, Inc.
Note 1- Significant Accounting Policies
USE OF ESTIMATES. The preparation of the Consolidated Financial Statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the
financial statements and accompanying notes. Actual results could differ from
those estimates.
PRINCIPLES OF CONSOLIDATION. The accompanying consolidated financial
statements include the accounts of Piccadilly Cafeterias, Inc. and its
subsidiaries (hereinafter referred to as the Company). All significant
intercompany balances and transactions have been eliminated in
consolidation.
INDUSTRY. The Company's principal industry is the operation of Company-owned
cafeterias and seafood restaurants.
INVENTORIES. Inventories consist primarily of food and supplies and are
stated at the lower of cost (first-in, first-out method) or market.
PROPERTY, PLANT AND EQUIPMENT. Property, plant and equipment (PP&E) is
stated at cost, except for PP&E that have been impaired, for which
the carrying amount is reduced to estimated fair value. Depreciation is
provided using the straight-line method for financial reporting purposes
on the following estimated useful lives:
Buildings and component equipment 10-30 years
Furniture and fixtures 10 years
Machinery and equipment 4 years
Leasehold improvements are amortized over the life of the original lease
term, including renewal periods if applicable. The cost of leasehold
improvements has been reduced by the amount of construction allowances
received from developers and landlords. Repairs and maintenance are charged
to operations as incurred. Renewals and betterments which increase the
value or extend the lives of assets are capitalized and depreciated over
their estimated useful lives. When assets are retired, or are otherwise
disposed of, cost and the related accumulated depreciation are eliminated
from the accounts and any resulting gain or loss is included in the
determination of income.
LONG-LIVED ASSETS. The Company reviews long-lived assets to be held and used
in the business for impairment whenever events or changes in circumstances
indicate that the carrying amount of an asset or a group of assets may not
be recoverable. The Company considers a history of operating losses to
be its primary indicator of potential impairment. Assets are evaluated for
impairment at the operating unit level. An asset is deemed to be impaired
if a forecast of undiscounted future operating cash flows directly related
to the asset, including disposal value if any, is less than its carrying
amount. If an asset is determined to be impaired, the loss is measured as
the amount by which the carrying amount of the asset exceeds its fair value.
The Company generally estimates fair value by discounting estimated future
cash flows. Considerable management judgment is necessary to estimate cash
flows. Accordingly, it is reasonably possible that actual results could vary
significantly from such estimates.
INCOME TAXES. The Company accounts for income taxes using the liability
method. Under this method, deferred income taxes reflect the net tax effects
of temporary differences between the carrying amounts of assets and liabilities
for financial reporting and the amounts used for income tax.
UNIT OPENING EXPENSES. Salaries and wages, training costs and other expenses
of opening new units are charged to expense during the first month of the new
unit's operation.
STOCK-BASED COMPENSATION. The Company accounts for its stock compensation
arrangements under the provision of Accounting Principles Board ("APB") No.
25, "Accounting for Stock Issued to Employees," but is reviewing the provisions
of SFAS No. 123, "Accounting for Stock-Based Compensation," which is
effective for fiscal years beginning after December 15, 1995. SFAS No. 123
establishes financial accounting and reporting standards for stock-based
employee compensation plans. The Company has not yet finalized its review
of the provisions of this statement, and accordingly, has not yet
determined whether it will adopt SFAS No. 123 for expense recognition
purposes, or continue to follow APB Opinion No. 25, and make the proforma
information disclosures required under the new standard.
EARNINGS PER SHARE. Earnings per share of Common Stock are based on the
weighted average number of shares outstanding.
RECLASSIFICATIONS. Certain balances in prior fiscal years have been
reclassified to conform with the presentation adopted in the current fiscal
year.
Note 2-Impairment of Long-Lived Assets
The Company adopted Statement of Financial Accounting Standards No. 121
(SFAS 121), "Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed Of," during the fourth quarter of 1996.
The initial, noncash charge in connection with the adoption of SFAS 121 was
$9,404,000 ($5,830,000 after-tax or $.56 per share), which included
$4,668,000 ($2,894,000 after-tax or $.28 per share) related to four
operating units for which closure decisions were made during the fourth
quarter. The initial charge represented a reduction of the carrying amounts
of the impaired assets to their estimated fair value, as determined by using
discounted estimated future cash flows, and a reserve for future rental
commitments. Under the Company's previous accounting policy, long-lived
assets to be held and used were evaluated as a group for impairment on a
market by market basis. Because of the strong operating profit history and
prospects for each market, no impairment evaluation had been required
for fiscal 1995 or 1994 under the Company's previous accounting policy.
Note 3 - Income Taxes
Significant components of the Company's deferred tax liabilities and
assets are as follows:
(Amounts in thousands)
- ------------------------------------------------------------------------
June 30 1996 1995
- ------------------------------------------------------------------------
Deferred tax liabilities:
Property, plant and equipment $ 7,507 $ 9,760
Inventories 871 839
- ------------------------------------------------------------------------
8,378 10,599
- ------------------------------------------------------------------------
Deferred tax assets:
Unit closing reserves 3,594 2,232
Intangible assets 2,304 2,517
Accrued expenses--net 988 92
Minimum tax credit carryforward --- 154
NOL carryforward 158 233
- ------------------------------------------------------------------------
7,044 5,228
- ------------------------------------------------------------------------
Net deferred tax liabilities $ 1,334 5,371
- ------------------------------------------------------------------------
The components of the provision for income taxes are summarized as follows:
(Amounts in thousands)
- -------------------------------------------------------------------------
Year Ended June 30 1996 1995 1994
- -------------------------------------------------------------------------
Current:
Federal $ 3,752 $ 2,896 $ 3,079
State 528 262 549
- -------------------------------------------------------------------------
4,280 3,158 3,628
- -------------------------------------------------------------------------
Deferred:
Federal (3,588) (703) 1,168
State (449) 135 (290)
- -------------------------------------------------------------------------
(4,037) (568) 878
- -------------------------------------------------------------------------
Total provision for income taxes $ 243 $ 2,590 $ 4,506
- -------------------------------------------------------------------------
Differences between the provision for income taxes and the amount computed by
applying the federal statutory income tax rate to income before income taxes
are as follows:
(Amounts in thousands)
- -------------------------------------------------------------------------
Year Ended June 30 1996 1995 1994
- -------------------------------------------------------------------------
Income tax at statutory rate $ 217 $ 2,258 $ 3,944
Add state income taxes, net of federal taxes 79 398 259
- -------------------------------------------------------------------------
296 2,656 4,203
Tax credits (78) (125) (244)
Other items 25 59 547
- -------------------------------------------------------------------------
Total provision for income taxes $ 243 $ 2,590 $4,506
- -------------------------------------------------------------------------
The Company's tax returns are currently under examination by the Internal
Revenue Service (IRS) for the fiscal years ended June 30, 1987 through 1992.
The IRS has proposed adjustments to the Company's tax returns primarily
related to the amortization of intangible assets and the timing of certain
other deductions. At June 30, 1996 the Company had recorded reserves
of $2,728,000, primarily for the estimated interest expense exposure related
to the proposed adjustments.
Note 4 - Commitments
The Company rents most of its cafeteria and restaurant facilities under
long-term leases with varying provisions and with original lease terms
generally being 20 to 30 years. The Company has the option to renew the
leases for specified periods subsequent to their original terms. Minimum
future lease commitments as of June 30, 1996, including $16,162,000 for
closed units are as follows:
(Amounts in thousands)
- -----------------------------------------------------------------------------
Year Ending June 30
- -----------------------------------------------------------------------------
1997 $ 9,014
1998 8,611
1999 8,462
2000 8,179
2001 7,682
Subsequent 46,022
- -----------------------------------------------------------------------------
87,970
Less sublease income 9,113
- -----------------------------------------------------------------------------
Net minimum lease commitments $78,857
- -----------------------------------------------------------------------------
The leases generally provide for percentage rentals based on sales. Certain
leases also provide for payments of executory costs such as real estate taxes,
insurance, maintenance and other miscellaneous charges. Rent expense for the
periods shown below does not include these executory costs.
(Amounts in thousands)
- ----------------------------------------------------------------------------
Year Ended June 30 1996 1995 1994
- ----------------------------------------------------------------------------
Minimum rentals $ 7,966 $ 8,209 $ 7,894
Contingent rentals 2,728 2,576 2,813
- ----------------------------------------------------------------------------
Total $10,694 $10,785 $10,707
- ----------------------------------------------------------------------------
Note 5 - Long-Term Debt and Lines of Credit
(Amounts in thousands)
- -----------------------------------------------------------------------------
June 30 1996 1995
- -----------------------------------------------------------------------------
10.15% senior notes, due in equal, annual
installments of $6,000,000 on January 31, 1997,
and January 31, 1998 (Fair value at June 30, 1996
- - $12,112,000; June 30, 1995 - $26,171,000) $12,000 $24,000
Note payable to bank, due at maturity on September 30,
1999 (Amount available at June 30, 1996 - $18,800,000;
fair value at June 30, 1996 - $11,200,000) 11,200 ---
Note payable to bank, due in installments of $1,500,000
on September 30, 1997 and $7,000,000 on September 30,
1998 (Fair value at June 30, 1996 - $8,500,000) 8,500 ---
- -----------------------------------------------------------------------------
31,700 30,000
Less current portion (6,000) (6,000)
- -----------------------------------------------------------------------------
Total long-term debt, net of current portion $25,700 $18,000
- -----------------------------------------------------------------------------
The aggregate maturities of long-term debt for the remaining years following
June 30, 1996, are as follows: 1997 - $6,000,000, 1998 - $7,500,000, 1999 -
$7,000,000, 2000 - $11,200,000. The fair values of the Company's long-term
borrowings are estimated using discounted cash flow analyses, based on the
Company's current incremental borrowing rates for similar types of borrowing
arrangements.
In January 1989, the Company issued unsecured senior notes in the principal
amount of $30,000,000 at an interest rate of 10.15%. The Company has a
prepayment option, subject to a premium, which can be exercised at any time
during the term of the senior notes. This facility contains covenants
which include provisions for the maintenance of net worth and limitations on
the level of liabilities. At June 30, 1996, the Company was in compliance
with all such covenants.
In April 1996, the Company entered into line-of-credit agreements with two
banks. Both facilities are unsecured and bear interest based on applicable
rates and margins. The interest rate in effect at June 30, 1996 (6.875%)
on the $11,200,000 note payable was based upon London InterBank Offered Rate
(LIBOR) plus 1.25%. The interest rate in effect at June 30, 1996 (7.375%)
on the $8,500,000 note payable was based upon LIBOR plus 1.75%. These
facilities contain covenants which include provisions for the maintenance
of net worth, limitations on the level of liabilities, and requirements for
minimum coverage of fixed charges. At June 30, 1996, the Company was in
compliance with all such covenants. Both facilities contain prepayment
options, without penalty, which can be exercised at any time during the term
of the agreement.
The Company capitalized interest costs of $85,000 in 1996, and $339,000
in 1995, and $300,000 in 1994 with respect to qualifying construction. Total
interest cost incurred was $5,338,000 in 1996, $5,363,000 in 1995, and
$3,389,000 in 1994 including interest reserves relating to IRS examinations
(See Note 3) of $1,528,000 in 1996 and $1,200,000 in 1995.
Note 6 - Pension and Bonus Plan
The Company has a pension plan covering substantially all employees who
meet certain age and length-of-service requirements. Retirement benefits are
based upon an employee's years of credited service and final average
compensation. Annual contributions are made in amounts sufficient to fund
normal costs as accrued and to amortize prior service costs over a 40-year
period. Assets of the plan are invested principally in obligations of the
United States Government and other marketable debt and equity securities
including 367,662 shares of the Company's Common Stock held at June 30, 1996
and June 30, 1995.
The following tables set forth the plan's funded status and amounts recognized
in the Company's financial statements.
(Amounts in thousands)
- ------------------------------------------------------------------------------
June 30 1996 1995
- ------------------------------------------------------------------------------
Accumulated benefit obligations, including vested
benefits of $40,770,000 in 1996 and $37,167,000 in 1995 $39,027 $43,410
- ------------------------------------------------------------------------------
Fair value of plan assets $42,502 $46,257
Projected benefit obligation 51,144 45,664
- ------------------------------------------------------------------------------
Plan assets over (under) projected benefit obligation (4,887) (3,162)
Unrecognized transition amount --- (698)
Unrecognized prior service cost (40) (45)
Unrecognized net loss 9,878 9,893
- ------------------------------------------------------------------------------
Prepaid pension cost Included in other non-current assets 4,951 5,988
- ------------------------------------------------------------------------------
(Amounts in thousands)
- ------------------------------------------------------------------------------
Year Ended June 30 1996 1995 1994
- ------------------------------------------------------------------------------
Net pension expense:
Service cost $ 1,854 $ 1,733 $ 1,673
Interest cost on projected benefit obligation 3,569 3,093 2,912
Actual return on plan assets (5,187) (3,305) (1,401)
Net Amortization and deferral 1,084 (788) (2,749)
- ------------------------------------------------------------------------------
$ 1,320 733 435
- ------------------------------------------------------------------------------
June 30 1996 1995 1994
- ------------------------------------------------------------------------------
Actuarial assumptions:
Discount rate 8.0% 8.0% 8.25%
Compensation increases 4.0% 4.0% 4.0%
Long-term rate of return 9.0% 9.0% 9.0%
The Company also provides bonus compensation to cafeteria and restaurant
managers based on unit profitability. Charges to expense for such compensation
amounted to $10,197,000, $10,088,000, and $9,982,000 during 1996, 1995 and
1994, respectively.
Note 7 - Common Stock
On August 3, 1987, the Board of Directors adopted the Piccadilly Cafeterias,
Inc. Dividend Reinvestment and Stock Purchase Plan. Shareholders of record
may reinvest quarterly dividends and/or up to $5,000 per quarter in the
Company's Common Stock. Stock obtained through reinvested dividends is issued
at a 5% discount. The Company has reserved 500,000 shares for issuance under
the plan. Common Shares issued under the plan were 16,502 and 52,212 for
the years ended June 30, 1996 and 1995, respectively. At June 30, 1996,
there were 338,955 unissued Common Shares reserved under the plan.
On November 2, 1987, the Company's stockholders adopted the Piccadilly
Cafeterias, Inc. Employee Stock Purchase Plan. Under the plan, eligible
employees may be granted options to purchase up to 1,500 shares of Common
Stock annually. Options are exercisable at 85% of the applicable market
value provided that this value is greater than book value per share. If 85%
of the applicable market value is less than book value per share, options
are exercisable at book value per share. Options are exercisable at the
applicable market value if the applicable market value is less than book
value per share. The applicable market value is the lower of the beginning
of the plan year and the end of the plan year market price. Book value
per share is determined as of the most recent audited balance sheet
date. The Company has reserved 1,000,000 shares of stock for issuance
under the plan. Common Shares issued under the plan were 119,918 and
132,950 for the years ended June 30, 1996 and 1995, respectively. During
the year ended June 30, 1996, the Company terminated the plan.
On November 1, 1993, the Company's stockholders approved the Piccadilly
Cafeterias, Inc. 1993 Incentive Compensation Plan (the 1993 Plan). Under
the terms of the plan, which amends and restates the Piccadilly Cafeterias,
Inc. 1988 Stock Option Plan (the 1988 Plan), incentive stock options and
non-qualified stock options, stock appreciation rights, stock awards,
restricted stock, performance shares and cash awards may be granted to
officers or key employees. Options to purchase shares of the Company's Common
Stock may be issued at no less than 100% of the fair market value on the
date of grant. The Company has reserved 1,000,000 shares, in total, for
issuance under the 1988 and 1993 Plans. Transactions under the restated
Plan for the last three fiscal years are summarized as follows:
(Dollars in thousands -- except per share data)
- --------------------------------------------------------------------------------
Option Price
Common -------------------
Stock Per Share
Shares Average Total
- -----------------------------------------------------------------------------
OUTSTANDING AT JUNE 30, 1993 980,000 $10,778
Canceled (60,500) $ 14.00 (847)
Exercised (14,000) 10.38 (145)
Granted 67,500 10.61 716
- ---------------------------------------------------------- --------
OUTSTANDING AT JUNE 30, 1994 973,000 10,502
Canceled --- --- ---
Granted --- --- ---
- ---------------------------------------------------------- --------
OUTSTANDING AT JUNE 30, 1995 973,000 10,502
Canceled (110,500) 15.04 (1,662)
Exercised (50,000) 9.00 (450)
Granted 82,500 9.63 794
- ---------------------------------------------------------- --------
OUTSTANDING AT JUNE 30, 1996 895,000 $ 9,184
- ---------------------------------------------------------- --------
Note 8 - Quarterly Results of Operations (Unaudited)
The following is a tabulation of the unaudited quarterly results of operations
for the two years ended June 30, 1996:
<TABLE>
<CAPTION>
(Amounts in thousands -- except per share data)
- ----------------------------------------------------------------------------------------------
Year Ended June 30, 1996 Year Ended June 30, 1995
- ----------------------------------------------------------------------------------------------
9/30 12/31 3/31 6/30 9/30 12/31 3/31 6/30
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $75,140 $75,807 $73,100 $76,503 $70,779 $73,411 $69,066 $74,592
Cost of sales and
other operating
expenses 67,767 68,355 66,442 70,119 64,564 65,925 62,419 68,135
Net income (loss) 1,198 2,270 1,801 (4,883) 877 1,834 1,203 137
Net Income (loss)
per share $ .12 $ .22 $ .17 $ (.47) $ .09 $ .18 $ .12 $ .01
</TABLE>
During the quarter ended September 30, 1995, the Company recorded a $1,300,000
($806,000 after-tax or $0.08 per share) severance charge. The Company recorded
an asset impairment of $9,404,000 ($5,830,000 after-tax or $.56 per share) in
connection with the adoption of SFAS 121 (see Note 2 for further discussion)
during the quarter ended June 30, 1996. Also during the quarter ended June
30, 1996, the Company recorded additional interest reserves of $1,528,000
($947,000 after-tax or $.09 per share). See Note 3 for further discussion.
During the quarter ended September 30, 1994, the Company recorded a $361,000
($220,000 after-tax or $.02 per share) charge for severance costs. The
Company incurred write-offs related to its deluxe remodeling program of
$329,000 ($201,000 after-tax or $.02 per share), $404,000 ($246,000
after-tax or $.02 per share) and $660,000 ($403,000 after-tax or $.04 per
share) in the first, second and fourth quarters of 1995, respectively. During
the quarter ended June 30, 1995, the Company recorded its initial reserves
of $1,467,000 ($895,000 after-tax or $.09 per share) for interest and taxes.
EXHIBIT 13(e)
Report of Ernst & Young LLP, Independent Auditors
Shareholders and Board of Directors
Piccadilly Cafeterias, Inc.
Baton Rouge, Louisiana
We have audited the accompanying consolidated balance sheets of Piccadilly
Cafeterias, Inc. as of June 30, 1996 and 1995, and the related consolidated
statements of income, changes in shareholders' equity, and cash flows for each
of the three years in the period ended June 30,1996. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Piccadilly
Cafeterias, Inc. at June 30, 1996 and 1995, and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended June 30, 1996 in conformity with generally accepted accounting
principles.
As discussed in Note 2 to the consolidated financial statements, in 1996 the
Company changed its method of accounting for the impairment of long-lived
assets.
Ernst & Young LLP
New Orleans, Louisiana
July 29, 1996
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in this Annual Report
(Form 10-K) of Piccadilly Cafeterias, Inc. of our report dated July 29, 1996,
included in the 1996 Annual Report to Shareholders of Piccadilly Cafeterias,
Inc.
Our audits also included the financial statement schedule of Piccadilly
Cafeterias, Inc. listed in Item 14(a). This schedule is the responsibility
of the Company's management. Our responsibility is to express an opinion
based on our audits. In our opinion, the financial statement schedule referred
to above, when considered in relation to the basic financial statements taken
as a whole, presents fairly in all material respects the information set
forth therein.
We also consent to the incorporation by reference in the Registration
Statements (Form S-8 No. 33-17737 and Form S-8 No. 33-27793) and in the
Registration Statement and related Prospectuses (form S-3 No. 33-17131) of
our report dated July 29, 1996, with respect to the consolidated financial
statements incorporated herein by reference and our report included in the
preceding paragraph with respect to the financial statement schedule
included in this Annual Report (Form 10-K) of Piccadilly Cafeterias, Inc.
Ernst & Young, LLP
New Orleans, Louisiana
September 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
The following Financial Data Schedule contains summary financial information
extracted from the Company's Annual Shareholders Report for the year ended June
30, 1996 and its qualified in its entirety by reference to such financial
statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-END> JUN-30-1996
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 619
<ALLOWANCES> 0
<INVENTORY> 10,087
<CURRENT-ASSETS> 13,719
<PP&E> 245,424
<DEPRECIATION> 112,005
<TOTAL-ASSETS> 148,280
<CURRENT-LIABILITIES> 40,469
<BONDS> 0
0
0
<COMMON> 19,096
<OTHER-SE> 54,197
<TOTAL-LIABILITY-AND-EQUITY> 148,280
<SALES> 300,550
<TOTAL-REVENUES> 300,550
<CGS> 171,224
<TOTAL-COSTS> 285,444
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,253
<INCOME-PRETAX> 628
<INCOME-TAX> 243
<INCOME-CONTINUING> 385
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 385
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
</TABLE>
