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 March 31, 1998
[ ] 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 of (I.R.S. Employer
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 April 30, 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)
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Balances at March 31 June 30
1998 1997
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ASSETS
CURRENT ASSETS
Accounts and notes receivable $ 638 $ 611
Inventories 10,457 10,400
Deferred income taxes 3,546 3,546
Other current assets 1,339 766
- -----------------------------------------------------------------------
TOTAL CURRENT ASSETS 15,980 15,323
PROPERTY, PLANT AND EQUIPMENT, net 124,690 126,020
OTHER ASSETS 6,890 5,989
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TOTAL ASSETS $147,560 $147,332
=======================================================================
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 13,156 $ 9,579
Accrued expenses 19,397 20,411
Current portion of long-term debt -- 4,500
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TOTAL CURRENT LIABILITIES 32,553 34,490
LONG-TERM DEBT, less current portion 26,200 27,240
DEFERRED INCOME TAXES 5,823 5,223
RESERVE FOR UNIT CLOSINGS 1,640 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 March 31, 1998 and
at June 30, 1997 19,141 19,141
Additional paid-in capital 18,735 18,735
Retained earnings 43,717 39,965
81,593 77,841
- -----------------------------------------------------------------------
Less treasury stock at cost: 25,000 shares
of Common Stock at March 31, 1998 and
June 30, 1997 249 237
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TOTAL SHAREHOLDERS' EQUITY 81,344 77,604
- -----------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $147,560 $147,332
=======================================================================
See Notes to Condensed Consolidated Financial Statements (Unaudited)
CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Piccadilly Cafeterias, Inc
(Amounts in thousands - except per share data)
- -------------------------------------------------------------------------------
Three Months Nine Months
Ended March 31 Ended March 31
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1998 1997 1998 1997
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Net sales $ 76,641 $ 74,160 $234,782 $227,129
Cost and expenses:
Cost of sales 44,002 42,029 136,153 130,912
Other operating expense 25,122 24,556 76,755 74,971
General and administrative
expense 2,969 2,812 8,689 8,289
Interest expense 576 736 1,699 2,264
Other expense (income) (142) (149) (411) (306)
- -------------------------------------------------------------------------------
72,527 69,984 222,885 216,130
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INCOME BEFORE INCOME TAXES 4,114 4,176 11,897 10,999
Provision for income taxes 1,522 1,587 4,402 4,180
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NET INCOME $ 2,592 $ 2,589 $ 7,495 $ 6,819
===============================================================================
Weighted average number of shares
outstanding 10,503 10,512 10,503 10,506
===============================================================================
Net income per share - basic and
assuming dilution $ .25 $ .25 $ .71 $ .65
===============================================================================
Cash dividends per share $ .12 $ .12 $ .36 $ .36
===============================================================================
See Notes to Condensed Consolidated Financial Statements (Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Piccadilly Cafeterias, Inc.
(Amounts in thousands)
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Nine Months Ended March 31 1998 1997
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OPERATING ACTIVITIES
Net income $ 7,495 $ 6,819
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation 9,122 9,013
Costs associated with reserved units (663) (1,085)
Provision for deferred income taxes 600 100
Loss on sale of assets 81 107
Pension expense -- net of contributions (950) (879)
Change in operating assets and liabilities 2,058 (5,814)
- -------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 17,743 8,261
INVESTING ACTIVITIES
Purchase of property, plant and equipment (10,243) (7,172)
Proceeds from sale of property, plant
and equipment 1,860 171
- -------------------------------------------------------------------------------
CASH USED IN INVESTING ACTIVITIES (8,383) (7,001)
FINANCING ACTIVITIES
Proceeds from (payments on) long-term debt - net (5,540) 2,560
Purchases of treasury stock (33) (12)
Dividends paid (3,787) (3,808)
- -------------------------------------------------------------------------------
NET CASH USED IN FINANCING ACTIVITIES (9,360) (1,260)
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Change in cash and cash equivalents --- ---
Cash and cash equivalents at beginning of period --- ---
- -------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ --- $ ---
===============================================================================
See Notes to Condensed Consolidated Financial Statements (Unaudited)
NOTE TO CONDENSED FINANCIAL STATEMENTS (Unaudited)
Piccadilly Cafeterias, Inc.
March 31, 1998
NOTE 1 - Basis of Presentation
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.
NOTE 2 - Subsequent Event
On April 23, 1998, the Company and Morrison Restaurants Inc.
("MRI") signed a definitive merger agreement under which the
Company agreed, subject to the terms and conditions stated in the
Agreement, to acquire through a cash tender offer all of the
outstanding shares of MRI at $5.00 per share. MRI currently has
approximately 9.2 million shares outstanding. On April 30, 1998,
the Company began its tender offer which is subject to receipt by
the Company of at least 66-2/3% of the shares of MRI as well as
regulatory approvals and certain other customary conditions.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
1998 Third Quarter Compared to 1997 Third Quarter
The following table summarizes comparable cafeteria customer
traffic for the quarters ended March 31, 1998 and 1997.
(Customers in thousands)
Quarter Ended March 31 1998 1997
------------------- ----------------- Customer
Customers Units Customers Units Change
Units open 3 months in
both periods 11,429 120 11,760 120 -2.8%
Units opened 382 9 (A) 83 1
Units closed 69 2 119 3 (B)
Total 11,880 11,962 -0.7%
(A) Includes five cafeterias and four Piccadilly Express (Associated Grocers
supermarkets) units opened after December 31, 1996
(B) Includes cafeterias closed after December 31, 1996
Same-store cafeteria sales increased $192,000, or 1.2%, over
the prior year. The cafeteria customer check average increased
from $5.62 in the prior year quarter to $5.85 in the current
quarter. Same-store sales for Ralph & Kacoo's seafood restaurants
increased $71,000, or 1.2%. 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 New Orleans, Louisiana was opened during the
third quarter. At March 31, 1998, 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.
The Company completed the conversion of seven Piccadilly
Express take-out shops in seven cafeterias during the quarter.
Sales for new units (cafeterias and Piccadilly Express Associated
Grocers supermarkets) open less than 12 months were $2,341,000 in
the current quarter.
Cost of sales as a percentage of sales increased 0.7% over
the prior year. Food cost increased 0.2% and labor cost
increased 0.5%, reflecting the increase in the minimum wage.
Other operating expense as a percentage of sales decreased 0.3%
reflecting lower workers compensation costs. Interest expense
decreased $160,000 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.
Nine Months Ended March 31, 1998 Compared to Nine Months Ended
March 31, 1997
The following table summarizes comparable cafeteria customer
traffic for the nine months ended March 31, 1998 and 1997.
(Customers in thousands)
Nine Months Ended March 31 1998 1997
------------------- ----------------- Customer
Customers Units Customers Units Change
Units open 9 months in
both periods 35,211 120 36,259 120 -2.9%
Units opened 1,106 9 (A) 83 1
Units closed 286 2 700 7 (B)
Total 36,603 37,042 -1.2%
(A) Includes five 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 $3,281,000, or 1.6%
over the prior year. The cafeteria check average increased from
$5.57 in the prior nine-month period to $5.83 in the current
period. Same-store sales for Ralph & Kacoo's seafood restaurants
increased $384,000, or 2.1%.
The Company opened three cafeterias during the nine months
ended March 31, 1998, 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 $6,828,000 during the
current nine-month period.
Cost of sales as a percentage of sales increased 0.4% 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 and lower workers compensation costs.
Interest expense decreased $565,000 over the prior nine 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
$9,482,000. Net changes in operating assets and liabilities
increased cash flow $7,872,000 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 combined with the timing of payments in the normal
course of business. 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 one cafeteria and complete eight
take-out shop conversions during the fourth quarter of fiscal
1998.
The Company's $4,500,000 private placement debt matured on
January 31, 1998 and was refinanced through existing lines of
credit. As of March 31, 1998, $18,800,000 was available under
two line of credit arrangements. The Company has subsequently
obtained a $100 million commitment from a bank to replace the
Company's existing facilities and to purchase the MRI shares and
pay related merger costs.
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
None
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
May 4, 1998
/s/ Ronald A. LaBorde 05/04/98
- ------------------------------------------------ ------------
Ronald A. LaBorde, President, Chief Executive Date
Officer, and Director
/s/ J. Fred Johnson 05/04/98
- ------------------------------------------------ ------------
J. Fred Johnson, Executive Vice President, Date
Chief Financial Officer and Treasurer
(Principal Financial Officer)
/s/ Mark L. Mestayer 05/04/98
- ------------------------------------------------ ------------
Mark L. Mestayer, Executive Vice President, Date
Secretary & Director of Finance
(Principal Accounting Officer)
<TABLE> <S> <C>
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<LEGEND>
Statements for the period ending March 31, 1998 and is
qualified in its entirety by reference to such financial
statements.
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1998
<PERIOD-END> MAR-31-1998
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<RECEIVABLES> 638,000
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<PP&E> 250,002,000
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0
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