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 SEPTEMBER 30, 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
November 2, 1998, was 10,528,368.
<PAGE>
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)
PICCADILLY CAFETERIAS, INC.
<TABLE>
<CAPTION>
(Amounts in thousands)
Balances at SEPTEMBER 30 June 30
1998 1998
<S> <C> <C>
ASSETS
CURRENT ASSETS
Accounts and notes receivable $ 1,343 $ 1,602
Inventories 12,051 12,489
Deferred income taxes 10,559 10,559
Other current assets 1,065 1,634
----------- -----------
TOTAL CURRENT ASSETS 25,018 26,284
PROPERTY, PLANT AND EQUIPMENT 334,309 332,918
Less allowances for depreciation and unit closings 132,474 129,053
----------- -----------
NET PROPERTY, PLANT AND EQUIPMENT 201,835 203,865
GOODWILL, net of $152 and $20 accumulated amortization at
September 30, 1998 and at June 30, 1998 13,773 12,447
OTHER ASSETS 14,365 11,264
----------- -----------
TOTAL ASSETS $254,991 $253,860
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 15,694 $ 18,359
Accrued interest 682 418
Accrued salaries, benefits and related taxes 22,068 24,869
Accrued rent 5,761 5,036
Other accrued expenses 4,982 11,455
----------- -----------
TOTAL CURRENT LIABILITIES 49,187 60,137
LONG-TERM DEBT, less current portion 90,015 78,979
DEFERRED INCOME TAXES 1,717 1,417
RESERVE FOR UNIT CLOSINGS 19,990 20,104
ACCRUED EMPLOYEE BENEFITS, less current portion 12,986 12,787
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 September 30, 1998 and
at June 30, 1998 19,141 19,141
Additional paid-in capital 18,735 18,735
Retained earnings 43,500 42,810
----------- -----------
81,376 80,686
Less treasury stock at cost: 25,000 Common Shares at
September 30, 1998 and at June 30, 1998 280 250
----------- -----------
TOTAL SHAREHOLDERS' EQUITY 81,096 80,436
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $254,991 $253,860
=========== ===========
</TABLE>
See Note to Condensed Consolidated Financial Statements (Unaudited)
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
PICCADILLY CAFETERIAS, INC.
<TABLE>
<CAPTION>
(Amounts in thousands - except per share data)
Three Months Ended September 30 1998 1997
<S> <C> <C>
Net sales $128,935 $ 78,952
Cost and expenses:
Cost of sales 77,003 46,068
Other operating expense 42,599 26,037
General and administrative expense 4,579 3,075
Interest expense 1,679 619
Other expense (income) 1 (142)
-------- --------
125,861 75,657
-------- --------
INCOME BEFORE INCOME TAXES 3,074 3,295
Provision for income taxes 1,186 1,219
-------- --------
NET INCOME $ 1,888 $ 2,076
======== ========
Weighted average number of shares outstanding 10,505 10,503
======== ========
Net income per share - basic and diluted $ .18 $ .20
======== ========
Cash dividends per share $ .12 $ .12
======== ========
</TABLE>
See Note to Condensed Consolidated Financial Statements (Unaudited)
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
PICCADILLY CAFETERIAS, INC.
<TABLE>
<CAPTION>
(Amount in thousands)
Three Months Ended September 30 1998 1997
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 1,888 $ 2,076
Adjustments to reconcile net income to net cash
Provided by operating activities:
Depreciation and amortization 4,567 2,992
Costs associated with reserved units (114) (315)
Provision for deferred income taxes 300 200
Loss on sale of assets 67 24
Pension expense -- net of contributions (2,133) (1,917)
Change in operating assets and liabilities (6,155) 4,287
--------- ---------
NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES (1,580) 7,347
INVESTING ACTIVITIES
Acquisition of business (6,143) ---
Purchase of property, plant and equipment (1,839) (3,319)
Proceeds from sale of property, plant and equipment 14 1,825
--------- ---------
CASH USED IN INVESTING ACTIVITIES (7,968) (1,494)
FINANCING ACTIVITIES
Proceeds from (payments on) long-term debt - net 11,036 (4,590)
Purchases of treasury stock (228) ---
Dividends paid (1,260) (1,263)
--------- ---------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 9,548 (5,853)
--------- ---------
Increase (decrease) 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)
<PAGE>
NOTE TO CONDENSED FINANCIAL STATEMENTS (UNAUDITED)
PICCADILLY CAFETERIAS, INC.
September 30, 1998
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 FIRST QUARTER COMPARED TO 1997 FIRST QUARTER
In May 1998, the Company acquired 89% of the
common stock of Morrison Restaurants, Inc. (Morrison)
for $5.00 per share. The merger was completed on July
31, 1998 when the Company purchased the remaining
outstanding Morrison shares for $5.00 per share (the
Morrison Acquisition). The aggregate purchase price of
the Morrison shares, including debt assumed, was
approximately $57,270,000. The Morrison Acquisition
was financed through a syndicated loan for which up to
$125,000,000 could be borrowed. At September 30, 1998,
approximately $34,985,000 was available under this
facility.
Total sales increased $49,983,000 or 63.3%, from
1997. Cafeteria sales increased $50,088,000. Ralph &
Kacoo's restaurant sales decreased $105,000. Cafeteria
sales for 1998 include $50,831,000 of Morrison sales.
The following table reconciles total cafeteria
sales to same-store cafeteria sales (units that were
open for three full months in both periods) for the
quarters ended September 30, 1998 and 1997:
<TABLE>
<CAPTION>
(sales in thousands)
1998 1997
Sales
Sales Units Sales Units Change
<S> <C> <C> <C> <C> <C>
Total cafeteria sales $122,296 $72,208 69.3%
Less new units 1,991 7(A) 126 2(A)
Less closed units --- --- 772 3(B)
Less Morrison units 50,831 ---
-------- -------
Net same-store cafeteria
sales $ 69,474 122 $71,310 122 -2.6%
</TABLE>
(A) Includes four cafeterias and three Piccadilly Express
(Associated Grocers Supermarkets) units opened since
June 30, 1997.
(B) Includes three cafeterias closed since June 30, 1997.
The decrease in same-store sales of 2.6% is the net
result of a 4.6% decline in customer traffic and 2.2%
increase in check average. Cafeteria prices were increased
an average of 4.0% in September 1997. Four tropical weather
systems impacted volumes in over 50 stores during the quarter
with no comparable weather-related impacts in the prior year.
During 1998 and 1997, operating income (net sales less
cost of sales and other operating expenses) as a percentage
of net sales was 7.2% and 8.7%, respectively. Food costs as
a percentage of net sales was unchanged. Labor costs as a
percentage of net sales increased 1.4%, reflecting both the
minimum wage increase and the lower sales volumes. Other
operating expenses as a percentage of net sales increased
0.1%. General and administrative expense as a percentage of
net sales decreased 0.3%, reflecting the elimination of some
Morrison expenses. Interest expense increased $1,060,000 in
1998 reflecting the increased debt levels associated with the
Morrison Acquisition.
Net cash provided by operating activities decreased
$8,927,000. Net changes in operating assets and liabilities
decreased cash flow $10,442,000 reflecting primarily the
timing of payments in the ordinary course of business and
acquisition-related costs, such as $1,175,000 in severance
costs. Prior year operating assets and liabilities include a
$2,900,000 federal tax refund. Prior year investing
activities include proceeds from the sale of the Company's
Orland Park, Illinois cafeteria, which was closed in
November 1996.
YEAR 2000 IMPACT
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,
including, among other things, a temporary inability to
process transactions, process reports, or engage in similar
normal business activities (Year 2000 Issues).
During fiscal 1996, the Company began migrating its
information technology (IT) from internally developed systems
to commercially available products. The decision to invest
in updated technology was made for a number of reasons
including Year 2000 Issues. The Company has completed an
assessment of its year 2000 Issues and believes that
previously scheduled replacements of its IT, will function
properly with respect to dates in the Year 2000 and
thereafter. The related projects of migrating the Company's
IT and addressing Year 2000 issues are hereinafter
collectively referred to as the Year 2000 Project.
The total cost of the Year 2000 Project 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 approximately $650,000 of such
costs. The company believes these costs would have been
incurred notwithstanding the Year 2000 Issues
With respect to the acquisition of Morrison, it is the
Company's intent to absorb the IT requirements of Morrison
into the Company's systems during fiscal 1999. Accordingly,
no additional Year 2000 Issues are anticipated as a result of
the acquisition of Morrison. The acquisition of Morrison has
the effect of delaying completion of the Year 2000 Project to
not later than June 30, 1999, which is prior to any
anticipated impact on its operating systems.
The Company believes that with conversions to new IT,
Year 2000 Issues will not pose significant operational
problems for its computer systems. As of September 30, 1998,
the Company has completed the conversion for all systems for
which Year 2000 Issues could have a material impact on the
operations of the Company, except that some Morrison systems
are not scheduled for conversion to the Company's systems
until the second quarter of fiscal 1999. The Company has no
contingency plan, nor does it intend to create one, in the
event that Year 2000 Issues are not fully addressed in time.
The Company believes that the likelihood of such an
occurrence having a material impact on the Company's
operations is remote.
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 the date hereof.
<PAGE>
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.
**FOOTNOTES**
(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.
<PAGE>
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
11/10/98
/s/ Ronald A. LaBorde 11/10/98
Ronald A. LaBorde, Date
President, Chief Executive Officer, and
Director
/s/ J. Fred Johnson 11/10/98
J. Fred Johnson, Date
Executive Vice President, Chief Financial
Officer and Treasurer (Principal Financial Officer)
/s/ Mark L. Mestayer 11/10/98
Mark L. Mestayer, Date
Executive Vice President, Secretary & Director
of Finance
(Principal Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
Statements for the period ending September 30, 1998 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> SEP-30-1998
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 1,343
<ALLOWANCES> 0
<INVENTORY> 12,051
<CURRENT-ASSETS> 25,018
<PP&E> 334,309
<DEPRECIATION> 131,159
<TOTAL-ASSETS> 254,991
<CURRENT-LIABILITIES> 49,187
<BONDS> 0
<COMMON> 19,141
0
0
<OTHER-SE> 62,235
<TOTAL-LIABILITY-AND-EQUITY> 254,991
<SALES> 128,935
<TOTAL-REVENUES> 128,935
<CGS> 77,003
<TOTAL-COSTS> 124,181
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,186
<INCOME-PRETAX> 3,074
<INCOME-TAX> 1,186
<INCOME-CONTINUING> 1,888
<DISCONTINUED> 0
<EXTRAORDINARY> 0
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<NET-INCOME> 1,888
<EPS-PRIMARY> 0.18
<EPS-DILUTED> 0.18
</TABLE>
