FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] Quarterly report pursuant to section 13 or 15(d) of the
securities exchange act of 1934
For the quarterly period ended December 31, 1997
[ ] Transition report pursuant to section 13 or 15(d) of the
securities exchange act of 1934
For the transition period from to
Commission file number: 1-11754
Piccadilly Cafeterias, Inc.
(Exact name of registrant as specified in its charter)
Louisiana 72-0604977
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
3232 Sherwood Forest Blvd., Baton Rouge, Louisiana 70816
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (504) 293-9440
Not applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of Common Stock, without par
value, as of February 2, 1998, was 10,528,368.
PART I -- Financial Information
Item 1. Financial Statements (Unaudited)
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
Piccadilly Cafeterias, Inc. (Amounts in thousands)
Balances at December June
31 30
1997 1997
ASSETS
CURRENT ASSETS
Accounts and notes receivable $ 815 $ 611
Inventories 11,094 10,400
Deferred income taxes 3,546 3,546
Other current assets 858 766
------- -------
TOTAL CURRENT ASSETS 16,313 15,323
PROPERTY, PLANT AND EQUIPMENT, net 123,893 126,020
OTHER ASSETS 7,381 5,989
------- -------
TOTAL ASSETS $147,587 $147,332
------- -------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 11,603 $ 9,579
Accrued expenses 20,113 20,411
Current portion of long-term debt 4,500 4,500
------- -------
TOTAL CURRENT LIABILITIES 36,216 34,490
LONG-TERM DEBT, less current portion 23,976 27,240
DEFERRED INCOME TAXES 5,623 5,223
RESERVE FOR UNIT CLOSINGS 1,788 2,775
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
10,528,368 shares at December 31, 1997 and
at June 30, 1997 19,141 19,141
Additional paid-in capital 18,735 18,735
Retained earnings 42,357 39,965
------- -------
80,233 77,841
Less treasury stock at cost:
25,000 Common Shares at
December 31, 1997 and June 30, 1997 249 237
------- -------
TOTAL SHAREHOLDERS' EQUITY 79,984 77,604
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $147,587 $147,332
See Note to Condensed Consolidated Financial Statements (Unaudited)
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Piccadilly Cafeterias, Inc.
<TABLE>
<CAPTION>
(Amounts in thousands - except per share data)
Three Months Six Months
Ended Ended
December 31 December 31
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Net sales $ 79,189 $ 77,469 $158,141 $152,969
Cost and expenses:
Cost of sales 46,083 44,468 92,151 88,883
Other operating expense 25,596 25,028 51,633 50,415
General and administrative
expense 2,645 2,676 5,720 5,477
Interest expense 504 806 1,123 1,528
Other expense (income) (127) (95) (269) (157)
-------- -------- -------- --------
74,701 72,883 150,358 146,146
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 4,488 4,586 7,783 6,823
Provision for income taxes 1,661 1,743 2,880 2,593
-------- -------- -------- --------
NET INCOME $ 2,827 $ 2,843 $ 4,903 $ 4,230
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of shares
outstanding 10,503 10,503 10,503 10,503
-------- -------- -------- --------
-------- -------- -------- --------
Net income per share - basic
and assuming dilution $ .27 $ .27 $ .47 $ .40
-------- -------- -------- --------
-------- -------- -------- --------
Cash dividends per share $ .12 $ .12 $ .24 $ .24
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See Note to Condensed Consolidated Financial Statements
(Unaudited)
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Piccadilly Cafeterias, Inc. (Amounts in thousands)
Six Months Ended December 31 1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 4,903 $ 4,230
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 6,038 6,079
Costs associated with reserved units (479) (845)
Provision for deferred income taxes 400 400
Loss on sale of assets 50 82
Pension expense -- net of contributions (1,433) (1,419)
Change in operating assets and liabilities 744 (3,261)
------- -------
NET CASH PROVIDED BY OPERATING ACTIVITIES 10,223 5,266
INVESTING ACTIVITIES
Purchase of property, plant and equipment (6,259) (3,189)
Proceeds from sale of property,
plant and equipment 1,860 14
------- -------
CASH USED IN INVESTING ACTIVITIES (4,399) (3,175)
FINANCING ACTIVITIES
Proceeds from(payments on)long-term debt - net (3,264) 430
Purchases of treasury stock (33) ---
Dividends paid (2,527) (2,521)
------- -------
NET CASH USED IN FINANCING ACTIVITIES (5,824) (2,091)
------- -------
Change in cash and cash equivalents --- ---
Cash and cash equivalents at beginning of period --- ---
------- -------
Cash and cash equivalents at end of period $ --- $ ---
------- -------
------- -------
</TABLE>
See Note to Condensed Consolidated Financial Statements
(Unaudited)
NOTE TO CONDENSED FINANCIAL STATEMENTS (Unaudited) Piccadilly
Cafeterias, Inc. December 31, 1997
The accompanying unaudited condensed consolidated financial
statements have been prepared in accordance with the instructions to
Form 10-Q and do not include all of the information and
footnotes required by generally accepted accounting principles for
complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
Comparative results of operations by periods may be affected by the
timing of the opening of new units. Quarterly results are
additionally affected by seasonal fluctuations in customer
volume. Customer volume at established units is generally higher in
the second quarter ended December 31 and lower in the third quarter
ending March 31 reflecting the general seasonal retail activity.
A fluctuation in customer volume has a disproportionate
effect on operating profit.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
1998 Second Quarter Compared to 1997 Second Quarter
The following table summarizes comparable cafeteria customer traffic
for the quarters ended December 31, 1997 and 1996.
<TABLE>
(Customers in thousands)
Quarter Ended 1997 1996 Customer
December 31 Change
Customers Units Customers Units
<S>
Units open 3 months <C> <C> <C> <C> <C>
in both periods 11,762 126 12,291 126 -4.3%
Units opened 377 8(A) --- ---
Units closed --- --- 141 3(B)
Total 12,139 12,432 -2.4%
(A) Includes four cafeterias and four Piccadilly Express (Associated
Grocers supermarkets) units opened after September 30, 1996
(B) Includes cafeterias closed after September 30, 1996
</TABLE>
Same-store cafeteria sales decreased $197,000, or 0.3%, over
the prior year. The cafeteria customer check average increased
from $5.68 in the prior year quarter to $5.92 in the current
quarter. Same-store sales for Ralph & Kacoo's seafood restaurants
increased $418,000, or 7.0%. On October 1, 1996 and September 1,
1997, the Company raised prices an average of 4.0% and 4.3%,
respectively, to offset the increases in the federal minimum
wage.
A cafeteria in Vicksburg, Mississippi was opened during the
second quarter. At December 31, 1997, the Company owned and
operated 130 cafeterias and seven Ralph & Kacoo's Seafood
Restaurants. A cafeteria in Augusta, Georgia was closed on
January 4, 1998 as its lease expired.
A Piccadilly Express (Associated Grocers supermarket) unit
in Port Allen, Louisiana was opened during the current quarter. At
December 31, 1997, the Company operated four of these units. The
Company also completed the conversion of two Piccadilly Express
take-out shops in two cafeterias during the quarter. Sales for
new units (cafeterias and Piccadilly Express Associated Grocers
supermarkets) open less than 12 months were $2,346,000 in the
current quarter.
Cost of sales as a percentage of sales increased 0.8% over
the prior year. Food cost increased 0.1% and labor cost
increased 0.7%, reflecting the increase in the minimum wage.
Other operating expense was 32.3% of sales in both periods.
Interest expense decreased $302,000 from the prior year
reflecting both lower debt levels and cost of debt. The Company
lowered its effective tax rate from 38.0% in fiscal year 1997 to
37.0% for fiscal year 1998 due to favorable estimates.
Six Months Ended December 31, 1997 Compared to Six Months Ended
December 31, 1996
The following table summarizes comparable cafeteria customer
traffic for the six months ended December 31, 1997 and 1996.
<TABLE>
<CAPTION>
(Customers in thousands)
Six Months Ended 1997 1996 Customer
December 31 Change
Customers Units Customers Units
<S> <C> <C> <C> <C> <C>
Units open 6 months
in both periods 23,999 126 24,750 126 -3.0%
Units opened 724 8(A) --- ---
Units closed --- --- 331 5(B)
Total 24,723 25,081 -1.4%
</TABLE>
(A) Includes four cafeterias and four Piccadilly Express (Associated
Grocers supermarkets) units opened after June 30, 1996
(B) Includes cafeterias closed after June 30, 1996
Same-store cafeteria sales increased $1,812,000, or 1.3%
over the prior year. The cafeteria check average increased from
$5.57 in the prior six-month period to $5.82 in the current
period. Same-store sales for Ralph & Kacoo's seafood restaurants
increased $313,000, or 2.6%.
The Company opened two cafeterias during the six months
ended December 31, 1997, one of which replaced a mall location
whose lease had expired. Three Piccadilly Express (Associated
Grocers supermarket) units were also opened. Sales for new
units (cafeterias and Piccadilly Express units in Associated
Grocers supermarkets) open less than 12 months were $4,487,000
during the current six-month period.
Cost of sales as a percentage of sales increased 0.2% over
the prior year, primarily from higher labor costs due to minimum
wage increases. Other operating expenses as a percentage of sales
decreased 0.3% over the prior year, reflecting favorable same-
store sales volumes. Interest expense decreased $405,000 over the
prior six months reflecting both lower debt levels and cost of
debt. The Company lowered its effective tax rate from 38% in
fiscal year 1997 to 37.0% for fiscal year 1998 due to favorable
estimates.
Liquidity and Capital Resources
Net cash provided by operating activities increased
$4,957,000. Net changes in operating assets and liabilities
increased cash flow $4,005,000 reflecting the prior year payment
of $3,272,000 in settlement of taxes and interest associated with
the IRS examinations of the Company's tax returns for 1987
through 1992. Prior year costs associated with reserved units
include lease termination costs of $500,000. Investing activities
in the current year include proceeds from the sale of the
Company's Orland Park, Illinois cafeteria, which was closed in
November, 1996, at amounts approximating book value.
The Company expects to open three to four more cafeterias
and complete twelve to fifteen take-out shop conversions during
the remainder of the fiscal year.
The Company's $4,500,000 private placement debt matured on
January 31, 1998 and was refinanced through existing lines of
credit. As of December 31, 1997, $21,024,000 was available under
two line of credit arrangements. These facilities, together with
cash flow from operations, are adequate to provide for capital
expenditures, debt and dividend requirements.
Impact of Year 2000
Some of the Company's older computer programs were written
using two digits rather than four to define the applicable year.
As a result, those computer programs have time-sensitive code
which treat a date ending in "00" as the year 1900 rather than
the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including,
among other things, a temporary inability to process transactions,
process reports, or engage in similar normal business activities.
The Company has completed an assessment of its Year 2000
issues and believes that previously scheduled replacements of
certain software, will function properly with respect to dates in
the year 2000 and thereafter. The total Year 2000 project cost
is estimated to be approximately $700,000, primarily for the
purchases of new software, which will be capitalized. To date,
the Company has incurred and capitalized $441,000 of such costs.
The project is estimated to be completed not later than
December 31, 1998, which is prior to any anticipated impact on
its operating systems. The Company believes that with conversions
to new software, the Year 2000 Issue will not pose significant
operational problems for its computer systems. However, if
such conversions are not made, or are not completed timely, the
Year 2000 Issue could have a material impact on the operations of
the Company.
The costs of the project and the date on which the Company
believes it will complete the Year 2000 conversions are based on
management's best estimates, which were derived utilizing
numerous assumptions of future events, including the continued
availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved
and actual results could differ materially from those
anticipated. Specific factors that might cause such material
differences include, but are not limited to, the availability and
cost of personnel trained in this area, the ability to locate and
correct all relevant computer codes, and similar uncertainties.
Forward-Looking Statements
Forward-looking statements regarding management's present
plans or expectations for new unit openings, remodels, other
capital expenditures, the financing thereof, and disposition of
impaired units involve risks and uncertainties relative to return
expectations and related allocation of resources, and changing
economic or competitive conditions, as well as the negotiation of
agreements with third parties, which could cause actual results
to differ from present plans or expectations, and such
differences could be material. Similarly, forward-looking
statements regarding management's present expectations for
operating results involve risks and uncertainties relative to
these and other factors, such as advertising effectiveness and
the ability to achieve cost reductions, which also would cause
actual results to differ from present plans. Such differences
could be material. Management does not expect to update such
forward-looking statements continually as conditions change, and
readers should consider that such statements speak only as to the
date hereof.
PART II -- Other Information
Item 1. Legal proceedings
None.
Item 2. Changes in securities
None.
Item 3. Defaults upon senior securities
None.
Item 4. Submission of matters to vote of security holders The
Annual Meeting of the shareholders of Piccadilly Cafeterias, Inc.
(the "Meeting") was held on November 3, 1997 and 8,711,447 shares
were represented. The voting tabulation follows:
The election of the following to the Board of Directors.
For Withheld
Ralph P. Erben 8,686,233 16,909
Ronald A. LaBorde 8,680,339 22,803
Paul W. Murrill 8,612,465 90,677
The following director's terms of office continued after the
Meeting: Norman Francis, Robert P. Guyton, Dale E. Redman,
Edward M. Simmons, Sr., Christel C. Slaughter, and C. Ray Smith.
Item 5. Other information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3.1 Articles of Incorporation of the Registrant (1),
as amended on September 14, 1987(2), as amended on
September 27, 1988(3), and as amended on September 28,
1989(4).
3.2 By-laws of the Company, as amended through July
22, 1996(5).
27 Financial Data Schedule
(b) Reports on Form 8-K -- None.
____________
(1) 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.
(2) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1987.
(3) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1988.
(4) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the fiscal year ended June 30, 1989.
(5) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1996.
SIGNATURES
Pursuant to the requirements of the Securities and 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
February 9, 1998
/s/ Ronald A. LaBorde 2/9/98
Ronald A. LaBorde, President, Chief Executive Date
Officer, and Director
/s/ J. Fred Johnson 2/9/98
J. Fred Johnson, Executive Vice President, Chief Date
Financial Officer and
Treasurer (Principal Financial Officer)
/s/ Mark L. Mestayer 2/9/98
Mark L. Mestayer, Executive Vice President, Date
Secretary & Director of Finance
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Statements for the period ending December 31, 1997 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 815,000
<ALLOWANCES> 0
<INVENTORY> 11,094,000
<CURRENT-ASSETS> 16,313,000
<PP&E> 247,846,000
<DEPRECIATION> 122,889,000
<TOTAL-ASSETS> 147,587,000
<CURRENT-LIABILITIES> 36,216,000
<BONDS> 0
<COMMON> 19,141,000
0
0
<OTHER-SE> 60,843,000
<TOTAL-LIABILITY-AND-EQUITY> 147,587,000
<SALES> 158,141,000
<TOTAL-REVENUES> 158,141,000
<CGS> 92,151,000
<TOTAL-COSTS> 149,235,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,123,000
<INCOME-PRETAX> 7,783,000
<INCOME-TAX> 2,880,000
<INCOME-CONTINUING> 4,903,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,903,000
<EPS-PRIMARY> 0.47
<EPS-DILUTED> 0.47
</TABLE>
